112th Congress, 1st Session – – – – – – – – – – – – – – House Document 112-23

THE 2011 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 2011 ANNUAL REPORT OF THE BOARD OF TRUSTEES OF THE

FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND FEDERAL

DISABILITY INSURANCE TRUST FUNDS

May 13, 2011.—Referred to the Committee on Ways and Means

and ordered to be printed

U.S. GOVERNMENT PRINTING OFFICE

66-327 WASHINGTON: 2011
.

.
CONTENTS

(V)

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

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

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

B. TRUST FUND FINANCIAL OPERATIONS IN 2010 ....... 5

C. ASSUMPTIONS ABOUT THE FUTURE ................ 7

D. PROJECTIONS OF FUTURE FINANCIAL STATUS ....... 8

E. CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND

LEGISLATIVE CHANGES IN THE LAST YEAR . . . . . . . . . . 22

A. OPERATIONS OF THE OLD-AGE AND SURVIVORS

INSURANCE (OASI) AND DISABILITY INSURANCE (DI)

TRUST FUNDS, IN CALENDAR YEAR 2010 . . . . . . . . . . . . 22

1. OASI Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

2. DI Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

3. OASI and DI Trust Funds, Combined . . . . . . . . . . . . . . . . . . 29

B. SOCIAL SECURITY AMENDMENTS SINCE THE

2010 REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

IV. ACTUARIAL ESTIMATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

A. SHORT-RANGE ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . 34

1. Operations of the OASI Trust Fund. . . . . . . . . . . . . . . . . . . . 35

2. Operations of the DI Trust Fund . . . . . . . . . . . . . . . . . . . . . . 38

3. Operations of the Combined OASI and DI Trust Funds . . . . . 41

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

Estimates From the 2010 Report . . . . . . . . . . . . . . . . . . . . . . 43

B. LONG-RANGE ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . . 46

1. Annual Income Rates, Cost Rates, and Balances . . . . . . . . . . 47

2. Comparison of Workers to Beneficiaries. . . . . . . . . . . . . . . . 52

3. Trust Fund Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

4. Summarized Income Rates, Cost Rates, and Balances . . . . . . 59

5. Additional Measures of OASDI Unfunded Obligations . . . . . 64

6. Test of Long-Range Close Actuarial Balance . . . . . . . . . . . . 67

7. Reasons for Change in Actuarial Balance From Last Report . . 72
(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. . . . . . . . . . . . . . . . . . . . . . . . . . 86

5. Life Expectancy Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . 89

B. ECONOMIC ASSUMPTIONS AND METHODS . . . . . . . . . . . 92

1. Productivity Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 93

2. Price Inflation Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . 94

3. Average Earnings Assumptions . . . . . . . . . . . . . . . . . . . . . . 95

4. Assumed Real-Wage Differentials . . . . . . . . . . . . . . . . . . . . 97

5. Labor Force and Unemployment Projections . . . . . . . . . . . . . 99

6. Gross Domestic Product Projections . . . . . . . . . . . . . . . . . . . 102

7. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

C. PROGRAM-SPECIFIC ASSUMPTIONS AND METHODS . . . 106

1. Automatically Adjusted Program Parameters. . . . . . . . . . . . . 106

2. Covered Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

3. Taxable Payroll and Payroll Tax Revenue . . . . . . . . . . . . . . . 114

4. Insured Population. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

5. Old-Age and Survivors Insurance Beneficiaries. . . . . . . . . . . 118

6. Disability Insurance Beneficiaries. . . . . . . . . . . . . . . . . . . . . 123

7. Average Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

8. Benefit Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

9. Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

10. Railroad Retirement Financial Interchange . . . . . . . . . . . . . . 134

11. Military Service Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . 135

12. Income From Taxation of Benefits . . . . . . . . . . . . . . . . . . . . 135
(VII)

VI. APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS. . 137

B. HISTORY OF ACTUARIAL BALANCE ESTIMATES . . . . . . 150

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2020 . . . . . . . . . . . . . . . . . . . . . . 155

D. LONG-RANGE SENSITIVITY ANALYSIS . . . . . . . . . . . . . . 162

1. Total Fertility Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162

2. Death Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

3. Net Immigration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

4. Real-Wage Differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

5. Consumer Price Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168

6. Real Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

7. Disability Incidence Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 170

8. Disability Termination Rates . . . . . . . . . . . . . . . . . . . . . . . . 171

E. STOCHASTIC PROJECTIONS. . . . . . . . . . . . . . . . . . . . . . . . 173

1. Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

2. Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

3. Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

F. ESTIMATES FOR OASDI AND HI, SEPARATE AND

COMBINED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

1. Estimates as a Percentage of Taxable Payroll. . . . . . . . . . . . . 179

2. Estimates as a Percentage of Gross Domestic Product . . . . . . 185

3. Estimates in Dollars. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190

G. ANALYSIS OF BENEFIT DISBURSEMENTS FROM THE

OASI TRUST FUND WITH RESPECT TO DISABLED

BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203

H. GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207

LIST OF TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224

LIST OF FIGURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228

INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230

STATEMENT OF ACTUARIAL OPINION. . . . . . . . . . . . . . . 235

THE 2011 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 in the

United States makes available a basic level of monthly income upon the

attainment of retirement eligibility age, death, or disability by insured workers. The OASDI program consists of two separate parts that pay benefits to

workers and their families—Old-Age and Survivors Insurance (OASI) and

Disability Insurance (DI). Under OASI, monthly benefits are paid to retired

workers and their families and to survivors of deceased workers. Under DI,

monthly benefits are paid to disabled workers and their families.

The Board of Trustees was established under the Social Security Act 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 other two members are

public representatives, appointed by the President. The Deputy Commissioner of the Social Security Administration (SSA) is designated as Secretary

of the Board.

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

annually to the Congress on the actuarial (financial) status of the OASI and

DI Trust Funds. This annual report, for 2011, is the 71st such report.
Overview

2

II. OVERVIEW

A. HIGHLIGHTS

The report’s major findings are summarized below.

In 2010

At the end of 2010, about 54 million people were receiving benefits:

37 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 10 million disabled workers and dependents

of disabled workers. During the year, an estimated 157 million people had

earnings covered by Social Security and paid payroll taxes. Total expenditures in 2010 were $713 billion. Total income was $781 billion ($664 billion

in non-interest income and $117 billion in interest earnings), and assets held

in special issue U.S. Treasury securities grew to $2.6 trillion.

Short-Range Results

The assets of the OASI Trust Fund and of the combined OASI and DI Trust

Funds are projected to be adequate over the next 10 years under the intermediate assumptions. However, the assets of the DI Trust Fund are projected to

steadily decline under the intermediate assumptions, and would fall below

100 percent of annual cost by the beginning of 2013 and continue to decline

until the trust fund is exhausted in 2018. The DI Trust Fund does not satisfy

the short-range test of financial adequacy, which requires that the trust fund

remain above 100 percent of annual cost throughout the short-range period.

The combined assets of the OASI and DI Trust Funds are projected to grow

throughout the short-range period, from $2,609 billion at the beginning of

2011, or 353 percent of annual cost, to $3,526 billion at the beginning of

2020, or 284 percent of annual cost, under the intermediate assumptions.

This increase in assets indicates that annual cost is less than total income

throughout the short-range period. However, annual cost exceeds non-interest income in 2011 and remains higher throughout the remainder of the

short-range period. For last year’s report, combined assets were projected to

be 353 percent of annual cost at the beginning of 2011 and 299 percent at the

beginning of 2020.

Long-Range Results

Under the intermediate assumptions, OASDI cost generally increases more

rapidly than non-interest income through 2035 because the retirement of the

baby-boom generation increases the number of beneficiaries much faster

than subsequent lower-birth-rate generations increase the labor force. From

2035 to 2050, the cost rate declines due principally to the aging of the
3

Highlights

already retired baby-boom generation. Thereafter, increases in life expectancy generally cause OASDI cost to increase relative to non-interest

income, but more slowly than prior to 2035. Annual cost is projected to

exceed non-interest income in 2011 and remain higher throughout the

remainder of the long-range period. However, total income, including interest earnings on trust fund assets, will be sufficient to cover annual cost until

2023. The dollar level of the combined trust funds is projected to be drawn

down beginning in 2023 until assets are exhausted in 2036. Individually, the

DI Trust Fund is projected to be exhausted in 2018 and the OASI Trust Fund

in 2038.

The OASDI annual cost rate is projected to increase from 13.35 percent of

taxable payroll in 2011 to 17.01 percent in 2035 and to 17.56 percent in

2085, a level that is 4.24 percent of taxable payroll more than the projected

income rate for 2085. For last year’s report, the OASDI cost for 2085 was

estimated at 17.47 percent, or 4.16 percent of payroll more than the annual

income rate for that year. Expressed in relation to the projected gross domestic product (GDP), OASDI cost is estimated to rise from the current level of

4.8 percent of GDP to about 6.2 percent in 2035, then to decline to

6.0 percent by 2050, and to remain between 5.9 and 6.0 percent through

2085.

For the 75-year projection period, the actuarial deficit is 2.22 percent of taxable payroll, 0.30 percentage point larger than in last year’s report. The open

group unfunded obligation for OASDI over the 75-year period is $6.5 trillion

in present value and is $1.1 trillion more than the measured level of a year

ago. If the assumptions, methods, starting values, and the law had all

remained unchanged, the unfunded obligation would have risen to about

$5.8 trillion due to the change in the valuation date.

Conclusion

Under the long-range intermediate assumptions, annual cost for the OASDI

program is projected to exceed non-interest income in 2011 and remain

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

OASI and DI Trust Funds are projected to increase through 2022, and then to

decline and become exhausted and unable to pay scheduled benefits in full

on a timely basis in 2036. However, the DI Trust Fund is projected to

become exhausted in 2018, so legislative action will be needed as soon as

possible. At a minimum, a reallocation of the payroll tax rate between OASI

and DI would be necessary, as was done in 1994.

For the combined OASDI Trust Funds to remain solvent throughout the

75-year projection period, the combined payroll tax rate could be increased
Overview

4

during the period in a manner equivalent to an immediate and permanent

increase of 2.15 percentage points,1 scheduled benefits could be reduced

during the period in a manner equivalent to an immediate and permanent

reduction of 13.8 percent, or some combination of these approaches could be

adopted. Significantly larger changes would be required if current beneficiaries and those close to retirement age were to be held harmless, or if trust

fund asset levels were to be stabilized at the end of the 75-year projection

period.

The projected trust fund shortfalls should be addressed in a timely way so

that necessary changes can be phased in gradually and workers and beneficiaries can be given time to adjust to them. Implementing changes sooner

would allow the needed revenue increases or benefit reductions to be spread

over more generations. Social Security will play a critical role in the lives of

56 million beneficiaries and 158 million covered workers and their families

in 2011. With informed discussion, creative thinking, and timely legislative

action, Social Security can continue to protect future generations.

1 The necessary tax rate increase differs from the 2.22 percent actuarial deficit for two reasons. First, the

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

trust fund reserve at the end of the period. Second, the necessary tax rate is increased based on the expectation that any change in tax rates will affect the proportion of employee compensation paid in wages. For proposed changes in law that would alter payroll tax rates, an increase in payroll taxes is presumed to result in a

small shift of wages and salaries to forms of employee compensation that are not subject to the payroll tax.
5

Calendar Year 2010 Operations

B. TRUST FUND FINANCIAL OPERATIONS IN 2010

The table below shows the income, expenditures, and assets for the OASI,

the DI, and the combined OASDI Trust Funds in calendar year 2010.

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

In 2010, net payroll tax contributions accounted for 82 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 $106,800 in 2010. The tax rates scheduled under

current law for 2010 and later are shown in table II.B2.

Note: Under Public Law 111-147, most employers were exempt 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. Under Public Law 111-312, the OASDI payroll tax rate is reduced for

2011 by 2 percentage points for employees and for self-employed workers. These temporary reductions in

2010 and 2011 payroll tax revenue due to lower payroll tax rates have been and will be made up by reimbursements from the General Fund of the Treasury to the OASI and DI Trust Funds.

Less than one percent of OASDI Trust Fund income in 2010 came from

reimbursements from the General Fund of the Treasury. The primary reimbursement for the year resulted from Public Law 111-147, the Hiring IncenTable II.B1.—Summary of 2010 Trust Fund Financial Operations

[In billions]

OASI DI OASDI

Assets at the end of 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . $2,336.8 $203.5 $2,540.3

Total income in 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677.1 104.0 781.1

Net payroll tax contributions . . . . . . . . . . . . . . . . . . . . . 544.8 92.5 637.3

Reimbursements from General Fund of the Treasury . . 2.0 .4 2.4

Taxation of benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.1 1.9 23.9

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108.2 9.3 117.5

Total expenditures in 2010. . . . . . . . . . . . . . . . . . . . . . . . . 584.9 127.7 712.5

Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577.4 124.2 701.6

Railroad Retirement financial interchange . . . . . . . . . . 3.9 .5 4.4

Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . 3.5 3.0 6.5

Net increase in assets in 2010 . . . . . . . . . . . . . . . . . . . . . . 92.2 -23.6 68.6

Assets at the end of 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . 2,429.0 179.9 2,609.0

Table II.B2.—Payroll Tax Contribution Rates for 2010 and Later

OASI DI OASDI

Payroll tax contribution rate for employees and employers, each

(in percent) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.30 0.90 6.20

Payroll tax contribution rate for self-employed persons (in percent) . . . 10.60 1.80 12.40
Overview

6

tives to Restore Employment (HIRE) Act, which specified general fund

reimbursement for temporary reductions in employer payroll taxes on behalf

of certain qualified individuals.

Three percent of OASDI Trust Fund income in 2010 came from subjecting

up to 50 percent of Social Security benefits above specified levels to Federal

personal income taxation, and 15 percent of OASDI income came from interest earned on investment of OASDI Trust Fund reserves. Trust fund assets

are invested in interest-bearing securities of the U.S. Government. In 2010,

the combined trust fund assets earned interest at an effective annual rate of

4.6 percent. More than 98 percent of expenditures from the combined

OASDI Trust Funds in 2010 were retirement, survivor, and disability benefits totaling $701.6 billion. The financial interchange with the Railroad

Retirement program resulted in a net payment of $4.4 billion from the combined OASDI Trust Funds, or about 0.6 percent of total expenditures. The

administrative expenses of the Social Security program were $6.5 billion, or

about 0.9 percent of total expenditures.

Assets of the trust funds provide a reserve to pay benefits whenever total program cost exceeds income. Trust fund assets increased by $68.6 billion in

2010 because total income to the combined funds, including interest earned

on trust fund assets, exceeded total expenditures. At the end of 2010, the

combined assets of the OASI and the DI Trust Funds were 353 percent of

estimated expenditures for 2011, down from an actual level of 357 percent at

the end of 2009.
7

Future Assumptions

C. ASSUMPTIONS ABOUT THE FUTURE

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.

The intermediate demographic and economic assumptions shown in table

II.C1 reflect the Trustees’ best estimates of future experience, and therefore

most of the figures in this overview depict only the outcomes under the intermediate assumptions. Any projection of the future is, of course, uncertain.

For this reason, alternatives I (low-cost) and III (high-cost) are included to

provide a range of possible future experience. The actual outcome for future

costs is very unlikely to be as extreme as either of the outcomes portrayed by

the low- and high-cost projections. The assumptions for these two alternatives are also shown in table II.C1, and their implications are highlighted in a

separate section, beginning on page 15, on the uncertainty of the projections.

Assumptions are reexamined each year in light of recent experience and new

information. This annual review helps to ensure that the assumptions provide

the Trustees’ best estimate of future possibilities.

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

Table II.C1.—Long-Range Valuesa of Key Demographic and Economic Assumptions

for the 75-year Projection Period

Long-range assumptions Intermediate Low-cost High-cost

Total fertility rate (children per woman), starting in 2035. . . . . . 2.0 2.3 1.7

Average annual percentage reduction in total age-sex-adjusted

death rates from 2010 to 2085 . . . . . . . . . . . . . . . . . . . . . . . . .78 .32 1.31

Average annual net immigration (in thousands) for years

2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,075 1,385 785

Productivity (total U.S. economy), starting in 2021 . . . . . . . . . . 1.7 2.0 1.4

Average annual percentage change in average wage in covered

employment from 2020 to 2085 . . . . . . . . . . . . . . . . . . . . . . . 4.0 3.6 4.4

Consumer Price Index (CPI), starting in 2019. . . . . . . . . . . . . . . 2.8 1.8 3.8

Average annual real-wage differential (percent) for years

2021-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 1.8 .6

Unemployment rate (percent), starting in 2021 . . . . . . . . . . . . . . 5.5 4.5 6.5

Annual trust fund real interest rate (percent), starting in 2022 . . 2.9 3.6 2.1
Overview

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D. PROJECTIONS OF FUTURE FINANCIAL STATUS

Short-Range Actuarial Estimates

For the short range (2011-20), the Trustees measure financial adequacy by

comparing projected assets at the beginning of each year to projected program cost for that year under the intermediate set of assumptions. A trust

fund ratio of 100 percent or more—that is, assets at the beginning of each

year at least equal to projected cost for the year—is a good indication of a

trust fund’s ability to cover most short-term contingencies. The projected

trust fund ratios for OASI alone, and for OASI and DI combined, under the

intermediate assumptions exceed 100 percent throughout the short-range

period, and therefore OASI and OASDI satisfy the Trustees’ short-term test

of financial adequacy. However, the DI Trust Fund fails the Trustees’ shortterm test of financial adequacy. Its trust fund ratio is projected to fall below

the 100 percent level by the beginning of 2013. After 2013, the DI trust fund

ratio continues to decline until the trust fund is exhausted in 2018. Figure

II.D1 below shows that the trust fund ratios for the combined OASI and DI

Trust Funds decline gradually after 2010.

Figure II.D1.—Short-Range OASDI Trust Fund Ratio

[Assets as a percentage of annual expenditures]

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Calendar year

Historical Estimated

"Minimum" level for short-term financial adequacy
9

Future Financial Status

For 2010 and throughout the remainder of the short-range period, cost will

exceed non-interest income but will be less than total income, including

interest earned on trust fund assets. Trust fund assets are projected to grow

more slowly than cost, which causes the trust fund ratio to decline, as shown

in figure II.D1.

Long-Range Actuarial Estimates

The actuarial status of the program over the next 75 years is measured in

terms of annual cost and income as a percentage of taxable payroll, trust fund

ratios, the actuarial balance (also as a percentage of taxable payroll), and the

open group unfunded obligation (expressed in present-value dollars, as a percentage of taxable payroll, and as a percentage of gross domestic product

(GDP)). Consideration of Social Security’s annual cost and income as a percentage of the total U.S. economic output or GDP provides an additional

important perspective.

The year-by-year relationship among income (excluding interest), cost

(including scheduled benefits), and expenditures (including payable benefits)

for the OASDI program is illustrated in figure II.D2 for the full 75-year

period. All values are expressed as percentages of taxable payroll and, in the

case of income and cost, are referred to as the income rate and the cost rate,

respectively. Under the intermediate assumptions, demographic factors

would by themselves cause the cost rate to rise rapidly for about the next two

decades before leveling off in about 2035. For the next 5 years, this effect

will be obscured by the sharp increase in the cost rate that occurred when the

recent recession led to a reduction in the tax base and a surge in beneficiaries. The projected income rate is stable at about 13 percent throughout the

75-year period except for a dip in 2011 due to an expected $10 billion downward adjustment to 2011 income that corrects for excess payroll tax revenue

credited to the trust funds in earlier years.

Annual cost exceeded non-interest income in 2010 and is projected to continue to be larger throughout the remainder of the 75-year valuation period.

Nevertheless, from 2010 through 2022, total trust fund income, including

interest income, is more than is necessary to cover costs, so trust fund assets

will continue to grow during that time period. Beginning in 2023, trust fund

assets will diminish until they become exhausted in 2036. Non-interest

income is projected to be sufficient to support expenditures at a level of

77 percent of scheduled benefits after trust fund exhaustion in 2036, and then

to decline to 74 percent of scheduled benefits in 2085.
Overview

10

The estimated number of workers per beneficiary is shown in figure II.D3.

There were about 2.9 workers for every OASDI beneficiary in 2010. This

ratio had been extremely stable, remaining between 3.2 and 3.4 from 1974

through 2008, and is lower for 2009 and 2010 due to the economic recession.

The projected future increase in the cost rate reflects a projected decline in

the number of covered workers per beneficiary. The ratio of workers to beneficiaries is projected to decline, even as the economy recovers, because the

workers of the baby-boom generation are being replaced in the workforce by

lower-birth-rate generations. This ratio reaches 2.1 by 2035 when the babyboom 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%

2005 2015 2025 2035 2045 2055 2065 2075 2085

Calendar year

Cost: Scheduled and

payable benefits

Income

Payable benefits as percent

of scheduled benefits:

2011-35: 100%

2036: 77%

2085: 74%

Cost: Scheduled but not

fully payable benefits

Expenditures: Payable benefits = income

after trust fund exhaustion in 2036
11

Future Financial Status

The projected maximum trust fund ratios during the long-range period for

the OASI, DI, and combined funds appear in table II.D1. The table also

shows the year in which the maximum projected trust fund ratio is attained

and the year in which the assets are projected to be exhausted.

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

through the end of the 75-year valuation period. It is essentially the difference, expressed as a percentage of taxable payroll during the valuation

period, between income and cost of the program from 1937 through the end

of the valuation period. When the actuarial balance is negative, the actuarial

deficit can be interpreted as the percentage that could be added to the current-law income rate for each of the next 75 years, or subtracted from the

cost rate for each year, to bring the funds into actuarial balance. More generFigure II.D3.—Number of Covered Workers Per OASDI Beneficiary

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

and Trust Fund Exhaustion Dates

[Under the Intermediate Assumptions]

OASI DI OASDI

Maximum trust fund ratio (percent). . . . . . . . . . . . . . 401 136 353

Year attained. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2011 2011 2011

Year of trust fund exhaustion. . . . . . . . . . . . . . . . . . . 2038 2018 2036

0

1

2

3

4

1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Historical Estimated
Overview

12

ally, this measure is the average amount of change in income or cost that is

needed over the valuation period in order to achieve actuarial balance. In this

report, the actuarial balance under the intermediate assumptions is a deficit

of 2.22 percent of taxable payroll for the combined OASI and DI Trust

Funds. The actuarial deficit was 1.92 percent in the 2010 report and has been

in the range of 1.70 percent to 2.23 percent for every year beginning with the

1994 report. If the assumptions, methods, starting values, and the law had all

remained unchanged from last year, the actuarial deficit in this report would

have increased to 1.97 percent of payroll due to adding one year to the projection period.

Another way to illustrate the financial shortfall of the OASDI program is to

examine the cumulative present value of scheduled income less cost. Figure

II.D4 shows the present value of cumulative OASDI income less cost from

the inception of the program through 2010 and through each of the next 75

years. A positive cumulative value represents the level of trust fund assets

through the end of the selected year. A negative value is referred to as the

unfunded obligation through the selected year. The balance of the combined

trust funds is $2.6 trillion at the end of 2010. This cumulative amount

declines after 2010 in present value, but continues to be positive through

2035. However, after 2035 this cumulative amount becomes negative, which

means that the OASDI Trust Funds have a net unfunded obligation through

each year after 2035. Through the end of 2085, the combined funds have a

present-value unfunded obligation of $6.5 trillion. This unfunded obligation

represents 2.1 percent of taxable payroll and 0.7 percent of GDP during the

75-year valuation period. The 0.14 percentage point difference between the

unfunded obligation as a share of taxable payroll (2.08 percent) and the actuarial deficit (2.22 percent) reflects the additional requirement of an ending

trust fund balance equal to one year’s cost for the actuarial balance measure.
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. Figure II.D5 shows that Social Security’s cost as a percentage of GDP is projected to continue growing from 4.4 percent in 2008 to about 6.2 percent in

2035, then to decline to 6.0 percent by 2050, and to remain between 5.9 and

6.0 percent through 2085. As the economy recovers, Social Security’s noninterest income, which reflects scheduled tax rates, is projected to increase

from its current level of about 4.5 percent of GDP to about 4.9 percent of

GDP for 2020. Thereafter, non-interest income as a percent of GDP declines

gradually, until it reaches about 4.6 percent by 2085. Future non-interest

income declines generally in relation to GDP because the share of employee

compensation provided in fringe benefits is projected to increase gradually,

which will make wages a declining share of GDP.

Figure II.D4.—Cumulative Scheduled OASDI Income Less Cost,

From 1937 Through Selected Years

[Present value as of January 1, 2011, in trillions]

-$7

-$6

-$5

-$4

-$3

-$2

-$1

$0

$1

$2

$3

2010 2025 2040 2055 2070 2085

Ending year of accumulation

Unfunded

obligation

(negative)

Trust fund

assets

2036
Overview

14

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.

Summary measures for a time period that extends over the infinite horizon

are also included in this report. These measures provide an additional indication of Social Security’s very long-run financial condition, but are subject to

much greater uncertainty. These calculations show that extending the horizon

beyond 75 years increases the unfunded obligation. Over the infinite horizon,

the shortfall (unfunded obligation) amounts to $17.9 trillion in present value,

3.6 percent of future taxable payroll, or 1.2 percent of future GDP. The summarized shortfalls for the 75-year period and the infinite horizon both reflect

annual shortfalls only for years after trust fund exhaustion. The annual shortfalls after trust fund exhaustion rise slowly and reflect increases in life

expectancy after 2036. 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 two-thirds of the years in the 75-year

period have unfunded annual shortfalls.

Figure II.D5.—OASDI Cost and Non-interest Income as a Percentage of GDP

0%

2%

4%

6%

8%

10%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Non-interest Income

Historical Estimated

Cost
15

Future Financial Status

The measured unfunded obligation over the infinite horizon is increased

from $16.1 trillion in last 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 $16.9 trillion due to the change

in the valuation date. Expressed as a percentage of taxable payroll, the measured unfunded obligation over the infinite horizon increased from

3.3 percent in last year’s report to 3.6 percent for this year’s report. As a percentage of GDP, the measured unfunded obligation over the infinite horizon

of 1.2 percent is the same as it was in last year’s report.

Uncertainty of the Projections

Significant uncertainty surrounds the intermediate assumptions. The Trustees

use several methods to help illustrate that uncertainty. One approach is the

use of 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 reflects a set of assumptions that

improves the projected financial status of the trust funds relative to the financial status under the intermediate set of assumptions. The low-cost alternative includes a higher ultimate total fertility rate, slower improvement in

mortality, a higher real-wage differential, and lower unemployment. The

high-cost alternative, in contrast, includes a lower ultimate total fertility rate,

more rapid improvement in mortality, a lower real-wage differential, and

higher unemployment. These alternatives are not intended to suggest 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. The actual outcome for future costs is very unlikely to be as

extreme as either of the outcomes portrayed by the low- and high-cost projections. The method for constructing these low- and high-cost projections

does not provide an estimate of the probability that actual experience will lie

within or outside the range they define.
Overview

16

In appendix D, this report also provides long-range sensitivity analysis for

the OASDI program, by varying one parameter at a time. These estimates

provide further illustrations of the uncertainty surrounding projections into

the future.

A third approach that measures uncertainty uses stochastic simulations to

develop a range of projections and provides estimates of the probability 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 exhaustion is highly probable by mid-century (see figure II.D7).

The stochastic results suggest that outcomes as good as the low-cost alternative or as bad as the high-cost alternative are unlikely. However, the relationship between the stochastic results and the low- and high-cost alternatives

may change as the methodology for the stochastic simulations is further

developed. As noted in appendix E, future improvements and refinements

are expected to be more likely to expand rather than reduce the indicated

range of uncertainty.

Figure II.D6.—Long-Range OASDI Trust Fund Ratios Under Alternative Assumptions

[Assets as a percentage of annual cost]

0%

100%

200%

300%

400%

500%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Historical Estimated

III II

I
17

Future Financial Status

Changes From Last Year’s Report

The long-range OASDI actuarial deficit of 2.22 percent of taxable payroll for

this year’s report is larger than the deficit of 1.92 percent of taxable payroll

shown in last year’s report under intermediate assumptions. Changes in mortality projections, due to new starting values and revised methods, are 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 effect are near-term lower levels of net

other immigration and real earnings than assumed in last year’s report. For a

detailed description of the specific changes identified in table II.D2 below,

see section IV.B.7 on page 72.

Figure II.D7.—Long-Range OASDI Trust Fund Ratios From Stochastic Modeling

0%

100%

200%

300%

400%

500%

2011 2026 2041 2056 2071 2086

Projection year

50%

97.5%

2.5%

90%

10%
Overview

18

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

The open group unfunded obligation over the 75-year projection period has

increased from $5.4 trillion (present discounted value as of January 1, 2010)

to $6.5 trillion (present discounted value as of January 1, 2011). The measured unfunded obligation would be expected to increase by about

$0.4 trillion due to advancing the valuation date by 1 year and including the

additional year 2085. Legislative changes, changes in methods, revisions in

assumptions, and updated data increased the measured unfunded obligation

by about $0.7 trillion.

This year’s projections of annual balances (non-interest income minus cost)

are lower than those in last year’s report throughout the 75-year projection

period. See figure II.D8.

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.09 1.92 14.01

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.71 2.22 15.93

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.62 -.30 -1.92

Changes in actuarial balance due to changes in:

Legislation / Regulation . . . . . . . . . . . . . . . . . . . . . . . .00 .00 .00

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

a In changing from the valuation period of last year’s report, which was 2010-84, to the valuation period of

this report, 2011-85, the relatively large negative annual balance for 2085 is included. This change in the valuation period results in a larger long-range actuarial deficit. The fund balance at the end of 2010, i.e., at the

beginning of the projection period, is included in the 75-year actuarial balance.

-.04 -.01 -.05

Demographic data and assumptions. . . . . . . . . . . . . . -.14 .00 -.14

Economic data and assumptions. . . . . . . . . . . . . . . . . -.05 -.01 -.06

Disability assumptions . . . . . . . . . . . . . . . . . . . . . . . . .00 .00 -.01

Methods and programmatic data . . . . . . . . . . . . . . . . -.06 +.02 -.05

Total change in actuarial balance . . . . . . . . . . . . . . . . . . -.30 .00 -.30

Shown in this report:

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.92 -.30 -2.22

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.11 1.91 14.02

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.04 2.21 16.25
19

Future Financial Status

Figure II.D8.—OASDI Annual Balances: 2010 and 2011 Trustees Reports

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

-6%

-4%

-2%

0%

2%

4%

2005 2015 2025 2035 2045 2055 2065 2075 2085

Calendar year

2010 Report

2011 Report
Overview

20

E. CONCLUSION

Under current law, the cost of Social Security will generally increase faster

than the program’s income because of the aging of the baby-boom generation, continuing low fertility compared to the baby-boom period, and

increasing life expectancy. Based on the Trustees’ best estimate, program

cost will exceed non-interest income in 2011, as it did in 2010, and remain

higher throughout the remainder of the 75-year projection period. Social

Security’s combined trust funds are projected to increase with the help of

interest income through 2022 and allow full payment of scheduled benefits

on a timely basis until the trust funds become exhausted in 2036. At that

time, annual non-interest income to the trust funds is projected to equal about

77 percent of program cost. By 2085, annual non-interest income is projected

to be about 74 percent as large as the annual cost of the OASDI program.

The OASI Trust Fund and the DI Trust Fund are projected to have sufficient

funds to pay full benefits on time until 2038 and 2018, respectively. Given

that the DI Trust Fund is projected to become exhausted in 2018, legislative

action will be needed as soon as possible. At a minimum, a reallocation of

the payroll tax rate between OASI and DI would be necessary, as was done

in 1994.

Over the full 75-year projection period, the actuarial deficit estimated for the

combined trust funds is 2.22 percent of taxable payroll—0.30 percentage

point larger than the 1.92 percent deficit projected in last year’s report. Solvency of the combined OASDI Trust Funds for the next 75 years could be

restored under the intermediate assumptions if increases in revenue were

made equivalent to immediately and permanently increasing the Social Security payroll tax from its current level of 12.40 percent (for employees and

employers combined) to 14.55 percent.1 Alternatively, changes could be

made that are equivalent to reducing scheduled benefits by about

13.8 percent. Other ways of reducing the deficit include other sources of revenue or some combination of these approaches.

If no substantial action is taken for several years, then changes necessary to

maintain Social Security solvency will be concentrated on fewer years and

fewer generations. This possible outcome can be seen by examining the large

and sudden changes that would be required if action were deferred until the

1 The necessary tax rate increase differs from the 2.22 percent actuarial deficit for two reasons. First, the

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

trust fund reserve at the end of the period. Second, the necessary tax rate is increased based on the expectation that any change in tax rates will affect the proportion of employee compensation paid in wages. For proposed changes in law that would alter payroll tax rates, an increase in payroll taxes is presumed to result in a

small shift of wages and salaries to forms of employee compensation that are not subject to the payroll tax.
21

Conclusion

combined trust funds become exhausted in 2036. For example, either of the

following two actions would eliminate the shortfall for the 75-year period as

a whole by specifically eliminating annual deficits after trust fund exhaustion:

• Payroll taxes could be raised to finance scheduled benefits fully in

every year starting in 2036. The payroll tax rate could be increased to

about 16.4 percent at the point of trust fund exhaustion in 2036 and continue rising generally thereafter, reaching about 16.9 percent in 2085.

• Similarly, benefits could be reduced to the level that is payable with

scheduled tax rates in each year beginning in 2036. Scheduled benefits

could be reduced 23 percent at the point of trust fund exhaustion in

2036, with reductions reaching 26 percent in 2085.

Based on the assumption of continued increase in the average age of the population after the 75-year period (due to expected improvement in life expectancy), Social Security’s annual cost will very likely continue to grow faster

than non-interest income after 2085. As a result, ensuring solvency of the

system beyond 2085 would likely require further changes beyond those

expected to be needed through 2085.

The projected trust fund shortfalls should be addressed in a timely way so

that necessary changes can be phased in gradually and workers and beneficiaries can be given time to adjust to them. Implementing changes sooner

would allow the needed revenue increases or benefit reductions to be spread

over more generations. Social Security will play a critical role in the lives of

56 million beneficiaries and 158 million covered workers and their families

in 2011. With informed discussion, creative thinking, and timely legislative

action, Social Security can continue to protect future generations.

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

• www.socialsecurity.gov/oact/tr/2011/index.html

• www.cms.gov/ReportsTrustFunds/

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

social_security.aspx
Financial Operations and Legislative Changes

22

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 2010

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

DI Trust Funds1 during calendar year 2010. Chapter IV provides projections

for calendar years 2011 through 2085.

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 2010,

and of the assets of the fund at the beginning and end of the calendar year. As

shown in this table, total trust fund receipts in 2010 amounted to $677.1 billion, while disbursements totaled $584.9 billion, an increase in trust fund

assets during 2010 of $92.2 billion.

Included in total receipts during calendar year 2010 were $546.3 billion in

payroll tax contributions. These contributions were partially offset by payments totaling $1.5 billion to the general fund for the estimated amount of

refunds to employees who worked for more than one employer during a year

and paid contributions on total earnings in excess of the contribution and

benefit base. Net payroll tax contributions thus amounted to $544.8 billion in

2010.

Reimbursements from the General Fund of the Treasury amounted to $2.0

billion in 2010. As shown in the table, the primary reimbursement for the

year resulted from Public Law 111-147, the Hiring Incentives to Restore

Employment (HIRE) Act. This law specified general fund reimbursement for

temporary reductions in employer payroll taxes on behalf of certain qualified

individuals.

The OASI Trust Fund was reimbursed approximately $12 million in 2010

under the provisions of Public Law 110-246, the Food, Conservation, and

Energy Act of 2008.

Reimbursements from the General Fund of the Treasury to the OASI and DI

Trust Funds have been made for the cost attributable to the granting of noncontributory wage credits for military service prior to 1957. Adjustments are

1 Data on trust fund operations are available at www.socialsecurity.gov/oact/progdata/fundsQuery.html.
23

Calendar Year 2010 Operations

made to the original reimbursements on a periodic basis. In 2010, a $113

million adjustment was made from the OASI Trust Fund to the general fund.

Special payments are made to uninsured persons who meet certain requirements. The costs associated with providing such payments are largely reimbursed from the General Fund of the Treasury. Although there was no

reimbursement in 2010, a reimbursement of about $3,000 is scheduled for

2011, reflecting costs incurred in fiscal year 2009.

Income based on taxation of benefits amounted to $22.1 billion in 2010.

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.

The OASI Trust Fund was credited with net interest of $108.2 billion in

2010, which consisted of: (1) interest earned on the investments of 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 $97,000, consisted of gifts received under the

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

funds.

Of the $584.9 billion in total OASI disbursements in 2010, $577.4 billion

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

rehabilitation services.1 The amount of net benefit payments in calendar year

2010 represents an increase of 3.6 percent over the corresponding amount in

calendar year 2009. Normally, benefit payments increase because of both an

increase in the total number of beneficiaries and an increase in the average

benefit. The increase in benefit payments was smaller than normal because

there was no automatic cost-of-living adjustment for December 2009.

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

of retired or deceased workers who receive benefits on the basis of disabilities that began before age 22.

Reimbursement from the trust funds for the costs of vocational rehabilitation services is made only in those

cases where the services contributed to the successful rehabilitation of the beneficiary.
Financial Operations and Legislative Changes

24

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

Provisions of the Railroad Retirement Act require an annual financial interchange between the Railroad Retirement and OASDI programs. The purpose

of such provisions is to put the OASI and DI Trust Funds in the same financial position they would have been had railroad employment always been

Table III.A1.—Operations of the OASI Trust Fund, Calendar Year 2010

[In millions]

Total assets, December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,336,798

Receipts:

Net payroll tax contributions:

Payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $546,267

Payments from the General Fund of the Treasury for payroll tax contributions subject to refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,495

Net payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 544,773

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L. 111-147. . . . . . . . . . . . . . . . . . . 2,143

Reimbursements directed by P.L. 110-246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Adjustment of previous determinations of costs attributable to noncontributory

wage credits for military service performed before 1957 . . . . . . . . . . . . . . . . . . -113

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

a Between -$0.5 and $0.5 million.

Net general fund reimbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,042

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 159

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,931

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,090

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,200

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.

6

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 108,206

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

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677,111

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577,448

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -57

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 2

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577,393

Financial interchange with the Railroad Retirement “Social Security Equivalent

Benefit Account”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,930

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,911

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 636

Offsetting receipts from sales of supplies, materials, etc. . . . . . . . . . . . . . . . . . . . . a

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.

-4

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,543

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584,866

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,245

Total assets, December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,429,043
25

Calendar Year 2010 Operations

covered by Social Security. Under those provisions, the Railroad Retirement

Board and the Commissioner of Social Security determined that an interchange of $3.9 billion to the Social Security Equivalent Benefit Account

from the OASI Trust Fund was required in June 2010.

The remaining $3.5 billion of disbursements from the OASI Trust Fund represented net administrative expenses. The expenses of administering the

OASI program are initially charged directly to the trust fund on an estimated

basis. Periodically, as actual experience develops and is analyzed, adjustments to the allocations of administrative expenses for prior periods are

made between the OASI Trust Fund, the DI Trust Fund, and the general fund

account for the Supplemental Security Income program, with appropriate

interest adjustments. As described earlier, the interest adjustments arising

from the reallocation of administrative expenses are recorded in the trust

fund accounting under investment income.

In 2010, 82 percent of OASI net administrative expenses represented the cost

of administering the program. The Social Security Administration charges

such costs to the trust fund ($2.9 billion in 2010). In addition, the Department of the Treasury charges directly to the trust fund expenses ($0.6 billion

in 2010) for services provided in administering the OASI program. A relatively small offset ($413 thousand in 2010) to administrative expenses represents income from the sale of excess supplies and equipment.

Finally, net reimbursements are made from the General Fund of the Treasury

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 ($2 million in

2010) and with the provision of information to participants in certain pension

plans ($2 million in 2010). These miscellaneous reimbursements totaled

$4 million in 2010.

The assets of the OASI Trust Fund at the end of calendar year 2010 totaled

$2,429.0 billion, consisting of $2,429.5 billion in U.S. Government obligations and, as an offset, an extension of credit in the amount of $0.5 billion

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

annual rate of interest earned by the assets of the OASI Trust Fund during

calendar year 2010 was 4.6 percent, as compared to 4.8 percent earned during calendar year 2009. Table VI.A5, 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 each year 2009 and 2010.
Financial Operations and Legislative Changes

26

By law, trust fund assets can be invested only 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 (i.e.,

securities sold only to the trust funds). These are of two types: short-term

certificates of indebtedness and long-term bonds. The certificates of indebtedness are issued on a daily basis for the investment of receipts not required

to meet current expenditures, and they mature on the next June 30 following

the date of issue. Special-issue bonds, on the other hand, are normally

acquired only when special issues of either type mature on June 30. The

amount of bonds acquired on June 30 is equal to the amount of special issues

maturing (including 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

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. Accordingly,

the amounts and maturity dates of the OASI special-issue bonds purchased

on June 30, 2010, with an interest rate of 2.875 percent, were selected so that

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

over the 15-year period 2011-25. The amounts of bonds purchased on June

30, 2010 are shown in table III.A7.

2. DI Trust Fund

A statement of the income and disbursements of the Federal Disability Insurance Trust Fund in calendar year 2010, and of the assets of the fund at the

beginning and end of the calendar year, is presented in table III.A2.
27

Calendar Year 2010 Operations

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

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

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

Table III.A2.—Operations of the DI Trust Fund, Calendar Year 2010

[In millions]

Total assets, December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $203,550

Receipts:

Net payroll tax contributions:

Payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $92,765

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

subject to refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -254

Net payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,511

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L. 111-147. . . . . . . . . . . . . . . . . . . 364

Reimbursements directed by P.L. 110-246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Adjustment of previous determinations of costs attributable to noncontributory

wage credits for military service performed before 1957 . . . . . . . . . . . . . . . . . . -3

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

a Between -$0.5 and $0.5 million.

Net general fund reimbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363

Income based on taxation of benefit payments:

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

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,848

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,852

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,290

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. . . . . . . . . ............... 9,292

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,017

Disbursements:

Benefit payments:

Monthly benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,191

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -29

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 54

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,216

Financial interchange with the Railroad Retirement “Social Security Equivalent

Benefit Account”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 462

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,842

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

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.

22

Total administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,982

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,660

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23,643

Total assets, December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,907
Financial Operations and Legislative Changes

28

Of the $104.0 billion in total receipts, $92.5 billion was net payroll tax contributions.

