THE 2013 ANNUAL REPORT OF THE BOARD OF 

TRUSTEES OF THE FEDERAL OLD-AGE AND SURVIVORS 

INSURANCE AND FEDERAL DISABILITY INSURANCE 

TRUST FUNDS

COMMUNICATION

FROM

THE BOARD OF TRUSTEES, FEDERAL OLD-AGE AND 

SURVIVORS INSURANCE AND FEDERAL DISABILITY 

INSURANCE TRUST FUNDS

TRANSMITTING

THE 2013 ANNUAL REPORT OF THE BOARD OF TRUSTEES OF THE 

FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND FEDERAL 

DISABILITY INSURANCE TRUST FUNDS
.


CONTENTS

(V)

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

A. HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

B. TRUST FUND FINANCIAL OPERATIONS IN 2012 . . . . . . . 6

C. ASSUMPTIONS ABOUT THE FUTURE . . . . . . . . . . . . . . . . 8

D. PROJECTIONS OF FUTURE FINANCIAL STATUS . . . . . . . 9

E. CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND

LEGISLATIVE CHANGES IN THE LAST YEAR . . . . . . . . . . 25

A. OPERATIONS OF THE OLD-AGE AND SURVIVORS 

INSURANCE (OASI) AND DISABILITY INSURANCE (DI) 

TRUST FUNDS, IN CALENDAR YEAR 2012 . . . . . . . . . . . . 25

1. OASI Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

2. DI Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

3. OASI and DI Trust Funds, Combined . . . . . . . . . . . . . . . . . . 31

B. SOCIAL SECURITY AMENDMENTS SINCE THE 

2012 REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

IV. ACTUARIAL ESTIMATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

A. SHORT-RANGE ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . 37

1. Operations of the OASI Trust Fund. . . . . . . . . . . . . . . . . . . . 38

2. Operations of the DI Trust Fund . . . . . . . . . . . . . . . . . . . . . . 41

3. Operations of the Combined OASI and DI Trust Funds . . . . . 43

4. Factors Underlying Changes in 10-Year Trust Fund Ratio 

Estimates From the 2012 Report . . . . . . . . . . . . . . . . . . . . . . 45

B. LONG-RANGE ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . . 47

1. Annual Income Rates, Cost Rates, and Balances . . . . . . . . . . 48

2. Comparison of Workers to Beneficiaries. . . . . . . . . . . . . . . . 54

3. Trust Fund Ratios and Test of Long-Range 

Close Actuarial Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

4. Summarized Income Rates, Summarized Cost Rates, 

and Actuarial Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

5. Additional Measures of OASDI Unfunded Obligations . . . . . 67

6. Reasons for Change in Actuarial Balance From Last Report . . 71
(VI)

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

A. DEMOGRAPHIC ASSUMPTIONS AND METHODS . . . . . . . 78

1. Fertility Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

2. Mortality Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

3. Immigration Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 81

4. Total Population Estimates. . . . . . . . . . . . . . . . . . . . . . . . . . 88

5. Life Expectancy Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . 90

B. ECONOMIC ASSUMPTIONS AND METHODS . . . . . . . . . . . 94

1. Productivity Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 95

2. Price Inflation Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . 95

3. Average Earnings Assumptions . . . . . . . . . . . . . . . . . . . . . . 97

4. Assumed Real-Wage Differential . . . . . . . . . . . . . . . . . . . . . 99

5. Labor Force and Unemployment Projections . . . . . . . . . . . . . 102

6. Gross Domestic Product Projections . . . . . . . . . . . . . . . . . . . 104

7. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

C. PROGRAM-SPECIFIC ASSUMPTIONS AND METHODS . . . 109

1. Automatically Adjusted Program Parameters. . . . . . . . . . . . . 109

2. Covered Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

3. Insured Population. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

4. Old-Age and Survivors Insurance Beneficiaries. . . . . . . . . . . 120

5. Disability Insurance Beneficiaries. . . . . . . . . . . . . . . . . . . . . 126

6. Covered and Taxable Earnings, Taxable Payroll, and 

Payroll Tax Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . 136

7. Income From Taxation of Benefits . . . . . . . . . . . . . . . . . . . . 141

8. Average Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

9. Scheduled Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

10. Illustrative Scheduled Benefit Amounts . . . . . . . . . . . . . . . . 143

11. Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

12. Railroad Retirement Financial Interchange . . . . . . . . . . . . . . 147

13. Military Service Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . 147
(VII)

VI. APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS. . 148

B. HISTORY OF ACTUARIAL STATUS ESTIMATES . . . . . . . . 159

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2022 . . . . . . . . . . . . . . . . . . . . . . 165

D. LONG-RANGE SENSITIVITY ANALYSIS . . . . . . . . . . . . . . 172

1. Total Fertility Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172

2. Death Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

3. Net Immigration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

4. Real-Wage Differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176

5. Consumer Price Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177

6. Real Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

7. Disability Incidence Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 180

8. Disability Termination Rates . . . . . . . . . . . . . . . . . . . . . . . . 180

E. STOCHASTIC PROJECTIONS AND UNCERTAINTY . . . . . . 182

1. Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

2. Stochastic Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

3. Stochastic Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

4. Comparison of Results: Stochastic to Low-Cost, 

Intermediate, and High-Cost Alternatives . . . . . . . . . . . . . . . 186

F. ESTIMATES FOR OASDI AND HI, SEPARATE AND 

COMBINED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192

1. Estimates as a Percentage of Taxable Payroll. . . . . . . . . . . . . 192

2. Estimates as a Percentage of Gross Domestic Product . . . . . . 198

3. Estimates in Dollars. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203

G. ANALYSIS OF BENEFIT DISBURSEMENTS FROM THE 

OASI TRUST FUND WITH RESPECT TO DISABLED 

BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213

H. GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217

LIST OF TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234

LIST OF FIGURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238

INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240

STATEMENT OF ACTUARIAL OPINION. . . . . . . . . . . . . . . 245

THE 2013 ANNUAL REPORT OF THE BOARD OF

TRUSTEES OF THE FEDERAL OLD-AGE AND

SURVIVORS INSURANCE AND FEDERAL DISABILITY

INSURANCE TRUST FUNDS

I. INTRODUCTION

The Old-Age, Survivors, and Disability Insurance (OASDI) program makes

monthly income available to insured workers and their families at retirement,

death, or disability. The OASDI program consists of two parts. Retired workers, their families, and survivors of deceased workers receive monthly benefits under the Old-Age and Survivors Insurance (OASI) program. Disabled

workers and their families receive monthly benefits under the Disability

Insurance (DI) program.

The Social Security Act established the Board of Trustees to oversee the

financial operations of the OASI and DI Trust Funds. The Board is composed of six members. Four members serve by virtue of their positions in the

Federal Government: the Secretary of the Treasury, who is the Managing

Trustee; the Secretary of Labor; the Secretary of Health and Human Services; and the Commissioner of Social Security. The President appoints and

the Senate confirms the other two members to serve as public representatives. The Deputy Commissioner of the Social Security Administration

serves as Secretary of the Board.

The Social Security Act requires that the Board, among other duties, report

annually to the Congress on the actuarial status and financial operations of

the OASI and DI Trust Funds. The 2013 report is the 73rd such report.
Overview

2

II. OVERVIEW

A. HIGHLIGHTS

This section summarizes the report’s major findings.

In 2012

At the end of 2012, the OASDI program was providing benefit payments1 to

about 57 million people: 40 million retired workers and dependents of retired

workers, 6 million survivors of deceased workers, and 11 million disabled

workers and dependents of disabled workers. During the year, an estimated

161 million people had earnings covered by Social Security and paid payroll

taxes. Total expenditures in 2012 were $786 billion. Total income was $840

billion, which consisted of $731 billion in non-interest income and $109 billion in interest earnings. Asset reserves held in special issue U.S. Treasury

securities grew from $2,678 billion at the beginning of the year to $2,732 billion at the end of the year.

Short-Range Results

In 2012, Social Security’s cost continued to exceed the program’s tax income

and also continued to exceed its non-interest income, a trend that the Trustees project to continue throughout the short-range period and beyond. The

2012 deficit of tax income relative to cost was $169 billion, and the projected

2013 deficit is $79 billion. The size of the 2012 deficit is largely due to a

temporary reduction in the Social Security payroll tax for 2011 and 2012.

The legislation establishing the payroll tax reduction also provided for transfers from the General Fund of the Treasury to the trust funds to “replicate to

the extent possible” revenues that would have occurred in the absence of the

payroll tax reduction. Including these general revenue reimbursements, the

2012 deficit of non-interest income relative to cost was $55 billion, and the

projected 2013 deficit is $75 billion.

The Trustees project that the asset reserves of the OASI Trust Fund and of

the combined OASI and DI Trust Funds will be adequate over the next 10

years under the intermediate assumptions. However, the projected reserves

of the DI Trust Fund decline steadily from 85 percent of annual cost at the

beginning of 2013 until the trust fund reserves are depleted in 2016. At the

time reserves are depleted, continuing income to the DI Trust Fund would be

sufficient to pay 80 percent of scheduled DI benefits. The DI Trust Fund

does not satisfy the short-range test of financial adequacy.

 1 The definition of “benefit payment” and other terms appear in the Glossary.
3

Highlights

The Trustees project that the combined reserves of the OASI and DI Trust

Funds will increase for the next several years, growing from $2,732 billion at

the beginning of 2013 to $2,922 billion at the beginning of 2021. Reserves

increase through 2020 because annual cost is less than total income for 2013

through 2020. At the same time, however, the ratio of reserves to cost

declines, from 330 percent of annual cost for 2013 to 218 percent of annual

cost for 2021. 

Beginning in 2021, annual cost exceeds total income, and therefore reserves

begin to decline, reaching $2,866 billion at the beginning of 2023. Excluding

interest earned on trust fund reserves from the comparison, annual cost

exceeds non-interest income in 2013, as it has since 2010, and remains

higher throughout the remainder of the short-range period. The ratio of

reserves to cost declines to 204 percent at the beginning of 2022. For last

year’s report, the Trustees projected that combined reserves would be

329 percent of annual cost at the beginning of 2013 and 212 percent at the

beginning of 2022. 

Long-Range Results

The Trustees project that annual OASDI cost will exceed non-interest

income throughout the long-range period under the intermediate assumptions. The dollar level of the combined trust fund reserves declines beginning

in 2021 until reserves are depleted in 2033. Considered separately, the DI

Trust Fund reserves become depleted in 2016 and the OASI Trust Fund

reserves become depleted in 2035. The projected reserve depletion years are

unchanged from last year’s report.

Projected OASDI cost generally increases more rapidly than projected noninterest income through about 2035 primarily because the retirement of the

baby-boom generation will increase the number of beneficiaries much faster

than the numbers of workers increases, as subsequent lower-birth-rate generations replace the baby-boom generation at working ages. From 2035 to

2050, the cost rate generally declines because the aging baby-boom generation is gradually replaced at retirement ages by historically low-birth-rate

generations, causing the beneficiary-to-worker ratio to decline. Thereafter,

increases in life expectancy cause OASDI cost to increase generally relative

to non-interest income, but more slowly than prior to 2035.

The projected OASDI annual cost rate increases from 13.95 percent of taxable payroll for 2013 to 16.98 percent for 2035 and to 18.01 percent for

2087, a level that is 4.77 percent of taxable payroll more than the projected

income rate for 2087. For last year’s report, the Trustees estimated the

OASDI cost for 2087 at 17.87 percent, or 4.54 percent of payroll more than
Overview

4

the annual income rate for that year. Expressed in relation to the projected

gross domestic product (GDP), OASDI cost rises from 5.1 percent of GDP

for 2013 to about 6.2 percent by 2035, then declines to 6.0 percent by 2050,

and remains between 6.0 and 6.2 percent through 2087.

For the 75-year projection period, the actuarial deficit is 2.72 percent of taxable payroll, 0.05 percentage point larger than in last year’s report. The open

group unfunded obligation for OASDI over the 75-year period is $9.6 trillion

in present value and is $1.0 trillion more than the measured level of $8.6 trillion a year ago. If the assumptions, methods, starting values, and the law had

all remained unchanged, the unfunded obligation would have risen to about

$9.1 trillion due to the change in the valuation date. The remaining increase

in the unfunded obligation is primarily due to lower near-term real interest

rates.

Conclusion

Under the intermediate assumptions, the Trustees project that annual cost for

the OASDI program will exceed non-interest income in 2013 and remain

higher throughout the remainder of the long-range period. The projected

combined OASI and DI Trust Fund asset reserves increase through 2020,

begin to decline in 2021, and become depleted and unable to pay scheduled

benefits in full on a timely basis in 2033. At the time of reserve depletion,

continuing income to the combined trust funds would be sufficient to pay

77 percent of scheduled benefits. However, the DI Trust Fund reserves

become depleted in 2016, at which time continuing income to the DI Trust

Fund would be sufficient to pay 80 percent of DI benefits. Therefore, legislative action is needed as soon as possible to address the DI program’s financial imbalance. In the absence of a long-term solution, lawmakers could

choose to reallocate a portion of the payroll tax rate between OASI and DI,

as they did in 1994.

For the combined OASI and DI Trust Funds to remain solvent throughout the

75-year projection period: (1) revenues would have to increase by an amount

equivalent to an immediate and permanent payroll tax rate increase of 2.66

percentage points1 (from its current level of 12.40 percent to 15.06 percent);

(2) scheduled benefits during the period would have to be reduced by an

amount equivalent to an immediate and permanent reduction of 16.5 percent

 1 The necessary tax rate of 2.66 percent differs from the 2.72 percent actuarial deficit for two reasons. First,

the necessary tax rate is the rate required to maintain solvency throughout the period that does not result in

any trust fund reserve at the end of the period, whereas the actuarial deficit incorporates an ending trust fund

reserve equal to 1 year’s cost. Second, the necessary tax rate reflects a behavioral response to tax rate

changes, whereas the actuarial deficit does not. In particular, the calculation of the necessary tax rate

assumes that an increase in payroll taxes results in a small shift of wages and salaries to forms of employee

compensation that are not subject to the payroll tax.
5

Highlights

applied to all current and future beneficiaries, or 19.8 percent if the reductions were applied only to those who become initially eligible for benefits in

2013 or later; or (3) some combination of these approaches would have to be

adopted.

The Trustees recommend that lawmakers address the projected trust fund

shortfalls in a timely way in order to phase in necessary changes and give

workers and beneficiaries time to adjust to them. Implementing changes soon

would allow more generations to share in the needed revenue increases or

reductions in scheduled benefits. Social Security will play a critical role in

the lives of 58 million beneficiaries and 163 million covered workers and

their families in 2013. With informed discussion, creative thinking, and

timely legislative action, Social Security can continue to protect future generations.
Overview

6

B. TRUST FUND FINANCIAL OPERATIONS IN 2012

Table II.B1 shows the income, expenditures, and asset reserves for the OASI,

the DI, and the combined OASI and DI Trust Funds in calendar year 2012.

Note: Totals do not necessarily equal the sums of rounded components.

In 2012, net payroll tax contributions accounted for 70 percent of total trust

fund income. Net payroll tax contributions consist of taxes paid by employees, employers, and the self-employed on earnings covered by Social Security. These taxes are paid on covered earnings up to a specified maximum

annual amount, which was $110,100 in 2012. Table II.B2 shows the tax rates

scheduled under current law for 2012.

In 2012, approximately 14 percent of OASI and DI combined Trust Fund

income came from reimbursements from the General Fund of the Treasury.

Public Law 112-78, the Temporary Payroll Tax Cut Continuation Act of

2011, and Public Law 112-96, the Middle Class Tax Relief and Job Creation

Act of 2012, account for most of the reimbursement for the year. These acts

specified general fund reimbursement for temporary reductions in revenue

due to reduced payroll tax rates for employees and for self-employed workers.

Three percent of OASI and DI combined Trust Fund income in 2012 came

from subjecting up to 50 percent of Social Security benefits above specified

levels to Federal personal income taxation, and 13 percent of OASDI income

came from interest earned on investment of trust fund asset reserves. The

Table II.B1.—Summary of 2012 Trust Fund Financial Operations

[In billions]

OASI DI OASDI

Asset reserves at the end of 2011. . . . . . . . . . . . . . . . . . . . $2,524.1 $153.9 $2,677.9

Total income in 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 731.1 109.1 840.2

Net payroll tax contributions . . . . . . . . . . . . . . . . . . . . . 503.9 85.6 589.5

Reimbursement from General Fund of the Treasury . . . 97.7 16.5 114.3

Taxation of benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.7 .6 27.3

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.8 6.4 109.1

Total expenditures in 2012. . . . . . . . . . . . . . . . . . . . . . . . . 645.5 140.3 785.8

Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637.9 136.9 774.8

Railroad Retirement financial interchange . . . . . . . . . . 4.1 .5 4.7

Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . 3.4 2.9 6.3

Net increase in asset reserves in 2012 . . . . . . . . . . . . . . . . 85.6 -31.2 54.4

Asset reserves at the end of 2012. . . . . . . . . . . . . . . . . . . . 2,609.7 122.7 2,732.3
7

Calendar Year 2012 Operations

Department of the Treasury invests trust fund reserves in interest-bearing

securities of the U.S. Government. In 2012, the combined trust fund reserves

earned interest at an effective annual rate of 4.1 percent. Almost 99 percent

of expenditures from the combined OASI and DI Trust Funds in 2012 were

retirement, survivor, and disability benefits totaling $774.8 billion. The

financial interchange with the Railroad Retirement program was the source

of a net payment of $4.7 billion from the combined OASI and DI Trust

Funds, which was about 0.6 percent of total expenditures. The administrative

expenses of the Social Security program were $6.3 billion, which was about

0.8 percent of total expenditures. 

The trust fund investments provide a reserve to pay benefits whenever total

program cost exceeds income. Trust fund reserves increased by $54.4 billion

in 2012 because total income to the combined funds, including interest

earned on trust fund reserves, exceeded total expenditures. At the end of

2012, the combined reserves of the OASI and the DI Trust Funds were

330 percent of estimated expenditures1 for 2013. In comparison, the combined reserves at the end of 2011 were 341 percent of expenditures for 2012.

Note: Public Laws 112-78 and 112-96 reduced the OASDI payroll tax rate for 2012 by 2 percentage points

for employees and for self-employed workers. These laws required that the General Fund of the Treasury

reimburse the OASI and DI Trust Funds for these temporary reductions in 2012 payroll tax revenue.

 1 Estimated expenditures are based on the intermediate set of assumptions.

Table II.B2.—Payroll Tax Contribution Rates for 2012

[In percent]

OASI DI OASDI

Payroll tax contribution rate for employees. . . . . . . . . . . . . . . . . . . . . . . 3.59 0.61 4.20

Payroll tax contribution rate for employers . . . . . . . . . . . . . . . . . . . . . . . 5.30 .90 6.20

Payroll tax contribution rate for self-employed persons . . . . . . . . . . . . . 8.89 1.51 10.40
Overview

8

C. ASSUMPTIONS ABOUT THE FUTURE

The future income and expenditures of the OASI and DI Trust Funds will

depend on many factors, including the size and characteristics of the population receiving benefits, the level of monthly benefit amounts, the size of the

workforce, and the level of covered workers’ earnings. These factors will

depend in turn on future birth rates, death rates, immigration, marriage and

divorce rates, retirement-age patterns, disability incidence and termination

rates, employment rates, productivity gains, wage increases, inflation, interest rates, and many other demographic, economic, and program-specific factors.

Table II.C1 presents key demographic and economic assumptions for three

alternative scenarios. The intermediate assumptions reflect the Trustees’ best

estimates of future experience. Therefore, most of the figures in this overview present only the outcomes under the intermediate assumptions. Any

projection of the future is, of course, uncertain. For this reason, the Trustees

also present results under low-cost and high-cost alternatives to provide a

range of possible future experience. The actual future costs are unlikely to be

as extreme as those portrayed by the low-cost and high-cost projections. A

separate section on the uncertainty of the projections, beginning on page 17,

highlights the implications of these alternative scenarios.

The Trustees reexamine the assumptions each year in light of recent experience and new information. This annual review helps to ensure that the Trustees’ assumptions provide the best estimate of future possibilities.

Table II.C1.—Long-Range Valuesa of Key Assumptions for the 75-year Projection Period

a See chapter V for details, including historical and projected values.

Long-range assumptions Intermediate Low-cost High-cost

Demographic:

Total fertility rate (children per woman), for 2037 and later . . . . 2.0 2.3 1.7

Average annual percentage reduction in total age-sex-adjusted 

death rates from 2012 to 2087. . . . . . . . . . . . . . . . . . . . . . . . . . .80 .42 1.21

Average annual net immigration (in thousands) for years 

2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,095 1,400 800

Economic:

Average annual percentage change in:

Productivity (total U.S. economy), for 2024 and later . . . . . . . 1.68 1.98 1.38

Average wage in covered employment from 2024 to 2087 . . . 3.93 3.52 4.32

Consumer Price Index (CPI-W), for 2019 and later. . . . . . . . . 2.80 1.80 3.80

Average annual real-wage differential (percent) for years 

2025-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.13 1.72 .52

Unemployment rate (percent), for 2022 and later . . . . . . . . . . . . 5.5 4.5 6.5

Annual trust fund real interest rate (percent), for 2023 and later. 2.9 3.4 2.4

Programmatic:

Disability incidence rate (per 1,000 exposed, age-sex-adjusted) 

by 2032 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 4.3 6.5

Disability recovery-termination rate (per 1,000 beneficiaries, 

age-sex-adjusted) by 2032. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.4 12.5 8.3
9

Future Financial Status

D. PROJECTIONS OF FUTURE FINANCIAL STATUS

Short-Range Actuarial Estimates

For the short-range period (2013 through 2022), the Trustees measure financial adequacy by comparing projected asset reserves at the beginning of each

year to projected program cost for that year under the intermediate set of

assumptions. Maintaining a trust fund ratio of 100 percent or more—that is,

reserves at the beginning of each year at least equal to projected cost for the

year—is a good indication that the trust fund can cover most short-term contingencies. The projected trust fund ratios under the intermediate assumptions for OASI alone, and for OASI and DI combined, exceed 100 percent

throughout the short-range period. Therefore, OASI and OASDI satisfy the

Trustees’ short-term test of financial adequacy. However, the DI Trust Fund

fails the Trustees’ short-term test of financial adequacy. The Trustees estimate that the DI trust fund ratio was at 85 percent at the beginning of 2013.

After 2013, the projected DI trust fund ratio declines until the trust fund

reserves become depleted in 2016. Figure II.D1 shows that the trust fund

ratios for the combined OASI and DI Trust Funds decline consistently after

2010.
Overview

10

As it has since 2010, projected OASDI cost exceeds non-interest income

throughout the short-range period. Cost is less than total income until 2021,

when cost begins to exceed total income. While trust fund reserves continue

to grow through 2020, they grow more slowly than cost, causing the trust

fund ratio to decline, as shown in figure II.D1.

Long-Range Actuarial Estimates

The Trustees use three types of measures to assess the actuarial status of the

program over the next 75 years: (1) annual cash-flow measures, including

income rates, cost rates, and balances; (2) trust fund ratios; and (3) summary

measures such as actuarial balances and open group unfunded obligations.

The Trustees most often express these measures as percentages of taxable

payroll, or less frequently as percentages of gross domestic product (GDP) or

in dollars. The Trustees also present summary measures over the infinite

horizon. The infinite horizon values provide an additional indication of

Social Security’s very-long-run financial condition, but are subject to much

greater uncertainty.

 Figure II.D1.—Short-Range OASI and DI Combined Trust Fund Ratio

[Asset reserves as a percentage of annual cost]

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Calendar year 

Historical Estimated 

"Minimum" level for short-term financial adequacy 
11

Future Financial Status

The Trustees also apply the test of long-range close actuarial balance each

year. To satisfy the test, a trust fund must meet two conditions: (1) the trust

fund satisfies the short-range test of financial adequacy, and (2) the trust fund

ratios stay above zero throughout the 75-year projection period, such that

benefits would be payable in a timely manner throughout the period. The

OASI, DI, and combined OASI and DI Trust Funds all fail the test of longrange close actuarial balance under the intermediate assumptions.

Annual Income Rates, Cost Rates, and Balances

Figure II.D2 illustrates the year-by-year relationship among OASDI income

(excluding interest), cost (including scheduled benefits), and expenditures

(including payable benefits) for the full 75-year period. The figure shows all

values as percentages of taxable payroll. Under the intermediate assumptions, demographic factors would by themselves cause the projected cost rate

to rise rapidly for the next two decades before leveling off in about 2035.

However, the recent recession led to a reduction in taxable earnings and a

surge in beneficiaries, which in turn sharply increased the cost rate. This

recession effect obscures the underlying rising trend in the cost rate for the

next 5 years. The projected income rate is stable at about 13 percent throughout the 75-year period.

Annual OASDI cost exceeded non-interest income in 2010 for the first time

since 1983. The Trustees project that cost will continue to exceed non-interest income throughout the 75-year valuation period. Nevertheless, total trust

fund income, including interest income, is more than is necessary to cover

costs through 2020, so trust fund asset reserves continue to grow. Beginning

in 2021, cost exceeds total income and combined OASI and DI Trust Fund

reserves diminish until they become depleted in 2033. After trust fund

reserve depletion, continuing income is sufficient to support expenditures at

a level of 77 percent of program cost for the rest of 2033, declining to

72 percent for 2087.
Overview

12

Figure II.D3 shows the estimated number of workers per beneficiary. Figures

II.D2 and II.D3 illustrate the inverse relationship between cost rates and the

number of workers per beneficiary. In particular, the projected future

increase in the cost rate reflects a projected decline in the number of covered

workers per beneficiary. There were about 2.9 workers for every OASDI

beneficiary in 2012. This ratio had been extremely stable, remaining between

3.2 and 3.4 from 1974 through 2008, and has declined since then due to the

economic recession and the beginning of the demographic shift that will

drive this ratio over the next 20 years. The Trustees project that the ratio of

workers to beneficiaries will continue to decline, even as the economy recovers, due to this demographic shift—as workers of lower-birth-rate generations replace workers of the baby-boom generation. The ratio of workers to

beneficiaries reaches 2.1 by 2035 when the baby-boom generation will have

largely retired, with a further gradual decline thereafter due to increasing longevity.

 Figure II.D2.—OASDI Income, Cost, and Expenditures as Percentages of Taxable Payroll

[Under Intermediate Assumptions]

0%

5%

10%

15%

20%

25%

2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Cost: Scheduled and 

payable benefits

Income

Payable benefits as percent

of scheduled benefits:

2012-32: 100%

2033: 77%

2087: 72%

Cost: Scheduled but not 

fully payable benefits

Expenditures: Payable benefits = income 

after trust fund depletion in 2033
13

Future Financial Status

Another important way to look at Social Security’s future is to view its

annual cost and non-interest income as a share of U.S. economic output. As

shown in figure II.D4, the Trustees project that Social Security’s cost as a

percent of GDP will grow from 4.4 percent in 2008 to about 6.2 percent by

2035, then decline to 6.0 percent by 2050, and remain between 6.0 and

6.2 percent through 2087. As the economy recovers, Social Security’s noninterest income, which reflects scheduled tax rates, increases from its current

level of about 4.6 percent of GDP to about 4.9 percent of GDP for 2022.

Thereafter, non-interest income as a percent of GDP declines gradually, to

about 4.6 percent by 2087, because the Trustees expect the share of

employee compensation provided as noncovered fringe benefits to increase

gradually.

 Figure II.D3.—Number of Covered Workers Per OASDI Beneficiary

0

1

2

3

4

1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Historical Estimated
Overview

14

Trust Fund Ratios

The trust fund ratio is defined as the asset reserves at the beginning of a year

expressed as a percentage of the cost during the year. The trust fund ratio

thus represents the proportion of a year’s cost which could be paid solely

with the reserves at the beginning of the year. Table II.D1 displays the projected maximum trust fund ratios during the long-range period for the OASI,

DI, and combined funds. The table also shows the year of maximum projected trust fund ratio during the long-range projection period (2013-87) and

the year of trust fund reserve depletion. Each trust fund ratio has been generally declining in recent years. OASI reached a peak level of 402 in 2011, DI

reached a peak level of 219 in 2003, and OASDI reached a peak level of 358

in 2008.

 Figure II.D4.—OASDI Cost and Non-interest Income as a Percentage of GDP

Table II.D1.—Projected Maximum Trust Fund Ratios During the Long-Range Period

and Trust Fund Reserve Depletion Dates

[Under the Intermediate Assumptions]

OASI DI OASDI

Maximum trust fund ratio (percent). . . . . . . . . . . . . . 383 85 330

Year attained. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 2013 2013

Year of trust fund reserve depletion. . . . . . . . . . . . . . 2035 2016 2033

0%

2%

4%

6%

8%

10%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Non-interest Income

Historical Estimated

Cost
15

Future Financial Status

Summary Measures

The actuarial balance is a summary measure of the program’s financial status

through the end of the 75-year valuation period. The actuarial balance measure includes the trust fund asset reserves at the beginning of the period and

all cost and income during the valuation period, so it is essentially the difference between the present values of income and cost from 1937 through the

end of the valuation period. The Trustees express actuarial balance as a percentage of the taxable payroll for the 75-year valuation period, and refer to a

negative actuarial balance as an actuarial deficit. The actuarial deficit represents the average amount of change in income or cost that is needed throughout the valuation period in order to achieve actuarial balance. 

In this report, the actuarial deficit for the combined OASI and DI Trust

Funds under the intermediate assumptions is 2.72 percent of taxable payroll.

The actuarial deficit was 2.67 percent in the 2012 report. If the assumptions,

methods, starting values, and the law had all remained unchanged from last

year, the actuarial deficit would have increased to 2.72 percent of payroll

solely due to advancing the valuation period by 1 year. The effects of

recently-enacted legislation, updated demographic data and assumptions, and

updated economic data and assumptions worsened the actuarial deficit, but

these effects were offset by updated programmatic data and improved methodologies, causing little additional change in the actuarial balance.

Another way to illustrate the projected financial shortfall of the OASDI program is to examine the cumulative present value of scheduled income less

cost. Figure II.D5 shows the present value of cumulative OASDI income less

cost from the inception of the program through years 2012-87. A positive

value represents the present value of trust fund reserves at the end of the

selected year. A negative value is the unfunded obligation through the

selected year. The asset reserves of the combined trust funds were $2.7 trillion at the end of 2012. The trust fund reserves decline on a present value

basis after 2012, but remain positive through 2032. However, after 2032 this

cumulative amount becomes negative, which means that the combined OASI

and DI Trust Funds have a net unfunded obligation through each year after

2032. Through the end of 2087, the combined funds have a present-value

unfunded obligation of $9.6 trillion. If the assumptions, methods, starting

values, and the law had all remained unchanged from last year, the unfunded

obligation would have risen to about $9.1 trillion due to the change in the

valuation date. The remaining increase in the unfunded obligation is primarily due to lower near-term real interest rates.
Overview

16

This unfunded obligation represents 2.57 percent of taxable payroll and 0.9

percent of GDP for the 75-year valuation period. The unfunded obligation as

a share of taxable payroll (2.57 percent) and the actuarial deficit (2.72 percent) are similar measures, but differ because the actuarial deficit includes

the cost of having an ending trust fund reserve equal to 1 year’s cost.

Figures II.D2, II.D4, and II.D5 show that the program’s financial condition is

worsening at the end of the projection period. Trends in annual balances and

cumulative values toward the end of the 75-year period provide an indication

of the program’s ability to maintain solvency beyond 75 years. Consideration

of summary measures alone for a 75-year period can lead to incorrect perceptions and to policy prescriptions that do not achieve sustainable solvency.1

The Trustees also consider summary measures over the infinite horizon. The

infinite horizon values provide an additional indication of Social Security’s

 1 Sustainable solvency for the financing of the program under a specified set of assumptions has been

achieved when the program has positive projected trust fund ratios throughout the 75-year projection period

that are either stable or rising at the end of the period.

 Figure II.D5.—Cumulative Scheduled OASDI Income Less Cost,

From Program Inception Through Years 2012-87

[Present value as of January 1, 2013, in trillions]

-$10

-$9

-$8

-$7

-$6

-$5

-$4

-$3

-$2

-$1

$0

$1

$2

$3

2012 2027 2042 2057 2072 2087

Ending year of accumulation

Unfunded 

obligation

(negative)

Trust fund 

reserves

(positive)

2033
17

Future Financial Status

financial condition over a period extending indefinitely into the future, but

results are subject to much greater uncertainty.

Extending the horizon beyond 75 years increases the measured unfunded

obligation. Through the infinite horizon, the unfunded obligation, or shortfall, equals $23.1 trillion in present value, which represents 4.0 percent of

future taxable payroll or 1.4 percent of future GDP. The summarized shortfalls for the 75-year period and through the infinite horizon both reflect

annual cash-flow shortfalls for all years after trust fund reserve depletion.

The annual shortfalls after trust fund reserve depletion rise slowly and reflect

increases in life expectancy after 2033. The summarized shortfalls for the 75-

year period, as percentages of taxable payroll and GDP, are lower than those

for the infinite horizon principally because only about three-quarters of the

years in the 75-year period have unfunded annual shortfalls.

The measured unfunded obligation over the infinite horizon increased from

$20.5 trillion in last year’s report to $23.1 trillion in this year’s report. If the

assumptions, methods, starting values, and the law had all remained

unchanged, the unfunded obligation over the infinite horizon would have

risen to $21.4 trillion solely due to the change in the valuation date. The

remaining increase in the unfunded obligation is mainly due to lower nearterm real interest rates. Expressed as a percentage of taxable payroll, the

measured unfunded obligation through the infinite horizon increased from

3.9 percent in last year’s report to 4.0 percent in this year’s report. As a percentage of GDP, the measured unfunded obligation through the infinite horizon increased from 1.3 percent in last year’s report to 1.4 percent in this

year’s report.

Uncertainty of the Projections

Significant uncertainty surrounds the intermediate assumptions. The Trustees

use several methods to help illustrate that uncertainty.

A first approach uses alternative scenarios reflecting low-cost (alternative I)

and high-cost (alternative III) sets of assumptions. Figure II.D6 shows the

projected trust fund ratios for the combined OASI and DI Trust Funds under

the intermediate, low-cost, and high-cost assumptions. The low-cost alternative includes a higher ultimate total fertility rate, slower improvement in

mortality, a higher real-wage differential, a higher ultimate real interest rate,

and a lower unemployment rate. The high-cost alternative, in contrast,

includes a lower ultimate total fertility rate, more rapid improvement in mortality, a lower real-wage differential, a lower ultimate real interest rate, and a

higher unemployment rate. These alternatives are not intended to suggest
Overview

18

that all parameters would be likely to differ from the intermediate values in

the same direction, but are intended to illustrate the effect of clearly defined

scenarios that are, on balance, very favorable or unfavorable for the program’s financial status. Actual future costs are unlikely to be as extreme as

those portrayed by the low-cost and high-cost projections. The method for

constructing the low-cost and high-cost projections does not lend itself to

estimating the probability that actual experience will lie within or outside the

range they define.

Appendix D of this report presents long-range sensitivity analysis for the

OASDI program. By varying one parameter at a time, sensitivity analysis

provides a second approach for illustrating the uncertainty surrounding projections into the future.

A third approach uses stochastic simulations that reflect randomly assigned

annual values for each parameter. These simulations produce a distribution

of projections and corresponding probabilities that future outcomes will fall

within or outside a given range. The results of the stochastic simulations, discussed in more detail in appendix E, suggest that trust fund reserve depletion

 Figure II.D6.—Long-Range OASI and DI Combined Trust Fund Ratios Under 

Alternative Scenarios

[Asset reserves as a percentage of annual cost]

0%

100%

200%

300%

400%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year 

Historical Estimated 

III 

II 

I 
19

Future Financial Status

(i.e., the point at which the trust fund ratio reaches zero) is likely by mid-century. In particular, figure II.D7 suggests that based on these stochastic simulations, trust fund asset reserves will deplete between 2028 and 2044 with a

95-percent probability.

The stochastic results suggest that trust fund ratios as high as the low-cost

alternative are unlikely. The difference in the ranges of the projected trust

fund ratios between two of the methods for illustrating uncertainty (alternative scenarios and stochastic simulations) is due in part to the different

assignment of real interest rates in these two methods. Appendix E includes

an explanation of the different treatments.

Changes From Last Year’s Report

The projected long-range OASDI actuarial deficit increased from 2.67 percent of taxable payroll for last year’s report to 2.72 percent of taxable payroll

for this year’s report. The change in the 75-year projection period alone

increased the actuarial deficit to 2.72 percent. The effects of recently-enacted

legislation, updated demographic data and assumptions, and updated economic data and assumptions worsened the actuarial deficit, but these effects

 Figure II.D7.—Long-Range OASI and DI Combined Trust Fund Ratios 

From Stochastic Modeling

0%

100%

200%

300%

400%

2013 2028 2043 2058 2073 2088

Projection year 

50% 

97.5% 

2.5% 

90% 

10% 
Overview

20

were offset by updated programmatic data and improved methodologies,

causing little additional change in the actuarial balance. For a detailed

description of the specific changes identified in table II.D2, see section

IV.B.6.

Note: Totals do not necessarily equal the sums of rounded components.

The open group unfunded obligation for the 75-year projection period

increased from $8.6 trillion (present value as of January 1, 2012) to $9.6 trillion (present value as of January 1, 2013). The unfunded obligation increased

by about $0.5 trillion solely due to advancing the valuation date by 1 year

and including the year 2087. Lower near-term real interest rates were the primary cause of the remaining $0.5 trillion increase in the unfunded obligation.

Figure II.D8 compares this year’s projections of annual balances (non-interest income minus cost) to those in last year’s report. See page 76 for details.

Table II.D2.—Reasons for Change in the 75-Year Actuarial Balance,

Based on Intermediate Assumptions

[As a percentage of taxable payroll]

Item OASI DI OASDI

Shown in last year's report:

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.12 1.90 14.02

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.42 2.27 16.69

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.30 -.37 -2.67

Changes in actuarial balance due to changes in:

Legislation / Regulation . . . . . . . . . . . . . . . . . . . . . . . -.14 -.01 -.15

Valuation perioda . . . . . . . . . . . . . . . . . . . . . . . . . . . .

a The change in the 75-year valuation period from last year’s report to this report means that the 75-year

actuarial balance now includes the relatively large negative annual balance for 2087. This change in the valuation period results in a larger long-range actuarial deficit. The actuarial deficit includes the trust fund

reserve at the beginning of the projection period.

-.05 -.01 -.06

Demographic data and assumptions. . . . . . . . . . . . . . -.18 .01 -.17

Economic data and assumptions. . . . . . . . . . . . . . . . . -.01 -.02 -.03

Disability data and assumptions. . . . . . . . . . . . . . . . . .00 .01 .01

Methods and programmatic data . . . . . . . . . . . . . . . . .28 .07 .35

Total change in actuarial balance . . . . . . . . . . . . . . . . . . -.10 .05 -.05

Shown in this report:

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.40 -.32 -2.72

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.00 1.88 13.88

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.40 2.20 16.60
21

Future Financial Status

 Figure II.D8.—OASDI Annual Balances: 2012 and 2013 Trustees Reports

[As a percentage of taxable payroll, under the intermediate assumptions]

-6%

-4%

-2%

0%

2%

2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

2012 Report

2013 Report
Overview

22

E. CONCLUSION

Under current law, the projected cost of Social Security increases faster than

projected income through about 2035 primarily because of the aging of the

baby-boom generation and relatively low fertility since the baby-boom

period. Cost will continue to grow faster than income, but to a lesser degree,

after 2035 due to increasing life expectancy. Based on the Trustees’ best estimate, program cost exceeds non-interest income for 2013, as it has since

2010, and remains higher than non-interest income throughout the remainder

of the 75-year projection period. Social Security’s combined trust funds

increase with the help of interest income through 2020 and allow full payment of scheduled benefits on a timely basis until the trust fund asset

reserves become depleted in 2033. At that time, projected continuing income

to the combined trust funds equals about 77 percent of program cost. By

2087, continuing income equals about 72 percent of program cost.

The Trustees project that the OASI Trust Fund and the DI Trust Fund will

have sufficient reserves to pay full benefits on time until 2035 and 2016,

respectively. Legislative action is needed as soon as possible to prevent

depletion of the DI Trust Fund reserves in 2016, at which time continuing

income to the DI Trust Fund would be sufficient to pay 80 percent of DI benefits. In the absence of a long-term solution, lawmakers could choose to reallocate a portion of the payroll tax rate between OASI and DI, as they did in

1994.

The Trustees estimate that the 75-year actuarial deficit for the combined trust

funds is 2.72 percent of taxable payroll—0.05 percentage point larger than

the 2.67 percent deficit in last year’s report. For the combined OASI and DI

Trust Funds to remain solvent throughout the 75-year projection period:

(1) revenues would have to increase by an amount equivalent to an immediate and permanent payroll tax rate increase of 2.66 percentage points1 (from

its current level of 12.40 percent to 15.06 percent); (2) scheduled benefits

during the period would have to be reduced by an amount equivalent to an

immediate and permanent reduction of 16.5 percent applied to all current and

future beneficiaries, or 19.8 percent if the reductions were applied only to

 1 The necessary tax rate of 2.66 percent differs from the 2.72 percent actuarial deficit for two reasons. First,

the necessary tax rate is the rate required to maintain solvency throughout the period that does not result in

any trust fund reserve at the end of the period, whereas the actuarial deficit incorporates an ending trust fund

reserve equal to 1 year’s cost. Second, the necessary tax rate reflects a behavioral response to tax rate

changes, whereas the actuarial deficit does not. In particular, the calculation of the necessary tax rate

assumes that an increase in payroll taxes results in a small shift of wages and salaries to forms of employee

compensation that are not subject to the payroll tax.
23

Conclusion

those who become initially eligible for benefits in 2013 or later; or (3) some

combination of these approaches would have to be adopted.

If substantial actions are deferred for several years, the changes necessary to

maintain Social Security solvency would be concentrated on fewer years and

fewer generations. Much larger changes would be necessary if action is

deferred until the combined trust fund reserves become depleted in 2033. In

order to maintain solvency throughout the 75-year projection period and

finance scheduled benefits fully in every year starting in 2033, it would be

necessary to increase revenues by an amount equivalent to a payroll tax rate

increase of about 4.1 percentage points (yielding a total payroll tax rate of

16.5 percent) at the point of trust fund reserve depletion, with the total rate

reaching about 17.5 percent in 2087. Alternatively, solvency could be maintained if benefits were reduced to the level that would be payable with scheduled tax rates and earnings subject to tax in each year beginning in 2033. At

the point of trust fund reserve depletion in 2033, this would be equivalent to

a reduction in all scheduled benefits of 23 percent, with reductions reaching

28 percent in 2087. In addition, of course, there is a continuum of policies

combining tax increases with benefit reductions that would maintain solvency at the point of trust fund depletion.

Some strategies for achieving solvency would not be feasible if delayed until

trust fund reserve depletion in 2033. For example, even a temporary 100-percent benefit reduction for those newly eligible for benefits in 2033 would not

by itself make it possible to pay all benefits scheduled for payment in that

year to already-eligible beneficiaries.

If the life expectancy of the population continues to improve after the end of

the 75-year period, Social Security’s annual cost will very likely continue to

grow faster than non-interest income after 2087. As a result, lawmakers

would have to make additional changes to ensure solvency of the system

beyond 2087.

The Trustees recommend that lawmakers address the projected trust fund

shortfalls in a timely way in order to phase in necessary changes and give

workers and beneficiaries time to adjust to them. Implementing changes soon

would allow more generations to share in the needed revenue increases or

reductions in scheduled benefits. Social Security will play a critical role in

the lives of 58 million beneficiaries and 163 million covered workers and

their families in 2013. With informed discussion, creative thinking, and

timely legislative action, Social Security can continue to protect future generations.
Overview

24

For further information related to the contents of this report, see the following websites:

 • www.socialsecurity.gov/oact/tr/2013/index.html

 • www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trendsand-Reports/ReportsTrustFunds/index.html

 • www.treasury.gov/resource-center/economic-policy/ss-medicare/Pages/

social_security.aspx
25

Calendar Year 2012 Operations

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND

LEGISLATIVE CHANGES IN THE LAST YEAR

A. OPERATIONS OF THE OLD-AGE AND SURVIVORS 

INSURANCE (OASI) AND DISABILITY INSURANCE (DI) TRUST 

FUNDS, IN CALENDAR YEAR 2012

This section presents detailed information on the operations of the OASI and

DI Trust Funds1 during calendar year 2012. Chapter IV provides projections

for calendar years 2013 through 2090.

1. OASI Trust Fund

Table III.A1 presents a statement of the income and disbursements of the

Federal Old-Age and Survivors Insurance Trust Fund in calendar year 2012,

and of the asset reserves in the fund at the beginning and end of the calendar

year. As shown in this table, total trust fund receipts in 2012 amounted to

$731.1 billion, while disbursements totaled $645.5 billion, an increase in

trust fund reserves during 2012 of $85.6 billion.

Total receipts during calendar year 2012 included $505.2 billion in gross

payroll tax contributions. The OASI fund paid the general fund $1.3 billion

for the estimated amount of employee payroll-tax refunds, partially offsetting these gross contributions. Employees who work for more than one

employer during a year and pay contributions on total earnings in excess of

the contribution and benefit base are eligible for such refunds. Net payroll

tax contributions were therefore $503.9 billion in 2012.

Net reimbursements from the General Fund of the Treasury amounted to

$97.7 billion in 2012. As shown in the table, Public Law 111-312, the Tax

Relief, Unemployment Insurance Reauthorization, and Job Creation Act of

2010, Public Law 112-78, the Temporary Payroll Tax Cut Continuation Act

of 2011, and Public Law 112-96, the Middle Class Tax Relief and Job Creation Act of 2012, account for almost all of the reimbursement for the year,

or about $97.6 billion. These acts specified general fund reimbursement for

temporary reductions in employee payroll taxes.

The General Fund of the Treasury reimbursed the OASI Trust Fund approximately $133 million in 2012 under the provisions of Public Law 111-147, the

Hiring Incentives to Restore Employment (HIRE) Act. The General Fund

reimbursed the OASI Trust Fund about $6 million in 2012 under the provi-

 1 See www.socialsecurity.gov/oact/progdata/fundsQuery.html.
Financial Operations and Legislative Changes

26

sions of Public Law 110-246, the Food, Conservation, and Energy Act of

2008.

The Social Security Administration makes special payments to uninsured

persons who meet certain requirements. The General Fund of the Treasury

largely reimburses costs associated with providing such payments. Although

there was no reimbursement in 2012, a reimbursement of about $1 thousand

is scheduled for 2013, reflecting costs incurred in fiscal year 2011.

Income based on taxation of OASI benefits amounted to $26.7 billion in

2012. About 99 percent of this income represents amounts credited to the

trust funds, on an estimated basis, generally in advance of the actual receipt

of taxes by the Treasury. The remaining 1 percent of the total income from

taxation of benefits represents amounts withheld from the benefits paid to

nonresident aliens.

In 2012, the OASI Trust Fund earned $102.8 billion in net interest, which

consisted of: (1) interest earned on the investments held by the trust fund;

(2) interest on adjustments in the allocation of administrative expenses

between the trust fund and the general fund account for the Supplemental

Security Income program; (3) interest arising from the revised allocation of

administrative expenses among the trust funds; and (4) interest on certain

reimbursements to the trust fund.

The remaining receipts, about $1 thousand, consisted of gifts received under

the provisions authorizing the deposit of money gifts or bequests in the trust

funds.

Of the $645.5 billion in total OASI disbursements in 2012, $637.9 billion

was for net benefit payments, including the reimbursable costs of vocational

rehabilitation services.1 Net benefit payments increased by 7.0 percent from

calendar year 2011 to calendar year 2012. This increase is due primarily to:

(1) an increase in the total number of beneficiaries and (2) an increase in the

average benefit amount. The increase in the average benefit amount in 2012

was due in large part to the automatic cost-of-living benefit increase of 3.6

percent which became effective for December 2011 under the automaticadjustment provisions in section 215(i) of the Social Security Act.

 1 Vocational rehabilitation services are furnished to disabled widow(er) beneficiaries and to those children

of retired or deceased workers who receive benefits based on disabilities that began before age 22. The Trust

Funds reimburse the providers of such services only in those cases where the services contributed to the successful rehabilitation of the beneficiary.
27

Calendar Year 2012 Operations

Note: Totals do not necessarily equal the sums of rounded components.

The Railroad Retirement Act requires an annual financial interchange

between the Railroad Retirement program and the OASDI program. The purpose of the interchange is to put the OASI and DI Trust Funds in the same

financial position they would have been in had railroad employment always

Table III.A1.—Operations of the OASI Trust Fund, Calendar Year 2012

[In millions]

Total asset reserves, December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,524,075

Receipts:

Net payroll tax contributions:

Payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $505,192

Payments from the General Fund of the Treasury for payroll tax contributions subject to refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,299

Net payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503,893

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L. 111-312, P.L. 112-78, 

and P.L. 112-96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,596

Reduction in payroll tax contributions due to P.L. 111-147. . . . . . . . . . . . . . . . . . . 133

Reimbursement directed by P.L. 110-246 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Payroll tax credits due to P.L. 98-21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

a Between -$0.5 and $0.5 million.

Net general fund reimbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,735

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 169

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,506

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,675

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,768

Interest adjustmentsb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust fund and

the general fund account for the Supplemental Security Income program; (2) interest arising from the revised

allocation of administrative expenses among the trust funds; and (3) interest on certain reimbursements to the

trust fund.

5

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 102,773

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 731,075

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 637,948

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -55

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 1

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637,894

Financial interchange with the Railroad Retirement “Social Security Equivalent 

Benefit Account”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,139

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,896

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573

Offsetting receipts from sales of supplies, materials, etc. . . . . . . . . . . . . . . . . . . . . -9

Miscellaneous reimbursements from the general fund c . . . . . . . . . . . . . . . . . . . . .

c Reimbursements for costs incurred in performing certain legislatively mandated activities not directly

related to administering the OASI program.

-12

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,448

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 645,482

Net increase in asset reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,593

Total asset reserves, December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,609,668
Financial Operations and Legislative Changes

28

been covered directly by Social Security. The Railroad Retirement Board and

the Social Security Administration calculated an interchange of $4.1 billion

from the OASI Trust Fund to the Social Security Equivalent Benefit Account

for June 2012.

The remaining $3.4 billion of disbursements from the OASI Trust Fund represents net administrative expenses. The Social Security Administration and

the Department of the Treasury initially charge administrative expenses

directly to the trust fund on an estimated basis. Periodically, as actual experience is recorded, they adjust the allocations of administrative expenses for

prior periods. These adjustments affect the OASI Trust Fund, the DI Trust

Fund, and the general fund account for the Supplemental Security Income

program, and include appropriate interest adjustments. As described earlier,

the trust fund accounting records such interest adjustments under investment

income.

In 2012, the cost incurred by the Social Security Administration to administer the OASI program was 84 percent of OASI net administrative expenses.

The Social Security Administration charges such costs to the trust fund

($2.9 billion in 2012). In addition, the Department of the Treasury charges to

the trust fund expenses ($0.6 billion in 2012) for services provided in administering the OASI program. A relatively small offset ($9 million in 2012) to

administrative expenses represents income from the sale of excess supplies

and equipment.

Finally, the General Fund of the Treasury makes net reimbursements for

administrative costs incurred by the Social Security Administration in performing legislatively mandated activities that are not directly related to the

OASI program. These reimbursements include the costs associated with

union activities related to administering the OASI program ($3 million in

2012) and with the provision of information to participants in certain pension

plans ($8 million in 2012). These miscellaneous reimbursements totaled

$12 million in 2012.

The asset reserves in the OASI Trust Fund at the end of calendar year 2012

totaled $2,609.7 billion, consisting of $2,610.3 billion in U.S. Government

obligations and, as an offset, an extension of credit of $0.6 billion against

securities to be redeemed within the following days. The effective annual

rate of interest earned by the reserves in the OASI Trust Fund during calendar year 2012 was 4.1 percent, slightly lower than the 4.4 percent earned during calendar year 2011. Table VI.A4, presented in appendix A, shows a

detailed listing of OASI Trust Fund holdings by type of security, interest rate,

and year of maturity at the end of calendar years 2011 and 2012.
29

Calendar Year 2012 Operations

By law, the Department of the Treasury must invest trust fund reserves in

interest-bearing securities backed by the full faith and credit of the United

States Government. Those securities currently held by the OASI Trust Fund

are special issues, that is, securities sold only to the trust funds. These special

issues are of two types: short-term certificates of indebtedness and longerterm bonds. Daily receipts are invested in the short-term certificates of

indebtedness which mature on the next June 30 following the date of issue.

The trust fund normally acquires long-term special-issue bonds when special

issues of either type mature on June 30 and must be reinvested. The amount

of long-term bonds acquired on June 30 is equal to the amount of special

issues maturing (including accrued interest earnings), plus tax receipts for

that day, less amounts required to meet expenditures on that day.

Section 201(d) of the Social Security Act provides that the obligations issued

for purchase by the OASI and DI Trust Funds shall have maturities fixed

with due regard for the needs of the funds. The usual practice has been to

reinvest the maturing special issues, as of each June 30, so that the value of

the securities maturing in each of the next 15 years are approximately equal.

Accordingly, the Department of the Treasury, in consultation with the Chief

Actuary of the Social Security Administration, selected the amounts and

maturity dates of the special-issue bonds purchased on June 30, 2012, so that

the maturity dates of the total portfolio of special issues were spread evenly

over the 15-year period 2013-27. The bonds purchased on that date have an

interest rate of 1.375 percent. Table III.A7 shows additional details on the

investment transactions during 2012, including the amounts of bonds purchased on June 30, 2012.

2. DI Trust Fund

Table III.A2 presents a statement of the income and disbursements of the

Federal Disability Insurance Trust Fund in calendar year 2012, and of the

asset reserves in the fund at the beginning and end of the calendar year.

Line entries in the DI statement are similar to those in the OASI statement.

The explanations of the OASI entries generally apply to DI as well.

Of the $109.1 billion in total receipts, $85.6 billion was net payroll tax contributions.
Financial Operations and Legislative Changes

30

Note: Totals do not necessarily equal the sums of rounded components.

Of the $140.3 billion of total disbursements, $136.9 billion was net benefit

payments. Net benefit payments increased by 6.2 percent from calendar year

2011 to calendar year 2012. This increase in DI benefit payments was due to

the same factors described earlier for OASI benefit payments.

Table III.A2.—Operations of the DI Trust Fund, Calendar Year 2012

[In millions]

Total asset reserves, December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $153,850

Receipts:

Net payroll tax contributions:

Payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $85,836

Payments from the General Fund of the Treasury for payroll tax contributions 

subject to refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -221

Net payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,615

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L. 111-312, P.L. 112-78, 

and P.L. 112-96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,522

Reduction in payroll tax contributions due to P.L. 111-147. . . . . . . . . . . . . . . . . . . 22

Reimbursements directed by P.L. 110-246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Payroll tax credits due to P.L. 98-21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

a Between -$0.5 and $0.5 million.

Net general fund reimbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,546

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 4

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,368

Interest adjustmentsb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust fund and

the general fund account for the Supplemental Security Income program; (2) interest arising from the revised

allocation of administrative expenses among the trust funds; and (3) interest on certain reimbursements to

the trust fund.

2

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 6,371

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,115

Disbursements:

Benefit payments:

Monthly benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,878

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -28

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 48

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,897

Financial interchange with the Railroad Retirement “Social Security Equivalent 

Benefit Account”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,758

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Offsetting receipts from sales of supplies, materials, etc. -1

Demonstration projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Miscellaneous reimbursements from the general fundc. . . . . . . . . . . . . . . . . . . . . .

c Includes reimbursements for costs incurred in performing certain legislatively mandated activities not

directly related to administering the DI program.

-3

Total administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,890

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,299

Net increase in asset reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31,184

Total asset reserves, December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,666
31

Calendar Year 2012 Operations

Total DI disbursements, which started to exceed non-interest income in 2005,

continued to exceed such income in 2012. As in 2011, DI disbursements

exceeded total DI income (including interest).

The reserves in the DI Trust Fund at the end of calendar year 2012 totaled

$122.7 billion, and consisted of $122.8 billion in U.S. Government obligations and, as an offset, an extension of credit of $0.1 billion against securities

to be redeemed within the following few days. The effective annual rate of

interest earned by the asset reserves in the DI Trust Fund during calendar

year 2012 was 4.7 percent, slightly lower than the 4.8 percent earned during

calendar year 2011. Table VI.A5, presented in appendix A, shows a detailed

listing of DI Trust Fund holdings by type of security, interest rate, and year

of maturity at the end of calendar years 2011 and 2012.

Section 201(d) of the Social Security Act provides that the Treasury securities issued for purchase by the OASI and DI Trust Funds shall have maturities fixed with due regard for the needs of the funds. The usual practice has

been to reinvest the maturing special issues, as of each June 30, so that the

value of the securities maturing in each of the next 15 years are approximately equal. However, as of June 2012, the Trustees projected that the

reserves in the DI Trust Fund would be depleted within 15 years. Therefore,

the Department of the Treasury, in consultation with the Chief Actuary of the

Social Security Administration, selected the amounts and maturity dates of

the DI special-issue bonds purchased on June 30, 2012, so that equal

amounts of special issues would mature over the four-year period 2013-16.

The bonds purchased have an interest rate of 1.375 percent. As of June 30,

2012, the DI Trust Fund had already redeemed all of the bonds coming due

on June 30, 2013 and on June 30, 2014, so this investment approach required

that all bond purchases on June 30, 2012 be split evenly over maturity dates

of June 30, 2013 and June 30, 2014. Table III.A7 shows additional details on

the investment transactions during 2012.

3. OASI and DI Trust Funds, Combined

Table III.A3 presents a statement of the operations of the OASI and DI Trust

Funds on a combined basis. The entries in this table represent the sums of the

corresponding values from tables III.A1 and III.A2. The two preceding subsections that cover OASI and DI provide a description of the nature of these

income and expenditure transactions.
Financial Operations and Legislative Changes

32

Note: Totals do not necessarily equal the sums of rounded components.

Table III.A4 compares estimates of total income and total expenditures for

calendar year 2012 from the 2008-12 Trustees Reports, to the corresponding

actual amounts for 2012.

Table III.A3.—Operations of the Combined OASI and DI Trust Funds, 

Calendar Year 2012

[In millions]

Total asset reserves, December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,677,925

Receipts:

Net payroll tax contributions:

Payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $591,028

Payments from the General Fund of the Treasury for payroll tax contributions subject to refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,519

Net payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589,508

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L. 111-312, P.L. 112-78, 

and P.L. 112-96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,118

Reduction in payroll tax contributions due to P.L. 111-147. . . . . . . . . . . . . . . . . . . 155

Reimbursements directed by P.L. 110-246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Payroll tax credits due to P.L. 98-21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

a Between -$0.5 and $0.5 million.

Net general fund reimbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,280

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 173

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,085

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,258

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,136

Interest adjustmentsb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust funds

and the general fund account for the Supplemental Security Income program; (2) interest arising from the

revised allocation of administrative expenses among the trust funds; and (3) interest on certain reimbursements to the trust funds.

7

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 109,143

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 840,190

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 774,825

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -83

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 49

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 774,791

Financial interchange with the Railroad Retirement “Social Security Equivalent 

Benefit Account”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,651

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,654

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680

Offsetting receipts from sales of supplies, materials, etc. . . . . . . . . . . . . . . . . . . . . -10

Demonstration projects 30

Miscellaneous reimbursements from the general fundc. . . . . . . . . . . . . . . . . . . . . .

c Includes reimbursements for costs incurred in performing certain legislatively mandated activities not

directly related to administering the OASI and DI programs.

-15

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,338

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 785,781

Net increase in asset reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,409

Total asset reserves, December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,732,334
33

Calendar Year 2012 Operations

l

Note: Totals do not necessarily equal the sums of rounded components.

A number of factors contribute to differences between estimates and subsequent actual amounts, including: (1) actual values for key demographic, economic, and other variables that differ from assumed levels; and (2)

legislation or other administrative initiatives that lawmakers enacted or finalized after the Trustees completed their estimates. Estimates for 2012 were far

too optimistic in the 2008 report because they did not anticipate the economic recession. Estimates in the 2009 and 2010 reports included an economic recession in the projections but assumed the recession would not be as

deep as it actually was and the recovery would not be as gradual as it has

been so far.

At the end of calendar year 2012, the OASDI program was providing

monthly benefits to about 56.8 million people. The OASI Trust Fund was

providing benefits to about 45.9 million people and the DI Trust Fund was

providing benefits to about 10.9 million people. The number of people

receiving benefits from the OASI and DI Trust Funds grew by 2.4 percent

Table III.A4.—Comparison of Actual Calendar Year 2012 Trust Fund Operations

With Estimates Made in Prior Reports, Based on Intermediate Assumptionsa

[Amounts in billions]

a Percentage differences are calculated prior to rounding.

Total income b

b “Actual” income for 2012 reflects adjustments to payroll tax contributions for prior calendar years (see

appendix A for description of these adjustments). “Estimated” income also includes such adjustments, but on

an estimated basis.

Total expenditures

Amount

Difference

from actual

(percent) Amount

Difference

from actual

(percent)

OASI Trust Fund:

Estimate in 2008 report . . . . . . . . . . . . . . $896.8 22.7 $656.7 1.7

Estimate in 2009 report . . . . . . . . . . . . . . 822.4 12.5 633.9 -1.8

Estimate in 2010 report . . . . . . . . . . . . . . 789.7 8.0 638.3 -1.1

Estimate in 2011 report . . . . . . . . . . . . . . 752.8 3.0 633.0 -1.9

Estimate in 2012 report . . . . . . . . . . . . . . 735.7 .6 647.2 .3

Actual amount . . . . . . . . . . . . . . . . . . . . . 731.1 — 645.5 —

DI Trust Fund:

Estimate in 2008 report . . . . . . . . . . . . . . 135.2 23.9 136.7 -2.6

Estimate in 2009 report . . . . . . . . . . . . . . 124.1 13.7 138.6 -1.2

Estimate in 2010 report . . . . . . . . . . . . . . 118.4 8.5 141.1 .5

Estimate in 2011 report . . . . . . . . . . . . . . 114.0 4.5 139.0 -1.0

Estimate in 2012 report . . . . . . . . . . . . . . 110.2 1.0 141.5 .8

Actual amount . . . . . . . . . . . . . . . . . . . . . 109.1 — 140.3 —

OASI and DI Trust Funds, combined:

Estimate in 2008 report . . . . . . . . . . . . . . 1,031.9 22.8 793.4 1.0

Estimate in 2009 report . . . . . . . . . . . . . . 946.5 12.7 772.4 -1.7

Estimate in 2010 report . . . . . . . . . . . . . . 908.1 8.1 779.3 -.8

Estimate in 2011 report . . . . . . . . . . . . . . 866.8 3.2 772.0 -1.8

Estimate in 2012 report . . . . . . . . . . . . . . 846.0 .7 788.7 .4

Actual amount . . . . . . . . . . . . . . . . . . . . . 840.2 — 785.8 —
Financial Operations and Legislative Changes

34

and 2.6 percent, respectively, during the calendar year. This growth reflects

increases in the insured population and effects of the economic downturn.

Table III.A5 shows the estimated distributions of benefit payments in calendar years 2011 and 2012, by type of beneficiary, for each trust fund separately.

Note: Benefits are monthly benefits and lump-sum death payments. Totals do not necessarily equal the sums

of rounded components.

Net administrative expenses of the OASI and DI Trust Funds in calendar

year 2012 totaled $6.3 billion. This amount is equal to 0.9 percent of noninterest income and 0.8 percent of total expenditures. Table III.A6 shows

corresponding percentages for each trust fund separately and for the OASDI

program as a whole for each of the last 5 years.

Table III.A5.—Distribution of Benefit Payments by Type of Beneficiary or Payment, 

Calendar Years 2011 and 2012

[Amounts in millions]

Calendar year 2011 Calendar year 2012

Amount

Percentage

of total Amount

Percentage

of total

Total OASDI benefit payments . . . . . . . . . . $725,148 100.0 $774,825 100.0

OASI benefit payments . . . . . . . . . . . . . . 596,212 82.2 637,948 82.3

DI benefit payments . . . . . . . . . . . . . . . . . 128,935 17.8 136,878 17.7

OASI benefit payments, total. . . . . . . . . . . . 596,212 100.0 637,948 100.0

Monthly benefits:

Retired workers and auxiliaries . . . . . . 489,699 82.1 527,403 82.7

Retired workers . . . . . . . . . . . . . . . . 461,234 77.4 497,471 78.0

Spouses . . . . . . . . . . . . . . . . . . . . . . . 24,176 4.1 25,348 4.0

Children . . . . . . . . . . . . . . . . . . . . . . 4,288 .7 4,583 .7

Survivors of deceased workers. . . . . . . 106,310 17.8 110,345 17.3

Aged widows and widowers. . . . . . . 84,342 14.1 87,603 13.7

Disabled widows and widowers . . . . 2,199 .4 2,293 .4

Parents . . . . . . . . . . . . . . . . . . . . . . . 22 a

a Less than 0.05 percent.

22 a

Children . . . . . . . . . . . . . . . . . . . . . . 18,100 3.0 18,752 2.9

Widowed mothers and fathers 

caring for child beneficiaries . . . . 1,647 .3 1,676 .3

Uninsured persons generally aged 72 

before 1968 . . . . . . . . . . . . . . . . . . . b

b Less than $0.5 million.

a — —

Lump-sum death payments . . . . . . . . . . . 204 a 200 a

DI benefit payments, total . . . . . . . . . . . . . . 128,935 100.0 136,878 100.0

Disabled workers . . . . . . . . . . . . . . . . . 119,563 92.7 127,155 92.9

Spouses. . . . . . . . . . . . . . . . . . . . . . . . . 608 .5 631 .5

Children . . . . . . . . . . . . . . . . . . . . . . . . 8,765 6.8 9,092 6.6
35

Calendar Year 2012 Operations

The acquisition and disposition of securities during calendar year 2012

changed the invested reserves of the OASI Trust Fund and the DI Trust

Fund. Table III.A7 presents these investment transactions for each trust fund

separately and for the trust funds combined.

Note: All investments are shown at par value. Totals do not necessarily equal the sums of rounded components.

Table III.A6.—Administrative Expenses as a Percentage of Non-interest Income and of 

Total Expenditures, Calendar Years 2008-12

Calendar year 

OASI Trust Fund DI Trust Fund

OASI and DI

Trust Funds,

combined

Non-interest

income

Total

expenditures

Non-interest

income

Total

expenditures

Non-interest

income

Total

expenditures

2008 . . . . . . . . . . . 0.5 0.6 2.6 2.3 0.8 0.9

2009 . . . . . . . . . . . .6 .6 2.8 2.3 .9 .9

2010 . . . . . . . . . . . .6 .6 3.1 2.3 1.0 .9

2011 . . . . . . . . . . . .6 .6 3.0 2.2 .9 .9

2012 . . . . . . . . . . . .5 .5 2.8 2.1 .9 .8

Table III.A7.—Trust Fund Investment Transactions, Calendar Year 2012

[In millions]

OASI

Trust Fund

DI

Trust Fund

OASI and DI

Trust Funds,

combined

Invested asset reserves, December 31, 2011a. .

a Invested asset reserves differ from total asset reserves by the amount of undisbursed balances. See tables

VI.A4 and VI.A5 for details.

$2,524,898 $153,996 $2,678,895

Acquisitions:

Special issues:

Certificates of indebtedness . . . . . . . . . . . 685,103 107,084 792,187

Bondsb . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Purchased on June 30, 2012. The interest rate on these purchases was 1.375 percent.

266,943 6,530 273,473

Total acquisitions . . . . . . . . . . . . . . . . . . . 952,046 113,614 1,065,660

Dispositions:

Special issues:

Certificates of indebtedness . . . . . . . . . . . 687,607 107,556 795,163

Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,066 37,253 216,318

Total dispositions . . . . . . . . . . . . . . . . . . . 866,672 144,809 1,011,481

Net increase in invested asset reserves . . . . . . 85,374 -31,195 54,179

Invested asset reserves, December 31, 2012a . 2,610,272 122,802 2,733,074
Financial Operations and Legislative Changes

36

B. SOCIAL SECURITY AMENDMENTS SINCE THE 2012 REPORT

Since the Trustees submitted the 2012 report to Congress, one policy has

been implemented and one law has been enacted that are expected to have

notable financial effects on the OASDI program.

The Deferred Action for Childhood Arrivals policy was implemented on

June 15, 2012 by the Department of Homeland Security. This policy directs

immigration and border officials to defer deportation actions for certain individuals who immigrated illegally to the United States as children. Deferred

action status is granted for two years, with the option to reapply for additional two-year periods thereafter. Those who apply for and receive deferred

action status are eligible for employment authorization. Because this policy

will lead to additional authorized workers, projected payroll tax income

increases slightly. This policy will have a small financial impact over both

the short-range and long-range projection periods.

The American Taxpayer Relief Act of 2012, Public Law 112-240, was

enacted on January 2, 2013. This law makes permanent most of the lower

personal income tax rate provisions of the Economic Growth and Tax Relief

Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003, which were scheduled to expire on January 1, 2013. The

principal exception is that the marginal tax rate for the highest income

bracket reverts to the higher level that had been in place prior to the 2001

law. The law also establishes caps on tax deductions and credits for those at

upper income levels. This law reduces projected income from taxation of

benefits, resulting in a significant financial impact over both the short-range

and long-range projection periods.

The financial projections shown in this report include the effects of the

implementation of the Deferred Action for Childhood Arrivals policy and the

American Taxpayer Relief Act of 2012. Sections IV.A.4 and IV.B.6 of this

report provide further analysis of the nature and magnitude of their effects on

the financial status of the OASDI program.
37

Short-Range Estimates

IV. ACTUARIAL ESTIMATES

This chapter presents actuarial estimates of the future financial condition of

the Social Security program. These estimates show the income, cost, and

asset reserves or unfunded obligation of the OASI and DI Trust Funds: (1) in

dollars over the 10-year short-range period; and (2) as a percentage of taxable payroll, as a percentage of gross domestic product, and in present-value

dollars over the 75-year long-range period. In addition, the chapter discusses

a variety of measures of the adequacy of current program financing. This

report distinguishes between: (1) the cost (obligations) of the program, which

includes all future benefits scheduled under current law; and (2) expenditures

(disbursements), which include actual payments for the past plus only the

portion of projected program cost that would be payable with the financing

provisions in current law.

This chapter presents the estimates and measures of trust fund financial adequacy for the short range period (2013-22) first, followed by estimates and

measures of actuarial status for the long range period (2013-87). Summary

measures are also provided for trust fund status over the infinite horizon. As

described in the Overview chapter of this report, these estimates depend

upon a broad set of demographic, economic, and programmatic factors. This

chapter presents estimates under three sets of assumptions to show a wide

range of possible outcomes, because assumptions related to these factors are

subject to uncertainty. The intermediate set of assumptions, designated as

alternative II, reflects the Trustees’ best estimate of future experience; the

low-cost alternative I is significantly more optimistic and the high-cost alternative III is significantly more pessimistic for the trust funds’ future financial

outlook. The tables of this report show the intermediate estimates first, followed by the low-cost and high-cost estimates. Chapter V describes these

three sets of assumptions, along with the actuarial methods used to produce

the estimates. Appendix D and appendix E present two additional methods to

illustrate the uncertainty of the projections. Appendix D presents sensitivity

analyses of the effects of variation in individual factors and appendix E presents probability distributions generated by a stochastic model.

A. SHORT-RANGE ESTIMATES

The Trustees consider the trust funds to be fully solvent if the funds can pay

scheduled benefits in full on a timely basis. A standard method of assessing

solvency is the “trust fund ratio,” which is the reserves in a fund at the beginning of a year (which do not include advance tax transfers) expressed as a

percentage of the cost during the year. The trust fund ratio represents the proportion of a year’s cost which the reserves available at the beginning of that

year can cover. The Trustees assume that a trust fund ratio of 100 percent of
Actuarial Estimates

38

annual program cost provides a reasonable “contingency reserve.” Maintaining a reasonable contingency reserve is important because the trust funds do

not have borrowing authority. After reserves are depleted, the trust funds

would be unable to pay benefits in full on a timely basis if annual revenue

were less than annual cost. Unexpected events, such as severe economic

recessions or large changes in other trends, can quickly deplete reserves. In

such cases, a reasonable contingency reserve can maintain the ability to pay

scheduled benefits while giving lawmakers time to address possible changes

to the program.

The short-range test of financial adequacy applies to the OASI and DI Trust

Funds individually and combined. If the estimated trust fund ratio is at least

100 percent at the beginning of the projection period, the test requires that it

remain at or above 100 percent throughout the 10-year period. If the ratio is

initially less than 100 percent, then it must reach at least 100 percent within

5 years (without reserve depletion at any time during this period) and then

remain at or above 100 percent throughout the remainder of the 10-year

period. This test is applied using the estimates based on the intermediate

assumptions. If either trust fund fails this test, then program solvency in the

next 10 years is in question, and lawmakers should take prompt action to

improve short-range financial adequacy.

1. Operations of the OASI Trust Fund

This subsection presents estimates, based on the assumptions described in

chapter V, of the operations and financial status of the OASI Trust Fund for

the period 2013-22. These estimates assume that there are no changes in the

statutory provisions and regulations under which the OASDI program currently operates.1

Table IV.A1 shows these estimates, which indicate that the asset reserves of

the OASI Trust Fund continue to increase through 2021 under the intermediate assumptions, throughout the next 10 years under the low-cost assumptions, and through 2015 under the high-cost assumptions. However, trust

fund ratios decline throughout the 10-year period under all three sets of

assumptions. Based on the intermediate assumptions, the reserves of the

OASI Trust Fund continue to exceed 100 percent of annual cost by a large

amount through the end of 2022. Consequently, the OASI Trust Fund satisfies the test of short-range financial adequacy by a wide margin. Table IV.A1

also indicates that the OASI Trust Fund would satisfy the short-range test

even under the high-cost assumptions. See figure IV.A1 for an illustration of

these results.

 1 The estimates shown in this subsection reflect 12 months of scheduled benefits in each year of the shortrange projection period. In practice, the actual payment dates have at times shifted over calendar year

boundaries as a result of the statutory requirement for early delivery of benefit checks when the normal

check delivery date is a Saturday, Sunday, or legal public holiday.
39

Short-Range Estimates

Note: Totals do not necessarily equal the sums of rounded components.

Table IV.A1.—Operations of the OASI Trust Fund, Calendar Years 2008-22a

[Dollar amounts in billions]

a Appendix A presents a detailed description of the components of income and cost, along with complete historical values.

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsb

b Includes reimbursements from the General Fund of the Treasury to the OASI Trust Fund for: (1) the cost of

noncontributory wage credits for military service before 1957; (2) the cost of benefits to certain uninsured persons who attained age 72 before 1968; (3) the cost of payroll tax credits provided to employees in 1984 and

self-employed persons in 1984-89 by Public Law 98-21; (4) the cost in 2009-17 of excluding certain selfemployment earnings from SECA taxes under Public Law 110-246; and (5) payroll tax revenue forgone under

the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.

Taxation of

benefits

Net

interest Total

Scheduled

benefits

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioc

c The “Trust fund ratio” column represents reserves at the beginning of a year (which are identical to reserves

at the end of the prior year shown in the “Amount at end of year” column) as a percentage of cost for the year.

Historical data:

2008 . . . $695.5 $574.6 d

d Between -$50 million and $50 million.

$15.6 $105.3 $516.2 $509.3 $3.2 $3.6 $179.3 $2,202.9 392

2009 . . . 698.2 570.4 d 19.9 107.9 564.3 557.2 3.4 3.7 133.9 2,336.8 390

2010 . . . 677.1 544.8 $2.0 22.1 108.2 584.9 577.4 3.5 3.9 92.2 2,429.0 400

2011 . . . 698.8 482.4 87.8 22.2 106.5 603.8 596.2 3.5 4.1 95.0 2,524.1 402

2012 . . . 731.1 503.9 97.7 26.7 102.8 645.5 637.9 3.4 4.1 85.6 2,609.7 391

Intermediate:

2013 . . . 743.4 617.6 3.7 24.2 97.9 682.0 674.8 3.3 3.9 61.4 2,671.1 383

2014 . . . 781.0 657.8 .3 28.0 95.0 724.7 717.2 3.3 4.3 56.3 2,727.4 369

2015 . . . 826.9 700.1 .2 30.8 95.9 770.3 762.4 3.4 4.4 56.6 2,784.0 354

2016 . . . 881.1 747.0 .1 34.1 99.9 822.4 814.7 3.6 4.2 58.7 2,842.7 339

2017 . . . 940.2 796.5 .1 37.9 105.8 879.6 871.2 3.7 4.7 60.5 2,903.3 323

2018 . . . 1,000.8 846.5 d 41.6 112.7 940.8 932.1 3.9 4.9 60.0 2,963.2 309

2019 . . . 1,056.9 892.3 d 45.8 118.7 1,006.9 997.9 4.0 5.1 49.9 3,013.2 294

2020 . . . 1,110.7 936.9 d 50.1 123.7 1,077.3 1,067.9 4.1 5.2 33.4 3,046.6 280

2021 . . . 1,164.3 982.5 d 54.4 127.5 1,146.7 1,137.4 4.2 5.1 17.7 3,064.3 266

2022 . . . 1,217.8 1,027.6 d 59.1 131.1 1,223.3 1,213.4 4.4 5.6 -5.5 3,058.7 250

Low-cost:

2013 . . . 750.4 623.7 3.8 24.1 98.7 681.6 674.5 3.3 3.9 68.7 2,678.4 383

2014 . . . 806.8 681.6 .3 27.9 97.1 722.5 715.0 3.3 4.2 84.3 2,762.7 371

2015 . . . 854.3 725.3 .2 30.6 98.3 763.6 755.8 3.4 4.4 90.7 2,853.4 362

2016 . . . 912.2 775.7 .1 33.5 102.9 808.3 800.6 3.6 4.1 103.9 2,957.3 353

2017 . . . 970.9 824.8 .1 36.9 109.2 857.2 849.0 3.7 4.6 113.7 3,071.0 345

2018 . . . 1,027.9 871.5 d 40.2 116.3 908.4 899.9 3.8 4.7 119.5 3,190.5 338

2019 . . . 1,081.2 913.8 d 43.8 123.6 962.6 953.9 3.9 4.8 118.6 3,309.1 331

2020 . . . 1,134.1 955.5 d 47.4 131.1 1,020.0 1,011.1 4.0 4.9 114.1 3,423.2 324

2021 . . . 1,188.9 999.5 d 51.0 138.4 1,075.7 1,066.9 4.1 4.7 113.2 3,536.4 318

2022 . . . 1,244.5 1,043.1 d 54.9 146.4 1,137.1 1,127.8 4.2 5.1 107.3 3,643.7 311

High-cost:

2013 . . . 735.8 610.8 3.7 24.2 97.2 682.3 675.1 3.3 3.9 53.5 2,663.2 383

2014 . . . 752.4 631.7 .3 28.1 92.4 726.9 719.3 3.3 4.3 25.5 2,688.7 366

2015 . . . 789.3 666.6 .2 31.1 91.4 777.0 769.0 3.4 4.5 12.4 2,701.1 346

2016 . . . 833.5 705.5 .1 34.7 93.2 836.6 828.7 3.6 4.3 -3.1 2,698.0 323

2017 . . . 888.2 752.6 .1 38.8 96.7 901.5 892.8 3.7 4.9 -13.3 2,684.7 299

2018 . . . 948.0 804.2 d 43.0 100.8 973.0 964.0 3.9 5.1 -25.0 2,659.6 276

2019 . . . 1,006.1 855.2 d 47.9 103.0 1,051.5 1,042.1 4.1 5.3 -45.4 2,614.2 253

2020 . . . 1,064.8 908.5 d 52.8 103.5 1,135.5 1,125.7 4.3 5.6 -70.7 2,543.5 230

2021 . . . 1,119.9 960.3 d 57.9 101.7 1,219.6 1,209.7 4.4 5.4 -99.7 2,443.8 209

2022 . . . 1,171.7 1,009.8 d 63.4 98.4 1,312.8 1,302.2 4.6 6.0 -141.1 2,302.8 186
Actuarial Estimates

40

The estimated income shown in table IV.A1 increases annually under each

set of assumptions throughout the short-range projection period. The estimated increases in income reflect increases in estimated OASDI taxable

earnings and growth in interest earnings on the invested reserves in the trust

fund. After decreasing in the period 2008-10, employment increases in every

year through 2022 for all three alternatives. The number of persons with taxable earnings increases on the basis of alternatives I, II, and III from

161 million during calendar year 2012 to about 183 million, 179 million, and

175 million, respectively, in 2022. The total annual amount of taxable earnings increases in every year through 2022 for each alternative. Total earnings

increase from $5,717 billion in 2012 to $9,900 billion, $9,757 billion, and

$9,593 billion in 2022, on the basis of alternatives I, II, and III, respectively.

These increases in taxable earnings are due primarily to: (1) projected

increases in employment levels as the working age population increases;

(2) trend increases in average earnings in covered employment (reflecting

both real growth and price inflation); (3) increases in the contribution and

benefit base under the automatic-adjustment provisions; and (4) growth in

employment and average earnings, temporarily higher than trend, as the

economy recovers from the economic recession.

 Figure IV.A1.—Short-Range OASI and DI Trust Fund Ratios

[Asset reserves as a percentage of annual cost]

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Calendar year 

DI

OASI

Historical Estimated 

"Minimum" level for short-term financial adequacy 

I 

III II 

I 

II 

III 
41

Short-Range Estimates

Interest earnings generally contribute to the overall projected increase in

trust fund income during this period. Despite the projected growth in OASI

Trust Fund reserves, annual interest earnings decline slightly in the early projection years under all three sets of assumptions due to historically low interest rates assumed for newly-issued bonds. Thereafter, interest income

increases under the intermediate and low-cost assumptions due to the net

effects of higher reserve levels and the patterns of projected interest rates.

Under the high-cost assumptions, interest income increases through 2020,

after which declining reserves cause decreases in interest income. Although

interest earnings generally increase over the short-range period, interest

declines as a share of total OASI Trust Fund income. By 2022, OASI interest

income is about 11 percent of total trust fund income under the intermediate

assumptions, as compared to 14 percent in 2012.

Rising OASI cost during 2013-22 reflects automatic benefit increases as well

as the upward trend in the number of beneficiaries and in the average

monthly earnings underlying benefits. The growth in the number of beneficiaries in the past and the expected future growth result both from the

increase in the aged population and from the increase in the proportion of the

population that is eligible for benefits.

The Treasury invests OASI income in financial securities, generally special

public-debt obligations of the U.S. Government. The revenue used to make

these purchases flows to the General Fund of the Treasury. The trust fund

earns interest on these securities, and the Treasury invests maturing securities

in new securities if not immediately needed to pay program costs. Program

expenditures require the redemption of trust fund securities, generally prior

to maturity, to cover the payments made by the General Fund of the Treasury

on behalf of the trust fund.

2. Operations of the DI Trust Fund

Table IV.A2 shows the estimated operations and financial status of the DI

Trust Fund during calendar years 2013-22 under the three sets of assumptions, together with values for actual experience during 2008-12. Non-interest income increases steadily after 2012 under each alternative, due to most

of the same factors described previously for the OASI Trust Fund. DI cost

grows at a slower rate than DI income or OASI cost, but remains greater than

DI income. As a result, after having reached a maximum in 2008, DI Trust

Fund reserves continue to decrease after 2012 under each alternative. Under

the low-cost assumptions, reserves begin to increase again after reaching a

low point in 2019. Under the intermediate assumptions, reserves continue to

decline until their projected depletion in 2016. Under the high-cost assumptions, DI reserves decline steadily until depletion in 2015.
Actuarial Estimates

42

Table IV.A2.—Operations of the DI Trust Fund, Calendar Years 2008-22a

[Dollar amounts in billions]

a Appendix A presents a detailed description of the components of income and cost, along with complete historical values.

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsb

b Includes reimbursements from the General Fund of the Treasury to the DI Trust Fund for: (1) the cost of noncontributory wage credits for military service before 1957; (2) the cost of payroll tax credits provided to

employees in 1984 and self-employed persons in 1984-89 by Public Law 98-21; (3) the cost in 2009-17 of

excluding certain self-employment earnings from SECA taxes under Public Law 110-246; and (4) payroll tax

revenue forgone under the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.

Taxation of

benefits

Net

interest Total

Scheduled

benefits

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioc

c The “Trust fund ratio” column represents reserves at the beginning of a year (which are identical to reserves at

the end of the prior year shown in the “Amount at end of year” column) as a percentage of cost for the year.

Historical data:

2008 . . . $109.8 $97.6 d

d Between -$50 million and $50 million.

$1.3 $11.0 $109.0 $106.0 $2.5 $0.4 $0.9 $215.8 197

2009 . . . 109.3 96.9 d 2.0 10.5 121.5 118.3 2.7 .4 -12.2 203.5 178

2010 . . . 104.0 92.5 $0.4 1.9 9.3 127.7 124.2 3.0 .5 -23.6 179.9 159

2011 . . . 106.3 81.9 14.9 1.6 7.9 132.3 128.9 2.9 .5 -26.1 153.9 136

2012 . . . 109.1 85.6 16.5 .6 6.4 140.3 136.9 2.9 .5 -31.2 122.7 110

Intermediate:

2013 . . . 111.4 104.9 .6 1.2 4.7 144.8 141.2 3.2 .4 -33.5 89.2 85

2014 . . . 117.1 111.7 d 2.2 3.2 150.2 146.6 3.2 .4 -33.1 56.1 59

2015 . . . 123.1 118.9 d 2.3 1.8 155.2 151.5 3.3 .4 -32.1 24.0 36

2016 . . . e

e The DI Trust Fund becomes depleted in 2016 and 2015 under the intermediate and the high-cost assumptions,

respectively. Accordingly, certain trust fund operation values from the year of trust fund depletion through 2022

are not meaningful under present law.

Note: Totals do not necessarily equal the sums of rounded components.

126.8 d 2.6 e 160.8 156.8 3.6 .4 e e 15

2017 . . . e 135.3 d 2.8 e 166.6 162.4 3.9 .3 e ee

2018 . . . e 143.7 d 3.1 e 172.8 168.3 4.2 .3 e ee

2019 . . . e 151.5 d 3.4 e 179.5 174.8 4.4 .2 e ee

2020 . . . e 159.1 d 3.6 e 186.6 181.7 4.7 .2 e ee

2021 . . . e 166.8 d 4.0 e 195.8 190.6 5.0 .2 e ee

2022 . . . e 174.5 d 4.3 e 205.3 200.0 5.2 .1 e ee

Low-cost:

2013 . . . 112.5 105.9 .7 1.2 4.7 142.8 139.2 3.2 .4 -30.3 92.4 86

2014 . . . 121.4 115.7 d 2.1 3.6 145.8 142.2 3.2 .4 -24.3 68.0 63

2015 . . . 128.0 123.2 d 2.2 2.6 147.8 144.1 3.3 .4 -19.7 48.3 46

2016 . . . 136.0 131.7 d 2.4 1.9 150.2 146.2 3.6 .3 -14.2 34.1 32

2017 . . . 144.0 140.1 d 2.6 1.4 153.0 148.8 3.9 .3 -9.0 25.1 22

2018 . . . 151.8 148.0 d 2.8 1.0 156.0 151.6 4.1 .3 -4.2 21.0 16

2019 . . . 159.1 155.2 d 3.0 .9 159.4 154.8 4.4 .2 -.3 20.6 13

2020 . . . 166.4 162.3 d 3.2 1.0 163.1 158.4 4.6 .2 3.3 23.9 13

2021 . . . 174.4 169.7 d 3.4 1.2 168.5 163.5 4.8 .1 5.9 29.9 14

2022 . . . 182.5 177.1 d 3.6 1.7 173.9 168.7 5.1 .1 8.6 38.5 17

High-cost:

2013 . . . 110.2 103.7 .6 1.2 4.6 147.0 143.4 3.2 .4 -36.8 85.8 83

2014 . . . 112.4 107.3 d 2.2 2.9 155.0 151.4 3.2 .4 -42.6 43.2 55

2015 . . . e 113.2 d 2.5 e 163.5 159.8 3.3 .4 e e 26

2016 . . . e 119.8 d 2.8 e 173.0 169.1 3.6 .4 e ee

2017 . . . e 127.8 d 3.1 e 182.4 178.1 3.9 .4 e ee

2018 . . . e 136.6 d 3.4 e 192.1 187.6 4.2 .3 e ee

2019 . . . e 145.2 d 3.8 e 202.4 197.6 4.5 .3 e ee

2020 . . . e 154.3 d 4.2 e 213.0 208.0 4.8 .2 e ee

2021 . . . e 163.1 d 4.6 e 225.8 220.5 5.1 .2 e ee

2022 . . . e 171.5 d 5.0 e 239.3 233.7 5.4 .2 e ee
43

Short-Range Estimates

Future DI cost increases in part due to increases in average benefit levels

resulting from: (1) automatic benefit increases; and (2) projected increases in

the amounts of average monthly earnings on which benefits are based. The

number of DI beneficiaries in current-payment status increases but at a

slower rate than in the past 20 years during the short-range projection period. 

At the beginning of calendar year 2012, the reserves of the DI Trust Fund

represented 110 percent of annual cost. During 2012, DI cost exceeded

income, and the trust fund ratio for the beginning of 2013 decreased to about

85 percent. Under the intermediate assumptions, cost exceeds total income

throughout the short-range projection period. The projected cost in excess of

income results in the estimated depletion of the DI Trust Fund reserves by

the end of 2016.

Under the low-cost assumptions, the trust fund ratio decreases to a low of

13 percent at the beginning of 2020 before increasing to 17 percent at the

beginning of 2022. Under the high-cost assumptions, the reserves of the DI

Trust Fund decline steadily until depletion in 2015.

Since the reserves of the DI Trust Fund were lower than estimated annual

cost at the beginning of 2013, and they remain below that level throughout

the short-range period, the DI Trust Fund fails the Trustees’ short-range test

of financial adequacy under all three alternatives. Furthermore, the DI Trust

Fund becomes depleted by the end of 2016 and 2015 under alternatives II

and III, respectively.

3. Operations of the Combined OASI and DI Trust Funds

Table IV.A3 shows the estimated operations and status of the combined

OASI and DI Trust Funds for calendar years 2013-22 under the three alternatives, together with actual experience in 2008-12. Income and cost for the

OASI Trust Fund represent over 80 percent of the corresponding amounts for

the combined OASI and DI Trust Funds. Therefore, based on the relative

strength of the OASI Trust Fund over the next 10 years, the combined OASI

and DI Trust Funds would have sufficient financial resources to pay all

scheduled benefits through the end of the short-range period and would satisfy the short-range test of financial adequacy under all three alternative sets

of assumptions. Under current law, one trust fund cannot share financial

resources with another trust fund.
Actuarial Estimates

44

Note: Totals do not necessarily equal the sums of rounded components.

Table IV.A3.—Operations of the Combined OASI and DI Trust Funds,

Calendar Years 2008-22a

[Dollar amounts in billions]

a Appendix A presents a detailed description of the components of income and cost, along with complete historical values.

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsb

b Includes reimbursements from the General Fund of the Treasury to the OASI and DI Trust Funds for: (1) the

cost of noncontributory wage credits for military service before 1957; (2) the cost of benefits to certain uninsured persons who attained age 72 before 1968; (3) the cost of payroll tax credits provided to employees in

1984 and self-employed persons in 1984-89 by Public Law 98-21; (4) the cost in 2009-17 of excluding certain

self-employment earnings from SECA taxes under Public Law 110-246; and (5) payroll tax revenue forgone

under the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.

Taxation of

benefits

Net

interest Total

Scheduled

benefits

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioc

c The “Trust fund ratio” column represents reserves at the beginning of a year (which are identical to reserves

at the end of the prior year shown in the “Amount at end of year” column) as a percentage of cost for the year.

Historical data:

2008 . . . $805.3 $672.1 d

d Between -$50 million and $50 million.

$16.9 $116.3 $625.1 $615.3 $5.7 $4.0 $180.2 $2,418.7 358

2009 . . . 807.5 667.3 d 21.9 118.3 685.8 675.5 6.2 4.1 121.7 2,540.3 353

2010 . . . 781.1 637.3 $2.4 23.9 117.5 712.5 701.6 6.5 4.4 68.6 2,609.0 357

2011 . . . 805.1 564.2 102.7 23.8 114.4 736.1 725.1 6.4 4.6 69.0 2,677.9 354

2012 . . . 840.2 589.5 114.3 27.3 109.1 785.8 774.8 6.3 4.7 54.4 2,732.3 341

Intermediate:

2013 . . . 854.8 722.5 4.4 25.3 102.6 826.8 816.0 6.5 4.3 28.0 2,760.3 330

2014 . . . 898.2 769.5 .3 30.1 98.2 875.0 863.8 6.4 4.7 23.2 2,783.5 315

2015 . . . 950.0 818.9 .2 33.2 97.7 925.5 913.9 6.8 4.9 24.5 2,808.0 301

2016 . . . 1,010.9 873.8 .1 36.7 100.3 983.2 971.5 7.2 4.5 27.6 2,835.7 286

2017 . . . 1,077.1 931.7 .1 40.7 104.7 1,046.3 1,033.6 7.6 5.0 30.9 2,866.6 271

2018 . . . 1,144.9 990.2 d 44.7 110.0 1,113.6 1,100.4 8.1 5.2 31.3 2,897.9 257

2019 . . . 1,207.4 1,043.8 d 49.2 114.4 1,186.4 1,172.7 8.4 5.3 21.0 2,918.9 244

2020 . . . 1,267.4 1,096.0 d 53.7 117.7 1,263.9 1,249.6 8.8 5.4 3.5 2,922.4 231

2021 . . . 1,327.4 1,149.3 d 58.4 119.7 1,342.4 1,328.0 9.2 5.2 -15.0 2,907.4 218

2022 . . . 1,386.9 1,202.1 d 63.4 121.4 1,428.6 1,413.3 9.6 5.7 -41.7 2,865.7 204

Low-cost:

2013 . . . 862.8 729.6 4.5 25.3 103.4 824.4 813.6 6.5 4.3 38.4 2,770.7 331

2014 . . . 928.2 797.3 .3 30.0 100.6 868.3 857.2 6.4 4.7 59.9 2,830.7 319

2015 . . . 982.4 848.4 .2 32.8 100.9 911.3 899.8 6.7 4.8 71.0 2,901.7 311

2016 . . . 1,048.2 907.4 .1 35.9 104.8 958.5 946.9 7.2 4.4 89.7 2,991.4 303

2017 . . . 1,114.9 964.8 .1 39.5 110.5 1,010.2 997.8 7.6 4.9 104.7 3,096.1 296

2018 . . . 1,179.7 1,019.5 d 42.9 117.3 1,064.4 1,051.5 7.9 5.0 115.3 3,211.5 291

2019 . . . 1,240.3 1,068.9 d 46.8 124.6 1,122.0 1,108.7 8.2 5.1 118.3 3,329.8 286

2020 . . . 1,300.5 1,117.8 d 50.6 132.1 1,183.2 1,169.4 8.6 5.1 117.4 3,447.1 281

2021 . . . 1,363.3 1,169.2 d 54.4 139.6 1,244.2 1,230.4 8.9 4.8 119.1 3,566.3 277

2022 . . . 1,427.0 1,220.2 d 58.6 148.2 1,311.0 1,296.5 9.3 5.3 115.9 3,682.2 272

High-cost:

2013 . . . 845.9 714.4 4.3 25.4 101.8 829.3 818.5 6.5 4.3 16.7 2,749.0 329

2014 . . . 864.9 739.0 .3 30.3 95.3 881.9 870.8 6.4 4.7 -17.1 2,732.0 312

2015 . . . 905.9 779.8 .2 33.6 92.3 940.5 928.8 6.7 4.9 -34.6 2,697.4 290

2016 . . . 954.5 825.3 .1 37.5 91.6 1,009.7 997.8 7.2 4.7 -55.2 2,642.2 267

2017 . . . 1,014.2 880.4 .1 41.9 91.9 1,083.8 1,070.9 7.6 5.3 -69.6 2,572.6 244

2018 . . . 1,079.4 940.8 d 46.4 92.1 1,165.1 1,151.6 8.1 5.4 -85.8 2,486.9 221

2019 . . . 1,142.4 1,000.5 d 51.7 90.2 1,253.9 1,239.7 8.6 5.6 -111.6 2,375.3 198

2020 . . . 1,206.0 1,062.8 d 57.0 86.3 1,348.5 1,333.6 9.1 5.8 -142.5 2,232.8 176

2021 . . . 1,265.5 1,123.3 d 62.5 79.7 1,445.3 1,430.2 9.5 5.6 -179.8 2,053.0 154

2022 . . . 1,321.0 1,181.3 d 68.4 71.3 1,552.0 1,535.9 10.0 6.2 -231.0 1,821.9 132
45

Short-Range Estimates

4. Factors Underlying Changes in 10-Year Trust Fund Ratio Estimates

From the 2012 Report

Table IV.A4 presents an analysis of the factors underlying the changes in the

intermediate estimates over the short-range projection period for the OASI,

DI, and the combined funds from last year’s report to this report.

In the 2012 report, the trust fund ratio for OASI reached 280 percent at the

beginning of 2021—the tenth projection year for that report. The change in

the short-range valuation period alone, from 2012-21 to 2013-22, lowered

the estimated trust fund ratio for the tenth year by 15 percentage points, to

265 percent. Changes to reflect legislation enacted since last year’s report,

the most recent data, adjustments to the assumptions for future years, and

changes in projection methods further reduced the ratio for the tenth projection year to 250 percent.

Changes in demographic assumptions over the short-range period reduced

the projected tenth-year trust fund ratio by 9 percentage points. Changes in

economic data and assumptions, primarily the effect of slightly higher costof-living adjustments and lower interest rates over the ten year period,

reduced the trust fund ratio by 11 percentage points by the beginning of

2022. Incorporating recent programmatic data, including the numbers of beneficiaries and amount of benefit payments, increased the 2022 trust fund ratio

by 5 percentage points. In addition, there are two significant changes in the

short-range projection methodology from what was used for the 2012 report.

The first of these is an improvement in the process used to estimate the number of people who are fully insured, and the second is a refinement of the

method for projecting the number of retired workers. In combination, these

methodology changes increased the ending trust fund ratio by 6 percentage

points. Finally, the estimated effects of P.L.112-240 and implementation of

the Deferred Action for Childhood Arrivals policy decreased the projected

ending OASI Trust Fund ratio by a net total of 4 percentage points. See section III.B for details.

Table IV.A4 also shows corresponding estimates of the factors underlying

the changes in the financial projections for the DI Trust Fund, and for the

combined OASI and DI Trust Funds. The ratios at the beginning of 2021 for

the DI Trust Fund and the combined OASI and DI Trust Funds in last year’s

report, as well as the corresponding ratios for the beginning of 2022 in this

year’s report, are theoretical because the Trustees project that the DI Trust

Fund reserves will be depleted prior to the end of the short range projection

period. The relatively small 2-percentage-point decrease in the DI trust fund

ratio is the net effect of largely offsetting increases and decreases from the

factors described above for the OASI Trust Fund.
Actuarial Estimates

46

Note: Totals do not necessarily equal the sums of rounded components.

Table IV.A4.—Reasons for Change in Trust Fund (Unfunded Obligation) Ratios 

at the Beginning of the Tenth Year of Projection Under Intermediate Assumptions

[In percent]

Item

OASI

Trust Fund

DI

Trust Fund

OASI and DI

Trust Funds,

combined

Trust fund ratio shown in last year’s report for calendar year 2021a.

a Figures for DI, and OASI and DI combined, are theoretical because the DI Trust Fund reserves are depleted

before the beginning of the tenth year under the assumptions of each report. The figures for DI are the ratios

of the unfunded obligation at the beginning of the tenth year to cost for that year.

280 -74 227

Change in trust fund ratio due to changes in: 

Legislation and regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4 -1 -4

Valuation period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15 -15 -15

Demographic data and assumptions. . . . . . . . . . . . . . . . . . . . . . . -9 b

b Between -0.5 and 0.5 percent.

-7

Economic data and assumptions . . . . . . . . . . . . . . . . . . . . . . . . -11 -6 -9

Programmatic data and assumptions . . . . . . . . . . . . . . . . . . . . . . 5 12 5

Projection methods and data . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 8 5

Total change in trust fund ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30 -2 -23

Trust fund ratio shown in this report for calendar year 2022a . . . . . . 250 -76 204
47

Long-Range Estimates

B. LONG-RANGE ESTIMATES

The Trustees use three types of financial measures to assess the actuarial status of the Social Security trust funds under the financing approach specified

in current law: (1) annual cash-flow measures, including income rates, cost

rates, and balances; (2) trust fund ratios; and (3) summary measures such as

actuarial balances and unfunded obligations.

The difference between the annual income rate and annual cost rate, both

expressed as percentages of taxable payroll, is the annual balance. The level

and trend of the annual balances at the end of the 75-year projection period

are factors that the Trustees use to assess the financial condition of the program.

The trust fund ratio for a year is the proportion of the year’s projected cost

that could be paid with funds available at the beginning of the year. Critical

factors considered by the Trustees in assessing actuarial status include:

(1) the level and year of maximum trust fund ratio; (2) the year of depletion

of the fund reserves and the percent of scheduled benefits that is still payable

after reserves are depleted; and (3) the stability of the trust fund ratio at the

end of the long-range period. 

Solvency at any point in time requires that sufficient financial resources are

available to pay all scheduled benefits at that time. Solvency is generally

indicated by a positive trust fund ratio. “Sustainable solvency” for the financing of the program under a specified set of assumptions has been achieved

when the program has positive projected trust fund ratios throughout the

75-year projection period that are either stable or rising at the end of the

period.

Summarized measures for any period indicate whether projected income is

sufficient, on average, for the whole period. The Trustees summarize the

total income and cost over valuation periods that extend through 75 years

and over the infinite horizon. This section presents two summarized measures: (1) the actuarial balance; and (2) the open group unfunded obligation.

The actuarial balance indicates the size of any surplus or shortfall as a percentage of the taxable payroll over the period. The open group unfunded

obligation indicates the size of any shortfall in present-value dollars.

This section also includes additional information that the Trustees use to

assess the financial status of the Social Security program, including: (1) a

comparison of the number of beneficiaries to the number of covered workers; (2) the test of long-range close actuarial balance; and (3) the reasons for

the change in the actuarial balance from the last report.
Actuarial Estimates

48

1. Annual Income Rates, Cost Rates, and Balances

The concepts of income rate and cost rate, expressed as percentages of taxable payroll, are important in the consideration of the long-range actuarial

status of the trust funds. The annual income rate is the ratio of all non-interest income to the OASDI taxable payroll for the year. Non-interest income

includes payroll taxes, taxes on scheduled benefits, and any general fund

transfers or reimbursements. The OASDI taxable payroll consists of the total

earnings subject to OASDI taxes with some relatively small adjustments.1

The annual cost rate is the ratio of the cost of the program to the taxable payroll for the year. The cost includes scheduled benefits, administrative

expenses, net interchange with the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries. For

any year, the income rate minus the cost rate is the “balance” for the year.

Table IV.B1 presents a comparison of the estimated annual income rates and

cost rates by trust fund and alternative. Table VI.F8 shows detailed longrange projections of trust fund operations in current dollar amounts.

Under the intermediate assumptions, the Trustees project that the OASI

income rate will rise from 10.89 percent of taxable payroll for 2013 to

11.39 percent for 2087. Income from taxation of benefits causes this increase

for two main reasons: (1) benefits are rising faster than payroll; and (2) the

benefit-taxation threshold amounts are fixed (not indexed), and therefore an

increasing share of benefits will be subject to tax as incomes and benefits

rise. The pattern of the cost rate is much different. The OASI cost rate

increased from 11.04 percent of taxable payroll for 2011 to 11.33 percent for

2012. For 2013 and 2014, the Trustees project smaller increases in the cost

rate, reaching levels of 11.51 and 11.63 percent of taxable payroll, respectively. From 2014 to 2016, the cost rate stabilizes, as the economic recovery

through this period offsets the effects of the aging population. From 2016 to

2035, the cost rate rises rapidly because the retirement of the baby-boom

generation will increase the number of beneficiaries much faster than the

number of workers increases, as subsequent lower-birth-rate generations

replace the baby-boom generation at working ages. From 2038 to 2050, the

cost rate declines because the aging baby-boom generation is gradually

replaced at retirement ages by historically low-birth-rate generations, causing the beneficiary-to-worker ratio to decline. After 2050, the Trustees project the OASI cost rate will generally rise, reaching 15.73 percent of taxable

payroll for 2087, primarily because of projected reductions in death rates.

 1 Adjustments include adding deemed wage credits based on military service for 1983-2001 and reflecting

the lower effective tax rates (as compared to the combined employee-employer rate) that apply to multipleemployer “excess wages.” Lower rates also applied to net earnings from self-employment before 1984 and

to income from tips before 1988.
49

Long-Range Estimates

The Trustees’ projections of income rates under the low-cost and high-cost

sets of assumptions are very similar to those projected for the intermediate

assumptions, because income rates are largely a reflection of the payroll tax

rates specified in the law (including reimbursements from the General Fund

of the Treasury to compensate fully for the temporary reductions in payroll

tax rates in 2010 through 2012), with the gradual change from taxation of

benefits noted above. In contrast, OASI cost rates for the low-cost and highcost assumptions are significantly different from those projected for the

intermediate assumptions. For the low-cost assumptions, the OASI cost rate

decreases from 2012 through 2017, and then rises until it peaks in 2034 at

13.05 percent of payroll. Thereafter, the cost rate generally declines until it

reaches 11.59 percent of payroll for 2087, at which point the income rate

reaches 11.18 percent. For the high-cost assumptions, the OASI cost rate

rises throughout the 75-year period. It rises relatively rapidly through 2035

because of the aging of the baby-boom generation. Thereafter, the cost rate

continues to rise and reaches 22.17 percent of payroll for 2087, at which

point the income rate reaches 11.73 percent.

The pattern of the projected OASI annual balance is important in the analysis

of the financial condition of the program. Under the intermediate assumptions, the annual balance is negative throughout the projection period. This

annual deficit rises rapidly, reaching a peak of 3.61 percent of taxable payroll

for 2038, then declines to 3.29 percent of taxable payroll for 2051, and generally rises thereafter, reaching 4.34 percent of taxable payroll for 2087.

Under the low-cost assumptions, the Trustees project the OASI annual balance to be negative in 2013-2015, positive for 2016 through 2018, and negative thereafter. The annual deficit peaks at 1.82 percent of taxable payroll for

2034 and then declines for most years thereafter, reaching a deficit of

0.41 percent of payroll for 2087. Under the high-cost assumptions, the OASI

balance is negative throughout the projection period. Annual deficits rise to

2.03 percent for 2020, 6.21 percent for 2050, and 10.45 percent of payroll for

2087.
Actuarial Estimates

50

Table IV.B1.—Annual Income Rates, Cost Rates, and Balances,

Calendar Years 1990-2090

[As a percentage of taxable payroll]

Calendar 

year

OASI DI OASDI

Income ratea Cost

rate Balance

Income ratea Cost

rate Balance

Income ratea Cost

rate Balance

Historical data:

1990. . . . . 11.47 9.66 1.82 1.18 1.09 0.10 12.66 10.74 1.91

1995. . . . . 10.64 10.22 .42 1.87 1.44 .43 12.51 11.67 .85

2000. . . . . 10.84 8.97 1.87 1.78 1.42 .36 12.62 10.40 2.23

2001. . . . . 10.90 9.08 1.82 1.82 1.48 .35 12.72 10.55 2.17

2002. . . . . 11.05 9.29 1.76 1.85 1.60 .24 12.90 10.89 2.01

2003. . . . . 10.79 9.34 1.44 1.80 1.68 .12 12.59 11.03 1.56

2004. . . . . 10.73 9.27 1.46 1.79 1.77 .02 12.52 11.05 1.48

2005. . . . . 10.96 9.31 1.65 1.84 1.85 -.02 12.80 11.16 1.63

2006. . . . . 10.96 9.18 1.78 1.83 1.88 -.05 12.79 11.06 1.73

2007. . . . . 11.01 9.45 1.57 1.84 1.88 -.04 12.86 11.33 1.53

2008. . . . . 10.90 9.54 1.37 1.83 2.01 -.19 12.73 11.55 1.18

2009. . . . . 11.23 10.74 .50 1.88 2.31 -.43 13.11 13.05 .06

2010. . . . . 10.75 11.05 -.30 1.79 2.41 -.62 12.54 13.46 -.92

2011 . . . . . 10.83 11.04 -.21 1.80 2.42 -.62 12.63 13.46 -.83

2012. . . . . 11.03 11.33 -.30 1.80 2.46 -.66 12.83 13.79 -.96

Intermediate:

2013. . . . . 10.89 11.51 -.62 1.80 2.44 -.64 12.69 13.95 -1.26

2014. . . . . 11.01 11.63 -.62 1.83 2.41 -.58 12.83 14.04 -1.20

2015. . . . . 11.03 11.63 -.59 1.83 2.34 -.51 12.86 13.97 -1.10

2016. . . . . 11.05 11.63 -.58 1.83 2.28 -.44 12.88 13.91 -1.03

2017. . . . . 11.07 11.67 -.60 1.83 2.21 -.38 12.90 13.88 -.98

2018. . . . . 11.10 11.75 -.66 1.83 2.16 -.32 12.93 13.91 -.98

2019. . . . . 11.11 11.93 -.82 1.84 2.13 -.29 12.95 14.06 -1.11

2020. . . . . 11.13 12.15 -1.02 1.84 2.10 -.27 12.97 14.26 -1.29

2021. . . . . 11.16 12.34 -1.18 1.84 2.11 -.27 12.99 14.44 -1.45

2022. . . . . 11.19 12.59 -1.41 1.84 2.11 -.27 13.03 14.70 -1.68

2025. . . . . 11.23 13.32 -2.09 1.84 2.15 -.31 13.07 15.48 -2.40

2030. . . . . 11.29 14.37 -3.08 1.84 2.13 -.28 13.13 16.49 -3.36

2035. . . . . 11.32 14.87 -3.55 1.85 2.11 -.26 13.16 16.98 -3.82

2040. . . . . 11.33 14.87 -3.55 1.85 2.09 -.24 13.17 16.96 -3.79

2045. . . . . 11.32 14.69 -3.36 1.85 2.14 -.29 13.17 16.83 -3.66

2050. . . . . 11.32 14.61 -3.29 1.85 2.17 -.32 13.17 16.78 -3.61

2055. . . . . 11.33 14.70 -3.38 1.85 2.21 -.35 13.18 16.91 -3.73

2060. . . . . 11.34 14.94 -3.60 1.85 2.20 -.35 13.20 17.14 -3.95

2065. . . . . 11.36 15.15 -3.79 1.85 2.21 -.36 13.21 17.36 -4.15

2070. . . . . 11.37 15.37 -4.00 1.85 2.22 -.36 13.22 17.58 -4.36

2075. . . . . 11.38 15.51 -4.13 1.85 2.21 -.36 13.23 17.72 -4.49

2080. . . . . 11.38 15.51 -4.13 1.85 2.25 -.40 13.23 17.76 -4.53

2085. . . . . 11.39 15.64 -4.25 1.85 2.28 -.42 13.24 17.91 -4.67

2090. . . . . 11.40 15.89 -4.49 1.85 2.27 -.42 13.25 18.16 -4.91

First year balance becomes

negative and remains negative

through 2090 . . . . . . . . . . . . . . 2010 . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . 2010

Low-cost:

2013. . . . . 10.82 11.32 -.50 1.79 2.37 -.58 12.61 13.69 -1.08

2014. . . . . 11.05 11.25 -.20 1.83 2.27 -.43 12.88 13.52 -.63

2015. . . . . 11.01 11.12 -.11 1.83 2.15 -.33 12.84 13.27 -.44

2016. . . . . 11.02 11.01 .01 1.83 2.05 -.22 12.85 13.05 -.20

2017. . . . . 11.04 10.99 .06 1.83 1.96 -.13 12.87 12.95 -.08

2018. . . . . 11.06 11.03 .04 1.83 1.89 -.06 12.89 12.92 -.02

2019. . . . . 11.08 11.14 -.06 1.83 1.84 -.01 12.91 12.98 -.07

2020. . . . . 11.09 11.28 -.19 1.83 1.80 .03 12.92 13.09 -.16

2021. . . . . 11.11 11.38 -.27 1.83 1.78 .05 12.94 13.16 -.22

2022. . . . . 11.14 11.53 -.40 1.83 1.76 .07 12.97 13.30 -.33
51

Long-Range Estimates

Notes:

1. The income rate excludes interest income.

2. Revisions of taxable payroll may change some historical values.

3. Totals do not necessarily equal the sums of rounded components.

The DI cost rate rose substantially from 1.88 percent of taxable payroll in

2007 to 2.46 percent for 2012 due to the recent economic recession. Under

the intermediate assumptions, the Trustees project that the DI cost rate will

Low-cost (Cont.):

2025. . . . . 11.17 12.06 -0.90 1.83 1.74 0.09 13.00 13.81 -0.80

2030. . . . . 11.21 12.80 -1.59 1.83 1.66 .18 13.05 14.46 -1.41

2035. . . . . 11.23 13.05 -1.82 1.83 1.59 .24 13.06 14.64 -1.57

2040. . . . . 11.22 12.82 -1.60 1.83 1.54 .29 13.06 14.37 -1.31

2045. . . . . 11.21 12.47 -1.26 1.83 1.56 .28 13.04 14.03 -.99

2050. . . . . 11.20 12.25 -1.05 1.83 1.56 .28 13.04 13.81 -.77

2055. . . . . 11.20 12.18 -.98 1.83 1.56 .28 13.03 13.74 -.70

2060. . . . . 11.20 12.20 -1.00 1.83 1.53 .31 13.04 13.73 -.69

2065. . . . . 11.20 12.16 -.95 1.83 1.52 .31 13.04 13.68 -.64

2070. . . . . 11.20 12.08 -.88 1.83 1.51 .32 13.03 13.59 -.56

2075. . . . . 11.19 11.91 -.71 1.83 1.50 .33 13.03 13.41 -.38

2080. . . . . 11.18 11.63 -.46 1.84 1.53 .30 13.01 13.17 -.15

2085. . . . . 11.17 11.55 -.38 1.84 1.56 .28 13.01 13.12 -.10

2090. . . . . 11.18 11.66 -.48 1.84 1.56 .27 13.02 13.22 -.20

First year balance becomes

negative and remains negative

through 2090 . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . b . . . . . . . . . . . . . . . . 2010

High-cost:

2013. . . . . 10.96 11.71 -.75 1.81 2.52 -.71 12.77 14.23 -1.46

2014. . . . . 10.97 12.08 -1.11 1.82 2.58 -.76 12.79 14.65 -1.87

2015. . . . . 11.07 12.32 -1.25 1.83 2.59 -.76 12.90 14.91 -2.01

2016. . . . . 11.09 12.53 -1.44 1.84 2.59 -.76 12.93 15.13 -2.20

2017. . . . . 11.11 12.66 -1.55 1.84 2.56 -.72 12.95 15.22 -2.27

2018. . . . . 11.14 12.79 -1.65 1.84 2.53 -.69 12.98 15.32 -2.34

2019. . . . . 11.16 12.99 -1.83 1.84 2.50 -.66 13.00 15.50 -2.49

2020. . . . . 11.18 13.20 -2.03 1.84 2.48 -.63 13.02 15.68 -2.66

2021. . . . . 11.21 13.42 -2.22 1.85 2.48 -.64 13.05 15.91 -2.86

2022. . . . . 11.24 13.75 -2.51 1.85 2.51 -.66 13.09 16.25 -3.17

2025. . . . . 11.29 14.68 -3.39 1.85 2.61 -.76 13.15 17.29 -4.15

2030. . . . . 11.37 16.10 -4.72 1.86 2.67 -.81 13.23 18.77 -5.54

2035. . . . . 11.42 16.97 -5.55 1.86 2.71 -.85 13.28 19.69 -6.40

2040. . . . . 11.45 17.34 -5.89 1.86 2.74 -.88 13.31 20.08 -6.77

2045. . . . . 11.46 17.47 -6.01 1.87 2.85 -.99 13.33 20.32 -6.99

2050. . . . . 11.48 17.69 -6.21 1.87 2.94 -1.07 13.35 20.63 -7.28

2055. . . . . 11.50 18.09 -6.58 1.87 3.02 -1.15 13.37 21.11 -7.74

2060. . . . . 11.54 18.68 -7.15 1.87 3.05 -1.18 13.41 21.73 -8.32

2065. . . . . 11.57 19.31 -7.74 1.87 3.11 -1.23 13.45 22.42 -8.97

2070. . . . . 11.61 20.04 -8.42 1.88 3.14 -1.27 13.49 23.18 -9.69

2075. . . . . 11.65 20.76 -9.11 1.88 3.14 -1.26 13.53 23.90 -10.37

2080. . . . . 11.68 21.32 -9.64 1.88 3.18 -1.30 13.56 24.50 -10.94

2085. . . . . 11.71 21.92 -10.20 1.88 3.19 -1.32 13.59 25.11 -11.52

2090. . . . . 11.74 22.53 -10.78 1.88 3.16 -1.28 13.62 25.69 -12.07

First year balance becomes

negative and remains negative

through 2090 . . . . . . . . . . . . . . 2010 . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . 2010

a Income rates include certain reimbursements from the General Fund of the Treasury.

b The Trustees project the annual balance to be negative for a temporary period and return to positive levels

before the end of the projection period.

Table IV.B1.—Annual Income Rates, Cost Rates, and Balances,

Calendar Years 1990-2090 (Cont.)

[As a percentage of taxable payroll]

Calendar 

year

OASI DI OASDI

Income

ratea Costrate Balance

Income

ratea Costrate Balance

Income

ratea Costrate Balance
Actuarial Estimates

52

decline from 2.46 percent for 2012 to 2.10 percent for 2020. From 2020 to

2040, the DI cost rate stays relatively stable and then increases to 2.28 percent for 2087. The income rate increases only very slightly from 1.80 percent

of taxable payroll for 2013 to 1.85 percent for 2087. The projected annual

deficit is 0.64 percent for 2013 and declines to 0.42 percent for 2087.

Under the low-cost assumptions, the DI cost rate declines from 2.46 percent

of payroll for 2012 to 1.54 percent for 2040, and remains relatively stable

thereafter, reaching 1.56 percent for 2087. The annual balance is negative for

the first 7 years and is positive throughout the remainder of the long-range

period. Under the high-cost assumptions, the DI cost rate generally rises

from 2020 through the end of the projection period, reaching 3.19 percent for

2087. The annual deficit is 0.71 percent for 2013, 0.63 percent for 2020, and

rises to 1.31 percent for 2087.

Figure IV.B1 shows the patterns of the OASI and DI annual cost rates.

Annual DI cost rates rose substantially between 1990 and 2010 in large part

due to: (1) aging of the working population as the baby-boom generation

moved from ages 25-44 in 1990, where disability prevalence is low, to ages

45-64 in 2010, where disability prevalence is much higher; (2) a substantial

increase in the percentage of women insured for DI benefits as a result of

increased and more consistent rates of employment; and (3) increased disability incidence rates for women to a level similar to those for men by 2010.

After 2010, all of these factors stabilize, and therefore the DI cost rate stabilizes also. Annual OASI cost rates follow a similar pattern to that for DI, but

displaced 20 to 25 years later, because the baby-boom generation enters

retirement ages 20 to 25 years after entering prime disability ages. Figure

IV.B1 shows only the income rates for alternative II because the variation in

income rates by alternative is very small. Income rates generally increase

slowly for each of the alternatives over the long-range period. Taxation of

benefits, which is a relatively small portion of income, is the main source of

both the increases in the income rate and the variation among the alternatives. Increases in income from taxation of benefits reflect: (1) increases in

the total amount of benefits paid; and (2) the increasing share of individual

benefits that will be subject to taxation because benefit taxation threshold

amounts are not indexed.

Figure IV.B1 shows the patterns of the annual balances for OASI and DI. For

each alternative and for historical data, the magnitude of each of the positive

balances, as a percentage of taxable payroll, is the distance between the

appropriate cost-rate curve and the income-rate curve above it. The magnitude of each of the deficits is the distance between the appropriate cost-rate

curve and the income-rate curve below it. Annual balances follow closely the

pattern of annual cost rates after 1990 because the payroll tax rate does not
53

Long-Range Estimates

change for the OASDI program, with only small variations in the allocation

between DI and OASI. The pattern of the projected OASDI annual balances

is important to the analysis of the financial condition of the Social Security

program as a whole.

In the future, the costs of OASI, DI, and the combined OASDI programs as a

percentage of taxable payroll are unlikely to fall outside the range encompassed by alternatives I and III because alternatives I and III define a wide

range of demographic and economic conditions.

Long-range OASDI cost and income are most often expressed as percentages

of taxable payroll. However, the Trustees also present cost and income as

shares of gross domestic product (GDP), the value of goods and services produced during the year in the United States. Under alternative II, the Trustees

project the OASDI cost to rise from 5.06 percent of GDP for 2013 to a peak

of 6.23 percent for 2036. Thereafter, OASDI cost as a percentage of GDP

declines to a low of 6.04 percent for 2052 and then generally increases

slowly thereafter, reaching 6.20 percent by 2087. Appendix F presents full

estimates of income and cost relative to GDP.

 Figure IV.B1.—Long-Range OASI and DI Annual Income Rates and Cost Rates

[As a percentage of taxable payroll]

0%

5%

10%

15%

20%

25%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Alternative II Income rates

OASI cost rates

DI cost rates

Historical Estimated

OASI

DI III

II

I

III

II

I
Actuarial Estimates

54

2. Comparison of Workers to Beneficiaries

Under the intermediate assumptions, the Trustees project the OASDI cost

rate will increase through 2014 and then decrease through 2017 as the economy recovers. The cost rate then rises rapidly between 2017 and 2035, primarily because the number of beneficiaries rises much more rapidly than the

number of covered workers as the baby-boom generation retires. The ratio of

OASDI beneficiaries to workers is dominated by the OASI program because

all workers eventually die or retire, but only a small minority become disabled. The trends described below are primarily due to demographic changes

and thus affect the DI program roughly 20 years earlier than the OASI and

OASDI programs. The baby-boom generation had lower fertility rates than

their parents, and the Trustees expect those lower fertility rates to persist;

therefore, the ratio of OASDI beneficiaries to workers will rise rapidly and

reach a permanently higher level after the baby-boom generation retires. Due

to increasing longevity, the ratio of beneficiaries to workers will generally

rise slowly thereafter. Table IV.B2 provides a comparison of the numbers of

covered workers and beneficiaries.
55

Long-Range Estimates

Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2090

Calendar year

Covered

workersa

(in thousands)

Beneficiariesb (in thousands) Covered

workers per

OASDI

beneficiary

OASDI

beneficiaries

per 100

covered

OASI DI OASDI workers

Historical data:

1945 . . . . . . . . . 46,390 1,106 - 1,106 41.9 2

1950 . . . . . . . . . 48,280 2,930 - 2,930 16.5 6

1955 . . . . . . . . . 65,066 7,564 - 7,564 8.6 12

1960 . . . . . . . . . 72,371 13,740 522 14,262 5.1 20

1965 . . . . . . . . . 80,539 18,509 1,648 20,157 4.0 25

1970 . . . . . . . . . 92,963 22,618 2,568 25,186 3.7 27

1975 . . . . . . . . . 100,193 26,998 4,125 31,123 3.2 31

1980 . . . . . . . . . 112,651 30,384 4,734 35,117 3.2 31

1985 . . . . . . . . . 120,238 32,763 3,874 36,636 3.3 30

1990 . . . . . . . . . 133,087 35,255 4,204 39,459 3.4 30

1995 . . . . . . . . . 140,892 37,364 5,731 43,096 3.3 31

2000 . . . . . . . . . 154,666 38,556 6,606 45,162 3.4 29

2001 . . . . . . . . . 155,030 38,888 6,780 45,668 3.4 29

2002 . . . . . . . . . 154,466 39,117 7,060 46,176 3.3 30

2003 . . . . . . . . . 154,689 39,315 7,438 46,753 3.3 30

2004 . . . . . . . . . 156,453 39,558 7,810 47,368 3.3 30

2005 . . . . . . . . . 158,848 39,961 8,172 48,133 3.3 30

2006 . . . . . . . . . 161,349 40,435 8,428 48,863 3.3 30

2007 . . . . . . . . . 163,136 40,863 8,739 49,603 3.3 30

2008 . . . . . . . . . 162,532 41,355 9,065 50,420 3.2 31

2009 . . . . . . . . . 157,702 42,385 9,475 51,860 3.0 33

2010 . . . . . . . . . 157,257 43,440 9,958 53,398 2.9 34

2011 . . . . . . . . . 158,616 44,388 10,428 54,816 2.9 35

2012 . . . . . . . . . 160,910 45,377 10,799 56,176 2.9 35

Intermediate:

2013 . . . . . . . . . 162,823 46,732 10,980 57,712 2.8 35

2015 . . . . . . . . . 167,340 49,703 11,301 61,004 2.7 36

2020 . . . . . . . . . 176,941 58,253 11,669 69,921 2.5 40

2025 . . . . . . . . . 181,582 65,987 12,278 78,264 2.3 43

2030 . . . . . . . . . 184,939 73,210 12,457 85,667 2.2 46

2035 . . . . . . . . . 188,896 78,110 12,726 90,836 2.1 48

2040 . . . . . . . . . 194,267 80,555 13,015 93,570 2.1 48

2045 . . . . . . . . . 199,813 81,845 13,633 95,478 2.1 48

2050 . . . . . . . . . 205,049 83,489 14,118 97,606 2.1 48

2055 . . . . . . . . . 209,727 85,881 14,605 100,487 2.1 48

2060 . . . . . . . . . 214,295 88,968 14,896 103,864 2.1 48

2065 . . . . . . . . . 219,142 92,100 15,348 107,447 2.0 49

2070 . . . . . . . . . 224,337 95,595 15,792 111,386 2.0 50

2075 . . . . . . . . . 229,763 98,816 16,164 114,980 2.0 50

2080 . . . . . . . . . 235,141 101,314 16,801 118,114 2.0 50

2085 . . . . . . . . . 240,363 104,605 17,382 121,988 2.0 51

2090 . . . . . . . . . 245,311 108,649 17,715 126,364 1.9 52
Actuarial Estimates

56

Notes: 

1. The number of beneficiaries does not include uninsured individuals who receive benefits under Section

228 of the Social Security Act. The General Fund of the Treasury reimburses the trust funds for the costs of

most of these individuals.

2. Historical covered worker and beneficiary data are subject to revision.

3. Totals do not necessarily equal the sums of rounded components.

The effect of the demographic shift under the three alternatives on the

OASDI cost rates is clear when one considers the projected number of

OASDI beneficiaries per 100 covered workers. Compared to the 2012 level

of 35 beneficiaries per 100 covered workers, the Trustees project that this

ratio will rise to 48 by 2035 under the intermediate assumptions because the

growth in beneficiaries greatly exceeds the growth in workers. By 2090, this

projected ratio rises further under the intermediate and high-cost assumptions, reaching 52 under the intermediate assumptions and 67 under the highLow-cost:

2013 . . . . . . . . . 163,597 46,727 10,921 57,648 2.8 35

2015 . . . . . . . . . 170,150 49,667 10,950 60,616 2.8 36

2020 . . . . . . . . . 180,451 58,014 10,680 68,694 2.6 38

2025 . . . . . . . . . 185,682 65,379 10,804 76,183 2.4 41

2030 . . . . . . . . . 189,601 72,124 10,562 82,686 2.3 44

2035 . . . . . . . . . 194,468 76,465 10,479 86,944 2.2 45

2040 . . . . . . . . . 201,443 78,296 10,535 88,831 2.3 44

2045 . . . . . . . . . 209,361 79,124 10,948 90,072 2.3 43

2050 . . . . . . . . . 217,595 80,460 11,310 91,770 2.4 42

2055 . . . . . . . . . 225,921 82,688 11,716 94,403 2.4 42

2060 . . . . . . . . . 234,666 85,634 12,021 97,655 2.4 42

2065 . . . . . . . . . 244,205 88,629 12,514 101,143 2.4 41

2070 . . . . . . . . . 254,724 91,860 13,065 104,925 2.4 41

2075 . . . . . . . . . 266,230 94,691 13,640 108,331 2.5 41

2080 . . . . . . . . . 278,351 96,974 14,519 111,492 2.5 40

2085 . . . . . . . . . 290,681 100,651 15,405 116,055 2.5 40

2090 . . . . . . . . . 303,024 105,758 16,113 121,872 2.5 40

High-cost:

2013 . . . . . . . . . 162,048 46,736 11,038 57,774 2.8 36

2015 . . . . . . . . . 163,637 49,729 11,682 61,411 2.7 38

2020 . . . . . . . . . 172,402 58,457 12,810 71,267 2.4 41

2025 . . . . . . . . . 177,446 66,669 13,904 80,573 2.2 45

2030 . . . . . . . . . 180,495 74,467 14,468 88,935 2.0 49

2035 . . . . . . . . . 183,668 80,016 15,045 95,061 1.9 52

2040 . . . . . . . . . 187,401 83,175 15,531 98,705 1.9 53

2045 . . . . . . . . . 190,601 85,053 16,328 101,381 1.9 53

2050 . . . . . . . . . 192,895 87,109 16,891 103,999 1.9 54

2055 . . . . . . . . . 194,140 89,723 17,408 107,131 1.8 55

2060 . . . . . . . . . 194,868 92,942 17,609 110,551 1.8 57

2065 . . . . . . . . . 195,444 96,207 17,927 114,134 1.7 58

2070 . . . . . . . . . 195,924 99,919 18,133 118,052 1.7 60

2075 . . . . . . . . . 196,136 103,481 18,117 121,598 1.6 62

2080 . . . . . . . . . 195,885 106,183 18,277 124,460 1.6 64

2085 . . . . . . . . . 195,303 108,988 18,306 127,294 1.5 65

2090 . . . . . . . . . 194,427 111,706 18,081 129,787 1.5 67

a Workers who are paid at some time during the year for employment on which OASDI taxes are due.

b Beneficiaries with monthly benefits in current-payment status as of June 30.

Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2090 (Cont.)

Calendar year

Covered

workersa

(in thousands)

Beneficiariesb (in thousands) Covered

workers per

OASDI

beneficiary

OASDI

beneficiaries

per 100

covered

OASI DI OASDI workers
57

Long-Range Estimates

cost assumptions. Under the low-cost assumptions, this ratio rises to 45 by

2035 and then declines, reaching a stable level of about 40 after 2077. Figure

IV.B2 shows beneficiaries per 100 covered workers.

For each alternative, the curve in figure IV.B2 is strikingly similar to the corresponding cost-rate curve in figure IV.B1. This similarity emphasizes the

extent to which the cost rate is determined by the age distribution of the population. The cost rate is essentially the product of the number of beneficiaries

and their average benefit, divided by the product of the number of covered

workers and their average taxable earnings. For this reason, the pattern of the

annual cost rates is similar to that of the annual ratios of beneficiaries to

workers.

Table IV.B2 also shows the number of covered workers per OASDI beneficiary, which was about 2.9 for 2012. Under the low-cost assumptions, this

ratio declines to 2.2 by 2035, and then generally rises throughout the remainder of the period, reaching 2.5 by 2090. Under the intermediate assumptions,

this ratio declines generally throughout the long-range period, reaching 2.1

for 2035 and 1.9 by 2090. Under the high-cost assumptions, this ratio

decreases steadily to 1.5 by 2090.

 Figure IV.B2.—Number of OASDI Beneficiaries Per 100 Covered Workers

0

10

20

30

40

50

60

70

80

90

100

1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Historical Estimated

III

II

I
Actuarial Estimates

58

3. Trust Fund Ratios and Test of Long-Range Close Actuarial Balance

Trust fund ratios are critical indicators of the adequacy of the financial

resources of the Social Security program. The trust fund ratio for a year is the

amount of asset reserves in a fund at the beginning of a year expressed as a

percentage of the cost for the year. Under present law, the OASI and DI Trust

Funds do not have the authority to borrow other than in the form of advance

tax transfers, which are limited to expected taxes for the current calendar

month. If reserves held in either trust fund become depleted during a year,

and continuing tax revenues fall short of the cost of scheduled benefits, then

full scheduled benefits would not be payable on a timely basis. For this reason, the trust fund ratio is the most critical financial measure.

The trust fund ratio serves an additional important purpose in assessing the

actuarial status of the program. If the projected trust fund ratio is positive

throughout the period and is either level or increasing at the end of the

period, then projected adequacy for the long-range period is likely to continue for subsequent reports. Under these conditions, the program has

achieved sustainable solvency.

Table IV.B3 shows the Trustees’ projections of trust fund ratios by alternative, without regard to advance tax transfers that would be effected, for the

separate and combined OASI and DI Trust Funds. The table also shows the

years of trust fund reserve depletion and the percentage of scheduled benefits

that would be payable thereafter, by alternative.

Under the intermediate assumptions, the OASI Trust Fund ratio consistently

declines from 383 percent at the beginning of the period until the trust fund

reserves become depleted in 2035, at which time 75 percent of scheduled

benefits would be payable. The DI trust fund ratio has been declining

steadily since 2003 (at first slowly and then more rapidly), and continues to

decline from 85 percent at the beginning of 2013 until the trust fund reserves

become depleted in 2016, at which time 80 percent of scheduled benefits

would be payable.

Under the intermediate assumptions, the trust fund ratio for the combined

OASI and DI Trust Funds declines from 330 percent at the beginning of

2013 until the combined fund reserves become depleted in 2033, at which

time 77 percent of scheduled benefits would be payable. This is the same

depletion year that was shown in last year’s report.

Under the low-cost assumptions, the trust fund ratio for the DI program

increases from 2020 through the end of the long-range projection period,

reaching the extremely high level of 1,462 percent for 2088. For the OASI

program, the trust fund ratio declines steadily, until the trust fund reserves

become depleted in 2054, at which time 91 percent of scheduled benefits
59

Long-Range Estimates

would still be payable. For the combined OASDI program, the trust fund

ratio declines from 331 percent for 2013 until reserves become depleted in

2068, at which time 95 percent of scheduled benefits would still be payable.

Thus, under the low-cost assumptions, only the DI program achieves sustainable solvency. However, the DI trust fund ratio falls below 25 percent for

some early years of the 75-year projection period.

Under the high-cost assumptions, the OASI trust fund ratio declines continually until reserves become depleted in 2029, at which time 70 percent of

scheduled benefits would still be payable. The DI trust fund ratio declines

from 83 percent for 2013 until reserves become depleted in 2015, at which

time 70 percent of scheduled benefits would still be payable. The combined

OASI and DI trust fund ratio declines from 329 percent for 2013 until

reserves become depleted in 2027, at which time 72 percent of scheduled

benefits would still be payable.

The Trustees project trust fund reserve depletion within the 75-year projection period with the exception of the DI Trust Fund under the low-cost

assumptions. It is therefore highly likely that lawmakers will need to increase

income, reduce program costs, or both, in order to maintain solvency for the

trust funds. The stochastic projections discussed in appendix E suggest that

trust fund reserve depletion is highly probable by mid-century.

Even under the high-cost assumptions, however, the combined OASI and DI

Trust Fund reserves on hand plus their estimated future income are sufficient

to cover their combined cost until 2027. Under the intermediate and low-cost

assumptions, the combined starting fund reserves plus estimated future

income are sufficient to cover cost until 2033 and 2068, respectively. In the

2012 report, the Trustees projected that the combined trust fund reserves

would become depleted in 2027 under the high-cost assumptions and in 2033

under the intermediate assumptions, but also projected that the combined

trust fund reserves would remain positive and achieve sustainable solvency

under the low-cost assumptions.
Actuarial Estimates

60

..

Note: The definition of trust fund ratio appears in the Glossary. The ratios shown for the combined trust

funds for years after reserve depletion of either the DI or OASI Trust Fund are theoretical.

The test of long-range close actuarial balance for each trust fund requires

meeting two conditions: (1) the short-range test of financial adequacy is satisfied; and (2) the trust fund ratios stay above zero throughout the 75-year

projection period, allowing scheduled benefits to be paid in a timely manner

throughout the period. As discussed in section IV.A, the DI Trust Fund fails

the short-range test of financial adequacy under the intermediate assumptions

because trust fund reserves become depleted in 2016. Under the intermediate

assumptions, the OASI trust fund reserves become depleted in 2035, and the

combined OASI and DI trust fund reserves become depleted in 2033. Therefore, the OASI, DI, and combined OASI and DI Trust Funds all fail the longrange test of close actuarial balance.

Table IV.B3.—Trust Fund Ratios, Calendar Years 2013-90

[In percent]

Calendar

year

Intermediate Low-cost High-cost

OASI DI OASDI OASI DI OASDI OASI DI OASDI

2013 . . . . . . . . . . . . . 383 85 330 383 86 331 383 83 329

2014 . . . . . . . . . . . . . 369 59 315 371 63 319 366 55 312

2015 . . . . . . . . . . . . . 354 36 301 362 46 311 346 26 290

2016 . . . . . . . . . . . . . 339 15 286 353 32 303 323 a 267

2017 . . . . . . . . . . . . . 323 a 271 345 22 296 299 a 244

2018 . . . . . . . . . . . . . 309 a 257 338 16 291 276 a 221

2019 . . . . . . . . . . . . . 294 a 244 331 13 286 253 a 198

2020 . . . . . . . . . . . . . 280 a

a The Trustees estimate that the trust fund reserves will be depleted by the beginning of this year.

231 324 13 281 230 a 176

2021 . . . . . . . . . . . . . 266 a 218 318 14 277 209 a 154

2022 . . . . . . . . . . . . . 250 a 204 311 17 272 186 a 132

2025 . . . . . . . . . . . . . 202 a 158 286 31 254 118 a 63

2030 . . . . . . . . . . . . . 111 a 71 238 71 219 aaa

2035 . . . . . . . . . . . . . 3 a a 181 144 177 aaa

2040 . . . . . . . . . . . . . aaa 125 243 137 aaa

2045 . . . . . . . . . . . . . aaa 76 345 106 aaa

2050 . . . . . . . . . . . . . aaa 34 451 81 aaa

2055 . . . . . . . . . . . . . aaa a 562 59 aaa

2060 . . . . . . . . . . . . . aaa a 695 37 aaa

2065 . . . . . . . . . . . . . aaa a 833 14 aaa

2070 . . . . . . . . . . . . . aaa a 979 a aaa

2075 . . . . . . . . . . . . . aaa a 1,133 a aaa

2080 . . . . . . . . . . . . . aaa a 1,260 a aaa

2085 . . . . . . . . . . . . . aaa a 1,380 a aaa

2090 . . . . . . . . . . . . . aaa a 1,521 a aaa

Trust fund reserves 

deplete in . . . . . . . 2035 2016 2033 2054 b

b The Trustees estimate that the trust fund reserves will not be depleted within the projection period.

2068 2029 2015 2027

Payable benefits as 

percent of scheduled benefits:

At the time of 

reserve

depletion . . . . . 75 80 77 91 b 95 70 70 72

For 2087 . . . . . 71 81 72 96 100 99 50 58 51
61

Long-Range Estimates

Beginning with this report, the Trustees modified the test of long-range close

actuarial balance to require solvency throughout the 75-year projection

period. The old test allowed for a negative actuarial balance of up to 5 percent of the summarized cost rate for the full 75-year period. The Trustees

modified the test to make it simpler and to be more consistent with the actuarial measures presented in this report.

Figure IV.B3 illustrates the trust fund ratios for the separate OASI and DI

Trust Funds for each of the alternative sets of assumptions. DI Trust Fund

status is more uncertain than OASI Trust Fund status because there is a high

degree of uncertainty associated with future disability prevalence. A graph of

the trust fund ratios for the combined trust funds appears in figure II.D6.

4. Summarized Income Rates, Summarized Cost Rates, and Actuarial

Balances

Summarized values for the full 75-year period are useful in analyzing the

program’s long-range financial adequacy over the period as a whole, both

under present law and under proposed modifications to the law. All annual

amounts included in a summarized value are present-value discounted to the

valuation date.

 Figure IV.B3.—Long-Range OASI and DI Trust Fund Ratios

[Asset reserves as a percentage of annual cost]

0%

200%

400%

600%

800%

1,000%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

OASI

DI

Historical Estimated

III

II I

I

II III
Actuarial Estimates

62

Table IV.B4 presents summarized income rates, summarized cost rates, and

actuarial balances for 25-year, 50-year, and 75-year valuation periods. Summarized income rates are the sum of the present value of non-interest income

for a period (which includes scheduled payroll taxes, the projected income

from the taxation of scheduled benefits, and reimbursements from the General Fund of the Treasury) and the starting trust fund asset reserves,

expressed as a percentage of the present value of taxable payroll over the

period. Under current law, the total OASDI payroll tax rate will remain at

12.4 percent in the future. In contrast, the Trustees expect income from taxation of benefits, expressed as a percentage of taxable payroll, to increase in

most years of the long-range period for two reasons. First, total scheduled

benefits are rising faster than payroll. Second, the benefit-taxation threshold

amounts are fixed (not indexed), so an increasing share of benefits will be

subject to tax as incomes and benefits rise. Summarized cost rates are the

sum of the present value of cost for a period (which includes scheduled benefits, administrative expenses, net interchange with the Railroad Retirement

program, and payments for vocational rehabilitation services for disabled

beneficiaries) and the present value of the cost of reaching a target trust fund

of 100 percent of annual cost at the end of the period, expressed as a percentage of the present value of taxable payroll over the period.

The actuarial balance for a valuation period is equal to the difference

between the summarized income rate and the summarized cost rate for the

period. An actuarial balance of zero for any period indicates that cost for the

period could be met for the period as a whole (but not necessarily at all

points within the period), with a remaining trust fund reserve at the end of

the period equal to 100 percent of the following year’s cost. A negative actuarial balance for a period indicates that the present value of income to the

program plus the existing trust fund is less than the present value of the cost

of the program plus the cost of reaching a target trust fund reserve of 1 year’s

cost by the end of the period. 

Payroll tax income, expressed as a percentage of taxable payroll, is generally

slightly smaller than the actual tax rates in effect for each period. The reason

for this difference is that workers receive earnings before the trust funds

receive the corresponding payroll taxes. As a result of this timing difference,

payroll tax income received in a given year includes taxes paid from a combination of the taxable payrolls for that year and prior years. When payroll

tax income is divided by taxable payroll for a particular year (or period of

years), the resulting income rate is slightly lower than the applicable tax rate

for the period. 

Table IV.B4 contains summarized rates for the intermediate, low-cost, and

high-cost assumptions. The low-cost and high-cost assumptions define a
63

Long-Range Estimates

wide range of possibilities. Financial outcomes as good as the low-cost scenario or as bad as the high-cost scenario are unlikely to occur.

For the 25-year valuation period, the OASDI program has an actuarial balance of 0.28 percent of taxable payroll under the low-cost assumptions, -1.27

percent under the intermediate assumptions, and -3.18 percent under the

high-cost assumptions. These balances indicate that the program is adequately financed for the 25-year valuation period under only the low-cost

projections.

For the 50-year valuation period, the OASDI program has actuarial balances

of -0.17 percent under the low-cost assumptions, -2.25 percent under the

intermediate assumptions, and -4.86 percent under the high-cost assumptions. These actuarial deficits mean that the program is not adequately

financed for the 50-year valuation period under the intermediate and highcost sets of assumptions. Under the low-cost assumptions, trust fund reserves

are not expected to deplete within the 50-year period.

For the entire 75-year valuation period, the combined OASDI program again

has actuarial deficits under all three sets of assumptions. The actuarial balance for this long-range valuation period is -0.19 percent of taxable payroll

under the low-cost assumptions, -2.72 percent under the intermediate assumptions, and -5.93 percent under the high-cost assumptions.

Assuming the Trustees’ intermediate assumptions accurately capture future

demographic and economic trends, solvency for the program over the next

75 years could be restored using a variety of approaches. For example, revenues could be increased in a manner equivalent to an immediate and permanent increase in the combined Social Security payroll tax rate from 12.40

percent to 15.06 percent, cost could be reduced in a manner equivalent to an

immediate and permanent reduction in scheduled benefits of 16.5 percent, or

some combination of approaches could be used.

However, eliminating the actuarial deficit over the next 75 years requires

raising payroll taxes or lowering benefits by more than is required just to

achieve solvency, because the actuarial deficit includes the cost of attaining a

target trust fund ratio equal to 100 percent of annual program cost by the end

of the period. The actuarial deficit could be eliminated for the 75-year period

by increasing revenues in a manner equivalent to an immediate and permanent increase in the combined payroll tax from 12.40 percent to 15.22 percent,1 reducing cost in a manner equivalent to an immediate reduction in

 1 The indicated increase in the payroll tax rate of 2.82 percent is somewhat larger than the 2.72 percent

75-year actuarial deficit because the indicated increase reflects a behavioral response to tax rate changes. In

particular, the calculation assumes that an increase in payroll taxes results in a small shift of wages and salaries to forms of employee compensation that are not subject to the payroll tax.
Actuarial Estimates

64

scheduled benefits of 17.3 percent, or some combination of approaches could

be used.

Under the intermediate assumptions, the OASDI program has large annual

deficits toward the end of the long-range period that are increasing and reach

4.77 percent of payroll for 2087 (see table IV.B1). These large deficits indicate that annual cost continues to exceed non-interest income after 2087, so

continued adequate financing would require larger changes than those

needed to maintain solvency for the 75-year period. Over the period extending through the infinite horizon, the actuarial deficit is 4.0 percent of taxable

payroll under the intermediate assumptions. The projected infinite horizon

shortfall could be eliminated with additional revenue equivalent to an immediate increase in the combined payroll tax rate from 12.4 percent to about

16.6 percent.1 This shortfall could be eliminated by reducing cost in a manner equivalent to an immediate and permanent reduction in benefits for all

current and future beneficiaries by 23.9 percent.

The financial shortfall of the DI program is substantially worse than that of

the OASI program for the first 25 years when measured relative to the level

of program cost. Summarized over the full 75-year period, however, longrange deficits for the OASI and DI programs under intermediate assumptions

are more similar measured relative to the level of program cost. Increases in

longevity after 2027, when the disability conversion age remains fixed, have

a greater effect on OASI cost than on DI cost. As a result of this greater

effect on OASI cost, the financial status of the OASI program in the later

portion of the 75-year projection period is worse than the financial status of

the DI program.

 1 The indicated increase in the payroll tax rate of 4.2 percent is somewhat larger than the 4.0 percent infinite

horizon actuarial deficit because the indicated increase reflects a behavioral response to tax rate changes. In

particular, the calculation assumes that an increase in payroll taxes results in a small shift of wages and salaries to forms of employee compensation that are not subject to the payroll tax.
65

Long-Range Estimates

.

Note: Totals do not necessarily equal the sums of rounded components.

Table IV.B5 presents the components and the calculation of the long-range

(75-year) actuarial balance under the intermediate assumptions. The present

value of future cost less future non-interest income over the long-range

period, minus the amount of trust fund asset reserves at the beginning of the

projection period, amounts to $9.6 trillion for the OASDI program. This

amount is the 75-year “open group unfunded obligation” (see row H). The

actuarial deficit (which is the negative of the actuarial balance) combines this

unfunded obligation with the present value of the ending target trust fund and

expresses the total as a percentage of the present value of the taxable payroll

for the period. The present value of future non-interest income minus cost,

Table IV.B4.—Components of Summarized Income Rates and Cost Rates, 

Calendar Years 2013-87

[As a percentage of taxable payroll]

Valuation period

Summarized income rate Summarized cost rate

Actuarial

balance

Non-interest

income

Beginning asset reserves Total CostEnding

target

fund Total

OASI:

Intermediate:

2013-37. . . . . 11.21 1.64 12.85 13.23 0.55 13.79 -0.94

2013-62. . . . . 11.27 .92 12.19 13.90 .23 14.13 -1.94

2013-87. . . . . 11.30 .70 12.00 14.27 .13 14.40 -2.40

Low-cost:

2013-37. . . . . 11.15 1.60 12.75 12.04 .49 12.53 .23

2013-62. . . . . 11.18 .88 12.06 12.20 .20 12.40 -.34

2013-87. . . . . 11.19 .65 11.83 12.12 .11 12.23 -.40

High-cost:

2013-37. . . . . 11.28 1.64 12.92 14.66 .65 15.31 -2.39

2013-62. . . . . 11.37 .93 12.30 16.01 .27 16.28 -3.98

2013-87. . . . . 11.44 .73 12.16 16.99 .15 17.14 -4.98

DI:

Intermediate:

2013-37. . . . . 1.84 .08 1.92 2.17 .08 2.25 -.33

2013-62. . . . . 1.84 .04 1.89 2.16 .03 2.20 -.31

2013-87. . . . . 1.85 .03 1.88 2.18 .02 2.20 -.32

Low-cost:

2013-37. . . . . 1.83 .08 1.91 1.79 .06 1.85 .06

2013-62. . . . . 1.83 .04 1.88 1.68 .02 1.71 .17

2013-87. . . . . 1.83 .03 1.86 1.64 .02 1.66 .21

High-cost:

2013-37. . . . . 1.85 .08 1.93 2.61 .10 2.71 -.79

2013-62. . . . . 1.86 .04 1.90 2.74 .04 2.78 -.88

2013-87. . . . . 1.86 .03 1.90 2.83 .02 2.85 -.95

OASDI:

Intermediate:

2013-37. . . . . 13.05 1.72 14.77 15.40 .63 16.03 -1.27

2013-62. . . . . 13.11 .97 14.08 16.07 .26 16.33 -2.25

2013-87. . . . . 13.14 .73 13.88 16.45 .15 16.60 -2.72

Low-cost:

2013-37. . . . . 12.98 1.68 14.66 13.83 .54 14.38 .28

2013-62. . . . . 13.02 .92 13.94 13.89 .22 14.11 -.17

2013-87. . . . . 13.02 .68 13.70 13.76 .13 13.89 -.19

High-cost:

2013-37. . . . . 13.13 1.71 14.84 17.27 .75 18.02 -3.18

2013-62. . . . . 13.23 .97 14.21 18.75 .31 19.06 -4.86

2013-87. . . . . 13.30 .76 14.06 19.82 .18 19.99 -5.93
Actuarial Estimates

66

plus starting trust fund reserves, minus the present value of the ending target

trust fund, is -$10.1 trillion for the OASDI program. The actuarial balance,

expressed as a percentage of taxable payroll for the period, is -2.72 percent.

Note: Totals do not necessarily equal the sums of rounded components.

The open group unfunded obligation (row H in the table above) increased

from $8.6 trillion shown in last year's report to $9.6 trillion in this report. If

there had been no changes in starting values, assumptions, laws, or methods

for this report, then the open group unfunded obligation would have

increased to $9.1 trillion solely due to the change in the valuation period.

This expected increase in the unfunded obligation occurs because: (1) the

unfunded obligation is now discounted to January 1, 2013, rather than to January 1, 2012, which tends to increase the unfunded obligation by the annual

nominal interest rate; and (2) the unfunded obligation now includes an additional year (2087). However, changes in assumptions, methods, and starting

values resulted a net additional $0.5 trillion increase in the unfunded obligation. This net additional measured increase in the present value of the

unfunded obligation may be explained by the lower projected real interest

rates on trust fund reserves through the first 15 years of the projection period.

Through this period, real interest accumulation is 5 percent less than in last

year's report, resulting in a 5 percent less “discounting” of future annual

shortfalls. Other changes combined to have only a small net effect on the

unfunded obligation for this year's report. For additional details on these

changes, see section IV.B.6.