Of the $127.7 billion in total disbursements, $124.2 billion was net benefit

payments. This amount represents an increase of 4.9 percent over the corresponding amount in calendar year 2009. This increase in DI benefit payments was due to the same factors that resulted in the net increase in benefit

payments from the OASI Trust Fund. As with OASI benefits, the increase in

DI benefit payments was smaller than normal in 2010 because there was no

automatic cost-of-living increase in December 2009. The increase in the

number of DI beneficiaries from 2009 to 2010 was more pronounced than

the corresponding increase in the number of OASI beneficiaries, due to the

increase in applications for disability benefits caused by the economic slowdown.

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

continued to exceed such income in 2010. As in 2009, DI disbursements

exceeded total DI income (including interest).

The assets of the DI Trust Fund at the end of calendar year 2010 totaled

$179.9 billion, and consisted of $180.0 billion in U.S. Government obligations and, as an offset, an extension of credit amounting to $0.1 billion

against securities to be redeemed within the following few days. The effective annual rate of interest earned by the assets of the DI Trust Fund during

calendar year 2010 was 4.9 percent, as compared to 5.0 percent earned during calendar year 2009. Table VI.A6, 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 each year 2009 and 2010.

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

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. However, as

of June 2010, the DI Trust Fund was estimated to exhaust its assets within 15

years. Therefore, the amounts and maturity dates of the DI special-issue

bonds purchased on June 30, 2010, with an interest rate of 2.875 percent,

were selected so that equal amounts of special issues would mature over the

10-year period 2011-20. The DI Trust Fund had already redeemed many of

the bonds coming due June 30, 2011, so this even spread led to the purchase

of a single bond maturing on June 30, 2011, as shown in table III.A7.
29

Calendar Year 2010 Operations

3. OASI and DI Trust Funds, Combined

A statement of the operations of the OASI and DI Trust Funds, on a combined basis, is presented in table III.A3. The entries in this table represent the

sums of the corresponding values from tables III.A1 and III.A2. A description of the nature of these income and expenditure transactions is provided in

the two preceding subsections that cover OASI and DI separately.

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

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

Calendar Year 2010

[In millions]

Total assets, December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,540,348

Receipts:

Net payroll tax contributions:

Payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $639,032

Payments from the General Fund of the Treasury for payroll tax contributions subject to refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,748

Net payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637,283

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L. 111-147. . . . . . . . . . . . . . . . . . . 2,507

Reimbursements directed by P.L. 110-246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Adjustment of previous determinations of costs attributable to noncontributory

wage credits for military service performed before 1957 . . . . . . . . . . . . . . . . . . -116

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

a Between -$0.5 and $0.5 million.

Net general fund reimbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,405

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 163

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,779

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,942

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,490

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

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 117,498

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

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 781,128

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 701,639

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -86

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 56

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701,609

Financial interchange with the Railroad Retirement “Social Security Equivalent

Benefit Account”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,392

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,753

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 755

Offsetting receipts from sales of supplies, materials, etc. . . . . . . . . . . . . . . . . . . . . a

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.

17

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,525

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 712,526

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,602

Total assets, December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,608,950
Financial Operations and Legislative Changes

30

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

calendar year 2010, from the 2006-10 Trustees Reports, to the corresponding

actual amounts for 2010.1

l

A number of factors can contribute to differences between estimates and subsequent actual amounts, including actual values for key demographic, economic, and other variables that differ from assumed levels. In addition, new

legislation or other administrative initiatives that were not enacted or finalized at the time the earlier estimates were completed can contribute to such

differences. Estimates for 2010 were far too optimistic in the 2006 through

2008 reports because they did not anticipate the economic recession. Estimates in the 2009 report were more accurate, but still underestimated the

effect of the recession for 2010.

1 Percentage differences are calculated using amounts before rounding to the nearest $0.1 billion.

Table III.A4.—Comparison of Actual Calendar Year 2010 Trust Fund Operations

With Estimates Made in Prior Reportsa

[Amounts in billions]

a The estimates shown are based on the intermediate assumptions.

Total income b

b “Actual” income for 2010 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 2006 report . . . . . . . . . . . . . . $810.4 19.7 $575.7 -1.6

Estimate in 2007 report . . . . . . . . . . . . . . 810.3 19.7 573.5 -1.9

Estimate in 2008 report . . . . . . . . . . . . . . 801.2 18.3 577.9 -1.2

Estimate in 2009 report . . . . . . . . . . . . . . 733.9 8.4 581.2 -.6

Estimate in 2010 report . . . . . . . . . . . . . . 686.1 1.3 586.2 .2

Actual amount . . . . . . . . . . . . . . . . . . . . . 677.1 — 584.9 —

DI Trust Fund:

Estimate in 2006 report . . . . . . . . . . . . . . 124.2 19.4 121.2 -5.1

Estimate in 2007 report . . . . . . . . . . . . . . 124.7 19.9 120.7 -5.4

Estimate in 2008 report . . . . . . . . . . . . . . 123.8 19.0 121.8 -4.6

Estimate in 2009 report . . . . . . . . . . . . . . 113.9 9.5 128.1 .4

Estimate in 2010 report . . . . . . . . . . . . . . 105.2 1.1 128.4 .6

Actual amount . . . . . . . . . . . . . . . . . . . . . 104.0 — 127.7 —

OASI and DI Trust Funds, combined:

Estimate in 2006 report . . . . . . . . . . . . . . 934.7 19.7 696.9 -2.2

Estimate in 2007 report . . . . . . . . . . . . . . 935.0 19.7 694.2 -2.6

Estimate in 2008 report . . . . . . . . . . . . . . 925.0 18.4 699.6 -1.8

Estimate in 2009 report . . . . . . . . . . . . . . 847.7 8.5 709.3 -.4

Estimate in 2010 report . . . . . . . . . . . . . . 791.3 1.3 714.6 .3

Actual amount . . . . . . . . . . . . . . . . . . . . . 781.1 — 712.5 —
31

Calendar Year 2010 Operations

At the end of calendar year 2010, about 54.0 million persons were receiving

monthly benefits under the OASDI program. Of these persons, about 43.8

million and 10.2 million were receiving monthly benefits from the OASI

Trust Fund and the DI Trust Fund, respectively. The number of persons

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

and 5.0 percent, respectively, during the calendar year, which reflects

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

The estimated distributions of benefit payments in calendar years 2009 and

2010, by type of beneficiary, are shown in table III.A5 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 drawn from the OASI and DI Trust Funds in

calendar year 2010 totaled $6.5 billion. This amount represented 1.0 percent

of non-interest income and 0.9 percent of expenditures. Corresponding perTable III.A5.—Distribution of Benefit Payments by Type of Beneficiary or Payment,

Calendar Years 2009 and 2010

[Amounts in millions]

Calendar year 2009 Calendar year 2010

Amount

Percentage

of total Amount

Percentage

of total

Total OASDI benefit payments . . . . . . . . . . $675,488 100.0 $701,639 100.0

OASI benefit payments . . . . . . . . . . . . . . 557,160 82.5 577,448 82.3

DI benefit payments . . . . . . . . . . . . . . . . . 118,329 17.5 124,191 17.7

OASI benefit payments, total. . . . . . . . . . . . 557,160 100.0 577,448 100.0

Monthly benefits:

Retired workers and auxiliaries . . . . . . 451,578 81.1 471,505 81.7

Retired workers . . . . . . . . . . . . . . . . 424,044 76.1 443,390 76.8

Spouses . . . . . . . . . . . . . . . . . . . . . . . 23,613 4.2 24,001 4.2

Children . . . . . . . . . . . . . . . . . . . . . . 3,922 .7 4,114 .7

Survivors of deceased workers. . . . . . . 105,380 18.9 105,741 18.3

Aged widows and widowers. . . . . . . 83,572 15.0 83,927 14.5

Disabled widows and widowers . . . . 2,067 .4 2,121 .4

Parents . . . . . . . . . . . . . . . . . . . . . . . 23 a

a Less than 0.05 percent.

23 a

Children . . . . . . . . . . . . . . . . . . . . . . 18,071 3.2 18,024 3.1

Widowed mothers and fathers

caring for child beneficiaries . . . . 1,647 .3 1,645 .3

Uninsured persons generally aged 72

before 1968 . . . . . . . . . . . . . . . . . . . b

b Less than $0.5 million.

a ba

Lump-sum death payments . . . . . . . . . . . 201 a 203 a

DI benefit payments, total . . . . . . . . . . . . . . 118,329 100.0 124,191 100.0

Disabled workers . . . . . . . . . . . . . . . . . 109,549 92.6 115,059 92.6

Spouses. . . . . . . . . . . . . . . . . . . . . . . . . 586 .5 598 .5

Children . . . . . . . . . . . . . . . . . . . . . . . . 8,194 6.9 8,534 6.9
Financial Operations and Legislative Changes

32

centages for each trust fund separately and for the OASDI program as a

whole are shown in table III.A6 for each of the last 5 years.

Changes in the invested assets of the OASI Trust Fund and the DI Trust Fund

between the end of 2009 and the end of 2010 result from the acquisition and

disposition of securities during calendar year 2010. 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.

Table III.A6.—Administrative Expenses as a Percentage of Non-interest Income and of

Total Expenditures, Calendar Years 2006-10

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

2006 . . . . . . . . . . . 0.5 0.7 2.5 2.5 0.8 1.0

2007 . . . . . . . . . . . .5 .6 2.6 2.5 .8 .9

2008 . . . . . . . . . . . .5 .6 2.6 2.3 .8 .9

2009 . . . . . . . . . . . .6 .6 2.8 2.3 .9 .9

2010 . . . . . . . . . . . .6 .6 3.1 2.3 1.0 .9

Table III.A7.—Trust Fund Investment Transactions, Calendar Year 2010

[In millions]

OASI

Trust Fund

DI

Trust Fund

OASI and DI

Trust Funds,

combined

Invested assets, December 31, 2009 . . . . . . . . $2,318,780 $199,760 $2,518,541

Acquisitions:

Special issues:

Certificates of indebtedness . . . . . . . . . . . 646,634 103,195 749,830

Bondsa ...........................

a Amounts shown were purchased on June 30, 2010. The interest rate on such purchases was 2.875 percent.

262,278 7,732 270,010

Total acquisitions . . . . . . . . . . . . . . . . . . . 908,912 110,927 1,019,839

Dispositions:

Special issues:

Certificates of indebtedness . . . . . . . . . . . 629,578 100,095 729,674

Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,600 30,569 199,169

Total dispositions . . . . . . . . . . . . . . . . . . . 798,179 130,664 928,843

Net increase in invested assets . . . . . . . . . . . . . 110,733 -19,737 90,996

Invested assets, December 31, 2010 . . . . . . . . 2,429,514 180,023 2,609,537
33

Social Security Amendments in 2010

B. SOCIAL SECURITY AMENDMENTS SINCE THE 2010 REPORT

Since the 2010 report was transmitted to Congress on August 5, 2010, two

laws were enacted that are expected to have direct financial effects on the

OASDI program.

The Small Business Jobs Act of 2010, Public Law 111-240, was enacted on

September 27, 2010. It allows business owners to deduct the cost of health

insurance incurred in 2010 for themselves and their family members when

calculating their 2010 self-employment taxable income. The amount of selfemployment taxes collected by the combined OASI and DI Trust Funds is

estimated to be reduced by about $1.3 billion in calendar year 2011. The

financial effect of this law over the long-range period is estimated to be negligible.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation

Act of 2010, Public Law 111-312, was enacted on December 17, 2010. Two

provisions of this law directly affect the financial status of the OASDI program. First, this law extended the temporary lowering of Federal income tax

rates scheduled through tax year 2010 for two additional years, through

2012. This first provision is expected to have a small financial impact over

the short-range period and a negligible financial impact over the long-range

period, due to reduced taxes paid on OASDI benefits in 2011 and 2012. Second, this law reduced the OASDI payroll tax rate for 2011 by 2 percentage

points for employees and for self-employed workers. This law provides for

reimbursements from the General Fund of the Treasury to the OASI and DI

Trust Funds to make up for the reduction in payroll tax revenue. Therefore,

this second provision is estimated to have no financial impact on the OASDI

program over the short-range and long-range periods.

The financial projections shown in this report include the effects of these

laws. Sections IV.A.4 and IV.B.7 of this report provide further analysis of

the nature and magnitude of the effect of these laws on the financial status of

the OASDI program.
Actuarial Estimates

34

IV. ACTUARIAL ESTIMATES

This chapter presents actuarial estimates of the future financial condition of

the Social Security program. The income, cost, and assets or unfunded obligation of the OASI and DI Trust Funds are projected: (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, a variety of measures of the adequacy

of current program financing are discussed. 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 program

cost that is projected to be payable with the financing provisions in current

law.

As described in the Overview section of this report, these estimates depend

upon a broad set of demographic, economic, and programmatic factors. The

estimates presented in this section are prepared 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 intermediate estimates are shown

first in the tables of this report, followed by the low-cost and high-cost estimates. These sets of assumptions, along with the actuarial methods used to

produce the estimates, are described in chapter V. In this chapter, the estimates and measures of trust fund financial adequacy for the short range

(2011-20) are presented first, followed by estimates and measures of actuarial status for the long range (2011-85) and over the infinite horizon. As additional illustrations related to uncertainty, sensitivity analyses of the effects of

variation in individual factors are presented in appendix D and probability

distributions of certain measures are presented in appendix E.

A. SHORT-RANGE ESTIMATES

Financial adequacy, or solvency, of the trust funds reflects the ability to pay

scheduled benefits in full on a timely basis. A standard method of assessing

solvency is the “trust fund ratio,” which is defined as the assets 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 could be paid solely with the assets at the

beginning of that year. A trust fund ratio of 100 percent of annual program

cost is generally assumed to provide a reasonable “contingency reserve.”
35

Short-Range Estimates

Maintaining a reasonable contingency reserve is important because the trust

funds do not have borrowing authority. The trust funds would be unable to

pay benefits in full on a timely basis if they were to become exhausted and 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 Congress 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

be projected to remain at or above 100 percent throughout the 10-year

period. Alternatively, if the ratio is initially less than 100 percent, then it

must be projected to reach at least 100 percent within 5 years (and not be

depleted 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 on

the basis of the intermediate estimates. The failure of either trust fund to

meet this test indicates that program solvency in the next 10 years is in question and that legislative action is needed 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 2011-20. No changes are assumed to occur in the present statutory

provisions and regulations under which the OASDI program operates.1

These estimates are shown in table IV.A1 and indicate that the assets of the

OASI Trust Fund would continue to increase throughout the next 10 years

under all three sets of assumptions. Based on the intermediate assumptions,

the assets of the OASI Trust Fund would continue to exceed 100 percent of

annual expenditures by a large amount through the end of 2020. Consequently, the OASI Trust Fund satisfies the test of short-range financial adequacy by a wide margin. The estimates in table IV.A1 also indicate that the

short-range test would be satisfied even under the high-cost assumptions (see

figure IV.A1 for graphical illustration of these results).

1 The estimates shown in this subsection reflect 12 months of benefit payments 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 that benefit checks be delivered early when the normal

check delivery date is a Saturday, Sunday, or legal public holiday. The annual benefit figures are shown as if

those benefit checks were delivered on the usual date.
Actuarial Estimates

36

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

Table IV.A1.—Operations of the OASI Trust Fund, Calendar Years 2006-20a

[Dollar amounts in billions]

a A detailed description of the components of income and cost, along with complete historical values, is presented in appendix A.

Calendar

year

Income Cost Assets

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 and 111-312.

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioc

c The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets 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:

2006 . . $642.2 $534.8 d

d Less than $50 million.

$15.6 $91.8 $461.0 $454.5 $3.0 $3.5 $181.3 $1,844.3 361

2007 . . 675.0 560.9 d 17.2 97.0 495.7 489.1 3.1 3.6 179.3 2,023.6 372

2008 . . 695.5 574.6 d 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

Intermediate:

2011 . . 700.7 482.7 90.1 20.9 107.0 605.6 598.0 3.7 4.0 95.1 2,524.1 401

2012 . . 752.8 616.1 4.3 22.9 109.5 633.0 625.1 3.9 4.1 119.8 2,643.9 399

2013 . . 796.4 653.0 d 28.0 115.4 670.0 662.1 3.8 4.1 126.4 2,770.3 395

2014 . . 845.7 690.0 d 33.0 122.7 711.7 703.7 3.9 4.2 133.9 2,904.2 389

2015 . . 893.7 727.1 d 36.3 130.2 757.2 748.9 4.0 4.3 136.5 3,040.7 384

2016 . . 943.4 765.6 d 40.0 137.8 805.6 797.4 4.1 4.1 137.8 3,178.6 377

2017 . . 993.9 803.8 d 44.1 146.1 858.0 849.2 4.2 4.6 135.9 3,314.5 370

2018 . . 1,048.7 844.8 — 47.7 156.2 915.3 906.1 4.3 4.8 133.4 3,447.9 362

2019 . . 1,102.4 884.4 — 51.6 166.4 981.1 971.7 4.5 4.9 121.3 3,569.2 351

2020 . . 1,155.1 923.7 — 55.9 175.4 1,052.6 1,042.8 4.6 5.1 102.5 3,671.7 339

Low-cost:

2011 . . 702.6 484.1 90.6 20.9 107.0 605.4 597.7 3.7 4.0 97.2 2,526.3 401

2012 . . 760.5 623.6 4.3 22.9 109.8 631.9 623.9 3.9 4.0 128.7 2,655.0 400

2013 . . 808.1 664.1 d 27.8 116.2 665.2 657.3 3.8 4.1 143.0 2,797.9 399

2014 . . 861.6 704.7 d 32.5 124.4 702.0 694.0 3.9 4.1 159.6 2,957.6 399

2015 . . 913.4 744.5 d 35.6 133.4 741.8 733.7 4.0 4.2 171.6 3,129.2 399

2016 . . 965.3 783.5 d 39.0 142.7 784.8 776.8 4.1 3.9 180.5 3,309.7 399

2017 . . 1,017.0 821.2 d 42.7 153.0 832.0 823.4 4.2 4.4 185.0 3,494.7 398

2018 . . 1,071.9 860.9 — 46.0 165.1 882.7 873.9 4.3 4.6 189.2 3,683.8 396

2019 . . 1,126.0 899.3 — 49.3 177.3 937.7 928.6 4.4 4.7 188.3 3,872.1 393

2020 . . 1,179.0 937.0 — 52.9 189.0 996.2 986.8 4.5 4.9 182.8 4,054.9 389

High-cost:

2011 . . 698.6 481.3 89.5 20.9 106.9 605.9 598.2 3.7 4.0 92.7 2,521.7 401

2012 . . 745.0 608.2 4.3 23.1 109.5 636.7 628.8 3.9 4.1 108.3 2,630.0 396

2013 . . 789.5 645.6 d 28.4 115.5 679.1 671.2 3.8 4.1 110.4 2,740.4 387

2014 . . 838.4 681.9 d 33.7 122.7 728.5 720.3 3.9 4.2 109.9 2,850.4 376

2015 . . 888.9 721.1 d 37.6 130.1 783.5 775.0 4.1 4.4 105.4 2,955.8 364

2016 . . 943.6 763.9 d 42.0 137.7 844.3 835.9 4.2 4.2 99.3 3,055.0 350

2017 . . 1,000.0 807.4 d 46.8 145.8 910.6 901.4 4.4 4.8 89.4 3,144.4 335

2018 . . 1,056.9 852.2 — 51.2 153.5 983.5 973.9 4.5 5.1 73.5 3,217.9 320

2019 . . 1,112.1 896.1 — 56.0 160.0 1,064.1 1,054.1 4.7 5.3 48.0 3,265.9 302

2020 . . 1,165.6 939.7 — 61.3 164.7 1,153.2 1,142.7 4.9 5.6 12.4 3,278.4 283
37

Short-Range Estimates

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 assets of the trust

fund. After decreasing in the period 2008-10, employment is assumed to

increase in every year through 2020 for all three alternatives. The number of

persons with taxable earnings would increase on the basis of alternatives I,

II, and III from 157 million during calendar year 2010 to about 179 million,

174 million, and 170 million, respectively, in 2020. The total annual amount

of taxable earnings is projected to increase in every year through 2020 for

each alternative. Total earnings increase from $5,333 billion in 2010 to

$8,899 billion, $8,774 billion, and $8,927 billion in 2020, on the basis of

alternatives I, II, and III, respectively.1 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, temFigure IV.A1.—Short-Range OASI and DI Trust Fund Ratios

[Assets as a percentage of annual cost]

1 Note that the pattern, by alternative, of these nominal amounts of total taxable earnings may not be as

expected because of the varying inflation assumptions embedded in the respective estimates.

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Calendar year

DI

OASI

Historical Estimated

"Minimum" level for short-term financial adequacy

I

III II

I

II

III
Actuarial Estimates

38

porarily higher than trend, as the economy recovers from the economic

recession.

Growth in interest earnings represents a significant component of the overall

increase in trust fund income during this period. The effective interest rates

payable on trust fund investments are projected to temporarily decline from

current levels through 2012, resulting in a slight decline in interest income in

2011. Thereafter, the rapid increase in OASI assets results in a corresponding

net increase in interest income. By 2020, interest income to the OASI Trust

Fund is projected to be about 15 percent of total trust fund income on the

basis of the intermediate assumptions, as compared to 16 percent in 2010.

Rising expenditures during 2011-20 reflect 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 estimates under all three sets of assumptions shown in table IV.A1 indicate that income to the OASI Trust Fund, including interest earned on trust

fund assets, would exceed expenditures in every year of the short-range projection period. While trust fund assets are estimated to increase substantially,

they will increase at a slowing rate of growth near the end of the short-range

period.

The portion of OASI income that is not needed to meet day-to-day expenditures is used to purchase financial securities, generally special public-debt

obligations of the U.S. Government. The cash used to make these purchases

flows to the General Fund of the Treasury. Interest on these securities is credited to the trust fund and, when the securities mature, they are reinvested in

new securities if not immediately needed to pay program costs. When securities are redeemed prior to maturity in order to pay program costs, general

fund revenue flows to the trust fund.

2. Operations of the DI Trust Fund

The estimated operations and financial status of the DI Trust Fund during

calendar years 2011-20 under the three sets of assumptions are shown in

table IV.A2, together with values for actual experience during 2006-10.

Income is projected to increase steadily after 2010 under each alternative,

due to most of the same factors described previously in connection with the

OASI Trust Fund. DI costs are projected to grow at an even faster pace than

income for reasons explained in greater detail below. As a result, DI Trust

Fund assets are projected to continue to decrease in 2011 under each alterna-
39

Short-Range Estimates

Table IV.A2.—Operations of the DI Trust Fund, Calendar Years 2006-20a

[Dollar amounts in billions]

a A detailed description of the components of income and cost, along with complete historical values, is presented in appendix A.

Calendar

year

Income Cost Assets

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 and 111-312.

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioc

c The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets 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:

2006. . . $102.6 $90.8 d

d Less than $50 million.

$1.2 $10.6 $94.5 $91.7 $2.3 $0.4 $8.2 $203.8 207

2007. . . 109.9 95.2 d 1.4 13.2 98.8 95.9 2.5 .4 11.1 214.9 206

2008. . . 109.8 97.6 d 1.3 11.0 109.0 106.0 2.5 .4 .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

Intermediate:

2011. . . 107.0 82.0 15.3 1.8 7.9 132.8 129.3 3.0 .4 -25.8 154.1 136

2012. . . 114.0 104.6 .7 2.1 6.6 139.0 135.3 3.2 .5 -25.0 129.1 111

2013. . . 118.7 110.9 d 2.5 5.3 143.8 140.0 3.3 .5 -25.1 104.0 90

2014. . . 124.2 117.2 d 3.0 4.1 148.8 144.9 3.5 .4 -24.6 79.4 70

2015. . . 129.7 123.5 d 3.2 3.1 153.8 149.7 3.7 .4 -24.1 55.4 52

2016. . . 135.5 130.0 d 3.5 2.0 159.2 155.0 3.9 .4 -23.7 31.6 35

2017. . . 141.2 136.5 d 3.8 .9 165.1 160.7 4.1 .4 -23.9 7.7 19

2018. . . e

e The DI Trust Fund is projected to become exhausted in 2018 and 2016 under the intermediate and the highcost assumptions, respectively. Accordingly, certain trust fund operation values from the year of trust fund

exhaustion through 2020 are not meaningful under present law and are not shown in this table.year.

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

143.5 — 4.1 e 171.7 167.0 4.3 .3 e e 5

2019. . . e 150.2 — 4.4 e 179.5 174.6 4.6 .3 e ee

2020. . . e 156.9 — 4.7 e 187.9 182.8 4.8 .3 e ee

Low-cost:

2011. . . 107.3 82.2 15.4 1.8 7.9 130.5 127.1 3.0 .4 -23.2 156.7 138

2012. . . 115.5 105.9 .7 2.0 6.9 134.7 131.0 3.2 .5 -19.2 137.5 116

2013. . . 121.2 112.8 d 2.4 6.0 137.0 133.2 3.3 .5 -15.8 121.7 100

2014. . . 127.7 119.7 d 2.8 5.3 139.0 135.1 3.5 .4 -11.3 110.4 88

2015. . . 134.1 126.4 d 2.9 4.8 141.0 137.0 3.7 .4 -6.9 103.5 78

2016. . . 140.8 133.1 d 3.1 4.6 143.6 139.4 3.8 .4 -2.8 100.7 72

2017. . . 147.4 139.5 d 3.4 4.6 147.0 142.6 4.1 .4 .4 101.1 68

2018. . . 154.7 146.2 — 3.6 4.9 151.0 146.5 4.3 .3 3.6 104.7 67

2019. . . 161.8 152.7 — 3.8 5.3 155.6 150.8 4.5 .3 6.3 111.0 67

2020. . . 169.0 159.1 — 4.0 5.8 160.3 155.3 4.7 .3 8.7 119.7 69

High-cost:

2011. . . 106.6 81.7 15.2 1.8 7.8 135.1 131.7 3.0 .4 -28.5 151.4 133

2012. . . 112.4 103.3 .7 2.1 6.3 144.0 140.3 3.2 .5 -31.6 119.7 105

2013. . . 116.9 109.6 d 2.7 4.6 151.9 148.1 3.4 .5 -35.0 84.8 79

2014. . . 122.0 115.8 d 3.2 3.0 160.3 156.3 3.5 .5 -38.3 46.4 53

2015. . . 127.2 122.5 d 3.5 1.2 169.2 165.0 3.8 .4 -42.0 4.4 27

2016. . . e 129.7 d 3.9 e 178.7 174.3 4.0 .4 e e 2

2017. . . e 137.1 d 4.4 e 188.8 184.2 4.3 .4 e ee

2018. . . e 144.7 — 4.8 e 199.6 194.7 4.5 .4 e ee

2019. . . e 152.2 — 5.2 e 211.2 206.1 4.8 .3 e ee

2020. . . e 159.6 — 5.6 e 223.9 218.5 5.1 .3 e ee
Actuarial Estimates

40

tive, after reaching a maximum in 2008. Under the low-cost assumptions,

assets would begin to increase again after reaching a low point in 2016.

Under the intermediate assumptions, assets would continue to decline until

their projected exhaustion in 2018. Under the high-cost assumptions, DI

assets would decline steadily until exhaustion in 2016.

Future DI cost is estimated to increase 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. In addition, the number of DI beneficiaries in current-payment

status is projected to generally increase during the short-range projection

period. Over the period 2010-20, the projected annual average growth rate in

the number of DI disabled-worker beneficiaries is roughly 0.5, 1.6, and

2.7 percent under alternatives I, II, and III, respectively. Growth is largely

attributable to the gradual progression of the baby-boom generation through

ages 50 to normal retirement age (NRA), at which ages higher rates of disability prevalence are experienced. The estimates under all three sets of

assumptions anticipate additional growth in the numbers of disabled-worker

beneficiaries due to a projected sharp, but temporary, increase in incidence

rates to levels comparable to some of the highest ever experienced under the

DI program. These increases are projected to result from the economic recession. The projected higher levels of disability incidence are expected to subside as the economy recovers, and to return to levels consistent with longer

term trends in incidence rates.1

The proportion of disabled-worker beneficiaries whose benefits terminate or

convert to retirement benefits in a given year has also fluctuated in the past.

Over the last 20 years, the rates of benefit termination due to death have

declined very gradually, and generally mirror the improving mortality experience for the overall population. The proportion of disabled worker beneficiaries converting to retirement benefits at attainment of NRA also declined

gradually through 2008 due to the relatively low average age of new beneficiaries coming on the rolls during the 1990s, along with the effects over the

period 2003-08 of the gradual increase in the NRA to age 66. After 2008, the

conversion proportion returned to pre-2003 levels as an 11-year period began

where the NRA remains at age 66 before beginning to increase again. Furthermore, starting in 2012, the conversion proportion will increase sharply as

the baby boom cohorts begin to reach NRA.

The termination rate due to recovery has been much more volatile. Currently,

the proportion of disabled beneficiaries whose benefits cease because of their

recovery from disability is very low in comparison to levels experienced

1 Historical and projected patterns of disability incidence rates are described in greater detail in section

V.C.6.
41

Short-Range Estimates

throughout the 1970s and early 1980s. Projected rates of recovery terminations in this year’s report are temporarily elevated in years 2013-15 due to an

assumed increase in funding for the purpose of reducing the backlog of continuing disability reviews (CDRs), although it is not clear that Congress will

provide the level of funding necessary to reduce this backlog. Following this

temporary increase in CDRs, recovery termination rates are projected to

return to levels consistent with: (1) projected levels of work terminations;

and (2) the assumption that terminations for medical improvement will be

consistent with continued timely completion of CDRs after 2015. The overall

proportion of disabled workers leaving the DI rolls (reflecting all causes) is

projected to generally increase due to the aging of the beneficiary population.

At the beginning of calendar year 2010, the assets of the DI Trust Fund represented 159 percent of annual expenditures. During 2010, DI expenditures

exceeded income, and the trust fund ratio for the beginning of 2011

decreased to about 136 percent. Under the intermediate set of assumptions,

expenditures are estimated to exceed total income throughout the short-range

projection period. The projected expenditures in excess of income result in

the estimated exhaustion of the DI Trust Fund by the end of 2018.

Under the low-cost assumptions, the trust fund ratio would decrease to a low

of 67 percent at the beginning of 2018 before increasing to 69 percent at the

beginning of 2020. Under the high-cost assumptions, the assets of the DI

Trust Fund would decline steadily, and dip below the level of annual expenditures during 2012 before becoming completely depleted in 2016.

Although assets of the DI Trust Fund were greater than annual expenditures

at the beginning of 2011, under all three alternatives the DI Trust Fund does

not satisfy the Trustees’ short-range test of financial adequacy. Furthermore,

the DI Trust Fund is projected to be exhausted by the end of 2018 and 2016

under alternatives II and III, respectively.

3. Operations of the Combined OASI and DI Trust Funds

The estimated operations and status of the combined OASI and DI Trust

Funds during calendar years 2011-20 for the three alternatives are shown in

table IV.A3, together with figures on actual experience in 2006-10. With

income and cost for the OASI Trust Fund representing over 80 percent of the

corresponding amounts for the combined OASI and DI Trust Funds, the

operations of the OASI Trust Fund tend to dominate the combined operations

of the two funds. Consequently, based on the strength of the OASI Trust

Fund over the next 10 years, the combined OASI and DI Trust Funds meet

the requirements of the short-range test of financial adequacy under all three

alternative sets of assumptions.
Actuarial Estimates

42

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 2006-20a

[Dollar amounts in billions]

a A detailed description of the components of income and cost, along with complete historical values, is presented in appendix A.

Calendar

year

Income Cost Assets

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 and 111-312.

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioc

c The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets 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:

2006 . . $744.9 $625.6 d

d Less than $50 million.

$16.9 $102.4 $555.4 $546.2 $5.3 $3.8 $189.5 $2,048.1 335

2007 . . 784.9 656.1 d 18.6 110.2 594.5 584.9 5.5 4.0 190.4 2,238.5 345

2008 . . 805.3 672.1 d 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

Intermediate:

2011 . . 807.7 564.7 105.4 22.7 114.9 738.4 727.3 6.7 4.4 69.3 2,678.2 353

2012 . . 866.8 720.7 5.0 25.0 116.1 772.0 760.3 7.1 4.5 94.8 2,773.0 347

2013 . . 915.1 763.9 d 30.5 120.7 813.8 802.1 7.2 4.5 101.3 2,874.3 341

2014 . . 969.9 807.2 d 35.9 126.8 860.5 848.5 7.4 4.6 109.4 2,983.7 334

2015 . . 1,023.4 850.5 d 39.5 133.3 911.0 898.6 7.7 4.7 112.4 3,096.1 328

2016 . . 1,079.0 895.6 d 43.5 139.8 964.8 952.4 8.0 4.4 114.1 3,210.2 321

2017 . . 1,135.1 940.2 d 47.9 147.0 1,023.1 1,009.8 8.3 5.0 112.0 3,322.2 314

2018 . . 1,196.0 988.2 — 51.7 156.1 1,086.9 1,073.2 8.7 5.1 109.1 3,431.3 306

2019 . . 1,255.4 1,034.6 — 56.0 164.8 1,160.6 1,146.3 9.1 5.2 94.8 3,526.1 296

2020 . . 1,313.4 1,080.5 — 60.7 172.2 1,240.4 1,225.6 9.4 5.4 73.0 3,599.1 284

Low-cost:

2011 . . 809.9 566.4 105.9 22.7 115.0 735.9 724.8 6.7 4.4 74.1 2,683.0 355

2012 . . 876.0 729.4 5.1 24.9 116.7 766.5 754.9 7.1 4.5 109.5 2,792.5 350

2013 . . 929.3 776.9 d 30.2 122.2 802.1 790.5 7.2 4.5 127.2 2,919.7 348

2014 . . 989.3 824.4 d 35.3 129.6 840.9 829.0 7.4 4.5 148.3 3,068.0 347

2015 . . 1,047.6 870.9 d 38.5 138.1 882.9 870.6 7.6 4.6 164.7 3,232.7 348

2016 . . 1,106.0 916.6 d 42.1 147.3 928.3 916.1 7.9 4.3 177.7 3,410.4 348

2017 . . 1,164.4 960.7 d 46.1 157.6 979.0 966.0 8.2 4.8 185.4 3,595.8 348

2018 . . 1,226.6 1,007.0 — 49.5 170.0 1,033.8 1,020.3 8.6 4.9 192.8 3,788.6 348

2019 . . 1,287.8 1,052.1 — 53.1 182.6 1,093.3 1,079.4 8.9 5.0 194.5 3,983.1 347

2020 . . 1,347.9 1,096.2 — 56.9 194.8 1,156.5 1,142.1 9.2 5.1 191.4 4,174.5 344

High-cost:

2011 . . 805.2 563.0 104.7 22.7 114.7 741.1 730.0 6.7 4.4 64.1 2,673.1 352

2012 . . 857.4 711.4 5.0 25.2 115.8 780.8 769.1 7.1 4.5 76.6 2,749.7 342

2013 . . 906.4 755.2 d 31.1 120.1 831.0 819.2 7.2 4.6 75.4 2,825.2 331

2014 . . 960.4 797.8 d 36.9 125.7 888.8 876.6 7.5 4.7 71.6 2,896.8 318

2015 . . 1,016.0 843.6 d 41.1 131.3 952.6 940.0 7.8 4.8 63.4 2,960.2 304

2016 . . 1,076.2 893.6 d 45.9 136.7 1,023.0 1,010.2 8.2 4.6 53.2 3,013.4 289

2017 . . 1,137.7 944.6 d 51.2 142.0 1,099.4 1,085.6 8.6 5.2 38.3 3,051.7 274

2018 . . 1,199.6 996.9 — 56.0 146.7 1,183.1 1,168.6 9.0 5.4 16.6 3,068.3 258

2019 . . 1,259.2 1,048.3 — 61.2 149.7 1,275.4 1,260.2 9.5 5.7 -16.1 3,052.1 241

2020 . . 1,316.5 1,099.2 — 66.9 150.3 1,377.1 1,361.3 9.9 5.9 -60.7 2,991.5 222
43

Short-Range Estimates

While this analysis permits an assessment of the short-range test for the two

programs on a combined basis, in practice one trust fund cannot share assets

with another trust fund without legislative changes to the Social Security

Act. For example, under the intermediate scenario, table IV.A2 shows that

the DI Trust Fund becomes exhausted in 2018. Nevertheless, considering the

OASI and DI Trust Funds together demonstrates that, on a combined basis, a

legislative change would allow sufficient assets to be available to pay all

benefits through the end of the short-range period.

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

From the 2010 Report

The factors underlying the changes in the intermediate estimates for the

OASI, DI, and the combined funds from last year’s report to this report are

analyzed in table IV.A4.

In the 2010 report, the trust fund ratio for OASI was estimated to reach

366 percent at the beginning of 2019—the tenth projection year from that

report. Based on the change in the short-range valuation period alone, from

2010-19 to 2011-20, the estimated ratio for the tenth year (now 2020) would

be 10 percentage points lower, or 356 percent. Changes to reflect legislation

enacted since last year’s report, the latest actual data, adjustments to the

assumptions for future years, and changes in projection methods further

reduce the ratio for the tenth projection year (2020) to 339 percent.

Public Law 111-312 (The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010) included a temporary two-year extension

of lower Federal income tax rates that had been scheduled through tax year

2010. This provision is projected to decrease revenue due to the effect on the

taxation of Social Security benefits over the next two years, with a cumulative effect of reducing the OASI trust fund ratio for 2020 by 1 percentage

point. This law also reduced the OASDI payroll tax rate for 2011 by 2 percentage points for employees and for self-employed workers, and provided

for reimbursements from the General Fund of the Treasury to the OASI and

DI Trust Funds to make up for this reduction in payroll tax revenue. This

provision has no effect on trust fund assets or the trust fund ratio. A second

piece of legislation enacted in 2010, Public Law 111-240 (The Small Business Jobs Act of 2010), provided for a temporary deduction of family health

insurance costs in the computation of self-employment earnings for business

owners. The legislation is estimated to decrease OASI SECA tax collections

by slightly more than $1 billion in 2011, but this one-time reduction in

SECA collections has a negligible effect on the OASI trust fund ratio for

2020.
Actuarial Estimates

44

The net effect of changes in demographic assumptions over the short-range

period resulted in a reduction in the tenth-year trust fund ratio of 7 percentage points. The cumulative net effects of changes in economic data and

assumptions, which reflects revised estimates of the effects of the economic

recession that started in December 2007, resulted in a reduction in the trust

fund ratio of 13 percentage points by the beginning of 2020. An increase in

the 2020 trust fund ratio of 5 percentage points resulted from the combined

effects of incorporating recent programmatic data including the numbers of

beneficiaries, amount of benefit payments, and administrative expenses.

Finally, there were several relatively minor changes in the short-range projection methodology since the 2010 report. The most important of these

changes was an improvement in the data and methods used to estimate the

growth rates of average benefit amounts awarded over the projection period.

The combined effect of the various methodological improvements on the

ending trust fund ratio was negligible.

Corresponding estimates of the factors underlying the changes in the financial projections for the DI Trust Fund, and for the OASI and DI Trust Funds

combined, are also shown in table IV.A4. The ratios at the beginning of 2019

(shown in last year’s report) and 2020 (shown in this report) for the DI Trust

Fund and the OASI and DI Trust Funds combined under the intermediate

assumptions are theoretical because the DI Trust Fund is projected to be

depleted during 2018 in both reports. The 20 percentage point decrease in the

DI trust fund ratio by the beginning of 2020 (compared with the ratio at the

beginning of 2019 in last year’s report) is largely caused by the change in the

valuation period, as well as updates to economic data and assumptions that

account for continuing effects of the economic downturn that began in

December 2007. The remainder of the change results from the combined

effects of enactments of Public Laws 111-240 and 111-312, demographic

changes, and the incorporation of recent programmatic data.
45

Short-Range Estimates

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

Table IV.A4.—Reasons for Change in Trust Fund Ratios at the Beginning

of the Tenth Year of Projection

[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 2019a.

a Figures for DI, and OASI and DI combined, are theoretical because of the depletion of the DI trust fund in

2018.

366 -3 309

Change in trust fund ratio due to changes in:

Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1 -1 -1

Valuation period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10 -14 -10

Demographic data and assumptions. . . . . . . . . . . . . . . . . . . . . . . -7 1 -6

Economic data and assumptions . . . . . . . . . . . . . . . . . . . . . . . . -13 -12 -13

Programmatic data and assumptions . . . . . . . . . . . . . . . . . . . . . . 5 6 5

Projection methods and data . . . . . . . . . . . . . . . . . . . . . . . . . . . b

b Between -0.5 and 0.5 percent.

b b

Total change in trust fund ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27 -20 -25

Trust fund ratio shown in this report for calendar year 2020a . . . . . . 339 -23 284
Actuarial Estimates

46

B. LONG-RANGE ESTIMATES

Three types of financial measures are useful in assessing the actuarial status

of the Social Security trust funds under the financing approach specified in

current law: (1) annual cash-flow measures, including income and cost rates,

and balances; (2) trust fund ratios; and (3) summary measures such as actuarial balances and unfunded obligations. The first long-range estimates presented are the series of projected annual balances (or net cash flow), which

are the differences between the projected annual income rates and annual

cost rates (expressed as percentages of the taxable payroll). In assessing the

financial condition of the program, critical factors include the level and trend

of the annual balances at the end of the long-range period.

The next measure is the pattern of projected trust fund ratios. The trust fund

ratio represents the proportion of a year’s projected cost that could be paid

with the funds available at the beginning of the year. Critical factors include

the level and year of maximum trust fund ratio, the year of exhaustion of the

funds, and the stability of the trust fund ratio in cases where the ratio remains

positive through the end of the long-range period. When a program has positive trust fund ratios throughout the 75-year projection period and these

ratios are stable or rising at the end of the period, the program financing is

said to achieve “sustainable solvency.”

The final measures in this section summarize the total income and cost over

valuation periods that extend through 75 years and over the infinite horizon.

These measures indicate whether projected income will be sufficient for the

period as a whole. The first such measure, actuarial balance, indicates the

size of any surplus or shortfall as a percentage of the taxable payroll over the

period. The second, open group unfunded obligation, indicates the size of

any shortfall in present-value dollars.

This section also includes additional estimates that are useful in assessing the

financial status of the Social Security program. These estimates include a

comparison of the number of beneficiaries to the number of covered workers.

In addition, this section provides the test of long-range close actuarial balance and the reasons for the change in the actuarial balance from the last

report.

If the 75-year actuarial balance is zero (or positive), then the trust fund ratio

at the end of the period will be at 100 percent (or greater), and financing for

the program would be sufficient for the 75-year period as a whole. Financial

adequacy, or solvency, for each year is determined by whether the trust fund

asset level is positive throughout the year. Whether or not financial adequacy

is stable in the sense that it is likely to continue for subsequent 75-year periods is also important to the actuarial status of the program. One measure of
47

Long-Range Estimates

this stability is sustainable solvency, which requires that trust fund ratios be

positive throughout the period and be at a constant or rising level for the last

several years of the long-range period. When sustainable solvency is

achieved, it is likely that subsequent Trustees Reports will also show projections of financial adequacy (assuming no changes in demographic and economic assumptions or the law). The actuarial balance and the open group

unfunded obligation over the infinite horizon provide additional measures of

the financial status of the program for the very long range.