The change in the actuarial deficit is more complicated. The actuarial deficit

was 2.67 percent of payroll in last year’s report, and was expected to increase

Table IV.B5.—Components of 75-Year Actuarial Balance

Under Intermediate Assumptions

Item OASI DI OASDI

Present value as of January 1, 2013 (in billions):

A. Payroll tax revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39,387 $6,688 $46,076

B. Reimbursements from general revenue. . . . . . . . . . . . . . . . . . . 4 1 5

C. Taxation of benefits revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,651 186 2,837

D. Non-interest income (A + B + C) . . . . . . . . . . . . . . . . . . . . . . . 42,043 6,875 48,918

E. Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,097 8,115 61,212

F. Cost minus non-interest income (E - D) . . . . . . . . . . . . . . . . . . 11,054 1,240 12,294

G. Trust fund asset reserves at start of period . . . . . . . . . . . . . . . . 2,610 123 2,732

H. Open group unfunded obligation (F - G). . . . . . . . . . . . . . . . . . 8,444 1,117 9,562

I. Ending target trust funda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

a The calculation of the actuarial balance includes the cost of accumulating a target trust fund reserve equal

to 100 percent of annual cost at the end of the period.

485 70 555

J. Income minus cost, plus reserves at start of period, minus

ending target trust fund (D - E + G - I = - H - I) . . . . . . . . . . . . -8,930 -1,187 -10,117

K. Taxable payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372,178 372,178 372,178

Percent of taxable payroll:

Actuarial balance (100 × J ÷ K) . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.40 -.32 -2.72
67

Long-Range Estimates

to a deficit of 2.72 percent of payroll solely due to the change in the valuation period. Given the additional increase noted above for the unfunded obligation, an increase beyond the valuation-period effect might have been

expected for the actuarial deficit as well. However, this did not happen even

though the numerator of the actuarial deficit is very similar to the unfunded

obligation. (The numerator of the actuarial deficit includes the ending target

trust fund reserve and the unfunded obligation does not.) The actuarial deficit

did not have a corresponding increase because the denominator of the actuarial deficit (present value of taxable payroll) also increased more than

expected, primarily as a result of lower projected real interest rates on trust

fund reserves through the first 15 years of the projection period.

5. Additional Measures of OASDI Unfunded Obligations

A negative actuarial balance (i.e., an actuarial deficit) is one measure of the

unfunded obligation of the program. This subsection presents two additional

measures of OASDI unfunded obligations under the intermediate assumptions.

a. Open Group Unfunded Obligations

Consistent with practice since 1965, this report focuses on a 75-year open

group valuation to evaluate the long-run financial status of the OASDI program. The open group valuation includes non-interest income and cost for

past, current, and future participants through the year 2087. The second line

of table IV.B6 shows that the present value of the open group unfunded obligation for the program is $9.6 trillion over 2013-87. The open group

unfunded obligation measures the adequacy of financing over the period as a

whole for a program financed on a pay-as-you-go basis. On this basis, payroll taxes and scheduled benefits for all participants are included through

2087.

Table IV.B6 also presents the 75-year unfunded obligation as percentages of

future OASDI taxable payroll and GDP through 2087. The 75-year unfunded

obligation as a percentage of taxable payroll is less than the actuarial deficit,

because the unfunded obligation excludes the ending target trust fund value

(see table IV.B5).

Consideration of summary measures alone (such as the actuarial balance and

open group unfunded obligation) for a 75-year period can lead to incorrect

perceptions and to policy prescriptions that do not achieve sustainable solvency. These concerns can be addressed by considering the trend in trust

fund ratios toward the end of the period. See the discussion of “sustainable

solvency” beginning on page 47.
Actuarial Estimates

68

Another measure that reflects all annual balances, even those after 75 years,

is the unfunded obligation extended over the infinite horizon. The extension

of the time period past 75 years assumes that the current-law OASDI program and the demographic and economic trends used for the 75-year projection continue indefinitely.

Table IV.B6 reports that the OASDI open group unfunded obligation over the

infinite horizon is $23.1 trillion, which is $13.5 trillion larger than for the

75-year period. The $13.5 trillion increment reflects a significant financing

gap projected for OASDI for years after 2087. Of course, the degree of

uncertainty associated with estimates increases substantially for years further

in the future.

The $23.1 trillion infinite horizon open group unfunded obligation is 4.0 percent of taxable payroll or 1.4 percent of GDP. These relative measures of the

unfunded obligation over the infinite horizon express its magnitude in relation to the resources potentially available to finance the shortfall.

Notes:

1. The present values of future taxable payroll for 2013-87 and for 2013 through the infinite horizon are

$372.2 trillion and $579.0 trillion, respectively.

2. The present values of GDP for 2013-87 and for 2013 through the infinite horizon are $1,030.2 trillion and

$1,707.8 trillion, respectively. Present values of GDP shown in the Medicare Trustees Report differ slightly

due to the use of interest discount rates that are specific to each program’s trust fund holdings.

Last year, the Trustees projected that the infinite horizon unfunded obligation

was $20.5 trillion in present value. If the assumptions, methods, and starting

values had not changed, moving the valuation date forward by 1 year would

have increased the unfunded obligation by about $0.9 trillion, to $21.4 trillion. The net effects of changes in assumptions, methods, law, and starting

values increased the infinite horizon unfunded obligation by an additional

$1.7 trillion, to $23.1 trillion in present value.

The infinite horizon unfunded obligation is 0.1 percentage point higher than

in last year’s report when expressed as a share of taxable payroll, and about

Table IV.B6.—Unfunded OASDI Obligations Through the Infinite Horizon,

Based on Intermediate Assumptions

[Present values as of January 1, 2013; dollar amounts in trillions]

Present

value

Expressed as a percentage

of future payroll and GDP

Taxable

payroll GDP

Unfunded obligation through the infinite horizona . . . . . . . . . . . . 

a Present value of future cost less future non-interest income, reduced by the amount of trust fund asset

reserves at the beginning of 2013. Expressed as a percentage of payroll and GDP for the period 2013 through

the infinite horizon.

$23.1 4.0 1.4

Unfunded obligation through 2087b . . . . . . . . . . . . . . . . . . . . . . . 

b Present value of future cost less future non-interest income through 2087, reduced by the amount of trust

fund reserves at the beginning of 2013. Expressed as a percentage of payroll and GDP for the period 2013

through 2087.

9.6 2.6 .9
69

Long-Range Estimates

the same as last year when expressed as a share of GDP. The main changes

affecting the infinite horizon unfunded obligation for this report are revised

starting values (such as lower mortality rates), legislative changes, changes

in near-term economic assumptions, adjustments in average benefit level

projections, and other method changes. See section IV.B.6 for details regarding changes in law, data, methods, and assumptions.

b. Unfunded Obligations for Past, Current, and Future Participants

Table IV.B7 separates the components of the infinite horizon unfunded obligation (with the exception of general fund reimbursements) among past, current, and future participants. The table does not separate past general fund

reimbursements among participants because there is no clear basis for attributing the reimbursements across generations.

The excess of the present value of cost for past and current participants1 over

the present value of dedicated tax income for past and current participants

produces an unfunded obligation for past and current participants of $24.3

trillion. Table IV.B7 also shows an unfunded obligation of $23.7 trillion for

past and current participants, including past and future general fund reimbursements. Future participants will pay dedicated taxes of $0.6 trillion more

into the system than the cost of their benefits ($51.0 trillion of dedicated tax

income as compared to $50.4 trillion of cost). The unfunded obligation for

all participants through the infinite horizon thus equals $23.1 trillion.

This accounting demonstrates that some generations are scheduled to receive

benefits with a present value exceeding the present value of their dedicated

tax income, while other generations are scheduled to receive benefits with a

present value less than the present value of their dedicated tax income,

whether past general fund reimbursements are included or not. Making

Social Security solvent over the infinite horizon requires some combination

of increased revenue or reduced benefits for current and future participants

amounting to $23.1 trillion in present value, 4.0 percent of future taxable

payroll, or 1.4 percent of future GDP.

 1 Individuals who attain age 15 or older in 2013.
Actuarial Estimates

70

Notes:

1. The present value of future taxable payroll for 2013 through the infinite horizon is $579.0 trillion.

2. The present value of GDP for 2013 through the infinite horizon is $1,707.8 trillion.

3. Totals do not necessarily equal the sums of rounded components.

Table IV.B7.—Present Values of OASDI Cost Less Non-interest Income

and Unfunded Obligations for Program Participants,

Based on Intermediate Assumptions

[Present values as of January 1, 2013; dollar amounts in trillions]

Present

value

Expressed as a 

percentage of future 

payroll and GDP

Taxable

payroll GDP

Present value of past cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48.2 8.3 2.8

Less present value of past dedicated tax income . . . . . . . . . . . . . . . . . . 50.4 8.7 3.0

Plus present value of future cost for current participants . . . . . . . . . . . 52.0 9.0 3.0

Less present value of future dedicated tax income for current 

participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.5 4.4 1.5

Equals unfunded obligation for past and current participants 

excluding general fund reimbursements . . . . . . . . . . . . . . . . . . . . . . 24.3 4.2 1.4

Less present value of past general fund reimbursementsa . . . . . . . . . . . .5 .1 b

Less present value of future general fund reimbursements over 

the infinite horizon a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cdb

Equals unfunded obligation for past and current participants 

including general fund reimbursements . . . . . . . . . . . . . . . . . . . . . . 23.7 4.1 1.4

Plus present value of cost for future participants over the infinite 

horizon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50.4 8.7 3.0

Less present value of dedicated tax income for future participants 

over the infinite horizon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.0 8.8 3.0

Equals unfunded obligation for all participants through the infinite 

horizon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.1 4.0 1.4

a Distribution of general fund reimbursements among past, current, and future participants cannot be determined.

b Less than 0.05 percent of GDP.

c Less than $50 billion.

d Less than 0.05 percent of taxable payroll.
71

Long-Range Estimates

6. Reasons for Change in Actuarial Balance From Last Report

Table IV.B8 shows the effects of changes on the long-range actuarial balance, by category, between last year’s report and this report.

Note: Totals do not necessarily equal the sums of rounded components.

If the assumptions, methods, starting values, and the law had all remained

unchanged from last year’s Trustees Report, the OASDI long-range actuarial

balance would have decreased (become more negative) by 0.06 percent of

taxable payroll solely due to the change in the valuation period. However, as

described below, this report includes changes in law, data, assumptions, and

methods. Though significant when considered separately, these changes

combine to produce a negligible effect on the actuarial balance. The actuarial

balance changed from -2.67 percent of taxable payroll in last year's report to

-2.72 percent in this report.

Since the last report, one law was enacted and one policy implemented that

are expected to have significant financial effects on the OASDI program. See

section III.B for details. The American Taxpayer Relief Act of 2012, enacted

on January 2, 2013, reduces Federal marginal income tax rates for most beneficiaries and thus lowers projected revenue from taxation of benefits. The

enactment of this law results in a decrease in the long-range OASDI actuarial

balance by 0.15 percent of taxable payroll. In addition, the policy directive,

The Deferred Action for Childhood Arrivals, which was implemented on

June 15, 2012, provides protection from deportation and an opportunity to

Table IV.B8.—Reasons for Change in the 75-Year Actuarial Balance,

Based on Intermediate Assumptions

[As a percentage of taxable payroll]

Item OASI DI OASDI

Shown in last year's report:

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.12 1.90 14.02

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.42 2.27 16.69

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.30 -.37 -2.67

Changes in actuarial balance due to changes in:

Legislation / Regulation . . . . . . . . . . . . . . . . . . . . . . . -.14 -.01 -.15

Valuation perioda . . . . . . . . . . . . . . . . . . . . . . . . . . . .

a The change in the 75-year valuation period from last year’s report to this report means that the 75-year

actuarial balance now includes the relatively large negative annual balance for 2086. This change in the valuation period results in a larger long-range actuarial deficit. The actuarial deficit includes the trust fund

reserve at the beginning of the projection period.

-.05 -.01 -.06

Demographic data and assumptions. . . . . . . . . . . . . . -.18 .01 -.17

Economic data and assumptions. . . . . . . . . . . . . . . . . -.01 -.02 -.03

Disability data and assumptions. . . . . . . . . . . . . . . . . .00 .01 .01

Methods and programmatic data . . . . . . . . . . . . . . . . .28 .07 .35

Total change in actuarial balance . . . . . . . . . . . . . . . . . . -.10 .05 -.05

Shown in this report:

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.40 -.32 -2.72

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.00 1.88 13.88

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.40 2.20 16.60
Actuarial Estimates

72

work legally for many unauthorized immigrants who entered the country

before age 16 and were under age 31 on June 15, 2012. Under the assumption that this policy will be extended for the affected group indefinitely, the

long-range OASDI actuarial balance is increased by 0.01 percent of taxable

payroll.

Changing the 75-year valuation period from 2012-86 to 2013-87 decreased

the projected long-range OASDI actuarial balance by 0.06 percent of taxable

payroll. This decrease is the result of including the relatively large negative

annual balance for 2087 in this year’s 75-year projection period. Note that

the annual balance for 2012 is not excluded from this year’s 75-year projection period because the actuarial balance includes trust fund asset reserves at

the beginning of the projection period. These reserves at the start of the

period reflect the program’s net financial flows for all past years up to the

start of the projection period.

Changes in ultimate assumptions and recent data for immigration have significant but largely offsetting effects on the actuarial balance for this year’s

report. The assumed ultimate annual immigration of “other immigrants”

(those entering the country without legal permanent resident status) is now

1.4 million, compared to 1.5 million assumed for last year’s report. The

assumed ultimate annual number of persons attaining legal permanent resident status is now 1.05 million, compared to 1.0 million assumed for last

year’s report. The distribution of this ultimate number between those entering the country with legal permanent resident status and those adjusting status after having already entered the country was also revised. The ultimate

annual number of new immigrants entering the country with legal permanent

resident status is now 0.6 million, compared to 0.5 million for last year’s

report. The ultimate annual number attaining legal permanent resident status

by adjusting status after having already entered the country is now 0.45 million, compared to 0.5 million for last year’s report. Reasons for these

changes include: (1) the expectation of continued tighter border control in

the future; (2) the assumed continuation of a recent increase in the number

attaining legal permanent resident status as immediate relatives; and (3) the

assumed continuation of a recent increase in the proportion of persons attaining legal permanent resident status upon entering the country (rather than

adjusting status after entry). These changes in ultimate assumptions plus

adjustments to levels of immigration for the early years of the projection

period to reflect recent experience and the projected economic recovery have

the net effect of increasing the long-range OASDI actuarial balance by 0.01

percent of taxable payroll.

The Trustees did not change the ultimate assumptions for other demographic

factors this year. However, updating the starting values for these factors, the
73

Long-Range Estimates

way these values transition to ultimate assumed levels, and other demographic changes, combined to decrease the long-range OASDI actuarial balance by 0.17 percent of taxable payroll. The following paragraph describes

the three updates that had significant effects on the long-range OASDI actuarial balance.

First, final mortality data for 2008 and 2009 show substantially larger reductions in death rates than expected in last year’s report. These new data result

in a lower starting level of death rates for the projections and a faster rate of

decline in death rates over the next 25 years. The age-sex-adjusted death rate

dropped by 3.5 percent from 2008 to 2009. This dramatic one-year drop contributes to an average annual rate of decline of 1.6 percent in the age-sexadjusted death rate from 2000-2009, more than double the average annual

rate of decline from 1982-2000. The effects of these final data decrease the

long-range actuarial balance by 0.20 percent of taxable payroll. Second, final

fertility (birth) data for 2009 and 2010, and preliminary data for 2011, indicate lower birth rates for these years than were assumed for last year’s report.

The Trustees recognize the effect of the recent economic recession on the

total fertility rate for 2009 and 2010 and assume the path of the total fertility

rate over the first 25 years of the projection period will reflect the economic

recovery. The additional fertility data and the altered path of fertility over the

first 25 years of the projection period combined to decrease the long-range

actuarial balance by 0.04 percent of taxable payroll. Third, incorporating

new historical data for marital status, for the number of new marriages, for

“other immigration,” and for the size of the population (based on the 2010

Census) combined to increase the long-range OASDI actuarial balance by

0.06 percent of taxable payroll.

The Trustees did not change any of the ultimate economic assumptions this

year. However, updated starting values and changes in near-term economic

assumptions combined for a net decrease in the long-range OASDI actuarial

balance of 0.03 percent of payroll. Lower real interest rates on trust fund

investments projected for the next 10 years decreased the actuarial balance

by 0.05 percent of payroll for this year’s report. Other changes in starting

values and near-term growth rate assumptions combined to increase the longrange OASDI actuarial balance by 0.02 percent of taxable payroll.

The Trustees did not change ultimate disability incidence or termination rates

from those in the prior report. However, slightly lower near term incidence

rates reflecting recent experience increased the long-range OASDI actuarial

balance by 0.01 percent of taxable payroll.

The projections in this report also reflect several methodological improvements and updates of program-specific data. These methodological changes,

updates, and interactions combined to increase the long-range OASDI actu-
Actuarial Estimates

74

arial balance by 0.35 percent of taxable payroll. Descriptions of six significant methodological changes and updates follow. 

The first methodological improvement alters the alignment of projected labor

force participation rates with future trends in disability, longevity, and population levels. Future changes in disability prevalence now affect the labor

force participation by: (1) extending the modeled effect of disability prevalence to ages over 72, and (2) reducing the modeled effects of disability

prevalence at increasing ages where workers tend to retire regardless of ability to work. The starting year for longevity changes used in the participation

rate projections is now consistent with the starting year for those projections.

These changes in labor force participation rates increased the long-range

actuarial balance by 0.01 percent of taxable payroll. 

The second methodological improvement develops the ultimate age-sex specific unemployment rates based on the relative levels of long-term historical

patterns through the most recent historical year. This improvement is

expected to substantially reduce volatility in projected levels of these rates

between Trustees Reports. This change increased the long-range actuarial

balance for this year’s report by 0.06 percent of taxable payroll.

The third methodological improvement separates modeling the number of

workers insured under the program into two groups by residency status: (1)

citizens and immigrants with legal permanent resident status, and (2) other

immigrants. While employment rates are assumed to be the same for these

two groups, the first group is far more likely to be in OASDI “covered”

employment, paying payroll taxes and accumulating earnings credits for

insured status. Detailed modeling is done for the first group using historical

and projected rates of covered employment specific to their resident status.

Because the rate of covered employment is much lower for the second group

(other immigrants), their likelihood of being insured is estimated to be much

lower. Separate modeling for these groups is important because their relative

sizes in the total population have been changing and will continue to do so.

In addition, the likelihood of being in covered employment has also changed,

particularly for the second group due to greater scrutiny in recent years in

issuing Social Security numbers. Compared to last year’s report, this methodological improvement results in less of the 60-64 population attaining

fully insured status during the period 2030 to 2055. Together these changes

in the projected relationship of covered work, insured status, and earnings

histories increased the OASDI actuarial balance by 0.09 percent of taxable

payroll.

The fourth significant change relates to the projection of average benefit levels for workers who will become eligible for benefits in the future. The historical sample of earnings histories for new beneficiaries, which is the
75

Long-Range Estimates

starting point for the long-range projection of average benefit levels, is now

updated to reflect new benefit entitlements in 2008. The 2007 sample served

as the basis for the projections in the prior report. The update of this sample

resulted in an increase in the long-range OASDI actuarial balance of about

0.05 percent of taxable payroll.

The fifth significant change improves the alignment of projections of income

from taxation of benefits after the tenth year of the projection period with

projections over the first ten years. This change resulted in an increase in the

income from taxation of benefits and an increase in the long-range OASDI

actuarial balance of about 0.05 percent of taxable payroll.

Finally, updating programmatic data, method changes for projecting beneficiaries and benefit levels over the first 10 years of the projection period,

other small methodological improvements, and interactions resulted in an

increase in the long-range OASDI actuarial balance of about 0.09 percent of

taxable payroll.

Figure IV.B4 compares the annual cash-flow balances for this report and the

prior year’s report for the combined OASDI program over the long-range

(75-year) projection period. The figure illustrates the annual effects of the

changes described earlier in this section.

 Figure IV.B4.—OASDI Annual Balances: 2012 and 2013 Trustees Reports

[As a percentage of taxable payroll, based on intermediate assumptions]

-6%

-4%

-2%

0%

2%

2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year 

2012 Report

2013 Report
Actuarial Estimates

76

Compared to last year’s report, the annual balance (income rate minus cost

rate) in this year’s report is: (1) more negative through 2019; (2) less negative for 2020 through 2057; and (3) more negative for the reminder of the

long-range period. Differences between the annual balances in the two

reports are less than 0.2 percent of taxable payroll over first 7 years of the

projection period, mainly due to reflecting 3.1 percent less real wage growth

over the period 2012 through 2014 in this year’s report. After 2022, the differences become increasingly less negative and peak in 2031. In 2031, the

annual balance in this report is 0.4 percent higher than projected in last

year’s report. The higher (less negative) annual balances for 2020 through

2057 are mainly due to: (1) a reduction in the proportion of the population

that is insured for benefits during this time period, a direct consequence of

the refined insured model described above, and (2) more legal immigrants

working and living in the country. These changes more than outweigh the

increase in the beneficiary population due to the lower mortality rates. After

2057, the lower annual balances in this year’s report are mainly due to: (1)

beneficiaries living longer, reflecting lower mortality rates at age 65 and

older, and (2) lower income for taxation of benefits, reflecting tax legislation

enacted at the beginning of 2013.

The annual deficit for 2086 is 4.72 percent of taxable payroll in this report,

compared to 4.50 percent for 2086 in last year's report. This difference

equals the projected loss of income from taxation of benefits due to the

recent tax legislation. However, other offsetting effects are important to mention. At the very end of the long-range period, the working age population is

almost the same as in last year’s report, but the beneficiary age population is

almost 2 percent larger. Offsetting some of the negative effect of this age

shift is a 2-percent increase in the projected number of covered workers. The

greater number of covered workers reflects the increased number of assumed

legal immigrants and higher labor force participation.
77

Demographic Assumptions and Methods

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

The future income and cost of the OASDI program will depend on many

demographic, economic, and program-specific factors. Trust fund income

will depend on how these factors affect the size and composition of the

working population as well as the level and distribution of earnings. Similarly, program cost will depend on how these factors affect the size and composition of the beneficiary population as well as the general level of benefits.

The Trustees make basic assumptions for several of these factors based on

analysis of historical trends, historical conditions, and expected future conditions. These factors include fertility, mortality, immigration, marriage,

divorce, productivity, inflation, average earnings, unemployment, real interest rate, and disability incidence and termination. Other factors depend on

these basic assumptions. These other, often interdependent, factors include

total population, life expectancy, labor force participation, gross domestic

product, and program-specific factors. Each year the Trustees reexamine

these assumptions and methods in light of new information and make appropriate revisions. The Trustees selected the assumptions for this report by the

end of December 2012.

Future levels of these factors and their interrelationships are inherently

uncertain. To address these uncertainties, this report uses three sets of

assumptions, designated as intermediate (alternative II), low-cost (alternative

I), and high-cost (alternative III). The intermediate set represents the Trustees’ best estimate of the future course of the population and the economy.

With regard to the net effect on the actuarial status of the OASDI program,

the low-cost set is more optimistic and the high-cost set is more pessimistic.

The low-cost and high-cost sets of assumptions reflect significant potential

changes in the interrelationships among factors, as well as changes in the

values for individual factors. 

While it is unlikely that all of the factors and interactions will differ in the

same direction from those expected, many combinations of individual differences in the factors could have a similar overall effect. Outcomes with overall long-range cost as low as the low-cost scenario or as high as the high-cost

scenario are very unlikely. This report also includes sensitivity analysis,

where factors are changed one at a time (see appendix D), and a stochastic

projection, which provides a probability distribution of possible future outcomes that is centered around the intermediate assumptions (see appendix

E).
Assumptions and Methods

78

Readers should interpret with care the estimates based on the three sets of

alternative assumptions. These estimates are not specific predictions of the

future financial status of the OASDI program, but rather a reasonable range

of future income and cost under a variety of plausible demographic and economic conditions.

The Trustees assume that values for each of the demographic, economic, and

program-specific factors change toward long-range ultimate values from

recent levels or trends within the next 25 years. For extrapolations beyond

the 75-year long-range period, the ultimate levels or trends reached by the

end of the 75-year period remain unchanged. The assumed ultimate values

represent average annual experience or growth rates. Actual future values

will exhibit fluctuations or cyclical patterns, as in the past.

The following sections briefly discuss the various assumptions and methods

required to make the estimates of trust fund financial status, which are the

heart of this report.1 There are, of course, many interrelationships among

these factors that make a sequential presentation potentially misleading. 

A. DEMOGRAPHIC ASSUMPTIONS AND METHODS

Table V.A1 displays the principal demographic assumptions relating to fertility, mortality, and net immigration for the three alternatives.

1. Fertility Assumptions

Birth rates by single year of age, for women aged 14 to 49, are the basis for

the fertility assumptions. These rates apply to the total number of women,

across all marital statuses, in the midyear population at each age.

Historically, birth rates in the United States have fluctuated widely. The total

fertility rate2 decreased from 3.31 children per woman at the end of World

War I (1918) to 2.15 during the Great Depression (1936). After 1936, the

total fertility rate rose to 3.68 in 1957 and then fell to 1.74 by 1976. After

1976, the total fertility rate began to rise again until it reached a level of 2.07

 1 Actuarial Studies published by the Office of the Chief Actuary, Social Security Administration, contain

further details about the assumptions, methods, and actuarial estimates. A complete list of available studies

may be found at www.socialsecurity.gov/OACT/NOTES/actstud.html. To obtain copies of such studies or of

this report, please submit a request at www.socialsecurity.gov/OACT/request.html or write to: Office of the

Chief Actuary, 700 Altmeyer Building, 6401 Security Boulevard, Baltimore, MD 21235. This entire report,

along with supplemental year-by-year tables, may also be found at

www.socialsecurity.gov/OACT/TR/2013/index.html.

 2 Defined to be the average number of children that would be born to a woman in her lifetime if she were to

experience, at each age of her life, the birth rate observed in, or assumed for, the selected year, and if she

were to survive the entire childbearing period. A rate of about 2.1 would ultimately result in a nearly constant population if immigration and emigration were both zero, and if death rates were to remain at current

levels.
79

Demographic Assumptions and Methods

for 1990. From 1991 to 2006, the total fertility rate averaged 2.03 children

per woman. Then, the total fertility rate dropped from 2.12 in 2007 to 1.93 in

2010 and, based on preliminary data, decreased further to a level of 1.89 in

2011. The recession and high unemployment are likely reasons for this drop.

The estimated total fertility rate for 2012 is 1.90.

These variations in the total fertility rate resulted from changes in many factors, including social attitudes, economic conditions, birth-control practices,

and the racial/ethnic composition of the population. The Trustees expect

future total fertility rates to remain close to recent levels. Certain population

characteristics, such as the higher percentages of women who have never

married, of women who are divorced, and of young women who are in the

labor force, are consistent with continued lower total fertility rates than experienced during the baby-boom era (1946-65). Based on consideration of

these factors, the Trustees assume ultimate total fertility rates of 2.30, 2.00,

and 1.70 children per woman for the low-cost, intermediate, and high-cost

assumptions, respectively. These ultimate rates are unchanged from last

year’s report.

For the intermediate alternative, the projected total fertility rate rises until

2021 when it reaches 2.07. This reflects the assumption that fertility rates

will have a recovery from their current recession-depleted levels. The Trustees then assume the total fertility rate follows a gradual trend toward the ultimate level in 2037. The Trustees assume the low-cost and high-cost total

fertility rates gradually trend away from the intermediate path to reach the

ultimate values in 2037.

2. Mortality Assumptions

The Office of the Chief Actuary at the Social Security Administration develops average percentage reductions in future mortality rates by age group,

sex, and cause of death. The office uses these percentages to estimate future

central death rates by age group, sex, and cause of death. From these estimated central death rates, the office calculates probabilities of death by single year of age and sex.

The Office of the Chief Actuary calculated historical death rates for years

1900-2009 for ages below 65 (and for all ages for years prior to 1968) using

data from the National Center for Health Statistics (NCHS).1 For ages 65

and over, the office used final Medicare data on deaths and enrollments for

years 1968 through 2009 and preliminary data for 2010. The office produced

 1 These rates reflect NCHS data on deaths and Census estimates of population.
Assumptions and Methods

80

death rates by cause of death at all ages for years 1979-2009 using data from

the NCHS.

The total age-sex-adjusted death rate1 declined at an average annual rate of

1.11 percent between 1900 and 2009. Between 1979 and 2009, the period for

which death rates were analyzed by cause, the total age-sex-adjusted death

rate, for all causes combined, declined at an average rate of 0.99 percent per

year.

Death rates have declined substantially in the U.S. since 1900, with rapid

declines over some periods and slow or no improvement over the other periods. Historical death rates generally declined more slowly for older ages and

more rapidly for children than for the rest of the population. Between 1900

and 2009, the age-sex-adjusted death rate for 65 and over declined at an

average rate of 0.81 percent per year, while declining at an average rate of

3.10 percent per year for ages under 15.

Many factors are responsible for historical reductions in death rates, including increased medical knowledge, increased availability of health-care services, and improvements in sanitation and nutrition. Considering the

expected rate of future progress in these and other areas, the Trustees assume

three alternative sets of ultimate annual percentage reductions in central

death rates by age group and cause of death, for 2037 and later. The intermediate set, alternative II, represents the Trustees’ best estimate. The average

annual percentage reductions for alternative I (low-cost) are smaller than

those for alternative II, while those for alternative III (high-cost) are larger.

These ultimate annual percentage reductions are the same as those in last

year’s report.

For the years 2010 through 2012, the assumed reductions in central death

rates are the same as the average annual reductions by age group, sex, and

cause of death experienced between 1999 and 2009. After 2012, the assumed

reductions in central death rates for alternative II change rapidly from the

average annual reductions experienced between 1999 and 2009, until they

reach the ultimate annual percentage reductions for 2037 and later. The

assumed reductions in death rates under alternatives I and III also rapidly

approach their ultimate levels, but start from levels which are, respectively,

50 and 150 percent of the corresponding alternative II level.

Table V.A1 contains projections of age-sex-adjusted death rates for the total

population (all ages), for ages under 65, and for ages 65 and over. Under the

 1 Based on the enumerated total population as of April 1, 2000, if that population were to experience the

death rates by age and sex for the selected year.
81

Demographic Assumptions and Methods

intermediate assumptions, projected age-sex-adjusted death rates are lower

than the death rates in last year’s report. These changes primarily result from

incorporating two additional years of historical data.

After adjusting for changes in the age-sex distribution of the population, the

projected total death rates decline at average annual rates of about

0.42 percent, 0.80 percent, and 1.21 percent between 2012 and 2087 for

alternatives I, II, and III, respectively. In keeping with the patterns observed

in the historical data, the assumed future rates of decline are greater for

younger ages than for older ages, but to a substantially lesser degree than in

the past. Accordingly, the projected age-sex-adjusted death rates for ages 65

and over decline at average annual rates of about 0.39 percent, 0.73 percent,

and 1.09 percent between 2012 and 2087 for alternatives I, II, and III,

respectively. The projected age-sex-adjusted death rates for ages under 15

decline at average annual rates of about 0.77 percent, 1.55 percent, and

2.54 percent between 2012 and 2087 for alternatives I, II, and III, respectively

Demographers express a wide range of views on the likely rate of future

decline in death rates. For example, the 2011 Technical Panel on Assumptions and Methods, appointed by the Social Security Advisory Board,

believed that ultimate rates of decline in mortality would be higher than the

rates of decline assumed for the intermediate projections in this report. Others believe that biological factors, social factors, and limitations on health

care spending may slow future rates of decline in mortality. Evolving trends

in health care and lifestyle will determine what further modifications to the

assumed ultimate rates of decline in mortality will be warranted for future

reports.

3. Immigration Assumptions

In order to develop projections of the total Social Security area population,

the Trustees make assumptions for annual legal immigration, legal emigration, “other immigration,” and “other emigration.” Legal immigration consists of persons who are granted legal permanent resident status. Legal

emigration consists of legal permanent residents and citizens who leave the

Social Security area population. Net legal immigration is the difference

between legal immigration and legal emigration. “Other immigration” consists of immigrants who enter the Social Security area in a given year and

stay to the end of that year without having legal permanent resident status,

such as undocumented immigrants and temporary foreign workers and students. “Other emigration” consists of other immigrants who leave the Social

Security area population or who adjust their status to become legal perma-
Assumptions and Methods

82

nent residents. Net other immigration is the difference between other immigration and other emigration. Net immigration refers to the sum of net legal

immigration and net other immigration.

The Trustees make separate assumptions for the low-cost, intermediate, and

high-cost scenarios. The low-cost scenario includes higher annual net immigration and the high-cost scenario includes lower annual net immigration.

Legal immigration increased after World War II to around 300,000 persons

per year and remained around that level until shortly after 1960. With the

Immigration Act of 1965 and other related changes, annual legal immigration increased to about 400,000 and remained fairly stable until 1977.

Between 1977 and 1990, legal immigration once again increased, averaging

about 580,0001 per year.

The Immigration Act of 1990, which took effect in fiscal year 1992, restructured the immigration categories and increased significantly the number of

immigrants who may legally enter the United States. Legal immigration

averaged about 780,0001 persons per year during the period 1992 through

1999. Legal immigration increased to about 900,000 in 2000 and about

1,060,000 in 2001, primarily due to an increase in the number of persons

granted legal permanent resident status as immediate relatives of U.S. citizens, the only category of legal immigration that is not numerically limited.

However, legal immigration declined to less than 800,000 by 2003 as processing slowed and the number of pending applications increased. From

2003 to 2006, processing accelerated and legal immigration increased until it

reached about 1,200,000 in 2006. For 2007 through 2009, legal immigration

decreased to about 1,100,000 and declined further to about 1,050,000 in

2010 and 1,060,000 in 2011. The estimated level of legal immigration in

2012 is 1,075,000.

The intermediate alternative assumes that annual legal immigration will be

1,050,000 persons for 2013 and later. Alternatives I and III assume that ultimate annual legal immigration will be 1,250,000 persons and 850,000 persons, respectively, for 2014 and later. The ultimate assumption for each

alternative is 50,000 per year higher than in last year’s report.

The assumed ratios of annual legal emigration to legal immigration are 20,

25, and 30 percent for alternatives I, II, and III, respectively. This range is

consistent with the limited historical data for legal emigration from the

Social Security area. These ratios are unchanged from last year’s report.

 1 This average excludes those persons who attained legal permanent resident status under the special, onetime provisions of the Immigration Reform and Control Act of 1986.
83

Demographic Assumptions and Methods

Under the intermediate alternative, by combining the ultimate annual legal

immigration and emigration assumptions, ultimate annual net legal immigration is about 790,000 persons. For the low-cost and high-cost scenarios, ultimate annual net legal immigration is 1,000,000 persons and 595,000 persons,

respectively.

The estimated number of other immigrants residing in the Social Security

area increased from 9.3 million persons for January 1, 2000, to 14.1 million

persons for January 1, 2008. The estimated other-immigrant population is

13.3 million persons for January 1, 2009, and 13.4 million persons for January 1, 2010 and January 1, 2011. The estimates for these 3 years are significantly lower than estimates for prior years’ levels, and this is likely due to

the recession.

Estimated annual other immigration for 2011 and 2012 is 1.0 million and

1.2 million persons, respectively. Due to the recent recession, these levels are

significantly lower than those estimated for the period 2000 through 2006.

Under the intermediate assumptions, annual other immigration is 1.3 million

for 2013, and increases to 1.6 million for 2018 and 2019 before decreasing to

the ultimate level of 1.4 million persons for 2022. For the low-cost and highcost scenarios, the future ultimate annual other immigration is 1.7 million

persons and 1.1 million persons, respectively, for 2022 and later. The ultimate assumption for each alternative is 0.1 million lower than in last year’s

report.

Emigration from the other-immigrant population includes those who leave

the Social Security area and those who adjust their status to become legal

permanent residents. This other-immigrant population is highly mobile and

far more likely to leave the Social Security area than is the citizen or legal

permanent resident population. The Office of the Chief Actuary models the

annual number of other immigrants who leave the Social Security area in two

groups. The first departing group equals a proportion of the number of other

immigrants, by age and sex, who have recently entered the Social Security

area. The second departing group is derived by applying annual departure

rates, by age and sex, to the other-immigrant population in the Social Security area.

Under the intermediate assumptions, the total annual number of other emigrants who leave the Social Security area averages 650,000 through the

75-year projection period. In addition, the Trustees assume that the ultimate

annual number of other immigrants who adjust status to become legal permanent residents is 450,000 for the intermediate assumptions. This ultimate

annual number who adjust status is about one-third of the ultimate annual
Assumptions and Methods

84

number of other immigrants entering the Social Security area. For the lowcost and high-cost scenarios, the total annual number of other emigrants

averages 750,000 and 530,000, respectively, through the 75-year projection

period. The Trustees assume the ultimate annual number of people adjusting

status to legal permanent resident status will be 550,000 persons and 350,000

persons, for the low-cost and high-cost scenarios, respectively.

Under the assumptions and methods described above, the projected size of

the other-immigrant population grows substantially. This growth reflects the

excess of annual other immigration over the combined annual numbers of

emigrants and deaths that occur within the other-immigrant population.

Estimated annual net other immigration averaged about 615,000 persons for

2000 through 2004. Estimates of net other immigration for 2005 through

2008 are based on data from the Department of Homeland Security. The estimated level is 1,140,000 for 2005, decreasing to 800,000 for 2006 and

70,000 for 2007. For 2008, estimated net other immigration is negative, at -

760,000, but returns to a positive level of 105,000 for 2009. The estimated

net other immigration for 2010, 2011, and 2012 is 50,000, 75,000, and

270,000, respectively.

Under the intermediate assumptions, projected net other immigration is

about 365,000 persons for 2013, and is about 595,000 persons for 2018. Net

other immigration then sharply decreases to about 350,000 for 2022, primarily due to the decline in the number of other immigrants entering the country.

This is followed by a more gradual decrease after 2022 to about 290,000 for

2040 and 265,000 for 2090. The decline in net other immigration after 2022

is due to the increasing number of other immigrants residing in the Social

Security area. Based on the rates of departure described above, an increase in

the number of other immigrants residing in the Social Security area results in

an increase in the number who emigrate out of the area. The Trustees assume

all other components of other immigration and emigration are stable after

2022, and thus do not contribute toward any change in net other immigration.

Under the intermediate assumptions, the projected average annual level of

net other immigration over the 75-year projection period is about 310,000

persons. For the low-cost and high-cost assumptions, projected average

annual net other immigration is about 400,000 persons and 205,000 persons,

respectively.

The projected average total level of net immigration (legal and other, combined) is about 1,095,000 persons per year during the 75-year projection

period under the intermediate assumptions. For the low-cost and high-cost
85

Demographic Assumptions and Methods

assumptions, projected average annual total net immigration is about

1,400,000 persons and 800,000 persons, respectively.

Demographers express a wide range of views about the future course of

immigration for the United States. Some, like the 2011 Technical Panel mentioned in the previous section, believe that net immigration will increase substantially in the future. Others believe that potential immigrants may be

increasingly attracted to other countries, that potential immigrants may be

fewer due to lower birth rates in many countries, or that changes in the law or

enforcement of the law could reduce immigration.
Assumptions and Methods

86

Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2090

Calendar year

Total

fertility ratea

Age-sex-adjusted death rateb

per 100,000, by age Net immigrationc d

Total Under 65 65 and over Legale Otherf

Historical data:

1940 . . . . . . . . . 2.23 1,779.1 673.0 9,569.0 45,000 —

1945 . . . . . . . . . 2.42 1,586.6 601.8 8,522.4 55,000 —

1950 . . . . . . . . . 3.03 1,435.6 499.4 8,028.3 170,000 —

1955 . . . . . . . . . 3.50 1,334.2 442.8 7,612.2 210,000 —

1960 . . . . . . . . . 3.61 1,330.9 436.9 7,626.7 200,000 —

1965 . . . . . . . . . 2.88 1,304.6 430.0 7,464.0 230,000 —

1970 . . . . . . . . . 2.43 1,224.3 422.6 6,870.7 280,000 —

1975 . . . . . . . . . 1.77 1,099.0 369.5 6,236.4 295,000 —

1980 . . . . . . . . . 1.82 1,035.9 331.9 5,993.6 410,000 200,000

1985 . . . . . . . . . 1.83 984.2 303.6 5,777.6 435,000 255,000

1990 . . . . . . . . . 2.07 930.9 289.1 5,451.1 500,000 645,000

1995 . . . . . . . . . 1.98 913.9 277.3 5,397.5 575,000 585,000

1996 . . . . . . . . . 1.98 900.4 266.1 5,367.2 665,000 500,000

1997 . . . . . . . . . 1.97 885.1 253.6 5,332.5 570,000 570,000

1998 . . . . . . . . . 2.00 878.3 246.9 5,325.2 490,000 615,000

1999 . . . . . . . . . 2.01 884.4 245.0 5,387.5 520,000 615,000

2000 . . . . . . . . . 2.05 875.6 243.4 5,328.3 670,000 610,000

2001 . . . . . . . . . 2.03 867.3 243.4 5,260.7 795,000 610,000

2002 . . . . . . . . . 2.03 863.5 242.6 5,236.6 730,000 615,000

2003 . . . . . . . . . 2.05 851.4 241.2 5,148.2 575,000 615,000

2004 . . . . . . . . . 2.06 819.9 234.8 4,940.6 750,000 620,000

2005 . . . . . . . . . 2.06 822.0 235.9 4,949.3 870,000 1,140,000

2006 . . . . . . . . . 2.11 799.2 233.4 4,783.5 910,000 800,000

2007 . . . . . . . . . 2.12 781.5 228.3 4,678.1 800,000 70,000

2008 . . . . . . . . . 2.07 781.2 225.3 4,696.1 835,000 -760,000

2009 . . . . . . . . . 2.00 753.9 222.4 4,497.2 830,000 105,000

2010g . . . . . . . . 1.93 754.1 222.8 4,495.4 785,000 50,000

2011g . . . . . . . . 1.89 742.4 220.9 4,415.0 795,000 75,000

2012g . . . . . . . . 1.90 732.1 219.0 4,345.0 805,000 270,000

Intermediate: 

2015 . . . . . . . . . 1.95 705.1 213.5 4,167.4 790,000 425,000

2020 . . . . . . . . . 2.06 670.2 203.1 3,960.0 790,000 465,000

2025 . . . . . . . . . 2.05 640.3 192.4 3,794.5 790,000 340,000

2030 . . . . . . . . . 2.03 613.0 182.2 3,647.5 790,000 325,000

2035 . . . . . . . . . 2.01 587.7 172.5 3,512.1 790,000 305,000

2040 . . . . . . . . . 2.00 564.1 163.4 3,386.0 790,000 290,000

2045 . . . . . . . . . 2.00 541.9 154.8 3,267.8 790,000 280,000

2050 . . . . . . . . . 2.00 521.1 146.9 3,156.8 790,000 275,000

2055 . . . . . . . . . 2.00 501.6 139.4 3,052.3 790,000 270,000

2060 . . . . . . . . . 2.00 483.3 132.4 2,953.9 790,000 270,000

2065 . . . . . . . . . 2.00 466.0 125.9 2,861.0 790,000 265,000

2070 . . . . . . . . . 2.00 449.7 119.8 2,773.4 790,000 265,000

2075 . . . . . . . . . 2.00 434.3 114.0 2,690.4 790,000 265,000

2080 . . . . . . . . . 2.00 419.8 108.6 2,611.9 790,000 265,000

2085 . . . . . . . . . 2.00 406.1 103.5 2,537.4 790,000 265,000

2090 . . . . . . . . . 2.00 393.1 98.7 2,466.7 790,000 265,000
87

Demographic Assumptions and Methods

Low-cost: 

2015 . . . . . . . . . 1.99 723.6 218.1 4,283.8 1,000,000 525,000

2020 . . . . . . . . . 2.15 708.9 214.0 4,194.0 1,000,000 630,000

2025 . . . . . . . . . 2.20 693.6 208.7 4,108.6 1,000,000 480,000

2030 . . . . . . . . . 2.24 678.5 203.1 4,026.0 1,000,000 445,000

2035 . . . . . . . . . 2.28 663.6 197.6 3,945.9 1,000,000 415,000

2040 . . . . . . . . . 2.30 649.2 192.1 3,868.4 1,000,000 395,000

2045 . . . . . . . . . 2.30 635.3 186.8 3,793.5 1,000,000 375,000

2050 . . . . . . . . . 2.30 621.8 181.7 3,721.0 1,000,000 360,000

2055 . . . . . . . . . 2.30 608.8 176.8 3,650.9 1,000,000 350,000

2060 . . . . . . . . . 2.30 596.2 172.1 3,583.1 1,000,000 345,000

2065 . . . . . . . . . 2.30 584.0 167.5 3,517.5 1,000,000 340,000

2070 . . . . . . . . . 2.30 572.2 163.0 3,454.0 1,000,000 335,000

2075 . . . . . . . . . 2.30 560.8 158.7 3,392.5 1,000,000 335,000

2080 . . . . . . . . . 2.30 549.8 154.6 3,332.8 1,000,000 335,000

2085 . . . . . . . . . 2.30 539.1 150.6 3,275.1 1,000,000 335,000

2090 . . . . . . . . . 2.30 528.7 146.7 3,219.0 1,000,000 335,000

High-cost:

2015 . . . . . . . . . 1.92 686.5 208.7 4,051.1 595,000 140,000

2020 . . . . . . . . . 1.96 630.7 191.3 3,724.6 595,000 80,000

2025 . . . . . . . . . 1.89 585.6 174.9 3,478.3 595,000 270,000

2030 . . . . . . . . . 1.81 546.5 159.9 3,269.5 595,000 245,000

2035 . . . . . . . . . 1.73 511.7 146.3 3,084.7 595,000 225,000

2040 . . . . . . . . . 1.70 480.4 134.2 2,919.0 595,000 215,000

2045 . . . . . . . . . 1.70 452.2 123.2 2,768.8 595,000 210,000

2050 . . . . . . . . . 1.70 426.6 113.4 2,632.0 595,000 205,000

2055 . . . . . . . . . 1.70 403.3 104.6 2,507.0 595,000 205,000

2060 . . . . . . . . . 1.70 382.0 96.6 2,392.5 595,000 205,000

2065 . . . . . . . . . 1.70 362.6 89.3 2,287.0 595,000 205,000

2070 . . . . . . . . . 1.70 344.8 82.8 2,189.7 595,000 205,000

2075 . . . . . . . . . 1.70 328.3 76.8 2,099.7 595,000 200,000

2080 . . . . . . . . . 1.70 313.2 71.4 2,016.0 595,000 200,000

2085 . . . . . . . . . 1.70 299.1 66.4 1,938.1 595,000 200,000

2090 . . . . . . . . . 1.70 286.1 61.8 1,865.3 595,000 200,000

a The total fertility rate for any year is the average number of children that would be born to a woman in her

lifetime if she were to experience, at each age of her life, the birth rate observed in, or assumed for, the

selected year, and if she were to survive the entire childbearing period.

b Based on the enumerated total population as of April 1, 2000, if that population were to experience the

death rates by age and sex observed in, or assumed for, the selected year.

c Net immigration values are rounded to the nearest 5,000.

d Estimates do not include persons who attained legal permanent resident status under the special one-time

provisions of the Immigration Reform and Control Act of 1986.

e Historical estimates of net legal immigration assume a 25 percent reduction in legal immigration due to

legal emigration.

f Historical net other immigration estimates depend on a residual method, using Department of Homeland

Security January 1 stock estimates for 2005 through 2011.

g Fertility is estimated starting in 2011, mortality starting in 2010, and immigration starting in 2011.

Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2090 (Cont.)

Calendar year

Total

fertility ratea

Age-sex-adjusted death rateb

per 100,000, by age Net immigrationc d

Total Under 65 65 and over Legale Otherf
Assumptions and Methods

88

4. Total Population Estimates

The starting Social Security area population for January 1, 2011, is derived

from the Census Bureau’s estimate of the residents of the 50 States and D.C.

and U.S. Armed Forces overseas. Adjustments are made to reflect mortality

assumptions for the aged population since 2010 that are consistent with

Medicare and Social Security data, net immigration assumptions for the aged

population since 2010, estimates of the net undercount in the 2010 census,

inclusion of U.S. citizens living abroad (including residents of U.S. territories), and inclusion of non-citizens living abroad who are insured for Social

Security benefits. The Office of the Chief Actuary projects the population in

the Social Security area by age, sex, and marital status for January 1 of each

year 2012 through 2090 by combining the assumptions for future fertility,

mortality, and net immigration with assumptions for marriage and divorce.

Previous sections of this chapter present the assumptions for future fertility,

mortality, and immigration. Assumptions for future rates of marriage and

divorce reflect historical data from the National Center for Health Statistics

and the Census Bureau.

This report contains a July 1 (i.e., midyear) population for each year, which

is derived from surrounding January populations. Table V.A2 shows the historical and projected population for July 1 by broad age group, for the three

alternatives. It also shows the aged and total dependency ratios (see table

footnotes for definitions).
89

Demographic Assumptions and Methods

Table V.A2.—Social Security Area Population on July 1 and Dependency Ratios,

Calendar Years 1945-2090

Calendar year

Population (in thousands) Dependency ratio

Under 20 20-64

65 and

over Total Ageda Totalb

Historical data:

1945 . . . . . . . . . . . . . . 49,121 88,109 10,896 148,126 .124 .681

1950 . . . . . . . . . . . . . . 53,902 92,382 12,769 159,052 .138 .722

1955 . . . . . . . . . . . . . . 63,291 96,207 15,075 174,574 .157 .815

1960 . . . . . . . . . . . . . . 73,074 99,802 17,277 190,153 .173 .905

1965 . . . . . . . . . . . . . . 80,032 104,879 19,071 203,982 .182 .945

1970 . . . . . . . . . . . . . . 81,047 113,000 20,901 214,948 .185 .902

1975 . . . . . . . . . . . . . . 78,718 122,654 23,316 224,687 .190 .832

1980 . . . . . . . . . . . . . . 74,851 134,104 26,308 235,263 .196 .754

1985 . . . . . . . . . . . . . . 73,077 144,567 29,145 246,788 .202 .707

1990 . . . . . . . . . . . . . . 74,823 152,753 31,935 259,510 .209 .699

1995 . . . . . . . . . . . . . . 79,570 160,552 34,434 274,557 .214 .710

2000 . . . . . . . . . . . . . . 82,387 170,000 35,693 288,080 .210 .695

2005 . . . . . . . . . . . . . . 84,231 180,291 37,230 301,752 .207 .674

2010 . . . . . . . . . . . . . . 85,469 188,448 41,094 315,012 .218 .672

2012 c . . . . . . . . . . . . . 84,951 191,124 43,574 319,650 .228 .672

Intermediate:

2015 . . . . . . . . . . . . . . 85,181 194,297 48,107 327,585 .248 .686

2020 . . . . . . . . . . . . . . 87,583 198,463 56,558 342,604 .285 .726

2025 . . . . . . . . . . . . . . 90,549 200,598 65,995 357,142 .329 .780

2030 . . . . . . . . . . . . . . 93,078 203,032 74,213 370,323 .366 .824

2035 . . . . . . . . . . . . . . 96,285 206,211 79,300 381,795 .385 .851

2040 . . . . . . . . . . . . . . 97,764 211,997 81,976 391,738 .387 .848

2045 . . . . . . . . . . . . . . 98,589 218,563 83,691 400,844 .383 .834

2050 . . . . . . . . . . . . . . 100,009 223,831 85,963 409,803 .384 .831

2055 . . . . . . . . . . . . . . 102,226 227,988 88,946 419,160 .390 .839

2060 . . . . . . . . . . . . . . 104,740 231,563 92,682 428,985 .400 .853

2065 . . . . . . . . . . . . . . 106,954 235,981 96,175 439,110 .408 .861

2070 . . . . . . . . . . . . . . 108,729 240,679 99,881 449,290 .415 .867

2075 . . . . . . . . . . . . . . 110,255 245,573 103,567 459,396 .422 .871

2080 . . . . . . . . . . . . . . 111,926 251,532 105,958 469,416 .421 .866

2085 . . . . . . . . . . . . . . 113,913 255,949 109,580 479,442 .428 .873

2090 . . . . . . . . . . . . . . 116,050 259,528 113,936 489,514 .439 .886

Low-cost:

2015 . . . . . . . . . . . . . . 85,464 194,653 48,049 328,165 .247 .686

2020 . . . . . . . . . . . . . . 89,168 200,065 56,204 345,437 .281 .727

2025 . . . . . . . . . . . . . . 94,240 203,491 65,173 362,904 .320 .783

2030 . . . . . . . . . . . . . . 99,662 207,168 72,771 379,601 .351 .832

2035 . . . . . . . . . . . . . . 106,445 211,636 77,138 395,218 .364 .867

2040 . . . . . . . . . . . . . . 111,602 219,336 79,084 410,022 .361 .869

2045 . . . . . . . . . . . . . . 115,766 228,580 80,172 424,518 .351 .857

2050 . . . . . . . . . . . . . . 120,449 237,234 82,000 439,683 .346 .853

2055 . . . . . . . . . . . . . . 126,069 245,438 84,736 456,243 .345 .859

2060 . . . . . . . . . . . . . . 132,147 253,755 88,332 474,233 .348 .869

2065 . . . . . . . . . . . . . . 138,295 263,355 91,663 493,314 .348 .873

2070 . . . . . . . . . . . . . . 144,121 273,952 95,083 513,156 .347 .873

2075 . . . . . . . . . . . . . . 149,653 285,662 98,356 533,671 .344 .868

2080 . . . . . . . . . . . . . . 155,337 299,226 100,418 554,981 .336 .855

2085 . . . . . . . . . . . . . . 161,493 311,484 104,298 577,275 .335 .853

2090 . . . . . . . . . . . . . . 168,023 322,955 109,620 600,598 .339 .860
Assumptions and Methods

90

Notes:

1. Historical data are subject to revision.

2. Totals do not necessarily equal the sums of rounded components.

5. Life Expectancy Estimates

Life expectancy, or average remaining number of years expected prior to

death, is an additional way to summarize the Trustees’ mortality assumptions. This report includes life expectancy in two different forms (period and

cohort) for two separate purposes.

 • Period life expectancy for a given year uses the actual or expected death

rates at each age for that year. It is a useful summary statistic for illustrating the overall level of the death rates experienced in a single year.

Period life expectancy for a particular year provides an individual’s

expected average remaining lifetime at a selected age, assuming no

change in death rates after that year. Table V.A3 presents historical and

projected life expectancy calculated on a period basis. 

 • Cohort life expectancy does not use death rates for a single year, but for

the series of years in which the individual will actually reach each succeeding age if he or she survives. Cohort life expectancy provides an

individual’s expected average remaining lifetime at a selected age in a

given year, using actual or expected future changes in death rates. Table

V.A4 presents historical and projected life expectancy calculated on a

High-cost:

2015 . . . . . . . . . . . . . . 84,795 193,690 48,161 326,646 .249 .686

2020 . . . . . . . . . . . . . . 85,422 195,441 56,887 337,750 .291 .728

2025 . . . . . . . . . . . . . . 86,262 196,269 66,811 349,342 .340 .780

2030 . . . . . . . . . . . . . . 86,006 197,681 75,694 359,381 .383 .818

2035 . . . . . . . . . . . . . . 85,832 199,781 81,559 367,171 .408 .838

2040 . . . . . . . . . . . . . . 84,028 203,767 85,027 372,822 .417 .830

2045 . . . . . . . . . . . . . . 82,090 207,688 87,421 377,199 .421 .816

2050 . . . . . . . . . . . . . . 80,856 209,746 90,146 380,748 .430 .815

2055 . . . . . . . . . . . . . . 80,377 210,187 93,312 383,877 .444 .826

2060 . . . . . . . . . . . . . . 80,213 209,448 97,074 386,735 .463 .846

2065 . . . . . . . . . . . . . . 79,596 209,117 100,637 389,349 .481 .862

2070 . . . . . . . . . . . . . . 78,598 208,424 104,566 391,587 .502 .879

2075 . . . . . . . . . . . . . . 77,510 207,199 108,610 393,320 .524 .898

2080 . . . . . . . . . . . . . . 76,660 206,512 111,285 394,457 .539 .910

2085 . . . . . . . . . . . . . . 76,104 204,476 114,439 395,020 .560 .932

2090 . . . . . . . . . . . . . . 75,661 201,964 117,438 395,064 .581 .956

a Ratio of the population at ages 65 and over to the population at ages 20-64.

b Ratio of the population at ages 65 and over and the population under age 20 to the population at ages

20-64.

c Estimated.

Table V.A2.—Social Security Area Population on July 1 and Dependency Ratios,

Calendar Years 1945-2090 (Cont.)

Calendar year

Population (in thousands) Dependency ratio

Under 20 20-64

65 and

over Total Ageda Totalb
91

Demographic Assumptions and Methods

cohort basis. Cohort life expectancy is somewhat greater than period

life expectancy for a given year because: (a) death rates at any age tend

to decline over time; and (b) cohort life expectancy uses death rates

from future years, while period life expectancy uses death rates only

from the given year.

Life expectancy at a given age reflects death rates at that and all older ages.

Period life expectancy is somewhat related to the age-sex-adjusted death rate

discussed in section V.A.2. However, life expectancy places far greater

weight on death rates at lower ages than at higher ages. Therefore, changes in

death rates at lower ages have far greater effects in changing life expectancy

over time. It is important to keep this concept in mind when considering

trends in life expectancy.
Assumptions and Methods

92

Table V.A3.—Period Life Expectancya

a The period life expectancy at a given age for a given year is the average remaining number of years

expected prior to death for a person at that exact age, born on January 1, using the mortality rates for that

year over the course of his or her remaining life.

Historical data

Calendar

year

At birth At age 65

Male Female Male Female

1940 . . . . 61.4 65.7 11.9 13.4

1945 . . . . 62.9 68.4 12.6 14.4

1950 . . . . 65.6 71.1 12.8 15.1

1955 . . . . 66.7 72.8 13.1 15.6

1960 . . . . 66.7 73.2 12.9 15.9

1965 . . . . 66.8 73.8 12.9 16.3

1970 . . . . 67.2 74.9 13.1 17.1

1975 . . . . 68.7 76.6 13.7 18.0

1980 . . . . 69.9 77.5 14.0 18.4

1985 . . . . 71.1 78.2 14.4 18.6

1990 . . . . 71.8 78.9 15.1 19.1

1995 . . . . 72.5 79.1 15.4 19.1

2000 . . . . 74.0 79.4 15.9 19.0

2001 . . . . 74.1 79.5 16.1 19.1

2002 . . . . 74.2 79.5 16.2 19.1

2003 . . . . 74.4 79.6 16.3 19.2

2004 . . . . 74.8 80.0 16.7 19.5

2005 . . . . 74.8 80.0 16.7 19.5

2006 . . . . 75.1 80.2 17.0 19.7

2007 . . . . 75.4 80.5 17.2 19.9

2008 . . . . 75.5 80.5 17.2 19.9

2009 . . . . 75.9 80.8 17.5 20.2

2010 b . . .

b Estimated.

75.9 80.8 17.6 20.2

2011 b . . . 76.1 80.9 17.8 20.3

2012 b . . . 76.3 81.1 17.9 20.4

Intermediate Low-cost High-cost

Calendar

year

At birth At age 65 At birth At age 65 At birth At age 65

Male Female Male Female Male Female Male Female Male Female Male Female

2015 . . . . 76.8 81.4 18.4 20.7 76.4 81.2 18.1 20.5 77.1 81.7 18.6 20.9

2020 . . . . 77.4 82.0 18.8 21.1 76.7 81.4 18.4 20.7 78.2 82.6 19.3 21.5

2025 . . . . 78.1 82.5 19.2 21.4 77.1 81.6 18.5 20.8 79.2 83.4 19.9 22.0

2030 . . . . 78.6 83.0 19.5 21.7 77.4 81.9 18.7 21.0 80.1 84.2 20.4 22.5

2035 . . . . 79.2 83.4 19.8 22.0 77.7 82.1 18.9 21.1 80.9 84.8 20.9 22.9

2040 . . . . 79.7 83.9 20.2 22.3 78.0 82.4 19.0 21.3 81.7 85.5 21.4 23.4

2045 . . . . 80.3 84.3 20.4 22.5 78.2 82.6 19.2 21.4 82.5 86.1 21.8 23.8

2050 . . . . 80.8 84.7 20.7 22.8 78.5 82.9 19.4 21.6 83.2 86.7 22.2 24.1

2055 . . . . 81.2 85.1 21.0 23.0 78.8 83.1 19.5 21.7 83.8 87.2 22.6 24.5

2060 . . . . 81.7 85.5 21.3 23.3 79.1 83.3 19.7 21.9 84.5 87.7 23.0 24.9

2065 . . . . 82.1 85.8 21.5 23.5 79.4 83.5 19.8 22.0 85.1 88.2 23.4 25.2

2070 . . . . 82.6 86.2 21.8 23.8 79.6 83.8 20.0 22.1 85.6 88.7 23.7 25.5

2075 . . . . 83.0 86.5 22.0 24.0 79.9 84.0 20.1 22.3 86.1 89.1 24.1 25.8

2080 . . . . 83.4 86.9 22.3 24.2 80.1 84.2 20.3 22.4 86.7 89.6 24.4 26.2

2085 . . . . 83.8 87.2 22.5 24.4 80.4 84.4 20.4 22.5 87.1 90.0 24.7 26.5

2090 . . . . 84.1 87.5 22.7 24.6 80.6 84.6 20.6 22.7 87.6 90.4 25.0 26.7
93

Demographic Assumptions and Methods

Table V.A4.—Cohort Life Expectancya

a The cohort life expectancy at a given age for a given year is the average remaining number of years

expected prior to death for a person at that exact age, born on January 1, using the mortality rates for the

series of years in which the individual will actually reach each succeeding age if he or she survives.

Calendar

year

Intermediate Low-cost High-cost

At birth b At age 65 c At birth b

b Cohort life expectancy at birth for those born in the calendar year is based on a combination of actual and

estimated death rates for birth years 1940 through 2009. For birth years after 2009, these values depend on

estimated death rates.

At age 65 c

c Age 65 cohort life expectancy for those attaining age 65 in calendar years 1940 though 2009 depends on

actual death rates or on a combination of actual and estimated death rates. After 2009, these values depend

on estimated death rates.

At birth b At age 65 c

Male Female Male Female Male Female Male Female Male Female Male Female

1940 . . . . 70.6 76.7 12.7 14.7 70.3 76.4 12.7 14.7 70.9 77.1 12.7 14.7

1945 . . . . 72.5 78.4 13.0 15.4 72.1 78.0 13.0 15.4 72.9 79.0 13.0 15.4

1950 . . . . 73.8 79.8 13.1 16.2 73.2 79.2 13.1 16.2 74.4 80.5 13.1 16.2

1955 . . . . 74.5 80.4 13.1 16.7 73.7 79.7 13.1 16.7 75.3 81.3 13.1 16.7

1960 . . . . 75.2 80.9 13.2 17.4 74.2 79.9 13.2 17.4 76.3 82.0 13.2 17.4

1965 . . . . 76.1 81.4 13.5 18.0 74.9 80.3 13.5 18.0 77.4 82.7 13.5 18.0

1970 . . . . 77.2 82.2 13.8 18.5 75.9 80.9 13.8 18.5 78.8 83.8 13.8 18.5

1975 . . . . 78.2 83.0 14.2 18.7 76.6 81.5 14.2 18.7 80.0 84.7 14.2 18.7

1980 . . . . 79.0 83.7 14.7 18.8 77.2 82.0 14.7 18.8 81.1 85.5 14.7 18.8

1985 . . . . 79.7 84.2 15.4 19.1 77.7 82.4 15.4 19.1 82.0 86.3 15.4 19.1

1990 . . . . 80.3 84.7 16.1 19.5 78.1 82.7 16.1 19.4 82.8 87.0 16.1 19.5

1995 . . . . 81.0 85.3 16.8 19.9 78.6 83.1 16.7 19.7 83.7 87.6 16.9 20.0

2000 . . . . 81.5 85.7 17.6 20.3 78.9 83.4 17.5 20.1 84.4 88.2 17.9 20.6

2001 . . . . 81.6 85.8 17.8 20.4 79.0 83.4 17.6 20.2 84.6 88.3 18.0 20.7

2002 . . . . 81.7 85.8 17.9 20.5 79.1 83.5 17.7 20.2 84.7 88.4 18.2 20.9

2003 . . . . 81.8 85.9 18.1 20.6 79.1 83.5 17.8 20.3 84.8 88.5 18.4 21.0

2004 . . . . 81.9 86.0 18.2 20.7 79.2 83.6 17.9 20.4 84.9 88.6 18.6 21.1

2005 . . . . 82.0 86.1 18.3 20.8 79.2 83.6 18.0 20.5 85.1 88.7 18.7 21.3

2006 . . . . 82.1 86.1 18.5 20.9 79.3 83.7 18.1 20.5 85.2 88.8 18.9 21.4

2007 . . . . 82.2 86.2 18.6 21.0 79.3 83.7 18.2 20.6 85.3 88.9 19.1 21.5

2008 . . . . 82.3 86.3 18.7 21.1 79.4 83.8 18.2 20.6 85.4 89.0 19.2 21.6

2009 . . . . 82.4 86.4 18.8 21.2 79.5 83.8 18.3 20.7 85.6 89.1 19.4 21.8

2010 . . . . 82.5 86.4 18.9 21.3 79.5 83.8 18.4 20.7 85.7 89.2 19.5 21.9

2011 . . . . 82.6 86.5 19.0 21.3 79.6 83.9 18.4 20.8 85.8 89.3 19.7 22.0

2012 . . . . 82.6 86.6 19.1 21.4 79.6 83.9 18.5 20.8 85.9 89.4 19.8 22.1

2015 . . . . 82.9 86.8 19.3 21.6 79.8 84.1 18.6 20.9 86.3 89.7 20.2 22.5

2020 . . . . 83.3 87.1 19.7 21.9 80.0 84.3 18.8 21.1 86.9 90.2 20.8 23.0

2025 . . . . 83.8 87.5 20.0 22.2 80.3 84.5 19.0 21.2 87.4 90.6 21.3 23.4

2030 . . . . 84.2 87.8 20.3 22.5 80.5 84.7 19.1 21.4 88.0 91.1 21.8 23.8

2035 . . . . 84.6 88.1 20.6 22.8 80.8 84.9 19.3 21.5 88.5 91.5 22.2 24.3

2040 . . . . 85.0 88.4 20.9 23.1 81.0 85.1 19.5 21.7 89.0 91.9 22.6 24.6

2045 . . . . 85.3 88.7 21.2 23.3 81.3 85.3 19.6 21.8 89.5 92.3 23.1 25.0

2050 . . . . 85.7 89.0 21.5 23.6 81.5 85.5 19.8 22.0 89.9 92.6 23.4 25.4

2055 . . . . 86.1 89.3 21.8 23.8 81.8 85.7 19.9 22.1 90.4 93.0 23.8 25.7

2060 . . . . 86.4 89.6 22.0 24.1 82.0 85.9 20.1 22.3 90.8 93.3 24.2 26.1

2065 . . . . 86.7 89.9 22.3 24.3 82.2 86.1 20.2 22.4 91.2 93.7 24.5 26.4

2070 . . . . 87.0 90.1 22.5 24.5 82.4 86.2 20.4 22.5 91.6 94.0 24.9 26.7

2075 . . . . 87.4 90.4 22.8 24.7 82.7 86.4 20.5 22.7 91.9 94.3 25.2 27.0

2080 . . . . 87.7 90.6 23.0 24.9 82.9 86.6 20.7 22.8 92.3 94.6 25.5 27.3

2085 . . . . 87.9 90.9 23.2 25.1 83.1 86.8 20.8 22.9 92.7 94.9 25.9 27.6

2090 . . . . 88.2 91.1 23.4 25.4 83.3 86.9 20.9 23.0 93.0 95.2 26.2 27.9
Assumptions and Methods

94

B. ECONOMIC ASSUMPTIONS AND METHODS

The three alternative sets of economic assumptions reflect a continuation of

the gradual recovery from the recession that started in December 2007. The

intermediate assumptions reflect the Trustees’ consensus expectation of sustained moderate economic growth and their best estimate for various other

economic parameters. The low-cost assumptions represent a more optimistic

outlook and assume a faster recovery, stronger long-term economic growth,

and relatively optimistic levels for other parameters. The high-cost assumptions represent a more pessimistic scenario, beginning with a small second

dip to the recession, followed by weaker long-term economic growth and relatively pessimistic levels for other parameters.

Actual economic data were available through the third quarter of 2012 at the

time the Trustees set the assumptions for this report. The data indicated that

economic activity peaked in December 20071 with the level of gross domestic product (GDP) about 1 percent above the estimated long-term sustainable-trend level. A severe recession followed, with a low point in the

economic cycle reached in the second quarter of 20092 with GDP about

7 percent below the estimated sustainable-trend level. The actual growth rate

in real GDP has been positive in all quarters since then, but not as strong as

in most past recoveries. The Trustees project that the economy will return to

its sustainable trend level of output within the first 10 years of the projection

period and remain on that trend thereafter. However, the speed of the return

varies by alternative. The Trustees project that the economy will return to its

sustainable trend level of output by 2020 for the intermediate assumptions,

2018 for the low-cost assumptions, and 2022 for the high-cost assumptions,

about 1 year later than in last year’s report for each alternative. Complete

cycles have little effect on the long-range estimates of financial status, so the

assumptions do not include economic cycles beyond 10 years.

The key economic assumptions underlying the three sets of projections of the

future financial status of the combined OASI and DI Trust Funds are discussed in the remainder of this section.

 1 Determination of the December 2007 Peak in Economic Activity, Business Cycle Dating Committee,

National Bureau of Economic Research. See www.nber.org/cycles/dec2008.html.

 2 See www.nber.org/cycles/sept2010.html.
95

Economic Assumptions and Methods

1. Productivity Assumptions

Total U.S. economy productivity is defined as the ratio of real GDP to hours

worked by all workers.1 The rate of change in total-economy productivity is

a major determinant in the growth of average earnings. Over the last five

complete economic cycles (1966-73, 1973-79, 1979-89, 1989-2000, and

2000-07, measured peak to peak), the annual increases in total productivity

averaged 2.26, 1.08, 1.30, 1.75 and 2.06 percent, respectively. For the 41-

year period from 1966 to 2007, covering those last five complete economic

cycles, the annual increase in total-economy productivity averaged 1.68 percent.

The Trustees set the ultimate annual increases in total-economy productivity

to 1.98, 1.68, and 1.38 percent for the low-cost, intermediate, and high-cost

assumptions, respectively2. These rates of increase are unchanged from the

2012 report, and reflect the belief that recent strong growth in private

non-farm business productivity is consistent with future long-term growth

similar to the long-term trends of the past.

The average annual rate of change in total economy productivity since the

last full business cycle (from 2007 to 2012) is 1.33 percent. For the intermediate assumptions, the Trustees assume the annual change in productivity

will be 0.68 percent for 2013, then increase to 2.06 percent for 2015, gradually decline to an average of 1.71 percent for 2016 through 2022, and reach

its ultimate value of 1.68 percent in 2023. For the low-cost assumptions, the

assumed annual change in productivity is 1.40 percent for 2013, averages

2.23 percent for 2014 through 2016 and 1.91 percent for 2017 through 2022,

and reaches its ultimate value of 1.98 percent in 2023. For the high-cost

assumptions, the assumed annual change in productivity is -0.14 percent for

2013, then averages 1.67 percent for 2014 through 2017, 1.45 percent for

2018 through 2022, and reaches the assumed ultimate value of 1.38 percent

in 2024.

2. Price Inflation Assumptions

Future changes in the Consumer Price Index for Urban Wage Earners and

Clerical Workers (CPI) will directly affect the OASDI program through the

 1 Historical levels of real GDP are from the Bureau of Economic Analysis’ National Income and Product

Accounts. Historical total hours worked is an unpublished series provided by the Bureau of Labor Statistics

that includes all U.S. Armed Forces and civilian employment.

 2 These assumptions are consistent with ultimate annual increases in private non-farm business productivity

of 2.39, 2.03, and 1.67 percent. Compared to total-economy productivity, private non-farm business productivity is a more widely known concept that excludes the farm, government, non-profit institution, and private

household sectors.
Assumptions and Methods

96

automatic cost-of-living benefit increases. Future changes in the GDP price

index (GDP deflator) affect the nominal levels of GDP, wages, self-employment income, average earnings, and taxable payroll.

The annual increases in the CPI averaged 4.6, 8.5, 5.3, 3.0, and 2.6 percent

over the economic cycles 1966-73, 1973-79, 1979-89, 1989-2000, and 2000-

07, respectively. The annual increases in the GDP deflator averaged 4.6, 7.7,

4.7, 2.2, and 2.6 percent for the same respective economic cycles. For the 41

years from 1966 to 2007, covering the last five complete economic cycles,

the annual increases in the CPI and GDP deflator averaged 4.6 and 4.1 percent, respectively. The estimated average annual change since the last complete economic cycle (2007 to 2012) is 2.2 percent for the CPI and 1.8

percent for the GDP deflator.

The Trustees set the ultimate annual increases in the CPI to 1.8, 2.8, and 3.8

percent for the low-cost, intermediate, and high-cost assumptions, respectively. These rates of increase are unchanged from the 2012 report, and

reflect a belief that: (1) future shocks that increase inflation will likely be offset by succeeding periods of relatively low inflation; and (2) future monetary

policy will be similar to that of the last 20 years, which emphasizes stable

prices and long-term sustainable economic growth.

For the intermediate assumptions, the Trustees assume the annual change in

the CPI will be 1.8 percent for 2013, 2.2 percent for 2014, and then, as the

economy moves toward full employment, increase gradually to the ultimate

growth rate of 2.8 percent for 2018 and later. For the low-cost assumptions,

the Trustees assume the annual change in the CPI will average 1.7 percent

for 2013 through 2016 and reach its ultimate annual growth rate of 1.8 percent for 2017 and later. For the high-cost assumptions, the Trustees assume

the annual rate of change in the CPI will increase from 1.9 percent for 2013

to the ultimate annual change of 3.8 percent for 2019 and later.

The annual increase in the GDP deflator differs from the annual increase in

the CPI due to methodological differences in the construction of the two

indices. The difference between the rate of change in the CPI and the rate of

change in the GDP deflator is called the price differential in this report. For

the 41 years from 1966 to 2007, covering the last five complete economic

cycles, the average annual price differential was 0.5 percent. Since the last

complete economic cycle (from 2007 to 2012), the average annual price differential is estimated to be 0.4 percent.

The Trustees assume the price differential will be 0.3, 0.4, and 0.5 percentage point for the low-cost, intermediate, and high-cost alternatives, respectively. Varying the ultimate projected price differential across alternatives

recognizes the historical variation in this measure. Accordingly, the Trustees
97

Economic Assumptions and Methods

assume the ultimate annual increase in the GDP deflator will be 1.5 (1.8 less

0.3), 2.4 (2.8 less 0.4), and 3.3 (3.8 less 0.5) percent for the low-cost, intermediate, and high-cost alternatives, respectively. These ultimate price differentials and GDP deflator growth rates are unchanged from the 2012 report.

The price differential was 1.4 percentage points for 2011 and is estimated to

be 0.2 percentage point for 2012. The large change in the price differential

between 2011 and 2012 primarily reflects fluctuations in oil prices in recent

years. Changes in oil prices affect the CPI much more than the GDP deflator

because oil represents a much larger share of U.S. consumption than of U.S.

production. The Trustees do not assume any future fluctuations in oil prices

because such fluctuations are inherently unpredictable. For the intermediate

assumptions, the Trustees assume the price differential will be -0.03 percentage point in 2013, 0.5 percentage point in 2014, and then stabilize at 0.4 percentage point in 2015 and later.

3. Average Earnings Assumptions

The average level of nominal earnings in OASDI covered employment for

each year has a direct effect on the size of the taxable payroll and on the

future level of average benefits. In addition, under the automatic-adjustment

provisions in the law, growth in the average wage in the U.S. economy

directly affects certain parameters used in the OASDI benefit formulas as

well as the contribution and benefit base, the exempt amounts under the

retirement earnings test, the amount of earnings required for a quarter of coverage, and certain automatic cost-of-living benefit increases.