1. Annual Income Rates, Cost Rates, and Balances

Basic to the consideration of the long-range actuarial status of the trust funds

are the concepts of income rate and cost rate, each of which is expressed as a

percentage of taxable payroll. Other measures of the cash flow of the program are shown in appendix F. The annual income rate is the ratio of all noninterest income reflecting scheduled tax rates to the OASDI taxable payroll

for the year. 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 is defined to include scheduled benefit payments,

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 referred to as

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. Detailed long-range projections of

trust fund operations, in current dollar amounts, are shown in table VI.F8.

The projections for OASI under the intermediate assumptions show the

income rate generally rising from 11.03 percent of taxable payroll in 2012 to

11.45 percent for 2085, mainly due to the gradually increasing effect of the

taxation of benefits. The projected income from the taxation of benefits,

expressed as a percentage of taxable payroll, is expected to increase for two

reasons. First, benefits are rising faster than payroll. Second, the benefit-taxation threshold amounts are not indexed, so that an increasing share of benefits will be subject to tax. The pattern of the cost rate is much different. The

cost rate, which increased substantially in 2009 and 2010 due to the effects

of the recent economic recession, remains fairly stable through 2014 as the

1 Adjustments are made to include deemed wage credits based on military service for 1983-2001, and to

reflect the lower effective tax rates (as compared to the combined employee-employer rate) that apply to

multiple-employer “excess wages” that applied before 1984 to net earnings from self-employment, and

before 1988 to income from tips.
Actuarial Estimates

48

economic recovery through this period roughly offsets the effects of the

aging population. From 2014 to 2035, the cost rate rises rapidly because the

retirement of the baby-boom generation will increase the number of beneficiaries much faster than subsequent lower-birth-rate generations will

increase the labor force. From 2037 to 2052, the cost rate declines as the

baby-boom generation ages, causing an increase in the average age of beneficiaries. After initial benefit eligibility, benefits increase annually with price

inflation rather than wage inflation, so as beneficiaries increase in age, their

benefit amounts drop relative to current average taxable earnings. Thereafter,

the OASI cost rate rises because of the projected reductions in death rates,

reaching 15.33 percent of taxable payroll for 2085.

Projected income rates under the low-cost and high-cost sets of assumptions

are very similar to those projected for the intermediate assumptions because

they are largely a reflection of the payroll tax rates specified in the law, with

the gradual change from taxation of benefits noted above. In contrast, OASI

cost rates for the low-cost and high-cost assumptions differ significantly

from those projected for the intermediate assumptions. For the low-cost

assumptions, the OASI cost rate decreases from 2011 through 2014, then

rises until it peaks in 2034 at 13.04 percent of payroll. The cost rate then generally declines gradually, until it reaches 11.04 percent of payroll for 2085, at

which point the income rate reaches 11.20 percent. For the high-cost assumptions, the OASI cost rate rises from 2012 through the end of the 75-year

period. It rises at a relatively fast pace between 2012 and 2035 because of the

aging of the baby-boom generation. Subsequently, the projected cost rate

continues rising and reaches 22.20 percent of payroll for 2085, at which

point the income rate reaches 11.85 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 in 2011, positive for 2012 through 2016,

and then negative thereafter. This annual deficit rises rapidly, reaching

3.49 percent of taxable payroll for 2035, and generally rises thereafter

(except for the period 2038-52), until it reaches 3.87 percent of taxable payroll for 2085.

Under the low-cost assumptions, the projected OASI annual balance is negative in 2011, positive for 2012 through 2019, and then becomes negative,

with the annual deficit peaking at 1.76 percent of taxable payroll for 2034.

The annual deficit then declines until 2073, when the OASI annual balance

becomes positive and reaches a surplus of 0.16 percent of payroll for 2085.

Under the high-cost assumptions, in contrast, the OASI balance is projected

to be negative throughout the projection period, with deficits of 1.71 percent

for 2020, 6.35 percent for 2050, and 10.35 percent of payroll for 2085.
49

Long-Range Estimates

Table IV.B1.—Annual Income Rates, Cost Rates, and Balances,

Calendar Years 1990-2085

[As a percentage of taxable payroll]

Calendar

year

OASI DI OASDI

Income

ratea Costrate Balance

Income

ratea Costrate Balance

Income

ratea Costrate Balance

Historical data:

1990 . . . . . 11.47 9.66 1.82 1.18 1.09 0.10 12.66 10.74 1.91

1991 . . . . . 11.51 10.15 1.36 1.21 1.18 .03 12.72 11.33 1.39

1992. . . . . 11.34 10.27 1.07 1.20 1.27 -.06 12.54 11.54 1.00

1993. . . . . 11.25 10.37 .88 1.20 1.35 -.16 12.45 11.73 .72

1994. . . . . 10.73 10.22 .51 1.86 1.40 .46 12.59 11.62 .97

1995. . . . . 10.64 10.22 .42 1.87 1.44 .43 12.51 11.67 .85

1996. . . . . 10.70 10.06 .65 1.88 1.48 .40 12.58 11.53 1.05

1997. . . . . 10.91 9.83 1.08 1.73 1.44 .29 12.63 11.27 1.37

1998. . . . . 10.82 9.45 1.37 1.69 1.42 .27 12.51 10.87 1.64

1999. . . . . 10.90 9.09 1.80 1.71 1.42 .29 12.61 10.51 2.09

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 12.73 10.56 2.17

2002. . . . . 11.06 9.29 1.76 1.85 1.60 .24 12.90 10.90 2.01

2003. . . . . 10.78 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 12.79 11.16 1.63

2006. . . . . 10.95 9.17 1.78 1.83 1.88 -.05 12.79 11.05 1.73

2007. . . . . 11.02 9.45 1.57 1.84 1.88 -.04 12.86 11.33 1.53

2008. . . . . 10.90 9.53 1.37 1.83 2.01 -.19 12.73 11.55 1.18

2009. . . . . 11.24 10.74 .50 1.88 2.31 -.43 13.12 13.06 .06

2010. . . . . 10.70 11.00 -.30 1.78 2.40 -.62 12.48 13.40 -.92

Intermediate:

2011 . . . . . 10.73 10.95 -.22 1.79 2.40 -.61 12.52 13.35 -.82

2012. . . . . 11.03 10.85 .18 1.84 2.38 -.54 12.87 13.23 -.36

2013. . . . . 11.03 10.85 .18 1.84 2.33 -.49 12.87 13.18 -.31

2014. . . . . 11.08 10.90 .17 1.84 2.28 -.44 12.92 13.18 -.27

2015. . . . . 11.10 11.01 .09 1.84 2.24 -.39 12.94 13.24 -.30

2016. . . . . 11.13 11.13 b 1.84 2.20 -.36 12.97 13.33 -.36

2017. . . . . 11.16 11.29 -.13 1.85 2.17 -.33 13.00 13.46 -.46

2018. . . . . 11.18 11.47 -.29 1.85 2.15 -.30 13.03 13.62 -.59

2019. . . . . 11.19 11.73 -.54 1.85 2.15 -.30 13.04 13.88 -.84

2020. . . . . 11.21 12.05 -.83 1.85 2.15 -.30 13.06 14.20 -1.14

2025. . . . . 11.30 13.42 -2.13 1.85 2.25 -.40 13.15 15.67 -2.52

2030. . . . . 11.36 14.44 -3.08 1.85 2.21 -.36 13.21 16.66 -3.44

2035. . . . . 11.39 14.88 -3.49 1.85 2.14 -.28 13.24 17.01 -3.77

2040. . . . . 11.40 14.86 -3.46 1.85 2.09 -.24 13.25 16.95 -3.71

2045. . . . . 11.39 14.65 -3.26 1.85 2.14 -.28 13.24 16.79 -3.54

2050. . . . . 11.39 14.52 -3.13 1.85 2.16 -.31 13.24 16.69 -3.44

2055. . . . . 11.39 14.54 -3.15 1.86 2.18 -.32 13.25 16.72 -3.47

2060. . . . . 11.40 14.64 -3.24 1.86 2.16 -.31 13.26 16.80 -3.55

2065. . . . . 11.41 14.69 -3.28 1.86 2.18 -.32 13.27 16.87 -3.60

2070. . . . . 11.42 14.80 -3.38 1.86 2.20 -.34 13.27 17.00 -3.73

2075. . . . . 11.43 14.97 -3.54 1.86 2.21 -.36 13.29 17.18 -3.89

2080. . . . . 11.44 15.14 -3.70 1.86 2.23 -.37 13.30 17.36 -4.06

2085. . . . . 11.45 15.33 -3.87 1.86 2.23 -.37 13.31 17.56 -4.24

First year balance becomes

negative and remains negative

through 2085 . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . 2010

Low-cost:

2011 . . . . . 10.71 10.89 -.18 1.79 2.35 -.56 12.50 13.24 -.74

2012. . . . . 11.04 10.72 .32 1.84 2.28 -.44 12.88 13.00 -.12

2013. . . . . 11.01 10.59 .43 1.83 2.18 -.35 12.85 12.77 .08

2014. . . . . 11.06 10.53 .53 1.84 2.09 -.25 12.90 12.61 .28

2015. . . . . 11.07 10.53 .54 1.84 2.00 -.17 12.91 12.53 .38

2016. . . . . 11.10 10.59 .51 1.84 1.94 -.10 12.94 12.53 .41

2017. . . . . 11.13 10.71 .41 1.84 1.89 -.05 12.97 12.61 .36

2018. . . . . 11.15 10.85 .30 1.84 1.86 -.02 12.99 12.71 .28

2019 . . . . . 11.16 11.03 .13 1.84 1.83 .01 13.00 12.86 .14

2020. . . . . 11.17 11.24 -.07 1.84 1.81 .03 13.01 13.05 -.04
Actuarial Estimates

50

Notes:

1. The income rate excludes interest income.

2. Some historical values are subject to change due to revisions of taxable payroll.

3. Totals do not necessarily equal the sums of rounded components.

Under the intermediate assumptions, the cost rate for DI, which rose substantially from 2.01 percent of taxable payroll in 2008 to 2.40 percent for 2010

due to the economic recession, generally declines to 2.09 percent for 2039,

and generally increases gradually thereafter to 2.23 percent for 2085. The

Low-cost (cont.):

2025. . . . . 11.23 12.23 -1.00 1.84 1.79 0.05 13.07 14.02 -0.95

2030. . . . . 11.27 12.90 -1.63 1.84 1.69 .15 13.11 14.60 -1.48

2035. . . . . 11.29 13.03 -1.74 1.84 1.59 .25 13.13 14.62 -1.49

2040. . . . . 11.28 12.75 -1.47 1.84 1.53 .31 13.11 14.28 -1.17

2045. . . . . 11.26 12.34 -1.08 1.84 1.54 .30 13.10 13.88 -.78

2050. . . . . 11.25 12.03 -.79 1.84 1.53 .30 13.08 13.57 -.48

2055. . . . . 11.24 11.85 -.61 1.84 1.52 .32 13.08 13.37 -.29

2060. . . . . 11.23 11.70 -.47 1.84 1.49 .34 13.07 13.19 -.12

2065. . . . . 11.22 11.48 -.26 1.84 1.49 .35 13.06 12.97 .09

2070. . . . . 11.22 11.30 -.09 1.84 1.49 .35 13.05 12.79 .26

2075. . . . . 11.21 11.15 .06 1.84 1.50 .34 13.05 12.65 .40

2080. . . . . 11.20 11.05 .15 1.84 1.51 .33 13.04 12.56 .48

2085. . . . . 11.20 11.04 .16 1.84 1.52 .32 13.04 12.56 .48

First year balance becomes

negative and remains negative

through 2085 . . . . . . . . . . . . . . c ................ c ................ c

High-cost:

2011 . . . . . 10.77 11.02 -.26 1.80 2.46 -.66 12.56 13.48 -.92

2012 . . . . . 11.00 11.02 -.02 1.84 2.49 -.66 12.84 13.52 -.68

2013 . . . . . 11.04 11.12 -.08 1.84 2.49 -.65 12.88 13.61 -.73

2014 . . . . . 11.10 11.29 -.20 1.84 2.49 -.64 12.94 13.78 -.84

2015. . . . . 11.12 11.48 -.36 1.85 2.48 -.63 12.97 13.96 -1.00

2016. . . . . 11.15 11.68 -.53 1.85 2.47 -.62 13.00 14.16 -1.16

2017. . . . . 11.19 11.92 -.74 1.85 2.47 -.62 13.04 14.40 -1.36

2018. . . . . 11.22 12.21 -.99 1.86 2.48 -.62 13.07 14.69 -1.62

2019. . . . . 11.24 12.56 -1.32 1.86 2.49 -.64 13.09 15.05 -1.96

2020. . . . . 11.26 12.97 -1.71 1.86 2.52 -.66 13.12 15.49 -2.37

2025. . . . . 11.37 14.79 -3.42 1.87 2.74 -.87 13.24 17.53 -4.29

2030. . . . . 11.46 16.24 -4.79 1.87 2.78 -.91 13.33 19.02 -5.69

2035. . . . . 11.52 17.14 -5.63 1.87 2.74 -.87 13.39 19.88 -6.50

2040. . . . . 11.55 17.55 -6.00 1.87 2.73 -.86 13.42 20.28 -6.86

2045. . . . . 11.57 17.72 -6.15 1.87 2.83 -.96 13.44 20.55 -7.11

2050. . . . . 11.58 17.94 -6.35 1.88 2.90 -1.03 13.46 20.84 -7.38

2055. . . . . 11.61 18.32 -6.71 1.88 2.97 -1.09 13.49 21.29 -7.80

2060. . . . . 11.64 18.83 -7.18 1.88 2.99 -1.11 13.52 21.82 -8.29

2065. . . . . 11.68 19.34 -7.66 1.88 3.04 -1.16 13.56 22.38 -8.82

2070. . . . . 11.72 19.99 -8.28 1.88 3.10 -1.21 13.60 23.09 -9.49

2075. . . . . 11.76 20.77 -9.00 1.88 3.12 -1.24 13.65 23.89 -10.24

2080. . . . . 11.81 21.53 -9.72 1.88 3.11 -1.23 13.69 24.65 -10.95

2085. . . . . 11.85 22.20 -10.35 1.88 3.10 -1.21 13.73 25.30 -11.56

First year balance becomes

negative and remains negative

through 2085 . . . . . . . . . . . . . . 2010 . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . 2010

a Income rates include certain reimbursements from the General Fund of the Treasury.

b Between -0.005 and 0.005 percent of taxable payroll.

c The annual balance is projected 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 1990-2085 (Cont.)

[As a percentage of taxable payroll]

Calendar

year

OASI DI OASDI

Income

ratea Costrate Balance

Income

ratea Costrate Balance

Income

ratea Costrate Balance
51

Long-Range Estimates

income rate increases only very slightly from 1.84 percent of taxable payroll

for 2012 to 1.86 percent for 2085. The annual deficit is 0.54 percent in 2012

and reaches 0.37 percent for 2085.

Under the low-cost assumptions, the DI cost rate declines from 2.35 percent

of payroll for 2011 to 1.53 percent for 2041, and reaches 1.52 percent for

2085. The annual balance is negative for the first 8 years and is positive

throughout the remainder of the long-range period. For the high-cost

assumptions, the DI cost rate rises much more and reaches 3.10 percent for

2085. The annual deficit is 0.66 percent in 2011 and reaches 1.21 percent for

2085.

Figure IV.B1 shows the patterns of the OASI and DI annual income rates and

cost rates. The income rates shown here are only for alternative II in order to

simplify the graphical presentation because, as shown in table IV.B1, the

variation in the income rates by alternative is very small. Income rates

increase generally, but at a slow rate for each of the alternatives over the

long-range period. Both increases in the income rate and variation among the

alternatives result primarily from the relatively small component of income

from taxation of benefits. Increases in income from taxation of benefits

reflect increases in the total amount of benefits paid and the increasing share

of individual benefits that will be subject to taxation because benefit taxation

threshold amounts are not indexed.

The patterns of the annual balances for OASI and DI can be inferred from

figure IV.B1. For each alternative, the magnitude of each of the positive balances, as a percentage of taxable payroll, is represented by the distance

between the appropriate cost-rate curve and the income-rate curve above it.

The magnitude of each of the deficits is represented by the distance between

the appropriate cost-rate curve and the income-rate curve below it.

In the future, the cost of OASI, DI, and the combined OASDI programs as a

percentage of taxable payroll will not necessarily be within the range encompassed by alternatives I and III. Nonetheless, the resulting estimates delineate a reasonable range for consideration of potential future program costs,

because alternatives I and III define a reasonably wide range of demographic

and economic conditions.
Actuarial Estimates

52

Long-range OASDI cost and income are generally expressed as percentages

of taxable payroll. Also of interest are estimates of income and cost

expressed as shares of gross domestic product (GDP), the value of goods and

services produced during the year in the United States. Under alternative II,

OASDI cost rises from 4.84 percent of GDP for 2012 to a peak of

6.22 percent for 2036. Then OASDI cost as a percentage of GDP is projected

to decline to a low of 5.91 percent for 2067 and increase slowly thereafter,

until it reaches a level of 6.01 percent by 2085. Full estimates of income and

cost are presented on this basis in appendix VI.F.2 beginning on page 185.

2. Comparison of Workers to Beneficiaries

The estimated OASDI cost rate is projected to decrease through 2014 as the

economy recovers. The cost rate is expected to rise rapidly between 2014

and 2035 primarily because the number of beneficiaries is expected to rise

substantially more rapidly than the number of covered workers as the babyboom generation retires. The baby-boom generation had low fertility rates

relative to their parents, and those lower fertility rates are expected to persist;

therefore, the ratio of beneficiaries to workers is expected to rise rapidly and

to reach a permanently higher level after the baby-boom generation retires.

After 2035, the ratio of beneficiaries to workers generally rises slowly due to

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

Calendar year

Alternative II Income rates

OASI cost rates

DI cost rates

Historical Estimated

OASI

DI III

II

I

III

II

I
53

Long-Range Estimates

increasing longevity. A comparison of the numbers of covered workers and

beneficiaries is shown in table IV.B2.

Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2085

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 . . . . . . . . . 65,065 7,564 - 7,564 8.6 12

1960 . . . . . . . . . 72,370 13,740 522 14,262 5.1 20

1965 . . . . . . . . . 80,533 18,509 1,648 20,157 4.0 25

1970 . . . . . . . . . 92,905 22,618 2,568 25,186 3.7 27

1975 . . . . . . . . . 100,191 26,998 4,125 31,123 3.2 31

1980 . . . . . . . . . 112,640 30,384 4,734 35,117 3.2 31

1985 . . . . . . . . . 120,223 32,763 3,874 36,636 3.3 30

1990 . . . . . . . . . 133,065 35,255 4,204 39,459 3.4 30

1995 . . . . . . . . . 140,847 37,364 5,731 43,096 3.3 31

2000 . . . . . . . . . 154,493 38,556 6,606 45,162 3.4 29

2001 . . . . . . . . . 154,808 38,888 6,780 45,668 3.4 29

2002 . . . . . . . . . 154,218 39,117 7,060 46,176 3.3 30

2003 . . . . . . . . . 154,467 39,315 7,438 46,753 3.3 30

2004 . . . . . . . . . 156,211 39,558 7,810 47,368 3.3 30

2005 . . . . . . . . . 158,610 39,961 8,172 48,133 3.3 30

2006 . . . . . . . . . 161,052 40,435 8,428 48,863 3.3 30

2007 . . . . . . . . . 162,905 40,863 8,739 49,603 3.3 30

2008 . . . . . . . . . 162,387 41,355 9,065 50,420 3.2 31

2009 . . . . . . . . . 157,606 42,385 9,475 51,860 3.0 33

2010 . . . . . . . . . 156,725 43,440 9,958 53,398 2.9 34

Intermediate:

2011 . . . . . . . . . 157,752 44,543 10,436 54,979 2.9 35

2015 . . . . . . . . . 167,403 50,171 11,437 61,607 2.7 37

2020 . . . . . . . . . 174,353 58,541 11,852 70,394 2.5 40

2025 . . . . . . . . . 178,251 66,182 12,642 78,824 2.3 44

2030 . . . . . . . . . 182,066 73,033 12,776 85,810 2.1 47

2035 . . . . . . . . . 186,683 77,727 12,805 90,532 2.1 48

2040 . . . . . . . . . 191,614 80,244 12,971 93,215 2.1 49

2045 . . . . . . . . . 196,669 81,762 13,530 95,292 2.1 48

2050 . . . . . . . . . 201,445 83,689 13,953 97,641 2.1 48

2055 . . . . . . . . . 206,136 86,189 14,357 100,546 2.1 49

2060 . . . . . . . . . 210,941 88,997 14,626 103,624 2.0 49

2065 . . . . . . . . . 216,051 91,654 15,077 106,731 2.0 49

2070 . . . . . . . . . 221,196 94,653 15,582 110,235 2.0 50

2075 . . . . . . . . . 226,253 97,933 16,026 113,959 2.0 50

2080 . . . . . . . . . 231,214 101,281 16,470 117,752 2.0 51

2085 . . . . . . . . . 236,079 104,840 16,869 121,708 1.9 52
Actuarial Estimates

54

Notes:

1. The number of beneficiaries does not include uninsured individuals who receive benefits under Section

228 of the Social Security Act. Costs are reimbursed from the General Fund of the Treasury for 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 impact of the demographic shifts under the three alternatives on the

OASDI cost rates is clear if one considers the projected number of OASDI

beneficiaries per 100 covered workers. As compared to the 2010 level of 34

beneficiaries per 100 covered workers, this ratio is estimated to rise to 48 by

2035 under the intermediate assumptions as the growth in beneficiaries

greatly exceeds the growth in workers. By 2085, this ratio rises further under

the intermediate and high-cost assumptions, until it reaches 52 under the

intermediate assumptions and 68 under the high-cost assumptions. Under the

low-cost assumptions, this ratio rises to 44 by 2035 and then declines to 40

Low-cost:

2011 . . . . . . . . . 158,184 44,542 10,369 54,911 2.9 35

2015 . . . . . . . . . 171,687 50,109 10,762 60,871 2.8 35

2020 . . . . . . . . . 178,712 58,202 10,615 68,817 2.6 39

2025 . . . . . . . . . 183,460 65,428 10,857 76,284 2.4 42

2030 . . . . . . . . . 187,895 71,653 10,620 82,274 2.3 44

2035 . . . . . . . . . 193,559 75,604 10,404 86,008 2.3 44

2040 . . . . . . . . . 200,301 77,356 10,421 87,777 2.3 44

2045 . . . . . . . . . 207,877 78,277 10,815 89,092 2.3 43

2050 . . . . . . . . . 215,813 79,798 11,153 90,951 2.4 42

2055 . . . . . . . . . 224,275 81,998 11,516 93,514 2.4 42

2060 . . . . . . . . . 233,310 84,456 11,832 96,288 2.4 41

2065 . . . . . . . . . 243,188 86,699 12,344 99,043 2.5 41

2070 . . . . . . . . . 253,820 89,238 12,952 102,191 2.5 40

2075 . . . . . . . . . 265,065 92,002 13,589 105,591 2.5 40

2080 . . . . . . . . . 276,722 95,200 14,316 109,516 2.5 40

2085 . . . . . . . . . 288,645 99,248 15,021 114,269 2.5 40

High-cost:

2011 . . . . . . . . . 157,184 44,547 10,503 55,049 2.9 35

2015 . . . . . . . . . 163,700 50,247 12,128 62,375 2.6 38

2020 . . . . . . . . . 169,813 58,943 13,102 72,045 2.4 42

2025 . . . . . . . . . 173,038 67,143 14,323 81,466 2.1 47

2030 . . . . . . . . . 176,318 74,807 14,799 89,606 2.0 51

2035 . . . . . . . . . 179,975 80,463 15,055 95,518 1.9 53

2040 . . . . . . . . . 183,237 83,972 15,338 99,310 1.8 54

2045 . . . . . . . . . 185,901 86,319 16,013 102,332 1.8 55

2050 . . . . . . . . . 187,684 88,835 16,468 105,303 1.8 56

2055 . . . . . . . . . 188,826 91,741 16,862 108,603 1.7 58

2060 . . . . . . . . . 189,774 94,909 17,012 111,921 1.7 59

2065 . . . . . . . . . 190,648 97,954 17,297 115,251 1.7 60

2070 . . . . . . . . . 191,047 101,437 17,561 118,998 1.6 62

2075 . . . . . . . . . 190,933 105,231 17,641 122,872 1.6 64

2080 . . . . . . . . . 190,440 108,787 17,571 126,358 1.5 66

2085 . . . . . . . . . 189,726 111,811 17,441 129,252 1.5 68

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 1945-2085 (Cont.)

Calendar year

Covered

workersa

(in thousands)

Beneficiariesb (in thousands) Covered

workers per

OASDI

beneficiary

OASDI

beneficiaries

per 100

covered

OASI DI OASDI workers
55

Long-Range Estimates

by 2085. The significance of these numbers is clear when one compares figure IV.B1 to figure IV.B2.

For each alternative, the shape of the curve in figure IV.B2, which shows

beneficiaries per 100 covered workers, is strikingly similar to that of the corresponding cost-rate curve in figure IV.B1, thereby emphasizing the extent to

which the cost of the OASDI program as a percentage of taxable payroll is

determined by the age distribution of the population. The cost rate is basically 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. Therefore, 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 2010. Under the low-cost assumptions, this

ratio declines to 2.3 by 2035, and then generally rises throughout the remainder of the period, reaching 2.5 for 2085. Under the intermediate assumptions,

this ratio declines generally throughout the long-range period, reaching 2.1

for 2035 and 1.9 for 2085, while under the high-cost assumptions, this ratio

decreases steadily to 1.5 for 2085.

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

Calendar year

Historical Estimated

III

II

I
Actuarial Estimates

56

3. Trust Fund Ratios

Trust fund ratios are useful indicators of the adequacy of the financial

resources of the Social Security program. The trust fund ratio for a year is

defined as the assets at the beginning of a year, which do not include advance

tax transfers, expressed as a percentage of the cost during the year. When the

trust fund ratio is positive for a year, but is not positive for the following

year, the trust fund becomes exhausted during that 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). Exhaustion of the assets in either fund during a

year would mean there are no longer sufficient assets in the fund to pay on a

timely basis the full amount of benefits scheduled for the year under present

law.

The trust fund ratio serves an additional important purpose in assessing the

actuarial status of the program. When the financing is adequate for the timely

payment of full benefits throughout the long-range period, the stability of the

trust fund ratio toward the end of the period reflects the likelihood that this

projected adequacy will continue for subsequent Trustees Reports. If the trust

fund ratio is positive throughout the period and is 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

financing is said to achieve sustainable solvency.

Table IV.B3 shows, by alternative, the estimated trust fund ratios (without

regard to advance tax transfers that would be effected) for the separate and

combined OASI and DI Trust Funds. Also shown in this table is the year in

which a fund is estimated to become exhausted.

Based on the intermediate assumptions, the OASI Trust Fund ratio declines

from 401 percent at the beginning of the period, at first slowly, and then

more rapidly, before becoming exhausted in 2038. The DI trust fund ratio has

been declining steadily since 2003, and is estimated to continue to decline

from 136 percent at the beginning of 2011 until the trust fund becomes

exhausted in 2018.

The trust fund ratio for the combined OASI and DI Trust Funds under the

intermediate assumptions declines from 353 percent at the beginning of

2011, with the combined funds becoming exhausted in 2036, one year earlier

than in last year’s report.

Under the intermediate assumptions, OASDI cost is projected to exceed noninterest income for the entire projection period. However, for the period 2011

through 2022, trust fund income, including interest income, is projected to be

more than needed to cover costs, so combined trust fund assets will continue
57

Long-Range Estimates

to grow. Beginning in 2023, combined trust fund assets will diminish until

assets are exhausted in 2036.

Under the low-cost assumptions, the trust fund ratio for the DI program

increases from 2018 through the end of the long-range projection period, and

reaches the extremely high level of 1,717 percent for 2086. The DI trust fund

ratio in 2086 rises by 36 percentage points from the level in 2085. For the

OASI program, the trust fund ratio generally declines to a low of 123 percent

for 2067, and rises thereafter to a level of 163 percent for 2086. At the end of

the period, the OASI trust fund ratio is rising by 3 percentage points per year.

For the OASDI program, the trust fund ratio generally declines to

205 percent for 2052, and increases thereafter, until it reaches 350 percent

for 2086. Subsequent Trustees Reports are likely to contain projections of

adequate long-range financing of the OASI, the DI, and the combined

OASDI programs under the low-cost assumptions, because the trust fund

ratios are large and increasing at the end of the long-range period. Thus,

under the low-cost assumptions, each program achieves sustainable solvency.

In contrast, under the high-cost assumptions, the OASI trust fund ratio is

estimated to decline continually to fund exhaustion in 2031. The DI trust

fund ratio is estimated to decline from 133 percent for 2011 to fund exhaustion in 2016. The combined OASI and DI trust fund ratio is estimated to

decline from 352 percent for 2011 to fund exhaustion in 2029.

With large, persistent annual deficits projected under all but the low-cost

assumptions, it is highly likely that income will need to be increased, program costs will need to be reduced, or both, in order to prevent exhaustion of

the trust funds. The stochastic projections discussed in appendix E suggest

that trust fund exhaustion is highly probable by mid-century.

Even under the high-cost assumptions, however, the combined OASI and DI

Trust Fund assets on hand plus their estimated future income would be able

to cover their combined cost for 18 years (until 2029). Under the intermediate assumptions, the combined starting funds plus estimated future income

would be able to cover cost for 25 years (until 2036). The program would be

able to cover cost for the foreseeable future under the more optimistic lowcost assumptions. In the 2010 report, the combined trust funds were projected to become exhausted in 2029 under the high-cost assumptions and in

2037 under the intermediate assumptions.
Actuarial Estimates

58

..

An illustration of the trust fund ratios for the separate OASI and DI Trust

Funds is shown in figure IV.B3 for each of the alternative sets of assumptions. A graph of the trust fund ratios for the combined trust funds is shown

in figure II.D6 on page 16.

Table IV.B3.—Trust Fund Ratios, Calendar Years 2011-85

[In percent]

Calendar

year

Intermediate Low-cost High-cost

OASI DI OASDI OASI DI OASDI OASI DI OASDI

2011 . . . . . . . . . . . . . 401 136 353 401 138 355 401 133 352

2012 . . . . . . . . . . . . . 399 111 347 400 116 350 396 105 342

2013 . . . . . . . . . . . . . 395 90 341 399 100 348 387 79 331

2014 . . . . . . . . . . . . . 389 70 334 399 88 347 376 53 318

2015 . . . . . . . . . . . . . 384 52 328 399 78 348 364 27 304

2016 . . . . . . . . . . . . . 377 35 321 399 72 348 350 2 289

2017 . . . . . . . . . . . . . 370 19 314 398 68 348 335 a 274

2018 . . . . . . . . . . . . . 362 5 306 396 67 348 320 a 258

2019 . . . . . . . . . . . . . 351 a

a The trust fund is estimated to be exhausted by the beginning of this year. The last line of the table shows the

specific year of trust fund exhaustion.

296 393 67 347 302 a 241

2020 . . . . . . . . . . . . . 339 a 284 389 69 344 283 a 222

2025 . . . . . . . . . . . . . 267 a 214 358 86 323 177 a 113

2030 . . . . . . . . . . . . . 176 a 127 313 120 290 47 a a

2035 . . . . . . . . . . . . . 71 a 25 263 197 256 aaa

2040 . . . . . . . . . . . . . aaa 219 308 228 aaa

2045 . . . . . . . . . . . . . aaa 186 423 212 aaa

2050 . . . . . . . . . . . . . aaa 162 547 206 aaa

2055 . . . . . . . . . . . . . aaa 144 684 206 aaa

2060 . . . . . . . . . . . . . aaa 130 845 211 aaa

2065 . . . . . . . . . . . . . aaa 124 1,010 225 aaa

2070 . . . . . . . . . . . . . aaa 124 1,175 247 aaa

2075 . . . . . . . . . . . . . aaa 131 1,344 275 aaa

2080 . . . . . . . . . . . . . aaa 144 1,508 308 aaa

2085 . . . . . . . . . . . . . aaa 160 1,681 343 aaa

Trust fund is estimated to become

exhausted in. . . . . 2038 2018 2036 b

b The trust fund is not estimated to be exhausted within the projection period

Note: See definition of trust fund ratio on page 222.The combined ratios shown for years after the DI Trust

Fund is estimated to be exhausted are theoretical and are shown for informational purposes only.

b b 2031 2016 2029
59

Long-Range Estimates

4. Summarized Income Rates, Cost Rates, and Balances

Summarized income and cost rates, along with their components, are presented in table IV.B4 for 25-year, 50-year, and 75-year valuation periods.

Income rates reflect the scheduled payroll tax rates, the projected income

from the taxation of scheduled benefits, and reimbursements from the General Fund of the Treasury, if any, expressed as a percentage of taxable payroll. Under current law, the combined payroll tax rate of 12.4 percent will

remain unchanged in the future. In contrast, the projected income from taxation of benefits, expressed as a percentage of taxable payroll, is expected to

generally increase throughout the long-range period for two reasons. First,

total benefit payments are rising faster than payroll. Second, the benefit-taxation threshold amounts are not indexed, so that an increasing share of beneficiaries will be paying tax on a larger portion of their benefits. Summarized

income rates also include the starting trust fund balance. Summarized cost

rates include the cost of reaching a target trust fund of 100 percent of annual

cost at the end of the period in addition to the cost included in the annual cost

rates.

The payroll tax income expressed as a percentage of taxable payroll, as

shown in table IV.B4, is generally slightly smaller than the actual tax rates in

effect for each period. The reason for this difference is that all OASDI

Figure IV.B3.—Long-Range OASI and DI Trust Fund Ratios

[Assets as a percentage of annual expenditures]

0%

200%

400%

600%

800%

1,000%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

OASI

DI

Historical Estimated

III II

I

I

III II
Actuarial Estimates

60

income and cost amounts are attributed to the year in which they are

expected to be received or expended, while taxable payroll is attributed to

the year in which earnings are paid. Earnings are paid to workers before the

corresponding payroll taxes are credited to the funds; therefore, payroll tax

income received in a given year reflects taxes paid from a combination of the

taxable payrolls for that year and prior years. Dividing payroll tax income by

taxable payroll for a particular year, or period of years, will thus generally

result in an income rate slightly lower than the applicable tax rate for the

period.

Summarized values for the full 75-year period are useful in analyzing the

long-range adequacy of financing for the program over the period as a

whole, both under present law and under proposed modifications to the law.

Table IV.B4 shows summarized rates for valuation periods of the first 25, the

first 50, and the entire 75 years of the long-range projection period, including

the funds on hand at the start of the period and the cost of accumulating a target trust fund balance equal to 100 percent of the following year’s annual

cost by the end of the period. The actuarial balance for each of these three

valuation periods is equal to the difference between the summarized income

rate and the summarized cost rate for the corresponding period. An actuarial

balance of zero for any period indicates that estimated 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 balance at the end of the

period equal to 100 percent of the following year’s cost. A negative actuarial

balance indicates that, over the period, the present value of income to the

program plus the existing trust fund falls short of the present value of the

cost of the program plus the cost of reaching a target trust fund balance of

1 year’s cost by the end of the period. This negative balance, combined with

a falling trust fund ratio, implies that the current-law level of financing is not

sustainable.

The values in table IV.B4 show summarized rates for the intermediate

assumptions, as well as for the low-cost and high-cost assumptions. The lowcost and high-cost assumptions define a wide range of possibilities, but are

each unlikely to occur. The combined OASDI program is expected to operate

with a positive actuarial balance over the 25-year valuation period under

only the low-cost assumptions. For the 25-year valuation period, the summarized values indicate actuarial balances of 0.78 percent of taxable payroll

under the low-cost assumptions, -0.60 percent under the intermediate

assumptions, and -2.26 percent under the high-cost assumptions.1 These bal1 The negative 25-year actuarial balance under intermediate assumptions means that the combined OASI

and DI Trust Fund balance falls below one year’s projected program cost by the end of 2035. In fact, under

the intermediate assumptions, the combined trust fund exhaustion date is 2036.
61

Long-Range Estimates

ances indicate that the program is more than adequately financed for the

25-year valuation period under only the low-cost projections. For the 50-year

valuation period, the OASDI program would have a positive actuarial balance of 0.23 percent under the low-cost assumptions, but would have deficits

of 1.78 percent under the intermediate assumptions and 4.37 percent under

the high-cost assumptions. These deficits mean that the program is more than

adequately financed for the 50-year valuation period under only the low-cost

set of assumptions.

For the entire 75-year valuation period, the combined OASDI program

would once again have actuarial deficits except under the low-cost set of

assumptions. The actuarial balance for this long-range valuation period is

projected to be 0.29 percent of taxable payroll under the low-cost assumptions, -2.22 percent under the intermediate assumptions, and -5.59 percent

under the high-cost assumptions.

Assuming the Trustees’ intermediate assumptions accurately reflect future

demographic and economic trends, solvency for the program over the next

75 years (timely payment of scheduled benefits throughout this period) could

be restored if the Social Security payroll tax rate were increased for earnings

during this period from 12.40 percent (combined employee-employer rates)

to 14.55 percent. Solvency for this period could also be restored if scheduled

benefits for this period were reduced by 13.8 percent. Alternatively, a combination of these approaches could be used.

However, eliminating the actuarial deficit over the next 75 years would

require 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. Eliminating the actuarial deficit could be achieved

for the 75-year period with an increase in the combined payroll tax to

14.71 percent1 for all earnings during this period or a decrease in scheduled

benefits of 14.6 percent for benefits paid during this period. Alternatively, a

combination of these approaches could be used. These changes would be sufficient to eliminate the actuarial deficit and leave a projected actuarial balance of zero for the OASDI program.

Large annual deficits projected under current law for the end of the longrange period, which equal 4.24 percent of payroll for 2085, under the inter1 The indicated increase in the payroll tax rate is somewhat larger than the actuarial deficit due to a reduction in the tax base, reflecting the assumed response of employers and employees to an increase in taxes. For

proposed changes in law that would alter payroll tax rates, an increase in payroll taxes is presumed to result

in a small shift of wages and salaries to forms of employee compensation that are not subject to the payroll

tax.
Actuarial Estimates

62

mediate assumptions (see table IV.B1), indicate that the annual cost will very

likely continue to exceed non-interest income after 2085. As a result, ensuring continued adequate financing would eventually 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 estimated to be 3.6 percent of taxable payroll under the intermediate assumptions. This estimate indicates that the projected infinite horizon shortfall

could be eliminated with an immediate increase in the combined payroll tax

rate from 12.4 percent to about 16.2 percent.1 This shortfall could also be

eliminated if all current and future benefits were immediately reduced by

21.9 percent.

Table IV.B4 indicates that the financial condition of the DI program is substantially worse than that of the OASI program for the first 25 years. Summarized over the full 75-year period, however, long-range deficits for the

OASI and DI programs under intermediate assumptions are more similar

when measured relative to the level of program costs. The relatively worse

financial status of the OASI program in the long-term occurs because

increases in longevity have a greater impact on OASI cost than on DI cost

largely due to the fixed normal retirement age after 2022.

1 The indicated increase in the payroll tax rate is somewhat larger than the actuarial deficit due to a reduction in the tax base, reflecting the assumed response of employers and employees to an increase in taxes. For

proposed changes in law that would alter payroll tax rates, an increase in payroll taxes is presumed to result

in a small shift of wages and salaries to forms of employee compensation that are not subject to the payroll

tax.
63

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 assets at the beginning of the projection period, amounts to $6.5 trillion for the OASDI program. This amount is

referred to as the 75-year “open group unfunded obligation” (see row G).

The actuarial deficit (i.e., 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

Table IV.B4.—Components of Summarized Income Rates and Cost Rates,

Calendar Years 2011-85

[As a percentage of taxable payroll]

Valuation period

Summarized income rate Summarized cost rate

Actuarial

balance

Non-interest

income

Beginning

fund

balance Total Cost

Ending

target

fund Total

OASI:

Intermediate:

2011-35. . . . . 11.24 1.79 13.03 12.77 0.54 13.31 -0.28

2011-60. . . . . 11.31 1.01 12.33 13.60 .22 13.82 -1.49

2011-85. . . . . 11.34 .77 12.11 13.91 .13 14.04 -1.92

Low-cost:

2011-35. . . . . 11.18 1.77 12.96 11.77 .47 12.24 .72

2011-60. . . . . 11.22 1.00 12.22 11.99 .18 12.17 .05

2011-85. . . . . 11.22 .75 11.97 11.81 .10 11.91 .06

High-cost:

2011-35. . . . . 11.30 1.77 13.08 13.95 .64 14.59 -1.52

2011-60. . . . . 11.43 1.00 12.43 15.68 .28 15.97 -3.54

2011-85. . . . . 11.51 .76 12.27 16.78 .17 16.95 -4.68

DI:

Intermediate:

2011-35. . . . . 1.85 .13 1.98 2.22 .08 2.30 -.32

2011-60. . . . . 1.85 .08 1.93 2.19 .03 2.22 -.29

2011-85. . . . . 1.85 .06 1.91 2.19 .02 2.21 -.30

Low-cost:

2011-35. . . . . 1.84 .13 1.97 1.85 .06 1.91 .06

2011-60. . . . . 1.84 .07 1.91 1.71 .02 1.73 .18

2011-85. . . . . 1.84 .06 1.89 1.66 .01 1.67 .22

High-cost:

2011-35. . . . . 1.86 .13 1.99 2.63 .10 2.73 -.74

2011-60. . . . . 1.87 .07 1.94 2.73 .04 2.77 -.83

2011-85. . . . . 1.87 .06 1.93 2.81 .02 2.84 -.91

OASDI:

Intermediate:

2011-35. . . . . 13.09 1.93 15.01 14.99 .62 15.61 -.60

2011-60. . . . . 13.16 1.09 14.25 15.78 .25 16.04 -1.78

2011-85. . . . . 13.20 .83 14.02 16.10 .15 16.25 -2.22

Low-cost:

2011-35. . . . . 13.02 1.90 14.93 13.62 .52 14.14 .78

2011-60. . . . . 13.06 1.07 14.14 13.70 .20 13.90 .23

2011-85. . . . . 13.06 .80 13.87 13.46 .11 13.58 .29

High-cost:

2011-35. . . . . 13.16 1.90 15.07 16.58 .74 17.32 -2.26

2011-60. . . . . 13.30 1.07 14.37 18.41 .33 18.74 -4.37

2011-85. . . . . 13.38 .82 14.20 19.59 .20 19.79 -5.59
Actuarial Estimates

64

cost, plus starting trust fund assets, minus the present value of the ending target trust fund, amounts to -$7.0 trillion for the OASDI program. The actuarial balance—this amount expressed as a percentage of taxable payroll for the

period—is therefore -2.22 percent.