Average U.S. earnings is defined as the ratio of the sum of total U.S. wage

and salary disbursements and net proprietors’ income to the sum of total U.S.

civilian employment and armed forces. The growth rate in average U.S. earnings for any period is equal to the combined growth rates for total U.S. economy productivity, average hours worked, the ratio of earnings to total

compensation (which reflects fringe benefits), the ratio of total compensation

to GDP, and the GDP deflator.

The average annual change in average hours worked was -0.27 percent over

the last five complete economic cycles covering the period from 1966 to

2007. The annual change in average hours worked averaged -0.71, -0.56,

0.00, 0.15, and -0.63 percent over the economic cycles 1966-73, 1973-79,

1979-89, 1989-2000, and 2000-07, respectively. Since the last complete economic cycle (2007 to 2012), the average annual change in average hours

worked has been -0.25 percent.
Assumptions and Methods

98

The Trustees set the ultimate annual rates of change for average hours

worked at 0.05, -0.05, and -0.15 percent for the low-cost, intermediate, and

high-cost assumptions, respectively. These ultimate annual rates of change

for average hours worked are unchanged from the 2012 report.

The average annual change in the ratio of earnings to total compensation was

-0.21 percent from 1966 to 2007. Most of this decrease was due to the relative increase in employer-sponsored group health insurance for wage workers. Assuming that the level of total employee compensation is not affected

by the amount of employer-sponsored group health insurance, any increase

or decrease in employer-sponsored group health insurance leads to a commensurate decrease or increase in other components of employee compensation, including wages. Projections of future ratios of earnings to total

compensation follow this principle. The Trustees assume that the total

amount of future employer-sponsored group health insurance will increase

more slowly than in the past due to provisions of the Affordable Care Act of

2010, as described in the 2010 report. Data from the Bureau of Economic

Analysis indicate that the other significant component of non-wage

employee compensation is employer contributions to retirement plans, which

is assumed to grow faster than employee compensation in the future as life

expectancy and potential time in retirement increase.

The Trustees set the average annual rate of change in the ratio of wages to

employee compensation from 2025 to 2087 to about -0.03, -0.13, and -0.23

percent for the low-cost, intermediate, and high-cost assumptions, respectively. Under the intermediate assumptions, the Trustees assume that the ratio

of wages to employee compensation will decline from 0.803 for 2012 to

0.734 for 2087. The rate of this decline is about half the rate assumed prior to

enactment of the Affordable Care Act of 2010, as described in the 2010

report. The ratio of earnings to compensation includes self-employment

income both in the numerator and in the denominator. As a result, the rate of

decline in earnings to compensation (which over the same period averages

0.11 percent under the intermediate assumptions) is less than the rate of

decline in wages to employee compensation.

The ratio of total compensation (i.e., employee compensation and net proprietors’ income) to GDP varies over the economic cycle and with changes in

the relative sizes of different sectors of the economy. Over the last five economic cycles from 1966 to 2007, this ratio has averaged 0.648. The ratio

declined from 0.666 for 2001 to 0.627 for 2011. The Trustees assume that

this ratio will rise as the economy recovers, reaching a level of 0.650 for

2021. For years after 2021, the Trustees assume the relative sizes of different
99

Economic Assumptions and Methods

sectors of the economy will remain constant, and therefore project the ratio

of total compensation to GDP to remain unchanged at the 2021 level.

The projected average annual growth rate in average nominal U.S. earnings

from 2025 to 2087 is about 3.95 percent for the intermediate alternative. This

growth rate reflects the average annual growth rate of approximately -0.11

percent for the ratio of earnings to total compensation, and also reflects the

assumed ultimate annual growth rates of 1.68, -0.05, and 2.40 percent for

productivity, average hours worked, and the GDP deflator, respectively. Similarly, the projected average annual growth rate in average nominal U.S.

earnings is 3.53 percent for the low-cost assumptions and 4.36 percent for

the high-cost assumptions.

Over long periods, the Trustees expect the average annual growth rate in the

average wage in OASDI covered employment (henceforth the “average covered wage”) to be very close to the average annual growth rate in average

U.S. earnings. Specifically, the assumed average annual growth rates in the

average covered wage from 2025 to 2087 are 3.52, 3.93, and 4.32 percent for

the low-cost, intermediate, and high-cost assumptions, respectively.1 The

Trustees estimate that the annual rate of change in the average covered wage

is 2.32 percent for 2012. For the intermediate assumptions, as the economy

recovers, the Trustees assume the annual rate of change in the average covered wage will average 4.52 percent from 2012 to 2022. Thereafter, the

assumed average annual rate of change in the average covered wage is 3.92

percent.

4. Assumed Real-Wage Differential

The Trustees have traditionally expressed the real increase in the average

OASDI covered wage in the form of a real-wage differential—the annual

percentage change in the average covered wage minus the annual percentage

change in the CPI. For the 41-year period including 1967 through 2007, covering the last five complete economic cycles, the real-wage differential averaged 0.91 percentage point, the result of averages of 1.48, 0.01, 0.45, 1.58,

and 0.61 percentage points over the economic cycles 1966-73, 1973-79,

1979-89, 1989-2000, and 2000-07, respectively.

For the years 2025-87, the Trustees assume that the annual real-wage differentials for OASDI covered employment will average 1.72, 1.13, and 0.52

 1 While the nominal growth rate is assumed to be lowest for the low-cost alternative, the real (inflationadjusted) growth rate is highest for the low-cost alternative. See section 4 following.
Assumptions and Methods

100

percentage points for the low-cost, intermediate, and high-cost assumptions,

respectively.

The estimated real-wage differential has averaged -0.54 percentage point for

the years since the last economic cycle (2008 through 2012). For the intermediate assumptions, the Trustees assume that the real-wage differential will

increase from 0.87 percentage point for 2013 to 3.10 percentage points for

2015, an improvement that reflects the economic recovery. Thereafter, the

real-wage differential gradually declines to an average of 1.13 percentage

points for 2025-87. For the low-cost assumptions, the real-wage differential

increases from 2.35 percentage points for 2013 to 3.65 percentage points for

2014, and gradually declines to its long-run average of 1.72 percentage

points after 2022. For the high-cost assumptions, the real-wage differential

increases from -0.75 percentage point for 2013 to 2.59 percentage points for

2017, gradually declines to 0.60 percentage point for 2022, and averages

0.52 percentage point after 2024.

Table V.B1.—Principal Economic Assumptions

Calendar year

Annual percentage changea in—

Realwage

differentialb

Productivity

(Total U.S.

economy)

Earnings as

a percent of

compensation

Average

hours

worked

GDP

price

index

Average

annual wage

in covered

employment

Consumer

Price

Index

Historical data:

5-year periods:

1960 to 1965 . . . 3.21 -0.20 0.16 1.38 3.22 1.24 1.98

1965 to 1970 . . . 1.98 -.38 -.68 4.07 5.84 4.23 1.61

1970 to 1975 . . . 2.11 -.70 -.87 6.66 6.62 6.76 -.17

1975 to 1980 . . . .93 -.57 -.17 7.31 8.87 8.91 -.05

1980 to 1985 . . . 1.67 -.26 .02 5.23 6.53 5.22 1.29

1985 to 1990 . . . 1.26 .07 -.07 3.22 4.74 3.83 .91

1990 to 1995 . . . 1.19 -.15 .40 2.46 3.59 3.03 .56

1995 to 2000 . . . 2.33 .46 .13 1.69 5.33 2.43 2.90

2000 to 2005 . . . 2.49 -.52 -.80 2.42 2.71 2.49 .22

2005 to 2010 . . . 1.55 -.12 -.48 2.11 2.50 2.30 .21

Economic cycles:c

1966 to 1973 . . . 2.26 -.44 -.71 4.63 6.10 4.61 1.48

1973 to 1979 . . . 1.08 -.67 -.56 7.65 8.55 8.54 .01

1979 to 1989 . . . 1.30 -.14 d 4.73 5.80 5.31 .45

1989 to 2000 . . . 1.75 .13 .15 2.23 4.54 2.96 1.58

2000 to 2007 . . . 2.06 -.25 -.63 2.61 3.25 2.65 .61

2007 to 2012 . . . 1.33 -.30 -.25 1.68 1.66 2.21 -.54

Single years:

2002 . . . . . . . . . . 3.16 -1.07 -1.03 1.61 .68 1.38 -.70

2003 . . . . . . . . . . 3.08 -1.30 -1.50 2.11 2.52 2.22 .30

2004 . . . . . . . . . . 2.32 .71 .03 2.81 4.69 2.61 2.08

2005 . . . . . . . . . . 1.51 -.43 -.18 3.32 3.72 3.52 .20

2006 . . . . . . . . . . .82 .50 -.02 3.24 4.74 3.19 1.55

2007 . . . . . . . . . . 1.22 .39 -.42 2.90 4.48 2.88 1.61

2008 . . . . . . . . . . .74 -.62 -.63 2.20 2.23 4.09 -1.85

2009 . . . . . . . . . . 2.60 -1.04 -1.90 .89 -1.47 -.67 -.79

2010 . . . . . . . . . . 2.39 .20 .59 1.34 2.62 2.07 .55

2011 . . . . . . . . . . .30 -.04 .94 2.13 2.68 3.56 -.88

2012e . . . . . . . . . .66 .03 -.21 1.84 2.32 2.07 .25
101

Economic Assumptions and Methods

Intermediate: 

2013 . . . . . . . . . . 0.68 0.02 0.30 1.83 2.67 1.80 0.87

2014 . . . . . . . . . . 1.96 -.04 .09 1.71 4.60 2.21 2.40

2015 . . . . . . . . . . 2.06 -.01 .17 2.02 5.52 2.42 3.10

2016 . . . . . . . . . . 1.94 .06 .16 2.14 5.58 2.54 3.04

2017 . . . . . . . . . . 1.80 .09 .10 2.30 5.36 2.70 2.66

2018 . . . . . . . . . . 1.69 .03 .05 2.40 4.98 2.80 2.18

2019 . . . . . . . . . . 1.58 -.16 d 2.40 4.36 2.80 1.56

2020 . . . . . . . . . . 1.64 -.18 -.04 2.40 4.15 2.80 1.35

2021 . . . . . . . . . . 1.67 -.16 -.05 2.40 4.14 2.80 1.34

2022 . . . . . . . . . . 1.65 -.13 -.05 2.40 3.89 2.80 1.09

2020 to 2025 . . . 1.67 -.12 -.05 2.40 3.92 2.80 1.12

2025 to 2087 . . . 1.68 -.11 -.05 2.40 3.93 2.80 1.13

Low-cost: 

2013 . . . . . . . . . . 1.40 .03 .52 1.78 4.02 1.67 2.35

2014 . . . . . . . . . . 2.41 -.03 .28 1.34 5.39 1.74 3.65

2015 . . . . . . . . . . 2.18 .01 .26 1.35 5.17 1.65 3.52

2016 . . . . . . . . . . 2.10 .09 .23 1.47 5.09 1.77 3.31

2017 . . . . . . . . . . 1.90 .13 .15 1.50 4.57 1.80 2.77

2018 . . . . . . . . . . 1.79 .09 .07 1.50 3.96 1.80 2.16

2019 . . . . . . . . . . 1.90 -.09 .05 1.50 3.66 1.80 1.86

2020 . . . . . . . . . . 1.98 -.11 .05 1.50 3.69 1.80 1.89

2021 . . . . . . . . . . 1.98 -.08 .05 1.50 3.74 1.80 1.94

2022 . . . . . . . . . . 1.93 -.04 .05 1.50 3.48 1.80 1.68

2020 to 2025 . . . 1.97 -.04 .05 1.50 3.52 1.80 1.72

2025 to 2087 . . . 1.98 -.03 .05 1.50 3.52 1.80 1.72

High-cost: 

2013 . . . . . . . . . . -.14 .02 .06 1.89 1.19 1.94 -.75

2014 . . . . . . . . . . 1.54 -.04 -.17 2.08 3.43 2.67 .75

2015 . . . . . . . . . . 1.71 -.02 -.03 2.68 5.07 3.18 1.89

2016 . . . . . . . . . . 1.72 .03 .03 2.81 5.66 3.31 2.35

2017 . . . . . . . . . . 1.72 .05 .06 3.09 6.18 3.59 2.59

2018 . . . . . . . . . . 1.58 -.02 .05 3.29 6.09 3.79 2.29

2019 . . . . . . . . . . 1.40 -.22 .01 3.30 5.50 3.80 1.70

2020 . . . . . . . . . . 1.52 -.26 -.03 3.30 5.37 3.80 1.57

2021 . . . . . . . . . . 1.37 -.25 -.09 3.30 4.92 3.80 1.12

2022 . . . . . . . . . . 1.36 -.22 -.13 3.30 4.40 3.80 .60

2020 to 2025 . . . 1.37 -.21 -.13 3.30 4.41 3.80 .61

2025 to 2087 . . . 1.38 -.20 -.15 3.30 4.32 3.80 .52

a For rows with a single year listed, the value is the annual percentage change from the prior year. For rows

with a range of years listed, the value is the compound average annual percentage change.

b For rows with a single year listed, the value is the annual percentage change in the average annual wage in

covered employment less the annual percentage change in the Consumer Price Index. For rows with a range

of years listed, the value is the average of annual values of the differential. Values are rounded after all computations.

c Economic cycles are shown from peak to peak, except for the last cycle, which is not yet complete.

d Greater than -0.005 and less than 0.005 percent.

e Historical data are not available for the full year. Estimated values vary slightly by alternative and are

shown for the intermediate assumptions.

Table V.B1.—Principal Economic Assumptions (Cont.)

Calendar year

Annual percentage changea in—

Realwage

differentialb

Productivity

(Total U.S.

economy)

Earnings as

a percent of

compensation

Average

hours

worked

GDP

price

index

Average

annual wage

in covered

employment

Consumer

Price

Index
Assumptions and Methods

102

5. Labor Force and Unemployment Projections

The Office of the Chief Actuary at the Social Security Administration projects the civilian labor force by age, sex, marital status, and presence of children. Projections of the labor force participation rates for each group reflect

disability prevalence, educational attainment, the average level of Social

Security retirement benefits, the state of the economy, and the change in life

expectancy. The projections also include a “cohort effect,” which reflects a

shift upward in female participation rates across cohorts born through 1948.

The annual rate of growth in the labor force decreased from an average of

about 2.4 percent during the 1966-73 economic cycle and 2.7 percent during

the 1973-79 cycle to 1.7 percent during the 1979-89 cycle, 1.3 percent during

the 1989-2000 cycle, and 1.0 percent during the 2000-07 cycle. The Trustees

expect further slowing of labor force growth due to a substantial slowing of

growth in the working age population in the future—a consequence of the

baby-boom generation approaching retirement and succeeding lower-birthrate cohorts reaching working age. Under the intermediate assumptions, the

Office of the Chief Actuary projects that the labor force will increase by an

average of 0.9 percent per year from 2012 to 2022 and 0.5 percent per year

over the remainder of the 75-year projection period.

The projected labor force participation rates are derived from a historically

based structural relationship that uses demographic and economic assumptions specific to each alternative. More optimistic economic assumptions in

the low-cost alternative are consistent with higher labor force participation

rates, but demographic assumptions in the low-cost alternative (such as

slower improvement in longevity) are consistent with lower labor force participation rates. These relationships with various basic assumptions move the

labor force participation rates in opposite directions; therefore, the net effect

is small, and projected labor force participation rates do not vary substantially across alternatives.

Historically, labor force participation rates reflect trends in demographics

and pensions. Between the mid-1960s and the mid-1980s, labor force participation rates at ages 50 and over declined for males but were fairly stable for

females. During this period, the baby-boom generation reached working age

and more women entered the labor force. This increasing supply of labor

allowed employers to offer attractive early retirement options. Between the

mid-1980s and the mid-1990s, participation rates roughly stabilized for

males and increased for females. Since the mid-1990s, however, participation rates for both sexes at ages 50 and over have generally risen significantly.
103

Economic Assumptions and Methods

Many economic and demographic factors, including longevity, health, disability prevalence, the business cycle, incentives for retirement in Social

Security and private pensions, education, and marriage patterns, will influence future labor force participation rates. The Office of the Chief Actuary

models some of these factors directly. To model the effects of other factors

related to increases in life expectancy, the office adjusts projected participation rates upward for mid-career and older ages to reflect projected increases

in life expectancy. For the intermediate projections, this adjustment increases

the total labor force by 3.2 percent for 2087.

For men age 16 and over, the projected age-adjusted labor force participation

rates1 for 2087 are 73.7, 73.5, and 73.3 percent for the low-cost, intermediate, and high-cost assumptions, respectively. For women age 16 and over, the

projected age-adjusted labor force participation rates for 2087 are 61.1, 61.1,

and 61.0 percent, for the low-cost, intermediate, and high-cost assumptions,

respectively. These rates are higher than the actual 2011 levels published by

the Bureau of Labor Statistics of 70.5 percent for men and 58.1 percent for

women, primarily due to the assumed increase in life expectancy. In the first

ten years, the assumed labor force participation rates also increase as the economic recovery draws more people into the labor force. Increasing disability

prevalence rates offset these increases somewhat in the intermediate and

high-cost assumptions, but a decrease in disability prevalence further contributes to increases in labor force participation in the low-cost assumptions.

The unemployment rates presented in table V.B2 are in the most commonly

cited form, the civilian rate. For years through 2022, the table presents total

civilian rates without adjustment for the changing age-sex distribution of the

population. For years after 2022, the table presents unemployment rates as

age-sex-adjusted rates, using the age-sex distribution of the 2011 civilian

labor force. Age-sex-adjusted rates allow for more meaningful comparisons

across longer time periods. The effect of age-sex adjustment through 2022 is

small.

The total civilian unemployment rate reflects the projected levels of unemployment for various age-sex groups of the population. The Office of the

Chief Actuary projects each group’s unemployment rate by relating changes

in the unemployment rate to the changes in the economic cycle, as measured

by the ratio of actual to potential GDP.2 For each alternative, the total civil-

 1 The Office of the Chief Actuary adjusts the labor force participation rates to the 2011 age distribution of

the civilian noninstitutional U.S. population.

 2 Potential GDP is the level of GDP assuming the economy is operating at the underlying sustainable trend

rate of growth.
Assumptions and Methods

104

ian unemployment rate moves toward the ultimate assumed rate as the economy moves toward the long-range sustainable growth path.

The Trustees assume that each alternative will reach the ultimate age-sexadjusted unemployment rate by 2022. The ultimate assumed unemployment

rates are 4.5, 5.5, and 6.5 percent for the low-cost, intermediate, and highcost assumptions, respectively. These values are unchanged from the 2012

report.

6. Gross Domestic Product Projections

The value of real GDP equals the product of three components: (1) average

weekly total employment;1 (2) productivity; and (3) average hours worked

per week. Consequently, the growth rate in real GDP is approximately equal

to the sum of the growth rates for total employment, productivity, and average hours worked. For the 41-year period from 1966 to 2007, which covers

the last five complete economic cycles, the average growth rate in real GDP

was 3.1 percent. This average growth rate approximately equals the sum of

the average growth rates of 1.6, 1.7, and -0.3 percent for total employment,

productivity, and average hours worked, respectively. As a result of the

2007-09 recession, the real GDP in 2011 was only 0.7 percent above the

2007 level. The estimated real GDP growth from 2011 to 2012 was 2.3 percent.

For the intermediate assumptions, the average annual growth in real GDP is

2.9 percent from 2012 to 2022, the approximate sum of component growth

rates of 1.1 percent for total employment, 1.7 percent for productivity, and

0.1 percent for average hours worked. The projected average annual growth

in real GDP of 2.9 percent for this period is 0.7 percentage point higher than

the underlying sustainable trend rate of 2.2 percent. This 0.7 percentage

point above-trend component reflects a relatively rapid increase in employment as the economy recovers and the unemployment rate falls from

8.1 percent in 2012 to its assumed ultimate level of 5.5 percent in 2020.

After 2022, the Trustees do not project any economic cycles. Accordingly,

the projected annual growth rate in real GDP combines the projected growth

rates for total employment, total U.S. economy productivity, and average

hours worked. After 2022, the annual growth in real GDP averages

2.1 percent, based on the assumed ultimate growth rates of 0.5 percent for

total employment, 1.7 percent for productivity, and -0.05 percent for average

hours worked. The assumed growth rate of real GDP is slower than the past

 1 Total employment is the sum of the U.S. Armed Forces and total civilian employment, which depends on

the projected total civilian labor force and unemployment rates.
105

Economic Assumptions and Methods

average growth rate mainly because the working-age population is expected

to grow slower than in the past.

For the low-cost assumptions, the annual growth in real GDP averages

3.6 percent over the decade ending in 2022. The relatively faster growth is

due mostly to higher assumed rates of growth for employment and worker

productivity. For the high-cost assumptions, the annual growth in real GDP

averages 2.2 percent for the decade ending in 2022.

7. Interest Rates

Table V.B2 presents average annual nominal and real interest rates for newly

issued trust fund securities. The nominal rate is the average of the nominal

interest rates for special U.S. Government obligations issuable to the trust

funds in each of the 12 months of the year. Interest for these securities is generally compounded semiannually. 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.

To develop a reasonable range of assumed ultimate future real interest rates

for the three alternatives, the Office of the Chief Actuary examined historical

experience for the last five complete economic cycles. For the 41-year period

from 1966 to 2007, the real interest rate averaged 2.8 percent per year. The

real interest rates averaged 1.3, -1.0, 5.2, 4.0, and 2.2 percent per year over

the economic cycles 1966-73, 1973-79, 1979-89, 1989-2000, and 2000-07,

respectively. The assumed ultimate real interest rates are 3.4 percent, 2.9 percent, and 2.4 percent for the low-cost, intermediate, and high-cost assumptions, respectively. These rates are unchanged from the 2012 report. 

The actual average annual nominal interest rate was approximately 2.4 percent for 2011, which means that securities newly issued in 2011 would yield

2.4 percent if held 1 year. Estimated average prices rose from 2011 to 2012

by approximately 2.1 percent. The annual real interest rate for 2012 is 0.4

percent, the approximate difference between the nominal interest rate and the

rate of price increase. For the 10-year short-range projection period, projected nominal interest rates depend on changes in the economic cycle and in

the CPI. When combined with the ultimate CPI assumptions of 1.8, 2.8, and

3.8 percent, the assumed ultimate real interest rates yield ultimate nominal

interest rates of about 5.2 percent for the low-cost assumptions, about 5.7

percent for the intermediate assumptions, and about 6.2 percent for the high-
Assumptions and Methods

106

cost assumptions. These nominal rates for newly issued trust fund securities

reach their ultimate levels by the end of the short-range period.

Table V.B2.—Additional Economic Factors

Calendar year 

Average annual

unemployment

ratea

Annual percentage changeb in— Average annual interest rate

Labor

forcec Total

employmentd RealGDPe Nominalf Realg

Historical data:

5-year periods:

1960 to 1965. . . . . 5.5 1.3 1.6 5.0 4.0 2.5

1965 to 1970. . . . . 3.9 2.2 2.1 3.4 5.8 1.0

1970 to 1975. . . . . 6.1 2.5 1.5 2.7 6.7 .0

1975 to 1980. . . . . 6.8 2.7 2.9 3.7 8.5 -.9

1980 to 1985. . . . . 8.3 1.5 1.5 3.2 12.1 6.9

1985 to 1990. . . . . 5.9 1.7 2.0 3.2 8.5 5.1

1990 to 1995. . . . . 6.6 1.0 .9 2.5 7.0 4.3

1995 to 2000. . . . . 4.6 1.5 1.8 4.3 6.2 3.9

2000 to 2005. . . . . 5.4 .9 .7 2.4 4.5 2.4

2005 to 2010. . . . . 6.8 .6 -.4 .7 3.8 1.8

Economic cycles:h

1966 to 1973. . . . . 4.6 2.4 2.0 3.6 6.1 1.3

1973 to 1979. . . . . 6.8 2.7 2.4 3.0 7.7 -1.0

1979 to 1989. . . . . 7.3 1.7 1.7 3.0 10.5 5.2

1989 to 2000. . . . . 5.6 1.3 1.3 3.3 6.8 4.0

2000 to 2007. . . . . 5.2 1.0 .9 2.4 4.6 2.2

2007 to 2012. . . . . 8.4 .2 -.5 .6 2.6 1.1

Single years:

2002 . . . . . . . . . . . 5.8 .8 -.3 1.8 4.9 3.9

2003 . . . . . . . . . . . 6.0 1.1 1.0 2.5 4.1 2.6

2004 . . . . . . . . . . . 5.5 .6 1.1 3.5 4.3 1.5

2005 . . . . . . . . . . . 5.1 1.3 1.7 3.1 4.3 .8

2006 . . . . . . . . . . . 4.6 1.4 1.8 2.7 4.8 1.1

2007 . . . . . . . . . . . 4.6 1.1 1.1 1.9 4.7 1.9

2008 . . . . . . . . . . . 5.8 .8 -.4 -.3 3.6 .6

2009 . . . . . . . . . . . 9.3 -.1 -3.7 -3.1 2.9 4.4

2010 . . . . . . . . . . . 9.6 -.2 -.6 2.4 2.8 .9

2011 . . . . . . . . . . . 9.0 -.2 .6 1.8 2.4 -.7

2012i. . . . . . . . . . . 8.1 .9 1.8 2.3 1.5 .4
107

Economic Assumptions and Methods

Intermediate:

2013 . . . . . . . . . . . 8.0 1.1 1.2 2.2 1.6 -.3

2014 . . . . . . . . . . . 7.8 1.1 1.3 3.4 2.8 -.6

2015 . . . . . . . . . . . 7.2 1.1 1.7 4.0 4.5 .4

2016 . . . . . . . . . . . 6.6 1.1 1.7 3.8 5.3 1.9

2017 . . . . . . . . . . . 6.1 .9 1.5 3.4 5.5 2.6

2018 . . . . . . . . . . . 5.8 .9 1.2 3.0 5.6 2.7

2019 . . . . . . . . . . . 5.6 .8 1.0 2.6 5.6 2.8

2020 . . . . . . . . . . . 5.5 .6 .7 2.3 5.6 2.8

2021 . . . . . . . . . . . 5.5 .6 .6 2.2 5.6 2.8

2022 . . . . . . . . . . . 5.5 .5 .5 2.1 5.7 2.8

2025 . . . . . . . . . . . 5.5 .5 .5 2.1 5.7 2.9

2030 . . . . . . . . . . . 5.5 .4 .4 2.0 5.7 2.9

2035 . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2040 . . . . . . . . . . . 5.5 .6 .6 2.2 5.7 2.9

2045 . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2050 . . . . . . . . . . . 5.5 .5 .5 2.1 5.7 2.9

2055 . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2060 . . . . . . . . . . . 5.5 .4 .4 2.0 5.7 2.9

2065 . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2070 . . . . . . . . . . . 5.5 .5 .5 2.1 5.7 2.9

2075 . . . . . . . . . . . 5.5 .5 .5 2.1 5.7 2.9

2080 . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2085 . . . . . . . . . . . 5.5 .4 .4 2.0 5.7 2.9

2090 . . . . . . . . . . . 5.5 .4 .4 2.0 5.7 2.9

Low-cost:

2013 . . . . . . . . . . . 7.6 1.3 1.8 3.8 2.1 -.2

2014 . . . . . . . . . . . 6.8 1.4 2.2 5.0 2.9 .3

2015 . . . . . . . . . . . 6.1 1.4 2.2 4.7 4.0 1.3

2016 . . . . . . . . . . . 5.3 1.2 2.0 4.4 4.8 2.2

2017 . . . . . . . . . . . 4.8 1.1 1.6 3.7 4.8 3.0

2018 . . . . . . . . . . . 4.6 1.0 1.2 3.1 4.8 3.0

2019 . . . . . . . . . . . 4.5 .9 .9 2.9 4.9 3.0

2020 . . . . . . . . . . . 4.5 .7 .7 2.8 5.1 3.1

2021 . . . . . . . . . . . 4.5 .7 .7 2.7 5.1 3.3

2022 . . . . . . . . . . . 4.5 .6 .6 2.6 5.2 3.3

2025 . . . . . . . . . . . 4.5 .6 .6 2.6 5.2 3.4

2030 . . . . . . . . . . . 4.5 .5 .5 2.5 5.2 3.4

2035 . . . . . . . . . . . 4.5 .6 .6 2.7 5.2 3.4

2040 . . . . . . . . . . . 4.5 .7 .7 2.8 5.2 3.4

2045 . . . . . . . . . . . 4.5 .8 .8 2.8 5.2 3.4

2050 . . . . . . . . . . . 4.5 .7 .7 2.8 5.2 3.4

2055 . . . . . . . . . . . 4.5 .7 .7 2.8 5.2 3.4

2060 . . . . . . . . . . . 4.5 .7 .7 2.8 5.2 3.4

2065 . . . . . . . . . . . 4.5 .8 .8 2.8 5.2 3.4

2070 . . . . . . . . . . . 4.5 .8 .8 2.9 5.2 3.4

2075 . . . . . . . . . . . 4.5 .9 .9 2.9 5.2 3.4

2080 . . . . . . . . . . . 4.5 .8 .8 2.9 5.2 3.4

2085 . . . . . . . . . . . 4.5 .8 .8 2.9 5.2 3.4

2090 . . . . . . . . . . . 4.5 .8 .8 2.8 5.2 3.4

Table V.B2.—Additional Economic Factors (Cont.)

Calendar year 

Average annual

unemployment

ratea

Annual percentage changeb in— Average annual interest rate

Labor

forcec Total

employmentd RealGDPe Nominalf Realg
Assumptions and Methods

108

High-cost:

2013 . . . . . . . . . . . 8.5 1.0 .6 .5 1.2 -.5

2014 . . . . . . . . . . . 9.0 .7 .1 1.5 2.4 -1.4

2015 . . . . . . . . . . . 9.0 .7 .7 2.4 4.6 -.8

2016 . . . . . . . . . . . 8.7 .7 1.0 2.8 5.6 1.3

2017 . . . . . . . . . . . 8.2 .6 1.1 3.0 6.2 2.0

2018 . . . . . . . . . . . 7.8 .6 1.1 2.8 6.5 2.4

2019 . . . . . . . . . . . 7.3 .6 1.1 2.5 6.5 2.7

2020 . . . . . . . . . . . 6.8 .5 1.0 2.5 6.5 2.7

2021 . . . . . . . . . . . 6.6 .5 .8 2.1 6.3 2.7

2022 . . . . . . . . . . . 6.5 .5 .6 1.8 6.2 2.5

2025 . . . . . . . . . . . 6.5 .4 .4 1.7 6.2 2.4

2030 . . . . . . . . . . . 6.5 .3 .3 1.6 6.2 2.4

2035 . . . . . . . . . . . 6.5 .4 .4 1.6 6.2 2.4

2040 . . . . . . . . . . . 6.5 .4 .4 1.6 6.2 2.4

2045 . . . . . . . . . . . 6.5 .3 .3 1.6 6.2 2.4

2050 . . . . . . . . . . . 6.5 .2 .2 1.4 6.2 2.4

2055 . . . . . . . . . . . 6.5 .1 .1 1.3 6.2 2.4

2060 . . . . . . . . . . . 6.5 .1 .1 1.3 6.2 2.4

2065 . . . . . . . . . . . 6.5 j j 1.3 6.2 2.4

2070 . . . . . . . . . . . 6.5 j j 1.3 6.2 2.4

2075 . . . . . . . . . . . 6.5 j j 1.2 6.2 2.4

2080 . . . . . . . . . . . 6.5 -.1 -.1 1.2 6.2 2.4

2085 . . . . . . . . . . . 6.5 -.1 -.1 1.1 6.2 2.4

2090 . . . . . . . . . . . 6.5 -.1 -.1 1.1 6.2 2.4

a The Office of the Chief Actuary adjusts the civilian unemployment rates for 2023 and later to the age-sex

distribution of the civilian labor force in 2011.

b For rows with a single year listed, the value is the annual percentage change from the prior year. For rows

with a range of years listed, the value is the compounded average annual percentage change.

c The U.S. civilian labor force.

d Total U.S. military and civilian employment.

e The value of the total output of goods and services in 2005 dollars.

f The average of the nominal interest rates, which compound semiannually, for special public-debt obligations

issuable to the trust funds in each of the 12 months of the year.

g The realized or expected annual real yield for each year on securities issuable in the prior year.

h Economic cycles are shown from peak to peak, except for the last cycle, which is not yet complete.

i Historical data are not available for the full year. Estimated values vary slightly by alternative and are shown

for the intermediate assumptions.

j Greater than -0.05 and less than 0.05 percent.

Table V.B2.—Additional Economic Factors (Cont.)

Calendar year 

Average annual

unemployment ratea

Annual percentage changeb in— Average annual interest rate

Labor

forcec Totalemploymentd RealGDPe Nominalf Realg
109

Program Assumptions and Methods

C. PROGRAM-SPECIFIC ASSUMPTIONS AND METHODS

The Office of the Chief Actuary at the Social Security Administration uses a

set of models to project future income and cost under the OASDI program.

These models rely not only on the demographic and economic assumptions

described in the previous sections, but also on a number of program-specific

assumptions and methods. Values of many program parameters change from

year to year as prescribed by formulas set out in the Social Security Act.

These program parameters affect the level of payroll taxes collected and the

level of benefits paid. The office uses more complex models to project the

numbers of future workers covered under OASDI and the levels of their covered earnings, as well as the numbers of future beneficiaries and the expected

levels of their benefits. The following subsections provide descriptions of

these program-specific assumptions and methods.

1. Automatically Adjusted Program Parameters

The Social Security Act requires that certain parameters affecting the determination of OASDI benefits and taxes be adjusted annually to reflect

changes in particular economic measures. Formulas prescribed in the law,

applied to reported statistics, change these program parameters annually. The

law bases these automatic adjustments on measured changes in the national

average wage index (AWI) and the Consumer Price Index for Urban Wage

Earners and Clerical Workers (CPI).1 This section shows values for program

parameters adjusted using these indices from the time that these adjustments

became effective through 2022. Projected values for future years depend on

the economic assumptions described in the preceding section of this report.

Tables V.C1 and V.C2 present the historical and projected values of the CPIbased benefit increases, the AWI series, and the values of many of the wageindexed program parameters. Each table shows projections under the three

alternative sets of economic assumptions. Table V.C1 includes:

 • The annual cost-of-living benefit increase percentages. The automatic

cost-of-living adjustment provisions in the Social Security Act specify

increases in OASDI benefits based on increases in the CPI. In December 2009 and December 2010, there were no cost-of-living adjustments.

Cost-of-living adjustments resumed in December 2011. Under all three

sets of economic assumptions, the Trustees assume a smooth trend in

future price increases, without regard to annual fluctuations that will

 1 The Federal Register publishes details of these indexation procedures annually. Also see

www.socialsecurity.gov/OACT/COLA/index.html.
Assumptions and Methods

110

occur. Therefore, the projections include annual cost-of-living adjustments in all future years.

 • The annual levels of and percentage increases in the AWI. Under section 215(b)(3) of the Social Security Act, Social Security benefit computations index taxable earnings (for most workers first becoming

eligible for benefits in 1979 or later) using the AWI for each year after

1950. This procedure converts a worker’s past earnings to approximately average-wage-indexed equivalent values near the time of his or

her benefit eligibility. Other program parameters presented in this section that are subject to the automatic-adjustment provisions also rely on

the AWI.

 • The wage-indexed contribution and benefit base. For any year, the contribution and benefit base is the maximum amount of earnings subject to

the OASDI payroll tax and creditable toward benefit computation. The

Social Security Act defers any increase in the contribution and benefit

base if there is no cost-of-living adjustment effective for December of

the preceding year. There was no increase in the contribution and benefit base in 2010 and 2011. Increases resumed in 2012.

 • The wage-indexed retirement earnings test exempt amounts. The

exempt amounts are the annual amount of earnings below which beneficiaries do not have benefits withheld. A lower exempt amount applies in

years before normal retirement age. A higher amount applies for the

year in which a beneficiary attains normal retirement age. Starting in

2000, the retirement earnings test no longer applies beginning with the

month of normal retirement age attainment. The Social Security Act

defers any increase in these exempt amounts if there is no cost-of-living

adjustment effective for December of the preceding year. There was no

increase in these exempt amounts in 2010 and 2011. Increases resumed

in 2012.
111

Program Assumptions and Methods

Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and 

Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2022

Calendar year

Cost-of-living

benefit

increasea

(percent)

Average

wage index (AWI) b Contribution

and benefit

base c

Retirement earnings

test exempt amount

Amount

Increase

(percent)

Under

NRAd At NRAe

Historical data:

1975 . . . . . . . . . . . 8.0 $8,630.92 7.5 $14,100 $2,520 $2,520

1976 . . . . . . . . . . . 6.4 9,226.48 6.9 15,300 2,760 2,760

1977 . . . . . . . . . . . 5.9 9,779.44 6.0 16,500 3,000 3,000

1978 . . . . . . . . . . . 6.5 10,556.03 7.9 17,700 3,240 4,000

1979 . . . . . . . . . . . 9.9 11,479.46 8.7 22,900 3,480 4,500

1980 . . . . . . . . . . . 14.3 12,513.46 9.0 25,900 3,720 5,000

1981 . . . . . . . . . . . 11.2 13,773.10 10.1 29,700 4,080 5,500

1982 . . . . . . . . . . . 7.4 14,531.34 5.5 32,400 4,440 6,000

1983 . . . . . . . . . . . 3.5 15,239.24 4.9 35,700 4,920 6,600

1984 . . . . . . . . . . . 3.5 16,135.07 5.9 37,800 5,160 6,960

1985 . . . . . . . . . . . 3.1 16,822.51 4.3 39,600 5,400 7,320

1986 . . . . . . . . . . . 1.3 17,321.82 3.0 42,000 5,760 7,800

1987 . . . . . . . . . . . 4.2 18,426.51 6.4 43,800 6,000 8,160

1988 . . . . . . . . . . . 4.0 19,334.04 4.9 45,000 6,120 8,400

1989 . . . . . . . . . . . 4.7 20,099.55 4.0 48,000 6,480 8,880

1990 . . . . . . . . . . . 5.4 21,027.98 4.6 51,300 6,840 9,360

1991 . . . . . . . . . . . 3.7 21,811.60 3.7 53,400 7,080 9,720

1992 . . . . . . . . . . . 3.0 22,935.42 5.2 55,500 7,440 10,200

1993 . . . . . . . . . . . 2.6 23,132.67 .9 57,600 7,680 10,560

1994 . . . . . . . . . . . 2.8 23,753.53 2.7 60,600 8,040 11,160

1995 . . . . . . . . . . . 2.6 24,705.66 4.0 61,200 8,160 11,280

1996 . . . . . . . . . . . 2.9 25,913.90 4.9 62,700 8,280 12,500

1997 . . . . . . . . . . . 2.1 27,426.00 5.8 65,400 8,640 13,500

1998 . . . . . . . . . . . 1.3 28,861.44 5.2 68,400 9,120 14,500

1999 . . . . . . . . . . . f2.5 30,469.84 5.6 72,600 9,600 15,500

2000 . . . . . . . . . . . 3.5 32,154.82 5.5 76,200 10,080 17,000

2001 . . . . . . . . . . . 2.6 32,921.92 2.4 80,400 10,680 25,000

2002 . . . . . . . . . . . 1.4 33,252.09 1.0 84,900 11,280 30,000

2003 . . . . . . . . . . . 2.1 34,064.95 2.4 87,000 11,520 30,720

2004 . . . . . . . . . . . 2.7 35,648.55 4.6 87,900 11,640 31,080

2005 . . . . . . . . . . . 4.1 36,952.94 3.7 90,000 12,000 31,800

2006 . . . . . . . . . . . 3.3 38,651.41 4.6 94,200 12,480 33,240

2007 . . . . . . . . . . . 2.3 40,405.48 4.5 97,500 12,960 34,440

2008 . . . . . . . . . . . 5.8 41,334.97 2.3 102,000 13,560 36,120

2009 . . . . . . . . . . . .0 40,711.61 -1.5 106,800 14,160 37,680

2010 . . . . . . . . . . . .0 41,673.83 2.4 106,800 14,160 37,680

2011 . . . . . . . . . . . 3.6 42,979.61 3.1 106,800 14,160 37,680

Intermediate:

2012 . . . . . . . . . . . g1.7 43,715.77 1.7 g110,100 g 14,640 g38,880

2013 . . . . . . . . . . . 2.0 44,826.31 2.5 g113,700 g15,120 g40,080

2014 . . . . . . . . . . . 2.0 46,832.15 4.5 115,500 15,360 40,800

2015 . . . . . . . . . . . 2.5 49,372.25 5.4 118,500 15,720 41,880

2016 . . . . . . . . . . . 2.6 52,105.87 5.5 123,600 16,440 43,680

2017 . . . . . . . . . . . 2.7 54,885.51 5.3 130,500 17,280 46,080

2018 . . . . . . . . . . . 2.8 57,617.96 5.0 137,700 18,240 48,600

2019 . . . . . . . . . . . 2.8 60,142.03 4.4 144,900 19,200 51,240

2020 . . . . . . . . . . . 2.8 62,648.35 4.2 152,100 20,160 53,760

2021 . . . . . . . . . . . 2.8 65,241.02 4.1 159,000 21,120 56,160

2022 . . . . . . . . . . . 2.8 67,786.09 3.9 165,600 21,960 58,440
Assumptions and Methods

112

Table V.C2 shows values for other wage-indexed parameters. The table provides historical values from 1978, when indexing of the amount of earnings

required for a quarter of coverage first began, through 2013, and also shows

projected values through 2022. These other wage-indexed program parameters are:

 • The bend points in the formula for computing the primary insurance

amount (PIA) for workers who reach age 62, become disabled, or die in

a given year. As figure V.C1 illustrates, these two bend points define

three ranges in a worker’s average indexed monthly earnings (AIME).

The formula for the worker’s PIA multiplies a 90, 32, or 15 percent facLow-cost:

2012 . . . . . . . . . . . g1.7 43,745.39 1.8 g110,100 g 14,640 g38,880

2013 . . . . . . . . . . . 1.8 45,413.30 3.8 g113,700 g15,120 g40,080

2014 . . . . . . . . . . . 1.5 47,795.78 5.2 115,500 15,360 40,800

2015 . . . . . . . . . . . 1.7 50,241.33 5.1 120,000 15,960 42,360

2016 . . . . . . . . . . . 1.8 52,782.94 5.1 126,300 16,800 44,640

2017 . . . . . . . . . . . 1.8 55,193.54 4.6 132,600 17,640 46,920

2018 . . . . . . . . . . . 1.8 57,389.02 4.0 139,500 18,480 49,200

2019 . . . . . . . . . . . 1.8 59,497.89 3.7 145,800 19,320 51,480

2020 . . . . . . . . . . . 1.8 61,694.50 3.7 151,500 20,160 53,520

2021 . . . . . . . . . . . 1.8 63,999.27 3.7 157,200 20,880 55,560

2022 . . . . . . . . . . . 1.8 66,228.49 3.5 162,900 21,600 57,600

High-cost:

2012 . . . . . . . . . . . g1.7 43,685.42 1.6 g110,100 g 14,640 g38,880

2013 . . . . . . . . . . . 2.2 44,180.55 1.1 g113,700 g15,120 g40,080

2014 . . . . . . . . . . . 2.5 45,655.01 3.3 115,500 15,360 40,800

2015 . . . . . . . . . . . 3.3 47,923.04 5.0 116,700 15,480 41,160

2016 . . . . . . . . . . . 3.3 50,605.98 5.6 120,600 15,960 42,600

2017 . . . . . . . . . . . 3.6 53,704.44 6.1 126,600 16,800 44,760

2018 . . . . . . . . . . . 3.8 56,956.90 6.1 133,800 17,760 47,160

2019 . . . . . . . . . . . 3.8 60,094.91 5.5 141,900 18,840 50,160

2020 . . . . . . . . . . . 3.8 63,322.96 5.4 150,600 19,920 53,160

2021 . . . . . . . . . . . 3.8 66,443.63 4.9 158,700 21,120 56,040

2022 . . . . . . . . . . . 3.8 69,383.85 4.4 167,400 22,200 59,040

a Effective with benefits payable for June in each year 1975-82, and for December in each year after 1982.

b See table VI.F6 for projected dollar amounts of the AWI beyond 2022.

c Public Law 95-216 specified amounts for 1978-81. Public Law 101-239 changed the indexing procedure

and caused slightly higher bases after 1989.

d Normal retirement age. See table V.C3 for specific values.

e In 1955-82, the retirement earnings test did not apply at ages 72 and over. In 1983-99, the test did not apply

at ages 70 and over. Beginning in 2000, the test does not apply beginning with the month of normal retirement

age attainment. In the year of normal retirement age attainment, the higher exempt amount applies to earnings

prior to the month of normal retirement age attainment. Public Law 95-216 specified amounts for 1978-82.

Public Law 104-121 specified amounts for 1996-2002.

f Originally determined as 2.4 percent. Pursuant to Public Law 106-554, effectively 2.5 percent.

g Actual amount, as determined under automatic-adjustment provisions.

Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and 

Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2022 (Cont.)

Calendar year

Cost-of-living

benefit

increasea

(percent)

Average

wage index (AWI) b Contribution

and benefit

base c

Retirement earnings

test exempt amount

Amount

Increase

(percent)

Under

NRAd At NRAe
113

Program Assumptions and Methods

tor by the portion of the worker’s AIME that falls within the three

respective ranges, and then adds the resulting products together.

 • The bend points in the formula for computing the maximum total

amount of monthly benefits payable based on the earnings record of a

retired or deceased worker (maximum family benefit). As figure V.C2

illustrates, these three bend points define four ranges in a worker’s PIA.

The formula for the maximum family benefit multiplies a 150, 272, 134,

or 175 percent factor by the portion of the worker’s PIA that falls within

the four respective ranges, and then adds the resulting products together.

 Figure V.C1.—Primary-Insurance-Amount Formula for Those Newly Eligible in 2013

90% 

32% 

15% 

$0

$500

$1,000

$1,500

$2,000

$2,500

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000

Primary Insurance Amount 

Average Indexed Monthly Earnings 

First 

bend point 

($791) 

Second 

bend point 

($4,768) 
Assumptions and Methods

114

 • The amount of earnings required in a year to earn a quarter of coverage

(QC). The number and timing of QCs earned determines an individual’s

insured status—the basic requirement for benefit eligibility under

OASDI.

 • The old-law contribution and benefit base—the contribution and benefit

base that would have been in effect without enactment of the 1977

amendments. This old-law base is used in determining special-minimum benefits for certain workers who have many years of low earnings

in covered employment. Since 1986, the calculation of OASDI benefits

for certain workers who are eligible to receive pensions based on noncovered employment uses the old-law base. In addition, the Railroad

Retirement program and the Employee Retirement Income Security Act

of 1974 use the old-law base for certain purposes.

 Figure V.C2.—Maximum-Family-Benefit Formula for Those Newly Eligible in 2013

150% 

272% 

134% 

175% 

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$0 $500 $1,000 $1,500 $2,000 $2,500

Maximum family benefit 

Primary Insurance Amount 

Third 

bend point 

($1,903) 

Second 

bend point 

($1,459) 

First 

bend point 

($1,011) 
115

Program Assumptions and Methods

Table V.C2.—Values for Selected Wage-Indexed Program Parameters, 

Calendar Years 1978-2022

Calendar year

AIME bend

points in PIA

formulaa

PIA bend points

in maximumfamily-benefit formulab

Earnings

required for

a quarter of

coverage

Old-law

contribution

and benefit

basec First Second First Second Third

Historical data:

1978 . . . . . . . . . d d d d de $250 e $17,700

1979 . . . . . . . . . e $180 e $1,085 e $230 e $332 e $433 260 18,900

1980 . . . . . . . . . 194 1,171 248 358 467 290 20,400

1981 . . . . . . . . . 211 1,274 270 390 508 310 22,200

1982 . . . . . . . . . 230 1,388 294 425 554 340 24,300

1983 . . . . . . . . . 254 1,528 324 468 610 370 26,700

1984 . . . . . . . . . 267 1,612 342 493 643 390 28,200

1985 . . . . . . . . . 280 1,691 358 517 675 410 29,700

1986 . . . . . . . . . 297 1,790 379 548 714 440 31,500

1987 . . . . . . . . . 310 1,866 396 571 745 460 32,700

1988 . . . . . . . . . 319 1,922 407 588 767 470 33,600

1989 . . . . . . . . . 339 2,044 433 626 816 500 35,700

1990 . . . . . . . . . 356 2,145 455 656 856 520 38,100

1991 . . . . . . . . . 370 2,230 473 682 890 540 39,600

1992 . . . . . . . . . 387 2,333 495 714 931 570 41,400

1993 . . . . . . . . . 401 2,420 513 740 966 590 42,900

1994 . . . . . . . . . 422 2,545 539 779 1,016 620 45,000

1995 . . . . . . . . . 426 2,567 544 785 1,024 630 45,300

1996 . . . . . . . . . 437 2,635 559 806 1,052 640 46,500

1997 . . . . . . . . . 455 2,741 581 839 1,094 670 48,600

1998 . . . . . . . . . 477 2,875 609 880 1,147 700 50,700

1999 . . . . . . . . . 505 3,043 645 931 1,214 740 53,700

2000 . . . . . . . . . 531 3,202 679 980 1,278 780 56,700

2001 . . . . . . . . . 561 3,381 717 1,034 1,349 830 59,700

2002 . . . . . . . . . 592 3,567 756 1,092 1,424 870 63,000

2003 . . . . . . . . . 606 3,653 774 1,118 1,458 890 64,500

2004 . . . . . . . . . 612 3,689 782 1,129 1,472 900 65,100

2005 . . . . . . . . . 627 3,779 801 1,156 1,508 920 66,900

2006 . . . . . . . . . 656 3,955 838 1,210 1,578 970 69,900

2007 . . . . . . . . . 680 4,100 869 1,255 1,636 1,000 72,600

2008 . . . . . . . . . 711 4,288 909 1,312 1,711 1,050 75,900

2009 . . . . . . . . . 744 4,483 950 1,372 1,789 1,090 79,200

2010 . . . . . . . . . 761 4,586 972 1,403 1,830 1,120 79,200

2011 . . . . . . . . . 749 4,517 957 1,382 1,803 1,120 79,200

2012 . . . . . . . . . 767 4,624 980 1,415 1,845 1,130 81,900

2013 . . . . . . . . . 791 4,768 1,011 1,459 1,903 1,160 84,300

Intermediate:

2014 . . . . . . . . . 805 4,850 1,028 1,484 1,936 1,180 85,800

2015 . . . . . . . . . 825 4,973 1,054 1,522 1,985 1,210 87,900

2016 . . . . . . . . . 862 5,196 1,101 1,590 2,074 1,270 91,800

2017 . . . . . . . . . 909 5,478 1,161 1,676 2,186 1,340 96,900

2018 . . . . . . . . . 959 5,781 1,225 1,769 2,307 1,410 102,300

2019 . . . . . . . . . 1,010 6,089 1,291 1,863 2,430 1,490 107,700

2020 . . . . . . . . . 1,061 6,393 1,355 1,956 2,551 1,560 113,100

2021 . . . . . . . . . 1,107 6,673 1,414 2,042 2,663 1,630 117,900

2022 . . . . . . . . . 1,153 6,951 1,473 2,127 2,774 1,700 123,000
Assumptions and Methods

116

In addition to the economic factors that affect the determination of OASDI

benefits, there are certain legislated changes that affect current and future

benefit amounts. Two such changes are the scheduled increases in the normal

retirement age and in the delayed retirement credits. Table V.C3 shows the

scheduled changes in these parameters and the resulting effects on benefit

levels expressed as a percentage of PIA.

Low-cost:

2014 . . . . . . . . . $805 $4,853 $1,029 $1,485 $1,937 $1,190 $85,800

2015 . . . . . . . . . 836 5,038 1,068 1,542 2,011 1,230 89,100

2016 . . . . . . . . . 880 5,303 1,124 1,623 2,116 1,300 93,900

2017 . . . . . . . . . 925 5,574 1,182 1,706 2,225 1,360 98,700

2018 . . . . . . . . . 972 5,856 1,241 1,792 2,337 1,430 103,500

2019 . . . . . . . . . 1,016 6,124 1,298 1,874 2,444 1,500 108,300

2020 . . . . . . . . . 1,056 6,367 1,350 1,948 2,541 1,550 112,500

2021 . . . . . . . . . 1,095 6,601 1,399 2,020 2,634 1,610 116,700

2022 . . . . . . . . . 1,136 6,845 1,451 2,094 2,732 1,670 120,900

High-cost:

2014 . . . . . . . . . 804 4,847 1,027 1,483 1,934 1,180 85,800

2015 . . . . . . . . . 813 4,902 1,039 1,500 1,956 1,200 86,700

2016 . . . . . . . . . 840 5,065 1,074 1,550 2,021 1,240 89,700

2017 . . . . . . . . . 882 5,317 1,127 1,627 2,122 1,300 93,900

2018 . . . . . . . . . 931 5,615 1,190 1,718 2,241 1,370 99,300

2019 . . . . . . . . . 988 5,958 1,263 1,823 2,378 1,460 105,300

2020 . . . . . . . . . 1,048 6,319 1,340 1,934 2,522 1,540 111,900

2021 . . . . . . . . . 1,106 6,667 1,413 2,040 2,661 1,630 117,900

2022 . . . . . . . . . 1,166 7,025 1,489 2,150 2,804 1,720 124,200

a The formula to compute a PIA is: (1) 90% of AIME below the first bend point; plus (2) 32% of AIME in

excess of the first bend point but not in excess of the second; plus (3) 15% of AIME in excess of the second

bend point. The bend points are determined based on the first year a beneficiary becomes eligible for benefits.

b The formula to compute a family maximum is: (1) 150% of PIA below the first bend point; plus (2) 272%

of PIA in excess of the first bend point but not in excess of the second; plus (3) 134% of PIA in excess of the

second bend point but not in excess of the third; plus (4) 175% of PIA in excess of the third bend point.

c Contribution and benefit base that would have been in effect without enactment of the Social Security

Amendments of 1977. Public Law 101-239 changed the indexing procedure and caused slightly higher bases

after 1989.

d No provision in law for this amount in this year.

e Amount specified by Social Security Amendments of 1977.

Table V.C2.—Values for Selected Wage-Indexed Program Parameters, 

Calendar Years 1978-2022 (Cont.)

Calendar year

AIME bend

points in PIA

formulaa

PIA bend points

in maximumfamily-benefit formulab

Earnings

required for

a quarter of

coverage

Old-law

contribution

and benefit

basec First Second First Second Third
117

Program Assumptions and Methods

2. Covered Employment

Projections of the total U.S. labor force and unemployment rate (see table

V.B2) are based on Bureau of Labor Statistics definitions from the Current

Population Survey (CPS). These projections represent the average weekly

number of employed and unemployed persons, age 16 and over, in the U.S.

in a calendar year. The Office of the Chief Actuary defines the total covered

workers in a year as the persons who have any OASDI covered earnings (that

is, earnings subject to the OASDI payroll tax) at any time during the year.

For those age 16 and over, projected covered employment is the sum of agesex components, each reflecting the growth projected for the component’s

total U.S employment and average weeks worked per year.1For the shortrange period, the average weeks worked for each component is assumed to

increase during the economic recovery. After 2022, the average weeks

worked for each component is assumed to remain constant. The projection

method also accounts for changes in non-OASDI-covered employment, the

Table V.C3.—Legislated Changes in Normal Retirement Age and Delayed Retirement

Credits for Persons Reaching Age 62 in Each Year 1986 and Later

Year of birth

Year of

attainment of

age 62

Normal

retirement

age (NRA)

Credit for each 

year of delayed 

retirement after

NRA (percent)

Benefit, as a percentage of PIA, 

beginning at age —

62 65 66 67 70

1924 . . . . . . . . 1986. . . . . . . . 65 . . . . . . . . 3 80 100 103 106 115

1925 . . . . . . . . 1987. . . . . . . . 65 . . . . . . . . 3 1/2 80 100 103 1/2 107 117 1/2

1926 . . . . . . . . 1988. . . . . . . . 65 . . . . . . . . 3 1/2 80 100 103 1/2 107 117 1/2

1927 . . . . . . . . 1989. . . . . . . . 65 . . . . . . . . 4 80 100 104 108 120

1928 . . . . . . . . 1990. . . . . . . . 65 . . . . . . . . 4 80 100 104 108 120

1929 . . . . . . . . 1991. . . . . . . . 65 . . . . . . . . 4 1/2 80 100 104 1/2 109 122 1/2

1930 . . . . . . . . 1992. . . . . . . . 65 . . . . . . . . 4 1/2 80 100 104 1/2 109 122 1/2

1931 . . . . . . . . 1993. . . . . . . . 65 . . . . . . . . 5 80 100 105 110 125

1932 . . . . . . . . 1994. . . . . . . . 65 . . . . . . . . 5 80 100 105 110 125

1933 . . . . . . . . 1995. . . . . . . . 65 . . . . . . . . 5 1/2 80 100 105 1/2 111 127 1/2

1934 . . . . . . . . 1996. . . . . . . . 65 . . . . . . . . 5 1/2 80 100 105 1/2 111 127 1/2

1935 . . . . . . . . 1997. . . . . . . . 65 . . . . . . . . 6 80 100 106 112 130

1936 . . . . . . . . 1998. . . . . . . . 65 . . . . . . . . 6 80 100 106 112 130

1937 . . . . . . . . 1999. . . . . . . . 65 . . . . . . . . 6 1/2 80 100 106 1/2 113 132 1/2

1938 . . . . . . . . 2000. . . . . . . . 65, 2 mo . . . 6 1/2 79 1/6 98 8/9 105 5/12 111 11/12 131 5/12

1939 . . . . . . . . 2001. . . . . . . . 65, 4 mo . . . 7 78 1/3 97 7/9 104 2/3 111 2/3 132 2/3

1940 . . . . . . . . 2002. . . . . . . . 65, 6 mo . . . 7 77 1/2 96 2/3 103 1/2 110 1/2 131 1/2

1941 . . . . . . . . 2003. . . . . . . . 65, 8 mo . . . 7 1/2 76 2/3 95 5/9 102 1/2 110 132 1/2

1942 . . . . . . . . 2004. . . . . . . . 65, 10 mo . . 7 1/2 75 5/6 94 4/9 101 1/4 108 3/4 131 1/4

1943-54 . . . . . 2005-16 . . . . . 66 . . . . . . . . 8 75 93 1/3 100 108 132

1955 . . . . . . . . 2017. . . . . . . . 66, 2 mo . . . 8 74 1/6 92 2/9 98 8/9 106 2/3 130 2/3

1956 . . . . . . . . 2018. . . . . . . . 66, 4 mo . . . 8 73 1/3 91 1/9 97 7/9 105 1/3 129 1/3

1957 . . . . . . . . 2019. . . . . . . . 66, 6 mo . . . 8 72 1/2 90 96 2/3 104 128

1958 . . . . . . . . 2020. . . . . . . . 66, 8 mo . . . 8 71 2/3 88 8/9 95 5/9 102 2/3 126 2/3

1959 . . . . . . . . 2021. . . . . . . . 66, 10 mo . . 8 70 5/6 87 7/9 94 4/9 101 1/3 125 1/3

1960 & later . . 2022 & later . 67 . . . . . . . . 8 70 86 2/3 93 1/3 100 124

 1 For those under age 16, projected covered employment is the sum of age-sex components, each of which

the office projects as a ratio to the Social Security area population.
Assumptions and Methods

118

increase in coverage of Federal civilian employment as a result of the 1983

Social Security Amendments, and changes in the number and employment

status of other immigrants residing within the Social Security coverage area.

The covered-worker rate is the ratio of OASDI covered workers to the Social

Security area population. For men age 16 and over, the projected ageadjusted covered-worker rates1 for 2087 are 71.2, 70.5, and 69.8 percent for

the low-cost, intermediate, and high-cost assumptions, respectively. For

women age 16 and over, the projected covered-worker rates for 2087 are

65.2, 64.5, and 63.7 percent for the low-cost, intermediate, and high-cost

assumptions, respectively. These rates are higher than the 2011 levels of 66.8

percent for males and 59.9 percent for women, due to the assumed decreases

in unemployment rates and assumed increase in labor force participation

rates. 

3. Insured Population

Eligibility for worker benefits under the OASDI program requires some

threshold level of work in covered employment. A worker satisfies this

requirement by his or her accumulation of quarters of coverage (QCs). Prior

to 1978, a worker earned one QC for each calendar quarter in which he or

she earned at least $50. In 1978, when annual earnings reporting replaced

quarterly reporting, the amount required to earn a QC (up to a maximum of

four per year) was set at $250. As specified in the law, the Social Security

Administration has adjusted this amount each year since then according to

changes in the AWI. Its value in 2013 is $1,160.

There are three types of insured status that a worker can acquire under the

OASDI program. The number and recency of QCs earned determine each

status. A worker acquires fully insured status when his or her total number of

QCs is greater than or equal to the number of years elapsed after the year of

attainment of age 21 (but not less than six). Once a worker has accumulated

40 QCs, he or she remains permanently fully insured. A worker acquires disability insured status if he or she is: (1) a fully insured worker who has accumulated 20 QCs during the 40-quarter period ending with the current quarter;

(2) a fully insured worker aged 24-30 who has accumulated QCs during onehalf of the quarters elapsed after the quarter of attainment of age 21 and up to

and including the current quarter; or (3) a fully insured worker under age 24

who has accumulated six QCs during the 12-quarter period ending with the

current quarter. A worker acquires currently insured status when he or she

 1 Age-adjusted covered worker rates are adjusted to the 2011 age distribution of the Social Security area

population.
119

Program Assumptions and Methods

has accumulated six QCs during the 13-quarter period ending with the current quarter. Periods of disability reduce the number of quarters required for

insured status, but not below the minimum of six QCs.

There are many types of benefits payable to workers and their family members under the OASDI program. A worker must be fully insured to be eligible for a primary retirement benefit and for his or her spouse or children to

be eligible for auxiliary benefits. A deceased worker must have been either

currently insured or fully insured at the time of death for his or her children

(and their mother or father) to be eligible for benefits. If there are no eligible

surviving children, the deceased worker must have been fully insured at the

time of death for his or her surviving spouse to be eligible. A worker must be

disability insured to be eligible for a primary disability benefit and for his or

her spouse or children to be eligible for auxiliary benefits.

The Office of the Chief Actuary estimates the fully insured population, as a

percentage of the Social Security area population, by single year of age and

sex starting in 1969. The short-range model extrapolates the historical trend

in these rates from data in the Continuous Work History Sample. The model

uses information on quarters of coverage earned due to employment covered

by Social Security derived from tabulations of the Continuous Work History

Sample. The model also uses historical administrative data on beneficiaries

in force and estimated historical mortality rates. The model combines this

information to estimate the proportion of individuals who were alive and

fully insured as of the end of each historical year. Using projected mortality

rates and covered workers, the model extrapolates these rates into the future

and applies them to the historical and projected population to arrive at the

fully insured population by age and sex through the end of the short-range

period.

The long-range fully insured model uses 30,000 simulated work histories for

each sex and birth cohort, representing everyone except the other immigrant

population. For the other immigrant population, the model generates substantially lower percentages attaining fully insured status. The model constructs

simulated work histories using past coverage rates, earnings distributions,

and amounts required for crediting QCs, and develops them in a manner that

replicates historical individual variations in work patterns. The probability of

covered employment in any year is assumed to be higher for those who have

worked more consistently in the recent past. Model parameters are selected

so that simulated fully insured percentages are consistent with the fully

insured percentages estimated by the short-range model for the recent historical period.
Assumptions and Methods

120

The Office of the Chief Actuary estimates the disability insured population,

as a percentage of the fully insured population, by age and sex starting in

1970. The office bases historical values on a tabulation of the disability

insured population from the Continuous Work History Sample and estimates

of the fully insured population. The short-range model projects these percentages by using the relationship between the historical percentages and

covered worker rates. The long-range model projects these percentages by

using the same simulated work histories used to project the fully insured percentages. The long-range model makes additional adjustments to the model

simulations in order to bring the disability insured percentages in the historical and short-range periods into close agreement with those estimated from

the Continuous Work History Sample and the short-range model.

The office does not project the currently insured population because the

number of beneficiaries who are entitled to benefits based solely on currently

insured status has been very small and is likely to remain small in the future.

Using these insured models, the percentage of the Social Security area population aged 62 and over that is fully insured will increase from its estimated

level of 82.9 for December 31, 2010, to 88.9, 89.5, and 90.3 for December

31, 2090, under the low-cost, intermediate, and high-cost alternatives,

respectively. Over the projection period, the percentage for females increases

significantly, reflecting the past substantial growth in the employment of

younger cohorts of women. The percentage for males declines to a small

degree, reflecting, in part, increases in the percent of the population that is

classified as other immigrants and is thus less likely to have earnings

reported and credited to them. Under the intermediate assumptions, for

example, the percentage for males decreases slightly from 92.2 to 90.3, and

the percentage for females increases from 75.5 to 88.7.

4. Old-Age and Survivors Insurance Beneficiaries

The Office of the Chief Actuary projects the number of OASI beneficiaries

for each type of benefit separately by the sex of the worker on whose earnings the benefits are based and by the age of the beneficiary. For the longrange period, the office also projects the number of beneficiaries by marital

status for several types of benefits. The office uses two separate models in

making these projections. The short-range model makes projections during

the first 10 years of the projection period and the long-range model makes

projections thereafter.

The short-range model develops the number of retired-worker beneficiaries

by applying award rates to the aged fully insured population, excluding those
121

Program Assumptions and Methods

already receiving retired-worker, disabled-worker, aged-widow(er)’s, or

aged-spouse’s benefits, and by applying termination rates to the number of

retired-worker beneficiaries.

The long-range model projects the number of retired-worker beneficiaries

who were not previously converted from disabled-worker beneficiary status

as a percentage of the exposed population.1 For age 62, the model projects

this percentage by using a linear regression based on the historical relationship between this percentage, the labor force participation rate at age 62, and

the number of months from age 62 to normal retirement age. The percentage

for ages 70 and over is nearly 100 because delayed retirement credits cannot

be earned after age 70. The long-range model projects the percentage for

each age 63 through 69 based on historical experience with an adjustment for

changes in the portion of the primary insurance amount that is payable at

each age of entitlement. The model adjusts these percentages for ages 62

through 69 to reflect changes in the normal retirement age.

The long-range model calculates the number of retired-worker beneficiaries

previously converted from disabled-worker beneficiary status using an

extension of disabled-worker death rates by age, sex, and duration.

The Office of the Chief Actuary estimates the number of aged-spouse beneficiaries, excluding those who are also receiving a retired-worker benefit, from

the population projected by age and sex. Benefits of aged-spouse beneficiaries depend on the earnings records of their husbands or wives, who are

referred to as “earners.” The short-range model projects insured aged-spouse

beneficiaries in conjunction with the retired-worker beneficiaries. This

model projects uninsured aged-spouse beneficiaries by applying award rates

to the aged uninsured male or female population and by applying termination

rates to the population already receiving such benefits.

The long-range model estimates aged-spouse beneficiaries separately for

those married and divorced. The model projects the number of married agedspouse beneficiaries, by age and sex, by applying a series of factors to the

number of spouses, aged 62 and over, in the population. These factors are the

probabilities that the spouse and the earner meet all of the conditions of

eligibility—that is, the probabilities that: (1) the earner is 62 or over; (2) the

earner is insured; (3) the earner is receiving benefits; (4) the spouse is not

receiving a benefit for the care of an entitled child; (5) the spouse is not

insured; and (6) the spouse is not eligible to receive a significant government

 1 The exposed population is the fully insured population age 62 and over, excluding persons entitled to or

converted from disabled-worker benefits and fully insured persons entitled only to widow(er)’s benefits.
Assumptions and Methods

122

pension based on earnings in noncovered employment. To calculate the estimated number of aged-spouse beneficiaries, the model applies a projected

prevalence rate to the resulting number of spouses.

The long-range model estimates the number of divorced aged-spouse beneficiaries, by age and sex, by applying the same factors to the number of

divorced persons aged 62 and over in the population, with three differences.

First, the model applies a factor to reflect the probability that the earner (former spouse) is still alive. If the former spouse is not alive, the person may be

entitled to a divorced widow(er)’s benefit. Second, the model applies a factor

to reflect the probability that the marriage to the former spouse lasted at least

10 years. Third, the model does not apply factor (3) in the previous paragraph because, effective January 1985, a divorced person is generally no longer required to wait for the former spouse to receive benefits.

The Office of the Chief Actuary bases the projected numbers of children

under age 18, and students aged 18 and 19, who are eligible for benefits as

children of retired-worker beneficiaries, on the projected number of children

in the population. The short-range model develops the number of entitled

children by applying award rates to the number of children in the population

who have two living parents and by applying termination rates to the number

of children already receiving benefits.

The long-range model projects separately the number of entitled children by

sex of the earner parent. For each age under 18, the model multiplies the projected number of children with a parent aged 62 and over by the ratio of the

number of retired workers aged 62 to 71 to the number of members of the

population aged 62 to 71. For student beneficiaries, the model multiplies the

number of children aged 18 and 19 in the population by the probabilities that:

(1) the parent is alive, aged 62 or over, insured, and receiving a retiredworker benefit; and (2) the child is attending high school.

The Office of the Chief Actuary projects the number of disabled children,

aged 18 and over, of retired-worker beneficiaries from the adult population.

The short-range model applies award rates to the population and applies termination rates to the number of disabled children already receiving benefits.

The long-range model projects the number of disabled children in a manner

similar to that used for student children except for a factor that reflects the

probability of being disabled before age 22.

The short-range model develops the number of spouses of retired workers,

who are entitled to spouse benefits because they are caring for a child who is

under age 16 or disabled, by applying award rates to the number of awards to

children of retired workers and by applying termination rates to the number
123

Program Assumptions and Methods

of young spouses with a child in their care who are already receiving benefits. The long-range model projects the number of young-spouse beneficiaries with a child in their care as a proportion of the number of child

beneficiaries of retired workers, including projected changes in average family size.

The Office of the Chief Actuary projects the number of aged-widow(er) beneficiaries, excluding those who are also receiving a retired-worker benefit,

from the population by age and sex. The short-range model projects fully

insured aged-widow(er) beneficiaries in conjunction with the retired-worker

beneficiaries. The model projects the number of uninsured aged-widow(er)

beneficiaries by applying award rates to the aged uninsured male or female

population and by applying termination rates to the population already

receiving such benefits. The long-range model projects uninsured agedwidow(er) beneficiaries by marital status. The model multiplies the number

of widow(er)s in the population aged 60 and over by the probabilities that:

(1) the deceased earner is fully insured at death; (2) the widow(er) is not

receiving a benefit for the care of an entitled child; (3) the widow(er) is not

fully insured; and (4) the widow(er)’s benefits are not withheld because of

receipt of a significant government pension based on earnings in noncovered

employment. In addition, the model applies the same factors to the number

of divorced persons aged 60 and over in the population and includes additional factors representing the probability that the person’s former earner

spouse has died and that the marriage lasted at least 10 years. The model

projects the number of insured aged-widow(er) beneficiaries who are ages 60

through 70 in a manner similar to that for uninsured aged-widow(er) beneficiaries. In addition, the model assumes that some insured widow(er)s who

had not applied for their retired-worker benefits will receive widow(er)’s

benefits. The model projects insured aged-widow(er) beneficiaries over age

70 by applying termination rates to the population that started receiving such

benefits prior to age 70.

The short-range model develops the number of disabled-widow(er) beneficiaries by applying award rates to the uninsured male or female population

and by applying termination rates to the population already receiving a disabled-widow(er) benefit. The long-range model projects the number for each

cohort by age from 50 to normal retirement age as percentages of the widowed and divorced populations, adjusted for the insured status of the

deceased spouse, the prevalence of disability, and the probability that the disabled spouse is not receiving another type of benefit.

The Office of the Chief Actuary bases the projected number of children

under age 18, and students aged 18 and 19, who are entitled to benefits as
Assumptions and Methods

124

survivors of deceased workers, on the number of children in the population

whose mothers or fathers are deceased. The short-range model develops the

number of entitled children by applying award rates to the number of

orphaned children and by applying termination rates to the number of children already receiving benefits.

The long-range model projects the number of child-survivor beneficiaries in

a manner similar to that for student beneficiaries of retired workers, except

that the model replaces the probability that the parent is aged 62 or over with

the probability that the parent is deceased.

The Office of the Chief Actuary projects the number of disabled-child-survivor beneficiaries, aged 18 and over, from the adult population. The shortrange model applies award rates to the population and applies termination

rates to the number of disabled-child-survivor beneficiaries already receiving

benefits. The long-range model projects the number of disabled-child-survivor beneficiaries in a manner similar to that for student-child-survivor beneficiaries, except for including an additional factor to reflect the probability of

being disabled before age 22.

The short-range model develops the numbers of entitled mother-survivor and

father-survivor beneficiaries by applying award rates to the number of

awards to child-survivor beneficiaries, in cases where the children are either

under age 16 or disabled, and by applying termination rates to the number of

mother-survivors and father-survivors already receiving benefits. The longrange model estimates the numbers of mother-survivor and father-survivor

beneficiaries, assuming they are not remarried, from the number of child-survivor beneficiaries.

The Office of the Chief Actuary projects the number of parent-survivor beneficiaries based on the historical pattern of the number of such beneficiaries.

Table V.C4 shows the projected number of beneficiaries under the OASI program by type of benefit. The retired worker beneficiary counts include those

persons who receive a residual auxiliary benefit in addition to their retiredworker benefit. The office makes estimates of the number and amount of

residual payments separately for spouses and widow(er)s.
125

Program Assumptions and Methods

Table V.C4.—OASI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1945-2090

[In thousands]

Calendar year

Retired workers and auxiliaries Survivors

Worker Total a Spouse Child

WidowwidowerMotherfather Child Parent

Historical data:

1945 . . . . . . . . . . 518 159 13 94 121 377 6 1,288

1950 . . . . . . . . . . 1,771 508 46 314 169 653 15 3,477

1955 . . . . . . . . . . 4,474 1,192 122 701 292 1,154 25 7,961

1960 . . . . . . . . . . 8,061 2,269 268 1,544 401 1,577 36 14,157

1965 . . . . . . . . . . 11,101 2,614 461 2,371 472 2,074 35 19,128

1970 . . . . . . . . . . 13,349 2,668 546 3,227 523 2,688 29 23,030

1975 . . . . . . . . . . 16,589 2,867 643 3,888 582 2,919 21 27,509

1980 . . . . . . . . . . 19,564 3,018 639 4,415 563 2,610 15 30,823

1985 . . . . . . . . . . 22,435 3,069 456 4,862 372 1,918 10 33,122

1990 . . . . . . . . . . 24,841 3,104 421 5,098 304 1,777 6 35,551

1995 . . . . . . . . . . 26,679 3,027 441 5,213 275 1,884 4 37,522

1996 . . . . . . . . . . 26,905 2,971 442 5,199 242 1,898 4 37,661

1997 . . . . . . . . . . 27,282 2,926 441 5,043 230 1,893 3 37,817

1998 . . . . . . . . . . 27,518 2,866 439 4,981 221 1,884 3 37,911

1999 . . . . . . . . . . 27,784 2,811 442 4,936 212 1,885 3 38,073

2000 . . . . . . . . . . 28,505 2,798 459 4,901 203 1,878 3 38,747

2001 . . . . . . . . . . 28,843 2,742 467 4,828 197 1,890 3 38,969

2002 . . . . . . . . . . 29,195 2,681 477 4,771 194 1,908 2 39,227

2003 . . . . . . . . . . 29,537 2,622 480 4,707 190 1,910 2 39,448

2004 . . . . . . . . . . 29,952 2,569 482 4,643 184 1,901 2 39,733

2005 . . . . . . . . . . 30,461 2,524 488 4,569 178 1,903 2 40,126

2006 . . . . . . . . . . 30,976 2,476 490 4,494 171 1,899 2 40,508

2007 . . . . . . . . . . 31,528 2,431 494 4,436 165 1,892 2 40,947

2008 . . . . . . . . . . 32,274 2,370 525 4,380 160 1,915 2 41,625

2009 . . . . . . . . . . 33,514 2,343 561 4,327 160 1,921 2 42,828

2010 . . . . . . . . . . 34,593 2,316 580 4,285 159 1,913 2 43,847

2011 . . . . . . . . . . 35,600 2,291 594 4,239 158 1,907 2 44,791

2012 . . . . . . . . . . 36,720 2,280 612 4,193 154 1,907 1 45,868

Intermediate:

2013 . . . . . . . . . . 38,121 2,262 627 4,197 151 1,912 1 47,270

2015 . . . . . . . . . . 41,133 2,253 654 4,188 148 1,930 1 50,308

2020 . . . . . . . . . . 49,680 2,237 751 4,140 144 1,981 1 58,934

2025 . . . . . . . . . . 57,542 2,214 846 4,012 143 1,994 1 66,752

2030 . . . . . . . . . . 64,650 2,291 942 3,813 146 1,993 1 73,837

2035 . . . . . . . . . . 69,298 2,332 1,012 3,631 149 2,027 1 78,450

2040 . . . . . . . . . . 71,696 2,342 1,025 3,466 148 2,017 1 80,694

2045 . . . . . . . . . . 73,135 2,345 1,033 3,344 144 1,984 1 81,986

2050 . . . . . . . . . . 74,896 2,391 1,049 3,253 141 1,943 1 83,673

2055 . . . . . . . . . . 77,356 2,503 1,070 3,194 138 1,906 1 86,167

2060 . . . . . . . . . . 80,369 2,645 1,092 3,156 135 1,879 1 89,277

2065 . . . . . . . . . . 83,402 2,767 1,110 3,153 133 1,863 1 92,429

2070 . . . . . . . . . . 86,771 2,877 1,147 3,177 130 1,851 1 95,954

2075 . . . . . . . . . . 89,788 2,966 1,168 3,212 127 1,834 1 99,096

2080 . . . . . . . . . . 92,184 3,028 1,178 3,256 123 1,813 1 101,582

2085 . . . . . . . . . . 95,455 3,109 1,212 3,299 120 1,793 1 104,989

2090 . . . . . . . . . . 99,386 3,206 1,249 3,319 118 1,778 1 109,057
Assumptions and Methods

126

Notes: 

1. The number of beneficiaries does not include uninsured individuals who receive benefits under Section

228 of the Social Security Act. Transfers from the General Fund of the Treasury reimburse the OASI Trust

Fund for the cost of most of these individuals.

2. Totals do not necessarily equal the sums of rounded components.

5. Disability Insurance Beneficiaries

The DI Trust Fund pays for benefits to disabled workers who: (1) satisfy the

disability insured requirements; (2) are unable to engage in any substantial

gainful activity due to a medically determinable physical or mental impairment severe enough to satisfy the requirements of the program; and (3) have

not yet attained normal retirement age. Spouses and children of such disabled

Low-cost:

2013 . . . . . . . . . . 38,113 2,262 627 4,196 151 1,913 1 47,262

2015 . . . . . . . . . . 41,089 2,253 655 4,183 148 1,933 1 50,263

2020 . . . . . . . . . . 49,408 2,240 755 4,119 146 2,005 1 58,674

2025 . . . . . . . . . . 56,794 2,184 861 4,023 142 2,098 1 66,103

2030 . . . . . . . . . . 63,302 2,253 973 3,854 144 2,171 1 72,698

2035 . . . . . . . . . . 67,263 2,275 1,063 3,704 145 2,294 1 76,745

2040 . . . . . . . . . . 68,943 2,256 1,095 3,567 143 2,373 1 78,379

2045 . . . . . . . . . . 69,844 2,230 1,129 3,459 142 2,421 1 79,226

2050 . . . . . . . . . . 71,231 2,246 1,177 3,373 142 2,452 1 80,622

2055 . . . . . . . . . . 73,460 2,340 1,227 3,311 144 2,479 1 82,962

2060 . . . . . . . . . . 76,257 2,465 1,278 3,264 147 2,519 1 85,930

2065 . . . . . . . . . . 79,064 2,562 1,326 3,250 151 2,586 1 88,940

2070 . . . . . . . . . . 82,057 2,650 1,396 3,266 155 2,660 1 92,186

2075 . . . . . . . . . . 84,583 2,715 1,448 3,297 158 2,726 1 94,929

2080 . . . . . . . . . . 86,707 2,756 1,487 3,352 161 2,783 1 97,246

2085 . . . . . . . . . . 90,296 2,818 1,566 3,421 163 2,842 1 101,107

2090 . . . . . . . . . . 95,182 2,909 1,653 3,487 167 2,908 1 106,306

High-cost:

2013 . . . . . . . . . . 38,126 2,262 627 4,197 151 1,912 1 47,276

2015 . . . . . . . . . . 41,166 2,253 654 4,191 147 1,927 1 50,340

2020 . . . . . . . . . . 49,932 2,232 745 4,157 141 1,950 1 59,158

2025 . . . . . . . . . . 58,388 2,242 829 3,991 145 1,885 1 67,480

2030 . . . . . . . . . . 66,209 2,325 911 3,750 147 1,815 1 75,158

2035 . . . . . . . . . . 71,623 2,392 960 3,528 146 1,764 1 80,415

2040 . . . . . . . . . . 74,849 2,428 954 3,331 139 1,681 1 83,384

2045 . . . . . . . . . . 76,935 2,454 940 3,192 129 1,591 1 85,242

2050 . . . . . . . . . . 79,163 2,513 926 3,097 120 1,506 1 87,325

2055 . . . . . . . . . . 81,884 2,632 919 3,038 112 1,436 1 90,023

2060 . . . . . . . . . . 85,088 2,775 912 3,004 105 1,378 1 93,263

2065 . . . . . . . . . . 88,312 2,912 902 3,003 98 1,324 1 96,552

2070 . . . . . . . . . . 91,970 3,044 908 3,017 90 1,276 1 100,305

2075 . . . . . . . . . . 95,387 3,151 900 3,045 83 1,229 1 103,797

2080 . . . . . . . . . . 97,999 3,230 889 3,068 77 1,183 1 106,446

2085 . . . . . . . . . . 100,789 3,310 889 3,079 71 1,139 1 109,279

2090 . . . . . . . . . . 103,446 3,385 891 3,058 66 1,099 1 111,947

a Retired-worker beneficiaries include persons who also receive a residual benefit consisting of the excess of

an auxiliary benefit over their retired-worker benefit.

Table V.C4.—OASI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1945-2090 (Cont.)

[In thousands]

Calendar year

Retired workers and auxiliaries Survivors

Worker Total a Spouse Child

WidowwidowerMotherfather Child Parent
127

Program Assumptions and Methods

workers may also receive DI benefits provided they satisfy certain criteria,

primarily age and earnings requirements.

The Office of the Chief Actuary projects the number of disabled-worker beneficiaries in current-payment status (disability prevalence) for each future

year. The projections start with the number in current-payment status as of

December 2012. Projections of the number of new beneficiaries awarded

benefits each year (disability incidence) and the number of beneficiaries

leaving the disability rolls each year then determine the number in currentpayment status in later years. Beneficiaries leave the rolls due to death and

recovery (disability terminations) and due to conversion from disabledworker to retired-worker beneficiary status at normal retirement age, after

which the OASI Trust Fund pays for benefits. The remainder of this section

describes the concepts of disability incidence, termination, and prevalence.

a. Disability Incidence

The disability incidence rate is the ratio of the number of new beneficiaries

awarded benefits each year to the number of individuals who meet insured

requirements but are not yet receiving benefits (the disability-exposed population1). The Office of the Chief Actuary projects the number of newly

awarded beneficiaries for each future year by multiplying assumed age-sexspecific disability incidence rates and the projected disability-exposed population by age and sex.

Figure V.C3 illustrates the historical and estimated incidence rates under the

three alternatives. Incidence rates have varied substantially during the historical period since 1970 due to a variety of demographic and economic factors,

along with changes in legislation and program administration. The solid lines

in figure V.C3 show the incidence rate adjusted to the age-sex distribution of

the disability-exposed population for 2000. This adjustment allows a comparison of incidence rates over time by focusing on the likelihood of becoming disabled, and by excluding the effects of a changing distribution of the

population toward ages where disability is more or less likely.

The dashed lines in figure V.C3 represent the gross (unadjusted) incidence

rates. The changing age-sex distribution of the exposed population over time

influences these unadjusted rates. The gross incidence rate fell substantially

below the age-sex-adjusted rate between 1975 and 1995 as the baby-boom

generation swelled the size of the younger working-age population, where

 1 The disability-exposed population excludes those receiving benefits, while the disability insured population includes them. Section V.C.3 of this report describes the projection of the disability insured population.
Assumptions and Methods

128

disability incidence is lower than in older populations. After 1995, the gross

rate rose faster than the age-sex-adjusted rate as the baby-boom generation

moved into an age range where disability incidence peaks. After 2023, the

projected gross incidence rate declines relative to the age-sex-adjusted rate

as the baby-boom generation moves above the normal retirement age and the

lower-birth-rate cohorts of the 1970s enter prime disability ages (50 to normal retirement age). As these smaller cohorts age beyond normal retirement

age, by about 2050, the gross incidence rate returns to a higher relative level

under the intermediate assumptions. Thereafter, the gross rate remains higher

and reflects the persistently higher average age of the working-age population, which is largely due to lower birth rates since 1965.

For the first 10 years of the projection period (through 2022), incidence rates

reflect several factors including: (1) aspects of program administration, such

as efforts to reduce the disability backlog and recent changes to how claims

are adjudicated; (2) assumed future unemployment rates; and (3) underlying

trends in incidence. For this year’s report, all three sets of underlying economic assumptions include a gradual economic recovery with unemployment rates gradually declining to their ultimate sustainable levels. During the

period of high unemployment, the projected disability incidence rates are

above the general trend level. The elevated incidence rates subside as the

economy recovers, and then briefly drop below the general trend level since

some of the earlier additional awards would have occurred in a later year.

After 2022, age-sex-specific incidence rates trend toward the ultimate rates

assumed for the long-range projections and reach these ultimate rates in

2032. These ultimate age-sex-specific disability incidence rates were

selected based on careful analysis of historical levels and patterns and

expected future conditions, including the impact of scheduled increases in

the normal retirement age.1 The ultimate incidence rates represent the

expected average rates of incidence for the future.

For the intermediate alternative, the Trustees assume that the ultimate agesex-adjusted incidence rate (adjusted to the disability-exposed population for

the year 2000) will be 5.4 awards per thousand exposed, which is the same as

in last year’s report. Figure V.C3 illustrates that the estimated ultimate agesex-adjusted incidence rate of 5.4 is slightly higher than the average rate for

the historical period 1970 through 2012, reflecting the increase in female

incidence rates over this period. However, a similar comparison using gross

incidence rates gives a different result. The estimated ultimate gross inci-

 1 Projected incidence rates are adjusted upward to account for additional workers who are expected to file

for disability benefits (rather than retirement benefits) in response to reductions in retirement benefits as the

normal retirement age rises.
129

Program Assumptions and Methods

dence rate is substantially greater than the average gross rate over the historical period due to the large changes in the age-sex distribution of the

disability-exposed population between 1970 and 2010.

The Trustees assume that the ultimate age-sex-adjusted incidence rates for

the low-cost and high-cost alternatives will be 4.3 and 6.5 awards per thousand exposed, or about 17 percent lower and 25 percent higher than the average for the historical period, respectively. These ultimate age-sex-adjusted

incidence rates are similar to those in last year’s report.

b. Disability Termination

Beneficiaries stop receiving disability benefits when they die, recover from

their medically-determinable disabling condition, or return to work. Disabled-worker beneficiaries who return to substantial work for an extended

period are deemed to have recovered, and their benefits are then terminated.

The termination rate is the ratio of the number of terminations for these reasons to the average number of disabled-worker beneficiaries during the year.

The Office of the Chief Actuary projects termination rates by age, sex, and

reason for termination. In addition, the office projects termination rates by

 Figure V.C3.—DI Disability Incidence Rates, 1970-2090

[Awards per thousand disability-exposed]

0

1

2

3

4

5

6

7

8

9

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Gross incidence rates

Age-sex-adjusted

incidence rates

I

II

III

Historical Estimated
Assumptions and Methods

130

duration of entitlement to disabled-worker benefits in the long-range period

(post-2022).

In the short-range period (through 2022), the projected age-sex-adjusted

death rate (adjusted to the 2000 disabled-worker population) under the intermediate assumptions gradually declines from 26.5 deaths per thousand beneficiaries in 2012 to about 22.3 per thousand by 2022. The projected age-sexadjusted recovery rate (medical improvement and return to work) under the

intermediate assumptions rises from a level of 9.7 per thousand beneficiaries

in 2012 (reflecting temporarily lower levels of continuing disability reviews)

to 11.4 per thousand beneficiaries by 2022. Under the low-cost and high-cost

assumptions, total age-sex-adjusted termination rates due to death and recovery are roughly 10-15 percent higher or lower, respectively, than under the

intermediate assumptions.

For the long-range period (post-2022), the Office of the Chief Actuary projects death and recovery rates by age, sex, and duration of entitlement relative

to the average level of rates experienced over the base period 2001-2005.

The assumed ultimate age-sex-adjusted recovery rate for disabled workers is

about 10.4 per thousand beneficiaries. The assumed ultimate age-sexadjusted recovery rates for the low-cost and high-cost alternatives are about

12.5 and 8.3 recoveries per thousand beneficiaries, respectively. Recovery

rates by age, sex, and duration of entitlement reach ultimate levels in the

twentieth year of the projection period (2032) for all three sets of assumptions. In contrast, death rates by age and sex change throughout the longrange period at the same rate as death rates in the general population. From

the age-sex-adjusted death rate of 26.5 per thousand beneficiaries in 2012,

this rate decreases to 17.8, 11.0, and 6.4 per thousand disabled-worker beneficiaries for 2090 under the low-cost, intermediate, and high-cost assumptions, respectively.

Figure V.C4 illustrates gross and age-sex-adjusted total termination rates for

disabled-worker beneficiaries for the historical period since 1970, and for the

projection period through 2090. In the near term, through 2016, recovery terminations are projected to increase, consistent with the assumption that the

Social Security Administration will receive sufficient budget appropriations

to reduce the pending backlog of continuing disability reviews. As with incidence rates, the age-sex-adjusted termination rate illustrates the real change

in the tendency to terminate benefits. Changes in the age-sex distribution of

the beneficiary population influence the gross termination rate. A shift in the

beneficiary population to older ages, as occurred over the past 20 years when

the baby-boom generation moved into pre-retirement ages, increases gross

death termination rates relative to the age-sex-adjusted rates.
131

Program Assumptions and Methods

c. Comparison of Incidence, Termination, and Conversion

Incidence and termination rates are the foundation for projecting the number

of disabled-worker beneficiaries in current-payment status. At normal retirement age, disabled-worker beneficiaries convert to retired-worker status and

leave the DI rolls. 

Figure V.C5 compares the historical and projected (intermediate) levels of

incidence, termination, and conversion on both a gross basis and an age-sexadjusted basis. Incidence rates have varied widely, and, on an age-sexadjusted basis under the intermediate assumptions, the Trustees expect them

to remain near the middle of the high and low extremes experienced since

1970. Termination rates have declined and the Trustees expect them to continue to decline, largely because of declining death rates. 

Conversions are simply a transfer of beneficiaries at normal retirement age

from the DI Trust Fund account to the OASI Trust Fund account. Therefore,

the disability “conversion” rate is 100 percent for disabled-worker beneficiaries reaching normal retirement age in a given year and zero at all other ages.

After conversion, recovery from the disabling condition is no longer relevant. The conversion ratio is the number of conversions in a given year (that

 Figure V.C4.—DI Disability Termination Rates, 1970-2090

[Terminations per thousand disabled-worker beneficiaries]

0

20

40

60

80

100

120

140

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Gross termination rates

Age-sex-adjusted

termination rates

II

III

I

Historical Estimated
Assumptions and Methods

132

is, beneficiaries who reach normal retirement age) divided by the average

number of disabled-worker beneficiaries at all ages in that year. The ratio is

constant on an age-sex-adjusted basis, except for the two periods during

which normal retirement age increases under current law. On a gross basis,

however, the conversion ratio rises and falls with the changing proportion of

all disabled-worker beneficiaries who attain normal retirement age in a given

year. The gross conversion ratio generally increases from 2002 to 2030 due

to aging of the beneficiary population.

d. DI Beneficiaries and Disability Prevalence Rates

The Office of the Chief Actuary makes detailed projections of disabledworker awards, terminations, and conversions and combines these to project

the number of disabled workers receiving benefits over the next 75 years.

Table V.C5 presents the projected numbers of disabled workers in currentpayment status. The number of disabled workers in current-payment status

grows from 8.8 million at the end of 2012, to 12.7 million, 14.4 million, and

15.2 million at the end of 2090, under the low-cost, intermediate, and highcost assumptions, respectively. Of course, much of this growth results from

 Figure V.C5.—Comparison of DI Disability Incidence Rates, Termination Rates and 

Conversion Ratios Under Intermediate Assumptions, 1970-2090

[Awards per thousand disability-exposed;

terminations and conversions per thousand disabled-worker beneficiaries]

0

20

40

60

80

100

120

140

160

0

1

2

3

4

5

6

7

8

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Termination rates &

Conversion ratios

Incidence rates

Calendar year

Gross incidence rates

Age-sex-adjusted incidence rates

Gross conversion ratios

Age-sex-adjusted conversion ratios

Gross termination rates

Historical Estimated

Age-sex-adjusted termination rates
133

Program Assumptions and Methods

the growth and aging of the population described earlier in this chapter. Table

V.C5 also presents projected numbers of auxiliary beneficiaries and disability prevalence rates on both a gross basis and an age-sex-adjusted basis.

Table V.C5.—DI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1960-2090

[Beneficiaries in thousands; prevalence rates per thousand persons insured for disability benefits]

Calendar year

Disabledworker

beneficiaries

Auxiliary beneficiaries

Total

beneficiaries

Disability

prevalence rates

Spouse Child Gross

Age-sexadjusteda

Historical data:

1960. . . . . . . . . . . . 455 77 155 687 — —

1965. . . . . . . . . . . . 988 193 558 1,739 — —

1970. . . . . . . . . . . . 1,493 283 889 2,665 20 18

1975. . . . . . . . . . . . 2,488 453 1,411 4,351 29 28

1980. . . . . . . . . . . . 2,856 462 1,359 4,677 28 31

1985. . . . . . . . . . . . 2,653 306 945 3,904 24 26

1990. . . . . . . . . . . . 3,007 266 989 4,261 25 28

1995. . . . . . . . . . . . 4,179 264 1,409 5,852 33 35

1996. . . . . . . . . . . . 4,378 224 1,463 6,065 34 36

1997. . . . . . . . . . . . 4,501 207 1,438 6,146 34 36

1998. . . . . . . . . . . . 4,691 190 1,446 6,327 35 36

1999. . . . . . . . . . . . 4,870 176 1,468 6,514 36 36

2000. . . . . . . . . . . . 5,036 165 1,466 6,667 36 36

2001. . . . . . . . . . . . 5,268 157 1,482 6,907 38 37

2002. . . . . . . . . . . . 5,539 152 1,526 7,217 39 38

2003. . . . . . . . . . . . 5,869 151 1,571 7,590 41 38

2004. . . . . . . . . . . . 6,198 153 1,599 7,950 43 39

2005. . . . . . . . . . . . 6,519 157 1,633 8,309 45 40

2006. . . . . . . . . . . . 6,807 156 1,652 8,615 46 40

2007. . . . . . . . . . . . 7,099 154 1,665 8,918 48 41

2008. . . . . . . . . . . . 7,427 155 1,692 9,273 50 41

2009. . . . . . . . . . . . 7,788 159 1,749 9,695 52 43

2010. . . . . . . . . . . . 8,204 161 1,820 10,185 55 44

2011. . . . . . . . . . . . 8,576 164 1,874 10,614 57 46

2012. . . . . . . . . . . . 8,827 163 1,900 10,890 59 46

Intermediate:

2013. . . . . . . . . . . . 8,960 162 1,920 11,041 59 46

2015. . . . . . . . . . . . 9,231 159 1,962 11,353 61 47

2020. . . . . . . . . . . . 9,529 156 1,988 11,673 61 46

2025. . . . . . . . . . . . 10,121 167 2,050 12,338 63 46

2030. . . . . . . . . . . . 10,128 184 2,155 12,467 63 47

2035. . . . . . . . . . . . 10,268 198 2,291 12,758 63 47

2040. . . . . . . . . . . . 10,494 205 2,371 13,071 62 47

2045. . . . . . . . . . . . 11,049 215 2,428 13,692 64 48

2050. . . . . . . . . . . . 11,465 227 2,477 14,169 64 48

2055. . . . . . . . . . . . 11,861 243 2,542 14,646 65 48

2060. . . . . . . . . . . . 12,059 249 2,624 14,932 65 49

2065. . . . . . . . . . . . 12,420 256 2,718 15,394 65 49

2070. . . . . . . . . . . . 12,769 262 2,803 15,835 66 49

2075. . . . . . . . . . . . 13,072 265 2,866 16,203 66 49

2080. . . . . . . . . . . . 13,674 275 2,921 16,871 67 49

2085. . . . . . . . . . . . 14,158 286 2,982 17,425 68 50

2090. . . . . . . . . . . . 14,402 291 3,053 17,745 68 50
Assumptions and Methods

134

Note: Totals do not necessarily equal the sums of rounded components.

The disability prevalence rate is the ratio of the number of disabled-worker

beneficiaries in current-payment status to the number of persons insured for

disability benefits. Figure V.C6 illustrates the historical and projected disability prevalence rates on both a gross basis and on an age-sex-adjusted

basis (adjusted to the age-sex distribution of the insured population for the

year 2000).

Changes in prevalence rates are a direct result of changes in incidence rates

and termination rates. Figure V.C5 depicts patterns for incidence and termiLow-cost:

2013. . . . . . . . . . . . 8,874 161 1,891 10,926 59 46

2015. . . . . . . . . . . . 8,898 157 1,867 10,922 58 45

2020. . . . . . . . . . . . 8,678 152 1,806 10,636 55 42

2025. . . . . . . . . . . . 8,853 142 1,818 10,813 54 40

2030. . . . . . . . . . . . 8,515 147 1,874 10,535 52 39

2035. . . . . . . . . . . . 8,354 149 1,978 10,481 50 38

2040. . . . . . . . . . . . 8,362 146 2,060 10,568 49 37

2045. . . . . . . . . . . . 8,703 148 2,138 10,990 48 37

2050. . . . . . . . . . . . 8,981 154 2,216 11,351 48 37

2055. . . . . . . . . . . . 9,278 165 2,308 11,751 48 37

2060. . . . . . . . . . . . 9,468 169 2,423 12,060 47 37

2065. . . . . . . . . . . . 9,825 173 2,569 12,567 47 37

2070. . . . . . . . . . . . 10,223 180 2,720 13,123 47 37

2075. . . . . . . . . . . . 10,666 182 2,857 13,705 47 38

2080. . . . . . . . . . . . 11,435 192 2,989 14,616 47 38

2085. . . . . . . . . . . . 12,156 201 3,125 15,482 48 38

2090. . . . . . . . . . . . 12,700 209 3,272 16,182 48 38

High-cost:

2013. . . . . . . . . . . . 9,044 163 1,949 11,156 60 47

2015. . . . . . . . . . . . 9,597 162 2,069 11,829 64 49

2020. . . . . . . . . . . . 10,500 161 2,195 12,856 69 52

2025. . . . . . . . . . . . 11,516 197 2,299 14,012 73 53

2030. . . . . . . . . . . . 11,852 230 2,428 14,510 74 55

2035. . . . . . . . . . . . 12,290 258 2,556 15,104 76 57

2040. . . . . . . . . . . . 12,737 274 2,596 15,607 77 58

2045. . . . . . . . . . . . 13,511 290 2,599 16,400 80 59

2050. . . . . . . . . . . . 14,053 305 2,589 16,947 82 60

2055. . . . . . . . . . . . 14,520 324 2,603 17,447 85 60

2060. . . . . . . . . . . . 14,676 328 2,629 17,633 86 61

2065. . . . . . . . . . . . 14,972 336 2,647 17,955 88 61

2070. . . . . . . . . . . . 15,159 342 2,645 18,146 89 61

2075. . . . . . . . . . . . 15,153 340 2,618 18,110 89 62

2080. . . . . . . . . . . . 15,362 345 2,587 18,295 91 62

2085. . . . . . . . . . . . 15,376 351 2,565 18,292 92 62

2090. . . . . . . . . . . . 15,152 349 2,555 18,056 92 62

a Adjusted to the age-sex distribution of the insured population for the year 2000.

Table V.C5.—DI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1960-2090 (Cont.)

[Beneficiaries in thousands; prevalence rates per thousand persons insured for disability benefits]

Calendar year

Disabledworker

beneficiaries

Auxiliary beneficiaries

Total

beneficiaries

Disability

prevalence rates

Spouse Child Gross

Age-sexadjusteda
135

Program Assumptions and Methods

nation rates, which are helpful for understanding the trend in prevalence

rates. Annual incidence and termination rates are not directly comparable or

combinable because their denominators differ.

Age-sex-adjusted prevalence rates have increased primarily because: (1) termination rates have declined; (2) incidence rates at younger ages have

increased relative to rates at older ages; and (3) incidence rates have

increased substantially for women to parity with men. Gross prevalence rates

have increased more than age-sex-adjusted prevalence rates ever since the

baby-boom generation began to reach ages 45 through normal retirement

age, a time of life when disability incidence rates are relatively high. The

Office of the Chief Actuary projects both gross and age-sex adjusted prevalence rates to grow at a slower pace based on assumed stabilization in three

factors: (1) the age distribution of the general population; (2) the age distribution of the disability insured population; and (3) incidence rates by age and

gender. As these factors gradually stabilize, the declining death termination

rate continues to have a small influence toward higher disability prevalence

rates.

 Figure V.C6.—DI Disability Prevalence Rates, 1970-2090

[Rate per thousand persons insured for disability benefits]

0

10

20

30

40

50

60

70

80

90

100

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Gross prevalence rates

Age-sex-adjusted

prevalence rates

III

II

II

I

I

Historical Estimated

III
Assumptions and Methods

136

As mentioned above in the discussion of incidence and termination rates, the

age-sex-adjusted prevalence rate isolates the changing trend in the underlying likelihood of receiving benefits for the insured population, without

reflecting changes in the age distribution of the population. As with incidence rates, gross disability prevalence rates declined relative to the age-sexadjusted rate when the baby-boom generation reached working age between

1970 and 1990; this trend reflects the lower disability prevalence rates associated with younger ages. Conversely, the gross rate of disability prevalence

has increased relative to the age-sex-adjusted rate after 1990 due to the aging

of the baby-boom generation into ages with higher disability prevalence

rates.

Under the intermediate assumptions, the projected age-sex-adjusted disability prevalence rate grows from 46.2 per thousand disability insured at the end

of 2012 to 49.8 per thousand at the end of 2090. As mentioned above, the

Office of the Chief Actuary projects that the growth in prevalence will slow

relative to the historical period.

Under the low-cost and high-cost assumptions, the age-sex-adjusted disability prevalence rate decreases to 38.0 per thousand and increases to 62.1 per

thousand insured workers at the end of 2090, respectively.

Table V.C5 presents projections of the numbers of auxiliary beneficiaries

paid from the DI Trust Fund. As indicated at the beginning of this subsection, auxiliary beneficiaries are qualifying spouses and children of disabled

workers. A spouse must either be at least age 62 or have an eligible child

beneficiary in his or her care who is either under age 16 or disabled prior to

age 22. A child must be: (1) under age 18; (2) age 18 or 19 and still a student

in high school; or (3) age 18 or older and disabled prior to age 22.

The projection of the number of auxiliary beneficiaries relies on the projected number of disabled-worker beneficiaries. In the short-range period

(2013-22), the Office of the Chief Actuary projects incidence and termination rates for each category of auxiliary beneficiary. After 2022, the office

projects child beneficiaries at ages 18 and under in relation to the projected

number of children in the population using the probability that either of their

parents is a disabled-worker beneficiary. The office projects the remaining

categories of children and spouses in a similar manner.

6. Covered and Taxable Earnings, Taxable Payroll, and Payroll Tax

Contributions

Covered earnings are the sum of covered wages and covered self-employment net earnings. The Office of the Chief Actuary projects covered wages
137

Program Assumptions and Methods

for component sectors of the economy (i.e., private, State and local, Federal

civilian, and military) based on the projected overall growth of sectoral and

total wages in the U.S. economy. The projections of covered wages also

reflect changes in covered employment due to a relative increase in non-covered undocumented immigrants and to the mandatory coverage of new hires

in the Federal civilian sector. The office projects covered self-employment

net earnings based on the growth in net proprietors’ income in the U.S. economy.

Taxable earnings are the amount of covered earnings subject to the Social

Security payroll tax. Taxable wages for an employee are total covered wages

from all wage employment up to the contribution and benefit base. Taxable

wages for an employer are the sum of all covered wages paid to each

employee up to the base. Employees with multiple jobs whose total wages

exceed the base are eligible for a refund of excess employee taxes withheld;

employers are not eligible for a refund on this basis. For self-employed

workers with no taxable wages, taxable earnings are the amount of covered

self-employment net earnings up to the base. For self-employed workers

with taxable wages less than the base, covered self-employment net earnings

are taxable up to the difference between the base and their taxable wages.

For projection purposes, the Office of the Chief Actuary computes taxable

earnings based on a proportion of covered earnings that is at or below the

base.

The OASDI taxable payroll (see table VI.F6) for a year is the amount of

earnings which, when multiplied by the combined OASDI employeeemployer payroll tax rate for that year, yields the total amount of payroll

taxes due from wages paid and self-employment net earnings for the year.

The Trustees use taxable payroll to determine income rates, cost rates, and

actuarial balances. Taxable payroll is derived by adjusting total taxable earnings to account for categories of earnings that are taxed at rates other than the

combined employee-employer rate and to take into account amounts credited

as wages that were not included in normally reported wages. For 1951 and

later, taxable earnings are reduced by one-half of the amount of wages paid

to employees with multiple jobs that exceed the contribution and benefit

base. For 1983 through 2001, deemed wage credits for military service after

1956 are added to taxable earnings. The self-employment tax rates for 1951

through 1983 were less than the combined employee-employer rates; therefore, the self-employment component of taxable payroll for those years is

reduced by multiplying the ratio of the self-employment rate to the combined

employee-employer rate times the taxable self-employment net earnings.

Finally, for 1966 through 1979, employers were exempt from paying their
Assumptions and Methods

138

share of payroll tax on their employees’ tips and, for 1980 through 1987,

employers paid tax on only part of their employees’ tips. For those years, the

taxable payroll is reduced by half of the amount of tips for which the

employer owed no payroll tax.

The ratio of taxable payroll to covered earnings (the taxable ratio) fell from

88.3 percent for 1984 to 82.4 percent for 2000, mostly due to much higher

increases in wage levels for very high earners than for all other earners. From

2000 to 2010, the taxable ratio varied with the business cycle, rising during

economic downturns and falling during recoveries. Specifically, the taxable

ratio rose to 85.5 percent for 2002, declined to 82.2 percent for 2007, rose to

85.0 percent for 2009, and was 83.2 percent for 2011.

For the 2013 report, the Trustees assume a level for the taxable ratio for 2022

of 82.5 percent for the intermediate assumptions, 81.0 percent for the highcost assumptions (or 1.5 percentage points lower than the intermediate

assumptions), and 84.0 percent for the low-cost assumptions (or 1.5 percentage points higher than the intermediate assumptions). These are the same

assumptions that the Trustees made for the 2012 report.

The Office of the Chief Actuary projects payroll tax contributions using the

patterns of tax collection required by Federal laws and regulations. The

office determines payroll tax liabilities by multiplying the scheduled tax rates

for each year by the amount of taxable wages and self-employment net earnings for that year. The office then splits these liabilities into amounts by collection period. For wages, Federal law requires that employers withhold

OASDI and HI payroll taxes and Federal individual income taxes from

employees’ pay. As an employer’s accumulation of such taxes (including the

employer share of payroll taxes) meets certain thresholds, which the Department of the Treasury determines, the employer must deposit these taxes with

the U.S. Treasury by a specific day, depending on the amount of money

involved1. For projection purposes, the office splits the payroll tax contributions related to wages into amounts paid in the same quarter as incurred and

in the following quarter. Self-employed workers must make estimated tax

payments on their earnings four times during the year and to make up any

underestimate on their individual income tax returns. The projection splits

the self-employed tax liabilities by collection quarter to reflect this pattern of

receipts. 

 1 Generally, the higher the amount of liability, the sooner the taxes must be paid. For smaller employers,

payment is due by the middle of the month following when the liability was incurred. Medium-size employers have three banking days in which to make their deposits. Larger employers must make payment on the

next business day after paying their employees.
139

Program Assumptions and Methods

The projected tax contributions also reflect the method used to insure that

money transferred to the trust funds is adjusted, over time, to equal the actual

liability owed. Because payers generally make tax payments without identifying the separate OASDI contribution amounts, Treasury makes daily transfers of money from the general fund to the trust funds on an initial estimated

basis. The Social Security Administration periodically certifies the amounts

of wages and self-employment net earnings on which tax contributions are

owed for each year, at which time Treasury determines adjustments to appropriations to reconcile tax liabilities with deposits in the trust funds. This process also includes periodic transfers from the trust funds to the general fund

for contributions on wages in excess of the contribution and benefit base.

Table V.C6 shows the payroll tax contribution rates applicable under current

law in each calendar year and the allocation of these rates between the OASI

and DI Trust Funds.1 It also shows the contribution and benefit base for each

year through 2013.

 1 Table VI.F1 shows the payroll tax contribution rates for the Hospital Insurance (HI) program.
Assumptions and Methods

140

Table V.C6.—Contribution and Benefit Base and Payroll Tax Contribution Rates

Calendar years

Contribution

and benefit 

base

Payroll tax contribution rates (percent)

Employees and employers, 

combineda Self-employedb

OASDI OASI DI OASDI OASI DI

1937-49 . . . . . . . . . $3,000 2.00 2.00 — — — —

1950. . . . . . . . . . . . 3,000 3.00 3.00 — — — —

1951-53 . . . . . . . . . 3,600 3.00 3.00 — 2.2500 2.2500 —

1954. . . . . . . . . . . . 3,600 4.00 4.00 — 3.0000 3.0000 —

1955-56 . . . . . . . . . 4,200 4.00 4.00 — 3.0000 3.0000 —

1957-58 . . . . . . . . . 4,200 4.50 4.00 0.50 3.3750 3.0000 0.3750

1959. . . . . . . . . . . . 4,800 5.00 4.50 .50 3.7500 3.3750 .3750

1960-61 . . . . . . . . . 4,800 6.00 5.50 .50 4.5000 4.1250 .3750

1962. . . . . . . . . . . . 4,800 6.25 5.75 .50 4.7000 4.3250 .3750

1963-65 . . . . . . . . . 4,800 7.25 6.75 .50 5.4000 5.0250 .3750

1966. . . . . . . . . . . . 6,600 7.70 7.00 .70 5.8000 5.2750 .5250

1967. . . . . . . . . . . . 6,600 7.80 7.10 .70 5.9000 5.3750 .5250

1968. . . . . . . . . . . . 7,800 7.60 6.65 .95 5.8000 5.0875 .7125

1969. . . . . . . . . . . . 7,800 8.40 7.45 .95 6.3000 5.5875 .7125

1970. . . . . . . . . . . . 7,800 8.40 7.30 1.10 6.3000 5.4750 .8250

1971. . . . . . . . . . . . 7,800 9.20 8.10 1.10 6.9000 6.0750 .8250

1972. . . . . . . . . . . . 9,000 9.20 8.10 1.10 6.9000 6.0750 .8250

1973. . . . . . . . . . . . 10,800 9.70 8.60 1.10 7.0000 6.2050 .7950

1974. . . . . . . . . . . . 13,200 9.90 8.75 1.15 7.0000 6.1850 .8150

1975. . . . . . . . . . . . 14,100 9.90 8.75 1.15 7.0000 6.1850 .8150

1976. . . . . . . . . . . . 15,300 9.90 8.75 1.15 7.0000 6.1850 .8150

1977. . . . . . . . . . . . 16,500 9.90 8.75 1.15 7.0000 6.1850 .8150

1978. . . . . . . . . . . . 17,700 10.10 8.55 1.55 7.1000 6.0100 1.0900

1979. . . . . . . . . . . . 22,900 10.16 8.66 1.50 7.0500 6.0100 1.0400

1980. . . . . . . . . . . . 25,900 10.16 9.04 1.12 7.0500 6.2725 .7775

1981. . . . . . . . . . . . 29,700 10.70 9.40 1.30 8.0000 7.0250 .9750

1982. . . . . . . . . . . . 32,400 10.80 9.15 1.65 8.0500 6.8125 1.2375

1983. . . . . . . . . . . . 35,700 10.80 9.55 1.25 8.0500 7.1125 .9375

1984c . . . . . . . . . . . 37,800 11.40 10.40 1.00 11.4000 10.4000 1.0000

1985c . . . . . . . . . . . 39,600 11.40 10.40 1.00 11.4000 10.4000 1.0000

1986c . . . . . . . . . . . 42,000 11.40 10.40 1.00 11.4000 10.4000 1.0000

1987c . . . . . . . . . . . 43,800 11.40 10.40 1.00 11.4000 10.4000 1.0000

1988c . . . . . . . . . . . 45,000 12.12 11.06 1.06 12.1200 11.0600 1.0600

1989c . . . . . . . . . . . 48,000 12.12 11.06 1.06 12.1200 11.0600 1.0600

1990 . . . . . . . . . . . 51,300 12.40 11.20 1.20 12.4000 11.2000 1.2000

1991. . . . . . . . . . . . 53,400 12.40 11.20 1.20 12.4000 11.2000 1.2000

1992. . . . . . . . . . . . 55,500 12.40 11.20 1.20 12.4000 11.2000 1.2000

1993. . . . . . . . . . . . 57,600 12.40 11.20 1.20 12.4000 11.2000 1.2000

1994. . . . . . . . . . . . 60,600 12.40 10.52 1.88 12.4000 10.5200 1.8800

1995. . . . . . . . . . . . 61,200 12.40 10.52 1.88 12.4000 10.5200 1.8800

1996. . . . . . . . . . . . 62,700 12.40 10.52 1.88 12.4000 10.5200 1.8800

1997. . . . . . . . . . . . 65,400 12.40 10.70 1.70 12.4000 10.7000 1.7000

1998. . . . . . . . . . . . 68,400 12.40 10.70 1.70 12.4000 10.7000 1.7000

1999. . . . . . . . . . . . 72,600 12.40 10.70 1.70 12.4000 10.7000 1.7000

2000. . . . . . . . . . . . 76,200 12.40 10.60 1.80 12.4000 10.6000 1.8000

2001. . . . . . . . . . . . 80,400 12.40 10.60 1.80 12.4000 10.6000 1.8000

2002. . . . . . . . . . . . 84,900 12.40 10.60 1.80 12.4000 10.6000 1.8000

2003. . . . . . . . . . . . 87,000 12.40 10.60 1.80 12.4000 10.6000 1.8000

2004. . . . . . . . . . . . 87,900 12.40 10.60 1.80 12.4000 10.6000 1.8000

2005. . . . . . . . . . . . 90,000 12.40 10.60 1.80 12.4000 10.6000 1.8000
141

Program Assumptions and Methods

7. Income From Taxation of Benefits

Under current law, the OASI and DI Trust Funds are credited with income

tax revenue from the taxation of up to the first 50 percent of OASI and DI

benefit payments. (The HI Trust Fund receives the remainder of the income

tax revenue from the taxation of up to 85 percent of OASI and DI benefit

payments.)

For the short-range period, the Office of the Chief Actuary estimates the

income to the trust funds from taxation of benefits by applying the following

two factors (projected by the Office of Tax Analysis, Department of the Treasury) to total OASI and DI scheduled benefits: (1) the percentage of scheduled benefits (limited to 50 percent) that is taxable; and (2) the average

marginal tax rate applicable to those benefits.

For the long-range period, the office estimates the income to the trust funds

from taxation of benefits by applying projected ratios of taxation of OASI

and DI benefits to total OASI and DI scheduled benefits. The income thresholds used for benefit taxation are, by law, constant in the future, while

2006. . . . . . . . . . . . $94,200 12.40 10.60 1.80 12.4000 10.6000 1.8000

2007. . . . . . . . . . . . 97,500 12.40 10.60 1.80 12.4000 10.6000 1.8000

2008. . . . . . . . . . . . 102,000 12.40 10.60 1.80 12.4000 10.6000 1.8000

2009. . . . . . . . . . . . 106,800 12.40 10.60 1.80 12.4000 10.6000 1.8000

2010d . . . . . . . . . . . 106,800 12.40 10.60 1.80 12.4000 10.6000 1.8000

2011d . . . . . . . . . . . 106,800 10.40 8.89 1.51 10.4000 8.8900 1.5100

2012d . . . . . . . . . . . 110,100 10.40 8.89 1.51 10.4000 8.8900 1.5100

2013. . . . . . . . . . . . 113,700 12.40 10.60 1.80 12.4000 10.6000 1.8000

2014 and later . . . . e 12.40 10.60 1.80 12.4000 10.6000 1.8000

a Except as noted below, the combined employee/employer rate is divided equally between employees and

employers.

b Beginning in 1990, self-employed persons receive a deduction, for purposes of computing their net earnings, equal to half of the combined OASDI and HI contributions that would be payable without regard to the

contribution and benefit base. The OASDI contribution rate then applies to net earnings after this deduction,

but subject to the OASDI base.

c In 1984 only, employees received an immediate credit of 0.3 percent of taxable wages against their OASDI

payroll tax contributions. The self-employed received similar credits of 2.7 percent, 2.3 percent, and

2.0 percent against their combined OASDI and Hospital Insurance (HI) contributions on net earnings from

self-employment in 1984, 1985, and 1986-89, respectively. The General Fund of the Treasury reimbursed the

trust funds for these credits.

d Public Law 111-147 exempted most employers from paying the employer share of OASDI payroll tax on

wages paid during the period March 19, 2010 through December 31, 2010 to certain qualified individuals

hired after February 3, 2010. Public Law 111-312 reduced the OASDI payroll tax rate for 2011 by 2 percentage points for employees and for self-employed workers. Public Law 112-96 extended the 2011 rate reduction through 2012. These laws require that the General Fund of the Treasury reimburse the OASI and DI

Trust Funds for these temporary reductions in 2010 through 2012 payroll tax revenue, in order to “replicate

to the extent possible” revenue that would have been received if the combined employee/employer payroll

tax rates had remained at 12.4 percent for OASDI (10.6 percent for OASI and 1.8 percent for DI).

e Subject to automatic adjustment based on increases in average wages.

Table V.C6.—Contribution and Benefit Base and Payroll Tax Contribution Rates (Cont.)

Calendar years

Contribution

and benefit 

base

Payroll tax contribution rates (percent)

Employees and employers, 

combineda Self-employedb

OASDI OASI DI OASDI OASI DI
Assumptions and Methods

142

income and benefit levels continue to rise. Accordingly, projected ratios of

income from taxation of benefits to the amount of benefits increase gradually. Ultimate tax ratios for OASI and DI benefits used in the projection rely

on estimates from the Office of Tax Analysis in the Department of the Treasury. 

8. Average Benefits

Projections of average benefits for each benefit type reflect recent historical

averages, projected average primary insurance amounts (PIAs), and projected ratios of average benefits to average PIAs. Calculations of average

PIAs are based on projected distributions of beneficiaries by duration from

year of initial entitlement, average PIAs at initial entitlement, and increases

in PIAs after initial entitlement. Projected increases in average PIAs after initial entitlement depend on automatic benefit increases, recomputations to

reflect additional covered earnings, and differences in mortality by level of

lifetime earnings. Calculations of future average PIAs at initial entitlement

are based on projected earnings histories, which in turn reflect a combination

of the actual earnings histories associated with a sample of 2008 initial entitlements and more recent actual earnings levels by age and sex for covered

workers.

For retired-worker, aged-spouse, and aged-widow(er) benefits, the percentage of the PIA that is payable depends on the age at initial entitlement to

benefits. Projected ratios of average benefits to average PIAs for these types

of benefits are based on projections of age distributions at initial entitlement.

9. Scheduled Benefits

For each type of benefit, scheduled benefits are the product of the number of

beneficiaries and the corresponding average monthly benefit. The shortrange model calculates scheduled benefits on a quarterly basis. The longrange model calculates all scheduled benefits on an annual basis, using the

number of beneficiaries at the beginning and end of the year. Adjustments to

these annual scheduled benefits include retroactive payments to newly

awarded beneficiaries and other amounts not reflected in the regular monthly

scheduled benefits.

Scheduled lump-sum death benefits are estimated as the product of: (1) the

number of lump-sum death payments projected on the basis of the assumed

death rates, the projected fully insured population, and the estimated percentage of the fully insured population that will qualify for lump-sum death pay-
143

Program Assumptions and Methods

ments; and (2) the amount of the lump-sum death payment, which is $255

(unindexed since 1973).

10.Illustrative Scheduled Benefit Amounts

Table V.C7 shows, under the intermediate assumptions, future benefit

amounts payable upon retirement at the normal retirement age and at age 65,

for workers attaining age 65 in 2013 and subsequent years. The table shows

illustrative benefit amounts for workers with four separate pre-retirement

earnings patterns. The benefit amounts in table V.C7 are presented in CPIindexed 2013 dollars—that is, adjusted to 2013 levels by the CPI indexing

series shown in table VI.F6. Table V.C7 also shows each benefit amount as a

percentage or “replacement rate” of career-average earnings, indexed by

national average wage growth to the year prior to retirement. For these

scaled worker profiles, this method of calculation produces percentages that

may differ significantly from those that would be produced by comparing

benefits to these representative workers’ recent average earnings levels or to

other more common measures of pre-retirement income. The Trustees are

exploring whether to expand or otherwise modify this presentation in the

2014 Trustees Report.

The normal retirement age was 65 for individuals who reached age 62 before

2000. It increased to age 66 during the period 2000-05, at a rate of 2 months

per year as workers attained age 62. Under current law, the normal retirement

age will increase to age 67 during the period 2017-22, also by 2 months per

year as workers attain age 62. The illustrative benefit amounts shown in table

V.C7 for retirees at age 65 are lower than the amounts shown for retirees at

normal retirement age because the statute requires actuarial reduction of benefits taken before normal retirement age.

Table V.C7 shows five different pre-retirement earnings patterns. Four of

these patterns assume the earnings history of workers with scaled-earnings

patterns1 and reflect very low, low, medium, and high career-average levels

of pre-retirement earnings starting at age 21. The fifth pattern assumes the

earnings history of a steady maximum earner. The four scaled-earnings patterns derive from earnings experienced by insured workers during

1991-2009. These earnings levels differ by age. The career-average level of

earnings for each scaled case targets a percent of the national average wage

index (AWI). As a result, the benefit amounts shown here are consistent with

the levels for “steady-earnings” cases presented in the 2000 and earlier Trust-

 1 Actuarial Note Number 2012.3 has more details on scaled-earnings patterns.

See www.socialsecurity.gov/OACT/NOTES/ran3/an2012-3.html.
Assumptions and Methods

144

ees Reports. Since 2001, the Trustees have used scaled-earnings cases,

instead of steady-earnings cases, because they better illustrate the differences

in benefit levels under the wide variety of reform proposals considered in

recent years.

For the scaled medium earner, the career-average earnings level is about

equal to the AWI (or $44,826 for 2013). For the scaled very low, low, and

high earners, the career-average earnings level is about 25 percent, 45 percent, and 160 percent of the AWI, respectively (or $11,207, $20,172, and

$71,722, respectively, for 2013). The steady maximum earner has earnings at

or above the contribution and benefit base for each year starting at age 22

through the year prior to retirement (or $113,700 for 2013).
145

Program Assumptions and Methods

Table V.C7.—Annual Scheduled Benefit Amountsa for Retired Workers

With Various Pre-Retirement Earnings Patterns

Based on Intermediate Assumptions, Calendar Years 2013-90 

Year attain age 65b

Retirement at normal retirement age Retirement at age 65

Age at

retirement

CPI-indexed

2013

dollars c Percent ofearnings

Age at

retirement

CPI-indexed

2013

dollarsc Percent ofearnings

 Scaled very low earnings:d

2013 . . . . . . . . . . . . 66:0 $9,055 82.6 65:0 $8,463 77.4

2015 . . . . . . . . . . . . 66:0 8,784 76.4 65:0 8,191 73.2

2020 . . . . . . . . . . . . 66:2 9,352 73.3 65:0 8,618 68.6

2025 . . . . . . . . . . . . 67:0 10,332 76.1 65:0 8,959 67.4

2030 . . . . . . . . . . . . 67:0 10,918 75.8 65:0 9,458 67.2

2035 . . . . . . . . . . . . 67:0 11,564 75.9 65:0 10,017 67.2

2040 . . . . . . . . . . . . 67:0 12,245 76.0 65:0 10,615 67.4

2045 . . . . . . . . . . . . 67:0 12,948 76.1 65:0 11,221 67.4

2050 . . . . . . . . . . . . 67:0 13,678 76.2 65:0 11,857 67.5

2055 . . . . . . . . . . . . 67:0 14,434 76.2 65:0 12,510 67.5

2060 . . . . . . . . . . . . 67:0 15,230 76.3 65:0 13,200 67.5

2065 . . . . . . . . . . . . 67:0 16,059 76.3 65:0 13,918 67.5

2070 . . . . . . . . . . . . 67:0 16,929 76.3 65:0 14,673 67.5

2075 . . . . . . . . . . . . 67:0 17,845 76.2 65:0 15,466 67.5

2080 . . . . . . . . . . . . 67:0 18,824 76.1 65:0 16,315 67.4

2085 . . . . . . . . . . . . 67:0 19,877 76.1 65:0 17,226 67.4

2090 . . . . . . . . . . . . 67:0 20,998 76.1 65:0 18,198 67.4

 Scaled low earnings:e

2013 . . . . . . . . . . . . 66:0 $11,832 60.0 65:0 $11,070 56.3

2015 . . . . . . . . . . . . 66:0 11,485 55.5 65:0 10,719 53.2

2020 . . . . . . . . . . . . 66:2 12,246 53.4 65:0 11,290 50.0

2025 . . . . . . . . . . . . 67:0 13,520 55.3 65:0 11,715 49.0

2030 . . . . . . . . . . . . 67:0 14,279 55.1 65:0 12,376 48.9

2035 . . . . . . . . . . . . 67:0 15,126 55.1 65:0 13,110 48.9

2040 . . . . . . . . . . . . 67:0 16,020 55.2 65:0 13,882 48.9

2045 . . . . . . . . . . . . 67:0 16,941 55.3 65:0 14,681 49.0

2050 . . . . . . . . . . . . 67:0 17,895 55.4 65:0 15,511 49.0

2055 . . . . . . . . . . . . 67:0 18,884 55.4 65:0 16,365 49.0

2060 . . . . . . . . . . . . 67:0 19,923 55.4 65:0 17,266 49.1

2065 . . . . . . . . . . . . 67:0 21,010 55.4 65:0 18,208 49.1

2070 . . . . . . . . . . . . 67:0 22,150 55.4 65:0 19,196 49.1

2075 . . . . . . . . . . . . 67:0 23,345 55.4 65:0 20,233 49.0

2080 . . . . . . . . . . . . 67:0 24,629 55.3 65:0 21,346 49.0

2085 . . . . . . . . . . . . 67:0 26,004 55.3 65:0 22,537 49.0

2090 . . . . . . . . . . . . 67:0 27,471 55.3 65:0 23,808 49.0

Scaled medium earnings:f

2013 . . . . . . . . . . . . 66:0 $19,499 44.5 65:0 $18,234 41.7

2015 . . . . . . . . . . . . 66:0 18,935 41.2 65:0 17,668 39.5

2020 . . . . . . . . . . . . 66:2 20,198 39.6 65:0 18,622 37.1

2025 . . . . . . . . . . . . 67:0 22,287 41.0 65:0 19,318 36.3

2030 . . . . . . . . . . . . 67:0 23,538 40.9 65:0 20,400 36.3

2035 . . . . . . . . . . . . 67:0 24,937 40.9 65:0 21,607 36.3

2040 . . . . . . . . . . . . 67:0 26,404 41.0 65:0 22,885 36.3

2045 . . . . . . . . . . . . 67:0 27,917 41.0 65:0 24,194 36.3

2050 . . . . . . . . . . . . 67:0 29,497 41.1 65:0 25,561 36.4

2055 . . . . . . . . . . . . 67:0 31,123 41.1 65:0 26,972 36.4

2060 . . . . . . . . . . . . 67:0 32,835 41.1 65:0 28,456 36.4

2065 . . . . . . . . . . . . 67:0 34,624 41.1 65:0 30,007 36.4

2070 . . . . . . . . . . . . 67:0 36,500 41.1 65:0 31,634 36.4

2075 . . . . . . . . . . . . 67:0 38,474 41.1 65:0 33,345 36.4

2080 . . . . . . . . . . . . 67:0 40,589 41.0 65:0 35,177 36.4

2085 . . . . . . . . . . . . 67:0 42,855 41.0 65:0 37,140 36.3

2090 . . . . . . . . . . . . 67:0 45,274 41.0 65:0 39,236 36.3
Assumptions and Methods

146

11. Administrative Expenses

The projection of administrative expenses through 2022 is based on historical experience and the projected growth in average wages. The Office of

Budget of the Social Security Administration provides estimates for the first

several years of the projection. For years after 2022, projected administrative

expenses reflect increases in the number of beneficiaries and increases in the

Scaled high earnings:g

2013 . . . . . . . . . . . . 66:0 $25,873 36.9 65:0 $24,196 34.6

2015 . . . . . . . . . . . . 66:0 25,097 34.1 65:0 23,435 32.7

2020 . . . . . . . . . . . . 66:2 26,735 32.8 65:0 24,650 30.7

2025 . . . . . . . . . . . . 67:0 29,539 34.0 65:0 25,600 30.1

2030 . . . . . . . . . . . . 67:0 31,189 33.9 65:0 27,031 30.0

2035 . . . . . . . . . . . . 67:0 33,039 33.9 65:0 28,630 30.0

2040 . . . . . . . . . . . . 67:0 34,988 33.9 65:0 30,320 30.1

2045 . . . . . . . . . . . . 67:0 36,995 34.0 65:0 32,060 30.1

2050 . . . . . . . . . . . . 67:0 39,082 34.0 65:0 33,874 30.1

2055 . . . . . . . . . . . . 67:0 41,240 34.0 65:0 35,741 30.1

2060 . . . . . . . . . . . . 67:0 43,508 34.0 65:0 37,708 30.1

2065 . . . . . . . . . . . . 67:0 45,880 34.1 65:0 39,762 30.1

2070 . . . . . . . . . . . . 67:0 48,366 34.1 65:0 41,919 30.1

2075 . . . . . . . . . . . . 67:0 50,980 34.0 65:0 44,182 30.1

2080 . . . . . . . . . . . . 67:0 53,781 34.0 65:0 46,611 30.1

2085 . . . . . . . . . . . . 67:0 56,784 34.0 65:0 49,212 30.1

2090 . . . . . . . . . . . . 67:0 59,986 34.0 65:0 51,987 30.1

Steady maximum earnings:h

2013 . . . . . . . . . . . . 66:0 $31,224 29.6 65:0 $29,016 27.9

2015 . . . . . . . . . . . . 66:0 30,542 27.3 65:0 28,386 26.2

2020 . . . . . . . . . . . . 66:2 32,735 26.2 65:0 30,053 24.5

2025 . . . . . . . . . . . . 67:0 36,353 27.2 65:0 31,261 23.9

2030 . . . . . . . . . . . . 67:0 38,443 27.1 65:0 33,066 23.9

2035 . . . . . . . . . . . . 67:0 40,747 27.1 65:0 35,055 23.8

2040 . . . . . . . . . . . . 67:0 43,118 27.1 65:0 37,097 23.9

2045 . . . . . . . . . . . . 67:0 45,601 27.2 65:0 39,247 23.9

2050 . . . . . . . . . . . . 67:0 48,110 27.2 65:0 41,411 23.9

2055 . . . . . . . . . . . . 67:0 50,662 27.3 65:0 43,608 24.0

2060 . . . . . . . . . . . . 67:0 53,394 27.3 65:0 45,959 24.0

2065 . . . . . . . . . . . . 67:0 56,309 27.3 65:0 48,473 24.0

2070 . . . . . . . . . . . . 67:0 59,360 27.3 65:0 51,098 24.0

2075 . . . . . . . . . . . . 67:0 62,575 27.3 65:0 53,864 24.0

2080 . . . . . . . . . . . . 67:0 66,016 27.3 65:0 56,827 24.0

2085 . . . . . . . . . . . . 67:0 69,702 27.3 65:0 59,998 24.0

2090 . . . . . . . . . . . . 67:0 73,633 27.2 65:0 63,382 24.0

a Annual amounts are the total for the 12-month period starting with the month of retirement.

b Attains age 65 on January 1 of the year.

c CPI-indexed dollar adjustment uses the adjusted CPI indexing series shown in table VI.F6.

d Career-average earnings at about 25 percent of the national average wage index (AWI).

e Career-average earnings at about 45 percent of the AWI.

f Career-average earnings at about 100 percent of the AWI.

g Career-average earnings at about 160 percent of the AWI.

h Earnings for each year at or above the contribution and benefit base.

Table V.C7.—Annual Scheduled Benefit Amountsa for Retired Workers

With Various Pre-Retirement Earnings Patterns

Based on Intermediate Assumptions, Calendar Years 2013-90 (Cont.) 

Year attain age 65b

Retirement at normal retirement age Retirement at age 65

Age at

retirement

CPI-indexed

2013

dollars c Percent ofearnings

Age at

retirement

CPI-indexed

2013

dollarsc Percent ofearnings
147

Program Assumptions and Methods

average wage. However, the increases in average wage are partially offset by

assumed administrative productivity gains.

12.Railroad Retirement Financial Interchange

Railroad workers are covered under a separate multi-tiered benefit plan, with

a first tier of coverage similar to OASDI coverage. An annual financial interchange between the Railroad Retirement fund and the OASI and DI Trust

Funds is made to resolve the difference between: (1) the amount of OASDI

benefits that would be paid to railroad workers and their families if railroad

employment had been covered under the OASDI program, plus administrative expenses associated with these benefits; and (2) the amount of OASDI

payroll tax and income tax that would be received with allowances for interest from railroad workers.

Calculation of the financial interchange with the Railroad Retirement reflects

trends similar to those used in estimating the cost of OASDI benefits. The

annual short-range net cost for the OASI and DI Trust Funds ranges from

$4 - 6 billion and the long-range summarized net cost for the OASI and DI

Trust Funds is 0.03 percent of taxable payroll.

13.Military Service Transfers

Beginning in 1966, the General Fund of the Treasury reimbursed the OASI

and DI Trust Funds annually for the cost (including administrative expenses)

of providing additional benefit payments resulting from noncontributory

wage credits for military service performed prior to 1957. The 1983 amendments modified the reimbursement mechanism and the timing of the reimbursements, and required a reimbursement in 1983 to include all future costs

attributable to the wage credits. The amendments also require adjustments to

that 1983 reimbursement every fifth year, beginning with 1985, to account

for actual data.
Appendices

148

VI. APPENDICES

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS

The Federal Old-Age and Survivors Insurance (OASI) Trust Fund was established on January 1, 1940 as a separate account in the United States Treasury.

The Federal Disability Insurance (DI) Trust Fund, another separate account

in the United States Treasury, was established on August 1, 1956. These

funds conduct the financial operations of the OASI and DI programs. The

Board of Trustees is responsible for overseeing the financial operations of

these funds. The following paragraphs describe the various components of

trust fund income and outgo. Following this description, tables VI.A1 and

VI.A2 present the historical operations of the separate trust funds since their

inception, and table VI.A3 presents the operations of the combined trust

funds during the period when they have co-existed.

The primary receipts of these two funds are amounts appropriated under permanent authority on the basis of payroll tax contributions. Federal law

requires that all employees who work in OASDI covered employment, and

their employers, make payroll tax contributions on their wages. Employees

and their employers must also make payroll tax contributions on monthly

cash tips if such tips are at least $20. Self-employed persons must make payroll tax contributions on their covered net earnings from self-employment.

The Federal Government pays amounts equivalent to the combined employer

and employee contributions that would be paid on deemed wage credits

attributable to military service performed between 1957 and 2001, if such

wage credits were covered wages.

Income also includes various reimbursements from the General Fund of the

Treasury, such as: (1) the cost of noncontributory wage credits for military

service before 1957, and periodic adjustments to previous determinations of

this cost; (2) the cost in 1971-82 of deemed wage credits for military service

performed after 1956; (3) the cost of benefits to certain uninsured persons

who attained age 72 before 1968; (4) the cost of payroll tax credits provided

to employees in 1984 and self-employed persons in 1984-89 by Public Law

98-21; (5) the cost in 2009-17 of excluding certain self-employment earnings

from SECA taxes under Public Law 110-246; and (6) payroll tax revenue

forgone under the provisions of Public Laws 111-147, 111-312, 112-78,

and 112-96.

Beginning in 1984, Federal law subjected up to 50 percent of an individual’s

or couple’s OASDI benefits to Federal income taxation under certain circumstances. Effective for taxable years beginning after 1993, the law increased
149

History of Trust Fund Operations

the maximum percentage from 50 percent to 85 percent. Treasury credits the

proceeds from this taxation of up to 50 percent of benefits to the OASI and

DI Trust Funds in advance, on an estimated basis, at the beginning of each

calendar quarter, with no reimbursement to the general fund for interest costs

attributable to the advance transfers.1 Treasury makes subsequent adjustments based on the actual amounts shown on annual income tax records.

Each of the OASI and DI Trust Funds receives the income taxes paid on the

benefits from that trust fund.2

Another source of income to the trust funds is interest received on investments held by the trust funds. On a daily basis, Treasury invests trust fund

income not required to meet current operating expenses, primarily in interest-bearing obligations of the U.S. Government. These investments include

the special public-debt obligations described in the next paragraph. The

Social Security Act also authorizes the trust funds to hold obligations guaranteed as to both principal and interest by the United States. The act therefore permits the trust funds to hold certain Federally sponsored agency

obligations and marketable obligations.3 The trust funds may acquire any of

these obligations on original issue at the issue price or by purchase of outstanding obligations at their market price.

The Social Security Act authorizes the issuance of special public-debt obligations for purchase exclusively by the trust funds. The act provides that the

interest rate for special obligations newly issued in any month is the average

market yield, as of the last business day of the prior month, on all of the outstanding marketable U.S. obligations that are due or callable more than 4

years in the future. This rate is rounded to the nearest one-eighth of one percent. Beginning January 1999, in calculating the average market yield rate

for this purpose, the Treasury incorporates the yield to the call date when a

callable bond’s market price is above par.

Although the Social Security Act does not authorize the purchase or sale of

special issues in the open market, the Treasury may redeem them at any time

at par value. In practice, the Treasury redeems special issues prior to maturity only when needed to meet current operating expenses. Given this separation from market-based valuations, changes in market yield rates do not

cause fluctuations in principal value. As is true for marketable Treasury

 1 The HI Trust Fund receives the additional tax revenue resulting from the increase to 85 percent.

 2 A special provision applies to benefits paid to nonresident aliens. Effective for taxable years beginning

after 1994, Public Law 103-465 subjects benefits to a flat-rate tax, usually 25.5 percent, before they are

paid. Therefore, this tax remains in the trust funds. From 1984 to 1994, the flat-rate tax was usually

15 percent.

 3 The Social Security Act requires the trust funds to acquire special-issue obligations unless the Managing

Trustee determines that the purchase of marketable obligations is in the public interest. The purchase of marketable obligations has been quite limited and has not occurred since 1980.
Appendices

150

securities held by the public, the full faith and credit of the U.S. Government

backs all of the investments held by the trust funds.

The primary expenditures of the OASI and DI Trust Funds are: (1) OASDI

benefit payments, net of any reimbursements from the General Fund of the

Treasury for unnegotiated benefit checks; and (2) expenses incurred by the

Social Security Administration and the Department of the Treasury in administering the OASDI program and the provisions of the Internal Revenue

Code relating to the collection of contributions. Such administrative

expenses include expenditures for construction, rental and lease, or purchase

of office buildings and related facilities for the Social Security Administration. The Social Security Act prohibits expenditures from the OASI and DI

Trust Funds for any purpose not related to the payment of benefits or administrative costs for the OASDI program. 

The expenditures of the trust funds also include: (1) the costs of vocational

rehabilitation services furnished to disabled persons receiving cash benefits

because of their disabilities, where such services contributed to their successful rehabilitation; and (2) net costs of the provisions of the Railroad Retirement Act that provide for a system of coordination and financial interchange

between the Railroad Retirement program and the Social Security program.

Under the financial interchange provisions, the Railroad Retirement program’s Social Security Equivalent Benefit Account and the trust funds interchange amounts on an annual basis so that each trust fund is in the same

position it would have been had railroad employment always been covered

under Social Security.

The statements of the operations of the trust funds in this report do not

include the net worth of facilities and other fixed capital assets because the

value of fixed capital assets is not available in the form of a financial asset

redeemable for the payment of benefits or administrative expenditures. As a

result of this unavailability, the actuarial status of the trust funds does not

take these assets into account.
151

History of Trust Fund Operations

Table VI.A1.— Operations of the OASI Trust Fund, Calendar Years 1937-2012

[Dollar amounts in billions]

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsa

Taxation of

benefits

Net

interestb Total

Benefit

pay- mentsc

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiod

1937e . $0.8 $0.8 — — ff f — — $0.8 $0.8 —

1938e . .4 .4 — — ff f — — .4 1.1 7,660

1939e . .6 .6 — — ff f — — .6 1.7 8,086

1940 . . .4 .3 — — f $0.1 f f — .3 2.0 2,781

1941 . . .8 .8 — — $0.1 .1 $0.1 f — .7 2.8 1,782

1942 . . 1.1 1.0 — — .1 .2 .1 f — .9 3.7 1,737

1943 . . 1.3 1.2 — — .1 .2 .2 f — 1.1 4.8 1,891

1944 . . 1.4 1.3 — — .1 .2 .2 f — 1.2 6.0 2,025

1945 . . 1.4 1.3 — — .1 .3 .3 f — 1.1 7.1 1,975

1946 . . 1.4 1.3 — — .2 .4 .4 f — 1.0 8.1 1,704

1947 . . 1.7 1.6 f — .2 .5 .5 f — 1.2 9.4 1,592

1948 . . 2.0 1.7 f — .3 .6 .6 $0.1 — 1.4 10.7 1,542

1949 . . 1.8 1.7 f — .1 .7 .7 .1 — 1.1 11.8 1,487

1950 . . 2.9 2.7 f — .3 1.0 1.0 .1 — 1.9 13.7 1,156

1951 . . 3.8 3.4 f — .4 2.0 1.9 .1 — 1.8 15.5 698

1952 . . 4.2 3.8 — — .4 2.3 2.2 .1 — 1.9 17.4 681

1953 . . 4.4 3.9 — — .4 3.1 3.0 .1 — 1.3 18.7 564

1954 . . 5.6 5.2 — — .4 3.7 3.7 .1 f 1.9 20.6 500

1955 . . 6.2 5.7 — — .5 5.1 5.0 .1 f 1.1 21.7 405

1956 . . 6.7 6.2 — — .5 5.8 5.7 .1 f .9 22.5 371

1957 . . 7.4 6.8 — — .6 7.5 7.3 .2 f -.1 22.4 300

1958 . . 8.1 7.6 — — .6 8.6 8.3 .2 $0.1 -.5 21.9 259

1959 . . 8.6 8.1 — — .5 10.3 9.8 .2 .3 -1.7 20.1 212

1960 . . 11.4 10.9 — — .5 11.2 10.7 .2 .3 .2 20.3 180

1961 . . 11.8 11.3 — — .5 12.4 11.9 .2 .3 -.6 19.7 163

1962 . . 12.6 12.1 — — .5 14.0 13.4 .3 .4 -1.4 18.3 141

1963 . . 15.1 14.5 — — .5 14.9 14.2 .3 .4 .1 18.5 123

1964 . . 16.3 15.7 — — .6 15.6 14.9 .3 .4 .6 19.1 118

1965 . . 16.6 16.0 — — .6 17.5 16.7 .3 .4 -.9 18.2 109

1966 . . 21.3 20.6 $0.1 — .6 19.0 18.3 .3 .4 2.3 20.6 96

1967 . . 24.0 23.1 .1 — .8 20.4 19.5 .4 .5 3.7 24.2 101

1968 . . 25.0 23.7 .4 — .9 23.6 22.6 .5 .4 1.5 25.7 103

1969 . . 29.6 27.9 .4 — 1.2 25.2 24.2 .5 .5 4.4 30.1 102

1970 . . 32.2 30.3 .4 — 1.5 29.8 28.8 .5 .6 2.4 32.5 101

1971 . . 35.9 33.7 .5 — 1.7 34.5 33.4 .5 .6 1.3 33.8 94

1972 . . 40.1 37.8 .5 — 1.8 38.5 37.1 .7 .7 1.5 35.3 88

1973 . . 48.3 46.0 .4 — 1.9 47.2 45.7 .6 .8 1.2 36.5 75

1974 . . 54.7 52.1 .4 — 2.2 53.4 51.6 .9 .9 1.3 37.8 68

1975 . . 59.6 56.8 .4 — 2.4 60.4 58.5 .9 1.0 -.8 37.0 63

1976 . . 66.3 63.4 .6 — 2.3 67.9 65.7 1.0 1.2 -1.6 35.4 54

1977 . . 72.4 69.6 .6 — 2.2 75.3 73.1 1.0 1.2 -2.9 32.5 47

1978 . . 78.1 75.5 .6 — 2.0 83.1 80.4 1.1 1.6 -5.0 27.5 39

1979 . . 90.3 87.9 .6 — 1.8 93.1 90.6 1.1 1.4 -2.9 24.7 30

1980 . . 105.8 103.5 .5 — 1.8 107.7 105.1 1.2 1.4 -1.8 22.8 23

1981 . . 125.4 122.6 .7 — 2.1 126.7 123.8 1.3 1.6 -1.3 21.5 18

1982 . . 125.2 123.7 .7 — .8 142.1 138.8 1.5 1.8 g .6 22.1 15

1983 . . 150.6 138.3 5.5 — 6.7 153.0 149.2 1.5 2.3 -2.4 19.7 14

1984 . . 169.3 159.5 4.7 $2.8 2.3 161.9 157.8 1.6 2.4 7.4 27.1 20
Appendices

152

Note: Totals do not necessarily equal the sums of rounded components.

1985 . . $184.2 $175.1 $4.0 $3.2 $1.9 $171.2 $167.2 $1.6 $2.3 g$8.7 $35.8 24

1986 . . 197.4 189.1 1.8 3.4 3.1 181.0 176.8 1.6 2.6 g3.2 39.1 28

1987 . . 210.7 201.1 1.7 3.3 4.7 187.7 183.6 1.5 2.6 23.1 62.1 30

1988 . . 240.8 227.7 2.1 3.4 7.6 200.0 195.5 1.8 2.8 40.7 102.9 41

1989 . . 264.7 248.1 2.1 2.4 12.0 212.5 208.0 1.7 2.8 52.2 155.1 59

1990 . . 286.7 266.1 -.7 4.8 16.4 227.5 223.0 1.6 3.0 59.1 214.2 78

1991 . . 299.3 272.5 .1 5.9 20.8 245.6 240.5 1.8 3.4 53.7 267.8 87

1992 . . 311.2 281.1 -.1 5.9 24.3 259.9 254.9 1.8 3.1 51.3 319.1 103

1993 . . 323.3 290.9 f 5.3 27.0 273.1 267.8 2.0 3.4 50.2 369.3 117

1994 . . 328.3 293.3 f 5.0 29.9 284.1 279.1 1.6 3.4 44.1 413.5 130

1995 . . 342.8 304.7 -.2 5.5 32.8 297.8 291.6 2.1 4.1 45.0 458.5 139

1996 . . 363.7 321.6 f 6.5 35.7 308.2 302.9 1.8 3.6 55.5 514.0 149

1997 . . 397.2 349.9 f 7.4 39.8 322.1 316.3 2.1 3.7 75.1 589.1 160

1998 . . 424.8 371.2 f 9.1 44.5 332.3 326.8 1.9 3.7 92.5 681.6 177

1999 . . 457.0 396.4 f 10.9 49.8 339.9 334.4 1.8 3.7 117.2 798.8 201

2000 . . 490.5 421.4 f 11.6 57.5 358.3 352.7 2.1 3.5 132.2 931.0 223

2001 . . 518.1 441.5 f 11.9 64.7 377.5 372.3 2.0 3.3 140.6 1,071.5 247

2002 . . 539.7 455.2 .4 12.9 71.2 393.7 388.1 2.1 3.5 146.0 1,217.5 272

2003 . . 543.8 456.1 f 12.5 75.2 406.0 399.8 2.6 3.6 137.8 1,355.3 300

2004 . . 566.3 472.8 f 14.6 79.0 421.0 415.0 2.4 3.6 145.3 1,500.6 322

2005 . . 604.3 506.9 -.3 13.8 84.0 441.9 435.4 3.0 3.6 162.4 1,663.0 340

2006 . . 642.2 534.8 f 15.6 91.8 461.0 454.5 3.0 3.5 181.3 1,844.3 361

2007 . . 675.0 560.9 f 17.2 97.0 495.7 489.1 3.1 3.6 179.3 2,023.6 372

2008 . . 695.5 574.6 f 15.6 105.3 516.2 509.3 3.2 3.6 179.3 2,202.9 392

2009 . . 698.2 570.4 f 19.9 107.9 564.3 557.2 3.4 3.7 133.9 2,336.8 390

2010 . . 677.1 544.8 2.0 22.1 108.2 584.9 577.4 3.5 3.9 92.2 2,429.0 400

2011 . . 698.8 482.4 87.8 22.2 106.5 603.8 596.2 3.5 4.1 95.0 2,524.1 402

2012 . . 731.1 503.9 97.7 26.7 102.8 645.5 637.9 3.4 4.1 85.6 2,609.7 391

a Includes reimbursements from the General Fund of the Treasury to the OASI Trust Fund for: (1) the cost of

noncontributory wage credits for military service before 1957; (2) the cost in 1971-82 of deemed wage credits

for military service performed after 1956; (3) the cost of benefits to certain uninsured persons who attained age

72 before 1968; (4) the cost of payroll tax credits provided to employees in 1984 and self-employed persons in

1984-89 by Public Law 98-21; (5) the cost in 2009-17 of excluding certain self-employment earnings from

SECA taxes under Public Law 110-246; and (6) payroll tax revenue forgone under the provisions of Public

Laws 111-147, 111-312, 112-78, and 112-96.

b Net interest includes net profits or losses on marketable investments. Beginning in 1967, the trust fund pays

administrative expenses on an estimated basis, with a final adjustment including interest made in the following

fiscal year. Net interest includes the amounts of these interest adjustments. The 1970 report describes the

accounting for administrative expenses for years prior to 1967. Beginning in October 1973, figures include relatively small amounts of gifts to the fund. Net interest for 1983-86 reflects payments for interest on amounts

owed under the interfund borrowing provisions. During 1983-90, net interest reflects interest reimbursements

paid from the trust fund to the general fund on advance tax transfers.

c Beginning in 1966, includes payments for vocational rehabilitation services furnished to disabled persons

receiving benefits because of their disabilities. Beginning in 1983, net benefit amounts include reimbursements

paid from the general fund to the trust fund for unnegotiated benefit checks.

d The “Trust fund ratio” column represents asset reserves at the beginning of a year as a percentage of expenditures during the year. The table shows no ratio for 1937 because no reserves existed at the beginning of the year.

For years 1984-90, reserves at the beginning of a year include January advance tax transfers. 

e Operations prior to 1940 are for the Old-Age Reserve Account established by the original Social Security Act.

The 1939 Amendments transferred the asset reserves of the Account to the OASI Trust Fund effective January

1, 1940.

f Between -$50 million and $50 million.

g Reflects interfund borrowing and subsequent repayment of loans. The OASI Trust Fund borrowed

$17.5 billion from the DI and HI Trust Funds in 1982 and repaid the loans in 1985 ($4.4 billion) and 1986

($13.2 billion).