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

5. Additional Measures of OASDI Unfunded Obligations

As shown in the previous section, a negative actuarial balance (or an actuarial deficit) provides one measure of the unfunded obligation of the program

over a period of time. Two additional measures of OASDI unfunded obligations under the intermediate assumptions are presented below.

a. Open Group Unfunded Obligations

Consistent with practice since 1965, this report focuses on the 75-year period

(from 2011 to 2085 for this report) for the evaluation of the long-run financial status of the OASDI program on an open group basis (i.e., including

non-interest income and cost for past, current, and future participants

through the year 2085). Table IV.B6, in its second line, shows that the present value of the open group unfunded obligation for the program over that

period is $6.5 trillion. 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 2085.

Table IV.B6 also presents the 75-year unfunded obligation as percentages of

future OASDI taxable payroll and GDP through 2085. The 75-year unfunded

Table IV.B5.—Components of 75-Year Actuarial Balance

Under Intermediate Assumptions

Item OASI DI OASDI

Present value as of January 1, 2011 (in billions):

A. Payroll tax revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $33,256 $5,647 $38,903

B. Reimbursements from general revenue. . . . . . . . . . . . . . . . . . . 92 16 108

C. Taxation of benefits revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,411 181 2,592

D. Non-interest income (A + B + C) . . . . . . . . . . . . . . . . . . . . . . . 35,759 5,844 41,603

E. Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,850 6,910 50,760

F. Cost minus non-interest income (E - D) . . . . . . . . . . . . . . . . . . 8,092 1,066 9,157

G. Trust fund assets at start of period. . . . . . . . . . . . . . . . . . . . . . . 2,429 180 2,609

H. Open group unfunded obligation (F - G). . . . . . . . . . . . . . . . . . 5,663 886 6,548

I. Ending target trust funda ..............................

a The calculation of the actuarial balance includes the cost of accumulating a target trust fund balance equal

to 100 percent of annual cost by the end of the period.

403 58 462

J. Income minus cost, plus assets at start of period, minus

ending target trust fund (D - E + G - I = - H - I) . . . . . . . . . . . . -6,066 -944 -7,010

K. Taxable payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315,246 315,246 315,246

Percent of taxable payroll:

Actuarial balance (100 × J ÷ K) . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.92 -.30 -2.22
65

Long-Range Estimates

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 “sustainable solvency” at the

beginning of section IV.B on page 46).

Another measure that reflects the continued, and possibly increasing, annual

shortfalls after 75 years is the unfunded obligation extended over the infinite

horizon. The extension assumes that the current-law OASDI program and the

demographic and economic trends used for the 75-year projection continue

indefinitely.

Over the infinite horizon, table IV.B6 reports that the projected OASDI open

group unfunded obligation is $17.9 trillion, which is $11.3 trillion larger than

for the 75-year period. The $11.3 trillion increment reflects a significant

financing gap projected for OASDI for years after 2085. Of course, the

degree of uncertainty associated with estimates beyond 2085 is substantial.

The $17.9 trillion infinite horizon open group unfunded obligation amounts

to 3.6 percent of taxable payroll or 1.2 percent of GDP. These relative measures of the unfunded obligation over the infinite horizon express its magnitude in relation to the resources that are potentially available to finance the

shortfall.
Actuarial Estimates

66

Notes:

1. The present values of future taxable payroll for 2011-85 and for 2011 through the infinite horizon are

$315.2 trillion and $500.5 trillion, respectively.

2. The present values of GDP for 2011-85 and for 2011 through the infinite horizon are $873.7 trillion and

$1,460.4 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’s report projected the infinite horizon unfunded obligation at

$16.1 trillion in present value. If the assumptions, methods, and starting values had all remained unchanged, the change in the valuation date to one year

later would have increased the unfunded obligation by about $0.8 trillion to

$16.9 trillion. The net effects of changes in assumptions, methods, and starting values increased the infinite horizon unfunded obligation by about

$1.0 trillion in present value.

The infinite horizon unfunded obligation is 0.3 percentage point higher than

in last year’s report when expressed as a share of taxable payroll, and is

unchanged when expressed as a share of GDP. The main changes affecting

the infinite horizon unfunded obligation for this report are reductions in mortality rates at the older ages. See section IV.B.7 for details regarding changes

in law, data, methods, and assumptions.

b. Unfunded Obligations for Past, Current, and Future Participants

Table IV.B7 disaggregates the infinite horizon unfunded obligation of

$17.9 trillion into components for past, current, and future participants. The

present value of future cost reduced by future non-interest income over the

next 100 years for all current participants1 equals $21.4 trillion. Subtracting

the current value of the trust fund gives a closed group unfunded obligation

of $18.8 trillion, which represents the shortfall of lifetime contributions for

all past and current participants relative to the cost of benefits for them.

Table IV.B6.—Unfunded OASDI Obligations for 1935 (Program Inception)

Through the Infinite Horizon,

Based on Intermediate Assumptions

[Present values as of January 1, 2011; dollar amounts in trillions]

Present

value

Expressed as a percentage

of future payroll and GDP

Taxable

payroll GDP

Unfunded obligation for 1935 through the infinite horizona .....

a Present value of future cost less future non-interest income, reduced by the amount of trust fund assets at

the beginning of 2011. Expressed as percentage of payroll and GDP for the period 2011 through the infinite

horizon.

$17.9 3.6 1.2

Unfunded obligation for 1935 through 2085b ................

b Present value of future cost less future non-interest income through 2085, reduced by the amount of trust

fund assets at the beginning of 2011. Expressed as percentage of payroll and GDP for the period 2011

through 2085.

6.5 2.1 .7

1 Individuals who attain age 15 or older in 2011.
67

Long-Range Estimates

Future participants, on the other hand, are scheduled to pay $0.9 trillion more

into the system than the cost of benefits for them. The total unfunded obligation, $17.9 trillion, is the sum of the unfunded obligation for current and past

participants ($18.8 trillion) and the present value of cost less non-interest

income for future participants (-$0.9 trillion).

This accounting makes clear that if some generations receive benefits with a

present value exceeding the present value of their payroll tax contributions

and other receipts on their behalf, other generations must receive benefits

with a present value less than the present value of their payroll tax contributions and other receipts on their behalf. Making Social Security solvent over

the infinite horizon requires some combination of increased revenue or

reduced benefits for current and future participants that amounts to

$17.9 trillion in present value, 3.6 percent of future taxable payroll, or

1.2 percent of future GDP.

Notes:

1. It is not clear how to allocate across generations the burden of providing $0.1 trillion of reimbursement

from the General Fund of the Treasury in 2010, 2011, and 2012. Any allocation would make at most a

rounding difference in some values in this table. Therefore, for the purpose of this table, these reimbursements are allocated as though they represent taxes in the years of reimbursements.

2. The present value of future taxable payroll for 2011 through the infinite horizon is $500.5 trillion.

3. The present value of GDP for 2011 through the infinite horizon is $1,460.4 trillion.

4. Totals do not necessarily equal the sums of rounded components.

6. Test of Long-Range Close Actuarial Balance

The test of long-range close actuarial balance applies to a set of 66 separate

valuation periods beginning with the first 10-year period, and including the

periods of the first 11 years, the first 12 years, up through the full 75-year

projection period. Under the long-range test, the summarized income rate

and cost rate are calculated for each of these valuation periods. The longrange test is met if, for each of the 66 valuation periods, the actuarial balance

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, 2011; dollar amounts in trillions]

Present

value

Expressed as a

percentage of future

payroll and GDP

Taxable

payroll GDP

Present value of future cost less future non-interest income for

current participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21.4 4.3 1.5

Less current trust fund

(accumulation of non-interest income minus expenditures

to date for past and current participants). . . . . . . . . . . . . . . . . . . . . . . 2.6 .5 .2

Equals unfunded obligation for past and current participantsa ........

a This concept is also referred to as the closed group unfunded obligation.

18.8 3.8 1.3

Plus present value of cost less non-interest income for future

participants over the infinite horizon . . . . . . . . . . . . . . . . . . . . . . . . . -.9 -.2 -.1

Equals unfunded obligation for all participants through the infinite

horizon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.9 3.6 1.2
Actuarial Estimates

68

is not less than zero or is negative by, at most, a specified percentage of the

summarized cost rate for the same time period. The percentage allowed for a

negative actuarial balance is 5 percent for the full 75-year period. For shorter

periods, the allowable percentage begins with zero for the first 10 years and

increases uniformly for longer periods, until it reaches the maximum percentage of 5 percent allowed for the 75-year period. The criterion for meeting the test is less stringent for the longer periods in recognition of the

greater uncertainty associated with estimates for more distant years.

When a negative actuarial balance in excess of the allowable percentage of

the summarized cost rate is projected for one or more of the 66 separate valuation periods, the program fails the test of long-range close actuarial balance.

Being out of close actuarial balance indicates that the program will experience financial problems in the future and that ways of improving the financial status of the program should be considered. The sooner the actuarial

balance is less than the minimum allowable balance, expressed as a percentage of the summarized cost rate, the more urgent is the need for corrective

action. Necessary changes in program financing or benefit provisions should

not be put off until the last possible moment if future beneficiaries and workers are to plan effectively for their retirement.

Table IV.B8 presents a comparison, based on the intermediate estimates, of

the actuarial balances with the minimum allowable balance (or maximum

allowable deficit) under the long-range test, each expressed as a percentage

of the summarized cost rate. For display purposes, values are shown for

14 selected valuation periods, ranging from 10 years to 75 years in length.

However, each of the 66 periods—those of 10 years, 11 years, and continuing in 1-year increments through 75 years—is considered for the test. These

minimum allowable balances are calculated to show the limit for each valuation period resulting from the graduated tolerance scale. The patterns in the

estimated balances as a percentage of the summarized cost rates, as well as

that for the minimum allowable balance, are presented graphically in figure

IV.B4 for the OASI, DI, and combined OASDI programs. Values shown for

the 25-year, 50-year, and 75-year valuation periods correspond to those presented in table IV.B4.

For the OASI program, the estimated actuarial balance as a percentage of the

summarized cost rate exceeds the minimum allowable for valuation periods

of 10 through 23 years under the intermediate estimates. For valuation periods of greater than 23 years, the estimated actuarial balance is less than the

minimum allowable. For the full 75-year long-range period, the estimated

actuarial balance reaches -13.71 percent of the summarized cost rate, for a

shortfall of 8.71 percent from the minimum allowable balance of -5.0 percent

of the summarized cost rate. Although the OASI program satisfies the test of
69

Long-Range Estimates

short-range financial adequacy (as discussed earlier on page 35), it is not in

long-range close actuarial balance.

For the DI program, under the intermediate assumptions, the estimated actuarial balance as a percentage of the summarized cost rate is less than the minimum allowable balance for all 66 valuation periods. For the full 75-year

long-range period, the estimated actuarial balance reaches -13.55 percent of

the summarized cost rate, for a shortfall of 8.55 percent from the minimum

allowable balance of -5.0 percent of the summarized cost rate. Thus, the DI

program fails to meet the short-range test of financial adequacy (as discussed

on page 35), and is also not in long-range close actuarial balance.

Financing for the DI program is much less adequate than for the OASI program in satisfying the test for long-range actuarial balance, even though

long-range actuarial deficits are more comparable over the entire 75-year

period. For the long-range actuarial deficit, much more of the increase in the

long-range cost due to the aging of the baby-boom generation occurs earlier

for the DI program than for the OASI program. As a result, payroll tax rates

that are relatively more adequate for the OASI program during the first

25 years become relatively less adequate later in the long-range period.

For the OASDI program, the estimated actuarial balance as a percentage of

the summarized cost rate exceeds the minimum allowable balance for valuation periods of 10 through 21 years under the intermediate estimates. For valuation periods of greater than 21 years, the estimated actuarial balance is

below the minimum allowable balance. The size of the shortfall from the

minimum allowable balance rises gradually, reaching 8.69 percent of the

summarized cost rate for the full 75-year long-range valuation period.

Although the OASDI program satisfies the short-range test of financial adequacy, it is out of long-range close actuarial balance.

The OASI and DI programs, both separate and combined, were out of close

actuarial balance in last year’s report. The estimated deficits for the OASI,

DI, and combined OASDI programs in this report are larger when compared

to those shown in last year’s report for all valuation periods.
Actuarial Estimates

70

Figure IV.B4.—Test of Long-Range Close Actuarial Balance

[Comparison of long-range actuarial balances with the minimum allowable

for close actuarial balance, based on intermediate assumptions]

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085

Ending year of valuation period

OASI

OASDI

DI

Actuarial balance as percentage

of summarized cost rate

Minimum allowable actuarial

balance
71

Long-Range Estimates

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

Table IV.B8.—Comparison of Long-Range Actuarial Balances With the Minimum

Allowable in the Test for Close Actuarial Balance,

Based on Intermediate Assumptions

Valuation period

Rates

(percentage of taxable payroll)

Values expressed as a

percentage of cost rate

Summarized

income rate

Summarized

cost rate

Actuarial

balance

Actuarial

balance

Minimum

allowable

actuarial

balance

OASI:

10-year: 2011-20 . . . . . . . 15.40 12.51 2.89 23.12 0.00

15-year: 2011-25 . . . . . . . 14.03 12.68 1.35 10.68 -.38

20-year: 2011-30 . . . . . . . 13.40 13.01 .39 2.96 -.77

25-year: 2011-35 . . . . . . . 13.03 13.31 -.28 -2.09 -1.15

30-year: 2011-40 . . . . . . . 12.79 13.52 -.72 -5.35 -1.54

35-year: 2011-45 . . . . . . . 12.62 13.64 -1.01 -7.43 -1.92

40-year: 2011-50 . . . . . . . 12.50 13.71 -1.21 -8.84 -2.31

45-year: 2011-55 . . . . . . . 12.40 13.77 -1.36 -9.91 -2.69

50-year: 2011-60 . . . . . . . 12.33 13.82 -1.49 -10.78 -3.08

55-year: 2011-65 . . . . . . . 12.27 13.86 -1.60 -11.51 -3.46

60-year: 2011-70 . . . . . . . 12.22 13.90 -1.69 -12.13 -3.85

65-year: 2011-75 . . . . . . . 12.18 13.95 -1.77 -12.70 -4.23

70-year: 2011-80 . . . . . . . 12.14 13.99 -1.85 -13.22 -4.62

75-year: 2011-85 . . . . . . . 12.11 14.04 -1.92 -13.71 -5.00

DI:

10-year: 2011-20 . . . . . . . 2.16 2.47 -.31 -12.51 .00

15-year: 2011-25 . . . . . . . 2.06 2.38 -.32 -13.59 -.38

20-year: 2011-30 . . . . . . . 2.01 2.34 -.33 -14.08 -.77

25-year: 2011-35 . . . . . . . 1.98 2.30 -.32 -13.84 -1.15

30-year: 2011-40 . . . . . . . 1.96 2.27 -.30 -13.40 -1.54

35-year: 2011-45 . . . . . . . 1.95 2.25 -.30 -13.22 -1.92

40-year: 2011-50 . . . . . . . 1.94 2.23 -.29 -13.20 -2.31

45-year: 2011-55 . . . . . . . 1.93 2.23 -.29 -13.23 -2.69

50-year: 2011-60 . . . . . . . 1.93 2.22 -.29 -13.22 -3.08

55-year: 2011-65 . . . . . . . 1.92 2.22 -.29 -13.24 -3.46

60-year: 2011-70 . . . . . . . 1.92 2.21 -.29 -13.30 -3.85

65-year: 2011-75 . . . . . . . 1.92 2.21 -.30 -13.38 -4.23

70-year: 2011-80 . . . . . . . 1.91 2.21 -.30 -13.47 -4.62

75-year: 2011-85 . . . . . . . 1.91 2.21 -.30 -13.55 -5.00

OASDI:

10-year: 2011-20 . . . . . . . 17.56 14.98 2.58 17.25 .00

15-year: 2011-25 . . . . . . . 16.09 15.06 1.03 6.84 -.38

20-year: 2011-30 . . . . . . . 15.41 15.35 .06 .36 -.77

25-year: 2011-35 . . . . . . . 15.01 15.61 -.60 -3.82 -1.15

30-year: 2011-40 . . . . . . . 14.76 15.78 -1.03 -6.51 -1.54

35-year: 2011-45 . . . . . . . 14.57 15.88 -1.31 -8.25 -1.92

40-year: 2011-50 . . . . . . . 14.44 15.95 -1.51 -9.45 -2.31

45-year: 2011-55 . . . . . . . 14.33 15.99 -1.66 -10.37 -2.69

50-year: 2011-60 . . . . . . . 14.25 16.04 -1.78 -11.12 -3.08

55-year: 2011-65 . . . . . . . 14.19 16.08 -1.89 -11.75 -3.46

60-year: 2011-70 . . . . . . . 14.14 16.12 -1.98 -12.29 -3.85

65-year: 2011-75 . . . . . . . 14.09 16.16 -2.07 -12.79 -4.23

70-year: 2011-80 . . . . . . . 14.06 16.20 -2.15 -13.25 -4.62

75-year: 2011-85 . . . . . . . 14.02 16.25 -2.22 -13.69 -5.00
Actuarial Estimates

72

7. Reasons for Change in Actuarial Balance From Last Report

The estimated effects (by category) of various changes from last year’s

report to this report on the long-range actuarial balance under the intermediate assumptions are listed in table IV.B9.

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

Since the last report, no legislation that has a significant long-range financial

effect on the OASDI program has been enacted (see section III.B).

In changing from the valuation period of last year's report, which was

2010-84, to the valuation period of this report, 2011-85, the relatively large

negative annual balance for 2085 is included. This change results in a

decrease in the long-range OASDI actuarial balance of 0.05 percent of taxable payroll. (Note that the trust fund assets at the end of 2010, i.e., at the

beginning of the projection period, are included in the 75-year actuarial balance. These assets reflect the net financial flows for the program for all past

years. In effect, therefore, the actuarial balance presented in these reports

reflects financial activity from 1937 through the end of the long-range

period.)

The ultimate demographic assumptions are unchanged from those in last

year’s report. However, changes in the demographic starting values and the

transition to ultimate assumptions combine to decrease the long-range

OASDI actuarial balance by 0.14 percent of taxable payroll. The demoTable IV.B9.—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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.09 1.92 14.01

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.71 2.22 15.93

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.62 -.30 -1.92

Changes in actuarial balance due to changes in:

Legislation / Regulation . . . . . . . . . . . . . . . . . . . . . . . .00 .00 .00

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

a In changing from the valuation period of last year’s report, which was 2010-84, to the valuation period of

this report, 2011-85, the relatively large negative annual balance for 2085 is included. This change in the valuation period results in a larger long-range actuarial deficit. The fund balance at the end of 2010, i.e., at the

beginning of the projection period, is included in the 75-year actuarial balance.

-.04 -.01 -.05

Demographic data and assumptions. . . . . . . . . . . . . . -.14 .00 -.14

Economic data and assumptions. . . . . . . . . . . . . . . . . -.05 -.01 -.06

Disability assumptions . . . . . . . . . . . . . . . . . . . . . . . . .00 .00 -.01

Methods and programmatic data . . . . . . . . . . . . . . . . -.06 +.02 -.05

Total change in actuarial balance . . . . . . . . . . . . . . . . . . -.30 .00 -.30

Shown in this report:

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.92 -.30 -2.22

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.11 1.91 14.02

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.04 2.21 16.25
73

Long-Range Estimates

graphic change contributing most to this reduction is the inclusion of final

mortality data for 2007, which results in lower starting death rates and faster

near-term declines in death rates at older ages compared to last year’s report.

These lower death rates result in a decrease in the long-range OASDI actuarial balance of 0.10 percent of taxable payroll. Revised historical estimates of

net other immigration and final data on legal immigration for 2009 are also

included in this year’s report. Based on estimates from the Department of

Homeland Security for 2007 and 2008 and due to the weak U.S. economy

since 2008, net other immigration levels for years 2007-10 are estimated to

be negative. These levels are significantly lower than the positive estimates

in last year’s report. For years 2011-14, the number of other immigrants

entering the country is assumed to be lower than in last year’s report, consistent with the expected timing of the economic recovery. The effect of including these new immigration data and assumptions is a decrease in the longrange OASDI actuarial balance of 0.05 percent of taxable payroll. Birth rates

projected through 2026 are slightly lower than in last year’s report, a result

caused by lower preliminary birth data for 2008 and 2009 than had been

expected for last year’s report. These changes in birth rates result in a

decrease in the long-range OASDI actuarial balance of 0.01 percent of taxable payroll. Finally, incorporating updated starting population levels and the

interaction of these levels with the changes in fertility, mortality, and immigration result in an increase in the long-range OASDI actuarial balance of

0.02 percent of taxable payroll.

The ultimate economic assumptions are unchanged from those in last year’s

report. However, the combination of updating starting economic values and

changing near-term economic growth rate assumptions decreases the longrange OASDI actuarial balance by 0.06 percent of taxable payroll. The economic recovery has been slower than assumed in last year’s report. For this

year’s report, OASDI taxable earnings are considerably lower for the starting

year, 2010, than were projected in last year’s report. Even with faster real

earnings growth after 2010 through 2019, the projected level of earnings is

lower through 2018 than in last year’s report. In addition, consistent with the

less robust recovery, unemployment rates are slightly higher over the next

few years than assumed in last year’s report.

This report includes updated disabled worker mortality and termination rates

that reflect a more recent historical period. Combining these updated rates

with new starting disability data result in a decrease in the long-range

OASDI actuarial balance of 0.01 percent of taxable payroll.

Several methodological improvements and updates of program-specific data

are included in this report. These changes to programmatic data and methods

have partially offsetting effects and combine to decrease the long-range
Actuarial Estimates

74

OASDI actuarial balance by 0.05 percent of taxable payroll. First, the

method for determining the initial projected rates of mortality decline was

changed to place greater emphasis on recent experience. These initial rates of

decline are now determined using the mortality data during the most recent

10 years of historical data, rather than the most recent 20 years. This change

increased the rate of decline in death rates at older ages for years following

the year of final data (2007) up to the year the ultimate rates of decline are

fully in effect (2035). This mortality change results in a decrease in the longrange OASDI actuarial balance of about 0.05 percent of taxable payroll. The

second significant change improved the historical estimates of the other

immigrant population by age and sex and the consistency between the other

immigrant population and the total population. This change to the historical

population results in a decrease in the long-range OASDI actuarial balance

of about 0.04 percent of taxable payroll. A third significant change in methodology affects labor force participation rates. The assumed effect of gains in

life expectancy on labor force participation for persons over 40 was doubled,

significantly increasing projected participation rates at higher ages. Partially

offsetting this increase in labor force participation, disability prevalence was

added as an input variable to the labor force model for persons over normal

retirement age. The net of these changes on labor force participation

increases the long-range OASDI actuarial balance by about 0.01 percent of

taxable payroll. A 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 new beneficiaries, which serves as the basis

for the projection of average benefit levels, was updated from a 2006 sample

to a 2007 sample. The update of this sample resulted in an increase in the

long-range OASDI actuarial balance of about 0.02 percent of taxable payroll.

Finally, updating programmatic data and other small methodological

improvements resulted in an increase in the long-range OASDI actuarial balance of about 0.01 percent of taxable payroll.

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

unchanged from last year, the OASDI long-range actuarial balance would

have diminished (become more negative) by 0.05 percent of taxable payroll

due to the change in the valuation period. However, the combined changes in

law, data, assumptions, and methods reflected in this report decrease the

actuarial balance by an additional 0.25 percent of payroll. Thus, the actuarial

balance changes from -1.92 percent of taxable payroll in last year's report to

-2.22 percent in this report.

The effects of changes made in this report can also be illustrated by comparing the annual (cash-flow) balances for this and the prior year’s report. Figure IV.B5 provides this comparison for the combined OASDI program over

the long-range (75-year) projection period.
75

Long-Range Estimates

The annual balance (income rate minus cost rate) for each year in the 75-year

projection period is lower than projected in last year’s report. For 2011, the

annual balance in this report is 0.70 percent of payroll lower than was projected in last year's report. This lower balance is mainly due to an expected

$10 billion downward adjustment to 2011 income that corrects for excess

payroll tax revenue credited to the trust funds in earlier years, and to a slower

than expected recovery from the economic recession. In particular, earnings

for 2011 are projected to be significantly lower than in last year’s report.

However, over the next 10 years, the difference between the annual balances

in the two reports declines rapidly. The economic recovery assumed for this

year’s report is complete at about the same time with about the same level of

economic output as for last year’s report. By 2020, the difference in the

annual balances is only 0.04 percent of payroll. After 2020, the difference

between the annual balances in the two reports begins to increase, until it

reaches a level of 0.34 percent of payroll shortly after 2050. For the period

2055 through 2084, the difference between the annual balances in the two

reports decreases, reaching a level of 0.09 percent of payroll in 2084. This

pattern of differences after 2020 (first increasing and then decreasing) is

largely due to changes in mortality. Compared to last year’s report, age-sexadjusted death rates for ages 65 and older become progressively lower

through 2034, while age-sex-adjusted death rates for ages under 65 become

Figure IV.B5.—OASDI Annual Balances: 2010 and 2011 Trustees Reports

[As a percentage of taxable payroll, based on intermediate assumptions]

-6%

-4%

-2%

0%

2%

4%

2005 2015 2025 2035 2045 2055 2065 2075 2085

Calendar year

2010 Report

2011 Report
Actuarial Estimates

76

progressively higher. Lower death rates at older ages result in more beneficiaries, while higher death rates for ages under 65 eventually tend to offset

some of the increase in beneficiaries from longer life after age 65. The cumulative effects of these mortality changes result in more beneficiaries throughout the projection period as compared to last year’s report. The differences in

the number of retired-worker beneficiaries between the reports generally

increase each year until soon after 2055. Thereafter, the increases reverse,

which results in decreasing differences between the two reports through

2084. Compared to last year’s report, the number of additional retiredworker beneficiaries increases through about 2053, reaching a level that is

2.2 percent higher than in last year’s report. Thereafter, the number of additional retired-worker beneficiaries decreases until it reaches a level for 2084

that is only 0.7 percent higher than in last year’s report. The annual deficit

for 2084 is 4.21 percent of taxable payroll in this report compared to

4.12 percent for 2084 in last year's report.
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.

Basic assumptions are developed for several of these factors based on analysis of historical trends and conditions, as well as expected future conditions.

These factors include fertility, mortality, immigration, marriage, divorce,

productivity, inflation, average earnings, unemployment, real interest rate,

retirement, and disability incidence and termination. Other factors are developed utilizing these basic assumptions. The other factors include total population, life expectancy, labor force participation, gross domestic product, and

program-specific factors. All factors included in any consistent set of

assumptions are interrelated directly or indirectly.

The assumptions and methods used in this report are reexamined each year in

light of new information that may influence future conditions and are

revised, if warranted.

Projections of these factors and their interrelationships are inherently uncertain. Therefore, 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 Board’s best estimate of the

future course of the population and the economy. With regard to the net

effect on the status of the OASDI program, the low-cost is more optimistic,

and the high-cost is more pessimistic. The low- and high-cost sets of

assumptions reflect significant potential changes in the interrelationship

among factors, as well as changes in the values for individual factors.

While it is unlikely that all of the factors and interactions would 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 (or lower than) the low-cost scenario or as high

as (or higher than) 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

The estimates developed using the three sets of alternative assumptions

should be interpreted with care. These estimates are not intended to be 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 values for each of the demographic, economic, and program-specific

factors are assumed to change toward long-range ultimate values from

recently experienced levels or trends, generally over 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 are generally maintained.

The assumed ultimate values, which are generally reached within the first 25

years for both the demographic and the economic factors (and apply thereafter through the end of the 75-year long-range period), are intended to represent average annual experience or growth rates. Actual future values will

exhibit fluctuations or cyclical patterns, as in the past.

The following sections discuss, in abbreviated form, 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. Nevertheless, the following sections roughly follow the order

used in building the trust fund estimates presented in chapter IV.

A. DEMOGRAPHIC ASSUMPTIONS AND METHODS

The principal demographic assumptions relating to fertility, mortality, and

net immigration for the three alternatives are shown in table V.A1.

1. Fertility Assumptions

Fertility assumptions are developed for women in the form of birth rates by

single year of age, from 14 to 49. These rates apply to the total number of

women, for all marital statuses, in the midyear population at each age.

1 Further details about the assumptions, methods, and actuarial estimates are contained in Actuarial Studies

published by the Office of the Chief Actuary, Social Security Administration. 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; or

call 410-965-3000. This entire report, along with supplemental year-by-year tables, may also be found at

www.socialsecurity.gov/OACT/TR/TR11/index.html.
79

Demographic Assumptions and Methods

Historically, birth rates in the United States have fluctuated widely. The total

fertility rate1 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

for 1990. In the 1990s, the total fertility rate was fairly stable, around 2.00

children per woman. Since 2000, the total fertility rate has been consistently

above 2.00, and was 2.13 in 2007.

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. Future total fertility rates

are expected 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,

ultimate total fertility rates of 2.30, 2.00, and 1.70 children per woman are

assumed for the low-cost, intermediate, and high-cost assumptions, respectively. These assumptions are unchanged from those used in last year’s

report.

Based on preliminary data, the total fertility rate is assumed to have

decreased to a level of 2.09 children per woman in 2008, and decreased further to 2.03 in 2009. The total fertility rate for 2010 is assumed to be 2.08.

These levels are slightly lower than those estimated in last year’s report for

the intermediate assumptions. For each of the three alternatives, the total fertility rate is then assumed to follow a gradual trend toward the selected ultimate level, which is reached in 2035.

2. Mortality Assumptions

For the projections in this year’s report, assumed average percentage reductions in future mortality rates were developed by age group, sex, and cause of

death. These assumptions were then used to estimate future central death

rates by age group, sex, and cause of death. From these estimated central

death rates, probabilities of death by single year of age and sex were calculated.

1 Defined to be 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 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 net

immigration were zero and if death rates were to remain at, or near, current levels.
Assumptions and Methods

80

Historical death rates (for years 1900-2007) were calculated 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, final Medicare

data on deaths and enrollments were used for years 1968 through 2007.

Death rates by cause of death at all ages for years 1979-2007 were produced

using data from the NCHS.

The total age-sex-adjusted death rate2 declined at an average rate3 of 1.10

percent per year between 1900 and 2007. Between 1979 and 2007, 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 0.93 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 than

for the rest of the population. The age-sex-adjusted death rate for ages 65 and

over declined at an average rate of 0.79 percent per year between 1900 and

2007.

Reductions in death rates resulted from many factors, including increased

medical knowledge, increased availability of health-care services, and

improvements in sanitation and nutrition. Based on consideration of the

expected rate of future progress in these and other areas, three alternative

sets of ultimate annual percentage reductions in central death rates by age

group, sex, and cause of death are assumed for 2035 and later. The intermediate set, which is used for alternative II, is considered to be the most likely

to occur. The average annual percentage reductions used for alternative I are

generally smaller than those for alternative II, while those used for

alternative III are generally larger. These ultimate annual percentage reductions are the same as those in last year’s report.

For the years 2008 through 2010, the reductions in central death rates are

assumed to be the same as the average annual reductions by age group, sex,

and cause of death observed between 1997 and 2007. After 2010, the reductions in central death rates for alternative II are assumed to change rapidly

from the average annual reductions by age group, sex, and cause of death

observed between 1997 and 2007 until they reach the ultimate annual per1 These rates reflect NCHS data on deaths and Census estimates of population.

2 Calculated here as the crude rate that would occur in 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.

3 Average rate of decline is calculated as the annual geometric rate of reduction between the first and last

years of the period.
81

Demographic Assumptions and Methods

centage reductions by age group, sex, and cause of death assumed for 2035

and later. The reductions in death rates under alternatives I and III are also

assumed to change rapidly to their ultimate levels, but start from levels

which are, respectively, 50 or 150 percent of the average annual reductions

observed between 1997 and 2007.

Projections of age-sex-adjusted death rates are presented in table V.A1 for

the total population (all ages), for under age 65, and for ages 65 and over.

Under the intermediate assumptions, projected age-sex-adjusted death rates

for the total population are lower than the death rates in last year’s report.

However, for the age group under age 65, projected age-sex-adjusted death

rates are higher than in last year’s report. For the age group 65 and over, projected age-sex-adjusted death rates are lower than in last year’s report. These

changes primarily result from incorporating new final mortality data for

2007 and a methodological change to use a more recent 10-year period

(1997-2007), rather than a 20-year period (1987-2007), to set the starting

rates of annual reduction in death rates.

After adjustment for changes in the age-sex distribution of the population,

the resulting total death rates are projected to decline at average annual rates

of about 0.32 percent, 0.78 percent, and 1.31 percent between 2010 and 2085

for alternatives I, II, and III, respectively. In keeping with the patterns

observed in the historical data, future rates of decline are assumed to be

greater for younger ages than for older ages, but to a substantially lesser

degree than in the past. Accordingly, age-sex-adjusted death rates for ages 65

and over are projected to decline at average annual rates of about

0.29 percent, 0.72 percent, and 1.26 percent between 2010 and 2085 for

alternatives I, II, and III, respectively.

Experts express a wide range of views on the likely rate of future decline in

death rates. For example, the 2007 Technical Panel on Assumptions and

Methods, appointed by the Social Security Advisory Board, believed that

ultimate rates of decline in mortality will be higher than the rates of decline

assumed for the intermediate projections in this report. Others believe that

biological and social factors may slow future rates of decline in mortality.

Evolving mortality trends in health care and lifestyle will be closely monitored to 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,

assumptions are made for annual legal immigration, legal emigration, “other
Assumptions and Methods

82

immigration,” and “other emigration.” Legal immigration consists of persons

who are granted legal permanent resident (LPR) status. Legal emigration

consists of those legal immigrants and native-born citizens who leave the

Social Security area population. Net legal immigration is then calculated as

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 LPR 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 LPR. Net other immigration

is then calculated as the difference between other immigration and other emigration. Net immigration refers to the sum of net legal immigration and net

other immigration.

Separate assumptions are developed for the low-cost, intermediate, and highcost 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 reflecting primarily an increase in the

number of persons granted LPR 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 the

number of pending applications increased. From 2003 to 2006, legal immigration increased until it reached about 1,200,000 for 2005 and 2006. For

2007 through 2009, legal immigration decreased to about 1,100,000. Legal

immigration in excess of 1,000,000 reflects the concerted effort in recent

years to reduce the backlog of pending applications for LPR status.

1 Excludes those persons who attained legal permanent resident status under the special, one-time provisions of the Immigration Reform and Control Act of 1986.
83

Demographic Assumptions and Methods

For the intermediate alternative, the Department of Homeland Security is

expected to continue to reduce the backlog of pending applications, and legal

immigration is assumed to be about 1,100,000 persons in 2010, 1,050,000 in

2011, and 1,000,000 persons per year thereafter. For alternatives I and III,

annual legal immigration is ultimately assumed to be 1,200,000 persons and

800,000 persons, respectively. These ultimate assumptions are unchanged

from last year’s report.

The ratios of annual legal emigration to legal immigration are assumed to be

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 the same ratios used in last year’s

report. Under the intermediate alternative, by combining the ultimate annual

legal immigration and emigration assumptions, the ultimate annual net legal

immigration is 750,000 persons. For the low-cost and high-cost scenarios,

ultimate annual net legal immigration is 960,000 persons and 560,000 persons, respectively.

The number of other immigrants residing in the Social Security area population is estimated to have been about 8.9 million persons as of January 1,

2000, increasing to about 13.5 million persons as of January 1, 2007. During

the recession, the other-immigrant population is estimated to have decreased

and reached a level of 12.6 million persons as of January 1, 2009.

Annual other immigration for 2009 and 2010 is estimated to have been

1.0 million persons. Due to the recent recession, these levels are significantly

lower than those estimated during the period 2000 through 2006. Under the

intermediate assumptions, annual other immigration would be 1.1 million in

2011, and would increase until 2015 to the ultimate level of 1.5 million persons. For the low- and high-cost scenarios, the future ultimate annual other

immigration is assumed to be 1.8 million persons and 1.2 million persons,

respectively.

Emigration from the other-immigrant population includes those who leave

the Social Security area and those who adjust their status to become LPRs.

This other-immigrant population is highly mobile and far more likely to

leave the Social Security area than is the native-born or legal-immigrant population. The annual number of other immigrants who leave the Social Security area is estimated in two groups. The first departing group is set, by age

and sex, at a stable proportion of the number of other immigrants who are

assumed to have recently entered the Social Security area. The size of the

second departing group is calculated by applying a set of annual departure

rates, by age and sex, to the other-immigrant population in the Social Secu-
Assumptions and Methods

84

rity area. The annual number of other emigrants who leave the Social Security area is projected to average 665,000 through the 75-year projection

period. In addition, the annual number of other immigrants who adjust status

to become LPRs is assumed to ultimately be 500,000 for the intermediate

assumptions. This ultimate level is one-third of the annual number of other

immigrants assumed to enter the Social Security area. For the low- and highcost scenarios, ultimate annual numbers adjusting status to LPR are assumed

to average 600,000 persons and 400,000 persons, respectively.

Under the assumptions and methods described above, the size of the otherimmigrant population is projected to grow 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.

Net other immigration is estimated to have averaged about 610,000 persons

from 2000 through 2004. Estimates of net other immigration are based on

data from the Department of Homeland Security for 2005 through 2008. The

levels for 2005 and 2006 are estimated to have been 1,015,000 persons and

675,000 persons, respectively. For 2007 through 2010, net other immigration

is estimated to have been negative, as compared to high positive levels in last

year’s report. Under the intermediate assumptions, net other immigration is

projected to return to a positive level of 105,000 persons in 2011, and rise to

about 500,000 persons in 2015. Net other immigration is then projected to

decrease to about 320,000 in 2040 and to about 275,000 in 2085. The decline

in net other immigration is attributable to the increasing number of other

immigrants residing in the Social Security area. Based on the rates of departure described above, this effect occurs because 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. All other components of other

immigration and emigration are assumed to be stable after 2014, and thus do

not contribute toward any change in net other immigration. The average

annual level of net other immigration over the 75-year projection period is

estimated to be about 325,000 persons. Net other immigration is estimated to

average about 425,000 persons per year under the low-cost assumptions and

225,000 persons per year under the high-cost assumptions.

The total level of net immigration (legal and other combined) is estimated to

average 1,075,000 persons per year during the 75-year projection period

under the intermediate assumptions. For the low-cost assumptions, total net

immigration is estimated to average 1,385,000 persons per year. Under the

high-cost assumptions, total net immigration is estimated to average 785,000

persons per year.
85

Demographic Assumptions and Methods

Demographers express a wide range of views about the future course of

immigration for the United States. Some, like the 2007 Technical Panel mentioned in the previous section, believe that immigration will increase substantially in the future. Others believe that potential immigrants may be

attracted to other countries or that changes in the law or enforcement of the

law could restrict immigration.

Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2085

Calendar year

Total

fertility

ratea

Age-sex-adjusted death rateb

per 100,000, by age Net immigrationc

Total Under 65 65 and over Legald Othere

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 5,993.6 410,000 290,000

1985 . . . . . . . . . 1.83 984.2 303.6 5,777.6 435,000 355,000

1990 . . . . . . . . . 2.07 931.2 289.4 5,451.1 500,000 530,000

1995 . . . . . . . . . 1.98 913.9 277.3 5,397.5 575,000 470,000

1996 . . . . . . . . . 1.98 900.4 266.1 5,367.2 665,000 385,000

1997 . . . . . . . . . 1.97 885.1 253.6 5,332.5 570,000 460,000

1998 . . . . . . . . . 2.00 878.3 246.9 5,325.2 490,000 510,000

1999 . . . . . . . . . 2.01 884.4 245.0 5,387.5 520,000 510,000

2000 . . . . . . . . . 2.05 875.7 243.4 5,328.3 670,000 610,000

2001 . . . . . . . . . 2.03 867.5 243.7 5,260.7 795,000 610,000

2002 . . . . . . . . . 2.03 863.9 243.0 5,236.6 730,000 610,000

2003 . . . . . . . . . 2.06 851.8 241.7 5,148.2 575,000 615,000

2004 . . . . . . . . . 2.06 820.4 235.4 4,940.6 750,000 615,000

2005 . . . . . . . . . 2.06 822.6 236.6 4,949.3 870,000 1,015,000

2006 . . . . . . . . . 2.12 799.8 234.2 4,783.5 910,000 675,000

2007 . . . . . . . . . 2.13 782.1 228.9 4,678.1 800,000 -20,000

2008f . . . . . . . . 2.09 789.6 230.0 4,730.9 835,000 -800,000

2009f . . . . . . . . 2.03 781.5 228.4 4,676.7 850,000 -10,000

2010f. . . . . . . . . 2.08 773.8 226.8 4,625.4 825,000 -5,000

Intermediate:

2015 . . . . . . . . . 2.06 739.6 218.3 4,411.0 750,000 500,000

2020 . . . . . . . . . 2.05 707.8 207.8 4,228.6 750,000 445,000

2025 . . . . . . . . . 2.03 677.4 197.1 4,059.7 750,000 400,000

2030 . . . . . . . . . 2.02 648.7 186.8 3,901.7 750,000 365,000

2035 . . . . . . . . . 2.00 621.8 177.1 3,753.8 750,000 340,000

2040 . . . . . . . . . 2.00 596.6 167.9 3,615.3 750,000 320,000

2045 . . . . . . . . . 2.00 572.9 159.4 3,485.5 750,000 305,000

2050 . . . . . . . . . 2.00 550.8 151.4 3,363.7 750,000 300,000

2055 . . . . . . . . . 2.00 530.0 143.9 3,249.4 750,000 290,000

2060 . . . . . . . . . 2.00 510.5 136.9 3,141.9 750,000 290,000

2065 . . . . . . . . . 2.00 492.2 130.3 3,040.6 750,000 285,000

2070 . . . . . . . . . 2.00 474.9 124.1 2,945.1 750,000 280,000

2075 . . . . . . . . . 2.00 458.6 118.3 2,855.0 750,000 280,000

2080 . . . . . . . . . 2.00 443.2 112.8 2,769.8 750,000 280,000

2085 . . . . . . . . . 2.00 428.7 107.7 2,689.1 750,000 275,000
Assumptions and Methods

86

4. Total Population Estimates

Combining the above assumptions for future fertility, mortality, and net

immigration with assumptions on marriage and divorce based on data from

the NCHS, projections were made of the population in the Social Security

area by age, sex, and marital status as of January 1 of each year 2010 through

Low-cost:

2015 . . . . . . . . . 2.12 769.0 226.4 4,590.3 960,000 645,000

2020 . . . . . . . . . 2.17 758.3 222.6 4,530.8 960,000 570,000

2025 . . . . . . . . . 2.21 745.4 217.7 4,461.5 960,000 515,000

2030 . . . . . . . . . 2.26 732.1 212.7 4,390.1 960,000 465,000

2035 . . . . . . . . . 2.30 718.9 207.6 4,319.4 960,000 430,000

2040 . . . . . . . . . 2.30 705.9 202.7 4,250.1 960,000 410,000

2045 . . . . . . . . . 2.30 693.4 197.9 4,183.1 960,000 390,000

2050 . . . . . . . . . 2.30 681.3 193.3 4,118.0 960,000 375,000

2055 . . . . . . . . . 2.30 669.6 188.9 4,054.9 960,000 365,000

2060 . . . . . . . . . 2.30 658.2 184.6 3,993.8 960,000 360,000

2065 . . . . . . . . . 2.30 647.2 180.4 3,934.4 960,000 355,000

2070 . . . . . . . . . 2.30 636.5 176.4 3,876.8 960,000 350,000

2075 . . . . . . . . . 2.30 626.2 172.5 3,820.8 960,000 350,000

2080 . . . . . . . . . 2.30 616.1 168.8 3,766.5 960,000 350,000

2085 . . . . . . . . . 2.30 606.4 165.2 3,713.7 960,000 350,000

High-cost:

2015 . . . . . . . . . 2.00 709.8 210.9 4,223.4 560,000 150,000

2020 . . . . . . . . . 1.93 655.7 195.2 3,898.8 560,000 330,000

2025 . . . . . . . . . 1.85 607.3 180.4 3,614.2 560,000 295,000

2030 . . . . . . . . . 1.78 563.8 166.6 3,361.2 560,000 265,000

2035 . . . . . . . . . 1.70 524.7 154.0 3,135.1 560,000 245,000

2040 . . . . . . . . . 1.70 489.5 142.5 2,932.6 560,000 235,000

2045 . . . . . . . . . 1.70 457.6 132.1 2,750.5 560,000 225,000

2050 . . . . . . . . . 1.70 428.8 122.5 2,586.5 560,000 225,000

2055 . . . . . . . . . 1.70 402.7 113.7 2,438.2 560,000 220,000

2060 . . . . . . . . . 1.70 378.9 105.6 2,303.8 560,000 220,000

2065 . . . . . . . . . 1.70 357.3 98.2 2,181.5 560,000 215,000

2070 . . . . . . . . . 1.70 337.5 91.4 2,070.0 560,000 215,000

2075 . . . . . . . . . 1.70 319.3 85.2 1,967.9 560,000 215,000

2080 . . . . . . . . . 1.70 302.6 79.5 1,874.2 560,000 210,000

2085 . . . . . . . . . 1.70 287.2 74.2 1,787.9 560,000 210,000

a The total fertility rate for any year is the average number of children who would be born to a woman in her

lifetime if she were to experience the birth rates by age observed in, or assumed for, the selected year, and if

she were to survive the entire childbearing period. The ultimate total fertility rate is assumed to be reached in

2035.

b The age-sex-adjusted death rate is the crude rate that would occur in 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 Historical estimates of net legal immigration assume a 25 percent reduction in legal immigration due to

legal emigration. 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 net other immigration estimates are based on a residual method. The total other population is

forced to match the Department of Homeland Security estimates for 2005 through 2009.

f Estimated.

Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2085 (Cont.)

Calendar year

Total

fertility

ratea

Age-sex-adjusted death rateb

per 100,000, by age Net immigrationc

Total Under 65 65 and over Legald Othere
87

Demographic Assumptions and Methods

2085. The starting Social Security area population for January 1, 2009, is

based, with several adjustments, on the Census Bureau’s estimate of the residents of the 50 States and D.C., and U.S. Armed Forces overseas. These

adjustments reflect mortality assumptions for the aged population since 2000

that are consistent with Medicare and Social Security data, net immigration

assumptions for the aged population since 2000, estimates of the net undercount in the 2000 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. This starting population was then

projected using assumed rates of birth, death, marriage, and divorce; and

assumed levels of net immigration.

Using surrounding January 1 populations, a July 1 (i.e., midyear) population

was also calculated for each year. Table V.A2 shows the historical and projected population as of July 1 by broad age group, for the three alternatives.

Also shown are aged and total dependency ratios (see table footnotes for definitions).
Assumptions and Methods

88

Table V.A2.—Social Security Area Population as of July 1 and Dependency Ratios,

Calendar Years 1950-2085

Calendar year

Population (in thousands) Dependency ratio

Under 20 20-64

65 and

over Total Ageda Totalb

Historical data:

1950 . . . . . . . . . . . . . . 54,477 92,849 12,812 160,138 0.138 0.725

1960 . . . . . . . . . . . . . . 73,059 99,818 17,278 190,155 .173 .905

1965 . . . . . . . . . . . . . . 79,997 104,881 19,073 203,951 .182 .945

1970 . . . . . . . . . . . . . . 80,882 112,991 20,893 214,766 .185 .901

1975 . . . . . . . . . . . . . . 78,664 122,574 23,176 224,414 .189 .831

1980 . . . . . . . . . . . . . . 74,932 134,103 26,196 235,231 .195 .754

1985 . . . . . . . . . . . . . . 73,342 144,853 29,121 247,315 .201 .707

1990 . . . . . . . . . . . . . . 75,239 153,333 31,989 260,562 .209 .699

1995 . . . . . . . . . . . . . . 79,856 160,870 34,450 275,176 .214 .711

2000 . . . . . . . . . . . . . . 82,583 169,907 35,650 288,139 .210 .696

2005 . . . . . . . . . . . . . . 84,158 179,763 37,231 301,152 .207 .675

2010c . . . . . . . . . . . . . 85,230 188,906 40,896 315,032 .216 .668

Intermediate:

2015 . . . . . . . . . . . . . . 86,790 194,371 47,498 328,659 .244 .691

2020 . . . . . . . . . . . . . . 89,723 197,924 55,582 343,228 .281 .734

2025 . . . . . . . . . . . . . . 92,419 199,991 64,700 357,110 .324 .786

2030 . . . . . . . . . . . . . . 94,500 202,741 72,609 369,850 .358 .824

2035 . . . . . . . . . . . . . . 96,236 207,659 77,324 381,219 .372 .836

2040 . . . . . . . . . . . . . . 97,857 213,901 79,702 391,459 .373 .830

2045 . . . . . . . . . . . . . . 99,638 220,159 81,204 401,002 .369 .821

2050 . . . . . . . . . . . . . . 101,665 225,058 83,552 410,275 .371 .823

2055 . . . . . . . . . . . . . . 103,828 229,299 86,594 419,721 .378 .830

2060 . . . . . . . . . . . . . . 105,867 233,529 90,201 429,597 .386 .840

2065 . . . . . . . . . . . . . . 107,712 238,662 93,536 439,909 .392 .843

2070 . . . . . . . . . . . . . . 109,502 243,734 97,151 450,387 .399 .848

2075 . . . . . . . . . . . . . . 111,365 248,428 100,995 460,788 .407 .855

2080 . . . . . . . . . . . . . . 113,326 252,907 104,778 471,011 .414 .862

2085 . . . . . . . . . . . . . . 115,321 257,187 108,642 481,150 .422 .871

Low-cost:

2015 . . . . . . . . . . . . . . 87,829 195,967 47,381 331,176 .242 .690

2020 . . . . . . . . . . . . . . 92,412 200,739 55,094 348,245 .274 .735

2025 . . . . . . . . . . . . . . 97,537 203,983 63,631 365,150 .312 .790

2030 . . . . . . . . . . . . . . 102,845 207,861 70,750 381,455 .340 .835

2035 . . . . . . . . . . . . . . 108,282 214,240 74,544 397,067 .348 .853

2040 . . . . . . . . . . . . . . 113,479 222,719 75,994 412,193 .341 .851

2045 . . . . . . . . . . . . . . 118,652 231,890 76,709 427,251 .331 .842

2050 . . . . . . . . . . . . . . 124,124 240,350 78,488 442,961 .327 .843

2055 . . . . . . . . . . . . . . 129,814 248,900 81,140 459,854 .326 .848

2060 . . . . . . . . . . . . . . 135,604 258,130 84,365 478,100 .327 .852

2065 . . . . . . . . . . . . . . 141,510 268,834 87,200 497,544 .324 .851

2070 . . . . . . . . . . . . . . 147,454 280,282 90,150 517,886 .322 .848

2075 . . . . . . . . . . . . . . 153,471 292,288 93,190 538,949 .319 .844

2080 . . . . . . . . . . . . . . 159,641 304,613 96,509 560,763 .317 .841

2085 . . . . . . . . . . . . . . 165,999 316,836 100,644 583,479 .318 .842
89

Demographic Assumptions and Methods

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 a useful analytical concept. Life expectancy is calculated in two different forms for two separate purposes.

Period life expectancy is calculated for a given year using 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, and thus is closely related to the age-sex-adjusted death rate discussed

in section V.A.2. Period life expectancy for a particular year may be viewed

as the expected remaining life at a selected age only if it is assumed that

there is 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 truly answers the question “What is the expected

average remaining lifetime for an individual at a selected age in a given

year?” Cohort life expectancy is calculated using death rates not from a single year, but from the series of years in which the individual will actually

reach each succeeding age if he or she survives. Table V.A4 presents historical and projected life expectancy calculated on a cohort basis. Cohort life

expectancy is somewhat greater than period life expectancy for the same

year, because death rates for any given age tend to decline as time passes and

the cohort grows older.

High-cost:

2015 . . . . . . . . . . . . . . 85,807 192,887 47,629 326,323 0.247 0.692

2020 . . . . . . . . . . . . . . 87,111 195,130 56,132 338,374 .288 .734

2025 . . . . . . . . . . . . . . 87,496 196,074 65,935 349,505 .336 .783

2030 . . . . . . . . . . . . . . 86,531 197,746 74,779 359,056 .378 .816

2035 . . . . . . . . . . . . . . 84,806 201,281 80,590 366,677 .400 .822

2040 . . . . . . . . . . . . . . 83,222 205,352 84,078 372,652 .409 .815

2045 . . . . . . . . . . . . . . 82,110 208,794 86,524 377,428 .414 .808

2050 . . . . . . . . . . . . . . 81,371 210,287 89,536 381,195 .426 .813

2055 . . . . . . . . . . . . . . 80,883 210,464 92,984 384,332 .442 .826

2060 . . . . . . . . . . . . . . 80,234 210,063 96,910 387,208 .461 .843

2065 . . . . . . . . . . . . . . 79,240 210,125 100,638 390,003 .479 .856

2070 . . . . . . . . . . . . . . 78,222 209,526 104,801 392,548 .500 .874

2075 . . . . . . . . . . . . . . 77,395 207,864 109,341 394,600 .526 .898

2080 . . . . . . . . . . . . . . 76,764 205,705 113,507 395,976 .552 .925

2085 . . . . . . . . . . . . . . 76,199 203,579 116,927 396,705 .574 .949

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 as of July 1 and Dependency Ratios,

Calendar Years 1950-2085 (Cont.)

Calendar year

Population (in thousands) Dependency ratio

Under 20 20-64

65 and

over Total Ageda Totalb
Assumptions and Methods

90

Table V.A3.—Period Life Expectancya

a The period life expectancy at a given age for a given year represents the average number of years of life

remaining if a group of persons at that exact age, born on January 1, were to experience the mortality rates

for that year over the course of their remaining lives.

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

1996 . . . . 73.0 79.2 15.5 19.1

1997 . . . . 73.4 79.4 15.6 19.1

1998 . . . . 73.7 79.4 15.7 19.1

1999 . . . . 73.8 79.3 15.7 19.0

2000 . . . . 74.0 79.4 15.9 19.0

2001 . . . . 74.1 79.4 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 80.4 17.2 19.9

2008b . . . 75.4 80.3 17.2 19.8

2009b . . . 75.6 80.4 17.4 19.8

2010b ...

b Estimated.

75.8 80.5 17.5 19.9

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 . . . . 76.5 80.9 18.1 20.2 76.0 80.5 17.8 19.9 77.0 81.3 18.5 20.5

2020 . . . . 77.1 81.4 18.5 20.5 76.2 80.7 17.9 20.0 78.0 82.2 19.2 21.1

2025 . . . . 77.7 81.9 18.8 20.8 76.5 80.9 18.1 20.1 79.0 83.0 19.8 21.7

2030 . . . . 78.2 82.4 19.2 21.1 76.8 81.1 18.2 20.2 79.9 83.8 20.4 22.3

2035 . . . . 78.8 82.8 19.5 21.4 77.0 81.3 18.3 20.4 80.7 84.5 20.9 22.8

2040 . . . . 79.3 83.3 19.8 21.7 77.3 81.5 18.5 20.5 81.6 85.2 21.5 23.3

2045 . . . . 79.8 83.7 20.1 22.0 77.5 81.7 18.6 20.6 82.4 85.9 22.0 23.8

2050 . . . . 80.3 84.1 20.3 22.3 77.8 81.9 18.7 20.7 83.1 86.6 22.5 24.3

2055 . . . . 80.8 84.5 20.6 22.6 78.0 82.1 18.8 20.8 83.8 87.2 22.9 24.7

2060 . . . . 81.3 84.9 20.9 22.8 78.3 82.3 19.0 21.0 84.5 87.7 23.4 25.2

2065 . . . . 81.7 85.3 21.2 23.1 78.5 82.5 19.1 21.1 85.2 88.3 23.8 25.6

2070 . . . . 82.1 85.7 21.4 23.3 78.7 82.6 19.2 21.2 85.8 88.8 24.2 26.0

2075 . . . . 82.5 86.0 21.7 23.6 78.9 82.8 19.3 21.3 86.4 89.3 24.6 26.3

2080 . . . . 82.9 86.4 21.9 23.8 79.1 83.0 19.4 21.4 87.0 89.8 25.0 26.7

2085 . . . . 83.3 86.7 22.1 24.0 79.4 83.2 19.5 21.5 87.6 90.3 25.4 27.1
91

Demographic Assumptions and Methods

Table V.A4.—Cohort Life Expectancya

a The cohort life expectancy at a given age for a given year represents the average number of years of life

remaining if a group of persons at that exact age, born on January 1, were to experience the mortality rates

for the series of years in which they reach each succeeding age.

Calendar

year

Intermediate Low-cost High-cost

At birthb At age 65c At birthb

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 2007. For birth years after 2007, these values are based

solely on estimated death rates.

At age 65 c

c Age 65 cohort life expectancy for those attaining age 65 in calendar years 1940 though 2007 is either based

on actual death rates or on a combination of actual and estimated death rates. After 2007, these values are

based solely on estimated death rates.

At birthb At age 65 c

Male Female Male Female Male Female Male Female Male Female Male Female

1940 . . . . 70.4 76.3 12.7 14.7 70.1 76.0 12.7 14.7 70.7 76.8 12.7 14.7

1945 . . . . 72.2 78.0 13.0 15.4 71.7 77.5 13.0 15.4 72.8 78.7 13.0 15.4

1950 . . . . 73.5 79.3 13.1 16.2 72.8 78.5 13.1 16.2 74.3 80.2 13.1 16.2

1955 . . . . 74.2 79.9 13.1 16.7 73.3 78.9 13.1 16.7 75.3 81.2 13.1 16.7

1960 . . . . 74.8 80.3 13.2 17.4 73.7 79.2 13.2 17.4 76.3 81.9 13.2 17.4

1965 . . . . 75.7 80.9 13.5 18.0 74.3 79.5 13.5 18.0 77.4 82.7 13.5 18.0

1970 . . . . 76.8 81.7 13.8 18.5 75.2 80.0 13.8 18.5 78.9 83.8 13.8 18.5

1975 . . . . 77.7 82.4 14.2 18.7 75.8 80.5 14.2 18.7 80.1 84.8 14.2 18.7

1980 . . . . 78.6 83.1 14.7 18.8 76.4 81.0 14.7 18.8 81.3 85.7 14.7 18.8

1985 . . . . 79.3 83.7 15.4 19.0 76.8 81.3 15.4 19.0 82.2 86.5 15.4 19.0

1990 . . . . 79.9 84.2 16.0 19.3 77.2 81.6 16.0 19.2 83.1 87.3 16.1 19.4

1995 . . . . 80.6 84.8 16.7 19.6 77.6 81.9 16.6 19.4 84.1 88.0 16.8 19.8

1996 . . . . 80.7 84.9 16.9 19.7 77.7 82.0 16.7 19.5 84.2 88.2 17.0 19.8

1997 . . . . 80.8 84.9 17.0 19.7 77.7 82.0 16.9 19.5 84.4 88.3 17.2 19.9

1998 . . . . 80.9 85.0 17.2 19.8 77.8 82.1 17.0 19.6 84.5 88.4 17.4 20.0

1999 . . . . 81.0 85.1 17.3 19.9 77.9 82.1 17.1 19.6 84.7 88.5 17.6 20.2

2000 . . . . 81.1 85.2 17.5 20.0 77.9 82.2 17.2 19.7 84.9 88.7 17.7 20.3

2001 . . . . 81.2 85.3 17.6 20.0 78.0 82.2 17.3 19.7 85.0 88.8 17.9 20.4

2002 . . . . 81.3 85.3 17.7 20.1 78.0 82.3 17.4 19.8 85.1 88.9 18.1 20.5

2003 . . . . 81.4 85.4 17.9 20.2 78.0 82.3 17.5 19.8 85.3 89.0 18.2 20.7

2004 . . . . 81.5 85.5 18.0 20.3 78.1 82.3 17.6 19.9 85.4 89.1 18.4 20.8

2005 . . . . 81.6 85.6 18.1 20.4 78.1 82.4 17.7 19.9 85.6 89.2 18.6 20.9

2006 . . . . 81.7 85.7 18.2 20.4 78.2 82.4 17.7 20.0 85.7 89.4 18.8 21.0

2007 . . . . 81.8 85.7 18.3 20.5 78.2 82.4 17.8 20.0 85.9 89.5 18.9 21.2

2008 . . . . 81.9 85.8 18.4 20.6 78.3 82.5 17.9 20.0 86.0 89.6 19.1 21.3

2009 . . . . 81.9 85.9 18.5 20.7 78.3 82.5 17.9 20.1 86.1 89.7 19.2 21.4

2010 . . . . 82.0 86.0 18.6 20.7 78.4 82.6 18.0 20.1 86.3 89.8 19.4 21.6

2015 . . . . 82.5 86.3 19.0 21.1 78.6 82.8 18.1 20.2 87.0 90.4 20.1 22.2

2020 . . . . 82.9 86.7 19.3 21.4 78.9 82.9 18.3 20.4 87.6 90.9 20.8 22.8

2025 . . . . 83.4 87.1 19.7 21.7 79.1 83.1 18.4 20.5 88.3 91.4 21.4 23.4

2030 . . . . 83.8 87.4 20.0 22.0 79.3 83.3 18.5 20.6 88.9 91.9 21.9 23.9

2035 . . . . 84.2 87.7 20.3 22.3 79.6 83.5 18.7 20.7 89.5 92.4 22.5 24.5

2040 . . . . 84.6 88.1 20.6 22.6 79.8 83.7 18.8 20.8 90.1 92.9 23.0 24.9

2045 . . . . 84.9 88.4 20.9 22.9 80.0 83.9 18.9 21.0 90.6 93.3 23.5 25.4

2050 . . . . 85.3 88.7 21.1 23.1 80.2 84.0 19.0 21.1 91.1 93.8 24.0 25.9

2055 . . . . 85.7 89.0 21.4 23.4 80.4 84.2 19.2 21.2 91.6 94.2 24.4 26.3

2060 . . . . 86.0 89.3 21.7 23.6 80.6 84.4 19.3 21.3 92.1 94.6 24.9 26.7

2065 . . . . 86.3 89.5 21.9 23.9 80.8 84.5 19.4 21.4 92.6 95.0 25.3 27.1

2070 . . . . 86.7 89.8 22.2 24.1 81.0 84.7 19.5 21.5 93.1 95.4 25.7 27.5

2075 . . . . 87.0 90.1 22.4 24.4 81.2 84.8 19.6 21.6 93.5 95.8 26.1 27.9

2080 . . . . 87.3 90.3 22.6 24.6 81.4 85.0 19.7 21.7 94.0 96.2 26.5 28.2

2085 . . . . 87.6 90.6 22.9 24.8 81.6 85.1 19.8 21.8 94.4 96.6 26.9 28.6
Assumptions and Methods

92

B. ECONOMIC ASSUMPTIONS AND METHODS

All three sets of basic economic assumptions project a continuation of the

gradual recovery from the recent recession that started in December 2007.

The intermediate assumptions reflect the Trustees’ consensus expectation of

sustained moderate economic growth after the recovery and their best estimate for various other economic parameters. The low-cost assumptions represent a more optimistic outlook and assume relatively strong economic

growth and optimistic levels for other parameters. The high-cost assumptions

represent a more pessimistic scenario, with relatively weak economic growth

and pessimistic levels for other parameters.

Actual economic data were available through the third quarter of 2010 at the

time the assumptions for this report were set. 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 that was 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 typical recoveries. The economy is projected to return to its sustainable trend level of output in each alternative within the first 10 years of the projection period and to

remain on that trend thereafter. However, the speed of the return varies by

alternative. The economy is projected to return to its sustainable trend level

of output in 2018 for the intermediate assumptions, 2016 for the low-cost

assumptions, and 2020 for the high-cost assumptions. Economic cycles are

not included in the assumptions beyond the first 10 years of the projection

period because complete cycles have little effect on the long-range estimates

of financial status.

The remainder of this section discusses the key economic assumptions

underlying the three sets of projections of the future financial status of the

combined OASI and DI Trust Funds.

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.
93

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. For the 40

years from 1969 to 2009, annual increases in total productivity averaged

1.7 percent, the result of average annual increases of 1.7, 1.3, 1.7, and

2.1 percent for the 10-year periods 1969-79, 1979-89, 1989-99, and

1999-2009, respectively. For 2010, the estimated annual change in productivity is 2.7 percent.

It is more useful to consider historical average growth rates for complete

economic cycles, because productivity growth can vary substantially within

economic cycles. The annual increase in total productivity, covering the

41-year period from 1966 to 2007, also averaged 1.7 percent over the last

five complete economic cycles (measured from peak to peak). The annual

increase in total productivity averaged 2.3, 1.2, 1.2, 1.8, and 2.1 percent over

the economic cycles 1966-73, 1973-78, 1978-89, 1989-2000, and 2000-07,

respectively.

The ultimate annual increases in total economy productivity are assumed to

be 2.0, 1.7, and 1.4 percent for the low-cost, intermediate, and high-cost

assumptions, respectively, and are consistent with ultimate annual increases

in private non-farm business productivity of 2.4, 2.0, and 1.7 percent. The

private non-farm business sector excludes the farm, government, non-profit

institution, and private household sectors. These rates of increase are the

same as those used in the 2010 report, and reflect the belief that recent strong

growth in private non-farm business productivity, after the relatively poor

performance from 1973 to 1995, is consistent with future long-term growth

that mirrors the long-term trends of the past.

For the intermediate assumptions, the annual change in productivity is

assumed to be 1.7 percent for 2011, then average 2.0 percent for 2012

through 2014, 1.6 percent for 2015 through 2020, and reach its ultimate

value of 1.7 percent thereafter. For the low-cost assumptions, the annual

change in productivity is assumed to be 1.8 percent for 2011, then average

2.1 percent for 2012 through 2014, 1.8 percent for 2015 through 2020, and

reach its ultimate value of 2.0 percent thereafter. For the high-cost assumptions, the annual change in productivity is assumed to be 1.3 percent for

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.
Assumptions and Methods

94

2011, then average 1.9 percent for 2012 through 2014, and average the

assumed ultimate value of 1.4 percent thereafter.

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

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.

Historically, the CPI increased at an average annual rate of 4.4 percent for

the 40 years from 1969 to 2009, the result of average annual increases of 7.1,

5.3, 2.9, and 2.5 percent for the 10-year periods 1969-79, 1979-89, 1989-99,

and 1999-2009, respectively. The GDP deflator increased at an average

annual rate of 4.0 percent from 1969 to 2009, the result of average annual

increases of 6.6, 4.7, 2.2, and 2.4 percent for the same respective 10-year

periods. For 2010, the annual change is estimated to be 2.1 percent for the

CPI and 1.0 percent for the GDP deflator.

The ultimate annual increases in the CPI are estimated to be 1.8, 2.8, and

3.8 percent for the low-cost, intermediate, and high-cost assumptions,

respectively. These rates of increase are the same as those used in the 2010

report, and reflect a belief that future inflationary shocks will likely be offset

by succeeding periods of relatively slow inflation due to future monetary

policy that is similar to that of the last 20 years, with a continuing emphasis

on holding the growth rate in prices to relatively low levels.

For the intermediate assumptions, as the economy moves on a path toward

full employment, the annual change in the CPI is assumed to increase gradually from 1.2 percent in 2011 until it reaches the ultimate growth rate of

2.8 percent for 2019 and later. The actual levels of the CPI in the third quarters of 2009 and 2010 were below the level of the CPI in the third quarter of

2008; therefore, there were no automatic cost-of-living benefit increases for

December 2009 and December 2010. Automatic cost-of-living benefit

increases are projected to resume in December 2011 and occur in each subsequent year.

For the low-cost assumptions, the annual change in the CPI is assumed to

increase from 1.1 percent for 2011 until it reaches its ultimate assumed

annual change of 1.8 percent for 2018 and later. For the high-cost assumptions, the annual change in the CPI is assumed to increase from 1.6 percent

for 2011 until it reaches its ultimate assumed annual change of 3.8 percent

for 2019 and later.
95

Economic Assumptions and Methods

The ultimate annual increase in the GDP deflator is assumed to be equal to

the annual increase in the CPI minus a price differential. The price differential is based primarily on methodological differences in the construction of

the two indices. The price differential is assumed to equal 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 concept. Accordingly, the ultimate annual increase in the GDP deflator is assumed to 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 assumptions reflect the

same ultimate price differentials and GDP deflator growth rates assumed for

the 2010 report.

The price differential is estimated to be 1.1 percentage points for 2010.

Under the intermediate assumptions, the price differential is projected to be

0.0 percentage point for 2011. This large change in the price differential is

mostly due to the 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. Oil

prices are assumed to behave less cyclically in the future. The price differential is assumed to be 0.4 percentage point in 2012 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 additional parameters used for the computation of 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 proprietor income to the sum of total U.S. military and civilian employment. 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 compensation

(which includes fringe benefits), the ratio of compensation to GDP, and the

GDP deflator.
Assumptions and Methods

96

The average annual change in average hours worked was -0.3 percent over

the last 40 years, and -0.7, -0.0, 0.3, and -0.8 percent for the 10-year periods

1969-79, 1979-89, 1989-99, and 1999-2009, respectively. The average

annual change in average hours worked was -0.3 percent over the last five

complete economic cycles covering the period from 1966 to 2007. The

annual change in average hours worked averaged -0.7, -0.7, 0.0, 0.1, and

-0.6 percent over the economic cycles 1966-73, 1973-78, 1978-89,

1989-2000, and 2000-07, respectively.

The ultimate annual rates of change for average hours worked are assumed to

be 0.1, 0.0, and -0.1 percent for the low-cost, intermediate, and high-cost

assumptions, respectively. These ultimate annual rates of change for average

hours worked are the same as those assumed for the 2010 report.

The average annual change in the ratio of earnings to compensation was -0.2

percent from 1969 to 2009. Most of this decrease has been 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 compensation, including

wages. Projections of future ratios of earnings to compensation follow this

principle and are consistent with the year-by-year projections of the cost of

employer-sponsored group health insurance from the Office of the Actuary at

the Centers for Medicare and Medicaid Services. The total amount of future

employer-sponsored group health insurance is projected to increase more

slowly 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 are assumed to grow faster

than employee compensation in the future as life expectancy and potential

time in retirement increase.

The assumed annual rates of change in the ratio of wages to employee compensation average 0.0, -0.1, and -0.2 percent for the low-cost, intermediate,

and high-cost assumptions, respectively. Under the intermediate assumptions, the ratio of wages to employee compensation is projected to decline

from 0.802 for 2010 to 0.733 for 2085. 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 compensation to GDP is assumed

to be stable at 0.649 after 2019.

The projected average annual growth rate in average U.S. earnings from

2020 to 2085 is about 4.0 percent for the intermediate assumptions. This
97

Economic Assumptions and Methods

growth rate reflects the average annual growth rate of approximately

-0.1 percent for the ratio of earnings to compensation, and the assumed ultimate annual growth rates of 1.7, 0.0, and 2.4 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

3.6 percent for the low-cost assumptions and 4.4 percent for the high-cost

assumptions.

Over long periods, the average annual growth rate in the average wage in

OASDI covered employment (henceforth the “average covered wage”) is

expected 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 2020 to 2085 are 3.6, 4.0, and 4.4 percent for the

low-cost, intermediate, and high-cost assumptions, respectively. The annual

rate of change in the average covered wage is estimated to be -1.8 percent for

2009, which reflects the recession low point, and is estimated to be

2.9 percent for 2010. For the intermediate assumptions, as the economy

recovers, the annual rate of change in the average covered wage is assumed

to average 4.2 percent from 2011 to 2019, and 3.9 percent from 2020 to

2025. Thereafter, the assumed average annual rate of change in the average

covered wage is 4.0 percent.

4. Assumed Real-Wage Differentials

Real increases in the average OASDI covered wage have traditionally been

expressed in the form of real-wage differentials—i.e., the percentage change

in the average covered wage minus the percentage change in the CPI. This

differential is closely related to assumed growth rates in average earnings

and productivity, which are discussed in the previous sections. For the 40-

year period including 1970 through 2009, the real-wage differential averaged

0.7 percentage point, the result of averages of 0.5, 0.4, 1.5, and

0.4 percentage points for the 10-year periods 1970-79, 1980-89, 1990-99,

and 2000-2009, respectively.

For the years 2020-85, the annual real-wage differentials for OASDI covered

employment average 1.8, 1.2, and 0.6 percentage points for the low-cost,

intermediate, and high-cost assumptions, respectively.

Based on preliminary data, the real-wage differential is estimated to be

0.8 percentage point for 2010. For the intermediate assumptions, the realwage differential is projected to average 2.8 percentage points for 2011

through 2013, an improvement that reflects the economic recovery. Thereafter, the real-wage differential is assumed to gradually decline to
Assumptions and Methods

98

1.1 percentage points for 2020 and to average 1.2 percentage points for 2021

through 2085. For the low-cost assumptions, the real-wage differential is

projected to average 3.3 percentage points for 2011 through 2013,

2.2 percentage points for 2014 through 2020, and 1.8 percentage points for

2021 through 2085. For the high-cost assumptions, the real-wage differential

is projected to average 2.3 percentage points for 2011 through 2013, and then

mostly decline to 0.6 percentage point by 2020, and to average

0.6 percentage point for 2021 through 2085.

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:

1960 to 1965. . . . 3.2 -0.2 0.2 1.4 3.2 1.2 2.0

1965 to 1970. . . . 2.0 -.4 -.7 4.1 5.8 4.2 1.6

1970 to 1975. . . . 2.1 -.7 -.9 6.7 6.6 6.8 -.2

1975 to 1980. . . . .9 -.6 -.2 7.3 8.9 8.9 -.1

1980 to 1985. . . . 1.7 -.3 .0 5.2 6.5 5.2 1.3

1985 to 1990. . . . 1.3 .1 -.1 3.2 4.7 3.8 .9

1990 to 1995. . . . 1.2 -.2 .4 2.5 3.6 3.0 .6

1995 to 2000. . . . 2.3 .5 .1 1.7 5.3 2.4 2.9

2000 to 2005. . . . 2.5 -.5 -.8 2.4 2.7 2.5 .2

2005 to 2010. . . . 1.8 -.2 -.4 2.1 2.5 2.3 .2

2000 . . . . . . . . . . 2.7 .1 -1.1 2.2 6.1 3.5 2.6

2001 . . . . . . . . . . 2.4 -.5 -1.3 2.3 2.0 2.7 -.7

2002 . . . . . . . . . . 3.2 -1.1 -1.0 1.6 .7 1.4 -.7

2003 . . . . . . . . . . 3.0 -1.3 -1.5 2.2 2.6 2.2 .3

2004 . . . . . . . . . . 2.4 .7 .0 2.8 4.7 2.6 2.1

2005 . . . . . . . . . . 1.5 -.4 -.2 3.3 3.7 3.5 .2

2006 . . . . . . . . . . .8 .5 .0 3.3 4.6 3.2 1.4

2007 . . . . . . . . . . 1.2 .4 -.4 2.9 4.7 2.9 1.8

2008 . . . . . . . . . . 1.1 -.4 -.7 2.2 2.3 4.1 -1.8

2009 . . . . . . . . . . 2.9 -1.2 -1.8 .9 -1.8 -.7 -1.2

2010c . . . . . . . . . 2.7 -.1 .7 1.0 2.9 2.1 .8

Intermediate:

2011 . . . . . . . . . . 1.7 .2 .2 1.2 4.1 1.2 2.9

2012 . . . . . . . . . . 2.0 .2 .0 1.3 4.5 1.7 2.9

2013 . . . . . . . . . . 2.0 .0 .0 1.5 4.6 1.9 2.7

2014 . . . . . . . . . . 1.9 -.3 .0 1.6 4.2 2.0 2.2

2015 . . . . . . . . . . 1.7 -.3 .0 1.6 3.9 2.0 1.9

2016 . . . . . . . . . . 1.5 .0 .0 1.6 4.0 2.0 2.0

2017 . . . . . . . . . . 1.5 .0 .0 1.8 4.0 2.2 1.8

2018 . . . . . . . . . . 1.6 .2 .0 2.2 4.4 2.6 1.8

2019 . . . . . . . . . . 1.6 .0 .0 2.4 4.2 2.8 1.4

2020 . . . . . . . . . . 1.6 -.1 .0 2.4 3.9 2.8 1.1

2020 to 2025. . . . 1.7 -.1 .0 2.4 3.9 2.8 1.1

2025 to 2085. . . . 1.7 -.1 .0 2.4 4.0 2.8 1.2
99

Economic Assumptions and Methods

5. Labor Force and Unemployment Projections

The civilian labor force is projected by age, sex, marital status, and presence

of children. Projections of the labor force participation rates for each group

take into account 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” that

applies differences in participation rates for a cohort at a specific age, relative to earlier cohorts at the same age, to participation rates for that cohort at

older ages.

The annual rate of growth in the labor force decreased from an average of

about 2.1 percent during the 1970s and 1980s to about 1.1 percent from 1990

Low-cost:

2011 . . . . . . . . . . 1.8 0.2 0.3 1.2 4.4 1.1 3.2

2012 . . . . . . . . . . 2.2 .2 .1 .9 4.5 1.1 3.4

2013 . . . . . . . . . . 2.2 .0 .1 1.0 4.5 1.3 3.3

2014 . . . . . . . . . . 1.8 -.2 .1 1.1 3.9 1.4 2.5

2015 . . . . . . . . . . 1.6 -.3 .1 1.2 3.6 1.5 2.2

2016 . . . . . . . . . . 1.6 .0 .1 1.3 3.8 1.6 2.2

2017 . . . . . . . . . . 1.8 .1 .1 1.4 3.9 1.7 2.2

2018 . . . . . . . . . . 1.9 .2 .1 1.5 4.0 1.8 2.3

2019 . . . . . . . . . . 1.9 .0 .1 1.5 3.8 1.8 2.0

2020 . . . . . . . . . . 1.9 .0 .1 1.5 3.5 1.8 1.7

2020 to 2025. . . . 2.0 .0 .1 1.5 3.5 1.8 1.7

2025 to 2085. . . . 2.0 .0 .1 1.5 3.6 1.8 1.8

High-cost:

2011 . . . . . . . . . . 1.3 .2 .1 1.5 3.8 1.6 2.2

2012 . . . . . . . . . . 1.9 .2 -.1 1.9 4.8 2.4 2.5

2013 . . . . . . . . . . 1.9 .0 -.1 2.3 5.1 2.8 2.3

2014 . . . . . . . . . . 1.7 -.3 -.1 2.5 4.8 3.0 1.8

2015 . . . . . . . . . . 1.7 -.4 -.1 2.7 4.9 3.2 1.7

2016 . . . . . . . . . . 1.6 -.1 -.1 2.7 5.1 3.2 1.9

2017 . . . . . . . . . . 1.4 -.1 -.1 2.9 4.9 3.4 1.5

2018 . . . . . . . . . . 1.3 .1 -.1 3.1 4.8 3.6 1.2

2019 . . . . . . . . . . 1.3 -.1 -.1 3.3 4.7 3.8 .9

2020 . . . . . . . . . . 1.4 -.2 -.1 3.3 4.4 3.8 .6

2020 to 2025. . . . 1.4 -.2 -.1 3.3 4.3 3.8 .5

2025 to 2085. . . . 1.4 -.2 -.1 3.3 4.4 3.8 .6

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 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

100

to 2009. Further slowing of labor force growth is projected due to a substantial slowing of growth in the working age population in the future—a natural

consequence of the baby-boom generation approaching retirement and succeeding lower-birth-rate cohorts reaching working age. Under the intermediate assumptions, the labor force is projected to increase by about 0.7 percent

per year, on average, through 2020. Thereafter, the labor force is projected to

increase by an average of 0.5 percent per year over the remainder of the

75-year projection period.

The projected labor force participation rates are not basic assumptions. They

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 generally

associated 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. The relations

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 and 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 early-retirement options that were attractive.

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.

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. Some of these factors are modeled

directly. To model the effects of other factors related to increases in life

expectancy, projected participation rates are adjusted upward for mid-career

and older ages to reflect assumed increases in life expectancy. For the intermediate projections, this adjustment adds about 3.0 percent to the total labor

force in 2085.

For men age 16 and over, the projected age-adjusted labor force participation

rates for 2085 are 72.1, 72.7, and 72.5 percent for the low-cost, intermediate,

and high-cost assumptions, respectively, compared to the 2009 level of
101

Economic Assumptions and Methods

72.0 percent. (Age-adjusted labor force participation rates are adjusted to the

2009 age distribution of the civilian noninstitutional U.S. population.) These

rates reflect the net effect of: (1) increases due to assumed improvements in

life expectancy; (2) decreases due to higher assumed disability prevalence

rates; and (3) decreases due to an increasing proportion of males who never

marry. For women age 16 and over, the projected age-adjusted labor force

participation rates for 2085 are 60.9, 60.7, and 60.5 percent, for the low-cost,

intermediate, and high-cost assumptions, respectively, compared to the 2009

level of 59.2 percent. These projections reflect the combination of decreases

due to higher assumed disability prevalence rates, increases due to assumed

improvements in life expectancy, and increases due to assumed changes in

the proportion of females who are separated, widowed, divorced, or never

married.

The unemployment rates presented in table V.B2 are in the most commonly

cited form, the civilian rate. For years through 2020, total civilian rates are

presented without adjustment for the changing age-sex distribution of the

population. For years after 2020, unemployment rates are presented as agesex-adjusted rates (using the age-sex distribution of the 2009 civilian labor

force). Age-sex-adjusted rates allow for more meaningful comparisons

across longer time periods. The effect of this adjustment through 2020 is

small.

The total civilian unemployment rate reflects the projected levels of unemployment for various age-sex groups of the population. The unemployment

rate for each group is projected by relating changes in the unemployment rate

to the changes in the economic cycle, as measured by the ratio of actual to

potential GDP. For each alternative, the total civilian unemployment rate is

projected to move toward the ultimate assumed rate as the economy moves

toward the long-range sustainable growth path.

The ultimate age-sex-adjusted unemployment rate for each alternative is

assumed to be reached by 2020. The ultimate assumed unemployment rates

are 4.5, 5.5, and 6.5 percent for the low-cost, intermediate, and high-cost

assumptions, respectively. These values are the same as those assumed for

the 2010 report.
Assumptions and Methods

102

6. Gross Domestic Product Projections

Real GDP can be expressed as the product of three components: (1) total

employment;1 (2) productivity; and (3) average hours worked. Given this,

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

40-year period from 1969 to 2009, the average growth rate in real GDP was

2.8 percent, which approximately equals the sum of the average growth rates

of 1.4, 1.7, and -0.3 percent for total employment, productivity, and average

hours worked, respectively.

For the intermediate assumptions, the average annual growth in real GDP is

projected to be 3.0 percent from 2010 to 2020, the approximate sum of component growth rates of 1.2 percent for total employment, 1.7 percent for productivity, and 0.0 percent for average hours worked. This projected average

annual growth in real GDP of 3.0 percent can also be approximately separated into an underlying sustainable trend rate of change of 2.2 percent for

this period, plus an above-trend growth rate of 0.7 percent that is mostly

associated with a relatively rapid increase in employment as the economy

recovers and the unemployment rate falls from near 10 percent in 2010 to its

assumed ultimate level of 5.5 percent in 2018. After 2020, no economic

cycles are projected. Accordingly, the projected annual growth rate in real

GDP is determined by combining the projected growth rates for total

employment, total U.S. economy productivity, and average hours worked.

After 2050, the annual growth in real GDP is 2.1 percent due to the assumed

ultimate growth rates of 0.4 percent for total employment, 1.7 percent for

productivity, and 0.0 percent for average hours worked.

For the low-cost assumptions, the annual growth in real GDP is projected to

average 3.5 percent over the decade ending in 2020. 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 is projected to average 2.4 percent for the decade ending in 2020.

7. Interest Rates

Average annual nominal and real interest rates for new trust fund assets are

presented in table V.B2. 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” (ex post) is defined to be

1 Total employment is the sum of the U.S. Armed Forces and total civilian employment, which is based on

the projected total civilian labor force and unemployment rates.
103

Economic Assumptions and Methods

the annual compound 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) annual real yield on securities issuable in the prior year.

In developing a reasonable range of assumed ultimate future real interest

rates for the three alternatives, historical experience was examined for the

40 years, 1970-2009, and for each of the 10-year subperiods, 1970-79, 1980-

89, 1990-99, and 2000-2009. For the 40-year period, the real interest rate

averaged 2.9 percent per year. For the four 10-year subperiods, the real interest rates averaged 0.0, 5.2, 4.2, and 2.3 percent, respectively. The assumed

ultimate real interest rates are 3.6 percent, 2.9 percent, and 2.1 percent for

the low-cost, intermediate, and high-cost assumptions, respectively, and are

unchanged from the 2010 report. These ultimate real interest rates, when

combined with the ultimate CPI assumptions of 1.8, 2.8, and 3.8 percent,

yield ultimate nominal interest rates of about 5.4 percent for the low-cost

assumptions, about 5.7 percent for the intermediate assumptions, and about

5.9 percent for the high-cost assumptions. These ultimate nominal rates are

assumed to be reached by the end of the short-range period.