Table VI.A1.— Operations of the OASI Trust Fund, Calendar Years 1937-2012 (Cont.)

[Dollar amounts in billions]

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsaTaxation of

benefits

Net

interestb Total

Benefit

pay- mentsc

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiod
153

History of Trust Fund Operations

Table VI.A2.— Operations of the DI Trust Fund, Calendar Years 1957-2012

[Dollar amounts in billions]

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsa

Taxation of

benefits

Net

interestb Total

Benefit

pay- ments c

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiod

1957. . . $0.7 $0.7 — — e $0.1 $0.1 e — $0.6 $0.6 —

1958. . . 1.0 1.0 — — e .3 .2 e — .7 1.4 249

1959. . . .9 .9 — — e .5 .5 e e .4 1.8 284

1960. . . 1.1 1.0 — — $0.1 .6 .6 e e .5 2.3 304

1961. . . 1.1 1.0 — — .1 1.0 .9 $0.1 e .1 2.4 239

1962. . . 1.1 1.0 — — .1 1.2 1.1 .1 e -.1 2.4 206

1963. . . 1.2 1.1 — — .1 1.3 1.2 .1 e -.1 2.2 183

1964. . . 1.2 1.2 — — .1 1.4 1.3 .1 e -.2 2.0 159

1965. . . 1.2 1.2 — — .1 1.7 1.6 .1 e -.4 1.6 121

1966. . . 2.1 2.0 e — .1 1.9 1.8 .1 e .1 1.7 82

1967. . . 2.4 2.3 e — .1 2.1 1.9 .1 e .3 2.0 83

1968. . . 3.5 3.3 e — .1 2.5 2.3 .1 e 1.0 3.0 83

1969. . . 3.8 3.6 e — .2 2.7 2.6 .1 e 1.1 4.1 111

1970. . . 4.8 4.5 e — .3 3.3 3.1 .2 e 1.5 5.6 126

1971. . . 5.0 4.6 $0.1 — .4 4.0 3.8 .2 e 1.0 6.6 140

1972. . . 5.6 5.1 .1 — .4 4.8 4.5 .2 e .8 7.5 140

1973. . . 6.4 5.9 .1 — .5 6.0 5.8 .2 e .5 7.9 125

1974. . . 7.4 6.8 .1 — .5 7.2 7.0 .2 e .2 8.1 110

1975. . . 8.0 7.4 .1 — .5 8.8 8.5 .3 e -.8 7.4 92

1976. . . 8.8 8.2 .1 — .4 10.4 10.1 .3 e -1.6 5.7 71

1977. . . 9.6 9.1 .1 — .3 11.9 11.5 .4 e -2.4 3.4 48

1978. . . 13.8 13.4 .1 — .3 13.0 12.6 .3 e .9 4.2 26

1979. . . 15.6 15.1 .1 — .4 14.2 13.8 .4 e 1.4 5.6 30

1980. . . 13.9 13.3 .1 — .5 15.9 15.5 .4 e -2.0 3.6 35

1981. . . 17.1 16.7 .2 — .2 17.7 17.2 .4 e -.6 3.0 21

1982. . . 22.7 22.0 .2 — .5 18.0 17.4 .6 e f -.4 2.7 17

1983. . . 20.7 18.0 1.1 — 1.6 18.2 17.5 .6 e 2.5 5.2 15

1984. . . 17.3 15.5 .4 $0.2 1.2 18.5 17.9 .6 e -1.2 4.0 35

1985. . . 19.3 17.0 1.2 .2 .9 19.5 18.8 .6 e f2.4 6.3 27

1986. . . 19.4 18.2 .2 .2 .8 20.5 19.9 .6 $0.1 f1.5 7.8 38

1987. . . 20.3 19.5 .2 e .6 21.4 20.5 .8 .1 -1.1 6.7 44

1988. . . 22.7 21.8 .2 .1 .6 22.5 21.7 .7 .1 .2 6.9 38

1989. . . 24.8 23.8 .2 .1 .7 23.8 22.9 .8 .1 1.0 7.9 38

1990. . . 28.8 28.4 -.6 .1 .9 25.6 24.8 .7 .1 3.2 11.1 40

1991. . . 30.4 29.1 e .2 1.1 28.6 27.7 .8 .1 1.8 12.9 39

1992. . . 31.4 30.1 e .2 1.1 32.0 31.1 .8 .1 -.6 12.3 40

1993. . . 32.3 31.2 e .3 .8 35.7 34.6 1.0 .1 -3.4 9.0 35

1994. . . 52.8 51.4 e .3 1.2 38.9 37.7 1.0 .1 14.0 22.9 23

1995. . . 56.7 54.4 -.2 .3 2.2 42.1 40.9 1.1 .1 14.6 37.6 55

1996. . . 60.7 57.3 e .4 3.0 45.4 44.2 1.2 e 15.4 52.9 83

1997. . . 60.5 56.0 e .5 4.0 47.0 45.7 1.3 .1 13.5 66.4 113

1998. . . 64.4 59.0 e .6 4.8 49.9 48.2 1.6 .2 14.4 80.8 133

1999. . . 69.5 63.2 e .7 5.7 53.0 51.4 1.5 .1 16.5 97.3 152

2000. . . 77.9 71.1 -.8 .7 6.9 56.8 55.0 1.6 .2 21.1 118.5 171

2001. . . 83.9 74.9 e .8 8.2 61.4 59.6 1.7 e 22.5 141.0 193

2002. . . 87.4 77.3 e .9 9.2 67.9 65.7 2.0 .2 19.5 160.5 208

2003. . . 88.1 77.4 e .9 9.7 73.1 70.9 2.0 .2 15.0 175.4 219

2004. . . 91.4 80.3 e 1.1 10.0 80.6 78.2 2.2 .2 10.8 186.2 218
Appendices

154

Note: Totals do not necessarily equal the sums of rounded components.

2005 . . $97.4 $86.1 e $1.1 $10.3 $88.0 $85.4 $2.3 $0.3 $9.4 $195.6 212

2006 . . 102.6 90.8 e 1.2 10.6 94.5 91.7 2.3 .4 8.2 203.8 207

2007 . . 109.9 95.2 e 1.4 13.2 98.8 95.9 2.5 .4 11.1 214.9 206

2008 . . 109.8 97.6 e 1.3 11.0 109.0 106.0 2.5 .4 .9 215.8 197

2009 . . 109.3 96.9 e 2.0 10.5 121.5 118.3 2.7 .4 -12.2 203.5 178

2010 . . 104.0 92.5 $0.4 1.9 9.3 127.7 124.2 3.0 .5 -23.6 179.9 159

2011 . . 106.3 81.9 14.9 1.6 7.9 132.3 128.9 2.9 .5 -26.1 153.9 136

2012 . . 109.1 85.6 16.5 .6 6.4 140.3 136.9 2.9 .5 -31.2 122.7 110

a Includes reimbursements from the General Fund of the Treasury to the DI Trust Fund for: (1) the cost of noncontributory wage credits for military service before 1957; (2) the cost in 1971-82 of deemed wage credits for

military service performed after 1956; (3) the cost of payroll tax credits provided to employees in 1984 and selfemployed persons in 1984-89 by Public Law 98-21; (4) the cost in 2009-17 of excluding certain self-employment earnings from SECA taxes under Public Law 110-246; and (5) payroll tax revenue forgone under the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.

b Net interest includes net profits or losses on marketable investments. Beginning in 1967, the trust fund pays

administrative expenses on an estimated basis, with a final adjustment including interest made in the following

fiscal year. Net interest includes the amounts of these interest adjustments. The 1970 report describes the

accounting for administrative expenses for years prior to 1967. Beginning in July 1974, figures include relatively small amounts of gifts to the fund. Net interest for 1983-86 reflects payments for interest on amounts

owed under the interfund borrowing provisions. During 1983-90, net interest reflects interest reimbursements

paid from the trust fund to the general fund on advance tax transfers.

c Beginning in 1966, includes payments for vocational rehabilitation services furnished to disabled persons

receiving benefits because of their disabilities. Beginning in 1983, net benefit amounts include reimbursements

paid from the general fund to the trust fund for unnegotiated benefit checks.

d The “Trust fund ratio” column represents asset reserves at the beginning of a year as a percentage of expenditures during the year. The table shows no ratio for 1957 because no reserves existed at the beginning of the year.

For years 1984-90, reserves at the beginning of a year include January advance tax transfers.

e Between -$50 million and $50 million.

f Reflects interfund borrowing and subsequent repayment of loans. The DI Trust Fund loaned $5.1 billion to the

OASI Trust Fund in 1982. The OASI Trust Fund repaid the loan in 1985 ($2.5 billion) and 1986 ($2.5 billion).

Table VI.A2.— Operations of the DI Trust Fund, Calendar Years 1957-2012 (Cont.)

[Dollar amounts in billions]

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsaTaxation of

benefits

Net

interestb Total

Benefit

pay- mentsc

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiod
155

History of Trust Fund Operations

Table VI.A3.— Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1957-2012

[Dollar amounts in billions]

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsa

Taxation of

benefits

Net

interestb Total

Benefit

paymentsc

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiod

1957 . . $8.1 $7.5 — — $0.6 $7.6 $7.4 $0.2 e $0.5 $23.0 298

1958 9.1 8.5 — — .6 8.9 8.6 .2 $0.1 .2 23.2 259

1959 . . 9.5 8.9 — — .6 10.8 10.3 .2 .3 -1.3 22.0 215

1960 . . 12.4 11.9 — — .6 11.8 11.2 .2 .3 .6 22.6 186

1961 . . 12.9 12.3 — — .6 13.4 12.7 .3 .3 -.5 22.2 169

1962 . . 13.7 13.1 — — .6 15.2 14.5 .3 .4 -1.5 20.7 146

1963 . . 16.2 15.6 — — .6 16.2 15.4 .3 .4 e 20.7 128

1964 . . 17.5 16.8 — — .6 17.0 16.2 .4 .4 .5 21.2 122

1965 . . 17.9 17.2 — — .7 19.2 18.3 .4 .5 -1.3 19.8 110

1966 . . 23.4 22.6 $0.1 — .7 20.9 20.1 .4 .5 2.5 22.3 95

1967 . . 26.4 25.4 .1 — .9 22.5 21.4 .5 .5 3.9 26.3 99

1968 . . 28.5 27.0 .4 — 1.0 26.0 25.0 .6 .5 2.5 28.7 101

1969 . . 33.3 31.5 .5 — 1.3 27.9 26.8 .6 .5 5.5 34.2 103

1970 . . 37.0 34.7 .5 — 1.8 33.1 31.9 .6 .6 3.9 38.1 103

1971 . . 40.9 38.3 .5 — 2.0 38.5 37.2 .7 .6 2.4 40.4 99

1972 . . 45.6 42.9 .5 — 2.2 43.3 41.6 .9 .7 2.3 42.8 93

1973 . . 54.8 51.9 .5 — 2.4 53.1 51.5 .8 .8 1.6 44.4 80

1974 . . 62.1 58.9 .5 — 2.7 60.6 58.6 1.1 .9 1.5 45.9 73

1975 . . 67.6 64.3 .5 — 2.9 69.2 67.0 1.2 1.0 -1.5 44.3 66

1976 . . 75.0 71.6 .7 — 2.7 78.2 75.8 1.2 1.2 -3.2 41.1 57

1977 . . 82.0 78.7 .7 — 2.5 87.3 84.7 1.4 1.2 -5.3 35.9 47

1978 . . 91.9 88.9 .8 — 2.3 96.0 93.0 1.4 1.6 -4.1 31.7 37

1979 . . 105.9 103.0 .7 — 2.2 107.3 104.4 1.5 1.5 -1.5 30.3 30

1980 . . 119.7 116.7 .7 — 2.3 123.5 120.6 1.5 1.4 -3.8 26.5 25

1981 . . 142.4 139.4 .8 — 2.2 144.4 141.0 1.7 1.6 -1.9 24.5 18

1982 . . 147.9 145.7 .9 — 1.4 160.1 156.2 2.1 1.8 f

 .2 24.8 15

1983 . . 171.3 156.3 6.7 — 8.3 171.2 166.7 2.2 2.3 .1 24.9 14

1984 . . 186.6 175.0 5.2 $3.0 3.4 180.4 175.7 2.3 2.4 6.2 31.1 21

1985 . . 203.5 192.1 5.2 3.4 2.7 190.6 186.1 2.2 2.4 f11.1 42.2 24

1986 . . 216.8 207.4 1.9 3.7 3.9 201.5 196.7 2.2 2.7 f

 4.7 46.9 29

1987 . . 231.0 220.6 1.9 3.2 5.3 209.1 204.1 2.4 2.6 21.9 68.8 31

1988 . . 263.5 249.5 2.3 3.4 8.2 222.5 217.1 2.5 2.9 41.0 109.8 41

1989 . . 289.4 271.9 2.3 2.5 12.7 236.2 230.9 2.4 2.9 53.2 163.0 57

1990 . . 315.4 294.5 -1.3 5.0 17.2 253.1 247.8 2.3 3.0 62.3 225.3 75

1991 . . 329.7 301.6 .1 6.1 21.9 274.2 268.2 2.6 3.5 55.5 280.7 82

1992 . . 342.6 311.3 -.1 6.1 25.4 291.9 286.0 2.7 3.2 50.7 331.5 96

1993 . . 355.6 322.0 .1 5.6 27.9 308.8 302.4 3.0 3.4 46.8 378.3 107

1994 . . 381.1 344.7 e 5.3 31.1 323.0 316.8 2.7 3.5 58.1 436.4 117

1995 . . 399.5 359.1 -.4 5.8 35.0 339.8 332.6 3.1 4.1 59.7 496.1 128

1996 . . 424.5 378.9 e 6.8 38.7 353.6 347.0 3.0 3.6 70.9 567.0 140

1997 . . 457.7 406.0 e 7.9 43.8 369.1 362.0 3.4 3.7 88.6 655.5 154

1998 . . 489.2 430.2 e 9.7 49.3 382.3 375.0 3.5 3.8 106.9 762.5 171

1999 . . 526.6 459.6 e 11.6 55.5 392.9 385.8 3.3 3.8 133.7 896.1 194

2000 . . 568.4 492.5 -.8 12.3 64.5 415.1 407.6 3.8 3.7 153.3 1,049.4 216

2001 . . 602.0 516.4 e 12.7 72.9 438.9 431.9 3.7 3.3 163.1 1,212.5 239

2002 . . 627.1 532.5 .4 13.8 80.4 461.7 453.8 4.2 3.6 165.4 1,378.0 263

2003 . . 631.9 533.5 e 13.4 84.9 479.1 470.8 4.6 3.7 152.8 1,530.8 288

2004 . . 657.7 553.0 e 15.7 89.0 501.6 493.3 4.5 3.8 156.1 1,686.8 305
Appendices

156

Note: Totals do not necessarily equal the sums of rounded components.

Tables VI.A4 and VI.A5 show the total asset reserves of the OASI Trust

Fund and the DI Trust Fund, respectively, at the end of calendar years 2011

and 2012. The tables show reserves by interest rate and year of maturity.

Bonds issued to the trust funds in 2012 had an interest rate of 1.375 percent,

compared with an interest rate of 2.5 percent for bonds issued in 2011.

2005 . . $701.8 $592.9 -$0.3 $14.9 $94.3 $529.9 $520.7 $5.3 $3.9 $171.8 $1,858.7 318

2006 . . 744.9 625.6 e 16.9 102.4 555.4 546.2 5.3 3.8 189.5 2,048.1 335

2007 . . 784.9 656.1 e 18.6 110.2 594.5 584.9 5.5 4.0 190.4 2,238.5 345

2008 . . 805.3 672.1 e 16.9 116.3 625.1 615.3 5.7 4.0 180.2 2,418.7 358

2009 . . 807.5 667.3 e 21.9 118.3 685.8 675.5 6.2 4.1 121.7 2,540.3 353

2010 . . 781.1 637.3 2.4 23.9 117.5 712.5 701.6 6.5 4.4 68.6 2,609.0 357

2011 . . 805.1 564.2 102.7 23.8 114.4 736.1 725.1 6.4 4.6 69.0 2,677.9 354

2012 . . 840.2 589.5 114.3 27.3 109.1 785.8 774.8 6.3 4.7 54.4 2,732.3 341

a Includes reimbursements from the General Fund of the Treasury to the OASI and DI Trust Funds for: (1) the

cost of noncontributory wage credits for military service before 1957; (2) the cost in 1971-82 of deemed wage

credits for military service performed after 1956; (3) the cost of benefits to certain uninsured persons who

attained age 72 before 1968; (4) the cost of payroll tax credits provided to employees in 1984 and self-employed

persons in 1984-89 by Public Law 98-21; (5) the cost in 2009-17 of excluding certain self-employment earnings

from SECA taxes under Public Law 110-246; and (6) payroll tax revenue forgone under the provisions of Public

Laws 111-147, 111-312, 112-78, and 112-96.

b Net interest includes net profits or losses on marketable investments. Beginning in 1967, the trust funds pay

administrative expenses on an estimated basis, with a final adjustment including interest made in the following

fiscal year. Net interest includes the amounts of these interest adjustments. The 1970 report describes the

accounting for administrative expenses for years prior to 1967. Beginning in October 1973, figures include relatively small amounts of gifts to the funds. Net interest for 1983-86 reflects payments for interest on amounts

owed under the interfund borrowing provisions. During 1983-90, net interest reflects interest reimbursements

paid from the trust funds to the general fund on advance tax transfers.

c Beginning in 1966, includes payments for vocational rehabilitation services furnished to disabled persons

receiving benefits because of their disabilities. Beginning in 1983, net benefit amounts include reimbursements

paid from the general fund to the trust funds for unnegotiated benefit checks.

d The “Trust fund ratio” column represents asset reserves at the beginning of a year as a percentage of expenditures during the year. For years 1984-90, reserves at the beginning of a year include January advance tax transfers.

e Between -$50 million and $50 million.

f Reflects interfund borrowing and subsequent repayment of loans. The OASI trust fund borrowed $12.4 billion

from the HI Trust Fund in 1982 and repaid the loan in 1985 ($1.8 billion) and 1986 ($10.6 billion).

Table VI.A3.— Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1957-2012 (Cont.)

[Dollar amounts in billions]

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsaTaxation of

benefits

Net

interestb Total

Benefit

pay- mentsc

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiod
157

History of Trust Fund Operations

Note: Amounts of special issues are at par value. The trust fund always purchases and redeems special issues

at par value. The table groups equal amounts that mature in two or more years at a given interest rate. A negative undisbursed balance represents an extension of credit against securities to be redeemed within the following few days.

Table VI.A4.—Asset Reserves of the OASI Trust Fund, 

End of Calendar Years 2011 and 2012

[In thousands]

December 31, 2011 December 31, 2012

Obligations sold only to the trust funds (special issues): 

Certificates of indebtedness:

 1.375 percent, 2013 — $60,511,850

 1.750 percent, 2012 $63,015,398 —

Bonds:

 1.375 percent, 2014-16 — 20,079,057

 1.375 percent, 2017-25 — 60,237,180

 1.375 percent, 2026 — 6,693,019

 1.375 percent, 2027 — 173,240,401

 2.500 percent, 2013 5,971,788 —

 2.500 percent, 2014-16 17,915,364 17,915,364

 2.500 percent, 2017-25 53,746,083 53,746,083

 2.500 percent, 2026 166,547,382 166,547,382

 2.875 percent, 2013 7,264,431 —

 2.875 percent, 2014-15 14,528,862 14,528,862

 2.875 percent, 2016-24 65,379,888 65,379,888

 2.875 percent, 2025 160,575,595 160,575,595

 3.250 percent, 2013 10,628,271 —

 3.250 percent, 2014-15 21,256,542 21,256,542

 3.250 percent, 2016-23 85,026,160 85,026,160

 3.250 percent, 2024 153,311,163 153,311,163

 3.500 percent, 2013 9,513,751 —

 3.500 percent, 2014-15 19,027,502 19,027,502

 3.500 percent, 2016-17 19,027,504 19,027,504

 3.500 percent, 2018 86,900,994 86,900,994

 4.000 percent, 2012 9,125,781 —

 4.000 percent, 2013 12,075,192 3,300,605

 4.000 percent, 2014-22 108,676,728 108,676,728

 4.000 percent, 2023 142,682,893 142,682,893

 4.125 percent, 2012 10,516,946 —

 4.125 percent, 2013-19 73,618,622 73,618,622

 4.125 percent, 2020 106,585,700 106,585,700

 4.625 percent, 2012 9,167,664 —

 4.625 percent, 2013-15 27,502,992 27,502,992

 4.625 percent, 2016-18 27,502,989 27,502,989

 4.625 percent, 2019 96,068,657 96,068,657

 5.000 percent, 2012 12,454,232 —

 5.000 percent, 2013-21 112,088,088 112,088,088

 5.000 percent, 2022 130,607,701 130,607,701

 5.125 percent, 2012 11,567,866 —

 5.125 percent, 2013-19 80,975,062 80,975,062

 5.125 percent, 2020 11,567,769 11,567,769

 5.125 percent, 2021 118,153,469 118,153,469

 5.250 percent, 2012 9,235,912 —

 5.250 percent, 2013-15 27,707,736 27,707,736

 5.250 percent, 2016 9,235,911 9,235,911

 5.250 percent, 2017 77,387,242 77,387,242

 5.625 percent, 2012 9,621,437 —

 5.625 percent, 2013-15 28,864,311 28,864,311

 5.625 percent, 2016 68,151,331 68,151,331

 5.875 percent, 2012 6,169,273 —

 5.875 percent, 2013 43,258,869 43,258,869

 6.000 percent, 2012 6,693,628 —

 6.000 percent, 2013 6,693,628 6,693,628

 6.000 percent, 2014 49,952,497 49,952,497

 6.500 percent, 2012 8,577,396 —

 6.500 percent, 2013-14 17,154,792 17,154,792

 6.500 percent, 2015 58,529,893 58,529,893

 6.875 percent, 2012 37,089,596 —

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,524,898,481 2,610,272,031

Undisbursed balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -823,874 -604,215

Total asset reserves 2,524,074,607 2,609,667,816
Appendices

158

Note: Amounts of special issues are at par value. The trust fund always purchases and redeems special issues

at par value. The table groups equal amounts that mature in two or more years at a given interest rate. A negative undisbursed balance represents an extension of credit against securities to be redeemed within the following few days.

Table VI.A5.—Asset Reserves of the DI Trust Fund, 

End of Calendar Years 2011 and 2012

[In thousands]

December 31, 2011 December 31, 2012

Obligations sold only to the trust funds (special issues):

Certificates of indebtedness: 

 1.375 percent, 2013 — $5,102,991

 1.750 percent, 2012 $5,575,386 —

Bonds:

 3.250 percent, 2015 877,559 —

 3.250 percent, 2016 877,559 —

 3.250 percent, 2017-20 3,510,240 3,510,240

 3.500 percent, 2015 1,115,127 —

 3.500 percent, 2016 1,115,128 —

 3.500 percent, 2017 1,115,128 1,115,128

 3.500 percent, 2018 11,378,384 11,378,384

 4.000 percent, 2015 622,572 —

 4.000 percent, 2016 622,572 —

 4.000 percent, 2017-19 1,867,713 1,867,713

 4.000 percent, 2020-22 1,867,716 1,867,716

 4.000 percent, 2023 14,675,554 14,675,554

 4.125 percent, 2015 677,385 —

 4.125 percent, 2016 677,385 —

 4.125 percent, 2017 677,385 677,385

 4.125 percent, 2018-19 1,354,772 1,354,772

 4.125 percent, 2020 12,911,283 12,911,283

 4.625 percent, 2015 855,498 —

 4.625 percent, 2016 855,497 54,468

 4.625 percent, 2017-18 1,710,994 1,710,994

 4.625 percent, 2019 12,233,881 12,233,881

 5.000 percent, 2014 147,273 —

 5.000 percent, 2015 476,586 —

 5.000 percent, 2016-19 1,906,344 1,906,344

 5.000 percent, 2020-21 953,168 953,168

 5.000 percent, 2022 14,052,982 14,052,982

 5.125 percent, 2014 665,131 —

 5.125 percent, 2015 665,131 —

 5.125 percent, 2016-17 1,330,262 1,330,262

 5.125 percent, 2018-19 1,330,260 1,330,260

 5.125 percent, 2020 665,115 665,115

 5.125 percent, 2021 13,576,398 13,576,398

 5.250 percent, 2014 1,363,408 —

 5.250 percent, 2015 1,363,408 —

 5.250 percent, 2016 1,363,408 1,363,408

 5.250 percent, 2017 10,263,256 10,263,256

 5.625 percent, 2014 1,524,967 —

 5.625 percent, 2015 1,524,967 —

 5.625 percent, 2016 8,899,848 8,899,848

 6.000 percent, 2014 6,057,772 —

 6.500 percent, 2014 1,317,109 —

 6.500 percent, 2015 7,374,881 —

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,996,392 122,801,550

Undisbursed balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -146,009 -135,125

Total asset reserves 153,850,383 122,666,425
159

History of Actuarial Status

B. HISTORY OF ACTUARIAL STATUS ESTIMATES

This appendix chronicles the history of the OASDI actuarial balance and the

year of combined OASI and DI Trust Fund reserve depletion since 1982. The

actuarial balance is the principal summary measure of long-range actuarial

status. The 1983 report was the last report for which the actuarial balance

was positive. Section IV.B.4 defines actuarial balance in detail. The two

basic components of actuarial balance are the summarized income rate and

the summarized cost rate, both of which are expressed as percentages of taxable payroll. For any given period, the actuarial balance is the difference

between the present value of non-interest income for the period and the present value of the cost for the period, each divided by the present value of taxable payroll for all years in the period. The computation of the actuarial

balance also includes:

 • In the reports for 1988 and later, the amount of the trust fund asset

reserves on hand at the beginning of the valuation period; and

 • In the reports for 1991 and later, the present value of a target trust fund

asset reserve equal to 100 percent of the annual cost to be reached and

maintained at the end of the valuation period.

Reports prior to 1973 used the current method of calculating the actuarial

balance based on present values, but the reports of 1973-87 did not. During

that period, the reports used the average-cost method, a simpler method

which approximates the results of the present-value approach. Under the

average-cost method, the sum of the annual cost rates over the 75-year projection period was divided by the total number of years, 75, to obtain the

average cost rate per year. A similar computation produced the average

income rate. The actuarial balance was the difference between the average

income rate and the average cost rate.

When the 1973 report introduced the average-cost method, the long-range

financing of the program was more nearly on a pay-as-you-go basis. Also,

the long-range demographic and economic assumptions in that report produced an annual rate of growth in taxable payroll which was about the same

as the annual rate at which the trust funds earned interest. In either situation

(i.e., pay-as-you-go financing, where the annual income rate is the same as

the annual cost rate, or an annual rate of growth in taxable payroll equal to

the annual interest rate), the average-cost method produces the same result as

the present-value method. However, by 1988, neither of these situations still

existed.
Appendices

160

After the 1977 and 1983 Social Security Amendments, estimates showed

substantial increases in the trust funds continuing well into the 21st century.

These laws changed the program’s financing from essentially pay-as-you-go

to partial advance funding. Also, the reports from 1973-87 phased in reductions in long-range fertility rates and average real-wage growth, which produced an annual rate of growth in long-range taxable earnings which was

significantly lower than the assumed interest rate. As a result of the difference between this rate of growth and the assumed interest rate, the results of

the average-cost method and the present-value method in the reports for

1973-87 began to diverge, and by 1988 they were quite different. While the

average-cost method still accounted for most of the effects of the assumed

interest rate, it no longer accounted for all of the interest effects. The presentvalue method, by contrast, accounts for the full effect of the assumed interest

rates. The 1988 report reintroduced the present-value method of calculating

the actuarial balance in order to fully reflect the effects of interest.

A positive actuarial balance indicates that estimated income is more than sufficient to meet estimated trust fund obligations for the period as a whole. A

negative actuarial balance indicates that estimated income is insufficient to

meet estimated trust fund obligations for the entire period. An actuarial balance of zero indicates that the estimated income exactly matches estimated

trust fund obligations for the period.

Table VI.B1 contains the estimated OASDI actuarial balances, summarized

income rates, and summarized cost rates for the 1982 report through the current report. The reports presented these values on the basis of the intermediate assumptions, which recent reports refer to as alternative II and reports

prior to 1991 referred to as alternative II-B.
161

History of Actuarial Status

Note: Totals do not necessarily equal the sums of rounded components.

For several of the years included in the table, significant legislative changes

or definitional changes affected the estimated actuarial balance. The Social

Security Amendments of 1983 accounted for the largest single change in

recent history: the actuarial balance of -1.82 for the 1982 report improved to

+0.02 for the 1983 report. In 1985, the estimated actuarial balance changed

largely because of an adjustment made to the method for estimating the age

distribution of immigrants.

Table VI.B1.—Long-Range OASDI Actuarial Balances and Trust Fund Reserve 

Depletion Dates as Shown in the Trustees Reports for 1982-2013a

[As a percentage of taxable payroll]

a The reports compute the actuarial balance and year of trust fund reserve depletion based on the intermediate assumptions, which the 1982-90 reports referred to as alternative II-B and the 1991 and later reports

refer to as alternative II.

Year of report

Summarized

income rate

Summarized cost rateActuarial

balance

Change from

previous year

Year of

combined trust

fund reserve

depletion

1982 12.27 14.09 -1.82 b 1983

1983 12.87 12.84 +.02 +1.84 solvent

1984 12.90 12.95 -.06 -.08 solvent

1985 12.94 13.35 -.41 -.35 2049

1986 12.96 13.40 -.44 -.03 2051

1987 12.89 13.51 -.62 -.18 2051

1988 12.94 13.52 -.58 +.04 2048

1989 13.02 13.72 -.70 -.13 2046

1990 13.04 13.95 -.91 -.21 2043

1991 13.11 14.19 -1.08 -.17 2041

1992 13.16 14.63 -1.46 -.38 2036

1993 13.21 14.67 -1.46 b

b Between -0.005 and 0.005 percent of taxable payroll.

2036

1994 13.24 15.37 -2.13 -.66 2029

1995 13.27 15.44 -2.17 -.04 2030

1996 13.33 15.52 -2.19 -.02 2029

1997 13.37 15.60 -2.23 -.03 2029

1998 13.45 15.64 -2.19 +.04 2032

1999 13.49 15.56 -2.07 +.12 2034

2000 13.51 15.40 -1.89 +.17 2037

2001 13.58 15.44 -1.86 +.03 2038

2002 13.72 15.59 -1.87 -.01 2041

2003 13.78 15.70 -1.92 -.04 2042

2004 13.84 15.73 -1.89 +.03 2042

2005 13.87 15.79 -1.92 -.04 2041

2006 13.88 15.90 -2.02 -.09 2040

2007 13.92 15.87 -1.95 +.06 2041

2008 13.94 15.63 -1.70 +.26 2041

2009 14.02 16.02 -2.00 -.30 2037

2010 14.01 15.93 -1.92 +.08 2037

2011 14.02 16.25 -2.22 -.30 2036

2012 14.02 16.69 -2.67 -.44 2033

2013 13.88 16.60 -2.72 -.05 2033
Appendices

162

Rebenchmarking of the National Income and Product Accounts and changes

in demographic assumptions contributed to the change in the actuarial balance for 1987. Various changes in assumptions and methods for the 1988

report had roughly offsetting effects on the actuarial balance. In 1989 and

1990, changes in economic assumptions accounted for most of the changes

in the estimated actuarial balance.

In 1991, the effect of legislation, changes in economic assumptions, and the

introduction of the cost of reaching and maintaining an ending target trust

fund combined to produce the change in the actuarial balance. In 1992,

changes in disability assumptions and the method for projecting average benefit levels accounted for most of the change in the actuarial balance. In 1993,

numerous small changes in assumptions and methods had offsetting effects

on the actuarial balance. In 1994, changes in the real-wage assumptions, disability rates, and the earnings sample used for projecting average benefit levels accounted for most of the change in the actuarial balance. In 1995,

numerous small changes had largely offsetting effects on the actuarial balance, including a substantial reallocation of the payroll tax rate, which

reduced the OASI actuarial balance, but increased the DI actuarial balance.

In 1996, a change in the method of projecting dually-entitled beneficiaries

produced a large increase in the actuarial balance, which almost totally offset

decreases produced by changes in the valuation period and in the demographic and economic assumptions. Various changes in assumptions and

methods for the 1997 report had roughly offsetting effects on the actuarial

balance. In 1998, increases caused by changes in the economic assumptions,

although partially offset by decreases produced by changes in the valuation

period and in the demographic assumptions, accounted for most of the

changes in the estimated actuarial balance. In 1999, increases caused by

changes in the economic assumptions (related to improvements in the CPI by

the Bureau of Labor Statistics) accounted for most of the changes in the estimated actuarial balance.

For the 2000 report, changes in economic assumptions and methodology

caused increases in the actuarial balance, although reductions in the balance

caused by the change in valuation period and changes in demographic

assumptions partially offset these increases. For the 2001 report, increases

caused by changes in the demographic starting values, although partially offset by a decrease produced by the change in the valuation period, accounted

for most of the changes in the estimated actuarial balance. For the 2002

report, changes in the valuation period and the demographic assumptions—

both decreases in the actuarial balance—were offset by changes in the economic assumptions, while an increase due to disability assumptions was
163

History of Actuarial Status

slightly more than offset by a decrease due to changes in the projection methods and data. For the 2003 report, an increase due to the change in program

assumptions was more than offset by decreases due to the change in valuation period and changes in demographic assumptions. In the 2004 report,

increases due to changing the method of projecting benefit levels for higher

earners more than offset decreases in the actuarial balance arising from the

change in the valuation period and the net effect of other changes in programmatic data and methods.

For the 2005 report, an increase due to changing the method of projecting

future average benefit levels was more than offset by decreases due to

changes in the valuation period, updated starting values for the economic

assumptions, and other methodological changes. In 2006, decreases in the

actuarial balance due to the change in the valuation period, a reduction in the

ultimate annual real interest rate, and improvements in calculating mortality

for disabled workers, were greater in aggregate than increases in the actuarial

balance due to changes in demographic starting values and the ultimate total

fertility rate, as well as other programmatic data and method changes. For the

2007 report, increases in the actuarial balance arising from revised disability

incidence rate assumptions, improvements in average benefit level projections, and changes in near-term economic projections, more than offset

decreases in the balance due to the valuation period change and updated historical mortality data.

For the 2008 report, the large increase in the actuarial balance was primarily

due to changes in immigration projection methods and assumptions. These

changes more than offset the decreases in the actuarial balance due to the

change in the valuation period and the lower starting and ultimate mortality

rates. In 2009, changes in starting values and near-term economic assumptions due to the economic recession, faster ultimate rates of decline in death

rates for ages 65-84, and the change in the valuation period accounted for

most of the large decrease in the actuarial balance. Legislative changes, in

particular the estimated effects of the Patient Protection and Affordable Care

Act and the Health Care and Education Reconciliation Act of 2010, were the

main reason for the increase in the actuarial balance for the 2010 report. The

change in the valuation period partially offset this increase; there were also

changes in several assumptions, methods, and recent data which had largely

offsetting effects.

For the 2011 report, changes in mortality projections, due to new starting

values and revised methods, were the most significant of several factors contributing to the increase in the deficit. These mortality changes resulted in

lower death rates for the population age 65 and over. Adding to this negative
Appendices

164

effect were near-term lower levels of net other immigration and real earnings

than assumed in the 2010 report.

For the 2012 report, changes in economic assumptions and starting values

accounted for about half of the decrease in actuarial balance. Updating starting economic data resulted in higher benefit levels, lower payroll taxes, and

lower real interest rates in the short term than projected in the previous year.

Other factors worsening the actuarial balance were the change in valuation

period, changes to starting demographic values, changes to ultimate disability incidence assumptions, and methodology changes and data updates.

Section IV.B.6 describes changes affecting the actuarial balance shown for

the 2013 report.
165

Fiscal Year Operations and Projections

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2022

Tables VI.C1, VI.C2, and VI.C3 contain details of the fiscal year 2012 operations of the OASI, DI, and the combined OASI and DI Trust Funds, respectively. Fiscal year 2012 is the most recent fiscal year for which complete

information is available. These tables are similar to the calendar year operations tables in section III.A. Please see that section for a description of the

various items of income and outgo.
Appendices

166

Note: Totals do not necessarily equal the sums of rounded components.

Table VI.C1.—Operations of the OASI Trust Fund, Fiscal Year 2012

[In millions]

Total asset reserves, September 30, 2011 $2,491,654

Receipts:

Net payroll tax contributions:

Payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $501,960

Payments from the General Fund of the Treasury for payroll tax contributions subject to refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,299

Net payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,661

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L.s 111-312, 112-78, and 112-96 . 95,788

Reduction in payroll tax contributions due to P.L. 111-147. . . . . . . . . . . . . . . . . . . 133

Reimbursements directed by P.L. 110-246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Reimbursement for the costs of payments to uninsured persons who attained age 

72 before 1968. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

a Between -$0.5 and $0.5 million.

Payroll tax credits due to P.L. 98-21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

Net general fund reimbursements 95,927

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 166

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,984

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,150

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,238

Net Interest adjustmentsb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust fund and

the general fund account for the Supplemental Security Income program; (2) interest arising from the revised

allocation of administrative expenses among the trust funds; and (3) interest on certain reimbursements to the

trust fund.

5

Net investment income and interest adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 105,243

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 728,981

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 627,264

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -56

Payment for costs of vocational rehabilitation services for disabled beneficiaries 1

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 627,208

Financial interchange with the Railroad Retirement “Social Security Equivalent

Benefit Account”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,139

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,766

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 604

Offsetting receipts from sales of supplies, materials, etc. . . . . . . . . . . . . . . . . . . . . -9

Miscellaneous reimbursements from the general fund c . . . . . . . . . . . . . . . . . . . . . 

c Reimbursements for costs incurred in performing certain legislatively mandated activities not directly

related to administering the OASI program.

-9

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,352

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634,700

Net increase in asset reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,281

Total asset reserves, September 30, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,585,936
167

Fiscal Year Operations and Projections

Note: Totals do not necessarily equal the sums of rounded components.

Table VI.C2.—Operations of the DI Trust Fund, Fiscal Year 2012

[In millions]

Total asset reserves, September 30, 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $161,682

Receipts:

Net payroll tax contributions:

Payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $85,293

Payments from the General Fund of the Treasury for payroll tax contributions subject to refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -221

Net payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,072

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L.s 111-312, 112-78, and 112-96 . 16,211

Reduction in payroll tax contributions due to P.L. 111-147. . . . . . . . . . . . . . . . . . . 22

Reimbursements directed by P.L. 110-246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Payroll tax credits due to P.L. 98-21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

a Between -$0.5 and $0.5 million.

Net general fund reimbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,234

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 4

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379

Total income from taxation of benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,153

Interest adjustmentsb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust fund and

the general fund account for the Supplemental Security Income program; (2) interest arising from the revised

allocation of administrative expenses among the trust funds; and (3) interest on certain reimbursements to

the trust fund.

3

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 7,156

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,845

Disbursements:

Benefit payments:

Monthly benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,097

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -30

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 47

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,114

Financial interchange with the Railroad Retirement “Social Security Equivalent

Benefit Account” 512

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,781

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

Offsetting receipts from sales of supplies, materials, etc. -1

Demonstration projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Miscellaneous reimbursements from the general fundc. . . . . . . . . . . . . . . . . . . . . .

c Reimbursements for costs incurred in performing certain legislatively mandated activities not directly

related to administering the DI program.

-4

Total administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,920

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,546

Net increase in asset reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29,701

Total asset reserves, September 30, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131,981
Appendices

168

Note: Totals do not necessarily equal the sums of rounded components.

Table VI.C3.—Operations of the Combined OASI and DI Trust Funds, Fiscal Year 2012

[In millions]

Total asset reserves, September 30, 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,653,336

Receipts:

Net payroll tax contributions:

Payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $587,253

Payments from the General Fund of the Treasury for payroll tax contributions subject to refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,519

Net payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585,734

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L.s 111-312, 112-78, and 112-96 . 111,999

Reduction in payroll tax contributions due to P.L. 111-147. . . . . . . . . . . . . . . . . . . 155

Reimbursements directed by P.L. 110-246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Reimbursement for the costs of payments to uninsured persons who attained age 

72 before 1968. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

a Between -$0.5 and $0.5 million.

Payroll tax credits due to P.L. 98-21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

Net general fund reimbursements 112,161

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 171

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,363

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,534

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,391

Net Interest adjustmentsb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust funds

and the general fund account for the Supplemental Security Income program; (2) interest arising from the

revised allocation of administrative expenses among the trust funds; and (3) interest on certain reimbursements to the trust funds.

8

Net investment income and interest adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 112,398

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 837,827

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 762,361

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -86

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 48

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 762,323

Financial interchange with the Railroad Retirement “Social Security Equivalent

Benefit Account”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,651

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,547

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719

Offsetting receipts from sales of supplies, materials, etc. . . . . . . . . . . . . . . . . . . . . -10

Demonstration projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Miscellaneous reimbursements from the general fundc . . . . . . . . . . . . . . . . . . . . . .

c Reimbursements for costs incurred in performing certain legislatively mandated activities not directly

related to administering the OASI and DI programs.

-12

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,273

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 773,247

Net increase in asset reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,580

Total asset reserves, September 30, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,717,916
169

Fiscal Year Operations and Projections

Tables VI.C4, VI.C5, and VI.C6 show estimates of the operations and status of

the OASI, DI, and the combined OASI and DI Trust Funds, respectively, during fiscal years 2008-22. Since 1976, the fiscal year for the U.S. Government is

the 12-month period ending September 30.

Note: Totals do not necessarily equal the sums of rounded components.

Table VI.C4.—Operations of the OASI Trust Fund, Fiscal Years 2008-22

[Dollar amounts in billions]

Fiscal 

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsa

a Includes reimbursements from the General Fund of the Treasury to the OASI Trust Fund for: (1) the cost of

noncontributory wage credits for military service before 1957; (2) the cost of benefits to certain uninsured persons who attained age 72 before 1968; (3) the cost of payroll tax credits provided to employees in 1984 and

self-employed persons in 1984-89 by Public Law 98-21; (4) the cost in 2009-17 of excluding certain selfemployment earnings from SECA taxes under Public Law 110-246; and (5) payroll tax revenue forgone under

the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.

Taxation of

benefits

Net

interest Total

Scheduled

benefits

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiob

b The “Trust fund ratio” column represents asset reserves at the beginning of a year (which are identical to

reserves at the end of the prior year shown in the “Amount at end of year” column) as a percentage of cost for

the year. 

Historical data:

2008 . $692.9 $573.7 c

c Between -$50 million and $50 million.

$16.4 $102.7 $509.9 $503.0 $3.3 $3.6 $183.0 $2,150.1 386

2009 . 697.3 571.2 c 19.0 107.1 551.5 544.5 3.4 3.7 145.8 2,295.8 390

2010 . 682.4 552.0 $0.7 21.1 108.6 579.9 572.5 3.5 3.9 102.5 2,398.4 396

2011 . 692.5 495.0 68.9 21.2 107.4 599.2 591.5 3.6 4.1 93.3 2,491.7 400

2012 . 729.0 500.7 95.9 27.2 105.2 634.7 627.2 3.4 4.1 94.3 2,585.9 393

Intermediate:

2013 . 739.5 589.3 26.4 23.8 100.0 672.2 664.9 3.3 3.9 67.3 2,653.3 385

2014 . 768.1 645.1 -.2 27.3 95.9 713.9 706.4 3.2 4.3 54.2 2,707.5 372

2015 . 814.3 689.1 -.1 30.1 95.1 758.7 750.9 3.4 4.4 55.6 2,763.2 357

2016 . 871.9 740.4 .1 33.3 98.0 809.1 801.3 3.5 4.2 62.8 2,826.0 342

2017 . 924.9 785.6 .1 36.9 102.4 865.3 856.9 3.7 4.7 59.7 2,885.6 327

2018 . 985.9 835.6 c 40.6 109.7 925.4 916.6 3.8 4.9 60.5 2,946.1 312

2019 . 1,042.6 882.1 c 44.8 115.8 990.2 981.2 4.0 5.1 52.4 2,998.5 298

2020 . 1,093.1 922.3 c 49.0 121.7 1,059.5 1,050.1 4.1 5.2 33.6 3,032.1 283

2021 . 1,152.8 973.7 c 53.3 125.8 1,128.9 1,119.7 4.2 5.1 23.8 3,056.0 269

2022 . 1,207.7 1,021.1 c 57.9 128.7 1,204.2 1,194.2 4.3 5.6 3.5 3,059.5 254

Low-cost:

2013 . 742.3 592.0 26.4 23.8 100.1 672.0 664.7 3.3 3.9 70.4 2,656.3 385

2014 . 792.6 667.9 -.2 27.3 97.5 712.2 704.7 3.2 4.2 80.4 2,736.7 373

2015 . 840.3 713.0 -.1 29.9 97.5 753.1 745.3 3.4 4.4 87.2 2,823.9 363

2016 . 901.2 768.1 .1 32.8 100.2 796.8 789.2 3.5 4.1 104.5 2,928.4 354

2017 . 956.6 814.4 .1 36.0 106.1 845.0 836.7 3.7 4.6 111.6 3,040.0 347

2018 . 1,013.4 861.1 c 39.3 112.9 895.4 887.0 3.8 4.7 117.9 3,157.9 339

2019 . 1,066.8 904.1 c 42.9 119.8 948.8 940.1 3.9 4.8 118.0 3,275.9 333

2020 . 1,115.7 941.5 c 46.5 127.6 1,005.5 996.5 4.0 4.9 110.2 3,386.1 326

2021 . 1,176.3 991.3 c 50.1 134.9 1,061.4 1,052.7 4.1 4.7 114.9 3,501.0 319

2022 . 1,232.7 1,037.1 c 53.9 141.7 1,121.8 1,112.5 4.2 5.1 110.9 3,611.9 312

High-cost:

2013 . 736.5 586.3 26.4 23.8 100.0 672.4 665.1 3.3 3.9 64.2 2,650.1 385

2014 . 742.0 620.6 -.3 27.4 94.2 715.5 708.0 3.2 4.3 26.4 2,676.5 370

2015 . 780.1 658.2 -.1 30.3 91.6 764.2 756.3 3.4 4.5 15.9 2,692.4 350

2016 . 826.7 700.3 .1 33.8 92.4 821.4 813.5 3.5 4.3 5.3 2,697.7 328

2017 . 874.5 742.2 .1 37.8 94.5 885.2 876.6 3.7 4.9 -10.7 2,687.0 305

2018 . 934.3 793.0 c 41.9 99.3 955.0 946.0 3.9 5.1 -20.7 2,666.3 281

2019 . 992.3 843.7 c 46.6 102.0 1,031.7 1,022.3 4.1 5.3 -39.4 2,626.9 258

2020 . 1,047.6 892.2 c 51.5 103.8 1,114.3 1,104.5 4.2 5.6 -66.7 2,560.2 236

2021 . 1,109.5 950.4 c 56.6 102.5 1,198.1 1,188.3 4.4 5.4 -88.6 2,471.6 214

2022 . 1,164.4 1,002.1 c 62.0 100.3 1,289.5 1,278.9 4.5 6.0 -125.0 2,346.6 192
Appendices

170

Note: Totals do not necessarily equal the sums of rounded components.

Table VI.C5.—Operations of the DI Trust Fund, Fiscal Years 2008-22

[Dollar amounts in billions]

Fiscal 

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsa

a Includes reimbursements from the General Fund of the Treasury to the DI Trust Fund for: (1) the cost of noncontributory wage credits for military service before 1957; (2) the cost of payroll tax credits provided to

employees in 1984 and self-employed persons in 1984-89 by Public Law 98-21; (3) the cost in 2009-17 of

excluding certain self-employment earnings from SECA taxes under Public Law 110-246; and (4) payroll tax

revenue forgone under the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.

Taxation of

benefits

Net

interest Total

Scheduled

benefits

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiob

b The “Trust fund ratio” column represents asset reserves at the beginning of a year (which are identical to

reserves at the end of the prior year shown in the “Amount at end of year” column) as a percentage of cost for

the year. 

Historical data:

2008. . $109.8 $97.4 c

c Between -$50 million and $50 million.

$1.4 $11.0 107.2 $104.2 $2.5 $0.4 $2.7 $216.2 199

2009. . 109.7 97.0 c 1.8 10.8 118.1 115.1 2.6 .4 -8.5 207.8 183

2010. . 105.5 93.7 $0.1 1.7 9.9 126.3 122.9 2.9 .5 -20.8 186.9 164

2011 . . 106.2 84.0 11.7 1.9 8.6 131.5 128.0 3.0 .5 -25.3 161.7 142

2012. . 108.8 85.1 16.2 .4 7.2 138.5 135.1 2.9 .5 -29.7 132.0 117

Intermediate:

2013. . 111.2 100.1 4.5 1.1 5.5 143.3 139.8 3.0 .4 -32.1 99.9 92

2014. . 115.5 109.5 c 2.1 3.9 148.8 145.2 3.1 .4 -33.3 66.6 67

2015. . 121.9 117.0 c 2.3 2.6 153.9 150.3 3.2 .4 -32.1 34.5 43

2016. . 129.3 125.7 c 2.5 1.1 159.4 155.5 3.6 .4 -30.1 4.5 22

2017. . d

d The DI Trust Fund reserves become depleted in fiscal years 2017 and 2016 under the intermediate and highcost assumptions, respectively. Accordingly, certain trust fund operations values from the year of trust fund

reserve depletion through 2022 are not meaningful under present law.

133.4 c 2.8 d 165.2 161.0 3.8 .3 d d 3

2018. . d 141.9 c 3.0 d 171.2 166.8 4.1 .3 d dd

2019. . d 149.8 c 3.3 d 177.8 173.1 4.4 .2 d dd

2020. . d 156.6 c 3.6 d 184.8 180.0 4.6 .2 d dd

2021. . d 165.3 c 3.9 d 193.4 188.3 4.9 .2 d dd

2022. . d 173.4 c 4.2 d 202.9 197.6 5.2 .1 d dd

Low-cost:

2013. . 111.6 100.5 4.5 1.1 5.5 141.9 138.4 3.0 .4 -30.2 101.7 93

2014. . 119.5 113.4 c 2.0 4.1 145.0 141.4 3.1 .4 -25.5 76.3 70

2015. . 126.3 121.1 c 2.2 3.1 147.3 143.6 3.2 .4 -20.9 55.3 52

2016. . 135.1 130.4 c 2.4 2.3 149.6 145.7 3.6 .3 -14.5 40.8 37

2017. . 142.4 138.3 c 2.5 1.6 152.3 148.1 3.8 .3 -9.9 31.0 27

2018. . 150.1 146.2 c 2.7 1.2 155.2 150.9 4.1 .3 -5.1 25.9 20

2019. . 157.4 153.5 c 2.9 1.0 158.5 154.0 4.3 .2 -1.1 24.8 16

2020. . 164.0 159.9 c 3.1 1.0 162.2 157.5 4.5 .2 1.8 26.6 15

2021. . 172.8 168.3 c 3.3 1.1 167.0 162.1 4.8 .1 5.7 32.3 16

2022. . 181.1 176.1 c 3.6 1.4 172.5 167.3 5.0 .1 8.6 41.0 19

High-cost:

2013. . 110.7 99.6 4.5 1.1 5.5 144.8 141.3 3.0 .4 -34.1 97.9 91

2014. . 111.3 105.4 c 2.2 3.8 152.9 149.3 3.1 .4 -41.6 56.2 64

2015. . 116.1 111.8 c 2.4 1.9 161.3 157.7 3.2 .4 -45.2 11.0 35

2016. . d 118.9 c 2.7 d 170.7 166.8 3.5 .4 d d 6

2017. . d 126.0 c 3.0 d 180.1 175.9 3.8 .4 d dd

2018. . d 134.7 c 3.4 d 189.7 185.3 4.1 .3 d dd

2019. . d 143.3 c 3.7 d 199.8 195.1 4.4 .3 d dd

2020. . d 151.5 c 4.1 d 210.4 205.4 4.7 .2 d dd

2021. . d 161.4 c 4.5 d 222.5 217.3 5.0 .2 d dd

2022. . d 170.2 c 4.9 d 235.8 230.3 5.3 .2 d dd
171

Fiscal Year Operations and Projections

Note: Totals do not necessarily equal the sums of rounded components.

Table VI.C6.—Operations of the Combined OASI and DI Trust Funds,

Fiscal Years 2008-22

[Dollar amounts in billions]

Fiscal

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsa

a Includes reimbursements from the General Fund of the Treasury to the OASI and DI Trust Funds for: (1) the

cost of noncontributory wage credits for military service before 1957; (2) the cost of benefits to certain uninsured persons who attained age 72 before 1968; (3) the cost of payroll tax credits provided to employees in 1984

and self-employed persons in 1984-89 by Public Law 98-21; (4) the cost in 2009-17 of excluding certain selfemployment earnings from SECA taxes under Public Law 110-246; and (5) payroll tax revenue forgone under

the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.

Taxation of

benefits

Net

interest Total

Scheduled

benefits

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiob

b The “Trust fund ratio” column represents asset reserves at the beginning of a year (which are identical to

reserves at the end of the prior year shown in the “Amount at end of year” column) as a percentage of cost for

the year. 

Historical data:

2008 . . $802.7 $671.2 c

c Between -$50 million and $50 million.

$17.8 $113.7 $617.0 $607.2 $5.8 $4.0 $185.7 $2,366.3 353

2009 . . 807.0 668.2 c 20.8 118.0 669.7 659.6 6.0 4.1 137.3 2,503.6 353

2010 . . 788.0 645.8 $0.9 22.8 118.5 706.3 695.4 6.4 4.4 81.7 2,585.3 354

2011 . . 798.7 579.1 80.6 23.1 116.0 730.7 719.5 6.7 4.6 68.0 2,653.3 354

2012 . . 837.8 585.7 112.2 27.5 112.4 773.2 762.3 6.3 4.7 64.6 2,717.9 343

Intermediate:

2013 . . 850.7 689.3 30.9 24.9 105.5 815.5 804.8 6.4 4.3 35.2 2,753.1 333

2014 . . 883.7 754.6 -.3 29.4 99.9 862.7 851.6 6.4 4.7 21.0 2,774.1 319

2015 . . 936.2 806.1 -.1 32.4 97.7 912.6 901.1 6.6 4.9 23.6 2,797.7 304

2016 . . 1,001.2 866.2 .1 35.8 99.1 968.5 956.8 7.1 4.5 32.7 2,830.4 289

2017 . . 1,060.7 919.0 .1 39.7 102.0 1,030.5 1,017.9 7.5 5.0 30.3 2,860.7 275

2018 . . 1,128.9 977.5 c 43.7 107.7 1,096.6 1,083.5 8.0 5.2 32.3 2,893.0 261

2019 . . 1,192.1 1,031.9 c 48.0 112.2 1,168.0 1,154.3 8.3 5.3 24.2 2,917.1 248

2020 . . 1,248.1 1,078.9 c 52.6 116.6 1,244.3 1,230.1 8.7 5.4 3.8 2,920.9 234

2021 . . 1,315.1 1,139.0 c 57.2 118.9 1,322.3 1,308.0 9.1 5.2 -7.2 2,913.8 221

2022 . . 1,376.6 1,194.5 c 62.1 120.0 1,407.0 1,391.8 9.5 5.7 -30.4 2,883.4 207

Low-cost:

2013 . . 854.0 692.5 30.9 24.9 105.6 813.8 803.1 6.4 4.3 40.1 2,758.0 334

2014 . . 912.1 781.4 -.2 29.3 101.6 857.1 846.1 6.4 4.7 55.0 2,813.0 322

2015 . . 966.6 834.0 -.1 32.1 100.6 900.4 889.0 6.6 4.8 66.3 2,879.3 312

2016 . . 1,036.3 898.6 .1 35.1 102.5 946.4 934.9 7.1 4.4 89.9 2,969.2 304

2017 . . 1,099.0 952.6 .1 38.6 107.7 997.2 984.9 7.5 4.9 101.7 3,070.9 298

2018 . . 1,163.5 1,007.3 c 42.1 114.1 1,050.7 1,037.9 7.8 5.0 112.8 3,183.8 292

2019 . . 1,224.3 1,057.7 c 45.8 120.8 1,107.3 1,094.1 8.2 5.1 116.9 3,300.7 288

2020 . . 1,279.6 1,101.4 c 49.6 128.6 1,167.6 1,154.0 8.5 5.1 112.0 3,412.7 283

2021 . . 1,349.1 1,159.6 c 53.5 136.1 1,228.5 1,214.8 8.8 4.8 120.6 3,533.3 278

2022 . . 1,413.8 1,213.2 c 57.5 143.1 1,294.3 1,279.8 9.2 5.3 119.5 3,652.9 273

High-cost:

2013 . . 847.2 685.9 30.9 24.9 105.5 817.2 806.5 6.4 4.3 30.0 2,748.0 333

2014 . . 853.2 726.0 -.3 29.6 98.0 868.4 857.3 6.4 4.7 -15.2 2,732.7 316

2015 . . 896.2 770.0 -.1 32.7 93.6 925.6 914.0 6.6 4.9 -29.3 2,703.4 295

2016 . . 948.0 819.3 .1 36.5 92.1 992.0 980.3 7.1 4.7 -44.0 2,659.4 273

2017 . . 1,000.5 868.3 .1 40.8 91.4 1,065.3 1,052.5 7.5 5.3 -64.8 2,594.6 250

2018 . . 1,065.6 927.7 c 45.3 92.6 1,144.7 1,131.2 8.0 5.4 -79.1 2,515.5 227

2019 . . 1,128.6 986.9 c 50.3 91.3 1,231.5 1,217.4 8.5 5.6 -102.9 2,412.6 204

2020 . . 1,188.2 1,043.7 c 55.6 88.9 1,324.7 1,309.9 9.0 5.8 -136.5 2,276.1 182

2021 . . 1,255.8 1,111.8 c 61.1 82.9 1,420.6 1,405.5 9.4 5.6 -164.8 2,111.3 160

2022 . . 1,315.0 1,172.3 c 66.9 75.8 1,525.3 1,509.2 9.9 6.2 -210.3 1,901.0 138
Appendices

172

D. LONG-RANGE SENSITIVITY ANALYSIS

This appendix presents estimates that illustrate the sensitivity of the longrange actuarial status of the OASDI program to changes in selected individual assumptions. The estimates based on the three alternative sets of assumptions, which were presented earlier in this report, illustrate the effects of

varying all of the principal assumptions simultaneously, in order to portray a

generally more optimistic or pessimistic future. For each sensitivity analysis

presented in this appendix, the intermediate alternative II projection is the

reference point, and one assumption is varied within that alternative. The

variation used for each individual assumption is the same as the level used

for that assumption in the low-cost alternative I and high-cost alternative III

projections.

Each table in this section shows the effects of changing a particular assumption on the OASDI summarized income rates, summarized cost rates, and

actuarial balances for 25-year, 50-year, and 75-year valuation periods. Following each table is a discussion of the estimated changes in cost rates. The

change in each of the actuarial balances is approximately equal to the change

in the corresponding cost rate, but in the opposite direction. This appendix

does not discuss income rates following each table because income rates

vary only slightly with changes in assumptions. This stability occurs because

the combined rate, which includes payroll taxes and reimbursements from

the General Fund of the Treasury, is constant for the entire 75-year valuation

period.

1. Total Fertility Rate

Table VI.D1 shows OASDI income rates, cost rates, and actuarial balances

on the basis of alternative II with various assumptions about the ultimate

total fertility rate. The Trustees assume that total fertility will ultimately be

1.7, 2.0, and 2.3 children per woman under alternatives III, II, and I, respectively. The total fertility rate reaches ultimate values in 2037.
173

Long-Range Sensitivity Analysis

For the 25-year period, the cost rate for the three fertility assumptions varies

by only about 0.05 percent of taxable payroll. In contrast, the 75-year cost

rate varies over a wide range, decreasing from 17.02 to 16.19 percent, as the

assumed ultimate total fertility rate increases from 1.7 to 2.3. Similarly,

while the 25-year actuarial balance varies by only 0.05 percent of taxable

payroll, the 75-year actuarial balance varies over a much wider range, from

-3.10 to -2.35 percent.

During the 25-year period, the very slight increases in the working population resulting from increases in fertility are more than offset by decreases in

the female labor force and increases in the number of child beneficiaries.

Therefore, program cost increases slightly with higher fertility. For the

75-year long-range period, however, changes in fertility have a relatively

greater effect on the labor force than on the beneficiary population. As a

result, an increase in fertility significantly reduces the cost rate. Each

increase of 0.1 in the ultimate total fertility rate increases the long-range

actuarial balance by about 0.13 percent of taxable payroll.

Table VI.D1.—Sensitivity of OASDI Measures to Varying Fertility Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate total fertility ratea b

a The total fertility rate for any year is the average number of children that would be born to a woman in her

lifetime if she were to experience, at each age of her life, the birth rate observed in, or assumed for, the

selected year, and if she were to survive the entire childbearing period. The ultimate total fertility rate is

reached in 2037.

b Ultimate total fertility rates used for this analysis are: 1.7 from the alternative III assumptions, 2.0 from the

alternative II assumptions, and 2.3 from the alternative I assumptions. All other assumptions used for this

analysis are from alternative II.

1.7 2.0 2.3

Summarized income rate:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.76 14.77 14.77

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.09 14.08 14.07

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.92 13.88 13.84

Summarized cost rate:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.01 16.03 16.06

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.44 16.33 16.23

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.02 16.60 16.19

Actuarial balance:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.24 -1.27 -1.29

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.35 -2.25 -2.16

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3.10 -2.72 -2.35

Annual balance for 2087 . . . . . . . . . . . . . . . . . . . . . . . . . . -7.04 -4.77 -2.93

Year of combined trust fund reserve depletion . . . . . . . . 2033 2033 2033
Appendices

174

2. Death Rates

Table VI.D2 shows OASDI income rates, cost rates, and actuarial balances

on the basis of alternative II with various assumptions about future reductions in death rates for the period 2012-87. These assumptions are described

in section V.A.2. The Trustees assume that the age-sex-adjusted death rates

will decline at average annual rates of 0.42 percent, 0.80 percent, and

1.21 percent for alternatives I, II, and III, respectively. 

The variation in cost for the 25-year period is less pronounced than the variation for the 75-year period because the Trustees assume that decreases in

death rates will occur gradually. The 25-year cost rate increases from

15.90 percent (for an average annual death-rate reduction of 0.42 percent) to

16.17 percent (for an average annual death-rate reduction of 1.21 percent).

The 75-year cost rate increases from 16.13 to 17.07 percent. The actuarial

balance decreases from -1.13 to -1.41 percent for the 25-year period, and

from -2.27 to -3.18 percent for the 75-year period.

Lower death rates raise both the income (through increased taxable payroll)

and the cost of the OASDI program. The relative increase in cost, however,

exceeds the relative increase in taxable payroll. For any given year, reductions in the death rates for people who are age 62 and over (ages at which

Table VI.D2.—Sensitivity of OASDI Measures to Varying Death-Rate Assumptions

[As a percentage of taxable payroll]

Valuation period

Average annual death-rate reductiona b

a The average annual death-rate reduction is the average annual geometric rate of decline in the age-sexadjusted death rate between 2012 and 2087. The overall age-sex-adjusted death rate decreases from 2012 to

2087 by 27 percent, 45 percent, and 60 percent for alternatives I, II, and III, respectively.

b The average annual death-rate reductions used for this analysis are: 0.42 percent from the alternative I

assumptions, 0.80 percent from the alternative II assumptions, and 1.21 percent from the alternative III

assumptions. All other assumptions used for this analysis are from alternative II.

0.42 percent 0.80 percent 1.21 percent

Summarized income rate:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.77 14.77 14.76

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.07 14.08 14.08

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.87 13.88 13.89

Summarized cost rate:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.90 16.03 16.17

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.00 16.33 16.67

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.13 16.60 17.07

Actuarial balance:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.13 -1.27 -1.41

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.93 -2.25 -2.59

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.27 -2.72 -3.18

Annual balance for 2087 . . . . . . . . . . . . . . . . . . . . . . . . . . -3.79 -4.77 -5.72

Year of combined trust fund reserve depletion . . . . . . . . 2034 2033 2033
175

Long-Range Sensitivity Analysis

death rates are the highest) increase the number of retired-worker beneficiaries (and, therefore, the amount of retirement benefits paid) without adding

significantly to the number of covered workers (and, therefore, to the taxable

payroll). Reductions for people at age 50 to retirement eligibility age result

in significant increases to the taxable payroll. However, those increases are

not large enough to offset the sum of the additional retirement benefits mentioned above and the disability benefits paid to additional beneficiaries at

these pre-retirement ages, which are ages of high disability incidence. At

ages under 50, death rates are so low that even substantial reductions in death

rates do not result in significant increases in the numbers of covered workers

or beneficiaries. Consequently, if death rates decline by about the same relative amount for all ages, the cost increases faster than the rate of growth in

payroll, which results in higher cost rates and lower actuarial balances. Each

additional 0.1-percentage-point increase in the average annual rate of decline

in the death rate decreases the long-range actuarial balance by about 0.12

percent of taxable payroll.

3. Net Immigration

Table VI.D3 shows OASDI income rates, cost rates, and actuarial balances

under alternative II with various assumptions about the magnitude of net

immigration. The Trustees assume that annual net immigration will average

800,000 persons, 1,095,000 persons, and 1,400,000 persons over the longrange period under alternatives III, II, and I, respectively.

Table VI.D3.—Sensitivity of OASDI Measures to Varying Net-Immigration Assumptions

[As a percentage of taxable payroll]

Valuation period

Average annual net immigrationa b

a Net immigration per year is the annual net immigration to the Social Security area, including both legal and

other immigration, averaged over the 75-year projection period.

b The average annual net immigration assumptions used for this analysis are: 800,000 from the alternative III

assumptions, 1,095,000 from the alternative II assumptions, and 1,400,000 from the alternative I assumptions. All other assumptions used for this analysis are from alternative II.

800,000 1,095,000 1,400,000

Summarized income rate:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.79 14.77 14.74

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.11 14.08 14.05

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.91 13.88 13.85

Summarized cost rate:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.18 16.03 15.90

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.55 16.33 16.13

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.86 16.60 16.37

Actuarial balance:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.38 -1.27 -1.16

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.45 -2.25 -2.08

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.95 -2.72 -2.53

Annual balance for 2087 . . . . . . . . . . . . . . . . . . . . . . . . . . -5.22 -4.77 -4.39

Year of combined trust fund reserve depletion . . . . . . . . 2032 2033 2034
Appendices

176

For all three periods, when net immigration increases, the cost rate decreases.

For the 25-year period, the cost rate decreases from 16.18 percent of taxable

payroll (for average annual net immigration of 800,000 persons) to 15.90

percent (for average annual net immigration of 1,400,000 persons). For the

50-year period, it decreases from 16.55 percent to 16.13 percent, and for the

75-year period, it decreases from 16.86 percent to 16.37 percent. The actuarial balance increases from -1.38 to -1.16 percent for the 25-year period, from

-2.45 to -2.08 percent for the 50-year period, and from -2.95 to -2.53 percent

for the 75-year period.

The cost rate decreases with an increase in net immigration because immigration occurs at relatively young ages, thereby increasing the numbers of

covered workers earlier than the numbers of beneficiaries. Increasing average annual net immigration by 100,000 persons improves the long-range

actuarial balance by about 0.07 percent of taxable payroll.

4. Real-Wage Differential

Table VI.D4 shows OASDI income rates, cost rates, and actuarial balances

on the basis of alternative II with various assumptions about the real-wage

differential. The Trustees assume the ultimate real-wage differential will be

0.52 percentage point, 1.12 percentage points, and 1.72 percentage points

under alternatives III, II, and I, respectively. In each case, the ultimate annual

increase in the CPI is 2.80 percent (consistent with alternative II). Therefore,

the ultimate percentage increases in average annual wages in covered

employment are 3.32, 3.92, and 4.52 percent.

For the 25-year period, the cost rate decreases from 16.75 percent (for a realwage differential of 0.52 percentage point) to 15.35 percent (for a differential

of 1.72 percentage points). For the 50-year period, it decreases from 17.38 to

15.33 percent, and for the 75-year period it decreases from 17.74 to

15.50 percent. The actuarial balance increases from -1.85 to -0.71 percent for

the 25-year period, from -3.13 to -1.41 percent for the 50-year period, and

from -3.68 to -1.79 percent for the 75-year period.
177

Long-Range Sensitivity Analysis

The cost rate decreases with increasing real-wage differentials. Higher wages

increase taxable payroll immediately, but they increase benefit levels only

gradually as new beneficiaries become entitled. In addition, cost-of-living

adjustments (COLAs) to benefits depend not on changes in wages, but on

changes in prices. Each 0.5-percentage-point increase in the real-wage differential increases the long-range actuarial balance by about 0.79 percent of taxable payroll.

5. Consumer Price Index

Table VI.D5 shows OASDI income rates, cost rates, and actuarial balances

on the basis of alternative II with various assumptions about the rate of

increase for the Consumer Price Index (CPI). The Trustees assume the

annual increase in the CPI will be 1.80 percent, 2.80 percent, and 3.80 percent under alternatives I, II, and III, respectively. In each case, the ultimate

real-wage differential is 1.12 percentage points (consistent with alternative

II), yielding ultimate percentage increases in average annual wages in covered employment of 2.92, 3.92, and 4.92 percent.

Table VI.D4.—Sensitivity of OASDI Measures to Varying Real-Wage Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate percentage increase in wages-CPIa b

a The first value in each pair is the ultimate annual percentage increase in average wages in covered employment. The second value is the ultimate annual percentage increase in the Consumer Price Index. The difference between the two values is the ultimate real-wage differential.

b The ultimate real-wage differentials of 0.52, 1.12, and 1.72 percentage points are the same as in alternatives III, II, and I, respectively. All other assumptions used for this analysis are from alternative II.

3.32-2.80 3.92-2.80 4.52-2.80

Summarized income rate:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.90 14.77 14.64

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.25 14.08 13.92

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.07 13.88 13.71

Summarized cost rate:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.75 16.03 15.35

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.38 16.33 15.33

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.74 16.60 15.50

Actuarial balance:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.85 -1.27 -.71

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3.13 -2.25 -1.41

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3.68 -2.72 -1.79

Annual balance for 2087 . . . . . . . . . . . . . . . . . . . . . . . . . . -6.64 -4.77 -3.16

Year of combined trust fund reserve depletion . . . . . . . . 2031 2033 2037
Appendices

178

For all three periods, the cost rate decreases when the assumed rates of

increase in the CPI are greater. For the 25-year period, the cost rate decreases

from 16.21 (for CPI increases of 1.80 percent) to 15.87 percent (for CPI

increases of 3.80 percent). For the 50-year period, it decreases from 16.56 to

16.11 percent, and for the 75-year period, it decreases from 16.85 to 16.36

percent. The actuarial balance increases from -1.41 to -1.14 percent for the

25-year period, from -2.45 to -2.07 percent for the 50-year period, and from

-2.95 to -2.51 percent for the 75-year period.

The time lag between the effects of the CPI changes on taxable payroll and

on scheduled benefits explains these patterns. When the rate of increase in

the CPI is greater and the real-wage differential is constant, then: (1) the

effect on taxable payroll due to a greater rate of increase in average wages

occurs immediately; and (2) the effect on benefits due to a larger COLA

occurs with a lag of about 1 year. As a result of these effects, the higher taxable payrolls have a stronger effect than the higher benefits, which results in

lower cost rates. Each 1.0-percentage-point increase in the rate of the change

in the CPI increases the long-range actuarial balance by about 0.22 percent

of taxable payroll.

Table VI.D5.—Sensitivity of OASDI Measures to Varying CPI-Increase Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate percentage increase in wages-CPIa b

a The first value in each pair is the ultimate annual percentage increase in average wages in covered employment. The second value is the ultimate annual percentage increase in the Consumer Price Index. The difference between the two values is the ultimate real-wage differential.

b The ultimate CPI increases of 1.80, 2.80, and 3.80 percent are the same as in alternatives I, II, and III,

respectively. The ultimate real-wage differential of 1.12 percentage points is the same as in alternative II. All

other assumptions used for this analysis are also from alternative II.

2.92-1.80 3.92-2.80 4.92-3.80

Summarized income rate:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.81 14.77 14.73

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.11 14.08 14.05

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.91 13.88 13.85

Summarized cost rate:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.21 16.03 15.87

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.56 16.33 16.11

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.85 16.60 16.36

Actuarial balance:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.41 -1.27 -1.14

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.45 -2.25 -2.07

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.95 -2.72 -2.51

Annual balance for 2087 . . . . . . . . . . . . . . . . . . . . . . . . . . -5.08 -4.77 -4.48

Year of combined trust fund reserve depletion . . . . . . . . 2032 2033 2034
179

Long-Range Sensitivity Analysis

6. Real Interest Rate

Table VI.D6 shows OASDI income rates, cost rates, and actuarial balances

under alternative II with various assumptions about the annual real interest

rate (compounded semiannually) for special public-debt obligations issuable

to the trust funds. The Trustees assume that the ultimate annual real interest

rate will be 2.4 percent, 2.9 percent, and 3.4 percent under alternatives III, II,

and I, respectively. In each case, the ultimate annual increase in the CPI is

2.80 percent, which is consistent with alternative II. Therefore, the ultimate

annual yields are 5.3, 5.8, and 6.3 percent, respectively.

For the 25-year period, the cost rate decreases with increasing real interest

rates from 16.11 percent (for an ultimate real interest rate of 2.4 percent) to

15.96 percent (for an ultimate real interest rate of 3.4 percent). For the 50-

year period, it decreases from 16.43 to 16.23 percent and, for the 75-year

period, it decreases from 16.73 to 16.46 percent. The actuarial balance

increases from -1.40 to -1.13 percent for the 25-year period, from -2.43 to

-2.07 percent for the 50-year period, and from -2.94 to -2.49 percent for the

75-year period. Each 0.5-percentage-point increase in the real interest rate

increases the long-range actuarial balance by about 0.23 percent of taxable

payroll.

Table VI.D6.—Sensitivity of OASDI Measures to Varying Real-Interest Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate annual real interest ratea b

a The ultimate real interest rate is the effective annual yield on asset reserves held by the trust funds divided

by the annual rate of growth in the CPI.

b The ultimate annual real interest rates used for this analysis are: 2.4 percent from the alternative III

assumptions, 2.9 percent from the alternative II assumptions, and 3.4 percent from the alternative I assumptions. All other assumptions used for this analysis are from alternative II.

2.4 percent 2.9 percent 3.4 percent

Summarized income rate:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.70 14.77 14.83

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.00 14.08 14.16

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.79 13.88 13.97

Summarized cost rate:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.11 16.03 15.96

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.43 16.33 16.23

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.73 16.60 16.46

Actuarial balance:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.40 -1.27 -1.13

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.43 -2.25 -2.07

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.94 -2.72 -2.49

Annual balance for 2087 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.77 -4.77 -4.77

Year of combined trust fund reserve depletion . . . . . . . . 2033 2033 2034
Appendices

180

7. Disability Incidence Rates

Table VI.D7 shows OASDI income rates, cost rates, and actuarial balances

on the basis of alternative II with various assumptions concerning future disability incidence rates. For all three alternatives, the Trustees assume that

incidence rates by age and sex will vary during the early years of the projection period before attaining ultimate levels in 2032. In comparison to the historical period 1970 through 2012, the ultimate age-sex-adjusted incidence

rate is about 4 percent higher for alternative II, 17 percent lower for alternative I, and 25 percent higher for alternative III.

For the 25-year period, the cost rate increases with increasing disability incidence rates, from 15.83 percent (for the relatively low rates assumed for

alternative I) to 16.25 percent (for the relatively high rates assumed for alternative III). For the 50-year period, it increases from 16.07 to 16.59 percent,

and for the 75-year period, it increases from 16.32 to 16.87 percent. The

actuarial balance decreases from -1.06 to -1.48 percent for the 25-year

period, from -1.99 to -2.51 percent for the 50-year period, and from -2.45 to

-2.99 percent for the 75-year period.