The actual average annual nominal interest rate was 2.9 percent for 2009,

which means that assets newly invested in 2009 would increase by

2.9 percent a year later. Average prices are estimated to rise from 2009 to

2010 by 2.1 percent; therefore, the annual real interest rate for 2010 is

0.9 percent. For the next 10-year short-range projection period, nominal

interest rates are projected based on changes in the business cycle and in the

CPI. Under the intermediate assumptions, the nominal interest rate is projected to rise to the ultimate assumed level of 5.7 percent by 2020. For the

low-cost assumptions, the average annual nominal interest rate is assumed to

reach an ultimate level of about 5.4 percent by 2019. For the high-cost

assumptions, it is assumed to reach the ultimate level of about 5.9 percent by

2020.
Assumptions and Methods

104

Table V.B2.—Additional Economic Factors

Calendar year

Average annual

unemployment

ratea

Annual percentage changeb in—

Average annual interest

rate

Labor

forcec Totalemploymentd RealGDPe Nominalf Realg

Historical data:

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 5.9 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 4.6 2.4

2005 to 2010. . . . . . 6.8 .6 -.4 .9 3.8 1.8

2000 . . . . . . . . . . . . 4.0 2.3 2.5 4.1 6.2 2.4

2001 . . . . . . . . . . . . 4.7 .8 .0 1.1 5.2 3.5

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 3.6 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 .0 3.6 .6

2009 . . . . . . . . . . . . 9.3 -.1 -3.7 -2.6 2.9 4.4

2010h . . . . . . . . . . . 9.7 -.2 -.6 2.8 2.8 .9

Intermediate:

2011 . . . . . . . . . . . . 9.5 .5 .7 2.7 3.1 1.5

2012 . . . . . . . . . . . . 8.9 .7 1.4 3.4 4.4 1.4

2013 . . . . . . . . . . . . 8.0 .9 1.7 3.8 5.0 2.5

2014 . . . . . . . . . . . . 7.2 1.0 1.9 3.8 5.2 3.1

2015 . . . . . . . . . . . . 6.5 .9 1.7 3.5 5.2 3.2

2016 . . . . . . . . . . . . 5.9 .9 1.5 3.0 5.1 3.2

2017 . . . . . . . . . . . . 5.6 .8 1.1 2.7 5.1 2.9

2018 . . . . . . . . . . . . 5.5 .7 .8 2.4 5.5 2.5

2019 . . . . . . . . . . . . 5.5 .6 .6 2.2 5.7 2.7

2020 . . . . . . . . . . . . 5.5 .5 .5 2.1 5.7 2.9

2025 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2030 . . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2035 . . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2040 . . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2045 . . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2050 . . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2055 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2060 . . . . . . . . . . . . 5.5 .5 .5 2.1 5.7 2.9

2065 . . . . . . . . . . . . 5.5 .5 .5 2.1 5.7 2.9

2070 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2075 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2080 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2085 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

Low-cost:

2011 . . . . . . . . . . . . 9.3 .6 1.0 3.2 3.2 1.6

2012 . . . . . . . . . . . . 8.3 1.0 2.1 4.4 4.4 2.0

2013 . . . . . . . . . . . . 7.1 1.3 2.7 5.0 5.0 3.1

2014 . . . . . . . . . . . . 5.9 1.4 2.7 4.7 5.1 3.6

2015 . . . . . . . . . . . . 4.9 1.3 2.3 4.1 5.2 3.7

2016 . . . . . . . . . . . . 4.5 1.1 1.5 3.2 5.0 3.6

2017 . . . . . . . . . . . . 4.5 .9 .9 2.8 5.1 3.4

2018 . . . . . . . . . . . . 4.5 .7 .7 2.7 5.3 3.3

2019 . . . . . . . . . . . . 4.5 .7 .6 2.6 5.4 3.5

2020 . . . . . . . . . . . . 4.5 .6 .6 2.6 5.4 3.6
105

Economic Assumptions and Methods

Low-cost: (Cont.)

2025 . . . . . . . . . . . . 4.5 0.5 0.5 2.6 5.4 3.6

2030 . . . . . . . . . . . . 4.5 .5 .5 2.6 5.4 3.6

2035 . . . . . . . . . . . . 4.5 .6 .6 2.7 5.4 3.6

2040 . . . . . . . . . . . . 4.5 .7 .7 2.8 5.4 3.6

2045 . . . . . . . . . . . . 4.5 .7 .7 2.8 5.4 3.6

2050 . . . . . . . . . . . . 4.5 .7 .7 2.8 5.4 3.6

2055 . . . . . . . . . . . . 4.5 .7 .7 2.8 5.4 3.6

2060 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2065 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2070 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2075 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2080 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2085 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

High-cost:

2011 . . . . . . . . . . . . 9.7 .4 .4 1.8 3.1 1.2

2012 . . . . . . . . . . . . 9.4 .4 .7 2.6 4.7 .7

2013 . . . . . . . . . . . . 8.9 .5 1.1 3.0 5.4 1.9

2014 . . . . . . . . . . . . 8.3 .6 1.2 2.9 5.6 2.4

2015 . . . . . . . . . . . . 7.7 .6 1.2 2.8 5.8 2.4

2016 . . . . . . . . . . . . 7.2 .6 1.2 2.7 5.7 2.6

2017 . . . . . . . . . . . . 6.9 .6 1.0 2.3 5.8 2.3

2018 . . . . . . . . . . . . 6.7 .5 .7 1.9 5.8 2.2

2019 . . . . . . . . . . . . 6.6 .5 .5 1.8 5.9 2.0

2020 . . . . . . . . . . . . 6.5 .4 .5 1.8 5.9 2.1

2025 . . . . . . . . . . . . 6.5 .3 .3 1.6 5.9 2.1

2030 . . . . . . . . . . . . 6.5 .4 .4 1.7 5.9 2.1

2035 . . . . . . . . . . . . 6.5 .4 .4 1.7 5.9 2.1

2040 . . . . . . . . . . . . 6.5 .4 .4 1.7 5.9 2.1

2045 . . . . . . . . . . . . 6.5 .3 .3 1.6 5.9 2.1

2050 . . . . . . . . . . . . 6.5 .2 .2 1.5 5.9 2.1

2055 . . . . . . . . . . . . 6.5 .1 .1 1.4 5.9 2.1

2060 . . . . . . . . . . . . 6.5 .1 .1 1.4 5.9 2.1

2065 . . . . . . . . . . . . 6.5 .1 .1 1.3 5.9 2.1

2070 . . . . . . . . . . . . 6.5 .0 .0 1.3 5.9 2.1

2075 . . . . . . . . . . . . 6.5 .0 .0 1.2 5.9 2.1

2080 . . . . . . . . . . . . 6.5 -.1 -.1 1.2 5.9 2.1

2085 . . . . . . . . . . . . 6.5 -.1 -.1 1.2 5.9 2.1

a The civilian unemployment rates for 2021 and later are adjusted to the age-sex distribution of the civilian

labor force in 2009. All other rates are unadjusted.

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 concept is used here.

d Total of civilian and military employment in the U.S. economy.

e The real GDP is the value of total output of goods and services in 2005 dollars.

f The average annual nominal interest rate is 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 average annual real interest rate reflects the realized or expected annual real yield for each year on

securities issuable in the prior year.

h Historical data are not available for the full year. Estimated values vary slightly by alternative and are

shown for the intermediate assumptions.

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
Assumptions and Methods

106

C. PROGRAM-SPECIFIC ASSUMPTIONS AND METHODS

A set of models is used 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. First, certain program parameters

are calculated based on formulas described explicitly in the Social Security

Act. These program parameters affect the level of payroll taxes collected and

the level of benefits paid. 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, are also projected. The following subsections provide descriptions of these program-specific assumptions and methods.

1. Automatically Adjusted Program Parameters

The Social Security Act specifies that certain program parameters affecting

the determination of OASDI benefits and taxes must be adjusted annually in

order to reflect changes in particular economic measures. The law prescribes

specific formulas that, when applied to reported statistics, produce automatic

revisions in these program parameters and hence in the benefit and tax computations. The law bases these automatic adjustments on measured changes

in the national average wage index (AWI) and the CPI.1 In this section, values are shown for program parameters that are subject to automatic adjustment, from the time that such adjustments became effective through 2020.

Projected values for future years are based 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. In each table, projections are shown under the

three alternative sets of economic assumptions described in the previous section. Table V.C1 includes:

• The annual percentage increases that have been applied to OASDI benefits under automatic cost-of-living adjustment provisions in the Social

Security Act based on increases in the CPI. In December 2009 and

December 2010, there were no cost-of-living adjustments. Under all

three sets of economic assumptions, cost-of-living adjustments are projected to return for December 2011 and later.

1 Details of these indexation procedures are published annually in the Federal Register, and also at

www.socialsecurity.gov/OACT/COLA/index.html.
107

Program Assumptions and Methods

• The annual levels of and percentage increases in the AWI. Under section 215(b)(3) of the Social Security Act, the AWI for each year after

1950 is used to index the taxable earnings of most workers first becoming eligible for benefits in 1979 or later. This procedure converts a

worker’s past earnings to approximately equivalent values near the time

of the worker’s benefit eligibility, and these indexed values are used to

calculate the worker’s benefit amount. The AWI is also used to adjust

most of the other program parameters that are subject to the automaticadjustment provisions.

• The wage-indexed contribution and benefit base—the maximum

amount of earnings for the specified year subject to the OASDI payroll

tax and creditable toward benefit computation. The Social Security Act

prohibits an increase in this base if there is no cost-of-living adjustment

effective for December of the preceding year.

• The wage-indexed retirement earnings test exempt amounts—the

annual amount of earnings below which beneficiaries are not subject to

benefit withholding. A lower exempt amount applies in years before a

beneficiary attains normal retirement age (NRA). A higher amount

applies for the year in which the beneficiary attains NRA. The retirement test does not apply beginning with the attainment of NRA. The

Social Security Act prohibits an increase in these exempt amounts if

there is no cost-of-living adjustment effective for December of the preceding year.
Assumptions and Methods

108

Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and

Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2020

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

Intermediate:

2010 . . . . . . . . . . . g.0 41,843.71 2.8 g106,800 g 14,160 g37,680

2011 . . . . . . . . . . . .7 43,517.83 4.0 g106,800 g14,160 g37,680

2012 . . . . . . . . . . . 1.7 45,435.49 4.4 110,700 14,640 39,000

2013 . . . . . . . . . . . 1.9 47,489.90 4.5 114,900 15,240 40,560

2014 . . . . . . . . . . . 2.0 49,462.43 4.2 120,000 15,960 42,360

2015 . . . . . . . . . . . 2.0 51,398.64 3.9 125,400 16,680 44,280

2016 . . . . . . . . . . . 2.0 53,430.36 4.0 130,800 17,280 46,200

2017 . . . . . . . . . . . 2.2 55,551.37 4.0 135,900 18,000 48,000

2018 . . . . . . . . . . . 2.7 57,969.43 4.4 141,300 18,720 49,800

2019 . . . . . . . . . . . 2.8 60,406.32 4.2 146,700 19,440 51,840

2020 . . . . . . . . . . . 2.8 62,760.16 3.9 153,300 20,280 54,120
109

Program Assumptions and Methods

Values for other wage-indexed parameters are shown in table V.C2. The table

provides historical values from 1978, when the amount of earnings required

for a quarter of coverage was first indexed, through 2010, and also shows

projected amounts through 2020. 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 illustrated in figure V.C1, these bend points indicate

three ranges in a worker’s average indexed monthly earnings (AIME)

over which a certain percent factor, 90, 32, or 15 percent, respectively,

is applied to determine the worker’s PIA.

Low-cost:

2010 . . . . . . . . . . . g0.0 $41,840.52 2.8 g$106,800 g$14,160 g$37,680

2011 . . . . . . . . . . . .6 43,599.58 4.2 g106,800 g14,160 g37,680

2012 . . . . . . . . . . . 1.2 45,522.96 4.4 110,700 14,640 39,000

2013 . . . . . . . . . . . 1.3 47,535.08 4.4 115,200 15,240 40,680

2014 . . . . . . . . . . . 1.4 49,370.46 3.9 120,300 15,960 42,480

2015 . . . . . . . . . . . 1.5 51,143.06 3.6 125,700 16,680 44,400

2016 . . . . . . . . . . . 1.6 53,057.41 3.7 130,500 17,280 46,080

2017 . . . . . . . . . . . 1.7 55,112.98 3.9 135,000 17,880 47,760

2018 . . . . . . . . . . . 1.8 57,323.29 4.0 140,100 18,600 49,560

2019 . . . . . . . . . . . 1.8 59,503.79 3.8 145,500 19,320 51,360

2020 . . . . . . . . . . . 1.8 61,577.65 3.5 151,500 20,040 53,520

High-cost:

2010 . . . . . . . . . . . g.0 41,836.85 2.8 g106,800 g14,160 g37,680

2011 . . . . . . . . . . . 1.2 43,363.65 3.6 g106,800 g14,160 g37,680

2012 . . . . . . . . . . . 2.4 45,401.07 4.7 110,400 14,640 39,000

2013 . . . . . . . . . . . 2.8 47,667.29 5.0 114,600 15,240 40,440

2014 . . . . . . . . . . . 3.0 49,918.31 4.7 120,000 15,960 42,360

2015 . . . . . . . . . . . 3.2 52,343.69 4.9 126,000 16,680 44,520

2016 . . . . . . . . . . . 3.2 54,993.37 5.1 132,000 17,520 46,560

2017 . . . . . . . . . . . 3.4 57,690.56 4.9 138,300 18,360 48,840

2018 . . . . . . . . . . . 3.6 60,485.28 4.8 145,200 19,320 51,360

2019 . . . . . . . . . . . 3.8 63,329.45 4.7 152,400 20,280 53,880

2020 . . . . . . . . . . . 3.8 66,140.81 4.4 159,900 21,240 56,400

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 2020.

c Amounts for 1979-81 were specified by Public Law 95-216. The bases are slightly higher after 1989 due to

changes in the indexing procedure that were required by Public Law 101-239.

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, it does not apply beginning with the month of attainment of NRA. In

the year of attainment of NRA, the higher exempt amount applies to earnings prior to the month of NRA

attainment. Amounts for 1978-82 specified by Public Law 95-216; for 1996-2002, Public Law 104-121.

f Originally determined as 2.4 percent, but pursuant to Public Law 106-554, is 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, 1975-2020 (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
Assumptions and Methods

110

• The bend points in the formula used in the computation of the maximum total amount of monthly benefits payable based on the earnings

record of a retired or deceased worker. This formula is a function of the

worker’s PIA, and, as shown in figure V.C2, relies on four intervals and

percentages.

Figure V.C1.—Primary-Insurance-Amount Formula for Those Newly Eligible in 2011

Figure V.C2.—Maximum-Family-Benefit Formula for Those Newly Eligible in 2011

15%

$1,500

$2,000

$2,500

urance Amount

First

bend point

($749)

Second

bend point

($4,517)

90%

32%

$0

$500

$1,000

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000

Primary Insu

Average Indexed Monthly Earnings Average Indexed Monthly Earnings

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

($1,803)

Second

bend point

($1,382)

First

bend point

($957)
111

Program Assumptions and Methods

• The amount of earnings required in a year to be credited with a quarter

of coverage (QC). The number and timing of QCs earned is used to

determine an individual’s insured status—the basic requirement for

benefit eligibility under OASDI.

• The old-law contribution and benefit base—the base that would have

been in effect had the 1977 amendments not been enacted. This old-law

base is used in determining special-minimum benefits for certain workers who have many years of low earnings in covered employment.

Beginning in 1986, the old-law base is also used in the calculation of

OASDI benefits for certain workers who are eligible to receive pensions

based on noncovered employment. In addition, the old-law base is used

for certain purposes under the Railroad Retirement program and the

Employee Retirement Income Security Act of 1974.

Table V.C2.—Values for Selected Wage-Indexed Program Parameters,

Calendar Years 1978-2020

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
Assumptions and Methods

112

In addition to the program parameters affecting the determination of OASDI

benefits that reflect changes in the economy, there are certain legislated

changes that have affected, and will affect, benefits. Two such changes are

the scheduled increases in the NRA 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.

Intermediate:

2012 . . . . . . . . . $770 $4,642 $984 $1,421 $1,853 $1,130 $82,200

2013 . . . . . . . . . 801 4,828 1,023 1,477 1,927 1,180 85,500

2014 . . . . . . . . . 836 5,041 1,069 1,542 2,012 1,230 89,100

2015 . . . . . . . . . 874 5,269 1,117 1,612 2,103 1,290 93,300

2016 . . . . . . . . . 910 5,488 1,163 1,679 2,190 1,340 96,900

2017 . . . . . . . . . 946 5,703 1,209 1,745 2,276 1,390 100,800

2018 . . . . . . . . . 983 5,928 1,257 1,814 2,366 1,450 104,700

2019 . . . . . . . . . 1,022 6,163 1,306 1,886 2,460 1,510 108,900

2020 . . . . . . . . . 1,067 6,432 1,363 1,968 2,567 1,570 113,700

Low-cost:

2012 . . . . . . . . . 770 4,642 984 1,420 1,853 1,130 82,200

2013 . . . . . . . . . 802 4,837 1,025 1,480 1,930 1,180 85,500

2014 . . . . . . . . . 838 5,051 1,071 1,545 2,016 1,230 89,400

2015 . . . . . . . . . 875 5,274 1,118 1,614 2,105 1,290 93,300

2016 . . . . . . . . . 909 5,478 1,161 1,676 2,186 1,340 96,900

2017 . . . . . . . . . 941 5,674 1,203 1,736 2,264 1,390 100,200

2018 . . . . . . . . . 977 5,887 1,248 1,801 2,349 1,440 104,100

2019 . . . . . . . . . 1,014 6,115 1,296 1,871 2,440 1,490 108,000

2020 . . . . . . . . . 1,055 6,360 1,348 1,946 2,538 1,550 112,500

High-cost:

2012 . . . . . . . . . 770 4,642 984 1,420 1,852 1,130 82,200

2013 . . . . . . . . . 798 4,811 1,020 1,472 1,920 1,170 85,200

2014 . . . . . . . . . 836 5,037 1,068 1,541 2,010 1,230 89,100

2015 . . . . . . . . . 877 5,289 1,121 1,618 2,111 1,290 93,600

2016 . . . . . . . . . 919 5,538 1,174 1,695 2,210 1,350 97,800

2017 . . . . . . . . . 963 5,807 1,231 1,777 2,318 1,420 102,600

2018 . . . . . . . . . 1,012 6,101 1,293 1,867 2,435 1,490 108,000

2019 . . . . . . . . . 1,062 6,401 1,357 1,959 2,554 1,560 113,100

2020 . . . . . . . . . 1,113 6,711 1,423 2,053 2,678 1,640 118,800

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 pertain to 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 determined automatically under the law in effect prior

to enactment of the Social Security Amendments of 1977. The bases for years after 1989 were increased

slightly by changes to the indexing procedure to determine the base, as required by Public Law 101-239.

d No provision in law for this amount in this year.

e Amount specified for first year by Social Security Amendments of 1977; amounts for subsequent years

subject to automatic-adjustment provisions.

Table V.C2.—Values for Selected Wage-Indexed Program Parameters,

Calendar Years 1978-2020

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
113

Program Assumptions and Methods

2. Covered Employment

Projections of the total 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, aged 16 and over, in the U.S. in a calendar year. Total covered workers in a year are the persons who have any

OASDI covered earnings (subject to the OASDI payroll tax) at any time during the year. Projected covered employment is the sum of age-sex components, each of which is projected as a ratio to the CPS concept of

employment.1 The projection methodology accounts for changes in the business cycle, changes in non-OASDI covered employment, the increase in coverage of Federal civilian employment as a result of the 1983 Social Security

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 is

projected as a ratio to the Social Security area population.
Assumptions and Methods

114

Amendments, and changes in the number and employment status of other

immigrants estimated to be residing within the Social Security coverage area.

Covered-worker rates are defined as the ratio of OASDI covered workers to

the Social Security area population. The age-adjusted coverage rate for males

age 16 and over is projected to be 69.7, 69.5, and 68.8 percent for 2085 for

the low-cost, intermediate, and high-cost assumptions, respectively, compared to the 2009 level of about 66.8 percent. (Age-adjusted covered worker

rates are adjusted to the 2009 age distribution of the Social Security area

population.) For females, the projected age-adjusted coverage rate changes

from 60.3 percent for 2009 to 63.5, 62.8, and 62.1 percent for 2085 for the

low-cost, intermediate, and high-cost assumptions, respectively.

3. Taxable Payroll and Payroll Tax Revenue

The OASDI taxable payroll (see table VI.F6) is the amount of earnings in a

year that, when multiplied by the combined employee-employer payroll tax

rate, yields the total amount of payroll taxes due from wages and selfemployed income in the year. Taxable payroll is used in estimating OASDI

income and in determining income and cost rates and actuarial balances. (See

section IV.B.1, Annual Income Rates, Cost Rates, and Balances, for definitions of these terms.) Taxable payroll is computed from taxable earnings,

defined as the sum of wages and self-employment earnings subject to the

Social Security payroll tax. In computing taxable payroll, wages are adjusted

to take into account the “excess wages” earned by workers with multiple jobs

whose combined wages exceed the contribution and benefit base. In addition, from 1983 through 2001, taxable payroll includes deemed wage credits

for military service. Prior to 1984, the self-employment tax rate was less than

the combined employee-employer rate; therefore, taxable self-employment

earnings are weighted to reflect this difference in payroll tax rate. Also, prior

to 1988, employers were exempt from paying Social Security payroll tax on

part of their employees’ tips; taxable payroll was thus reduced by half of the

amount of tips to take this into account.

The computation of taxable earnings for employees, employers, and the selfemployed is based on total earnings in covered employment. Covered earnings are summed from component sectors of the economy, including private,

State and local, Federal civilian, and military. Covered earnings for each sector are based on the projected growth of U.S. earnings and a factor that

reflects any projected change in coverage (e.g., the increase in coverage in

the Federal civilian sector due to mandatory coverage of newly hired

employees). The level of taxable earnings reflects only the portion of covered earnings that is at or below the contribution and benefit base. The por-
115

Program Assumptions and Methods

tion of covered earnings that is taxable (i.e., at or below the base) was about

89.5, 86.8, and 82.8 percent for 1983, 1994, and 2000, respectively. This

ratio of taxable earnings to covered earnings rose to about 85.8 percent for

2002, then fell in subsequent years to reach 82.4 percent for 2007. The average annual rate of change in the ratio was about -0.3 percent between 1983

and 2007. Most of this decline was due to a relative increase in wages for

high earners.

The ratio rose to 83.5 percent for 2008 and further to 85.2 percent for 2009,

largely due to a downturn-induced reduction in the relative amount of wages

of high earners. As the economy began to recover, the ratio fell to 84.2 percent for 2010 and is projected to continue to decline until it reaches levels for

2020 of 83.6, 82.9, and 82.1 percent for the low-cost, intermediate, and highcost assumptions, respectively. After 2020, the taxable-to-covered earnings

ratio is approximately constant.

Payroll tax revenue is computed by applying the scheduled tax rates to taxable wages and self-employment income. In addition, the lag between the

time the payroll tax liability is incurred and payroll taxes are collected is

taken into account. In the case of wages, Federal law requires employers to

withhold and deposit payroll taxes with the Treasury on a schedule determined by the amount of payroll tax liability incurred.1 Federal law requires

self-employed workers to make estimated payroll tax payments on their

earnings four times during the year and to make up any underestimate on

their individual income tax return. The pattern of actual receipts by the Treasury is taken into account when estimating self-employed payroll tax collections.

4. Insured Population

Eligibility for worker benefits under the OASDI program requires some minimal level of work in covered employment. A worker satisfies this requirement by his or her accumulation of quarters of coverage (QCs). Prior to

1978, one QC was credited for each calendar quarter in which at least $50

was earned. 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, this amount has been adjusted

each year since then according to changes in the AWI. Its value in 2011 is

$1,120.

1 Generally, the higher the amount of liability, the sooner the taxes must be paid—ranging from the middle

of the following month for employers with few employees to the next banking day after wages are paid for

companies with very large payrolls.
Assumptions and Methods

116

There are three types of insured status that a worker can acquire under the

OASDI program. Each status is determined by the number and recency of

QCs earned. 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 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 QCs during the 12-quarter

period ending with the current quarter. A worker acquires currently insured

status when he or she has accumulated six QCs during the 13-quarter period

ending with the current quarter. Periods of disability are excluded from the

above described QC requirements for insured status (but do not reduce 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.

Estimates of the fully insured population, as a percentage of the Social Security area population, are made by single year of age and sex starting in 1969.

The short-range projections are based on an extrapolation of the historical

trend in these rates starting with data in the Continuous Work History Sample (CWHS). The model uses information on quarters of coverage earned

due to employment covered by Social Security that is derived from tabulations of the CWHS. The model also uses historical administrative data on

beneficiaries in force and estimated historical mortality rates. This information is combined 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, these rates are extrapolated to the future and

applied 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.
117

Program Assumptions and Methods

The long-range model for projecting the fully insured population as a percentage of the Social Security area population uses 30,000 simulated work

histories for each sex and birth cohort. These simulated work histories are

constructed from past coverage rates, median earnings, and amounts required

for crediting QCs, and are developed in a manner that replicates historical

individual variations in tendency to work. Specifically, persons who have

recently been out of covered employment are less likely to be in covered

employment. This model is designed to produce simulated fully insured percentages that are close to the historical fully insured percentages estimated

from the CWHS and the short-range model starting in 1970, and projections

from the short-range model through the end of the short-range period.

Estimates of the disability-insured population, as a percentage of the fully

insured population, are made by age and sex starting in 1970. Historical values are based on a tabulation of the disability-insured population from the

CWHS and estimates of the fully insured population. Through the end of the

short-range period, these percentages are projected by modeling the relationship between the historical percentages and labor force participation rates.

After the short-range period, these percentages are projected using the same

simulated work histories used to project the fully insured percentages in the

long-range model. Additional adjustments are made to the long-range model

simulation in order to bring the disability-insured percentages in the historical and short-range periods into close agreement with those estimated from

the CWHS and the short-range model.

No projections are made of 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 expected 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 is projected to increase from its

estimated level of 82.9 for December 31, 2008, to 89.7, 89.8, and 89.8 for

December 31, 2085, under alternatives I, II, and III, respectively. The percentage for females is projected to increase significantly, and the percentage

for males is projected to decline somewhat. Under alternative II, for example, the percentage for males is projected to decrease slightly during this

period from 93.2 to 90.4, and the percentage for females is projected to

increase from 74.8 to 89.2.
Assumptions and Methods

118

5. Old-Age and Survivors Insurance Beneficiaries

The number of OASI beneficiaries is projected 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 long-range period, the number of beneficiaries is also projected by marital status for selected types of benefits.

For the short-range period, the number of retired-worker beneficiaries is

developed by applying award rates to the aged fully insured population

reduced by those insured persons entitled to retired-worker, disabled-worker,

aged-widow(er)’s, or aged-spouse’s benefits, and by applying termination

rates to the number of persons already receiving retired-worker benefits.

For the long-range period, the number of retired-worker beneficiaries in current-payment status who were not previously converted from disabledworker beneficiary status is projected as a percentage of the exposed population, i.e., the fully insured population age 62 and over reduced by persons

entitled to or converted from disabled-worker benefits and fully insured persons entitled only to widow(er)’s benefits. For age 62, a linear regression is

developed based on the historical relationship between this percentage and

the labor force participation rate. The regression coefficients are then used to

project this percentage based on the projected labor force participation rate

for age 62. The percentage for ages 70 and over is assumed to be nearly 100,

because delayed retirement credits cannot be earned after age 70. The percentage for each age 63 through 69 is projected 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. These percentages for ages

62 through 69 are adjusted to reflect changes in the NRA.

For the long-range period, the number of retired-worker beneficiaries previously converted from disabled-worker beneficiary status is calculated using

an extension of disabled-worker death rates by age, sex, and duration.

The number of aged-spouse beneficiaries (excluding those who are also

receiving a retired-worker benefit) is estimated from the population projected

by age and sex. The benefits of aged-spouse beneficiaries are based on the

earnings records of their husbands or wives, who are referred to as “earners.”

In the short-range period, insured aged-spouse beneficiaries are projected in

conjunction with the retired-worker beneficiaries. Uninsured aged-spouse

beneficiaries are projected by applying award rates to the aged uninsured

male or female population and by applying termination rates to the population already receiving such benefits.
119

Program Assumptions and Methods

In the long-range period, aged-spouse beneficiaries are estimated separately

for those married and divorced. The number of married aged-spouse beneficiaries, by age and sex, is projected by applying a series of factors to the

number of spouses aged 62 and over in the population. These factors represent the probabilities that the spouse and the earner meet all of the conditions

of eligibility—i.e., 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

pension based on earnings in noncovered employment. To the resulting number of spouses, a projected prevalence rate is applied to calculate the estimated number of aged-spouse beneficiaries.

The number of divorced aged-spouse beneficiaries, by age and sex, is estimated by applying the same factors to the number of divorced persons aged

62 and over in the population, with three differences. First, a factor is applied

to reflect the probability that the earner (former spouse) is still alive (otherwise, the person may be entitled to a divorced widow(er)’s benefit). Second,

a factor is applied to reflect the probability that the marriage to the former

spouse lasted at least 10 years. Third, factor (3) in the previous paragraph is

not applied because, effective January 1985, a divorced person is generally

no longer required to wait to receive divorced spouse benefits until the earner

(former spouse) is receiving benefits.

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,

are based on the projected number of children in the population. In the shortrange period, the number of entitled children is developed by applying award

rates to the number of children in the population for whom both parents are

alive, and by applying termination rates to the number of children already

receiving benefits.

In the long-range period, the number of entitled children is projected separately by sex of the earner parent. For each age under 18, the number of entitled children is projected from the latest beneficiary data by incorporating

changes in the number of children in the population and the ratio of retired

workers aged 62 through 71 to the population aged 20 through 71. For student beneficiaries, factors are applied to the number of children aged 18 and

19 in the population that represent the probabilities that the parent is alive,

aged 62 or over, insured, and receiving a retired-worker benefit. Another factor is applied that represents the probability that the child is attending a secondary school.
Assumptions and Methods

120

The number of disabled children, aged 18 and over, of retired-worker beneficiaries is projected from the adult population. In the short-range period,

award rates are applied to the population, and termination rates are applied to

the number of disabled children already receiving benefits. In the long-range

period, the number of disabled children is projected in a manner similar to

that used for student children except that a factor that reflects the probability

of being disabled before age 22 is included.

In the short-range period, the number of young spouses entitled because they

have a child in their care is developed by applying award rates to the number

of awards to children of retired workers, in cases where the children are

either under age 16 or disabled, and by applying termination rates to the

number of young spouses with a child in their care who are already receiving

benefits. In the long-range period, the number of young-spouse beneficiaries

with a child in their care is projected as a proportion of the number of child

beneficiaries of retired workers, including projected changes in average family size.

The number of aged-widow(er) beneficiaries (excluding those who are also

receiving a retired-worker benefit) is projected from the population by age

and sex. In the short-range period, fully insured aged-widow(er) beneficiaries are projected in conjunction with the retired-worker beneficiaries. The

number of uninsured aged-widow(er) beneficiaries is projected by applying

award rates to the aged uninsured male or female population, and by applying termination rates to the population already receiving such benefits. In the

long-range period, uninsured aged-widow(er) beneficiaries are projected by

marital status. Four factors are applied to the number of widow(er)s in the

population aged 60 and over. These factors represent 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. Also, the same factors are applied to the number of divorced

persons aged 60 and over in the population and include additional factors

representing the probability that the person’s former earner spouse is

deceased and that the marriage lasted at least 10 years. The number of

insured aged-widow(er) beneficiaries who are ages 60 to 70 is projected in a

manner similar to that for uninsured aged-widow(er) beneficiaries. In addition, some insured widow(er)s who had not applied for their retired-worker

benefits are assumed to receive widow(er)’s benefits. Insured agedwidow(er) beneficiaries over age 70 are projected by applying termination

rates to the population that started receiving such benefits prior to age 70.
121

Program Assumptions and Methods

In the short-range period, the number of disabled-widow(er) beneficiaries is

developed 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. In the long-range period, the number is projected

for each age from 50 to NRA 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 projected numbers of children under age 18, and students aged 18 and

19, who are entitled to benefits as survivors of deceased workers, are based

on the projected number of children in the population whose mothers or

fathers are deceased. In the short-range period, the number of entitled children is developed by applying award rates to the number of orphaned children and by applying termination rates to the number of children already

receiving benefits.

In the long-range period, the number of child-survivor beneficiaries is projected in a manner analogous to that for student beneficiaries of retired workers, with the exception that the factor representing the probability that the

parent is aged 62 or over is replaced by a factor that represents the probability that the parent is deceased.

The number of disabled-child-survivor beneficiaries, aged 18 and over, is

projected from the adult population. In the short-range period, award rates

are applied to the population and termination rates are applied to the number

of disabled-child-survivor beneficiaries already receiving benefits. In the

long-range period, the number of disabled-child-survivor beneficiaries is

projected in a manner similar to that for student-child-survivor beneficiaries,

with the exception that a factor reflecting the probability of being disabled

before age 22 is included.

In the short-range period, the numbers of entitled mother-survivor and fathersurvivor beneficiaries are developed 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.

In the long-range period, the numbers of mother-survivor and father-survivor

beneficiaries, assuming they are not remarried, are estimated from the number of child-survivor beneficiaries.

The number of parent-survivor beneficiaries is projected based on the historical pattern of the number of such beneficiaries.
Assumptions and Methods

122

Table V.C4 shows the projected number of beneficiaries under the OASI program by type of benefit. Included among the beneficiaries who receive

retired-worker benefits are those persons who receive a residual auxiliary

benefit in addition to their retired-worker benefit. Estimates of the number

and amount of residual payments are made separately for spouses and

widow(er)s.

Table V.C4.—OASI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1945-2085

[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

Intermediate:

2011 . . . . . . . . . . 35,705 2,319 596 4,261 156 1,911 2 44,949

2015 . . . . . . . . . . 41,446 2,328 676 4,203 152 1,953 1 50,760

2020 . . . . . . . . . . 49,860 2,287 755 4,113 151 2,026 1 59,194

2025 . . . . . . . . . . 57,784 2,301 821 3,852 139 2,032 2 66,930

2030 . . . . . . . . . . 64,549 2,440 851 3,602 129 2,030 2 73,602

2035 . . . . . . . . . . 69,256 2,334 867 3,461 128 2,022 2 78,069

2040 . . . . . . . . . . 71,903 2,178 881 3,299 125 2,002 2 80,390

2045 . . . . . . . . . . 73,707 2,084 894 3,147 122 1,975 2 81,930

2050 . . . . . . . . . . 75,808 2,087 928 2,998 119 1,953 2 83,894

2055 . . . . . . . . . . 78,395 2,192 953 2,873 117 1,938 2 86,469

2060 . . . . . . . . . . 81,095 2,373 972 2,783 114 1,922 2 89,261

2065 . . . . . . . . . . 83,622 2,555 977 2,763 112 1,899 2 91,930

2070 . . . . . . . . . . 86,497 2,695 998 2,794 109 1,876 2 94,971

2075 . . . . . . . . . . 89,630 2,793 1,021 2,856 107 1,851 2 98,258

2080 . . . . . . . . . . 92,878 2,857 1,042 2,916 104 1,828 2 101,627

2085 . . . . . . . . . . 96,356 2,913 1,068 2,954 102 1,809 2 105,204
123

Program Assumptions and Methods

Notes:

1. The number of beneficiaries does not include uninsured individuals who receive benefits under Section

228 of the Social Security Act. Costs are reimbursed from the General Fund of the Treasury for most of

these individuals.

2. Totals do not necessarily equal the sums of rounded components.

6. Disability Insurance Beneficiaries

Benefits are paid from the DI Trust Fund to disabled workers who: (1) satisfy

the disability-insured requirements; (2) are unable to engage in 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 NRA. Spouses and children of such disabled workers may

Low-cost:

2011 . . . . . . . . . . 35,702 2,319 596 4,260 157 1,911 2 44,947

2015 . . . . . . . . . . 41,354 2,331 681 4,197 153 1,968 1 50,686

2020 . . . . . . . . . . 49,431 2,301 768 4,092 157 2,080 1 58,830

2025 . . . . . . . . . . 56,847 2,269 835 3,869 136 2,168 2 66,126

2030 . . . . . . . . . . 62,863 2,376 880 3,647 125 2,255 2 72,148

2035 . . . . . . . . . . 66,715 2,237 910 3,538 121 2,345 2 75,869

2040 . . . . . . . . . . 68,495 2,061 936 3,400 118 2,420 2 77,431

2045 . . . . . . . . . . 69,618 1,950 964 3,262 117 2,482 2 78,395

2050 . . . . . . . . . . 71,239 1,930 1,018 3,123 117 2,542 2 79,971

2055 . . . . . . . . . . 73,452 2,008 1,060 3,007 119 2,600 2 82,247

2060 . . . . . . . . . . 75,734 2,146 1,093 2,924 121 2,661 2 84,681

2065 . . . . . . . . . . 77,804 2,258 1,115 2,902 124 2,725 2 86,930

2070 . . . . . . . . . . 80,199 2,308 1,157 2,923 127 2,789 2 89,507

2075 . . . . . . . . . . 82,807 2,330 1,202 2,963 130 2,853 2 92,287

2080 . . . . . . . . . . 85,905 2,346 1,251 3,008 133 2,918 2 95,563

2085 . . . . . . . . . . 89,818 2,383 1,316 3,049 136 2,988 2 99,692

High-cost:

2011 . . . . . . . . . . 35,710 2,319 596 4,261 156 1,911 2 44,955

2015 . . . . . . . . . . 41,549 2,325 673 4,210 150 1,940 1 50,849

2020 . . . . . . . . . . 50,343 2,277 744 4,141 146 1,976 1 59,628

2025 . . . . . . . . . . 58,911 2,354 809 3,838 141 1,902 2 67,956

2030 . . . . . . . . . . 66,612 2,524 826 3,557 130 1,819 2 75,470

2035 . . . . . . . . . . 72,375 2,455 831 3,384 126 1,731 2 80,903

2040 . . . . . . . . . . 76,091 2,323 832 3,199 119 1,643 2 84,209

2045 . . . . . . . . . . 78,774 2,246 831 3,035 111 1,558 2 86,557

2050 . . . . . . . . . . 81,514 2,256 845 2,879 104 1,488 2 89,088

2055 . . . . . . . . . . 84,533 2,385 855 2,747 97 1,436 2 92,055

2060 . . . . . . . . . . 87,618 2,609 857 2,649 90 1,384 2 95,209

2065 . . . . . . . . . . 90,528 2,866 845 2,620 84 1,325 2 98,269

2070 . . . . . . . . . . 93,860 3,108 846 2,645 77 1,268 2 101,805

2075 . . . . . . . . . . 97,449 3,303 849 2,714 71 1,213 2 105,601

2080 . . . . . . . . . . 100,817 3,432 846 2,791 66 1,163 2 109,117

2085 . . . . . . . . . . 103,723 3,511 842 2,831 61 1,116 2 112,085

a Included among the beneficiaries who receive retired-worker benefits are 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 1945-2085 (Cont.)

[In thousands]

Calendar year

Retired workers and auxiliaries Survivors

Worker Total a Spouse Child

WidowwidowerMotherfather Child Parent
Assumptions and Methods

124

also receive DI benefits provided they satisfy certain criteria, primarily age

and earnings requirements.

The number of disabled-worker beneficiaries in current-payment status (disability prevalence) is projected for each future year. The projections start

with the number in current-payment status as of December 2010. The number of new beneficiaries awarded benefits each year (disability incidence)

and the number of beneficiaries leaving the disability rolls each year are then

projected. Beneficiaries leave the rolls due to death and recovery (disability

terminations) and due to conversions from disabled-worker to retired-worker

beneficiary status, after which benefits are paid from the OASI Trust Fund.

The concepts of disability incidence, termination, and prevalence are

described in the remainder of this section.

a. Disability Incidence

The disability incidence rate is determined by dividing the number of new

beneficiaries awarded benefits each year by the number of individuals who

meet insured requirements but are not yet receiving benefits (the disabilityexposed population1). The number of newly awarded beneficiaries is projected for each future year by multiplying assumed age-sex-specific 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

the disability incidence is lower than in older populations. After 1995, the

1 The disability-exposed population excludes those receiving benefits, while the disability-insured population includes them. The projections of the disability-insured population are described in section V.C.4 of this

report.
125

Program Assumptions and Methods

gross rate rose relative to the age-sex-adjusted rate, due to the aging of the

baby-boom generation into higher ages, where disability incidence increases

substantially. After 2023, the gross incidence rate declines relative to the

age-sex-adjusted rate as the baby-boom generation moves above the NRA,

and is replaced at prime disability ages (50 to NRA) by the lower-birth-rate

cohorts of the 1970s. As these smaller cohorts age beyond NRA, 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 2020), 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

estimated to be above the general trend level. The elevated incidence rates

are assumed to 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 2020, age-sex-specific incidence rates are

assumed to trend toward the ultimate rates assumed for the long-range projections and to reach these ultimate rates in 2030. These ultimate age-sexspecific 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 NRA.1 The ultimate incidence rates are

assumed to represent the likely average rates of incidence for the future.

For the intermediate alternative, the ultimate age-sex-adjusted incidence rate

(adjusted to the disability-exposed population for the year 2000) for ages

through 64 is assumed to be 5.2 awards per thousand exposed population,

essentially the same as in last year’s report. Figure V.C3 illustrates that the

estimated age-sex-adjusted incidence level of 5.2 approximates the average

rate for the historical period 1970 through 2010. However, a similar comparison using gross incidence rates gives a different result. The estimated ultimate gross incidence rate is greater than the average gross rate over the

1 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 greater reductions in retirement benefits as the

NRA rises.
Assumptions and Methods

126

historical period due to the changing age-sex distribution of the disabilityexposed population.

The ultimate age-sex-adjusted incidence rates for the low-cost and high-cost

alternatives are assumed to be 4.2 and 6.3 awards per thousand exposed, or

about 19 percent lower and 21 percent higher than the average for the historical period, respectively. These ultimate assumed age-sex-adjusted incidence

rates are the same as in last year’s report.

b. Disability Termination

Disability benefits may be terminated if a beneficiary dies or recovers from

the disabling condition (as indicated by either medical improvement or

return to work). The termination rate is the ratio of the number of terminations to the average number of disabled-worker beneficiaries during the year.