8. Disability Termination Rates

Table VI.D8 shows OASDI income rates, cost rates, and actuarial balances

on the basis of alternative II with various assumptions about future disability

termination rates. For all three alternatives, the Trustees assume that death

Table VI.D7.—Sensitivity of OASDI Measures to 

Varying Disability Incidence Assumptions

[As a percentage of taxable payroll]

Valuation period

Disability incidence rates

based on alternative—

I II III

Summarized income rate:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.76 14.77 14.77

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.07 14.08 14.08

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.87 13.88 13.88

Summarized cost rate:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.83 16.03 16.25

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.07 16.33 16.59

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.32 16.60 16.87

Actuarial balance:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.06 -1.27 -1.48

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.99 -2.25 -2.51

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.45 -2.72 -2.99

Annual balance for 2087 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.44 -4.77 -5.08

Year of combined trust fund reserve depletion . . . . . . . . 2034 2033 2032
181

Long-Range Sensitivity Analysis

rates will decline throughout the long-range period. For alternative II, the

age-sex-adjusted1 death rate declines to a level in 2087 that is about

57 percent lower than the level in 2012. For alternative I, the age-sexadjusted death rate declines to a level in 2087 that is about 32 percent lower

than the level in 2012. For alternative III, the age-sex-adjusted death rate

declines to a level in 2087 that is about 75 percent lower than the level in

2012.

For all three alternatives, ultimate recovery-termination rates by age, sex,

and duration are attained in the twentieth year of the projection period. For

alternative II, the age-sex-adjusted1 recovery rate in 2032 is about 10 recoveries per thousand disabled-worker beneficiaries. For alternative I, the agesex-adjusted recovery rate in 2032 is about 13 recoveries per thousand disabled-worker beneficiaries. For alternative III, the age-sex-adjusted recovery

rate in 2032 is about 8 recoveries per thousand disabled-worker beneficiaries.

For the 25-year period, the cost rate increases with decreasing disability termination rates, from 16.00 percent (for the relatively high termination rates

assumed for alternative I) to 16.07 percent (for the relatively low termination

rates assumed for alternative III). For the 50-year period, it increases from

16.29 to 16.37 percent, and for the 75-year period, it increases from 16.56 to

16.63 percent. The actuarial balance decreases from -1.23 to -1.30 percent

for the 25-year period, from -2.21 to -2.29 percent for the 50-year period,

and from -2.68 to -2.75 percent for the 75-year period.

 1 Age adjusted to the total disabled workers in current-payment status as of the year 2000.

Table VI.D8.—Sensitivity of OASDI Measures to 

Varying Disability Termination Assumptions

[As a percentage of taxable payroll]

Valuation period

Disability termination rates

based on alternative—

I II III

Summarized income rate:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.77 14.77 14.77

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.08 14.08 14.08

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.88 13.88 13.88

Summarized cost rate:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.00 16.03 16.07

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.29 16.33 16.37

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.56 16.60 16.63

Actuarial balance:

25-year: 2013-37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.23 -1.27 -1.30

50-year: 2013-62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.21 -2.25 -2.29

75-year: 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.68 -2.72 -2.75

Annual balance for 2087 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.73 -4.77 -4.78

Year of combined trust fund reserve depletion . . . . . . . . 2033 2033 2033
Appendices

182

E. STOCHASTIC PROJECTIONS AND UNCERTAINTY

Significant uncertainty surrounds the estimates under the intermediate

assumptions, especially for a period as long as 75 years. This appendix presents a way to illustrate the uncertainty of these estimates. The stochastic projections supplement the traditional methods of examining such uncertainty.

1. Background

The Trustees have traditionally shown estimates using the low-cost and highcost sets of specified assumptions to illustrate the presence of uncertainty.

These alternative estimates provide a range of possible outcomes for the projections. However, they do not provide an indication of the probability that

actual future experience will be inside or outside this range. This appendix

presents the results of a model, based on stochastic modeling techniques, that

estimates a probability distribution of future outcomes of the financial status

of the combined OASI and DI Trust Funds. This model, which was first

included in the 2003 report, is subject to further development.

2. Stochastic Methodology

Other sections of this report provide estimates of the financial status of the

combined OASI and DI Trust Funds using a scenario-based model. For the

scenario-based model, the Trustees use three alternative scenarios (low-cost,

intermediate, and high-cost) that make assumptions about levels of fertility,

changes in mortality, legal and other immigration levels, legal and other emigration levels, changes in the Consumer Price Index, changes in average real

wages, unemployment rates, trust fund real yield rates, and disability incidence and recovery rates. In general, the Trustees assume that each of these

variables will reach an ultimate value at a specific point during the longrange period, and will maintain that value throughout the remainder of the

period. The three alternative scenarios assume separate, specified values for

each of these variables. Chapter V contains more details about each of these

assumptions.

This appendix presents estimates of the probability that key measures of

OASDI solvency will fall in certain ranges, based on 5,000 independent stochastic simulations. Each simulation allows the above variables to vary

throughout the long-range period. The fluctuation of each variable over time

is simulated using historical data and standard time-series techniques. Generally, each variable is modeled using an equation that: (a) captures a relationship between current and prior years’ values of the variable; and (b)

introduces year-by-year random variation as observed in the historical
183

Stochastic Projections 

period. For some variables, the equations also reflect relationships with other

variables. The equations contain parameters that are estimated using historical data for periods between 25 years and 110 years, depending on the nature

and quality of the available data. Each time-series equation is designed so

that, in the absence of random variation over time, the value of the variable

for each year equals its value under the intermediate assumptions.1

For each simulation, the stochastic method develops year-by-year random

variation in most of the variables using Monte Carlo techniques. The one

exception is that the model varies net other immigration directly rather than

as the difference of its components (other immigration minus other emigration). Each simulation produces an estimate of the financial status of the

combined OASI and DI Trust Funds. This appendix shows the distribution of

results from 5,000 simulations of the model.

Readers should interpret the results from this model with caution and with an

understanding of the model’s limitations. Results are very sensitive to equation specifications, degrees of interdependence among variables, and the historical periods used for the estimates. For some variables, recent historical

variation may not provide a realistic representation of the potential variation

for the future. Also, results would differ if additional variables (such as labor

force participation rates, retirement rates, marriage rates, and divorce rates)

were also allowed to vary randomly. Furthermore, more variability could

result if statistical approaches were used to model shifts in the central tendencies of the variables. The historical period utilized for most variables

does not reflect many substantial shifts, and time-series modeling reflects

only what occurred in the historical period. As a result, readers should understand that the true range of uncertainty is likely to be larger than indicated in

this appendix. Substantial shifts, as predicted by many experts and as seen in

prior centuries, are not fully reflected in the current model.

3. Stochastic Results

Figure VI.E1 displays the probability distribution of the year-by-year

OASDI cost rates (that is, cost as a percentage of taxable payroll). The range

of the cost rates widens as the projections move further into the future, which

reflects increasing uncertainty. Because there is relatively little variation in

income rates across the 5,000 stochastic simulations, the figure includes the

income rate only under the intermediate assumptions to indicate the patterns

 1 More detail on this model, and stochastic modeling in general, is available at

www.socialsecurity.gov/OACT/stochastic/index.html.
Appendices

184

of cash flow for the OASDI program. The two extreme lines in this figure

illustrate the range within which future annual cost rates are projected to

occur 95 percent of the time (i.e., a 95-percent confidence interval). In other

words, the model indicates that there is a 2.5 percent probability that the cost

rate in a given year will exceed the upper bound and a 2.5 percent probability

that it will fall below the lower bound. Other lines in the figure delineate

additional confidence intervals (80-percent, 60-percent, 40-percent, and

20-percent) around future annual cost rates. The median cost rate for each

year is the rate that falls exactly in the middle of possible outcomes for that

year. These lines do not represent the results of individual stochastic simulations. Instead, for each given year, they represent the percentile distribution

of cost rates based on all stochastic simulations for that year. 

Figure VI.E2 presents the simulated probability distribution of the annual

trust fund ratios for the combined OASI and DI Trust Funds. The lines in this

figure display the median set (50th percentile) of estimated annual trust fund

ratios and delineate the 95-percent, 80-percent, 60-percent, 40-percent, and

20-percent confidence intervals expected for future annual trust fund ratios.

These lines are not the results of individual stochastic simulations. For each

 Figure VI.E1.—Long-Range OASDI Cost Rates From Stochastic Modeling

5%

10%

15%

20%

25%

30%

2013 2028 2043 2058 2073 2088

Projection year 

50% 

97.5% 

2.5% 

90% 

10% 

Income Rate 
185

Stochastic Projections 

given year, they represent the percentile distribution of trust fund ratios

based on all stochastic simulations for that year.

Figure VI.E2 shows that the 95-percent confidence interval for the trust fund

depletion year ranges from 2028 to 2044, and there is a 50-percent probability of trust fund depletion by the end of 2033 (the median depletion year).

The median depletion year is the same as the Trustees project under the intermediate assumptions. The figure also shows confidence intervals for the trust

fund ratio in each year. For example, the 95-percent confidence interval for

the trust fund ratio in 2025 ranges from 255 to 78 percent of annual cost. 

Some of the difference in the ranges of the projected trust fund ratios

between two of the methods for illustrating uncertainty (alternative scenarios

and stochastic simulations) is due to the different assignment of real interest

rates in these two methods. The next section includes an explanation of the

different treatments.

 Figure VI.E2.—Long-Range OASDI Trust Fund Ratios From Stochastic Modeling

0%

100%

200%

300%

400%

2013 2028 2043 2058 2073 2088

Projection year 

50% 

97.5% 

2.5% 

90% 

10% 
Appendices

186

4. Comparison of Results: Stochastic to Low-Cost, Intermediate, and

High-Cost Alternatives

This section compares results from two different approaches for determining

ranges of uncertainty for trust fund actuarial status. One approach uses

results from the low-cost, intermediate, and high-cost alternative scenarios.

The other approach uses stochastic distributions of results. Each of these

approaches provides insights into uncertainty. Comparison of the results

requires an understanding of the differences in the approaches. Two fundamental differences exist between the approach using alternative scenarios

and the stochastic approach.

The first fundamental difference relates to presentation of results. Figure

VI.E3 shows projected OASDI annual cost rates for the low-cost, intermediate, and high-cost alternatives along with the annual cost rates at the 97.5th

percentile, 50th percentile, and 2.5th percentile for the stochastic simulations. While all values on each line for the alternatives are results from a single specified scenario, the values on each stochastic line may be results from

different simulations for different years. The one stochastic simulation (from

the 5,000 simulations) that yields results closest to a particular percentile in

one year may yield results that are distant from that percentile in another

year. Thus, the stochastic presentation illustrates distributions of the range of

potential results one year at a time, with no direct relationship of the results

among years.

Even with this fundamental difference in the presentation of results, figure

VI.E3 shows similar results between the range of OASDI cost rates resulting

from the alternatives and from the 95-percent confidence interval of stochastic results for years before 2045. After 2045, results for the alternatives show

a narrower range. The cost rates for the high-cost alternative are somewhat

lower than the stochastic year-by-year results at the 97.5th percentile. The

intermediate alternative results show somewhat higher cost rates than the

stochastic year-by-year results at the 50th percentile. By far, the largest differences are between the low-cost alternative and the stochastic year-by-year

results at the 2.5th percentile. For this comparison, cost rates are substantially higher for the low-cost alternative than for the stochastic year-by-year

results at the 2.5th percentile for years after 2045.
187

Stochastic Projections 

The second fundamental difference between the alternatives and the stochastic simulations is the method of assigning values for assumptions in the simulations. For the alternatives, the Trustees assign specific values for key

demographic and economic variables. In comparison to the intermediate

alternative, almost every value assigned to the high-cost alternative tends to

raise estimated program cost and almost every value assigned to the low-cost

alternative tends to reduce it. In contrast, the stochastic method randomly

assigns values for the key demographic and economic variables in each of

the 5,000 independent stochastic simulations. For each of the stochastic simulations, randomly assigned values for the various assumptions may have

varying effects on projected cost, with some tending toward higher cost and

some tending toward lower cost. 

Figure VI.E4 compares the ranges of trust fund (unfunded obligation) ratios

for the alternative scenarios and the 95-percent confidence interval of the

stochastic simulations. This figure extends figure VI.E2 to show unfunded

obligation ratios, expressed as negative values below the zero percent line.

Unfunded obligation ratios are the ratio of the unfunded obligation at the

beginning of the year to the present value of annual cost for that year. Figure

 Figure VI.E3.—OASDI Cost Rates: Comparison of Stochastic to Low-Cost, Intermediate, 

and High-Cost Alternatives

[as a percentage of taxable payroll]

10%

15%

20%

25%

30%

2013 2028 2043 2058 2073 2088

Projection year

Low-Cost

Intermediate

High-Cost

Stochastic 2.5%

Stochastic 50%

Stochastic 97.5%
Appendices

188

VI.E4 presents a more complete picture of the difference between the results

from the three alternative scenarios and the stochastic simulations.

After 2045, both trust fund (unfunded obligation) ratios and cost rates are

less optimistic for the intermediate scenario than the medians from the stochastic simulation. In addition, both the high-cost trust fund (unfunded obligation) ratios and cost rates are more optimistic than the 2.5th-percentile

trust fund (unfunded obligation) ratios and the 97.5th-percentile cost rates,

respectively. In sharp contrast, however, the trust fund (unfunded obligation)

ratios for the low-cost scenario are more optimistic than the 97.5th-percentile

results of the stochastic simulation, even though the cost rates for the lowcost alternative are substantially less optimistic than the 2.5th percentile

results of the stochastic simulation.

The treatment of real interest rates between the scenario and stochastic methods provides some insight into the sharp difference between the cost rates

and trust fund ratios for the low-cost alternative in relation to the correspond-

 Figure VI.E4.—OASDI Trust Fund (Unfunded Obligation) Ratios: Comparison of 

Stochastic to Low-Cost, Intermediate, and High-Cost Alternativesa

[Asset reserves (unfunded obligation) as a percentage of annual cost]

a An unfunded obligation, shown as a negative value in this figure, is equivalent to the amount the trust

funds would need to have borrowed to date in order to pay all scheduled benefits (on a timely basis) after

trust fund asset reserves are depleted. Note that current law does not permit the trust funds to borrow.

-4000%

-3500%

-3000%

-2500%

-2000%

-1500%

-1000%

-500%

0%

500%

2013 2028 2043 2058 2073 2088

Projection year

Low-Cost

Intermediate

High-Cost

Stochastic 2.5%

Stochastic 50%

Stochastic 97.5%

Trustfund asset reserves (positive)

Unfunded obligation (negative)
189

Stochastic Projections 

ing stochastic results. Projections of trust fund (unfunded obligation) ratios

shown in figure VI.E4 require an additional variable not reflected in the cost

rates shown in figure VI.E3. This additional variable is the real interest rate.

For the alternatives, the Trustees assign higher real interest rates for the lowcost alternative and lower real interest rates for the high-cost alternative.

Under the limitations imposed by the law, where the trust funds cannot borrow, a lower real interest rate is relatively pessimistic and thus consistent

with the high-cost alternative. However, in order to show the size of the

cumulative shortfall of non-interest income relative to scheduled cost (that is,

the unfunded obligation) that would not be payable under current law, the

Trustees project the cost of scheduled benefits, even after the point at which

trust fund reserves become depleted. 

In the case of the high-cost alternative, the relatively low assumed real interest rates make trust fund reserves decline faster and deplete sooner and make

the unfunded obligation grow more slowly thereafter. For the low-cost alternative, the relatively high assumed real interest rates help maintain trust fund

reserves and allow the trust fund reserves to remain close to positive

throughout the 75-year projection period.

The stochastic model, however, assigns real interest rates randomly (essentially independent of other variables), yielding rates with very little correlation to the overall “optimism” or “pessimism” of the other variable

assignments. The tendency for elevated trust fund ratios for the low-cost

alternative resulting from the assignment of high real interest rates is not

present in the stochastic results for the corresponding 97.5th percentile, so

trust fund reserves decline faster and deplete sooner. This very different

assignment of interest rates between the scenario and stochastic methods

helps explain the apparent contradiction of having cost rates under the lowcost scenario that are less optimistic, and trust fund ratios under the low-cost

scenario that are more optimistic, than the corresponding results of the stochastic simulations. A similar contradiction is not apparent when comparing

the high-cost scenario to the corresponding results of the stochastic simulations, because the low real interest rates assigned for the high-cost alternative

suppress projected reserves early and also suppress growth in unfunded obligations later in the projection period. Therefore, there is relatively little net

effect on the level of unfunded obligations late in the period.

This contrast in results and methods does not mean that either approach to

illustrating ranges of uncertainty, alternative scenarios or stochastic simulations, is superior to the other. The ranges are different and explainable. 
Appendices

190

Table VI.E1 displays long-range actuarial estimates for the combined

OASDI program using the two methods of illustrating uncertainty: (1) alternative scenarios and (2) stochastic simulations. The table shows stochastic

estimates for the median (50th percentile) and for the 95-percent and 80-percent confidence intervals. For comparison, the table shows scenario-based

estimates for the intermediate, low-cost, and high-cost assumptions. Each

individual stochastic estimate in the table is the level at that percentile from

the distribution of the 5,000 simulations. For each given percentile, the values in the table for each long-range actuarial measure are generally from different stochastic simulations.

The median stochastic estimates displayed in table VI.E1 are, in general,

slightly more optimistic than the intermediate-alternative scenario-based

estimates. The median estimate of the long-range actuarial balance is -2.63

percent of taxable payroll, about 0.09 percentage point higher than projected

under the intermediate assumptions. The median projected year that cost first

exceeds non-interest income (as it did in 2010, 2011, and 2012), and remains

in excess of non-interest income throughout the remainder of the long-range

period, is 2013. This is the same year as projected under the intermediate

assumptions. The median year that asset reserves first become depleted is

2033, also the same as projected under the intermediate assumptions. The

median estimates of the annual cost rate for the 75th year of the projection

period are 17.54 percent of taxable payroll and 5.80 percent of gross domestic product (GDP). The comparable estimates under the intermediate

assumptions are 18.01 percent of payroll and 6.20 percent of GDP.

A comparison of the 95-percent confidence interval to the range of variation

defined by the traditional low-cost and high-cost alternatives follows. For

three measures in table VI.E1 (the actuarial balance, the open group

unfunded obligation, and the first year asset reserves become depleted), the

95-percent stochastic confidence interval is narrower than the range defined

by the low-cost and high-cost alternatives. In other words, for these measures, the range defined by the low-cost and high-cost alternatives contains

the 95-percent confidence interval of the stochastic modeling projections.

For the remaining three measures (the first year cost exceeds non-interest

income and remains in excess through 2087, the annual cost in the 75th year

as a percent of taxable payroll, and the annual cost in the 75th year as a percent of GDP), one or both of the bounds of the 95-percent stochastic confidence interval fall outside the range defined by the low-cost and high-cost

alternatives.
191

Stochastic Projections 

Table VI.E1.—Long-Range Estimates Relating to the Actuarial Status of

the Combined OASDI Program

[Comparison of scenario-based and stochastic results]

Traditional

scenario-based model Stochastic model

IntermediateLowcostHighcost

Median

50th

percentile

80-percent

confidence interval

95-percent

confidence interval

10th

percentile

90th

percentile

2.5th

percentile

97.5th

percentile

Actuarial balance . . . . . . -2.72 -0.19 -5.93 -2.63 -4.04 -1.17 -4.84 -0.34

Open group unfunded 

obligation (in trillions) $9.6 $0.2 $20.6 $9.4 $15.2 $4.2 $18.8 $0.9

First projected year cost 

exceeds non-interest 

income and remains in 

excess through 2087a .

a Cost also exceeded non-interest income in 2010, 2011, and 2012.

2013 2013 2013 2013 2013 b

b For this percentile, cost does not exceed non-interest income in 2087.

2013 b

First year asset reserves 

become depletedc . . . .

c For some stochastic simulations, the first year in which trust fund reserves become depleted does not indicate a permanent depletion of reserves.

2033 2068 2027 2033 2029 2039 2028 2044

Annual cost in 75th year 

(percent of taxable

payroll) . . . . . . . . . . . . 18.01 13.15 25.36 17.54 12.95 22.70 10.83 26.05

Annual cost in 75th year 

(percent of GDP). . . . . 6.20 4.93 8.03 5.80 3.70 7.69 2.98 8.86
Appendices

192

F. ESTIMATES FOR OASDI AND HI, SEPARATE AND COMBINED

In this appendix, the Trustees present long-range actuarial estimates for the

OASDI and Hospital Insurance (HI) programs both separately and on a combined basis. These estimates facilitate analysis of the adequacy of the income

and asset reserves of these programs relative to their cost under current law.

This appendix does not include estimates for the Supplementary Medical

Insurance (SMI) program because adequate financing is guaranteed in the

law, and because the SMI program is not financed through a payroll tax. For

more information on Medicare estimates, please see the 2013 Medicare

Trustees Report.

The information in this appendix on combined operations, while significant,

should not obscure the analysis of the financial status of the individual trust

funds, which are legally separate and cannot be commingled. In addition, the

factors which determine the costs of the OASI, DI, and HI programs differ

substantially.

1. Estimates as a Percentage of Taxable Payroll

Comparing cost and income rates for the OASDI and HI programs as percentages of taxable payroll requires a note of caution. The taxable payrolls

for the HI program are larger than those estimated for the OASDI program

because: (1) a larger maximum taxable amount was established for the HI

program in 1991, with the maximum eliminated altogether for the HI program in 1994; (2) a larger proportion of Federal, State, and local government

employees are covered under the HI program; and (3) the earnings of railroad workers are included directly in the HI taxable payroll but not in the

OASDI taxable payroll. (Railroad contributions for the equivalent of OASDI

benefits are accounted for in a net interchange that occurs annually between

the OASDI and Railroad Retirement programs.) As a result, the HI taxable

payroll is about 26 percent larger than the OASDI taxable payroll throughout

the long-range period.

As with the OASI and DI Trust Funds, income to the HI Trust Fund comes

primarily from contributions paid by employees, employers, and selfemployed persons. Table VI.F1 shows the OASDI and HI contribution rates

that are authorized in the Federal Insurance Contributions Act.
193

OASDI and HI: Percent of Payroll

Table VI.F2 shows the Trustees’ estimates of annual income rates and cost

rates for the OASDI program and the HI program under the low-cost, intermediate, and high-cost sets of assumptions described earlier in this report.

The income rates reflect the tax rates shown in table VI.F1. For the HI proTable VI.F1.—Payroll Tax Contribution Rates for the OASDI and HI Programs

[In percent]

Calendar years

Employees and employers, 

combineda

a Except as noted below, the combined employee/employer rate is divided equally between employees and

employers.

Employees 

only Self employedb

b Beginning in 1990, self-employed persons receive a deduction, for purposes of computing their net earnings, equal to half of the combined OASDI and HI contributions that would be payable without regard to the

contribution and benefit base. The OASDI contribution rate then applies to net earnings after this deduction,

but subject to the OASDI base.

OASDI

up to basec

c The payroll tax on earnings for the OASDI program applies to annual earnings up to a contribution and

benefit base indexed to the average wage level. The base is $113,700 for 2013.

HI

all earningsd

d Prior to 1994, the payroll tax on earnings for the HI program applied to annual earnings up to a contribution base. The HI contribution base was eliminated beginning in 1994.

HI

over limite

e Starting with Federal personal income tax returns for tax year 2013, earned income exceeding $200,000 for

individual filers and $250,000 for married couples filing jointly is subject to an additional HI tax of

0.9 percent. These income limits are not indexed after 2013.

OASDI

up to basec HIall earningsd HIover limite

1966 . . . . . . . . . . . . . 7.70 0.70 — 5.80 0.35 —

1967 . . . . . . . . . . . . . 7.80 1.00 — 5.90 .50 —

1968 . . . . . . . . . . . . . 7.60 1.20 — 5.80 .60 —

1969-70 . . . . . . . . . . 8.40 1.20 — 6.30 .60 —

1971-72 . . . . . . . . . . 9.20 1.20 — 6.90 .60 —

1973 . . . . . . . . . . . . . 9.70 2.00 — 7.00 1.00 —

1974-77 . . . . . . . . . . 9.90 1.80 — 7.00 .90 —

1978 . . . . . . . . . . . . . 10.10 2.00 — 7.10 1.00 —

1979-80 . . . . . . . . . . 10.16 2.10 — 7.05 1.05 —

1981 . . . . . . . . . . . . . 10.70 2.60 — 8.00 1.30 —

1982-83 . . . . . . . . . . 10.80 2.60 — 8.05 1.30 —

1984f. . . . . . . . . . . . .

f In 1984 only, employees received an immediate credit of 0.3 percent of taxable wages against their OASDI

payroll tax contributions. The self-employed received similar credits of 2.7 percent, 2.3 percent, and

2.0 percent against their combined OASDI and Hospital Insurance (HI) contributions on net earnings from

self-employment in 1984, 1985, and 1986-89, respectively. The General Fund of the Treasury reimbursed

the trust funds for these credits. 

11.40 2.60 — 11.40 2.60 —

1985f . . . . . . . . . . . . 11.40 2.70 — 11.40 2.70 —

1986-87f. . . . . . . . . . 11.40 2.90 — 11.40 2.90 —

1988-89f. . . . . . . . . . 12.12 2.90 — 12.12 2.90 —

1990-2010g. . . . . . . .

g Public Law 111-147 exempted most employers from paying the employer share of OASDI payroll tax on

wages paid during the period March 19, 2010 through December 31, 2010 to certain qualified individuals

hired after February 3, 2010. Public Law 111-312, Public Law 112-78, and Public Law 112-96 reduced the

OASDI payroll tax rate for 2011 and 2012 by 2 percentage points for employees and for self-employed

workers. These laws require that the General Fund of the Treasury reimburse the OASI and DI Trust Funds

for these temporary reductions in 2010, 2011, and 2012 payroll tax revenue, in order to “replicate to the

extent possible” revenue that would have been received if the combined employee/employer payroll tax

rates had remained at 12.4 percent for OASDI (10.6 percent for OASI and 1.8 percent for DI).

12.40 2.90 — 12.40 2.90 —

2011-2012g. . . . . . . . 10.40 2.90 — 10.40 2.90 —

2013 and later. . . . . . 12.40 2.90 0.90 12.40 2.90 0.90
Appendices

194

gram, the income rates reflect: (1) the additional 0.9 percent tax on employees for relatively high earnings; and (2) the portion of total payroll to which

the 0.9 percent rate applies. Annual income and cost rates indicate the cashflow operation of the programs. Therefore, income rates exclude interest

earned on trust fund asset reserves. Table VI.F2 also shows annual balances,

which are the differences between annual income rates and cost rates.

The Trustees project that the OASDI and HI cost rates will rise generally

above current levels under the intermediate and high-cost sets of assumptions. The greatest increase occurs during the period 2018-35 under both sets

of assumptions for OASDI and under the intermediate assumptions for HI.

For the HI low-cost assumptions, cost rates increase relatively rapidly from

2020 to about 2050. Under the intermediate assumptions, the OASDI cost

rate increases by 29 percent from its current level by 2087, while under the

high-cost assumptions, the cost rate increases by 78 percent by 2087. For HI,

cost rates increase 62 percent and 240 percent from 2013-87 under the intermediate and high-cost assumptions, respectively. Under the low-cost

assumptions, the OASDI and HI cost rates each decrease by the end of the

period. 

For both the OASDI and HI programs, the Trustees project annual deficits

for almost every year of the projection period under the intermediate and

high-cost assumptions. Under the low-cost assumptions, OASDI annual balances are negative throughout the projection period, while HI annual balances are positive for all years except for 2013-14.
195

OASDI and HI: Percent of Payroll

Table VI.F2.—OASDI and HI Annual Income Rates, Cost Rates, and Balances,

Calendar Years 2013-90

[As a percentage of taxable payrolla]

Calendar year

OASDI HI

Income rateCost

rate Balance

Income rateCost

rateb Balance

Intermediate:

2013 . . . . . . . . . . 12.69 13.95 -1.26 3.27 3.62 -0.35

2014 . . . . . . . . . . 12.83 14.04 -1.20 3.30 3.48 -.18

2015 . . . . . . . . . . 12.86 13.97 -1.10 3.32 3.37 -.05

2016 . . . . . . . . . . 12.88 13.91 -1.03 3.34 3.34 c

2017 . . . . . . . . . . 12.90 13.88 -.98 3.36 3.34 .02

2018 . . . . . . . . . . 12.93 13.91 -.98 3.38 3.39 -.01

2019 . . . . . . . . . . 12.95 14.06 -1.11 3.40 3.43 -.03

2020 . . . . . . . . . . 12.97 14.26 -1.29 3.42 3.50 -.08

2021 . . . . . . . . . . 12.99 14.44 -1.45 3.44 3.58 -.14

2022 . . . . . . . . . . 13.03 14.70 -1.68 3.46 3.73 -.26

2025 . . . . . . . . . . 13.07 15.48 -2.40 3.52 3.99 -.47

2030 . . . . . . . . . . 13.13 16.49 -3.36 3.61 4.45 -.84

2035 . . . . . . . . . . 13.16 16.98 -3.82 3.68 4.86 -1.18

2040 . . . . . . . . . . 13.17 16.96 -3.79 3.74 5.18 -1.44

2045 . . . . . . . . . . 13.17 16.83 -3.66 3.80 5.36 -1.56

2050 . . . . . . . . . . 13.17 16.78 -3.61 3.86 5.44 -1.58

2055 . . . . . . . . . . 13.18 16.91 -3.73 3.94 5.48 -1.54

2060 . . . . . . . . . . 13.20 17.14 -3.95 4.01 5.54 -1.53

2065 . . . . . . . . . . 13.21 17.36 -4.15 4.07 5.65 -1.58

2070 . . . . . . . . . . 13.22 17.58 -4.36 4.14 5.78 -1.64

2075 . . . . . . . . . . 13.23 17.72 -4.49 4.19 5.88 -1.69

2080 . . . . . . . . . . 13.23 17.76 -4.53 4.24 5.89 -1.65

2085 . . . . . . . . . . 13.24 17.91 -4.67 4.28 5.87 -1.59

2090 . . . . . . . . . . 13.25 18.16 -4.91 4.33 5.93 -1.60

Low-cost:

2013 . . . . . . . . . . 12.61 13.69 -1.08 3.25 3.51 -.25

2014 . . . . . . . . . . 12.88 13.52 -.63 3.28 3.28 c

2015 . . . . . . . . . . 12.84 13.27 -.44 3.29 3.12 .17

2016 . . . . . . . . . . 12.85 13.05 -.20 3.31 3.04 .26

2017 . . . . . . . . . . 12.87 12.95 -.08 3.32 2.99 .33

2018 . . . . . . . . . . 12.89 12.92 -.02 3.34 2.98 .36

2019 . . . . . . . . . . 12.91 12.98 -.07 3.36 2.96 .40

2020 . . . . . . . . . . 12.92 13.09 -.16 3.37 2.96 .41

2021 . . . . . . . . . . 12.94 13.16 -.22 3.39 2.97 .41

2022 . . . . . . . . . . 12.97 13.30 -.33 3.40 3.04 .36

2025 . . . . . . . . . . 13.00 13.81 -.80 3.47 3.08 .39

2030 . . . . . . . . . . 13.05 14.46 -1.41 3.54 3.14 .40

2035 . . . . . . . . . . 13.06 14.64 -1.57 3.60 3.13 .47

2040 . . . . . . . . . . 13.06 14.37 -1.31 3.64 2.96 .68

2045 . . . . . . . . . . 13.04 14.03 -.99 3.68 2.82 .86

2050 . . . . . . . . . . 13.04 13.81 -.77 3.73 2.70 1.04

2055 . . . . . . . . . . 13.03 13.74 -.70 3.79 2.61 1.18

2060 . . . . . . . . . . 13.04 13.73 -.69 3.85 2.59 1.26

2065 . . . . . . . . . . 13.04 13.68 -.64 3.90 2.64 1.26

2070 . . . . . . . . . . 13.03 13.59 -.56 3.95 2.70 1.25

2075 . . . . . . . . . . 13.03 13.41 -.38 3.99 2.75 1.25

2080 . . . . . . . . . . 13.01 13.17 -.15 4.03 2.75 1.28

2085 . . . . . . . . . . 13.01 13.12 -.10 4.07 2.75 1.32

2090 . . . . . . . . . . 13.02 13.22 -.20 4.11 2.82 1.29
Appendices

196

Notes:

1. The income rate excludes interest income.

2. Totals do not necessarily equal the sums of rounded components.

Table VI.F3 shows summarized values over the 25-year, 50-year, and 75-

year valuation periods. For each of those periods, the summarized income

rates include beginning trust fund asset reserves, and the summarized cost

rates include the cost of accumulating an ending fund reserve equal to

100 percent of annual cost at the end of the period.

High-cost:

2013 . . . . . . . . . . 12.77 14.23 -1.46 3.27 3.77 -.50

2014 . . . . . . . . . . 12.79 14.65 -1.87 3.31 3.74 -.43

2015 . . . . . . . . . . 12.90 14.91 -2.01 3.33 3.70 -.37

2016 . . . . . . . . . . 12.93 15.13 -2.20 3.36 3.75 -.39

2017 . . . . . . . . . . 12.95 15.22 -2.27 3.38 3.83 -.44

2018 . . . . . . . . . . 12.98 15.32 -2.34 3.40 3.95 -.55

2019 . . . . . . . . . . 13.00 15.50 -2.49 3.43 4.08 -.65

2020 . . . . . . . . . . 13.02 15.68 -2.66 3.45 4.24 -.78

2021 . . . . . . . . . . 13.05 15.91 -2.86 3.48 4.42 -.94

2022 . . . . . . . . . . 13.09 16.25 -3.17 3.50 4.69 -1.19

2025 . . . . . . . . . . 13.15 17.29 -4.15 3.57 5.33 -1.76

2030 . . . . . . . . . . 13.23 18.77 -5.54 3.68 6.57 -2.89

2035 . . . . . . . . . . 13.28 19.69 -6.40 3.77 7.98 -4.21

2040 . . . . . . . . . . 13.31 20.08 -6.77 3.86 9.31 -5.45

2045 . . . . . . . . . . 13.33 20.32 -6.99 3.94 10.43 -6.50

2050 . . . . . . . . . . 13.35 20.63 -7.28 4.02 11.24 -7.22

2055 . . . . . . . . . . 13.37 21.11 -7.74 4.11 11.75 -7.64

2060 . . . . . . . . . . 13.41 21.73 -8.32 4.20 12.09 -7.89

2065 . . . . . . . . . . 13.45 22.42 -8.97 4.29 12.35 -8.06

2070 . . . . . . . . . . 13.49 23.18 -9.69 4.37 12.63 -8.26

2075 . . . . . . . . . . 13.53 23.90 -10.37 4.44 12.84 -8.40

2080 . . . . . . . . . . 13.56 24.50 -10.94 4.51 12.87 -8.36

2085 . . . . . . . . . . 13.59 25.11 -11.52 4.57 12.84 -8.26

2090 . . . . . . . . . . 13.62 25.69 -12.07 4.63 12.87 -8.23

a The taxable payroll for HI is significantly larger than the taxable payroll for OASDI because the HI taxable

maximum amount was eliminated beginning in 1994, and because HI covers all Federal civilian employees,

all State and local government employees hired after April 1, 1986, and railroad employees.

b Estimated costs attributable to insured beneficiaries only, on an incurred basis. The Trustees expect benefits and administrative costs for non-insured persons to be financed through general revenue transfers and

premium payments, rather than through payroll taxes.

c Between -0.005 and 0.005 percent of taxable payroll.

Table VI.F2.—OASDI and HI Annual Income Rates, Cost Rates, and Balances,

Calendar Years 2013-90 (Cont.)

[As a percentage of taxable payrolla]

Calendar year

OASDI HI

Income

rate

Cost

rate Balance

Income

rate

Cost

rateb Balance
197

OASDI and HI: Percent of Payroll

Note: Totals do not necessarily equal the sums of rounded components.

The Trustees project that the OASDI and HI systems will each experience

large actuarial deficits for the 25-year, 50-year, and 75-year valuation periods

under the high-cost assumptions. Actuarial deficits under the intermediate

assumptions are smaller than those for the high-cost assumptions for all three

valuation periods. The HI system has a positive actuarial balance under the

low-cost assumptions for all three valuation periods, but the OASDI system

has a negative actuarial balance for the 50-year and 75-year periods.

Table VI.F3.—Summarized OASDI and HI Income Rates and Cost Rates for Valuation 

Periods,a Calendar Years 2013-90

[As a percentage of taxable payrollb]

Valuation

period 

OASDI HI

Income rate Cost

rate

Actuarial

balance

Income rate Cost

rate

Actuarial

balance

Intermediate:

25-year:

2013-37 . . . . . . 14.77 16.03 -1.27 3.62 4.20 -0.58

50-year:

2013-62 . . . . . . 14.08 16.33 -2.25 3.73 4.69 -.97

75-year:

2013-87 . . . . . . 13.88 16.60 -2.72 3.83 4.94 -1.11

Low-cost:

25-year:

2013-37 . . . . . . 14.66 14.38 .28 3.57 3.21 .36

50-year:

2013-62 . . . . . . 13.94 14.11 -.17 3.64 2.99 .66

75-year:

2013-87 . . . . . . 13.70 13.89 -.19 3.73 2.91 .82

High-cost:

25-year:

2013-37 . . . . . . 14.84 18.02 -3.18 3.68 5.82 -2.14

50-year:

2013-62 . . . . . . 14.21 19.06 -4.86 3.81 7.91 -4.09

75-year:

2013-87 . . . . . . 14.06 19.99 -5.93 3.94 8.87 -4.93

a Income rates include beginning trust fund asset reserves and cost rates include the cost of reaching an ending target trust fund equal to 100 percent of annual cost at the end of the period.

b The taxable payroll for HI is significantly larger than the taxable payroll for OASDI because the HI taxable

maximum amount was eliminated beginning 1994, and because HI covers all Federal civilian employees, all

State and local government employees hired after April 1, 1986, and railroad employees.
Appendices

198

2. Estimates as a Percentage of Gross Domestic Product

This section contains long-range projections of the operations of the combined Old-Age and Survivors Insurance and Disability Insurance (OASI and

DI) Trust Funds and of the Hospital Insurance (HI) Trust Fund, expressed as

a percentage of gross domestic product (GDP). While expressing fund operations as a percentage of taxable payroll is the most useful approach for

assessing the financial status of the programs (see section IV.B.1), expressing them as a percentage of the total value of goods and services produced in

the United States provides an additional perspective.

Table VI.F4 shows non-interest income, total cost, and the resulting balance

of the combined OASI and DI Trust Funds, of the HI Trust Fund, and of the

combined OASI, DI, and HI Trust Funds, expressed as percentages of GDP

on the basis of each of the three alternative sets of assumptions. Table VI.F4

also contains estimates of GDP. For OASDI, non-interest income consists of

payroll tax contributions, proceeds from taxation of benefits, and reimbursements from the General Fund of the Treasury, if any. Cost consists of scheduled benefits, administrative expenses, financial interchange with the

Railroad Retirement program, and payments for vocational rehabilitation

services for disabled beneficiaries. For HI, non-interest income consists of

payroll tax contributions (including contributions from railroad employment), up to an additional 0.9 percent tax on earned income for relatively

high earners, proceeds from taxation of OASDI benefits, and reimbursements from the General Fund of the Treasury, if any. Cost consists of outlays

(benefits and administrative expenses) for insured beneficiaries. The Trustees show income and cost estimates on a cash basis for the OASDI program

and on an incurred basis for the HI program.

The Trustees project the OASDI annual balance (non-interest income less

cost) as a percentage of GDP to be negative throughout the projection period

under all three sets of assumptions. Under the low-cost assumptions the

OASDI annual deficit as a percentage of GDP decreases through 2018. After

2018, deficits increase to a peak in 2034 and then decrease throughout most

of the projection period, reaching 0.05 percent of GDP in 2087. Under the

intermediate assumptions, annual deficits decrease through 2017, increase

from 2017 through 2037, decrease from 2037 through 2050, and mostly

increase thereafter. Under the high-cost assumptions, annual deficits increase

throughout the projection period.

The Trustees project that the HI balance as a percentage of GDP will be negative from 2013 to 2014 under the low-cost assumptions, and then positive

and generally increasing thereafter. Under the intermediate assumptions, the

HI balance is negative for each year of the projection period except for 2017.
199

OASDI and HI: Percent of GDP

Annual deficits reach a peak in 2047 and remain relatively stable thereafter.

Under the high-cost assumptions, the HI balance is negative for all years of

the projection period. Annual deficits reach a peak in 2074 and mostly

decline thereafter.

The combined OASDI and HI annual balance as a percentage of GDP is negative throughout the projection period under both the intermediate and highcost assumptions. Under the low-cost assumptions, the combined OASDI

and HI balance is negative from 2013 through 2015, positive from 2016

through 2022, negative from 2023 through 2044, and then positive and

mostly rising thereafter. Under the intermediate assumptions, combined

OASDI and HI annual deficits decline from 2013 through 2017, increase

from 2017 through 2039, and mostly decrease through 2052. After 2052,

annual deficits generally rise, reaching 2.32 percent of GDP by 2087. Under

the high-cost assumptions, combined annual deficits rise throughout the projection period.

By 2087, the combined OASDI and HI annual balances as percentages of

GDP range from a positive balance of 0.57 percent for the low-cost assumptions to a deficit of 7.06 percent for the high-cost assumptions. Balances differ by a smaller amount for the tenth year, 2022, and range from a positive

balance of 0.04 percent for the low-cost assumptions to a deficit of

1.73 percent for the high-cost assumptions.

The summarized long-range (75-year) balance as a percentage of GDP for

the combined OASDI and HI programs varies among the three alternatives

by a relatively large amount, from a positive balance of 0.31 percent under

the low-cost assumptions to a deficit of 4.27 percent under the high-cost

assumptions. The 25-year summarized balance varies by a smaller amount,

from a positive balance of 0.27 percent to a deficit of 2.14 percent. Summarized rates are calculated on a present-value basis. They include the trust

fund balances on January 1, 2013 and the cost of reaching a target trust fund

level equal to 100 percent of the following year’s annual cost at the end of

the period. (See section IV.B.4 for further explanation.)
Appendices

200

Table VI.F4.—OASDI and HI Annual and Summarized Income, Cost, and Balance

as a Percentage of GDP, Calendar Years 2013-90

Calendar year

Percentage of GDP GDP in

dollars

(billions)

OASDI HI Combined

Incomea Cost Balance Incomea Cost Balance Incomea Cost Balance

Intermediate:

2013 . . . . . . 4.60 5.06 -0.46 1.47 1.63 -0.16 6.07 6.69 -0.61 $16,348

2014 . . . . . . 4.65 5.09 -.44 1.50 1.57 -.08 6.15 6.66 -.52 17,194

2015 . . . . . . 4.67 5.07 -.40 1.52 1.54 -.02 6.19 6.61 -.42 18,239

2016 . . . . . . 4.71 5.08 -.38 1.54 1.54 b 6.25 6.62 -.38 19,346

2017 . . . . . . 4.75 5.11 -.36 1.56 1.55 .01 6.31 6.67 -.35 20,463

2018 . . . . . . 4.80 5.16 -.36 1.58 1.59 -.01 6.38 6.75 -.37 21,582

2019 . . . . . . 4.82 5.23 -.41 1.59 1.61 -.01 6.42 6.84 -.43 22,667

2020 . . . . . . 4.84 5.32 -.48 1.61 1.64 -.04 6.45 6.96 -.52 23,747

2021 . . . . . . 4.86 5.40 -.54 1.62 1.68 -.06 6.47 7.08 -.61 24,853

2022 . . . . . . 4.87 5.50 -.63 1.62 1.75 -.12 6.49 7.24 -.75 25,993

2025 . . . . . . 4.86 5.75 -.89 1.64 1.86 -.22 6.50 7.61 -1.11 29,744

2030 . . . . . . 4.84 6.08 -1.24 1.67 2.06 -.39 6.51 8.14 -1.63 37,121

2035 . . . . . . 4.83 6.23 -1.40 1.69 2.24 -.54 6.52 8.47 -1.94 46,360

2040 . . . . . . 4.81 6.19 -1.38 1.71 2.37 -.66 6.52 8.56 -2.04 58,188

2045 . . . . . . 4.78 6.10 -1.33 1.73 2.44 -.71 6.51 8.54 -2.04 73,049

2050 . . . . . . 4.74 6.05 -1.30 1.75 2.46 -.71 6.49 8.51 -2.01 91,448

2055 . . . . . . 4.72 6.05 -1.33 1.77 2.46 -.69 6.48 8.51 -2.03 114,078

2060 . . . . . . 4.69 6.09 -1.40 1.79 2.47 -.68 6.48 8.56 -2.09 142,140

2065 . . . . . . 4.66 6.12 -1.46 1.81 2.50 -.70 6.47 8.63 -2.16 177,220

2070 . . . . . . 4.63 6.16 -1.53 1.82 2.54 -.72 6.45 8.71 -2.25 221,157

2075 . . . . . . 4.61 6.17 -1.56 1.83 2.57 -.74 6.44 8.74 -2.30 276,158

2080 . . . . . . 4.58 6.15 -1.57 1.84 2.56 -.72 6.43 8.71 -2.29 344,559

2085 . . . . . . 4.56 6.17 -1.61 1.86 2.54 -.69 6.42 8.72 -2.30 429,265

2090 . . . . . . 4.55 6.23 -1.68 1.87 2.56 -.69 6.42 8.79 -2.38 533,954

Summarized rates: c

25-year:

 2013-37 . . . 5.45 5.92 -.47 1.68 1.95 -.27 7.13 7.87 -.74

50-year:

 2013-62 . . . 5.14 5.97 -.82 1.71 2.15 -.44 6.85 8.12 -1.27

75-year

 2013-87 . . . 5.01 6.00 -.98 1.74 2.24 -.50 6.75 8.24 -1.49

Low-cost:

2013 . . . . . . 4.57 4.97 -.39 1.47 1.58 -.11 6.04 6.55 -.51 16,603

2014 . . . . . . 4.69 4.92 -.23 1.49 1.50 b 6.18 6.41 -.23 17,658

2015 . . . . . . 4.70 4.86 -.16 1.51 1.44 .08 6.22 6.30 -.08 18,736

2016 . . . . . . 4.76 4.83 -.08 1.53 1.41 .12 6.29 6.24 .05 19,839

2017 . . . . . . 4.81 4.84 -.03 1.55 1.40 .15 6.36 6.23 .13 20,886

2018 . . . . . . 4.86 4.87 -.01 1.57 1.40 .17 6.43 6.27 .16 21,864

2019 . . . . . . 4.89 4.91 -.03 1.58 1.39 .19 6.46 6.30 .16 22,830

2020 . . . . . . 4.91 4.97 -.06 1.58 1.39 .19 6.49 6.36 .13 23,810

2021 . . . . . . 4.93 5.01 -.08 1.59 1.40 .19 6.52 6.41 .11 24,823

2022 . . . . . . 4.95 5.07 -.12 1.60 1.43 .17 6.55 6.50 .04 25,854

2025 . . . . . . 4.94 5.24 -.31 1.62 1.44 .18 6.56 6.69 -.12 29,244

2030 . . . . . . 4.93 5.47 -.54 1.65 1.46 .19 6.58 6.93 -.35 35,777

2035 . . . . . . 4.93 5.52 -.59 1.67 1.46 .22 6.60 6.98 -.38 43,822

2040 . . . . . . 4.92 5.42 -.49 1.69 1.38 .31 6.61 6.79 -.18 54,062

2045 . . . . . . 4.91 5.28 -.37 1.71 1.31 .40 6.62 6.59 .03 66,895

2050 . . . . . . 4.90 5.19 -.29 1.73 1.25 .48 6.62 6.43 .19 82,712

2055 . . . . . . 4.89 5.15 -.26 1.75 1.20 .55 6.64 6.36 .28 102,118

2060 . . . . . . 4.88 5.14 -.26 1.78 1.20 .58 6.66 6.34 .32 126,142

2065 . . . . . . 4.88 5.12 -.24 1.80 1.22 .58 6.68 6.33 .34 156,094

2070 . . . . . . 4.87 5.08 -.21 1.82 1.24 .57 6.69 6.32 .37 193,566

2075 . . . . . . 4.87 5.01 -.14 1.84 1.26 .57 6.70 6.27 .43 240,543

2080 . . . . . . 4.86 4.92 -.06 1.85 1.27 .59 6.72 6.19 .53 298,980

2085 . . . . . . 4.87 4.91 -.04 1.87 1.27 .61 6.75 6.18 .57 371,055

2090 . . . . . . 4.88 4.96 -.08 1.90 1.30 .59 6.78 6.26 .52 459,684
201

OASDI and HI: Percent of GDP

Note: Totals do not necessarily equal the sums of rounded components.

To compare trust fund operations expressed as percentages of taxable payroll

and those expressed as percentages of GDP, table VI.F5 displays ratios of

OASDI taxable payroll to GDP. HI taxable payroll is about 26 percent larger

than the OASDI taxable payroll throughout the long-range period; see section 1 of this appendix for a detailed description of the difference. The cost

Low-cost (Cont.):

Summarized rates: c

25-year:

 2013-37 . . . 5.52 5.41 .11 1.66 1.49 .17 7.18 6.91 .27

50-year:

 2013-62 . . . 5.24 5.31 -.06 1.69 1.39 .30 6.94 6.70 .24

75-year

 2013-87 . . . 5.15 5.22 -.07 1.73 1.35 .38 6.88 6.57 .31

High-cost:

2013 . . . . . . 4.63 5.16 -.53 1.47 1.70 -.22 6.10 6.86 -.75 16,070

2014 . . . . . . 4.62 5.30 -.67 1.49 1.68 -.19 6.11 6.98 -.87 16,649

2015 . . . . . . 4.65 5.37 -.72 1.51 1.67 -.17 6.15 7.04 -.89 17,506

2016 . . . . . . 4.67 5.46 -.79 1.53 1.71 -.18 6.20 7.17 -.97 18,498

2017 . . . . . . 4.70 5.52 -.82 1.56 1.76 -.20 6.26 7.28 -1.03 19,634

2018 . . . . . . 4.74 5.59 -.85 1.58 1.84 -.26 6.32 7.43 -1.11 20,842

2019 . . . . . . 4.77 5.68 -.91 1.61 1.91 -.30 6.37 7.59 -1.22 22,067

2020 . . . . . . 4.79 5.77 -.98 1.62 1.99 -.37 6.42 7.76 -1.35 23,365

2021 . . . . . . 4.81 5.87 -1.05 1.64 2.08 -.44 6.45 7.95 -1.50 24,637

2022 . . . . . . 4.82 5.99 -1.17 1.65 2.21 -.56 6.47 8.20 -1.73 25,906

2025 . . . . . . 4.81 6.33 -1.52 1.67 2.49 -.82 6.48 8.82 -2.34 30,027

2030 . . . . . . 4.79 6.79 -2.00 1.70 3.04 -1.34 6.49 9.83 -3.34 38,279

2035 . . . . . . 4.76 7.06 -2.29 1.73 3.66 -1.93 6.49 10.71 -4.22 48,767

2040 . . . . . . 4.72 7.13 -2.40 1.75 4.22 -2.47 6.47 11.35 -4.87 62,251

2045 . . . . . . 4.68 7.13 -2.45 1.77 4.68 -2.92 6.44 11.82 -5.37 79,234

2050 . . . . . . 4.63 7.15 -2.52 1.78 4.99 -3.20 6.41 12.14 -5.73 100,308

2055 . . . . . . 4.58 7.23 -2.65 1.80 5.15 -3.35 6.38 12.38 -6.00 126,282

2060 . . . . . . 4.53 7.35 -2.81 1.82 5.23 -3.42 6.35 12.58 -6.23 158,461

2065 . . . . . . 4.49 7.48 -2.99 1.83 5.28 -3.45 6.32 12.76 -6.44 198,609

2070 . . . . . . 4.44 7.63 -3.19 1.84 5.33 -3.49 6.28 12.96 -6.68 248,746

2075 . . . . . . 4.40 7.77 -3.37 1.85 5.36 -3.50 6.25 13.13 -6.87 311,140

2080 . . . . . . 4.36 7.87 -3.52 1.86 5.31 -3.45 6.22 13.18 -6.96 388,318

2085 . . . . . . 4.32 7.98 -3.66 1.87 5.24 -3.37 6.19 13.22 -7.03 483,748

2090 . . . . . . 4.29 8.08 -3.80 1.87 5.20 -3.33 6.16 13.28 -7.12 601,803

Summarized rates: c

25-year:

 2013-37 . . . 5.39 6.55 -1.15 1.70 2.69 -.99 7.09 9.24 -2.14

50-year:

 2013-62 . . . 5.06 6.79 -1.73 1.73 3.59 -1.86 6.80 10.39 -3.59

75-year

 2013-87 . . . 4.91 6.98 -2.07 1.76 3.96 -2.20 6.67 10.94 -4.27

a Income for individual years excludes interest on the trust funds. Interest is implicit in all summarized values.

b Between -0.005 and 0.005 percent of GDP.

c Summarized rates are calculated on a present-value basis. They include the value of the trust funds on

January 1, 2013 and the cost of reaching a target trust fund level equal to 100 percent of annual cost at the end

of the period.

Table VI.F4.—OASDI and HI Annual and Summarized Income, Cost, and Balance

as a Percentage of GDP, Calendar Years 2013-90 (Cont.)

Calendar year

Percentage of GDP GDP in

dollars

(billions)

OASDI HI Combined

Incomea Cost Balance Incomea Cost Balance Incomea Cost Balance
Appendices

202

as a percentage of GDP is equal to the cost as a percentage of taxable payroll

multiplied by the ratio of taxable payroll to GDP.

Projections of GDP reflect projected increases in U.S. employment, labor

productivity, average hours worked, and the GDP deflator. Projections of

taxable payroll reflect the components of growth in GDP along with assumed

changes in the ratio of worker compensation to GDP, the ratio of earnings to

worker compensation, the ratio of OASDI covered earnings to total earnings,

and the ratio of taxable to total covered earnings.

Over the long-range period, the Trustees project that the ratio of OASDI taxable payroll to GDP will decline mostly due to a projected decline in the

ratio of wages to employee compensation. Over the last five complete economic cycles, the ratio of wages to employee compensation declined at an

average annual rate of 0.25 percent. The Trustees project that the ratio of

wages to employee compensation will continue to decline, over the 65-year

period ending in 2087, at an average annual rate of 0.03, 0.13, and

0.23 percent for the low-cost, intermediate, and high-cost assumptions,

respectively.

Table VI.F5.—Ratio of OASDI Taxable Payroll to GDP, Calendar Years 2013-90 

Calendar year Intermediate Low-cost High-cost

2013 . . . . . . . . . . . . . . . . . . . . . . . . . 0.363 0.363 0.363

2014 . . . . . . . . . . . . . . . . . . . . . . . . . .363 .364 .361

2015 . . . . . . . . . . . . . . . . . . . . . . . . . .363 .366 .360

2016 . . . . . . . . . . . . . . . . . . . . . . . . . .365 .370 .361

2017 . . . . . . . . . . . . . . . . . . . . . . . . . .368 .374 .363

2018 . . . . . . . . . . . . . . . . . . . . . . . . . .371 .377 .365

2019 . . . . . . . . . . . . . . . . . . . . . . . . . .372 .379 .367

2020 . . . . . . . . . . . . . . . . . . . . . . . . . .373 .380 .368

2021 . . . . . . . . . . . . . . . . . . . . . . . . . .374 .381 .369

2022 . . . . . . . . . . . . . . . . . . . . . . . . . .374 .381 .369

2025 . . . . . . . . . . . . . . . . . . . . . . . . . .372 .380 .366

2030 . . . . . . . . . . . . . . . . . . . . . . . . . .369 .378 .362

2035 . . . . . . . . . . . . . . . . . . . . . . . . . .367 .377 .358

2040 . . . . . . . . . . . . . . . . . . . . . . . . . .365 .377 .355

2045 . . . . . . . . . . . . . . . . . . . . . . . . . .363 .376 .351

2050 . . . . . . . . . . . . . . . . . . . . . . . . . .360 .376 .347

2055 . . . . . . . . . . . . . . . . . . . . . . . . . .358 .375 .342

2060 . . . . . . . . . . . . . . . . . . . . . . . . . .355 .375 .338

2065 . . . . . . . . . . . . . . . . . . . . . . . . . .353 .374 .334

2070 . . . . . . . . . . . . . . . . . . . . . . . . . .350 .374 .329

2075 . . . . . . . . . . . . . . . . . . . . . . . . . .348 .374 .325

2080 . . . . . . . . . . . . . . . . . . . . . . . . . .346 .374 .321

2085 . . . . . . . . . . . . . . . . . . . . . . . . . .345 .374 .318

2090 . . . . . . . . . . . . . . . . . . . . . . . . . .343 .375 .315
203

OASDI and HI: Estimates in Dollars

3. Estimates in Dollars

This section contains long-range projections, in dollars, of the operations of

the combined OASI and DI Trust Funds and in some cases the HI Trust

Fund. Comparing current dollar values over long periods of time is difficult

because of the effect of inflation. In order to compare dollar values in a

meaningful way, table VI.F6 provides several economic series or indices

which can be used to adjust current dollars for changes in prices, wages, or

other aspects of economic growth during the projection period. Any series of

values can be adjusted by dividing the value for each year by the corresponding index value for the year.

One of the most common forms of standardization is price indexing, which

uses some measure of change in the prices of consumer goods. The Bureau

of Labor Statistics, Department of Labor, publishes one such price index, the

Consumer Price Index for Urban Wage Earners and Clerical Workers (CPIW, hereafter referred to as CPI). The Social Security Administration (SSA)

uses this index to determine the annual cost-of-living increases for OASDI

monthly benefits. The Trustees assume the ultimate annual rate of increase in

the CPI will be 1.8, 2.8, and 3.8 percent for the low-cost, intermediate, and

high-cost sets of assumptions, respectively. Table VI.F7 provides CPIindexed dollar values (those adjusted using the CPI in table VI.F6), which

indicate the relative purchasing power of the values over time.

Wage indexing is another type of standardization. It combines the effects of

price inflation and real-wage growth. The wage index presented here is the

national average wage index, as defined in section 215(i)(1)(G) of the Social

Security Act. SSA uses this index to annually adjust the contribution and

benefit base and other earnings-related program amounts. The Trustees

assume that the average wage will grow by an average rate of 3.5, 3.9, and

4.3 percent under the low-cost, intermediate, and high-cost assumptions,

respectively, between 2022 and 2087. Wage-indexed values indicate the level

of a series relative to the standard of living of workers over time.

The taxable payroll index adjusts for the effects of changes in the number of

workers and changes in the proportion of earnings that are taxable, as well as

for the effects of price inflation and real-wage growth. The OASDI taxable

payroll consists of all earnings subject to OASDI taxation, with an adjustment for the lower effective tax rate on multiple-employer excess wages. A

series of values, divided by the taxable payroll, indicates the percentage of

payroll that each value represents, and thus the extent to which the series of

values increases or decreases as a percent of payroll over time.
Appendices

204

The GDP index adjusts for the growth in the aggregate amount of goods and

services produced in the United States. Values adjusted by GDP (see section

2 of this appendix) indicate their relative share of the total output of the

economy. The Trustees make no explicit assumption about growth in taxable

payroll or GDP. These series reflect the basic demographic and economic

assumptions, as discussed in sections V.A and V.B, respectively.

Discounting at the rate of interest is another way of adjusting current dollars.

Each interest-rate factor shown in table VI.F6 equals the average of the

assumed annual interest rates for special public-debt obligations issuable to

the trust funds in that year. The Trustees use a slightly different series of

interest rates, the actual annual yields on currently-held trust fund asset

reserves, to calculate the summarized values presented elsewhere in this

report. The Trustees assume that ultimate nominal interest rates, which in

practice are compounded semiannually, will equal approximately 5.2, 5.7,

and 6.2 percent for the low-cost, intermediate, and high-cost assumptions,

respectively.
205

OASDI and HI: Estimates in Dollars

Table VI.F6.—Selected Economic Variables, Calendar Years 2012-90

[GDP and taxable payroll in billions]

Calendar year

Adjusted

CPIa Averagewage index

Taxable

payrollb

Gross

domestic

product

Compound

interest-rate

factorc

Intermediate:

2012 . . . . . . . . . . . . . 98.23 $43,715.77 $5,697 $15,700 0.9844

2013 . . . . . . . . . . . . . 100.00 44,826.31 5,927 16,348 1.0000

2014 . . . . . . . . . . . . . 102.21 46,832.15 6,234 17,194 1.0282

2015 . . . . . . . . . . . . . 104.67 49,372.25 6,625 18,239 1.0748

2016 . . . . . . . . . . . . . 107.33 52,105.87 7,069 19,346 1.1322

2017 . . . . . . . . . . . . . 110.23 54,885.51 7,537 20,463 1.1953

2018 . . . . . . . . . . . . . 113.31 57,617.96 8,004 21,582 1.2635

2019 . . . . . . . . . . . . . 116.49 60,142.03 8,440 22,667 1.3356

2020 . . . . . . . . . . . . . 119.75 62,648.35 8,866 23,747 1.4117

2021 . . . . . . . . . . . . . 123.10 65,241.02 9,295 24,853 1.4923

2022 . . . . . . . . . . . . . 126.55 67,786.09 9,716 25,993 1.5785

2025 . . . . . . . . . . . . . 137.48 75,933.65 11,054 29,744 1.8684

2030 . . . . . . . . . . . . . 157.83 92,352.03 13,692 37,121 2.4747

2035 . . . . . . . . . . . . . 181.20 112,281.58 17,004 46,360 3.2776

2040 . . . . . . . . . . . . . 208.03 136,297.15 21,232 58,188 4.3411

2045 . . . . . . . . . . . . . 238.83 165,323.67 26,494 73,049 5.7497

2050 . . . . . . . . . . . . . 274.19 200,270.65 32,942 91,448 7.6153

2055 . . . . . . . . . . . . . 314.79 242,563.94 40,818 114,078 10.0862

2060 . . . . . . . . . . . . . 361.40 293,666.24 50,508 142,140 13.3589

2065 . . . . . . . . . . . . . 414.91 355,414.45 62,531 177,220 17.6935

2070 . . . . . . . . . . . . . 476.34 430,085.55 77,489 221,157 23.4345

2075 . . . . . . . . . . . . . 546.87 520,886.46 96,148 276,158 31.0383

2080 . . . . . . . . . . . . . 627.84 631,374.48 119,299 344,559 41.1094

2085 . . . . . . . . . . . . . 720.80 765,727.70 147,931 429,265 54.4481

2090 . . . . . . . . . . . . . 827.53 929,183.18 183,242 533,954 72.1150

Low-cost:

2012 . . . . . . . . . . . . . 98.36 43,745.39 5,700 15,713 0.9797

2013 . . . . . . . . . . . . . 100.00 45,413.30 6,023 16,603 1.0000

2014 . . . . . . . . . . . . . 101.74 47,795.78 6,424 17,658 1.0293

2015 . . . . . . . . . . . . . 103.42 50,241.33 6,866 18,736 1.0709

2016 . . . . . . . . . . . . . 105.25 52,782.94 7,342 19,839 1.1226

2017 . . . . . . . . . . . . . 107.14 55,193.54 7,803 20,886 1.1769

2018 . . . . . . . . . . . . . 109.07 57,389.02 8,239 21,864 1.2334

2019 . . . . . . . . . . . . . 111.03 59,497.89 8,642 22,830 1.2947

2020 . . . . . . . . . . . . . 113.03 61,694.50 9,040 23,810 1.3609

2021 . . . . . . . . . . . . . 115.07 63,999.27 9,454 24,823 1.4316

2022 . . . . . . . . . . . . . 117.14 66,228.49 9,861 25,854 1.5065

2025 . . . . . . . . . . . . . 123.58 73,336.14 11,109 29,244 1.7570

2030 . . . . . . . . . . . . . 135.11 87,499.39 13,531 35,777 2.2704

2035 . . . . . . . . . . . . . 147.71 104,283.50 16,537 43,822 2.9340

2040 . . . . . . . . . . . . . 161.50 124,042.17 20,378 54,062 3.7914

2045 . . . . . . . . . . . . . 176.56 147,446.24 25,175 66,895 4.8993

2050 . . . . . . . . . . . . . 193.04 175,076.85 31,069 82,712 6.3311

2055 . . . . . . . . . . . . . 211.05 207,884.91 38,303 102,118 8.1813

2060 . . . . . . . . . . . . . 230.74 246,894.75 47,253 126,142 10.5721

2065 . . . . . . . . . . . . . 252.26 293,214.85 58,402 156,094 13.6616

2070 . . . . . . . . . . . . . 275.80 348,203.32 72,347 193,566 17.6541

2075 . . . . . . . . . . . . . 301.53 413,875.56 89,878 240,543 22.8132

2080 . . . . . . . . . . . . . 329.66 492,297.03 111,773 298,980 29.4800

2085 . . . . . . . . . . . . . 360.42 585,863.60 138,901 371,055 38.0951

2090 . . . . . . . . . . . . . 394.05 697,514.60 172,384 459,684 49.2278
Appendices

206

Table VI.F7 shows the operations of the combined OASI and DI Trust Funds

in CPI-indexed 2013 dollars—that is, adjusted by the CPI indexing series as

discussed above. The following items are presented in the table: (1) noninterest income; (2) interest income; (3) total income; (4) total cost; and (5)

asset reserves at the end of the year. Non-interest income consists of payroll

tax contributions, income from taxation of benefits, and reimbursements

from the General Fund of the Treasury, if any. Cost consists of scheduled

benefits, administrative expenses, financial interchange with the Railroad

Retirement program, and payments for vocational rehabilitation services for

disabled beneficiaries. Table VI.F7 shows trust fund operations under the

low-cost, intermediate, and high-cost sets of assumptions.

High-cost:

2012 . . . . . . . . . . . . . 98.10 $43,685.42 $5,693 $15,686 0.9880

2013 . . . . . . . . . . . . . 100.00 44,180.55 5,827 16,070 1.0000

2014 . . . . . . . . . . . . . 102.67 45,655.01 6,018 16,649 1.0237

2015 . . . . . . . . . . . . . 105.94 47,923.04 6,306 17,506 1.0708

2016 . . . . . . . . . . . . . 109.45 50,605.98 6,675 18,498 1.1313

2017 . . . . . . . . . . . . . 113.38 53,704.44 7,121 19,634 1.2025

2018 . . . . . . . . . . . . . 117.68 56,956.90 7,605 20,842 1.2820

2019 . . . . . . . . . . . . . 122.16 60,094.91 8,092 22,067 1.3666

2020 . . . . . . . . . . . . . 126.80 63,322.96 8,600 23,365 1.4568

2021 . . . . . . . . . . . . . 131.62 66,443.63 9,086 24,637 1.5505

2022 . . . . . . . . . . . . . 136.62 69,383.85 9,551 25,906 1.6481

2025 . . . . . . . . . . . . . 152.79 78,608.51 10,986 30,027 1.9791

2030 . . . . . . . . . . . . . 184.11 97,411.43 13,851 38,279 2.6851

2035 . . . . . . . . . . . . . 221.86 120,767.66 17,477 48,767 3.6429

2040 . . . . . . . . . . . . . 267.34 149,571.09 22,092 62,251 4.9423

2045 . . . . . . . . . . . . . 322.14 185,043.43 27,809 79,234 6.7052

2050 . . . . . . . . . . . . . 388.18 228,568.77 34,778 100,308 9.0971

2055 . . . . . . . . . . . . . 467.75 282,243.71 43,243 126,282 12.3421

2060 . . . . . . . . . . . . . 563.64 348,143.55 53,570 158,461 16.7446

2065 . . . . . . . . . . . . . 679.19 429,131.12 66,270 198,609 22.7175

2070 . . . . . . . . . . . . . 818.42 528,804.28 81,916 248,746 30.8210

2075 . . . . . . . . . . . . . 986.20 652,095.11 101,186 311,140 41.8152

2080 . . . . . . . . . . . . . 1,188.37 804,896.10 124,808 388,318 56.7310

2085 . . . . . . . . . . . . . 1,431.99 994,266.48 153,796 483,748 76.9674

2090 . . . . . . . . . . . . . 1,725.54 1,229,100.54 189,366 601,803 104.4224

a CPI-W indexed to calendar year 2013.

b Total earnings subject to OASDI contribution rates, adjusted to reflect the lower effective contribution

rates (compared to the combined employee-employer rate) that apply to multiple-employer “excess wages.”

c Incorporates the average of the assumed annual interest rates for special public-debt obligations issuable to

the trust funds in the 12 months of the year, under each alternative.

Table VI.F6.—Selected Economic Variables, Calendar Years 2012-90

[GDP and taxable payroll in billions]

Calendar year

Adjusted

CPIa Average

wage index

Taxable

payrollb

Gross

domestic

product

Compound

interest-rate

factorc
207

OASDI and HI: Estimates in Dollars

Note: Totals do not necessarily equal the sums of rounded components.

Figure VI.F1 compares annual cost with annual total income and annual noninterest income. The figure shows only the OASDI program under intermediTable VI.F7.—Operations of the Combined OASI and DI Trust Funds,

in CPI-indexed 2013 Dollars,a Calendar Years 2013-90

[In billions]

a CPI-indexed 2013 dollars equal current dollars adjusted by the CPI indexing series in table VI.F6.

Calendar year

Non-interest

income

Interest

income

Total

income Cost

Asset reserves at

end of year

Intermediate:

2013 . . . . . . . . . . . . . $752.2 $102.6 $854.8 $826.8 $2,760.3

2014 . . . . . . . . . . . . . 782.7 96.1 878.8 856.1 2,723.4

2015 . . . . . . . . . . . . . 814.3 93.3 907.6 884.2 2,682.6

2016 . . . . . . . . . . . . . 848.4 93.4 941.8 916.0 2,641.9

2017 . . . . . . . . . . . . . 882.2 94.9 977.2 949.2 2,600.6

2018 . . . . . . . . . . . . . 913.3 97.1 1,010.4 982.8 2,557.4

2019 . . . . . . . . . . . . . 938.3 98.2 1,036.5 1,018.5 2,505.8

2020 . . . . . . . . . . . . . 960.1 98.3 1,058.4 1,055.5 2,440.5

2021 . . . . . . . . . . . . . 981.1 97.3 1,078.3 1,090.5 2,361.8

2022 . . . . . . . . . . . . . 1,000.0 96.0 1,096.0 1,128.9 2,264.5

2025 . . . . . . . . . . . . . 1,051.0 97.1 1,148.1 1,244.3 1,866.9

2030b . . . . . . . . . . . .

b The combined OASI and DI Trust Funds become depleted in 2068 under the low-cost assumptions, in 2033

under the intermediate assumptions, and in 2027 under the high-cost assumptions, so estimates for later

years are not shown.

1,139.3 51.9 1,191.2 1,430.9 777.3

Low-cost: 

2013 . . . . . . . . . . . . . 759.4 103.4 862.8 824.4 2,770.7

2014 . . . . . . . . . . . . . 813.5 98.9 912.4 853.5 2,782.4

2015 . . . . . . . . . . . . . 852.3 97.6 949.9 881.2 2,805.9

2016 . . . . . . . . . . . . . 896.4 99.6 996.0 910.7 2,842.3

2017 . . . . . . . . . . . . . 937.4 103.2 1,040.6 942.9 2,889.7

2018 . . . . . . . . . . . . . 974.1 107.5 1,081.6 975.9 2,944.4

2019 . . . . . . . . . . . . . 1,004.9 112.2 1,117.0 1,010.5 2,998.9

2020 . . . . . . . . . . . . . 1,033.7 116.9 1,150.6 1,046.7 3,049.7

2021 . . . . . . . . . . . . . 1,063.5 121.3 1,184.8 1,081.2 3,099.3

2022 . . . . . . . . . . . . . 1,091.7 126.5 1,218.2 1,119.2 3,143.5

2025 . . . . . . . . . . . . . 1,168.8 151.4 1,320.2 1,241.2 3,232.7

2030 . . . . . . . . . . . . . 1,306.5 164.6 1,471.1 1,448.1 3,193.5

2035 . . . . . . . . . . . . . 1,462.4 149.6 1,612.0 1,638.6 2,871.7

2040 . . . . . . . . . . . . . 1,647.3 128.7 1,776.0 1,812.8 2,453.3

2045 . . . . . . . . . . . . . 1,859.6 110.0 1,969.7 2,000.1 2,088.2

2050 . . . . . . . . . . . . . 2,098.0 93.6 2,191.6 2,222.4 1,762.8

2055 . . . . . . . . . . . . . 2,365.7 76.7 2,442.3 2,493.3 1,415.8

2060 . . . . . . . . . . . . . 2,669.9 53.6 2,723.5 2,812.1 939.1

2065b . . . . . . . . . . . . 3,018.1 23.4 3,041.5 3,166.0 325.5

High-cost:

2013 . . . . . . . . . . . . . 744.1 101.8 845.9 829.3 2,749.0

2014 . . . . . . . . . . . . . 749.5 92.8 842.4 859.0 2,660.8

2015 . . . . . . . . . . . . . 768.0 87.1 855.1 887.7 2,546.1

2016 . . . . . . . . . . . . . 788.4 83.7 872.1 922.5 2,414.2

2017 . . . . . . . . . . . . . 813.5 81.1 894.5 955.9 2,269.0

2018 . . . . . . . . . . . . . 838.9 78.3 917.2 990.1 2,113.2

2019 . . . . . . . . . . . . . 861.3 73.9 935.2 1,026.5 1,944.5

2020 . . . . . . . . . . . . . 883.1 68.0 951.1 1,063.5 1,760.9

2021 . . . . . . . . . . . . . 901.0 60.6 961.5 1,098.1 1,559.8

2022 . . . . . . . . . . . . . 914.8 52.2 967.0 1,136.1 1,333.6

2025b . . . . . . . . . . . . 945.2 31.4 976.6 1,243.5 518.3
Appendices

208

ate assumptions, and presents values in CPI-indexed 2013 dollars, consistent

with table VI.F7. The difference between the income values for each year is

equal to the trust fund interest earnings. The figure illustrates that, under

intermediate assumptions: (1) annual cost exceeds non-interest income in

each year of the projection period; (2) total annual income, which includes

interest earnings on trust fund asset reserves, is sufficient to cover annual

cost for years 2013 through 2020; and (3) total annual income is not sufficient to cover annual cost for years beginning in 2021. From 2021 through

2032 (the year preceding the year of trust fund reserve depletion), annual

cost is covered by drawing down combined trust fund reserves.

Table VI.F8 shows the operations of the combined OASI and DI Trust Funds

in current dollars—that is, in dollars unadjusted for price inflation. The following items are presented in the table: (1) non-interest income; (2) interest

income; (3) total income; (4) total cost; and (5) asset reserves at the end of

the year. The Trustees present these estimates, using the low-cost, intermediate, and high-cost sets of demographic and economic assumptions, to facilitate independent analysis.

 Figure VI.F1.—Estimated OASDI Income and Cost in CPI-indexed 2013 Dollars,

Based on Intermediate Assumptions

[In billions]

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2010 2015 2020 2025 2030 2035

Calendar year 

Cost 

Total income 

Non-interest income 
209

OASDI and HI: Estimates in Dollars

Note: Totals do not necessarily equal the sums of rounded components.