Termination rates are projected by age, sex, and reason for termination. In

addition, termination rates in the long-range period (post-2020) are assumed

to vary by duration of entitlement to disabled-worker benefits.

In the short-range period (through 2020), the age-sex-adjusted death rate

(adjusted to the 2000 disabled-worker population) under the intermediate

assumptions is projected to gradually decline from 26.3 deaths per thousand

Figure V.C3.—DI Disability Incidence Rates, 1970-2085

[Awards per thousand disability-exposed]

4

5

6

7

8

9

I

II

III

0

1

2

3

4

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Gross incidence rates

Age-sex-adjusted

incidence rates

Historical Estimated
127

Program Assumptions and Methods

beneficiaries in 2010 to about 20.6 per thousand by 2020. The age-sexadjusted recovery rate under the intermediate assumptions is assumed to rise

from a relatively low level of 10.5 per thousand beneficiaries in 2010

(reflecting temporarily lower levels of continuing disability reviews) to 11.7

per thousand beneficiaries by 2020. Under the low-cost and high-cost

assumptions, total age-sex-adjusted termination rates due to death and recovery are assumed to increase or decrease, respectively, by roughly 10-

15 percent relative to the intermediate assumptions.

For the long-range period (post-2020), death and recovery rates are projected

relative to rates by age, sex, and duration of entitlement experienced over the

base period 2001-2005. The ultimate age-sex-adjusted recovery rate for disabled workers is assumed to be about 10.7 per thousand beneficiaries. The

ultimate age-sex-adjusted recovery rates for the low-cost and high-cost alternatives are assumed to reach about 12.9 and 8.5 recoveries per thousand beneficiaries, respectively. The ultimate recovery rates by age, sex, and duration

of entitlement are reached in the twentieth year of the projection period

(2030) for all three sets of assumptions. In contrast, death rates by age and

sex are assumed to change throughout the long-range period at the same rate

as death rates in the general population. From the age-sex-adjusted death rate

of 26.3 per thousand beneficiaries in 2010, rates of 19.8, 11.4, and 7.3 per

thousand disabled-worker beneficiaries are projected for 2085 under the lowcost, 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 2085. In the near term, between 2013 and 2015,

recovery terminations are projected to be elevated as the Social Security

Administration continues to reduce the pending backlog of continuing disability reviews. As with incidence rates, the age-sex-adjusted termination

rate provides an illustration of the real change in the tendency to terminate

benefits. Changes in the age-sex distribution of the beneficiary population

influence the gross rate. A shift in the beneficiary population to older ages, as

when the baby-boom generation moves into pre-retirement ages, results in an

increase in gross death termination rates relative to the age-sex-adjusted

rates.
Assumptions and Methods

128

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 up to the NRA at

which time beneficiaries convert to retired-worker status and thereby leave

the DI rolls. For disabled-worker beneficiaries reaching NRA in a given year,

the disability “conversion” rate is, by definition, 100 percent. For beneficiaries at all other ages this rate is zero. Conversions are simply a transfer of

beneficiaries at NRA from the DI Trust Fund account to the OASI Trust

Fund account. After conversion, recovery from the disabling condition is no

longer considered. Conversions represent a form of exit from the DI rolls and

therefore must be accounted for in disabled-worker beneficiary totals.

Figure V.C5 compares the historical and projected (intermediate) levels of

incidence, termination, and conversion on both gross and age-sex-adjusted

bases. The rates for incidence and termination (death and recovery) are

described above. The conversion ratio is the number of conversions in a

given year (i.e., beneficiaries who reach NRA) divided by the average number of disabled-worker beneficiaries at all ages in that year. The ratio is a

constant on an age-sex-adjusted basis, except for the two periods during

which NRA increases under current law. On a gross basis, however, the conFigure V.C4.—DI Disability Termination Rates, 1970-2085

[Terminations per thousand disabled-worker beneficiaries]

80

100

120

140

Gross termination rates

Age-sex-adjusted

termination rates

Historical Estimated

0

20

40

60

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

II

III

I
129

Program Assumptions and Methods

version ratio rises and falls with the changing proportion of all disabledworker beneficiaries who attain NRA in a given year.

Termination rates have declined and are expected to continue to decline,

largely because of declining death rates. Incidence rates have varied widely,

and are assumed for the intermediate projection to remain (on an age-sexadjusted basis) near the middle of the high and low extremes experienced

since 1970. The gross conversion ratio is projected to generally increase due

to aging of the beneficiary population.

d. DI Beneficiaries and Disability Prevalence Rates

The detailed projections of disabled-worker awards, terminations, and conversions are combined using standard actuarial methods to project the number of disabled workers receiving benefits (i.e., in current-payment status)

over the next 75 years. The projected numbers of disabled workers in current-payment status are presented in table V.C5. The number of disabled

workers in current-payment status is projected to grow from 8.2 million at

the end of 2010, to 11.8 million, 13.7 million, and 14.6 million at the end of

2085, under the low-cost, intermediate, and high-cost assumptions, respecFigure V.C5.—Comparison of DI Disability Incidence Rates, Termination Rates and

Conversion Ratios Under Intermediate Assumptions, 1970-2085

[Awards per thousand disability-exposed;

terminations and conversions per thousand disabled-worker beneficiaries]

80

100

120

140

160

4

5

6

7

8

nation rates &

version ratios

ncidence rates

Gross incidence rates

Age-sex-adjusted incidence rates

Historical Estimated

0

20

40

60

0

1

2

3

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Termin

Conv

In

Calendar year

Gross conversion ratios

Age-sex-adjusted conversion ratios

Age-sex-adjusted and

gross termination rates
Assumptions and Methods

130

tively. Of course, much of this growth is a direct result of the growth and

aging of the population described earlier in this chapter. Table V.C5 presents

disability prevalence rates on both gross and age-sex-adjusted bases. Auxiliary beneficiary projections are discussed below.

Table V.C5.—DI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1960-2085

[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-sexadjusted

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 29

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 37 37

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 39

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 42

2009. . . . . . . . . . . . 7,788 159 1,749 9,695 52 43

2010. . . . . . . . . . . . 8,204 161 1,820 10,185 54 44

Intermediate:

2011. . . . . . . . . . . . 8,596 165 1,892 10,653 56 45

2015. . . . . . . . . . . . 9,301 160 2,017 11,478 60 47

2020. . . . . . . . . . . . 9,650 155 2,074 11,879 61 47

2025. . . . . . . . . . . . 10,322 172 2,214 12,708 63 47

2030. . . . . . . . . . . . 10,283 189 2,292 12,764 62 48

2035. . . . . . . . . . . . 10,296 177 2,346 12,818 61 48

2040. . . . . . . . . . . . 10,465 169 2,388 13,022 61 48

2045. . . . . . . . . . . . 10,968 184 2,433 13,585 62 47

2050. . . . . . . . . . . . 11,312 196 2,488 13,996 62 48

2055. . . . . . . . . . . . 11,617 213 2,561 14,391 62 48

2060. . . . . . . . . . . . 11,803 223 2,636 14,661 62 48

2065. . . . . . . . . . . . 12,188 233 2,708 15,128 63 48

2070. . . . . . . . . . . . 12,620 238 2,774 15,632 64 48

2075. . . . . . . . . . . . 12,996 242 2,835 16,073 64 48

2080. . . . . . . . . . . . 13,367 247 2,899 16,512 65 49

2085. . . . . . . . . . . . 13,688 252 2,966 16,906 65 49
131

Program Assumptions and Methods

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

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 agesex 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. The patterns depicted for incidence and termination

rates in figure V.C5 are helpful for understanding the trend in prevalence

rates. Annual incidence and termination rates are not directly comparable

and cannot be combined because their denominators differ.

Low-cost:

2011. . . . . . . . . . . . 8,503 161 1,860 10,523 56 45

2015. . . . . . . . . . . . 8,713 145 1,870 10,728 56 44

2020. . . . . . . . . . . . 8,592 137 1,868 10,597 54 41

2025. . . . . . . . . . . . 8,797 143 1,933 10,874 54 40

2030. . . . . . . . . . . . 8,450 148 1,981 10,580 50 39

2035. . . . . . . . . . . . 8,241 130 2,028 10,398 48 38

2040. . . . . . . . . . . . 8,248 119 2,087 10,454 46 37

2045. . . . . . . . . . . . 8,569 126 2,161 10,857 46 37

2050. . . . . . . . . . . . 8,808 131 2,251 11,190 46 36

2055. . . . . . . . . . . . 9,053 142 2,355 11,550 45 36

2060. . . . . . . . . . . . 9,252 147 2,475 11,873 44 36

2065. . . . . . . . . . . . 9,646 151 2,606 12,402 44 37

2070. . . . . . . . . . . . 10,124 151 2,740 13,016 44 37

2075. . . . . . . . . . . . 10,633 154 2,872 13,660 45 37

2080. . . . . . . . . . . . 11,219 161 3,007 14,387 45 37

2085. . . . . . . . . . . . 11,777 168 3,146 15,090 45 37

High-cost:

2011. . . . . . . . . . . . 8,691 168 1,926 10,785 57 46

2015. . . . . . . . . . . . 9,900 175 2,169 12,244 64 50

2020. . . . . . . . . . . . 10,716 172 2,275 13,163 68 52

2025. . . . . . . . . . . . 11,763 204 2,467 14,434 73 55

2030. . . . . . . . . . . . 12,033 234 2,546 14,814 74 57

2035. . . . . . . . . . . . 12,285 229 2,571 15,085 75 58

2040. . . . . . . . . . . . 12,615 224 2,562 15,402 75 58

2045. . . . . . . . . . . . 13,283 247 2,547 16,077 78 59

2050. . . . . . . . . . . . 13,705 264 2,543 16,513 80 59

2055. . . . . . . . . . . . 14,032 289 2,570 16,891 82 60

2060. . . . . . . . . . . . 14,148 301 2,584 17,033 82 60

2065. . . . . . . . . . . . 14,434 317 2,578 17,328 84 60

2070. . . . . . . . . . . . 14,695 328 2,558 17,582 86 60

2075. . . . . . . . . . . . 14,778 331 2,535 17,644 87 61

2080. . . . . . . . . . . . 14,715 328 2,516 17,558 87 61

2085. . . . . . . . . . . . 14,596 326 2,505 17,427 87 61

Table V.C5.—DI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1960-2085 (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-sexadjusted
Assumptions and Methods

132

Prevalence rates have increased primarily because termination rates have

declined, and incidence rates at younger ages have increased relative to rates

at older ages. Gross prevalence rates have increased more than age-sexadjusted prevalence rates since the baby-boom generation began to reach

ages 50 through NRA, a time of life when incidence rates are relatively high.

With this upward shift in the age distribution of the disabled population,

gross conversions to retired worker status at NRA have naturally increased

as well. In the future, prevalence rates are projected to grow at a slower pace

based on assumed stabilization in three factors: the age distribution of the

general population, the age distribution of the disability-insured population,

and relative incidence rates by age. As these factors gradually stabilize, the

declining death termination rate is projected to continue to have a small

influence toward higher disability prevalence rates.

As mentioned above in the discussion of incidence and termination rates, the

age-sex-adjusted prevalence rate isolates the changing trend in the true 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-sex-adjusted rate

when the baby-boom generation reached working age between 1975 and

Figure V.C6.—DI Disability Prevalence Rates, 1970-2085

[Rate per thousand persons insured for disability benefits]

50

60

70

80

90

III

II

II

I

Historical Estimated III

0

10

20

30

40

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Gross prevalence rates

Age-sex-adjusted

prevalence rates

I

I
133

Program Assumptions and Methods

1995; this trend reflects the lower disability prevalence rates associated with

younger ages. Conversely, the gross rate of disability prevalence increases

relative to the age-sex-adjusted rate after 1995 due to the aging of the babyboom generation into ages with higher disability prevalence rates.

The age-sex-adjusted disability prevalence rate for ages through 64 is projected to grow from 44.1 per thousand disability-insured at the end of 2010,

to 48.8 per thousand at the end of 2085 under the intermediate assumptions.

As mentioned above, the growth in prevalence is expected to slow relative to

the historical period.

Under the low-cost and high-cost assumptions, the age-sex-adjusted disability prevalence rate is projected to decrease to 37.1 per thousand and increase

to 60.9 per thousand insured workers at the end of 2085, 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, such auxiliary beneficiaries consist of qualifying spouses and children

of disabled workers. In the case of spouses, the spouse must either be at least

age 62, or have, in his or her care, an eligible child beneficiary who is either

under age 16 or disabled prior to age 22. In the case of children, the child

must be either: (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.

Projection of auxiliary beneficiaries is based on the projected number of disabled-worker beneficiaries. In the short-range period (2011-20), incidence

and termination rates are projected for each category of auxiliary beneficiary.

After 2020, the child beneficiaries at ages 18 and under are projected in relation to the projected number of children in the population by applying factors

representing the probability that either of their parents is a disabled-worker

beneficiary. The remaining categories of children and spouses are projected

in a similar manner.

7. Average Benefits

Average benefits are projected for each benefit type based on recent historical averages, projected average primary insurance amounts (PIAs), and projected ratios of average benefits to average PIAs. Average PIAs are

calculated from projected distributions of beneficiaries by duration from year

of initial entitlement, average PIAs at initial entitlement, and increases in

PIAs after initial entitlement. The increases in average PIAs after initial entitlement are based on automatic benefit increases, recomputations to reflect

additional covered earnings, and other factors. Future average PIAs at initial

entitlement are calculated from projected earnings histories, which are devel-
Assumptions and Methods

134

oped using a combination of the actual earnings histories associated with a

sample of 2007 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.

8. Benefit Payments

For each type of benefit, benefit payments are calculated as the product of a

number of beneficiaries and a corresponding average monthly benefit. In the

short-range period, benefit payments are calculated on a quarterly basis. In

the long-range period, all benefit payments are calculated on an annual basis,

using the number of beneficiaries on December 31. These amounts are

adjusted to include retroactive payments to newly awarded beneficiaries and

other amounts not reflected in the regular monthly benefit payments.

Lump-sum death payments are calculated as the product of: (1) the number

of such payments, which is projected on the basis of the assumed death rates,

the projected fully insured population, and the estimated percentage of the

fully insured population that would qualify for benefits; and (2) the amount

of the lump-sum death payment, which is $255 (not indexed in future years).

9. Administrative Expenses

The projection of administrative expenses through 2020 is based on historical experience and the expected growth in average wages. Additionally, the

Office of Budget of the Social Security Administration provides estimates

for the first several years of the projection. For years after 2020, administrative expenses are assumed to increase because of increases in the number of

beneficiaries and increases in the average wage, which will more than offset

assumed improvements in administrative productivity. Congressional simplification and rationalization of the Social Security Act could offset these

assumed increases.

10. Railroad Retirement Financial Interchange

Federal law covers railroad workers under a separate multi-tiered plan, with

a first tier of coverage that is very similar to OASDI coverage. An annual

financial interchange between the Railroad Retirement fund and the OASI

and DI Trust Funds reflects the difference between: (1) the amount of

OASDI benefits that would be paid to railroad workers and their families if
135

Program Assumptions and Methods

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.

The effect of the financial interchange with the Railroad Retirement program

is evaluated on the basis of trends similar to those used in estimating the cost

of OASDI benefits. The resulting effect is annual short-range costs of about

$4-5 billion and a long-range summarized cost of 0.03 percent of taxable

payroll to the OASDI program.

11. 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.

12. Income From Taxation of Benefits

Current law credits the OASI and DI Trust Funds with the additional income

taxes from the taxation of up to the first 50 percent of OASI and DI benefit

payments. (The remainder of the income taxes from the taxation of up to

85 percent of OASI and DI benefit payments is credited to the HI Trust

Fund.)

For the short-range period, the income to the trust funds from taxation of

benefits is estimated by applying the following two factors to total OASI and

DI benefit payments: (1) the percentage of benefit payments (limited to

50 percent) that is taxable; and (2) the average marginal tax rate applicable to

those benefits.

For the long-range period, the income to the trust funds from taxation of benefits is estimated by applying projected ratios of taxation of OASI and DI

benefits to total OASI and DI benefit payments. The income thresholds used

for benefit taxation are, by law, constant in the future; therefore, their values

in relation to future income and benefit levels will decline. Accordingly,

ratios of income from taxation of benefits to the amount of benefits are projected to increase gradually. Ultimate tax ratios for OASI and DI benefits
Assumptions and Methods

136

used in the projection are based on estimates from the Office of Tax Analysis

(OTA) in the Department of the Treasury. These estimates from OTA eliminate the current threshold amounts completely for taxation of Social Security

benefits. Subsequently, based on recent Current Population Survey data, the

Office of the Chief Actuary makes an adjustment to OTA’s ultimate ratios for

relative changes in the projected 75th year OASDI beneficiary population in

the most recent Trustees Report.
137

History of Trust Fund Operations

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. All the

financial operations of the OASI and DI programs are handled through these

respective funds. 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.A2 and VI.A3 present the historical operations of the separate

trust funds since their inception, and table VI.A4 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 to each of

them under permanent authority on the basis of payroll tax contributions

payable by workers, their employers, and individuals with self-employment

income, in work covered by the OASDI program. Federal law requires that

all employees in covered employment, and their employers, make payroll tax

contributions with respect to their wages. Federal law also requires that

employees, and their employers, make payroll tax contributions with respect

to cash tips, if the employee’s monthly cash tips are at least $20. Federal law

requires that all self-employed persons make payroll tax contributions with

respect to their covered net earnings from self-employment. In addition to

paying the required employer contributions on the wages of covered Federal

employees, the Federal Government also 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.

In general, an individual’s payroll tax contributions are assessed on wages or

net earnings from self-employment, or both wages and net self-employment

earnings combined, up to a specified maximum annual amount. Contributions are determined first on the wages and then on any net self-employment

earnings, such that the total does not exceed the annual maximum amount.

An employee who pays contributions on wages in excess of the annual maximum amount (because of employment with two or more employers) is eligible for a refund of the excess employee contributions.

The monthly benefit amount to which an individual (or his or her spouse and

children) may become entitled under the OASDI program is based on the

individual’s taxable earnings during his or her lifetime. For almost all persons who first become eligible to receive benefits in 1979 or later, the earn-
Appendices

138

ings used in the computation of benefits are indexed to reflect increases in

average wage levels.

Table VI.A1 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 The maximum amount of earnings on which

OASDI contributions are payable in a year, which is also the maximum

amount of earnings creditable in that year for benefit-computation purposes,

is called the contribution and benefit base. Table VI.A1 also shows the contribution and benefit base for each year through 2011.

1 Table VI.F1 shows the payroll tax contribution rates for the Hospital Insurance (HI) program and for the

OASDI and HI programs combined.

Table VI.A1.—Contribution and Benefit Base and Payroll Tax Contribution Rates

Calendar years

Contribution

and benefit

base

Payroll tax contribution rates (percent)

Employees and employers, each Self-employed

OASDI OASI DI OASDI OASI DI

1937-49 . . . . . . . . . $3,000 1.000 1.000 — — — —

1950. . . . . . . . . . . . 3,000 1.500 1.500 — — — —

1951-53 . . . . . . . . . 3,600 1.500 1.500 — 2.2500 2.2500 —

1954. . . . . . . . . . . . 3,600 2.000 2.000 — 3.0000 3.0000 —

1955-56 . . . . . . . . . 4,200 2.000 2.000 — 3.0000 3.0000 —

1957-58 . . . . . . . . . 4,200 2.250 2.000 0.250 3.3750 3.0000 0.3750

1959. . . . . . . . . . . . 4,800 2.500 2.250 .250 3.7500 3.3750 .3750

1960-61 . . . . . . . . . 4,800 3.000 2.750 .250 4.5000 4.1250 .3750

1962. . . . . . . . . . . . 4,800 3.125 2.875 .250 4.7000 4.3250 .3750

1963-65 . . . . . . . . . 4,800 3.625 3.375 .250 5.4000 5.0250 .3750

1966. . . . . . . . . . . . 6,600 3.850 3.500 .350 5.8000 5.2750 .5250

1967. . . . . . . . . . . . 6,600 3.900 3.550 .350 5.9000 5.3750 .5250

1968. . . . . . . . . . . . 7,800 3.800 3.325 .475 5.8000 5.0875 .7125

1969. . . . . . . . . . . . 7,800 4.200 3.725 .475 6.3000 5.5875 .7125

1970. . . . . . . . . . . . 7,800 4.200 3.650 .550 6.3000 5.4750 .8250

1971. . . . . . . . . . . . 7,800 4.600 4.050 .550 6.9000 6.0750 .8250

1972. . . . . . . . . . . . 9,000 4.600 4.050 .550 6.9000 6.0750 .8250

1973. . . . . . . . . . . . 10,800 4.850 4.300 .550 7.0000 6.2050 .7950

1974. . . . . . . . . . . . 13,200 4.950 4.375 .575 7.0000 6.1850 .8150

1975. . . . . . . . . . . . 14,100 4.950 4.375 .575 7.0000 6.1850 .8150

1976. . . . . . . . . . . . 15,300 4.950 4.375 .575 7.0000 6.1850 .8150

1977. . . . . . . . . . . . 16,500 4.950 4.375 .575 7.0000 6.1850 .8150

1978. . . . . . . . . . . . 17,700 5.050 4.275 .775 7.1000 6.0100 1.0900

1979. . . . . . . . . . . . 22,900 5.080 4.330 .750 7.0500 6.0100 1.0400

1980. . . . . . . . . . . . 25,900 5.080 4.520 .560 7.0500 6.2725 .7775

1981. . . . . . . . . . . . 29,700 5.350 4.700 .650 8.0000 7.0250 .9750

1982. . . . . . . . . . . . 32,400 5.400 4.575 .825 8.0500 6.8125 1.2375

1983. . . . . . . . . . . . 35,700 5.400 4.775 .625 8.0500 7.1125 .9375

1984a . . . . . . . . . . . 37,800 5.700 5.200 .500 11.4000 10.4000 1.0000

1985a . . . . . . . . . . . 39,600 5.700 5.200 .500 11.4000 10.4000 1.0000
139

History of Trust Fund Operations

The Internal Revenue Service collects all payroll tax contributions and

deposits them in the General Fund of the Treasury. The payroll tax contributions are immediately and automatically appropriated to the trust funds on an

estimated basis. The exact amount of payroll tax contributions received is not

known initially because the OASDI and HI payroll tax contributions and

individual income taxes are not separately identified in collection reports

received by the Internal Revenue Service. Subsequently, periodic adjustments are made to the extent that the estimates differ from the amounts of

payroll tax contributions actually payable as determined from reported earn1986a . . . . . . . . . . . $42,000 5.700 5.200 0.500 11.4000 10.4000 1.0000

1987a . . . . . . . . . . . 43,800 5.700 5.200 .500 11.4000 10.4000 1.0000

1988a . . . . . . . . . . . 45,000 6.060 5.530 .530 12.1200 11.0600 1.0600

1989a . . . . . . . . . . . 48,000 6.060 5.530 .530 12.1200 11.0600 1.0600

1990 . . . . . . . . . . . 51,300 6.200 5.600 .600 12.4000 11.2000 1.2000

1991. . . . . . . . . . . . 53,400 6.200 5.600 .600 12.4000 11.2000 1.2000

1992. . . . . . . . . . . . 55,500 6.200 5.600 .600 12.4000 11.2000 1.2000

1993. . . . . . . . . . . . 57,600 6.200 5.600 .600 12.4000 11.2000 1.2000

1994. . . . . . . . . . . . 60,600 6.200 5.260 .940 12.4000 10.5200 1.8800

1995. . . . . . . . . . . . 61,200 6.200 5.260 .940 12.4000 10.5200 1.8800

1996. . . . . . . . . . . . 62,700 6.200 5.260 .940 12.4000 10.5200 1.8800

1997. . . . . . . . . . . . 65,400 6.200 5.350 .850 12.4000 10.7000 1.7000

1998. . . . . . . . . . . . 68,400 6.200 5.350 .850 12.4000 10.7000 1.7000

1999. . . . . . . . . . . . 72,600 6.200 5.350 .850 12.4000 10.7000 1.7000

2000. . . . . . . . . . . . 76,200 6.200 5.300 .900 12.4000 10.6000 1.8000

2001. . . . . . . . . . . . 80,400 6.200 5.300 .900 12.4000 10.6000 1.8000

2002. . . . . . . . . . . . 84,900 6.200 5.300 .900 12.4000 10.6000 1.8000

2003. . . . . . . . . . . . 87,000 6.200 5.300 .900 12.4000 10.6000 1.8000

2004. . . . . . . . . . . . 87,900 6.200 5.300 .900 12.4000 10.6000 1.8000

2005. . . . . . . . . . . . 90,000 6.200 5.300 .900 12.4000 10.6000 1.8000

2006. . . . . . . . . . . . 94,200 6.200 5.300 .900 12.4000 10.6000 1.8000

2007. . . . . . . . . . . . 97,500 6.200 5.300 .900 12.4000 10.6000 1.8000

2008. . . . . . . . . . . . 102,000 6.200 5.300 .900 12.4000 10.6000 1.8000

2009. . . . . . . . . . . . 106,800 6.200 5.300 .900 12.4000 10.6000 1.8000

2010b . . . . . . . . . . . 106,800 6.200 5.300 .900 12.4000 10.6000 1.8000

2011b . . . . . . . . . . . 106,800 6.200 5.300 .900 12.4000 10.6000 1.8000

2012 and later . . . . c 6.200 5.300 .900 12.4000 10.6000 1.8000

a In 1984 only, an immediate credit of 0.3 percent of taxable wages was allowed against the OASDI payroll

tax contributions paid by employees. Similar credits of 2.7 percent, 2.3 percent, and 2.0 percent were

allowed against the combined OASDI and Hospital Insurance (HI) contributions on net earnings from selfemployment in 1984, 1985, and 1986-89, respectively. These credits were offset by reimbursements from

the General Fund of the Treasury. Beginning in 1990, self-employed persons are allowed 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 is then

applied to net earnings after this deduction, but subject to the OASDI base.

b Under Public Law 111-147, most employers were exempt 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. Under Public Law 111-312, the OASDI payroll tax rate is reduced for

2011 by 2 percentage points for employees and for self-employed workers. These temporary reductions in

2010 and 2011 tax revenue due to lower tax rates have been and will be made up by reimbursements from

the General Fund of the Treasury to the OASI and DI Trust Funds.

c Subject to automatic adjustment based on increases in average wages.

Table VI.A1.—Contribution and Benefit Base and Payroll Tax Contribution Rates (Cont.)

Calendar years

Contribution

and benefit

base

Payroll tax contribution rates (percent)

Employees and employers, each Self-employed

OASDI OASI DI OASDI OASI DI
Appendices

140

ings. Adjustments are also made to account for any refunds to employees

(with more than one employer) who paid payroll tax contributions on wages

in excess of the contribution and benefit base.

Various reimbursements from the General Fund of the Treasury are also

included in income, 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 Law 111-147.

Beginning in 1984, Federal law subjects up to one-half 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

the maximum percentage of benefits subject to taxation from 50 percent to

85 percent. The proceeds from taxation of up to 50 percent of benefits are

credited 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 Subsequent

adjustments are made based on the actual amounts as shown on annual

income tax records. The amounts appropriated from the General Fund of the

Treasury are allocated to the OASI and DI Trust Funds on the basis of the

income taxes paid on the benefits from each fund.2

Another source of income to the trust funds is interest received on investments held by the trust funds. That portion of each trust fund that is not

required to meet the current cost of benefits and administration is invested,

on a daily basis, primarily in interest-bearing obligations of the U.S. Government (including special public-debt obligations described below). Investments may also be made in obligations guaranteed as to both principal and

interest by the United States, including certain Federally sponsored agency

obligations that are designated in the laws authorizing their issuance as lawful investments for fiduciary and trust funds under the control and authority

of the United States or any officer of the United States. These obligations

1 The additional tax revenue resulting from the increase to 85 percent is transferred to the HI Trust Fund.

2 A special provision applies to benefits paid to nonresident aliens. Under Public Law 103-465, effective for

taxable years beginning after 1994, a flat-rate tax, usually 25.5 percent, is withheld from the benefits before

they are paid and, therefore, remains in the trust funds. From 1984 to 1994 the flat-rate tax that was withheld

was usually 15 percent.
141

History of Trust Fund Operations

may be acquired 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 on new special obligations will be the average market yield, as

of the last business day of a month, on all of the outstanding marketable U.S.

obligations that are due or callable more than 4 years in the future. The rate

so calculated is rounded to the nearest one-eighth of one percent and applies

to new issues in the following month. 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 special issues cannot be bought or sold in the open market, they

are nonetheless redeemable at any time at par value and thus bear no risk of

fluctuations in principal value due to changes in market yield rates. As in the

case of marketable Treasury securities held by the public, all of the investments held by the trust funds are backed by the full faith and credit of the

U.S. Government.

The primary expenditures of the OASI and DI Trust Funds are for:

(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 does not permit 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 as an additional benefit to disabled persons

receiving cash benefits because of their disabilities where such services contributed to their successful rehabilitation; and (2) net costs resulting from the

provisions of the Railroad Retirement Act which provide for a system of

coordination and financial interchange between the Railroad Retirement program and the Social Security program. Under the latter provisions, an interchange between the Railroad Retirement program’s Social Security

Equivalent Benefit Account and the trust funds is made on an annual basis in

order to place each trust fund in the same position in which it would have

been if railroad employment had always been covered under Social Security.

The statements of the operations of the trust funds presented in this report do

not carry the net worth of facilities and other fixed capital assets. This is

because the value of fixed capital assets is not available in the form of a
Appendices

142

financial asset redeemable for the payment of benefits or administrative expenditures, and therefore is not considered in assessing the actuarial status of the

trust funds.

Table VI.A2.— Operations of the OASI Trust Fund, Calendar Years 1937-2010

[Dollar amounts in billions]

Calendar

year

Income Cost Assets

Total

Net payroll tax

contributions

GF

reimbursementsaTaxation of

benefits

Net

interestb Total

Benefit

paymentsc

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiod

1937 . . $0.8 $0.8 — — ee e — — $0.8 $0.8 —

1938 . . .4 .4 — — ee e — — .4 1.1 7,660

1939 . . .6 .6 — — ee e — — .6 1.7 8,086

1940 . . .4 .3 — — e $0.1 e e — .3 2.0 2,781

1941 . . .8 .8 — — $0.1 .1 $0.1 e — .7 2.8 1,782

1942 . . 1.1 1.0 — — .1 .2 .1 e — .9 3.7 1,737

1943 . . 1.3 1.2 — — .1 .2 .2 e — 1.1 4.8 1,891

1944 . . 1.4 1.3 — — .1 .2 .2 e — 1.2 6.0 2,025

1945 . . 1.4 1.3 — — .1 .3 .3 e — 1.1 7.1 1,975

1946 . . 1.4 1.3 — — .2 .4 .4 e — 1.0 8.2 1,704

1947 . . 1.7 1.6 e — .2 .5 .5 e — 1.2 9.4 1,592

1948 . . 2.0 1.7 e — .3 .6 .6 $0.1 — 1.4 10.7 1,542

1949 . . 1.8 1.7 e — .1 .7 .7 .1 — 1.1 11.8 1,487

1950 . . 2.9 2.7 e — .3 1.0 1.0 .1 — 1.9 13.7 1,156

1951 . . 3.8 3.4 e — .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 e 1.9 20.6 500

1955 . . 6.2 5.7 — — .5 5.1 5.0 .1 e 1.1 21.7 405

1956 . . 6.7 6.2 — — .5 5.8 5.7 .1 e .9 22.5 371

1957 . . 7.4 6.8 — — .6 7.5 7.3 .2 e -.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 f .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
143

History of Trust Fund Operations

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 f

$8.7 $35.8 24

1986 . . 197.4 189.1 1.8 3.4 3.1 181.0 176.8 1.6 2.6 f3.2 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 40.8 102.9 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 51.3 319.2 103

1993 . . 323.3 290.9 e 5.3 27.0 273.1 267.8 2.0 3.4 50.2 369.3 117

1994 . . 328.3 293.3 e 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 e 6.5 35.7 308.2 302.9 1.8 3.6 55.5 514.0 149

1997 . . 397.2 349.9 e 7.4 39.8 322.1 316.3 2.1 3.7 75.1 589.1 160

1998 . . 424.8 371.2 e 9.1 44.5 332.3 326.8 1.9 3.7 92.5 681.6 177

1999 . . 457.0 396.4 e 10.9 49.8 339.9 334.4 1.8 3.7 117.2 798.8 201

2000 . . 490.5 421.4 e 11.6 57.5 358.3 352.7 2.1 3.5 132.2 931.0 223

2001 . . 518.1 441.5 e 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 e 12.5 75.2 406.0 399.8 2.6 3.6 137.8 1,355.3 300

2004 . . 566.3 472.8 e 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 e 15.6 91.8 461.0 454.5 3.0 3.5 181.3 1,844.3 361

2007 . . 675.0 560.9 e 17.2 97.0 495.7 489.1 3.1 3.6 179.3 2,023.6 372

2008 . . 695.5 574.6 e 15.6 105.3 516.2 509.3 3.2 3.6 179.3 2,202.9 392

2009 . . 698.2 570.4 e 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

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 Law

111-147.

b Net interest includes net profits or losses on marketable investments. Beginning in 1967, administrative

expenses are charged to the trust fund on an estimated basis, with a final adjustment, including interest, made in

the following fiscal year. The amounts of these interest adjustments are included in net interest. For years prior

to 1967, a description of the method of accounting for administrative expenses is contained in the 1970 report.

Beginning in October 1973, the figures shown include relatively small amounts of gifts to the fund. Net interest

for 1983-86 reflects payments from a borrowing trust fund to a lending trust fund for interest on amounts owed

under the interfund borrowing provisions. During 1983-90, interest paid from the trust fund to the general fund

on advance tax transfers is reflected.

c Beginning in 1966, includes payments for vocational rehabilitation services furnished to disabled persons

receiving benefits because of their disabilities. Beginning in 1983, amounts are reduced by amount of reimbursement for unnegotiated benefit checks.

d The “Trust fund ratio” column represents assets at the beginning of a year as a percentage of expenditures during the year. For 1937 no ratio is shown because no assets existed at the beginning of the year. For years 1984-

90, assets 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. In 1982, $17.5 billion was borrowed from

the DI and HI Trust Funds and was repaid in 1985 ($4.4 billion) and 1986 ($13.2 billion).

Table VI.A2.— Operations of the OASI Trust Fund, Calendar Years 1937-2010 (Cont.)

[Dollar amounts in billions]

Calendar

year

Income Cost Assets

Total

Net payroll tax

contributions

GF

reimbursementsaTaxation of

benefits

Net

interestb Total

Benefit

paymentsc

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiod
Appendices

144

Table VI.A3.— Operations of the DI Trust Fund, Calendar Years 1957-2010

[Dollar amounts in billions]

Calendar

year

Income Cost Assets

Total

Net payroll tax

contributions

GF

reimbursementsaTaxation of

benefits

Net

interestb Total

Benefit

paymentsc

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 $0.1 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 .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 2.0 .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
145

History of Trust Fund Operations

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

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 Law 111-147.

b Net interest includes net profits or losses on marketable investments. Beginning in 1967, administrative

expenses are charged to the trust fund on an estimated basis, with a final adjustment, including interest, made in

the following fiscal year. The amounts of these interest adjustments are included in net interest. For years prior

to 1967, a description of the method of accounting for administrative expenses is contained in the 1970 report.

Beginning in July 1974, the figures shown include relatively small amounts of gifts to the fund. Net interest for

1983-86 reflects payments from a borrowing trust fund to a lending trust fund for interest on amounts owed

under the interfund borrowing provisions. During 1983-90, interest paid from the trust fund to the general fund

on advance tax transfers is reflected.

c Beginning in 1966, includes payments for vocational rehabilitation services furnished to disabled persons

receiving benefits because of their disabilities. Beginning in 1983, amounts are reduced by amount of reimbursement for unnegotiated benefit checks.

d The “Trust fund ratio” column represents assets at the beginning of a year as a percentage of expenditures during the year. For 1957 no ratio is shown because no assets existed at the beginning of the year. For years 1984-

90, assets 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. In 1982, $5.1 billion was loaned to the

OASI Trust Fund and was repaid in 1985 ($2.5 billion) and 1986 ($2.5 billion).

Table VI.A3.— Operations of the DI Trust Fund, Calendar Years 1957-2010 (Cont.)

[Dollar amounts in billions]

Calendar

year

Income Cost Assets

Total

Net payroll tax

contributions

GF

reimbursementsaTaxation of

benefits

Net

interestb Total

Benefit

payments c

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiod
Appendices

146

Table VI.A4.— Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1957-2010

[Dollar amounts in billions]

Calendar

year

Income Cost Assets

Total

Net payroll tax

contributions

GF

reimbursementsaTaxation 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 — 2.3 123.6 120.6 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 38.7 353.6 347.1 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 3.8 107.0 762.5 171

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
147

History of Trust Fund Operations

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

Tables VI.A5 and VI.A6 show the total assets of the OASI Trust Fund and the

DI Trust Fund, respectively, at the end of each of the calendar years 2009 and

2010. These assets are separated by interest rate and year of maturity. Bonds

issued to the trust funds in 2010 had an interest rate of 2.875 percent, compared

with an interest rate of 3.25 percent for bonds issued in 2009.

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

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

Law 111-147.

b Net interest includes net profits or losses on marketable investments. Beginning in 1967, administrative

expenses are charged to the trust funds on an estimated basis, with a final adjustment, including interest, made in

the following fiscal year. The amounts of these interest adjustments are included in net interest. For years prior to

1967, a description of the method of accounting for administrative expenses is contained in the 1970 report.

Beginning in October 1973, the figures shown include relatively small amounts of gifts to the funds. Net interest

for 1983-86 reflects payments from a borrowing trust fund to a lending trust fund for interest on amounts owed

under the interfund borrowing provisions. During 1983-90, interest paid from the trust funds to the general fund

on advance tax transfers is reflected.

c Beginning in 1966, includes payments for vocational rehabilitation services furnished to disabled persons

receiving benefits because of their disabilities. Beginning in 1983, amounts are reduced by amount of reimbursement for unnegotiated benefit checks.

d The “Trust fund ratio” column represents assets at the beginning of a year as a percentage of expenditures during the year. For years 1984-90, assets 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. In 1982, $12.4 billion was borrowed from the

HI Trust Fund and was repaid in 1985 ($1.8 billion) and 1986 ($10.6 billion).

Table VI.A4.— Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1957-2010 (Cont.)

[Dollar amounts in billions]

Calendar

year

Income Cost Assets

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
Appendices

148

Note: Amounts of special issues are shown at par value. Special issues are always purchased and redeemed

at par value. Where equal amounts mature in two or more years at a given interest rate, they are grouped. An

undisbursed balance, if negative, represents an extension of credit against securities to be redeemed within

the following few days.

Table VI.A5.—Assets of the OASI Trust Fund, End of Calendar Years 2009 and 2010

[In thousands]

December 31, 2009 December 31, 2010

Obligations sold only to the trust funds (special issues):

Certificates of indebtedness:

2.375 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $69,480,186

2.875 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $52,423,996 —

Bonds:

2.875 percent, 2012-15 . . . . . . . . . . . . . . . . . . . . . . . . . . — 29,057,724

2.875 percent, 2016-24 . . . . . . . . . . . . . . . . . . . . . . . . . . — 65,379,888

2.875 percent, 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 160,575,595

3.250 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,628,270 —

3.250 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,628,270 10,628,270

3.250 percent, 2013-15 . . . . . . . . . . . . . . . . . . . . . . . . . . 31,884,813 31,884,813

3.250 percent, 2016-23 . . . . . . . . . . . . . . . . . . . . . . . . . . 85,026,160 85,026,160

3.250 percent, 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,311,163 153,311,163

3.500 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,513,751 —

3.500 percent, 2012-15 . . . . . . . . . . . . . . . . . . . . . . . . . . 38,055,004 38,055,004

3.500 percent, 2016-17 . . . . . . . . . . . . . . . . . . . . . . . . . . 19,027,504 19,027,504

3.500 percent, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,900,994 86,900,994

4.000 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,075,192 —

4.000 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,075,193 12,075,193

4.000 percent, 2013-22 . . . . . . . . . . . . . . . . . . . . . . . . . . 120,751,920 120,751,920

4.000 percent, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,682,893 142,682,893

4.125 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,423,199 —

4.125 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,516,946 1,398,449

4.125 percent, 2012-19 . . . . . . . . . . . . . . . . . . . . . . . . . . 84,135,568 84,135,568

4.125 percent, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,585,700 106,585,700

4.625 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,167,664 —

4.625 percent, 2011-15 . . . . . . . . . . . . . . . . . . . . . . . . . . 45,838,320 45,838,320

4.625 percent, 2016-18 . . . . . . . . . . . . . . . . . . . . . . . . . . 27,502,989 27,502,989

4.625 percent, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,068,657 96,068,657

5.000 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,454,233 —

5.000 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,454,233 12,454,233

5.000 percent, 2012-21 . . . . . . . . . . . . . . . . . . . . . . . . . . 124,542,320 124,542,320

5.000 percent, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,607,701 130,607,701

5.125 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,567,866 —

5.125 percent, 2011-19 . . . . . . . . . . . . . . . . . . . . . . . . . . 104,110,794 104,110,794

5.125 percent, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,567,769 11,567,769

5.125 percent, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,153,469 118,153,469

5.250 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,235,912 —

5.250 percent, 2011-15 . . . . . . . . . . . . . . . . . . . . . . . . . . 46,179,560 46,179,560

5.250 percent, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,235,911 9,235,911

5.250 percent, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,387,242 77,387,242

5.625 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,621,438 —

5.625 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,621,438 9,621,438

5.625 percent, 2012-15 . . . . . . . . . . . . . . . . . . . . . . . . . . 38,485,748 38,485,748

5.625 percent, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,151,331 68,151,331

5.875 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,169,273 —

5.875 percent, 2011-12 . . . . . . . . . . . . . . . . . . . . . . . . . . 12,338,546 12,338,546

5.875 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,258,869 43,258,869

6.000 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,693,627 —

6.000 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,693,627 6,693,627

6.000 percent, 2012-13 . . . . . . . . . . . . . . . . . . . . . . . . . . 13,387,256 13,387,256

6.000 percent, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,952,497 49,952,497

6.500 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,320,240 —

6.500 percent, 2011-14 . . . . . . . . . . . . . . . . . . . . . . . . . . 34,309,584 34,309,584

6.500 percent, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,529,893 58,529,893

6.875 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,975,272 —

6.875 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,975,272 3,975,272

6.875 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,089,596 37,089,596

7.000 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,371,480 —

7.000 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,114,324 33,114,324

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,318,780,487 2,429,513,970

Undisbursed balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,017,594 -470,689

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,336,798,081 2,429,043,281
149

History of Trust Fund Operations

Note: Amounts of special issues are shown at par value. Special issues are always purchased and redeemed

at par value. Where equal amounts mature in two or more years at a given interest rate, they are grouped. An

undisbursed balance, if negative, represents an extension of credit against securities to be redeemed within

the following few days.