Table VI.F9 shows, in current dollars, the annual non-interest income and

cost of the combined OASI and DI Trust Funds, of the HI Trust Fund, and of

the combined OASI, DI, and HI Trust Funds, based on the low-cost, intermediate, and high-cost sets of assumptions. For OASDI, non-interest income

Table VI.F8.—Operations of the Combined OASI and DI Trust Funds, 

in Current Dollars, Calendar Years 2013-90

[In billions]

Calendar year

Non-interest

income

Interest

income

Total

income Cost

Asset reserves at

end of year

Intermediate:

2013 . . . . . . . . . . . . . $752.2 $102.6 $854.8 $826.8 $2,760.3

2014 . . . . . . . . . . . . . 800.0 98.2 898.2 875.0 2,783.5

2015 . . . . . . . . . . . . . 852.3 97.7 950.0 925.5 2,808.0

2016 . . . . . . . . . . . . . 910.6 100.3 1,010.9 983.2 2,835.7

2017 . . . . . . . . . . . . . 972.5 104.7 1,077.1 1,046.3 2,866.6

2018 . . . . . . . . . . . . . 1,034.9 110.0 1,144.9 1,113.6 2,897.9

2019 . . . . . . . . . . . . . 1,093.0 114.4 1,207.4 1,186.4 2,918.9

2020 . . . . . . . . . . . . . 1,149.7 117.7 1,267.4 1,263.9 2,922.4

2021 . . . . . . . . . . . . . 1,207.7 119.7 1,327.4 1,342.4 2,907.4

2022 . . . . . . . . . . . . . 1,265.5 121.4 1,386.9 1,428.6 2,865.7

2025 . . . . . . . . . . . . . 1,444.8 133.6 1,578.4 1,710.6 2,566.5

2030a . . . . . . . . . . . .

a The combined OASI and DI Trust Funds become depleted in 2068 under the low-cost assumptions, in

2033 under the intermediate assumptions, and in 2027 under the high-cost assumptions, so estimates for later

years are not shown.

1,798.1 81.9 1,880.0 2,258.4 1,226.9

Low-cost:

2013 . . . . . . . . . . . . . 759.4 103.4 862.8 824.4 2,770.7

2014 . . . . . . . . . . . . . 827.6 100.6 928.2 868.3 2,830.7

2015 . . . . . . . . . . . . . 881.4 100.9 982.4 911.3 2,901.7

2016 . . . . . . . . . . . . . 943.5 104.8 1,048.2 958.5 2,991.4

2017 . . . . . . . . . . . . . 1,004.4 110.5 1,114.9 1,010.2 3,096.1

2018 . . . . . . . . . . . . . 1,062.4 117.3 1,179.7 1,064.4 3,211.5

2019 . . . . . . . . . . . . . 1,115.7 124.6 1,240.3 1,122.0 3,329.8

2020 . . . . . . . . . . . . . 1,168.4 132.1 1,300.5 1,183.2 3,447.1

2021 . . . . . . . . . . . . . 1,223.7 139.6 1,363.3 1,244.2 3,566.3

2022 . . . . . . . . . . . . . 1,278.8 148.2 1,427.0 1,311.0 3,682.2

2025 . . . . . . . . . . . . . 1,444.4 187.1 1,631.5 1,533.8 3,994.9

2030 . . . . . . . . . . . . . 1,765.1 222.4 1,987.6 1,956.5 4,314.6

2035 . . . . . . . . . . . . . 2,160.1 221.0 2,381.1 2,420.5 4,241.9

2040 . . . . . . . . . . . . . 2,660.3 207.8 2,868.1 2,927.6 3,961.9

2045 . . . . . . . . . . . . . 3,283.4 194.2 3,477.7 3,531.5 3,686.9

2050 . . . . . . . . . . . . . 4,049.8 180.7 4,230.5 4,290.1 3,402.8

2055 . . . . . . . . . . . . . 4,992.7 161.8 5,154.5 5,262.0 2,988.0

2060 . . . . . . . . . . . . . 6,160.5 123.6 6,284.0 6,488.5 2,166.9

2065a . . . . . . . . . . . . 7,613.4 59.1 7,672.5 7,986.5 821.0

High-cost:

2013 . . . . . . . . . . . . . 744.1 101.8 845.9 829.3 2,749.0

2014 . . . . . . . . . . . . . 769.6 95.3 864.9 881.9 2,732.0

2015 . . . . . . . . . . . . . 813.6 92.3 905.9 940.5 2,697.4

2016 . . . . . . . . . . . . . 862.9 91.6 954.5 1,009.7 2,642.2

2017 . . . . . . . . . . . . . 922.3 91.9 1,014.2 1,083.8 2,572.6

2018 . . . . . . . . . . . . . 987.2 92.1 1,079.4 1,165.1 2,486.9

2019 . . . . . . . . . . . . . 1,052.1 90.2 1,142.4 1,253.9 2,375.3

2020 . . . . . . . . . . . . . 1,119.7 86.3 1,206.0 1,348.5 2,232.8

2021 . . . . . . . . . . . . . 1,185.8 79.7 1,265.5 1,445.3 2,053.0

2022 . . . . . . . . . . . . . 1,249.8 71.3 1,321.0 1,552.0 1,821.9

2025a . . . . . . . . . . . . 1,444.2 48.0 1,492.2 1,899.9 792.0
Appendices

210

consists of payroll tax contributions, proceeds from taxation of OASDI benefits, and reimbursements from the General Fund of the Treasury, if any. Cost

consists of scheduled benefits, administrative expenses, financial interchange

with the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries. For HI, non-interest income consists of payroll tax contributions (including contributions from railroad

employment), up to an additional 0.9 percent tax on earned income for relatively high earners, proceeds from the taxation of OASDI benefits, and reimbursements from the General Fund of the Treasury, if any. Total cost consists

of outlays (scheduled benefits and administrative expenses) for insured beneficiaries. The Trustees show income and cost estimates on a cash basis for

the OASDI program and on an incurred basis for the HI program. Table

VI.F9 also shows the balance, which equals the difference between noninterest income and cost.
211

OASDI and HI: Estimates in Dollars

Table VI.F9.—OASDI and HI Annual Non-interest Income, Cost, and

Balance in Current Dollars, Calendar Years 2013-90

[In billions]

Calendar

year

OASDI HI Combined

Noninterest

income Cost Balance

Noninterest

income Cost Balance

Noninterest

income Cost Balance

Intermediate:

2013 . . . . . $752 $827 -$75 $241 $266 -$26 $993 $1,093 -$100

2014 . . . . . 800 875 -75 257 271 -14 1,057 1,146 -89

2015 . . . . . 852 925 -73 276 280 -4 1,129 1,206 -77

2016 . . . . . 911 983 -73 298 298 a 1,208 1,281 -73

2017 . . . . . 972 1,046 -74 319 318 1 1,292 1,364 -72

2018 . . . . . 1,035 1,114 -79 341 342 -1 1,376 1,456 -80

2019 . . . . . 1,093 1,186 -93 361 364 -3 1,454 1,551 -96

2020 . . . . . 1,150 1,264 -114 381 390 -9 1,531 1,654 -123

2021 . . . . . 1,208 1,342 -135 402 418 -16 1,609 1,760 -151

2022 . . . . . 1,265 1,429 -163 422 454 -32 1,687 1,883 -195

2025 . . . . . 1,445 1,711 -266 488 553 -65 1,933 2,264 -331

2030 . . . . . 1,798 2,258 -460 620 764 -144 2,418 3,023 -604

2035 . . . . . 2,239 2,887 -649 786 1,038 -253 3,024 3,926 -901

2040 . . . . . 2,797 3,602 -805 997 1,379 -382 3,794 4,981 -1,188

2045 . . . . . 3,489 4,458 -969 1,264 1,782 -518 4,753 6,240 -1,488

2050 . . . . . 4,339 5,529 -1,190 1,598 2,250 -652 5,937 7,779 -1,842

2055 . . . . . 5,380 6,902 -1,522 2,017 2,806 -789 7,396 9,708 -2,312

2060 . . . . . 6,665 8,657 -1,993 2,541 3,513 -972 9,206 12,170 -2,964

2065 . . . . . 8,259 10,853 -2,594 3,200 4,437 -1,237 11,459 15,291 -3,832

2070 . . . . . 10,245 13,626 -3,381 4,027 5,627 -1,600 14,272 19,253 -4,981

2075 . . . . . 12,720 17,038 -4,317 5,064 7,101 -2,036 17,785 24,138 -6,354

2080 . . . . . 15,786 21,187 -5,401 6,353 8,829 -2,475 22,140 30,015 -7,876

2085 . . . . . 19,587 26,502 -6,915 7,965 10,920 -2,956 27,552 37,422 -9,870

2090 . . . . . 24,288 33,285 -8,997 9,972 13,662 -3,691 34,260 46,947 -12,687

Low-cost:

2013 . . . . . 759 824 -65 244 263 -19 1,003 1,087 -84

2014 . . . . . 828 868 -41 264 264 a 1,091 1,132 -41

2015 . . . . . 881 911 -30 283 269 14 1,165 1,180 -15

2016 . . . . . 943 958 -15 304 280 24 1,248 1,239 9

2017 . . . . . 1,004 1,010 -6 324 292 32 1,329 1,302 27

2018 . . . . . 1,062 1,064 -2 342 306 37 1,405 1,370 35

2019 . . . . . 1,116 1,122 -6 360 317 43 1,476 1,439 36

2020 . . . . . 1,168 1,183 -15 377 331 46 1,546 1,514 31

2021 . . . . . 1,224 1,244 -20 396 347 48 1,619 1,591 28

2022 . . . . . 1,279 1,311 -32 414 370 44 1,692 1,681 12

2025 . . . . . 1,444 1,534 -89 475 422 53 1,919 1,955 -36

2030 . . . . . 1,765 1,957 -191 590 523 67 2,355 2,479 -124

2035 . . . . . 2,160 2,421 -260 733 638 95 2,893 3,059 -166

2040 . . . . . 2,660 2,928 -267 914 744 170 3,574 3,672 -97

2045 . . . . . 3,283 3,531 -248 1,143 876 267 4,426 4,407 19

2050 . . . . . 4,050 4,290 -240 1,429 1,032 397 5,479 5,322 157

2055 . . . . . 4,993 5,262 -269 1,788 1,231 558 6,781 6,493 288

2060 . . . . . 6,160 6,489 -328 2,239 1,509 731 8,400 7,997 403

2065 . . . . . 7,613 7,987 -373 2,806 1,900 906 10,420 9,887 533

2070 . . . . . 9,429 9,833 -404 3,520 2,408 1,112 12,950 12,242 708

2075 . . . . . 11,707 12,051 -344 4,420 3,042 1,378 16,127 15,093 1,034

2080 . . . . . 14,545 14,717 -172 5,545 3,790 1,756 20,091 18,507 1,584

2085 . . . . . 18,072 18,217 -145 6,956 4,697 2,259 25,028 22,914 2,114

2090 . . . . . 22,439 22,792 -353 8,718 5,990 2,728 31,157 28,782 2,375
Appendices

212

Note: Totals do not necessarily equal the sums of rounded components.

High-cost:

2013 . . . . . $744 $829 -$85 $236 $272 -$36 $981 $1,102 -$121

2014 . . . . . 770 882 -112 248 280 -32 1,018 1,162 -145

2015 . . . . . 814 940 -127 264 293 -29 1,077 1,233 -156

2016 . . . . . 863 1,010 -147 283 316 -33 1,146 1,326 -180

2017 . . . . . 922 1,084 -162 306 346 -40 1,228 1,430 -202

2018 . . . . . 987 1,165 -178 330 383 -53 1,317 1,549 -231

2019 . . . . . 1,052 1,254 -202 354 421 -67 1,406 1,675 -269

2020 . . . . . 1,120 1,349 -229 379 465 -86 1,499 1,814 -315

2021 . . . . . 1,186 1,445 -260 404 513 -109 1,590 1,958 -369

2022 . . . . . 1,250 1,552 -302 427 572 -145 1,677 2,124 -447

2025 . . . . . 1,444 1,900 -456 501 749 -248 1,945 2,649 -703

2030 . . . . . 1,832 2,599 -767 652 1,164 -512 2,484 3,763 -1,279

2035 . . . . . 2,322 3,441 -1,119 843 1,783 -940 3,165 5,224 -2,059

2040 . . . . . 2,941 4,436 -1,495 1,089 2,629 -1,540 4,030 7,064 -3,034

2045 . . . . . 3,706 5,651 -1,944 1,400 3,711 -2,311 5,106 9,362 -4,255

2050 . . . . . 4,642 7,173 -2,531 1,789 5,001 -3,212 6,431 12,174 -5,743

2055 . . . . . 5,784 9,129 -3,345 2,274 6,502 -4,228 8,058 15,631 -7,573

2060 . . . . . 7,184 11,643 -4,459 2,881 8,293 -5,413 10,064 19,936 -9,872

2065 . . . . . 8,911 14,855 -5,944 3,638 10,480 -6,842 12,549 25,335 -12,786

2070 . . . . . 11,048 18,986 -7,938 4,585 13,261 -8,676 15,633 32,247 -16,614

2075 . . . . . 13,686 24,179 -10,492 5,765 16,663 -10,898 19,451 40,842 -21,391

2080 . . . . . 16,921 30,576 -13,655 7,220 20,602 -13,382 24,141 51,178 -27,037

2085 . . . . . 20,902 38,620 -17,718 9,024 25,332 -16,308 29,925 63,952 -34,026

2090 . . . . . 25,796 48,646 -22,850 11,260 31,281 -20,021 37,056 79,927 -42,871

a Between -$500 million and $500 million.

Table VI.F9.—OASDI and HI Annual Non-interest Income, Cost, and

Balance in Current Dollars, Calendar Years 2013-90 (Cont.)

[In billions]

Calendar

year

OASDI HI Combined

Noninterest

income Cost Balance

Noninterest

income Cost Balance

Noninterest

income Cost Balance
213

OASI Expenditures for the Disabled

G. ANALYSIS OF BENEFIT DISBURSEMENTS FROM THE OASI 

TRUST FUND WITH RESPECT TO DISABLED BENEFICIARIES

(Required by section 201(c) of the Social Security Act)

Effective January 1957, the OASI Trust Fund pays monthly benefits to disabled children aged 18 and over of retired and deceased workers if the disability began before age 18. The age by which disability must have begun

was later changed to age 22. Effective February 1968, the OASI Trust Fund

pays reduced monthly benefits to disabled widows and widowers at ages 50

and over. Effective January 1991, the requirements for the disability of the

widow or widower were made less restrictive.

As of December 31, 2012, about 1,045,000 individuals were receiving

monthly benefits from the OASI Trust Fund because of their disabilities or

the disabilities of children. This total includes approximately 26,000 mothers

and fathers (wives or husbands under normal retirement age of retiredworker beneficiaries and widows or widowers of deceased insured workers)

who met all other qualifying requirements and were receiving unreduced

benefits solely because they had disabled-child beneficiaries (or disabled

children aged 16 or 17) in their care. In calendar year 2012, the OASI Trust

Fund paid a total of $9,698 million to the people described above. Table

VI.G1 shows OASI scheduled benefits for disability for selected calendar

years during 1960-2012 and estimates for 2013-22 based on the intermediate

set of assumptions.
Appendices

214

Note: Totals do not necessarily equal the sums of rounded components.

Table VI.G1.—Benefit Disbursements From the OASI Trust Fund

With Respect to Disabled Beneficiaries

[Beneficiaries in thousands; scheduled benefits in millions]

Calendar year

Disabled beneficiaries, end of year Amount of scheduled benefitsa

a Beginning in 1966, includes payments for vocational rehabilitation services.

Total Children b

b Also includes certain mothers and fathers (see text).

Widowswidowers c

c In 1984 and later years, includes only disabled widows and widowers aged 50-59, because disabled widows and widowers age 60 and older are eligible for the same benefit as a nondisabled aged widow or widower. Therefore, they are not receiving benefits solely because of a disability.

Total Childrenb Widowswidowers d

d In 1983 and prior years, includes the offsetting effect of lower benefits payable to disabled widows and

widowers who continued to receive benefits after attaining age 60 (62, for disabled widowers prior to 1973),

compared to the higher nondisabled widow’s and widower’s benefits that would otherwise be payable. In

1984 and later years, includes only scheduled benefits to disabled widows and widowers aged 50-59 (see

footnote c).

Historical data:

1960 . . . . . . . . . 117 117 — $59 $59 —

1965 . . . . . . . . . 214 214 — 134 134 —

1970 . . . . . . . . . 316 281 36 301 260 $41

1975 . . . . . . . . . 435 376 58 664 560 104

1980 . . . . . . . . . 519 460 59 1,223 1,097 126

1985 . . . . . . . . . 594 547 47 2,072 1,885 187

1990 . . . . . . . . . 662 613 49 2,882 2,649 233

1991 . . . . . . . . . 687 627 61 3,179 2,875 304

1992 . . . . . . . . . 715 643 72 3,459 3,079 380

1993 . . . . . . . . . 740 659 81 3,752 3,296 456

1994 . . . . . . . . . 758 671 86 3,973 3,481 492

1995 . . . . . . . . . 772 681 91 4,202 3,672 531

1996 . . . . . . . . . 782 687 94 4,410 3,846 565

1997 . . . . . . . . . 789 693 96 4,646 4,050 596

1998 . . . . . . . . . 797 698 99 4,838 4,210 627

1999 . . . . . . . . . 805 702 102 4,991 4,336 655

2000 . . . . . . . . . 811 707 104 5,203 4,523 680

2001 . . . . . . . . . 817 712 105 5,520 4,802 718

2002 . . . . . . . . . 823 717 106 5,773 5,024 749

2003 . . . . . . . . . 827 722 105 5,950 5,184 764

2004 . . . . . . . . . 828 723 105 6,099 5,316 781

2005 . . . . . . . . . 836 728 108 6,449 5,556 834

2006 . . . . . . . . . 840 732 108 6,720 5,852 864

2007 . . . . . . . . . 851 744 107 7,053 6,181 869

2008 . . . . . . . . . 922 813 109 7,688 6,776 908

2009 . . . . . . . . . 969 857 112 8,595 7,618 974

2010 . . . . . . . . . 996 879 117 8,858 7,848 1,008

2011 . . . . . . . . . 1,020 899 121 9,136 8,085 1,050

2012 . . . . . . . . . 1,045 920 125 9,698 8,595 1,102

Estimates under the intermediate assumptions:

2013 . . . . . . . . . 1,067 941 125 10,157 9,022 1,132

2014 . . . . . . . . . 1,087 962 125 10,611 9,462 1,146

2015 . . . . . . . . . 1,107 982 124 11,080 9,914 1,162

2016 . . . . . . . . . 1,125 1,002 123 11,608 10,426 1,178

2017 . . . . . . . . . 1,143 1,021 122 12,165 10,964 1,197

2018 . . . . . . . . . 1,160 1,039 121 12,758 11,532 1,223

2019 . . . . . . . . . 1,177 1,057 120 13,386 12,132 1,250

2020 . . . . . . . . . 1,194 1,075 120 14,051 12,758 1,289

2021 . . . . . . . . . 1,212 1,092 120 14,745 13,403 1,338

2022 . . . . . . . . . 1,230 1,109 121 15,485 14,085 1,395
215

OASI Expenditures for the Disabled

Under the intermediate assumptions, estimated total scheduled benefits from

the OASI Trust Fund with respect to disabled beneficiaries will increase

from $10,157 million in calendar year 2013 to $15,485 million in calendar

year 2022.

In calendar year 2012, benefit payments (including expenditures for vocational rehabilitation services) with respect to disabled persons from the OASI

Trust Fund and from the DI Trust Fund (including payments from the DI

fund to all children and spouses of disabled-worker beneficiaries) totaled

$146,623 million. Of this amount, $9,698 million, or 6.6 percent, represented

payments from the OASI Trust Fund. Table VI.G2 contains these and similar

figures for selected calendar years during 1960-2012 and estimates for calendar years 2013-22.
Appendices

216

Note: Totals do not necessarily equal the sums of rounded components.

Table VI.G2.—Benefit Disbursements Under the OASDI Program

With Respect to Disabled Beneficiaries

[Amounts in millions]

Calendar year Totala

a Beginning in 1966, includes payments for vocational rehabilitation services.

DI Trust Fund b

b Scheduled benefits for disabled workers and their children and spouses.

OASI Trust Fund

Amount c

c Scheduled benefits for disabled children aged 18 and over, for certain mothers and fathers (see text), and for

disabled widows and widowers (see footnote d, table VI.G1).

Percentage of total

Historical data:

1960 . . . . . . . . . $627 $568 $59 9.4

1965 . . . . . . . . . 1,707 1,573 134 7.9

1970 . . . . . . . . . 3,386 3,085 301 8.9

1975 . . . . . . . . . 9,169 8,505 664 7.2

1980 . . . . . . . . . 16,738 15,515 1,223 7.3

1985 . . . . . . . . . 20,908 18,836 2,072 9.9

1990 . . . . . . . . . 27,717 24,835 2,882 10.4

1991 . . . . . . . . . 30,877 27,698 3,179 10.3

1992 . . . . . . . . . 34,583 31,124 3,459 10.0

1993 . . . . . . . . . 38,378 34,626 3,752 9.8

1994 . . . . . . . . . 41,730 37,757 3,973 9.5

1995 . . . . . . . . . 45,140 40,937 4,202 9.3

1996 . . . . . . . . . 48,615 44,205 4,410 9.1

1997 . . . . . . . . . 50,358 45,712 4,646 9.2

1998 . . . . . . . . . 53,062 48,224 4,838 9.1

1999 . . . . . . . . . 56,390 51,399 4,991 8.9

2000 . . . . . . . . . 60,204 55,001 5,203 8.6

2001 . . . . . . . . . 65,157 59,637 5,520 8.5

2002 . . . . . . . . . 71,493 65,721 5,773 8.1

2003 . . . . . . . . . 76,902 70,952 5,950 7.7

2004 . . . . . . . . . 84,350 78,251 6,099 7.2

2005 . . . . . . . . . 91,835 85,386 6,449 7.0

2006 . . . . . . . . . 99,165 92,446 6,720 6.8

2007 . . . . . . . . . 106,200 99,147 7,053 6.6

2008 . . . . . . . . . 114,064 106,376 7,688 6.7

2009 . . . . . . . . . 127,002 118,407 8,595 6.8

2010 . . . . . . . . . 133,103 124,245 8,858 6.7

2011 . . . . . . . . . 138,115 128,979 9,136 6.6

2012 . . . . . . . . . 146,623 136,925 9,698 6.6

Estimates under the intermediate assumptions:

2013 . . . . . . . . . 151,400 141,243 10,157 6.7

2014 . . . . . . . . . 157,241 146,630 10,611 6.7

2015 . . . . . . . . . 162,540 151,460 11,080 6.8

2016 . . . . . . . . . 168,435 156,826 11,608 6.9

2017 . . . . . . . . . 174,539 162,374 12,165 7.0

2018 . . . . . . . . . 181,043 168,285 12,758 7.0

2019 . . . . . . . . . 188,177 174,790 13,386 7.1

2020 . . . . . . . . . 195,767 181,716 14,051 7.2

2021 . . . . . . . . . 205,383 190,637 14,745 7.2

2022 . . . . . . . . . 215,453 199,968 15,485 7.2
217

Glossary

H. GLOSSARY

Actuarial balance. The difference between the summarized income rate and

the summarized cost rate over a given valuation period.

Actuarial deficit. A negative actuarial balance.

Administrative expenses. Expenses incurred by the Social Security Administration and the Department of the Treasury in administering the OASDI

program and the provisions of the Internal Revenue Code relating to the collection of contributions. Such administrative expenses are paid from the

OASI and DI Trust Funds.

Advance tax transfers. Amounts representing the estimated total OASDI

tax contributions for a given month. From May 1983 through November

1990, such amounts were credited to the OASI and DI Trust Funds at the

beginning of each month. The trust funds reimbursed the General Fund of

the Treasury for the associated loss of interest. Advance tax transfers are no

longer made unless needed in order to pay benefits.

Alternatives I, II, or III. See “Assumptions.”

Annual balance. The difference between the income rate and the cost rate

for a given year.

Asset reserves. Treasury notes and bonds, other securities guaranteed by the

Federal Government, certain Federally sponsored agency obligations, and

cash, held by the trust funds for investment purposes.

Assumptions. Values related to future trends in key factors that affect the

trust funds. Demographic assumptions include fertility, mortality, net immigration, marriage, and divorce. Economic assumptions include unemployment rates, average earnings, inflation, interest rates, and productivity.

Program-specific assumptions include retirement patterns, and disability

incidence and termination rates. This report presents three sets of demographic, economic, and program-specific assumptions:

 • Alternative II is the intermediate set of assumptions, and represents the

Trustees’ best estimates of likely future demographic, economic, and

program-specific conditions.

 • Alternative I is a low-cost set of assumptions—it assumes relatively

rapid economic growth, low inflation, and favorable (from the standpoint of program financing) demographic and program-specific conditions.

 • Alternative III is a high-cost set of assumptions—it assumes relatively

slow economic growth, high inflation, and unfavorable (from the standpoint of program financing) demographic and program-specific conditions.

See tables V.A1, V.B1, and V.B2.
Appendices

218

Automatic cost-of-living benefit increase. The annual increase in benefits,

effective for December, reflecting the increase, if any, in the cost of living. A

benefit increase is applicable only after a beneficiary becomes eligible for

benefits. In general, the benefit increase equals the percentage increase in the

Consumer Price Index for Urban Wage Earners and Clerical Workers

(CPI-W) measured from the third quarter of the previous year to the third

quarter of the current year. If there is no increase in the CPI-W, there is no

cost-of-living benefit increase. See table V.C1.

Auxiliary benefits. Monthly benefits payable to a spouse or child of a

retired or disabled worker, or to a survivor of a deceased worker.

Average indexed monthly earnings—AIME. The measure of lifetime

earnings used in determining the primary insurance amount (PIA) for most

workers who attain age 62, become disabled, or die after 1978. A worker’s

actual past earnings are adjusted by changes in the average wage index, in

order to bring them up to their approximately equivalent value at the time of

retirement or other eligibility for benefits.

Average wage index—AWI. A series that generally increases with the average amount of total wages for each year after 1950, including wages in noncovered employment and wages in covered employment in excess of the

OASDI contribution and benefit base. (See Title 20, Chapter III, section

404.211(c) of the Code of Federal Regulations for a more precise definition.)

These average wage amounts are used to index the taxable earnings of most

workers first becoming eligible for benefits in 1979 or later, and for automatic adjustments in the contribution and benefit base, bend points, earnings

test exempt amounts, and other wage-indexed amounts. See table V.C1.

Award. An administrative determination that an individual is entitled to

receive a specified type of OASDI benefit. Awards can represent not only

new entrants to the benefit rolls but also persons already on the rolls who

become entitled to a different type of benefit. Awards usually result in the

immediate payment of benefits, although payments may be deferred or withheld depending on the individual’s particular circumstances.

Baby boom. The period from the end of World War II (1946) through 1965

marked by unusually high birth rates.

Bend points. The dollar amounts defining the AIME or PIA brackets in the

benefit formulas. For the bend points for years 1979 and later, see table V.C2.

Beneficiary. A person who has been awarded benefits on the basis of his or

her own or another’s earnings record. The benefits may be either in currentpayment status or withheld.

Benefit award. See “Award.”

Benefit payments. The amounts disbursed for OASI and DI benefits by the

Department of the Treasury.
219

Glossary

Benefit termination. See “Termination.”

Best estimate assumptions. See “Assumptions.”

Board. See “Board of Trustees.”

Board of Trustees. A Board established by the Social Security Act to oversee the financial operations of the Federal Old-Age and Survivors Insurance

Trust Fund and the Federal Disability Insurance Trust Fund. The Board is

composed of six members. Four members serve by virtue of their positions

in the Federal Government: the Secretary of the Treasury, who is the Managing Trustee; the Secretary of Labor; the Secretary of Health and Human Services; and the Commissioner of Social Security. The President appoints and

the Senate confirms the other two members to serve as public representatives. Also referred to as the “Board” or the “Trustees.”

Cash flow. Actual or projected revenue and costs reflecting the levels of

payroll tax contribution rates and benefits scheduled in the law. Net cash

flow is the difference between non-interest income and cost.

Consumer Price Index—CPI. An official measure of inflation in consumer

prices. In this report, CPI refers to the Consumer Price Index for Urban Wage

Earners and Clerical Workers (CPI-W). The Bureau of Labor Statistics,

Department of Labor, publishes historical values for the CPI-W.

Contribution and benefit base. Annual dollar amount above which earnings in employment covered under the OASDI program are neither taxable

nor creditable for benefit-computation purposes. (Also referred to as maximum contribution and benefit base, annual creditable maximum, taxable

maximum, and maximum taxable.) See tables V.C1 and V.C6. See “HI contribution base.”

Contributions. See “Payroll tax contributions.”

Cost. The cost for a year includes scheduled benefits, administrative

expenses, financial interchange with the Railroad Retirement program, and

payments for vocational rehabilitation services for disabled beneficiaries.

Cost-of-living adjustment. See “Automatic cost-of-living benefit increase.”

Cost rate. The cost rate for a year is the ratio of the cost of the program to

the taxable payroll for the year.

Covered earnings. Earnings in employment covered by the OASDI program.

Covered employment. All employment for which earnings are creditable

for Social Security purposes. The program covers almost all employment.

Some exceptions are:

 • State and local government employees whose employer has not elected

to be covered under Social Security and who are participating in an

employer-provided pension plan.
Appendices

220

 • Current Federal civilian workers hired before 1984 who have not

elected to be covered.

 • Self-employed workers earning less than $400 in a calendar year.

Covered worker. A person who has earnings creditable for Social Security

purposes based on services for wages in covered employment or income

from covered self-employment.

CPI-indexed dollars. Amounts adjusted by the CPI to the value of the dollar

in a particular year.

Creditable earnings. Wage or self-employment earnings posted to a

worker’s earnings record. Such earnings determine eligibility for benefits

and the amount of benefits on that worker’s record. The contribution and

benefit base is the maximum amount of creditable earnings for each worker

in a calendar year.

Current-cost financing. See “Pay-as-you-go financing.”

Current dollars. Amounts expressed in nominal dollars with no adjustment

for inflationary changes in the value of the dollar over time.

Currently insured status. A worker acquires currently insured status when

he or she has accumulated six quarters of coverage during the 13-quarter

period ending with the current quarter.

Current-payment status. Status of a beneficiary to whom a benefit is being

paid for a given month (with or without deductions, provided the deductions

add to less than a full month’s benefit).

Deemed wage credit. See “Military service wage credits.”

Delayed retirement credits. Increases in the benefit amount for certain individuals who did not receive benefits for months after attaining normal retirement age but before age 70. Delayed retirement credits apply to benefits for

January of the year following the year they are earned or for the month of

attainment of age 70, whichever comes first. See table V.C3.

Demographic assumptions. See “Assumptions.”

Disability. For Social Security purposes, the inability to engage in substantial gainful activity (see “Substantial gainful activity—SGA”) by reason of

any medically determinable physical or mental impairment that can be

expected to result in death or to last for a continuous period of not less than

12 months. Special rules apply for workers at ages 55 and over whose disability is based on blindness.

The law generally requires that a person be disabled continuously for 5

months before he or she can qualify for a disabled-worker benefit.

Disability conversion ratio. For a given year, the ratio of the number of disability conversions to the average number of disabled-worker beneficiaries at

all ages during the year.
221

Glossary

Disability conversion. Upon attainment of normal retirement age, a disabled-worker beneficiary is automatically converted to retired-worker status.

Disability incidence rate. The proportion of workers in a given year,

insured for but not receiving disability benefits, who apply for and are

awarded disability benefits.

Disability Insurance (DI) Trust Fund. See “Trust fund.”

Disability insured status. A worker acquires disability insured status if he

or she is: (1) a fully insured worker who has accumulated 20 quarters of coverage during the 40-quarter period ending with the current quarter; (2) a fully

insured worker aged 24-30 who has accumulated quarters of coverage during

one-half of the quarters elapsed after the quarter of attainment of age 21 and

up to and including the current quarter; or (3) a fully insured worker under

age 24 who has accumulated six quarters of coverage during the 12-quarter

period ending with the current quarter.

Disability prevalence rate. The proportion of persons insured for disability

benefits who are disabled-worker beneficiaries in current-payment status.

Disability termination rate. The proportion of disabled-worker beneficiaries in a given year whose disability benefits terminate as a result of their

recovery or death.

Disabled-worker benefit. A monthly benefit payable to a disabled worker

under normal retirement age and insured for disability. Before November

1960, disability benefits were limited to disabled workers aged 50-64.

Disbursements. Actual expenditures (outgo) made or expected to be made

under current law, including benefits paid or payable, administrative

expenses, financial interchange with the Railroad Retirement program, and

payments for vocational rehabilitation services for disabled beneficiaries.

Earnings. Unless otherwise qualified, all wages from employment and net

earnings from self-employment, whether or not they are taxable or covered.

Earnings test. The provision requiring the withholding of benefits if beneficiaries under normal retirement age have earnings in excess of certain

exempt amounts. See table V.C1.

Economic assumptions. See “Assumptions.”

Effective interest rate. See “Interest rate.”

Excess wages. Wages in excess of the contribution and benefit base on

which a worker initially makes payroll tax contributions, usually as a result

of working for more than one employer during a year. Employee payroll

taxes on excess wages are refundable to affected employees, while the

employer taxes are not refundable.

Expenditures. See “Disbursements.”
Appendices

222

Federal Insurance Contributions Act—FICA. Provision authorizing payroll taxes on the wages of employed persons to provide for Old-Age, Survivors, and Disability Insurance, and for Hospital Insurance. Workers and their

employers generally pay the tax in equal amounts.

Financial interchange. Provisions of the Railroad Retirement Act providing

for transfers between the trust funds and the Social Security Equivalent Benefit Account of the Railroad Retirement program in order to place each trust

fund in the same financial position it would have been had railroad employment always been covered under Social Security.

Fiscal year. The accounting year of the United States Government. Since

1976, a fiscal year is the 12-month period ending September 30. For example, fiscal year 2013 began October 1, 2012, and will end September 30,

2013.

Full advance funding. A financing method in which contributions are established to match the full cost of future benefits as these costs are incurred

through current service. Such financing methods also provide for amortization over a fixed period of any financial obligation that is incurred at the

beginning of the program (or subsequent modification) as a result of granting

credit for past service.

Fully insured status. A worker acquires fully insured status when his or her

total number of quarters of coverage is greater than or equal to the number of

years elapsed after the year of attainment of age 21 (but not less than six).

Once a worker has accumulated 40 quarters of coverage, he or she remains

permanently fully insured.

General Fund of the Treasury. Funds held by the Treasury of the United

States, other than receipts collected for a specific purpose (such as Social

Security), and maintained in a separate account for that purpose.

General fund reimbursements. Payments from the General Fund of the

Treasury to the trust funds for specific purposes defined in the law, including:

 • The cost of noncontributory wage credits for military service before

1957, and periodic adjustments of previous determinations.

 • The cost in 1971-82 of deemed wage credits for military service performed after 1956.

 • The cost of benefits to certain uninsured persons who attained age 72

before 1968.

 • The cost of payroll tax credits provided to employees in 1984 and selfemployed persons in 1984-89 by Public Law 98-21.

 • The cost in 2009-17 of excluding certain self-employment earnings

from SECA taxes under Public Law 110-246.
223

Glossary

 • Payroll tax revenue forgone under the provisions of Public Laws 111-

147, 111-312, 112-78, and 112-96.

The general fund also reimburses the trust funds for various other items,

including interest on checks which are not negotiated 6 months after the

month of issue and costs incurred in performing certain legislatively mandated activities not directly related to administering the OASI and DI programs.

Gross domestic product—GDP. The total dollar value of all goods and services produced by labor and property located in the United States, regardless

of who supplies the labor or property.

HI contribution base. Annual dollar amount above which earnings in

employment covered under the HI program are not taxable. (Also referred to

as maximum contribution base, taxable maximum, and maximum taxable.)

Beginning in 1994, the HI contribution base was eliminated.

High-cost assumptions. See “Assumptions.”

Hospital Insurance (HI) Trust Fund. See “Trust fund.”

Immigration. See “Legal immigration” and “Other immigration.”

Income. Income for a given year is the sum of tax revenue on a cash basis

(payroll tax contributions and income from the taxation of scheduled benefits), reimbursements from the General Fund of the Treasury, if any, and

interest credited to the trust funds.

Income rate. Ratio of non-interest income to the OASDI taxable payroll for

the year.

Infinite horizon. The period extending into the indefinite future.

Inflation. An increase in the general price level of goods and services.

Insured status. The state or condition of having sufficient quarters of coverage to meet the eligibility requirements for retired-worker or disabled-worker

benefits, or to permit the worker’s spouse and children or survivors to establish eligibility for benefits in the event of his or her disability, retirement, or

death. See “Quarters of coverage.”

Interest. A payment in exchange for the use of money during a specified

period.

Interest rate. Interest rates on new public-debt obligations issuable to Federal trust funds (see “Special public-debt obligation”) are determined

monthly. Such rates are equal to the average market yield on all outstanding

marketable U.S. securities not due or callable until after 4 years from the date

the rate is determined. See table V.B2 for historical and assumed future interest rates on new special-issue securities. The effective interest rate for a trust

fund is the ratio of the interest earned by the fund over a given period of time

to the average level of asset reserves held by the fund during the period. The
Appendices

224

effective rate of interest thus represents a measure of the overall average

interest earnings on the fund’s portfolio of investments.

Interfund borrowing. The borrowing of asset reserves by a trust fund

(OASI, DI, or HI) from another trust fund when the first fund is in danger of

depletion. The Social Security Act permitted interfund borrowing only during 1982 through 1987, and required all amounts borrowed to be repaid prior

to the end of 1989. The only exercise of this authority occurred in 1982,

when the OASI Trust Fund borrowed from the DI and HI Trust Funds. The

final repayment of borrowed amounts occurred in 1986.

Intermediate assumptions. See “Assumptions.”

Legal emigration. Legal emigration for a given year consists of those legal

permanent residents and native-born citizens who leave the Social Security

area during the year.

Legal immigration. Consistent with the definition used by the Department

of Homeland Security, legal immigration for a given year consists of foreignborn individuals who are granted legal permanent resident status during the

year.

Life expectancy. Average remaining number of years expected prior to

death. Period life expectancy is calculated for a given year using the actual or

expected death rates at each age for that year. Cohort life expectancy, sometimes referred to as generational life expectancy, is calculated for individuals

at a specific age in a given year using actual or expected death rates from the

years in which the individuals would actually reach each succeeding age if

they survive.

Long range. The next 75 years. The Trustees make long-range actuarial estimates for this period because it is approximately the maximum remaining

lifetime of current Social Security participants.

Low-cost assumptions. See “Assumptions.”

Lump-sum death payment. A lump sum, generally $255, payable on the

death of a fully or currently insured worker. The lump sum is payable to the

surviving spouse of the worker, under most circumstances, or to the worker’s

children.

Maximum family benefit. The maximum monthly amount that can be paid

on a worker’s earnings record. Whenever the total of the individual monthly

benefits payable to all the beneficiaries entitled on one earnings record

exceeds the maximum, each dependent’s or survivor’s benefit is proportionately reduced. Benefits payable to divorced spouses or surviving divorced

spouses are not reduced under the family maximum provision.

Medicare. A nationwide, Federally administered health insurance program

authorized in 1965 under Title XVIII of the Social Security Act to cover the

cost of hospitalization, medical care, and some related services for most peo-
225

Glossary

ple age 65 and over. In 1972, lawmakers extended coverage to people receiving Social Security Disability Insurance payments for 2 years and people

with End-Stage Renal Disease. (For beneficiaries whose primary or secondary diagnosis is Amyotrophic Lateral Sclerosis, the 2-year waiting period is

waived.) In 2010, people exposed to environmental health hazards within

areas under a corresponding emergency declaration became Medicare-eligible. In 2006, prescription drug coverage was added as well. Medicare consists of two separate but coordinated trust funds—Hospital Insurance (HI,

Part A) and Supplementary Medical Insurance (SMI). The SMI trust fund is

composed of two separate accounts—the Part B account and the Part D

account. Almost all persons who are aged 65 and over or disabled and who

are entitled to HI are eligible to enroll in Part B and Part D on a voluntary

basis by paying monthly premiums.

Military service wage credits. Credits recognizing that military personnel

receive wages in kind (such as food and shelter) in addition to their basic pay

and other cash payments. Noncontributory wage credits of $160 were provided for each month of active military service from September 16, 1940,

through December 31, 1956. For years after 1956, the basic pay of military

personnel is covered under the Social Security program on a contributory

basis. In addition to the contributory credits for basic pay, noncontributory

wage credits of $300 were granted for each calendar quarter, from January

1957 through December 1977, in which a person received pay for military

service. Noncontributory wage credits of $100 were granted for each $300 of

military wages, up to a maximum credit of $1,200 per calendar year, from

January 1978 through December 2001.

National average wage index—AWI. See “Average wage index—AWI.”

Non-interest income. Non-interest income for a given year is the sum of tax

revenue on a cash basis (payroll tax contributions and income from the taxation of scheduled benefits) and reimbursements from the General Fund of the

Treasury, if any.

Normal retirement age—NRA. The age at which a person may first

become entitled to retirement benefits without reduction based on age. For

persons reaching age 62 before 2000, the normal retirement age is 65. It will

increase gradually to 67 for persons reaching that age in 2027 or later, beginning with an increase to 65 years and 2 months for persons reaching age 65

in 2003. See table V.C3.

Old-Age and Survivors Insurance (OASI) Trust Fund. See “Trust fund.”

Old-law base. Amount the contribution and benefit base would have been if

the 1977 amendments had not provided for ad hoc increases. The Social

Security Amendments of 1972 provided for automatic annual indexing of the

contribution and benefit base. The Social Security Amendments of 1977

specified ad hoc bases for 1978-81, with subsequent bases updated in accor-
Appendices

226

dance with the normal indexing procedure. See table V.C2.

Open group unfunded obligation. See “Unfunded obligation.”

Other emigration. Other emigration for a given year consists of individuals

from the other-immigrant population who leave the Social Security area during the year or who adjust status to become legal permanent residents during

the year.

Other immigration. Other immigration for a given year consists of individuals who enter the Social Security area and stay 6 months or more but without legal permanent resident status, such as undocumented immigrants and

temporary workers and students.

Outgo. See “Disbursements.”

Par value. The value printed on the face of a bond. For both public and special issues held by the trust funds, par value is also the redemption value at

maturity.

Partial advance funding. A financing method in which contributions are

established to provide a substantial accumulation of trust fund asset reserves,

thereby generating additional interest income to the trust funds and reducing

the need for payroll tax increases in periods when costs are relatively high.

Higher general contributions or additional borrowing may be required, however, to support the payment of such interest. While substantial, the trust

fund buildup under partial advance funding is much smaller than it would be

with full advance funding.

Pay-as-you-go financing. A financing method in which contributions are

established to produce just as much income as required to pay current benefits, with trust fund asset reserves built up only to the extent needed to prevent depletion of the fund by random economic fluctuations.

Payment cycling. Beneficiaries who applied for benefits before May 1,

1997, are paid on the third of the month. Persons applying for OASDI benefits after April 1997 generally are paid on the second, third, or fourth

Wednesday of the month following the month for which payment is due. The

particular Wednesday payment date is based on the earner’s date of birth. For

those born on the first through tenth, the benefit payment day is the second

Wednesday of the month; for those born on the eleventh through the twentieth, the benefit payment day is the third Wednesday of the month; and for

those born after the twentieth of the month, the payment day is the fourth

Wednesday of the month.
227

Glossary

Payroll tax contributions. The amount based on a percent of earnings, up to

an annual maximum, that must be paid by:

 • employers and employees on wages from employment under the Federal Insurance Contributions Act,

 • the self-employed on net earnings from self-employment under the

Self-Employment Contributions Act, and

 • States on the wages of State and local government employees covered

under the Social Security Act through voluntary agreements under section 218 of the act. 

Also referred to as payroll taxes.

Population in the Social Security area. See “Social Security area population.”

Present value. The equivalent value, at the present time, of a stream of values (either income or cost, past or future). Present values are used widely in

calculations involving financial transactions over long periods of time to

account for the time value of money, by discounting or accumulating these

transactions at the rate of interest. Present-value calculations for this report

use the effective yield on trust fund asset reserves.

Primary insurance amount—PIA. The monthly amount payable to a

retired worker who begins to receive benefits at normal retirement age or

(generally) to a disabled worker. This amount, which is related to the

worker’s average monthly wage or average indexed monthly earnings, is also

used as a base for computing all types of benefits payable on an individual’s

earnings record.

Primary-insurance-amount formula. The mathematical formula relating

the PIA to the AIME for workers who attain age 62, become disabled, or die

after 1978. The PIA is equal to the sum of 90 percent of AIME up to the first

bend point, plus 32 percent of AIME above the first bend point up to the second bend point, plus 15 percent of AIME in excess of the second bend point.

Automatic benefit increases are applied beginning with the year of eligibility.

See table V.C2 for historical and assumed future bend points and table V.C1

for historical and assumed future benefit increases.

Quarters of coverage. Basic unit of measurement for determining insured

status. In 2013, a worker receives one quarter of coverage (up to a total of

four) for each $1,160 of annual covered earnings. For years after 1978, the

amount of earnings required for a quarter of coverage is subject to annual

automatic increases in proportion to increases in average wages. See table

V.C2. 

Railroad retirement. A Federal insurance program, similar to Social Security, designed for workers in the railroad industry. The provisions of the Railroad Retirement Act provide for a system of coordination and financial
Appendices

228

interchange between the Railroad Retirement program and the Social Security program.

Reallocation of payroll tax rates. An increase in the payroll tax rate for

either the OASI or DI Trust Fund, with a corresponding reduction in the rate

for the other fund, so that the total OASDI payroll tax rate is not changed. 

Real-wage differential. The difference between the percentage increases in:

(1) the average annual wage in covered employment; and (2) the average

annual Consumer Price Index. See table V.B1.

Recession. A period of adverse economic conditions; in particular, two or

more successive calendar quarters of negative growth in gross domestic

product.

Reserves. See “Asset reserves.”

Retired-worker benefit. A monthly benefit payable to a fully insured retired

worker aged 62 or older or to a person entitled under the transitionally

insured status provision in the law.

Retirement earnings test. See “Earnings test.”

Retirement eligibility age. The age, currently age 62, at which a fully

insured individual first becomes eligible to receive retired-worker benefits.

Retirement test. See “Earnings test.”

Scheduled benefits. The level of benefits specified under current law.

Scenario-based model. A model with specified assumptions for and relationships among variables. Under such a model, any specified set of assumptions determines a single outcome directly reflecting the specifications.

Self-employment. Operation of a trade or business by an individual or by a

partnership in which an individual is a member.

Self-Employment Contributions Act–SECA. Provision authorizing Social

Security payroll taxes on the net earnings of most self-employed persons.

Short range. The next 10 years. The Trustees prepare short-range actuarial

estimates for this period because of the short-range test of financial adequacy. The Social Security Act requires estimates for 5 years; the Trustees

prepare estimates for an additional 5 years to help clarify trends which are

only starting to develop in the mandated first 5-year period. 

Social Security Act. Provisions of the law governing most operations of the

Social Security program. The original Social Security Act is Public Law 74-

271, enacted August 14, 1935. With subsequent amendments, the Social

Security Act consists of 21 titles, of which three have been repealed. Title II

of the Social Security Act authorized the Old-Age, Survivors, and Disability

Insurance program.
229

Glossary

Social Security area population. The population comprised of: (1) residents

of the 50 States and the District of Columbia (adjusted for net census undercount); (2) civilian residents of Puerto Rico, the Virgin Islands, Guam,

American Samoa and the Northern Mariana Islands; (3) Federal civilian

employees and persons in the U.S. Armed Forces abroad and their dependents; (4) non-citizens living abroad who are insured for Social Security benefits; and (5) all other U.S. citizens abroad.

Solvency. A program is solvent at a point in time if it is able to pay scheduled benefits when due with scheduled financing. For example, the OASDI

program is solvent over any period for which the trust funds maintain a positive level of asset reserves.

Special public-debt obligation. Securities of the United States Government

issued exclusively to the OASI, DI, HI, and SMI Trust Funds and other Federal trust funds. Section 201(d) of the Social Security Act provides that the

public-debt obligations issued for purchase by the OASI and DI Trust Funds

shall have maturities fixed with due regard for the needs of the funds. The

usual practice has been to spread the holdings of special issues, as of each

June 30, so that the amounts maturing in each of the next 15 years are

approximately equal. Special public-debt obligations are redeemable at par

value at any time and carry interest rates determined by law (see “Interest

rate”). See tables VI.A4 and VI.A5 for a listing of the obligations held by the

OASI and DI Trust Funds, respectively.

Statutory blindness. Central visual acuity of 20/200 or less in the better eye

with the use of a correcting lens or tunnel vision of 20 degrees or less.

Stochastic model. A model used for projecting a probability distribution of

potential outcomes. Such models allow for random variation in one or more

variables through time. The random variation is generally based on fluctuations observed in historical data for a selected period. A large number of simulations, each of which reflects random variation in the variable(s), produce

a distribution of potential outcomes.

Substantial gainful activity—SGA. The level of work activity used to

establish disability. A finding of disability requires that a person be unable to

engage in substantial gainful activity. A person who earns more than a certain monthly amount (net of impairment-related work expenses) is ordinarily

considered to be engaging in SGA. The amount of monthly earnings considered as SGA depends on the nature of a person’s disability. The Social Security Act specifies a higher SGA amount for statutorily blind individuals;

Federal regulations specify a lower SGA amount for non-blind individuals.

Both SGA amounts increase with increases in the national average wage

index.

Summarized balance. The difference between the summarized cost rate and

the summarized income rate, expressed as a percentage of taxable payroll.
Appendices

230

Summarized cost rate. The ratio of the present value of cost to the present

value of the taxable payroll for the years in a given period, expressed as a

percentage. To evaluate the financial adequacy of the program, the summarized cost rate is adjusted to include the cost of reaching and maintaining a

target trust fund level. A trust fund level of about 1 year’s cost is considered

to be an adequate reserve for unforeseen contingencies; therefore, the targeted trust fund ratio is 100 percent of annual cost. Accordingly, the adjusted

summarized cost rate is equal to the ratio of: (1) the sum of the present value

of the cost during the period plus the present value of the targeted ending

trust fund level; to (2) the present value of the taxable payroll during the projection period.

Summarized income rate. The ratio of the present value of scheduled noninterest income to the present value of taxable payroll for the years in a given

period, expressed as a percentage. To evaluate the financial adequacy of the

program, the summarized income rate is adjusted to include asset reserves on

hand at the beginning of the period. Accordingly, the adjusted summarized

income rate equals the ratio of: (1) the sum of the trust fund reserve at the

beginning of the period plus the present value of non-interest income during

the period; to (2) the present value of the taxable payroll for the years in the

period.

Supplemental Security Income—SSI. A Federally administered program

(often with State supplementation) of cash assistance for needy aged, blind,

or disabled persons. The General Fund of the Treasury funds SSI and the

Social Security Administration administers it.

Supplementary Medical Insurance (SMI) Trust Fund. See “Trust fund.”

Survivor benefit. Benefit payable to a survivor of a deceased worker.

Sustainable solvency. Sustainable solvency for the financing of the program

under a specified set of assumptions has been achieved when the program

has positive projected trust fund ratios throughout the 75-year projection

period and these ratios are stable or rising at the end of the period.

Taxable earnings. Wages or self-employment income, in employment covered by the OASDI or HI programs, that is under the applicable annual maximum taxable limit. For 1994 and later, no maximum taxable limit applies to

the HI program.

Taxable payroll. A weighted sum of taxable wages and taxable self-employment income. When multiplied by the combined employee-employer payroll

tax rate, taxable payroll yields the total amount of payroll taxes incurred by

employees, employers, and the self-employed for work during the period.

Taxable self-employment income. The maximum amount of net earnings

from self-employment by an earner which, when added to any taxable
231

Glossary

wages, does not exceed the contribution and benefit base. For HI beginning

in 1994, all net earnings from self-employment.

Taxable wages. See “Taxable earnings.”

Taxation of benefits. Beginning in 1984, Federal law subjected up to 50 percent of an individual’s or a couple’s OASDI benefits to Federal income taxation under certain circumstances. Treasury allocates the revenue derived

from this provision to the OASI and DI Trust Funds on the basis of the

income taxes paid on the benefits from each fund. Beginning in 1994, the

law increased the maximum percentage from 50 percent to 85 percent. The

HI Trust Fund receives the additional tax revenue resulting from the increase

to 85 percent.

Taxes. See “Payroll tax contributions” and “Taxation of benefits.”

Termination. Cessation of payment because the beneficiary is no longer

entitled to receive a specific type of benefit. For example, benefits might terminate as a result of the death of the beneficiary, the recovery of a disabled

beneficiary, or the attainment of age 18 by a child beneficiary. In some cases,

the individual may become immediately entitled to another type of benefit,

such as the conversion of a disabled-worker beneficiary at normal retirement

age to a retired-worker beneficiary.

Test of long-range close actuarial balance. The conditions required to

meet this test are: 

 • The trust fund satisfies the short-range test of financial adequacy; 

 • The trust fund ratios stay above zero throughout the 75-year projection

period, such that benefits would be payable in a timely manner throughout the period. 

The Trustees apply the test to OASI, DI, and the combined OASDI program

based on the intermediate set of assumptions.

Test of short-range financial adequacy. The conditions required to meet

this test are:

 • If the trust fund ratio for a fund is at least 100 percent at the beginning

of the projection period, the test requires that it remain at or above

100 percent throughout the 10-year projection period;

 • If the ratio is initially less than 100 percent, then it must reach at least

100 percent within 5 years (without asset reserve depletion at any time

during this period) and then remain at or above 100 percent throughout

the remainder of the 10-year period. 

The Trustees apply the test to OASI, DI, and the combined OASDI program

based on the intermediate set of assumptions.

Total fertility rate. The average number of children that would be born to a

woman in her lifetime if she were to experience the birth rates by age
Appendices

232

observed in, or assumed for, a specified year, and if she were to survive the

entire childbearing period.

Trust fund. Separate accounts in the United States Treasury which hold the

payroll taxes received under the Federal Insurance Contributions Act and the

Self-Employment Contributions Act; payroll taxes resulting from coverage

of State and local government employees; any sums received under the

financial interchange with the railroad retirement account; voluntary hospital

and medical insurance premiums; and reimbursements or payments from the

General Fund of the Treasury. As required by law, the Department of the

Treasury invests funds not required to meet current expenditures in interestbearing securities backed by the full faith and credit of the U.S. Government.

The interest earned is also deposited in the trust funds.

 • Old-Age and Survivors Insurance (OASI). The trust fund used for

paying monthly benefits to retired-worker (old-age) beneficiaries, their

spouses and children, and to survivors of deceased insured workers.

 • Disability Insurance (DI). The trust fund used for paying monthly benefits to disabled-worker beneficiaries, their spouses and children, and

for providing rehabilitation services to the disabled.

 • Hospital Insurance (HI). The trust fund used for paying part of the

costs of inpatient hospital services and related care for aged and disabled individuals who meet the eligibility requirements. Also known as

Medicare Part A.

 • Supplementary Medical Insurance (SMI). The Medicare trust fund

composed of the Part B Account, the Part D Account, and the Transitional Assistance Account. The Part B Account pays for a portion of the

costs of physicians’ services, outpatient hospital services, and other

related medical and health services for voluntarily enrolled aged and

disabled individuals. The Part D Account pays private plans to provide

prescription drug coverage, beginning in 2006. The Transitional Assistance Account paid for transitional assistance under the prescription

drug card program in 2004 and 2005.

Trust fund ratio. A measure of trust fund adequacy. The asset reserves at

the beginning of a year, which do not include advance tax transfers,

expressed as a percentage of the cost for the year. The trust fund ratio represents the proportion of a year’s cost which could be paid solely with the

reserves at the beginning of the year.

Trustees. See “Board of Trustees.”

Unfunded obligation. A measure of the shortfall of trust fund income to

fully cover program cost through a specified date after depletion of trust fund

asset reserves. This measure is computed as the excess of the present value

of the projected cost of the program through a specified date over the sum of:
233

Glossary

(1) the value of trust fund reserves at the beginning of the valuation period;

and (2) the present value of the projected non-interest income of the program

through a specified date, assuming scheduled tax rates and benefit levels.

This measure can apply for all participants through a specified date, i.e., the

open group, or be limited to a specified subgroup of participants.

Unfunded obligation ratio. The unfunded obligation at the beginning of a

year expressed as a percentage of the present value of the cost for the year.

Unnegotiated check. A check which has not been cashed 6 months after the

end of the month in which the check was issued. When a check has been outstanding for a year, the Department of the Treasury administratively cancels

the check and reimburses the issuing trust fund separately for the amount of

the check and interest for the period the check was outstanding. The appropriate trust fund also receives an interest adjustment for the time the check

was outstanding if it is cashed 6-12 months after the month of issue. If a

check is presented for payment after it has been administratively cancelled, a

replacement check is issued.

Valuation period. A period of years which is considered as a unit for purposes of calculating the financial status of a trust fund.

Vocational rehabilitation. Services provided to disabled persons to help

them to return to gainful employment. The trust funds reimburse the providers of such services only in those cases where the services contributed to the

successful rehabilitation of the beneficiaries.

Year of depletion. The year in which a trust fund becomes unable to pay

benefits when due because the fund’s asset reserves have been used up.
List of Tables

234

LIST OF TABLES

II. OVERVIEW

II.B1 Summary of 2012 Trust Fund Financial Operations . . . . . . . . 6

II.B2 Payroll Tax Contribution Rates for 2012 . . . . . . . . . . . . . . . . 7

II.C1 Long-Range Values of Key Assumptions for the 75-year 

Projection Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

II.D1 Projected Maximum Trust Fund Ratios During the Long-Range 

Period and Trust Fund Reserve Depletion Dates. . . . . . . . . . . 14

II.D2 Reasons for Change in the 75-Year Actuarial Balance,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 20

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND

LEGISLATIVE CHANGES IN THE LAST YEAR

III.A1 Operations of the OASI Trust Fund, Calendar Year 2012 . . . . 27

III.A2 Operations of the DI Trust Fund, Calendar Year 2012 . . . . . . . 30

III.A3 Operations of the Combined OASI and DI Trust Funds, 

Calendar Year 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

III.A4 Comparison of Actual Calendar Year 2012 Trust Fund 

Operations With Estimates Made in Prior Reports, Based on 

Intermediate Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 33

III.A5 Distribution of Benefit Payments by Type of Beneficiary or 

Payment, Calendar Years 2011 and 2012 . . . . . . . . . . . . . . . . 34

III.A6 Administrative Expenses as a Percentage of Non-interest Income 

and of Total Expenditures, Calendar Years 2008-12 . . . . . . . . 35

III.A7 Trust Fund Investment Transactions, Calendar Year 2012 . . . . 35

IV. ACTUARIAL ESTIMATES

IV.A1 Operations of the OASI Trust Fund, 

Calendar Years 2008-22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

IV.A2 Operations of the DI Trust Fund, Calendar Years 2008-22. . . . 42

IV.A3 Operations of the Combined OASI and DI Trust Funds,

Calendar Years 2008-22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

IV.A4 Reasons for Change in Trust Fund (Unfunded Obligation) Ratios 

at the Beginning of the Tenth Year of Projection Under 

Intermediate Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 46

IV.B1 Annual Income Rates, Cost Rates, and Balances,

Calendar Years 1990-2090 . . . . . . . . . . . . . . . . . . . . . . . . . . 50

IV.B2 Covered Workers and Beneficiaries, 

Calendar Years 1945-2090 . . . . . . . . . . . . . . . . . . . . . . . . . . 55

IV.B3 Trust Fund Ratios, Calendar Years 2013-90 . . . . . . . . . . . . . . 60
List of Tables

235

IV.B4 Components of Summarized Income Rates and Cost Rates, 

Calendar Years 2013-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

IV.B5 Components of 75-Year Actuarial Balance

Under Intermediate Assumptions . . . . . . . . . . . . . . . . . . . . . 66

IV.B6 Unfunded OASDI Obligations Through the Infinite Horizon,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 68

IV.B7 Present Values of OASDI Cost Less Non-interest Income

and Unfunded Obligations for Program Participants,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 70

IV.B8 Reasons for Change in the 75-Year Actuarial Balance,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 71

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

V.A1 Principal Demographic Assumptions, 

Calendar Years 1940-2090 . . . . . . . . . . . . . . . . . . . . . . . . . . 86

V.A2 Social Security Area Population on July 1 and 

Dependency Ratios, Calendar Years 1945-2090 . . . . . . . . . . 89

V.A3 Period Life Expectancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

V.A4 Cohort Life Expectancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

V.B1 Principal Economic Assumptions . . . . . . . . . . . . . . . . . . . . . 100

V.B2 Additional Economic Factors . . . . . . . . . . . . . . . . . . . . . . . . 106

V.C1 Cost-of-Living Benefit Increases, Average Wage Index, 

Contribution and Benefit Bases, and Retirement 

Earnings Test Exempt Amounts, 1975-2022 . . . . . . . . . . . . . 111

V.C2 Values for Selected Wage-Indexed Program Parameters, 

Calendar Years 1978-2022 . . . . . . . . . . . . . . . . . . . . . . . . . . 115

V.C3 Legislated Changes in Normal Retirement Age and Delayed 

Retirement Credits for Persons Reaching Age 62 in 

Each Year 1986 and Later. . . . . . . . . . . . . . . . . . . . . . . . . . . 117

V.C4 OASI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1945-2090 . . . . . . . . . . . . . . . . 125

V.C5 DI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1960-2090 . . . . . . . . . . . . . . . . 133

V.C6 Contribution and Benefit Base and 

Payroll Tax Contribution Rates . . . . . . . . . . . . . . . . . . . . . . 140

V.C7 Annual Scheduled Benefit Amounts for Retired Workers

With Various Pre-Retirement Earnings Patterns

Based on Intermediate Assumptions, 

Calendar Years 2013-90 . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
List of Tables

236

VI. APPENDICES

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS

VI.A1 Operations of the OASI Trust Fund, 

Calendar Years 1937-2012 . . . . . . . . . . . . . . . . . . . . . . . . . . 151

VI.A2 Operations of the DI Trust Fund, Calendar Years 1957-2012 . . 153

VI.A3 Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1957-2012 . . . . . . . . . . . . . . . . . . . . . . . . . . 155

VI.A4 Asset Reserves of the OASI Trust Fund, 

End of Calendar Years 2011 and 2012 . . . . . . . . . . . . . . . . . . 157

VI.A5 Asset Reserves of the DI Trust Fund, 

End of Calendar Years 2011 and 2012 . . . . . . . . . . . . . . . . . . 158

B. HISTORY OF ACTUARIAL STATUS ESTIMATES

VI.B1 Long-Range OASDI Actuarial Balances and 

Trust Fund Reserve Depletion Dates as Shown in the 

Trustees Reports for 1982-2013 . . . . . . . . . . . . . . . . . . . . . . 161

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2022

VI.C1 Operations of the OASI Trust Fund, Fiscal Year 2012. . . . . . . 166

VI.C2 Operations of the DI Trust Fund, Fiscal Year 2012 . . . . . . . . . 167

VI.C3 Operations of the Combined OASI and DI Trust Funds, 

Fiscal Year 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168

VI.C4 Operations of the OASI Trust Fund, Fiscal Years 2008-22 . . . 169

VI.C5 Operations of the DI Trust Fund, Fiscal Years 2008-22 . . . . . . 170

VI.C6 Operations of the Combined OASI and DI Trust Funds,

Fiscal Years 2008-22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171

D. LONG-RANGE SENSITIVITY ANALYSIS

VI.D1 Sensitivity of OASDI Measures to Varying 

Fertility Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

VI.D2 Sensitivity of OASDI Measures to Varying 

Death-Rate Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

VI.D3 Sensitivity of OASDI Measures to Varying 

Net-Immigration Assumptions . . . . . . . . . . . . . . . . . . . . . . . 175

VI.D4 Sensitivity of OASDI Measures to Varying 

Real-Wage Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 177

VI.D5 Sensitivity of OASDI Measures to Varying 

CPI-Increase Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 178

VI.D6 Sensitivity of OASDI Measures to Varying 

Real-Interest Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 179
List of Tables

237

VI.D7 Sensitivity of OASDI Measures to Varying 

Disability Incidence Assumptions . . . . . . . . . . . . . . . . . . . . . 180

VI.D8 Sensitivity of OASDI Measures to Varying 

Disability Termination Assumptions . . . . . . . . . . . . . . . . . . . 181

E. STOCHASTIC PROJECTIONS AND UNCERTAINTY

VI.E1 Long-Range Estimates Relating to the Actuarial Status of

the Combined OASDI Program. . . . . . . . . . . . . . . . . . . . . . . 191

F. ESTIMATES FOR OASDI AND HI, 

SEPARATE AND COMBINED

VI.F1 Payroll Tax Contribution Rates for the OASDI and 

HI Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193

VI.F2 OASDI and HI Annual Income Rates, Cost Rates, 

and Balances, Calendar Years 2013-90 . . . . . . . . . . . . . . . . . 195

VI.F3 Summarized OASDI and HI Income Rates and Cost Rates 

for Valuation Periods, Calendar Years 2013-90 . . . . . . . . . . . 197

VI.F4 OASDI and HI Annual and Summarized Income, Cost, and 

Balance as a Percentage of GDP, Calendar Years 2013-90 . . . 200

VI.F5 Ratio of OASDI Taxable Payroll to GDP, 

Calendar Years 2013-90 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202

VI.F6 Selected Economic Variables, Calendar Years 2012-90 . . . . . . 205

VI.F7 Operations of the Combined OASI and DI Trust Funds,

in CPI-indexed 2013 Dollars, Calendar Years 2013-90 . . . . . . 207

VI.F8 Operations of the Combined OASI and DI Trust Funds, 

in Current Dollars, Calendar Years 2013-90 . . . . . . . . . . . . . . 209

VI.F9 OASDI and HI Annual Non-interest Income, Cost, and

Balance in Current Dollars, Calendar Years 2013-90 . . . . . . . 211

G. ANALYSIS OF BENEFIT DISBURSEMENTS 

FROM THE OASI TRUST FUND WITH 

RESPECT TO DISABLED BENEFICIARIES

VI.G1 Benefit Disbursements From the OASI Trust Fund

With Respect to Disabled Beneficiaries . . . . . . . . . . . . . . . . . 214

VI.G2 Benefit Disbursements Under the OASDI Program

With Respect to Disabled Beneficiaries . . . . . . . . . . . . . . . . . 216
List of Figures

238

LIST OF FIGURES

II. OVERVIEW

II.D1 Short-Range OASI and DI Combined Trust Fund Ratio . . . . . 10

II.D2 OASDI Income, Cost, and Expenditures as Percentages of 

Taxable Payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

II.D3 Number of Covered Workers Per OASDI Beneficiary. . . . . . . 13

II.D4 OASDI Cost and Non-interest Income as a Percentage

of GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

II.D5 Cumulative Scheduled OASDI Income Less Cost,

From Program Inception Through Years 2012-87 . . . . . . . . . . 16

II.D6 Long-Range OASI and DI Combined Trust Fund Ratios 

Under Alternative Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . 18

II.D7 Long-Range OASI and DI Combined Trust Fund Ratios 

From Stochastic Modeling . . . . . . . . . . . . . . . . . . . . . . . . . . 19

II.D8 OASDI Annual Balances: 2012 and 2013 Trustees Reports. . . 21

IV. ACTUARIAL ESTIMATES

IV.A1 Short-Range OASI and DI Trust Fund Ratios. . . . . . . . . . . . . 40

IV.B1 Long-Range OASI and DI Annual Income Rates and 

Cost Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

IV.B2 Number of OASDI Beneficiaries Per 100 Covered Workers . . 57

IV.B3 Long-Range OASI and DI Trust Fund Ratios. . . . . . . . . . . . . 61

IV.B4 OASDI Annual Balances: 2012 and 2013 Trustees Reports. . . 75

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

V.C1 Primary-Insurance-Amount Formula for Those Newly 

Eligible in 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

V.C2 Maximum-Family-Benefit Formula for Those Newly 

Eligible in 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

V.C3 DI Disability Incidence Rates, 1970-2090 . . . . . . . . . . . . . . . 129

V.C4 DI Disability Termination Rates, 1970-2090 . . . . . . . . . . . . . 131

V.C5 Comparison of DI Disability Incidence Rates, Termination 

Rates and Conversion Ratios Under 

Intermediate Assumptions, 1970-2090. . . . . . . . . . . . . . . . . . 132

V.C6 DI Disability Prevalence Rates, 1970-2090 . . . . . . . . . . . . . . 135
List of Figures

239

VI. APPENDICES

VI.E1 Long-Range OASDI Cost Rates From Stochastic Modeling . . 184

VI.E2 Long-Range OASDI Trust Fund Ratios From 

Stochastic Modeling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

VI.E3 OASDI Cost Rates: Comparison of Stochastic to Low-Cost, 

Intermediate, and High-Cost Alternatives . . . . . . . . . . . . . . . 187

VI.E4 OASDI Trust Fund (Unfunded Obligation) Ratios: 

Comparison of Stochastic to Low-Cost, Intermediate, 

and High-Cost Alternatives. . . . . . . . . . . . . . . . . . . . . . . . . . 188

VI.F1 Estimated OASDI Income and Cost in CPI-indexed 

2013 Dollars, Based on Intermediate Assumptions . . . . . . . . . 208
Index

240

INDEX

A

Actuarial balance 10, 15, 47, 159, 172

Actuarial deficit 4, 15, 22, 63, 197

Actuarial estimates, LR 47

Actuarial estimates, SR 37

Adjusted program amounts 109

Administrative expenses 6, 34, 48, 146, 150, 166, 198, 206

Advance tax transfers 58, 152

Amendments 36

Annual balance 20, 47, 71

Asset reserves 2, 6, 9, 28, 150, 166, 179, 192, 204

Assumptions 9, 77, 94, 109, 159, 172, 193, 198, 203, 213

Automatic cost-of-living benefit increase 41, 96, 109

Auxiliary benefits 119

Average benefits 142

Average earnings assumptions 97

Average indexed monthly earnings (AIME) 112

Average wage index 109, 203

Award 120

B

Baby-boom generation 3, 22, 48, 54, 102, 127

Bend points 112

Beneficiaries, DI 126

Beneficiary 12, 41, 54, 77, 110, 162, 173, 198, 206, 213

Beneficiary, OASI 120

Benefit payments 6, 48, 142, 150, 166

Benefit termination 8

Best estimate 8, 22, 37, 77

Board of Trustees 37, 94, 148

C

Constant dollars 208

Consumer Price Index 95, 177, 203, 218

Contribution and benefit base 40, 97, 110, 218

Contributions 6, 148, 166, 192, 198, 206, 217

Cost 3, 43

Cost rate 3, 11, 48, 192

Cost-of-living adjustment 109

Covered earnings 6, 109, 202

Covered employment 8, 40, 97, 117, 148, 176

Covered worker 56, 117, 175

Creditable earnings 220

Current dollars 203
241

Index

Current-payment status 43, 131, 132, 133, 218

D

Deemed wage credit 48

Delayed retirement credit 116

Demographic assumptions 8, 20, 37, 78, 102, 109, 159, 204, 217

Deterministic model 182, 191

DI beneficiaries 126

Disability 148, 175, 213

Disability conversion ratio 131

Disability incidence rate 77, 127, 129, 175, 180, 217

Disability Insurance Trust Fund 219

Disability prevalence rate 133, 135

Disability termination rate 180

Disabled-worker benefit 129, 220

Disbursements 25, 26, 27, 30, 32, 37, 166, 167, 168, 214, 216

E

Earnings 2, 6, 40, 48, 97, 110, 148, 160, 192, 202, 203, 217

Earnings test 97, 110, 218

Economic assumptions 8, 20, 37, 45, 94, 102, 109, 159, 204, 217

Excess wages 48, 203

Expenditures 6, 8, 29, 35, 37, 150, 221

F

Federal Insurance Contributions Act 192, 227

Fertility assumptions 78

Financial interchange 6, 147, 150

Fiscal year 82, 152, 165

Full advance funding 222

G

General Fund of the Treasury 39, 41, 42, 44, 152, 154, 156, 169, 170, 171,

217

General fund reimbursement 222

Gross domestic product 4, 10, 53, 77, 95, 104, 198

Gross domestic product projections 104

H

High-cost assumptions 8, 17, 37, 38, 49, 77, 94, 130, 172, 190, 193, 198,

203, 217

Hospital Insurance program 139, 192, 225

Hospital Insurance Trust Fund 198

I

Immigration 8, 77, 78, 81, 86, 175, 182, 217, 223
Index

242

Immigration assumptions 81

Income rate 3, 11, 48, 192

Infinite horizon 10

Inflation 8, 77, 95, 203, 217

Inflation assumptions 95

Insured population 8, 118

Insured status 114

Interest 40, 105, 149, 159, 166, 194, 217

Interest rate 77, 159, 179, 217

Interest rate projections 105

Interest rates 8

Interfund borrowing 152, 224

Intermediate assumptions 8, 37, 41, 49, 77, 130, 172, 194, 198, 203, 207,

209, 213, 217

L

Labor force projections 102

Legal immigration 82, 87, 224

Life expectancy 3, 22, 77, 90, 102, 224

Life expectancy estimates 90

Long range 10, 47, 78, 121, 159, 192, 198

Low-cost assumptions 8, 17, 37, 49, 77, 94, 130, 172, 190, 193, 203, 217

Lump-sum death payment 142

M

Medicare 79, 225

Military service 39, 42, 44, 48, 147, 148, 152, 154, 156, 169, 170, 171

N

National average wage index 109, 203

Normal retirement age 110, 126, 143, 220

O

OASI beneficiaries 120

Old-Age and Survivors Insurance Trust Fund 148, 219

Old-law base 114

Other immigration 81, 175, 226

P

Par value 149

Partial advance funding 226

Pay-as-you-go financing 159

Payroll taxes 2, 64, 109, 136, 162, 172, 192, 206

Population estimates 88

Population in the Social Security area 40, 57, 88, 117, 175

Present value 159
243

Index

Primary insurance amount (PIA) 112

Productivity assumptions 95

Q

Quarters of coverage 118

R

Railroad Retirement 48, 62, 114, 147, 150, 166, 167, 168, 192, 198, 206,

219

Reallocation of tax rates 228

Real-wage differential 99, 176

Recession 11, 33, 40

Retired-worker benefit 121, 175, 213

Retirement age 110, 143, 220

Retirement earnings test 97, 110

Retirement eligibility age 175

S

Scenario-based model 228

Scheduled benefits 178, 198, 206, 215, 228

scheduled benefits 38

Self-employment 48, 96, 193, 227

Self-Employment Contributions Act 227, 228

Sensitivity analysis 172

Short range 9, 37, 120

Social Security Act 109, 149, 203, 213, 219

Social Security amendments 36

Solvency 229

Special public-debt obligation 108, 149, 179

Stochastic projections 182

Substantial gainful activity 126, 220

Summarized balance 199

Summarized income and cost rates 62, 159, 172, 196, 217

Supplemental Security Income 166

Supplementary Medical Insurance program 192, 225

Survivor benefit 2, 7, 124, 218

Sustainable solvency 58, 59

T

Taxable earnings 40, 57, 110, 160, 218

Taxable payroll 4, 22, 48, 96, 118, 159, 173, 192, 198, 203, 219

Taxable self-employment income 230

Taxable wages 141, 193, 230

Taxation of benefits 6, 141, 198, 206, 223

Taxes 6, 109, 193
Index

244

Termination 77

Termination rate 8, 121, 180, 217

Test of short-range financial adequacy 38, 228

Total fertility rate 78, 172

Trust fund financial operations 6, 25, 38, 148

Trust fund ratio 9, 37, 47, 58, 152, 169, 232

Trust fund reserves 37

U

Unemployment projections 102

Unfunded obligation 4, 10, 15, 17, 20, 47, 65, 67, 69, 70, 190, 226, 232, 233

Unnegotiated check 166

V

Valuation period 15, 47, 159, 172, 196, 217

Vocational rehabilitation 48, 150, 167, 198, 206, 215, 219

Y

Year of depletion 11, 14, 47, 60
245

STATEMENT OF ACTUARIAL OPINION

It is my opinion that: (1) the techniques and methodology used herein to

evaluate the financial and actuarial status of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds are based upon sound

principles of actuarial practice and are generally accepted within the actuarial profession; and (2) the assumptions used and the resulting actuarial estimates are, individually and in the aggregate, reasonable for the purpose of

evaluating the financial and actuarial status of the trust funds, taking into

consideration the past experience and future expectations for the population,

the economy, and the program.

Stephen C. Goss,

Associate of the Society of Actuaries,

Member of the American Academy of Actuaries,

Chief Actuary, Social Security Administration