Table VI.A6.—Assets of the DI Trust Fund, End of Calendar Years 2009 and 2010

[In thousands]

December 31, 2009 December 31, 2010

Obligations sold only to the trust funds (special issues):

Certificates of indebtedness:

2.375 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $6,835,145

2.875 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,735,389 —

Bonds:

3.250 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 877,560 —

3.250 percent, 2013-14 . . . . . . . . . . . . . . . . . . . . . . . . . 1,755,120 1,755,120

3.250 percent, 2015-16 . . . . . . . . . . . . . . . . . . . . . . . . . 1,755,118 1,755,118

3.250 percent, 2017-20 . . . . . . . . . . . . . . . . . . . . . . . . . 3,510,240 3,510,240

3.500 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,115,127 —

3.500 percent, 2013-15 . . . . . . . . . . . . . . . . . . . . . . . . . 3,345,381 3,345,381

3.500 percent, 2016-17 . . . . . . . . . . . . . . . . . . . . . . . . . 2,230,256 2,230,256

3.500 percent, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,378,384 11,378,384

4.000 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 622,572 —

4.000 percent, 2013-16 . . . . . . . . . . . . . . . . . . . . . . . . . 2,490,288 2,490,288

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, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677,385 —

4.125 percent, 2013-17 . . . . . . . . . . . . . . . . . . . . . . . . . 3,386,925 3,386,925

4.125 percent, 2018-19 . . . . . . . . . . . . . . . . . . . . . . . . . 1,354,772 1,354,772

4.125 percent, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,911,283 12,911,283

4.625 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615,351 —

4.625 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 855,498 —

4.625 percent, 2013-15 . . . . . . . . . . . . . . . . . . . . . . . . . 2,566,494 2,566,494

4.625 percent, 2016-18 . . . . . . . . . . . . . . . . . . . . . . . . . 2,566,491 2,566,491

4.625 percent, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,233,881 12,233,881

5.000 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 476,586 —

5.000 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 476,586 —

5.000 percent, 2013-19 . . . . . . . . . . . . . . . . . . . . . . . . . 3,336,102 3,336,102

5.000 percent, 2020-21 . . . . . . . . . . . . . . . . . . . . . . . . . 953,168 953,168

5.000 percent, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,052,982 14,052,982

5.125 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665,131 —

5.125 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665,131 —

5.125 percent, 2013-17 . . . . . . . . . . . . . . . . . . . . . . . . . 3,325,655 3,325,655

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, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,363,407 —

5.250 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,363,408 —

5.250 percent, 2013-16 . . . . . . . . . . . . . . . . . . . . . . . . . 5,453,632 5,453,632

5.250 percent, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,263,256 10,263,256

5.625 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,524,968 —

5.625 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,524,968 —

5.625 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,524,968 1,524,968

5.625 percent, 2014-15 . . . . . . . . . . . . . . . . . . . . . . . . . 3,049,934 3,049,934

5.625 percent, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,899,848 8,899,848

5.875 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 916,286 —

5.875 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 916,286 —

5.875 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,361,805 5,361,805

6.000 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,966 —

6.000 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,966 —

6.000 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,967 695,967

6.000 percent, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,057,772 6,057,772

6.500 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,317,108 —

6.500 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,317,108 291,007

6.500 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,317,108 1,317,108

6.500 percent, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,317,109 1,317,109

6.500 percent, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,374,881 7,374,881

6.875 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,445,520 —

6.875 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,445,520 4,445,520

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199,760,403 180,023,248

Undisbursed balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,789,242 -116,407

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,549,645 179,906,841
Appendices

150

B. HISTORY OF ACTUARIAL BALANCE ESTIMATES

This appendix chronicles the history of the actuarial balance, which is the

principal summary measure of long-range actuarial status, since 1983. The

1983 report was the last report for which the actuarial balance was positive.

Actuarial balance is defined in detail in section IV.B.4, Summarized Income

Rates, Cost Rates, and Balances. The two basic components of actuarial balance are the summarized income rate and the summarized cost rate. Both

rates 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. Also included in the calculation of the actuarial balance are:

• The amount of the trust fund balances on hand at the beginning of the

valuation period, as shown in the reports for 1988 and later, and

• The present value of a target trust fund balance equal to 100 percent of

the amount of annual cost to be reached and maintained by the end of

the valuation period, as shown in the reports for 1991 and later.

The current method of calculating the actuarial balance based on present values, though used prior to the 1973 report, was not used for the reports of

1973-87. During that period, a simpler method was used that approximates

the results of the present-value approach, called the average-cost method.

Under the average-cost method, the sum of the annual cost rates (which are

expressed as percentages of taxable payroll) over the 75-year projection

period was divided by the total number of years, 75, to obtain the average

cost rate per year. The average income rate was calculated similarly, and the

difference between the average income rate and the average cost rate was

called the actuarial balance.

In 1973, when the average-cost method was first used, the long-range financing of the program was more nearly on a pay-as-you-go basis. Also, based on

the long-range demographic and economic assumptions then being used, the

annual rate of growth in taxable payroll was about the same as the annual

rate at which the trust funds earned interest. In either situation (i.e., pay-asyou-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.

As a result of legislation enacted in 1977 and in 1983, substantial increases

in the trust funds were estimated to occur well into the 21st century, so that
151

History of Actuarial Balances

the program was partially advance funded, rather than being funded on a

pay-as-you-go basis. Also, due to reductions in long-range fertility rates and

average real-wage growth that were assumed in the reports over the period

1973-87, the annual rate of growth in taxable earnings assumed for the long

range became significantly lower than the assumed interest rate. Therefore,

during the period 1973-87, the results of the average-cost method and the

present-value method 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 present-value method, of course, does account for the full effect of the

assumed interest rates. So, in 1988, the present-value method of calculating

the actuarial balance was reintroduced.

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 shows the estimated OASDI actuarial balances, as well as the

summarized income and cost rates, for the 1982-2010 reports, along with the

estimates for the current report. Values shown are based on the alternative II

assumptions, or alternative II-B for years prior to 1991.
Appendices

152

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.

Rebenchmarking of the National Income and Product Accounts and changes

in demographic assumptions contributed to the change in the actuarial balTable VI.B1.—Long-Range OASDI Actuarial Balancesa as Shown

in the Trustees Reports for 1982-2011

[As a percentage of taxable payroll]

a Values shown are based on the alternative II assumptions for 1991-2011, and on the alternative II-B

assumptions for 1982-90.

Year of report

Summarized

income rate

Summarized

cost rate

Actuarial

balance

Change from

previous year

1982 . . . . . . . . . . . . . . . . . . . . . . . . . . 12.27 14.09 -1.82 b

1983 . . . . . . . . . . . . . . . . . . . . . . . . . . 12.87 12.84 +.02 +1.84

1984 . . . . . . . . . . . . . . . . . . . . . . . . . . 12.90 12.95 -.06 -.08

1985 . . . . . . . . . . . . . . . . . . . . . . . . . . 12.94 13.35 -.41 -.35

1986 . . . . . . . . . . . . . . . . . . . . . . . . . . 12.96 13.40 -.44 -.03

1987 . . . . . . . . . . . . . . . . . . . . . . . . . . 12.89 13.51 -.62 -.18

1988 . . . . . . . . . . . . . . . . . . . . . . . . . . 12.94 13.52 -.58 +.04

1989 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.02 13.72 -.70 -.13

1990 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.04 13.95 -.91 -.21

1991 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.11 14.19 -1.08 -.17

1992 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.16 14.63 -1.46 -.38

1993 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.21 14.67 -1.46 b

b Between -0.005 and 0.005 percent of taxable payroll.

1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.24 15.37 -2.13 -.66

1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.27 15.44 -2.17 -.04

1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.33 15.52 -2.19 -.02

1997 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.37 15.60 -2.23 -.03

1998 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.45 15.64 -2.19 +.04

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.49 15.56 -2.07 +.12

2000 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.51 15.40 -1.89 +.17

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.58 15.44 -1.86 +.03

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.72 15.59 -1.87 -.01

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.78 15.70 -1.92 -.04

2004 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.84 15.73 -1.89 +.03

2005 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.87 15.79 -1.92 -.04

2006 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.88 15.90 -2.02 -.09

2007 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.92 15.87 -1.95 +.06

2008 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.94 15.63 -1.70 +.26

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . 14.02 16.02 -2.00 -.30

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . 14.01 15.93 -1.92 +.08

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . 14.02 16.25 -2.22 -.30
153

History of Actuarial Balances

ance 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 trust fund target 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 the actuarial balance

resulted from changes in economic assumptions and methodology; however,

these increases in the balance were partially offset by reductions caused by

the change in valuation period and changes in demographic assumptions.

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, the changes in the valuation period and the

demographic assumptions—both decreases in the actuarial balance—were

offset by changes in the economic assumptions, while the increase due to disability assumptions was slightly more than offset by the decrease due to

changes in the projection methods and data. For the 2003 report, the increase

due to the change in program assumptions was more than offset by decreases
Appendices

154

due to the change in valuation period and changes in demographic assumptions. For 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, the 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. This increase

was partially offset by the change in the valuation period; there were also

changes in several assumptions, methods, and recent data which had largely

offsetting effects.

Section IV.B.7, Reasons for Change in Actuarial Balance From Last Report,

describes changes affecting the actuarial balance shown for the 2011 report.
155

Fiscal Year Operations and Projections

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2020

Tables VI.C1, VI.C2, and VI.C3 present detailed operations of the OASI, DI,

and the combined OASI and DI Trust Funds, respectively, for fiscal year

2010, the most recent fiscal year for which complete actual 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

156

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

Table VI.C1.—Operations of the OASI Trust Fund, Fiscal Year 2010

[In millions]

Total assets, September 30, 2009 $2,295,835

Receipts:

Net payroll tax contributions:

Payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $553,531

Payments from the General Fund of the Treasury for payroll tax contributions subject to refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,495

Net payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 552,037

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L. 111-147. . . . . . . . . . . . . . . . . . . 725

Reimbursements directed by P.L. 110-246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

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 737

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 158

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,910

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,068

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,600

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.

6

Net investment income and interest adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 108,606

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

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682,448

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 572,569

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -57

Payment for costs of vocational rehabilitation services for disabled beneficiaries 3

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 572,515

Financial interchange with the Railroad Retirement “Social Security Equivalent

Benefit Account”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,930

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,829

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 639

Offsetting receipts from sales of supplies, materials, etc. . . . . . . . . . . . . . . . . . . . . a

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.

-5

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,462

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579,907

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,541

Total assets, September 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,398,377
157

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 2010

[In millions]

Total assets, September 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $207,777

Receipts:

Net payroll tax contributions:

Payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $93,993

Payments from the General Fund of the Treasury for payroll tax contributions subject to refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -254

Net payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,739

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L. 111-147. . . . . . . . . . . . . . . . . . . 123

Reimbursements directed by P.L. 110-246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

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

a Between -$0.5 and $0.5 million.

Net general fund reimbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

Income based on taxation of benefit payments:

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

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,741

Total income from taxation of benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,745

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,902

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. . . . . . . . . . . . . . . . . . . . . . . . 9,904

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,513

Disbursements:

Benefit payments:

Monthly benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,899

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

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 64

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,935

Financial interchange with the Railroad Retirement “Social Security Equivalent

Benefit Account” 462

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,802

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

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.

25

Total administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,947

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,344

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20,831

Total assets, September 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186,946
Appendices

158

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 2010

[In millions]

Total assets, September 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,503,612

Receipts:

Net payroll tax contributions:

Payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $647,524

Payments from the General Fund of the Treasury for payroll tax contributions subject to refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,748

Net payroll tax contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 645,776

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L. 111-147. . . . . . . . . . . . . . . . . . . 848

Reimbursements directed by P.L. 110-246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

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 862

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 162

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,651

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,813

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,502

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 . . . . . . . . . . . . . . . . . . . . . . . . . 118,510

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

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 787,961

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,469

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -86

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 66

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,449

Financial interchange with the Railroad Retirement “Social Security Equivalent

Benefit Account”. . . . ................................................ 4,392

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,631

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 759

Offsetting receipts from sales of supplies, materials, etc. . . . . . . . . . . . . . . . . . . . . a

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.

20

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,410

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706,250

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,710

Total assets, September 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,585,323
159

Fiscal Year Operations and Projections

Tables VI.C4, VI.C5, and VI.C6 present estimates of the operations and status

of the OASI, DI, and the combined OASI and DI Trust Funds, respectively,

during fiscal years (12 months ending on September 30) 2006-20.

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

Table VI.C4.—Operations of the OASI Trust Fund, Fiscal Years 2006-20

[Dollar amounts in billions]

Fiscal

year

Income Cost Assets

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 and 111-312.

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiob

b The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets 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:

2006 . $632.2 $530.0 -$0.3 $15.2 $87.3 $455.6 $449.2 $2.9 $3.5 $176.6 $1,792.2 355

2007 . 663.4 553.4 c

c Between -$50 million and $50 million.

16.7 93.3 488.6 481.8 3.2 3.6 174.8 1,967.0 367

2008 . 692.9 573.7 c 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 .7 21.1 108.6 579.9 572.5 3.5 3.9 102.5 2,398.4 396

Intermediate:

2011 . 688.8 490.2 70.2 21.2 107.3 600.3 592.6 3.7 4.0 88.5 2,486.9 400

2012 . 742.9 587.2 25.6 22.4 107.8 625.9 618.0 3.9 4.1 117.0 2,603.9 397

2013 . 784.1 645.1 c 26.7 112.3 660.4 652.5 3.8 4.1 123.7 2,727.6 394

2014 . 831.5 680.8 c 31.7 119.1 701.1 693.1 3.9 4.2 130.4 2,858.0 389

2015 . 878.0 716.0 c 35.5 126.5 745.6 737.4 4.0 4.3 132.4 2,990.4 383

2016 . 933.5 760.8 c 39.1 133.6 793.2 785.0 4.1 4.1 140.3 3,130.7 377

2017 . 980.3 795.0 c 43.0 142.2 844.8 836.0 4.2 4.6 135.5 3,266.2 371

2018 . 1,033.9 835.9 — 46.7 151.3 900.7 891.6 4.3 4.8 133.2 3,399.3 363

2019 . 1,087.9 876.0 — 50.6 161.4 964.4 955.0 4.5 4.9 123.5 3,522.8 352

2020 . 1,136.3 910.2 — 54.8 171.2 1,034.5 1,024.8 4.6 5.1 101.8 3,624.7 341

Low-cost:

2011 . 689.6 490.6 70.4 21.2 107.4 600.1 592.5 3.7 4.0 89.5 2,487.9 400

2012 . 749.9 593.9 25.8 22.3 107.9 625.0 617.1 3.9 4.0 124.9 2,612.7 398

2013 . 794.2 654.9 c 26.5 112.7 656.5 648.7 3.8 4.1 137.7 2,750.4 398

2014 . 846.5 694.8 c 31.3 120.4 692.6 684.6 3.9 4.1 153.9 2,904.3 397

2015 . 896.1 732.8 c 34.8 128.4 731.7 723.5 3.9 4.2 164.4 3,068.7 397

2016 . 955.4 778.9 c 38.1 138.4 773.7 765.8 4.0 3.9 181.7 3,250.4 397

2017 . 1,002.2 812.9 c 41.8 147.5 820.1 811.5 4.1 4.4 182.1 3,432.5 396

2018 . 1,056.7 852.3 — 45.1 159.3 869.9 861.0 4.3 4.6 186.8 3,619.3 395

2019 . 1,110.5 890.9 — 48.5 171.1 923.8 914.7 4.4 4.7 186.7 3,806.1 392

2020 . 1,159.5 923.9 — 52.0 183.6 981.4 972.0 4.5 4.9 178.1 3,984.2 388

High-cost:

2011 . 687.8 489.6 69.7 21.2 107.3 600.5 592.8 3.7 4.0 87.3 2,485.7 399

2012 . 735.5 579.8 25.4 22.5 107.8 628.8 620.8 3.9 4.1 106.8 2,592.4 395

2013 . 777.5 638.1 c 27.0 112.3 668.1 660.2 3.8 4.1 109.4 2,701.8 388

2014 . 824.4 672.7 c 32.4 119.3 715.9 707.8 3.9 4.2 108.5 2,810.2 377

2015 . 872.7 709.5 c 36.6 126.6 769.5 761.0 4.0 4.4 103.3 2,913.5 365

2016 . 932.8 758.1 c 40.9 133.9 828.8 820.4 4.2 4.2 104.1 3,017.6 352

2017 . 984.9 797.8 c 45.6 141.6 893.9 884.7 4.3 4.8 91.0 3,108.6 338

2018 . 1,042.7 842.4 — 50.1 150.2 965.0 955.4 4.5 5.1 77.7 3,186.3 322

2019 . 1,098.1 886.4 — 54.8 156.9 1,043.7 1,033.7 4.7 5.3 54.4 3,240.7 305

2020 . 1,147.8 925.3 — 60.0 162.5 1,130.7 1,120.2 4.8 5.6 17.1 3,257.8 287
Appendices

160

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

Table VI.C5.—Operations of the DI Trust Fund, Fiscal Years 2006-20

[Dollar amounts in billions]

Fiscal

year

Income Cost Assets

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 and 111-312.

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiob

b The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets 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:

2006. . $101.6 $90.0 c

c Less than $50 million.

$1.2 $10.4 $92.9 $90.1 $2.4 $0.4 $8.6 $201.9 208

2007. . 108.4 94.0 c 1.4 13.1 96.8 94.0 2.4 .4 11.6 213.6 209

2008. . 109.8 97.4 c 1.4 11.0 107.2 104.2 2.5 .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

Intermediate:

2011 . . 105.6 83.2 11.9 1.9 8.6 131.3 127.9 3.0 .4 -25.7 161.3 142

2012. . 113.3 99.7 4.3 2.0 7.3 137.5 133.8 3.2 .5 -24.2 137.0 117

2013. . 117.9 109.5 c 2.4 5.9 142.8 139.0 3.3 .5 -24.9 112.2 96

2014. . 123.1 115.6 c 2.8 4.6 147.6 143.7 3.5 .4 -24.5 87.7 76

2015. . 128.3 121.6 c 3.1 3.6 152.6 148.5 3.6 .4 -24.3 63.4 57

2016. . 135.2 129.2 c 3.4 2.6 157.9 153.7 3.8 .4 -22.7 40.7 40

2017. . 140.2 135.0 c 3.7 1.5 163.6 159.2 4.0 .4 -23.4 17.3 25

2018. . d

d The DI Trust Fund is projected to be exhausted in fiscal years 2018 and 2016 under the intermediate and the

high-cost assumptions, respectively. Therefore, certain trust fund operation values from the year of trust fund

exhaustion through 2020 are not meaningful under present law and are not shown in this table.

141.9 — 4.0 d 170.0 165.4 4.3 .3 d d 10

2019. . d 148.7 — 4.3 d 177.5 172.7 4.5 .3 d dd

2020. . d 154.6 — 4.6 d 185.8 180.7 4.8 .3 d dd

Low-cost:

2011 . . 105.7 83.3 12.0 1.9 8.6 129.8 126.3 3.0 .4 -24.0 162.9 144

2012. . 114.5 100.8 4.4 1.9 7.4 133.7 130.0 3.2 .5 -19.2 143.7 122

2013. . 119.9 111.2 c 2.3 6.4 136.6 132.8 3.3 .5 -16.6 127.1 105

2014. . 126.2 118.0 c 2.7 5.6 138.5 134.6 3.5 .4 -12.3 114.8 92

2015. . 132.3 124.4 c 2.9 5.0 140.5 136.5 3.6 .4 -8.2 106.6 82

2016. . 140.0 132.3 c 3.1 4.6 142.9 138.7 3.8 .4 -2.9 103.6 75

2017. . 146.0 138.0 c 3.3 4.6 146.1 141.8 4.0 .4 -.2 103.5 71

2018. . 153.0 144.7 — 3.5 4.8 150.0 145.5 4.2 .3 3.0 106.5 69

2019. . 160.1 151.3 — 3.7 5.1 154.4 149.7 4.4 .3 5.7 112.2 69

2020. . 166.4 156.9 — 4.0 5.6 159.1 154.2 4.7 .3 7.3 119.5 71

High-cost:

2011 . . 105.4 83.2 11.8 1.9 8.6 132.9 129.4 3.0 .4 -27.4 159.5 141

2012. . 111.9 98.4 4.3 2.1 7.1 141.9 138.3 3.2 .5 -30.0 129.5 112

2013. . 116.4 108.4 c 2.5 5.4 150.1 146.3 3.3 .5 -33.7 95.8 86

2014. . 121.1 114.2 c 3.1 3.8 158.2 154.3 3.5 .5 -37.1 58.6 61

2015. . 126.1 120.5 c 3.4 2.2 167.0 162.8 3.7 .4 -40.9 17.8 35

2016. . d 128.7 c 3.8 d 176.3 172.0 3.9 .4 d d 10

2017. . d 135.5 c 4.3 d 186.3 181.7 4.2 .4 d dd

2018. . d 143.1 — 4.7 d 196.9 192.1 4.5 .4 d dd

2019. . d 150.5 — 5.1 d 208.3 203.2 4.7 .3 d dd

2020. . d 157.1 — 5.5 d 220.7 215.4 5.0 .3 d dd
161

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 2006-20

[Dollar amounts in billions]

Fiscal

year

Income Cost Assets

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 and 111-312.

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiob

b The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets 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:

2006 . . $733.7 $620.0 -$0.3 $16.4 $97.7 $548.5 $539.3 $5.3 $3.8 $185.2 $1,994.2 330

2007 . . 771.8 647.4 c

c Between -$50 million and $50 million.

18.0 106.4 585.3 575.8 5.5 4.0 186.5 2,180.6 341

2008 . . 802.7 671.2 c 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 .9 22.8 118.5 706.3 695.4 6.4 4.4 81.7 2,585.3 354

Intermediate:

2011 . . 794.4 573.4 82.1 23.0 115.9 731.6 720.5 6.7 4.4 62.9 2,648.2 353

2012 . . 856.2 686.9 29.9 24.4 115.1 763.5 751.8 7.1 4.5 92.8 2,740.9 347

2013 . . 902.0 754.6 c 29.1 118.2 803.2 791.5 7.1 4.5 98.8 2,839.7 341

2014 . . 954.6 796.4 c 34.5 123.7 848.7 836.7 7.3 4.6 106.0 2,945.7 335

2015 . . 1,006.3 837.6 c 38.6 130.1 898.2 885.9 7.6 4.7 108.1 3,053.8 328

2016 . . 1,068.6 890.0 c 42.5 136.2 951.0 938.7 7.9 4.4 117.6 3,171.4 321

2017 . . 1,120.5 930.1 c 46.8 143.7 1,008.4 995.3 8.2 5.0 112.1 3,283.5 314

2018 . . 1,180.2 977.8 — 50.8 151.6 1,070.7 1,057.1 8.6 5.1 109.4 3,392.9 307

2019 . . 1,240.1 1,024.7 — 54.9 160.5 1,141.9 1,127.7 9.0 5.2 98.2 3,491.1 297

2020 . . 1,293.1 1,064.8 — 59.5 168.9 1,220.2 1,205.5 9.3 5.4 72.9 3,564.0 286

Low-cost:

2011 . . 795.3 574.0 82.4 23.0 115.9 729.9 718.8 6.7 4.4 65.4 2,650.8 354

2012 . . 864.4 694.7 30.1 24.3 115.3 758.7 747.1 7.1 4.5 105.7 2,756.5 349

2013 . . 914.1 766.1 c 28.8 119.2 793.1 781.5 7.1 4.5 121.0 2,877.5 348

2014 . . 972.7 812.8 c 34.0 125.9 831.1 819.2 7.3 4.5 141.6 3,019.1 346

2015 . . 1,028.4 857.2 c 37.7 133.4 872.2 860.1 7.6 4.6 156.1 3,175.2 346

2016 . . 1,095.4 911.2 c 41.2 143.0 916.6 904.5 7.8 4.3 178.8 3,354.0 346

2017 . . 1,148.2 950.9 c 45.1 152.1 966.2 953.3 8.1 4.8 181.9 3,536.0 347

2018 . . 1,209.7 997.0 — 48.7 164.1 1,019.9 1,006.5 8.5 4.9 189.9 3,725.9 347

2019 . . 1,270.6 1,042.2 — 52.2 176.2 1,078.2 1,064.4 8.8 5.0 192.4 3,918.3 346

2020 . . 1,325.9 1,080.7 — 56.0 189.2 1,140.5 1,126.2 9.2 5.1 185.4 4,103.7 344

High-cost:

2011 . . 793.2 572.8 81.5 23.1 115.8 733.4 722.3 6.7 4.4 59.9 2,645.2 353

2012 . . 847.5 678.2 29.8 24.5 114.9 770.7 759.1 7.1 4.5 76.7 2,721.9 343

2013 . . 893.9 746.5 c 29.6 117.8 818.2 806.5 7.1 4.6 75.6 2,797.6 333

2014 . . 945.5 787.0 c 35.4 123.0 874.1 862.1 7.4 4.7 71.3 2,868.9 320

2015 . . 998.8 830.0 c 40.1 128.8 936.4 923.9 7.7 4.8 62.4 2,931.3 306

2016 . . 1,065.5 886.8 c 44.7 134.0 1,005.1 992.3 8.1 4.6 60.4 2,991.6 292

2017 . . 1,122.4 933.3 c 49.8 139.2 1,080.2 1,066.5 8.5 5.2 42.1 3,033.8 277

2018 . . 1,185.2 985.5 — 54.8 145.0 1,161.9 1,147.5 8.9 5.4 23.3 3,057.1 261

2019 . . 1,245.2 1,036.9 — 59.9 148.4 1,252.0 1,237.0 9.4 5.7 -6.8 3,050.3 244

2020 . . 1,298.2 1,082.4 — 65.5 150.3 1,351.4 1,335.6 9.8 5.9 -53.2 2,997.1 226
Appendices

162

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 (see sections IV.B, V.A, V.B, and V.C), illustrate the effects of

varying all of the principal assumptions simultaneously in order to portray a

generally more optimistic or pessimistic future, in terms of the financial status of the OASDI program. In the sensitivity analysis presented in this

appendix, the intermediate alternative II projection is used as the reference

point, and one assumption at a time is varied within that alternative. The

variation used for each individual assumption reflects the levels 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. The

income rate varies only slightly with changes in assumptions because the

annual payroll tax rate is constant for the entire 75-year valuation period.

Therefore, the income rate is not considered in the discussion of the tables.

The change in each of the actuarial balances is approximately equal to the

change in the corresponding cost rate, but in the opposite direction.

1. Total Fertility Rate

Table VI.D1 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

the ultimate total fertility rate. The ultimate total fertility rate is assumed to

be 1.7, 2.0, and 2.3 children per woman, consistent with alternatives III, II,

and I, respectively. The total fertility rate is assumed to change gradually

from the 2010 level and reach the various ultimate values in 2035.
163

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 16.67 to 15.84 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

-2.60 to -1.86 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.

Hence, the program cost slightly increases with higher fertility. For the

75-year long-range period, however, changes in fertility have a relatively

greater impact 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 0.12 percent of taxable payroll.

Table VI.D1.—Sensitivity 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 who would be born to a woman in her

lifetime if she were to experience the birth rates by age observed in, or assumed for, the selected year, and if

she were to survive the entire childbearing period. The ultimate total fertility rate is assumed to be reached in

2035.

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: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.01 15.01 15.02

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.27 14.25 14.24

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.07 14.02 13.98

Summarized cost rate:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.59 15.61 15.64

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.15 16.04 15.94

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.67 16.25 15.84

Actuarial balance:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.58 -.60 -.62

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.88 -1.78 -1.70

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.60 -2.22 -1.86

Annual balance for 2085 . . . . . . . . . . . . . . . . . . . . . . . . . . -6.50 -4.24 -2.43

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2036 2036 2035
Appendices

164

2. Death Rates

Table VI.D2 shows the estimated 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 2010-85. These assumptions

are the same as those used for alternatives I, II, and III, which are described

in section V.A.2. The age-sex-adjusted death rates decline at average annual

rates of 0.32 percent, 0.78 percent, and 1.31 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 decreases in death rates are assumed

to occur gradually. The 25-year cost rate increases from 15.38 percent (for an

average annual death-rate reduction of 0.32 percent) to 15.78 percent (for an

average annual death-rate reduction of 1.31 percent). The 75-year cost rate

increases from 15.53 to 16.90 percent. The actuarial balance decreases from

-0.37 to -0.77 percent for the 25-year period, and from -1.54 to -2.86 percent

for the 75-year period.

Lower death rates cause both the income (through increased taxable payroll)

and the cost of the OASDI program to be higher. The relative increase in

cost, however, exceeds the relative increase in taxable payroll. For any given

Table VI.D2.—Sensitivity 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 2010 and 2085. The overall decreases from the age-sex-adjusted death rate in

2010 to the corresponding rate in 2085 are 22 percent, 45 percent, and 63 percent for alternatives I, II, and

III, respectively.

b The average annual death-rate reductions used for this analysis are: 0.32 percent from the alternative I

assumptions, 0.78 percent from the alternative II assumptions, and 1.31 percent from the alternative III

assumptions. All other assumptions used for this analysis are from alternative II.

0.32 percent 0.78 percent 1.31 percent

Summarized income rate:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.01 15.01 15.01

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.23 14.25 14.26

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.99 14.02 14.05

Summarized cost rate:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.38 15.61 15.78

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.53 16.04 16.50

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.53 16.25 16.90

Actuarial balance:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.37 -.60 -.77

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.29 -1.78 -2.23

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.54 -2.22 -2.86

Annual balance for 2085 . . . . . . . . . . . . . . . . . . . . . . . . . . -2.75 -4.24 -5.58

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2037 2036 2035
165

Long-Range Sensitivity Analysis

year, reductions in the death rates for people who are age 62 and over (ages

at which 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). Although reductions for people at ages 50 to retirement eligibility age do result in significant increases to the taxable payroll, 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 would not result in significant increases in the numbers of covered workers or beneficiaries. Consequently, if death rates for all ages are

lowered by about the same relative amount, cost increases at a rate greater

than the rate of growth in payroll, which results in higher cost rates and,

therefore, 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 0.13 percent of taxable payroll.

3. Net Immigration

Table VI.D3 shows the estimated OASDI income rates, cost rates, and actuarial balances, under alternative II with various assumptions about the magnitude of net immigration. Annual net immigration is assumed to average,

over the long-range period, 785,000 persons, 1,075,000 persons, and

1,385,000 persons, consistent with alternatives III, II, and I, respectively.
Appendices

166

For all three periods, the cost rate decreases with increasing rates of net

immigration. For the 25-year period, the cost rate decreases from

15.74 percent of taxable payroll (for average annual net immigration of

785,000 persons) to 15.47 percent (for average annual net immigration of

1,385,000 persons). For the 50-year period, it decreases from 16.25 percent

to 15.82 percent, and for the 75-year period, it decreases from 16.50 percent

to 16.00 percent. The actuarial balance increases from -0.70 to -0.49 percent

for the 25-year period, from -1.97 to -1.60 percent for the 50-year period,

and from -2.44 to -2.01 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 the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

the real-wage differential. The ultimate real-wage differential is assumed to

be 0.6 percentage point, 1.2 percentage points, and 1.8 percentage points,

consistent with alternatives III, II, and I, respectively. In each case, the ultiTable VI.D3.—Sensitivity 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 assumed 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: 785,000 from the alternative III

assumptions, 1,075,000 from the alternative II assumptions, and 1,385,000 from the alternative I assumptions. All other assumptions used for this analysis are from alternative II.

785,000 1,075,000 1,385,000

Summarized income rate:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.04 15.01 14.98

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.29 14.25 14.22

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.06 14.02 13.99

Summarized cost rate:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.74 15.61 15.47

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.25 16.04 15.82

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.50 16.25 16.00

Actuarial balance:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.70 -.60 -.49

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.97 -1.78 -1.60

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.44 -2.22 -2.01

Annual balance for 2085 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.66 -4.24 -3.88

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2035 2036 2037
167

Long-Range Sensitivity Analysis

mate annual increase in the CPI is assumed to be 2.8 percent (consistent with

alternative II), yielding ultimate percentage increases in average annual

wages in covered employment of 3.4, 4.0, and 4.6 percent.

For the 25-year period, the cost rate decreases from 16.27 percent (for a realwage differential of 0.6 percentage point) to 14.96 percent (for a differential

of 1.8 percentage points). For the 50-year period, it decreases from 17.02 to

15.09 percent, and for the 75-year period it decreases from 17.33 to

15.19 percent. The actuarial balance increases from -1.11 to -0.09 percent for

the 25-year period, from -2.58 to -1.01 percent for the 50-year period, and

from -3.10 to -1.36 percent for the 75-year period.

The cost rate decreases with increasing real-wage differentials. This is

because higher wages increase taxable payroll immediately, but 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

assumed real-wage differential increases the long-range actuarial balance by

about 0.72 percent of taxable payroll.

Table VI.D4.—Sensitivity 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 assumed ultimate annual percentage increase in average wages in covered

employment. The second value is the assumed 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 0.6, 1.2, and 1.8 percentage points are the same as in alternatives

III, II, and I, respectively. All other assumptions used for this analysis are from alternative II.

3.4-2.8 4.0-2.8 4.6-2.8

Summarized income rate:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.16 15.01 14.87

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.44 14.25 14.08

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.23 14.02 13.83

Summarized cost rate:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.27 15.61 14.96

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.02 16.04 15.09

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.33 16.25 15.19

Actuarial balance:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.11 -.60 -.09

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.58 -1.78 -1.01

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3.10 -2.22 -1.36

Annual balance for 2085 . . . . . . . . . . . . . . . . . . . . . . . . . . -6.00 -4.24 -2.71

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2033 2036 2041
Appendices

168

5. Consumer Price Index

Table VI.D5 shows the estimated 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 ultimate annual

increase in the CPI is assumed to be 1.8 percent, 2.8 percent, and 3.8 percent,

consistent with alternatives I, II, and III, respectively. In each case, the ultimate real-wage differential is assumed to be 1.2 percentage points (consistent with alternative II), yielding ultimate percentage increases in average

annual wages in covered employment of 3.0, 4.0, and 5.0 percent.

For all three periods, the cost rate decreases with greater assumed rates of

increase in the CPI. For the 25-year period, the cost rate decreases from

15.79 (for CPI increases of 1.8 percent) to 15.44 percent (for CPI increases

of 3.8 percent). For the 50-year period, it decreases from 16.27 to

15.83 percent, and for the 75-year period, it decreases from 16.50 to

16.02 percent. The actuarial balance increases from -0.73 to -0.48 percent for

the 25-year period, from -1.98 to -1.61 percent for the 50-year period, and

from -2.44 to -2.02 percent for the 75-year period.

The patterns described above result primarily from the time lag between the

effects of the CPI changes on taxable payroll and on benefit payments. When

Table VI.D5.—Sensitivity 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 assumed ultimate annual percentage increase in average wages in covered

employment. The second value is the assumed 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 1.8, 2.8, and 3.8 percent are the same as in alternatives I, II, and III, respectively. The ultimate real-wage differential of 1.2 percentage points is the same as in alternative II. All other

assumptions used for this analysis are also from alternative II.

3.0-1.8 4.0-2.8 5.0-3.8

Summarized income rate:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.06 15.01 14.97

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.29 14.25 14.22

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.06 14.02 13.99

Summarized cost rate:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.79 15.61 15.44

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.27 16.04 15.83

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.50 16.25 16.02

Actuarial balance:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.73 -.60 -.48

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.98 -1.78 -1.61

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.44 -2.22 -2.02

Annual balance for 2085 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.54 -4.24 -3.97

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2035 2036 2037
169

Long-Range Sensitivity Analysis

assuming a greater rate of increase in the CPI (in combination with a constant real-wage differential), the effect on taxable payroll due to a greater rate

of increase in average wages is experienced immediately, while the effect on

benefits due to a larger COLA is experienced with a lag of about 1 year.

Thus, 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 change assumed for the CPI increases the long-range actuarial balance by about 0.21 percent of taxable payroll.

6. Real Interest Rate

Table VI.D6 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

the annual real interest rate for special public-debt obligations issuable to the

trust funds, which are compounded semiannually. The ultimate annual real

interest rate is assumed to be 2.1 percent, 2.9 percent, and 3.6 percent, consistent with alternatives III, II, and I, respectively. In each case, the ultimate

annual increase in the CPI is assumed to be 2.8 percent (consistent with alternative II), which results in ultimate annual yields of 5.0, 5.8, and 6.5 percent.

For the 25-year period, the cost rate decreases with increasing real interest

rates, from 15.74 percent (for an ultimate real interest rate of 2.1 percent) to

Table VI.D6.—Sensitivity 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 defined as the effective annual yield on assets 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: 2.1 percent from the alternative III

assumptions, 2.9 percent from the alternative II assumptions, and 3.6 percent from the alternative I assumptions. All other assumptions used for this analysis are from alternative II.

2.1 percent 2.9 percent 3.6 percent

Summarized income rate:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.90 15.01 15.11

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.11 14.25 14.38

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.87 14.02 14.17

Summarized cost rate:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.74 15.61 15.50

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.21 16.04 15.89

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.47 16.25 16.06

Actuarial balance:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.84 -.60 -.39

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.10 -1.78 -1.50

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.60 -2.22 -1.89

Annual balance for 2085 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.24 -4.24 -4.24

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2034 2036 2037
Appendices

170

15.50 percent (for an ultimate real interest rate of 3.6 percent). For the 50-

year period, it decreases from 16.21 to 15.89 percent, and for the 75-year

period, it decreases from 16.47 to 16.06 percent. The actuarial balance

increases from -0.84 to -0.39 percent for the 25-year period, from -2.10 to

-1.50 percent for the 50-year period, and from -2.60 to -1.89 percent for the

75-year period. Each 0.5-percentage-point increase in the assumed real interest rate increases the long-range actuarial balance by about 0.24 percent of

taxable payroll.

7. Disability Incidence Rates

Table VI.D7 shows the estimated 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, incidence

rates by age and sex are assumed to vary during the early years of the projection period before attaining ultimate levels in 2030. In comparison to the historical period 1970 through 2010, the ultimate age-sex-adjusted incidence

rate is about the same for alternative II, 19 percent lower for alternative I,

and 21 percent higher for alternative III.

For the 25-year period, the cost rate increases with increasing disability incidence rates, from 15.39 percent (for the relatively low rates assumed for

alternative I) to 15.82 percent (for the relatively high rates assumed for

alternative III). For the 50-year period, it increases from 15.77 to 16.29 percent, and for the 75-year period, it increases from 15.96 to 16.52 percent.

Table VI.D7.—Sensitivity 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: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.01 15.01 15.02

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.25 14.25 14.26

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.02 14.02 14.03

Summarized cost rate:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.39 15.61 15.82

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.77 16.04 16.29

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.96 16.25 16.52

Actuarial balance:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.38 -.60 -.80

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.52 -1.78 -2.04

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.95 -2.22 -2.49

Annual balance for 2085 . . . . . . . . . . . . . . . . . . . . . . . . . . -3.91 -4.24 -4.56

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2037 2036 2034
171

Long-Range Sensitivity Analysis

The actuarial balance decreases from -0.38 to -0.80 percent for the 25-year

period, from -1.52 to -2.04 percent for the 50-year period, and from -1.95 to

-2.49 percent for the 75-year period.

8. Disability Termination Rates

Table VI.D8 shows the estimated 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, death rates are

assumed to decline throughout the long-range period. For alternative II, the

age-sex-adjusted1 death rate is assumed to decline to a level in 2085 that is

about 57 percent lower than the level in 2010. For alternative I, the age-sexadjusted death rate is assumed to decline to a level in 2085 that is about

25 percent lower than the level in 2010. For alternative III, the age-sexadjusted death rate is assumed to decline to a level in 2085 that is about

72 percent lower than the level in 2010.

For all three alternatives, ultimate recovery-termination rates by age, sex,

and duration are assumed to be attained in the twentieth year of the projection period. For alternative II, the age-sex-adjusted1 recovery rate in 2030 is

about 11 recoveries per thousand disabled-worker beneficiaries. For alternative I, the age-sex-adjusted recovery rate in 2030 is about 13 recoveries per

thousand disabled-worker beneficiaries. For alternative III, the age-sexadjusted recovery rate in 2030 is about 9 recoveries per thousand disabledworker beneficiaries.

1 Age adjusted to the total disabled workers in current-payment status as of the year 2000.
Appendices

172

For the 25-year period, the cost rate increases with decreasing disability termination rates, from 15.57 percent (for the relatively high termination rates

assumed for alternative I) to 15.64 percent (for the relatively low termination

rates assumed for alternative III). For the 50-year period, it increases from

15.99 to 16.08 percent, and for the 75-year period, it increases from 16.19 to

16.29 percent. The actuarial balance decreases from -0.56 to -0.63 percent

for the 25-year period, from -1.73 to -1.82 percent for the 50-year period,

and from -2.17 to -2.26 percent for the 75-year period.

Table VI.D8.—Sensitivity 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: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.01 15.01 15.01

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.25 14.25 14.25

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.02 14.02 14.02

Summarized cost rate:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.57 15.61 15.64

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.99 16.04 16.08

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.19 16.25 16.29

Actuarial balance:

25-year: 2011-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.56 -.60 -.63

50-year: 2011-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.73 -1.78 -1.82

75-year: 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.17 -2.22 -2.26

Annual balance for 2085 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.17 -4.24 -4.28

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2036 2036 2035
173

Stochastic Projections

E. STOCHASTIC PROJECTIONS

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 are intended to supplement the traditional methods of examining

such uncertainty.

1. Background

The Trustees Report has traditionally shown estimates using the low-cost and

high-cost sets of specified assumptions to reflect the presence of uncertainty.

These additional estimates provide a range of possible outcomes for the projections. However, they provide no indication of the probability that actual

future experience will be inside or outside the range of these estimates. 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 is subject to further development. Future improvements and

refinements are expected to expand, rather than reduce, the indicated range

of uncertainty.

2. Methodology

Other sections of this report provide estimates of the financial status of the

combined OASI and DI Trust Funds using a “deterministic” model. For the

deterministic model, certain assumptions are made regarding 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, each of these variables is assumed

to reach an ultimate value at a specific point during the long-range period

and to maintain that value throughout the remainder of the period. As mentioned above, three deterministic scenarios are developed by assuming separate, specified values for each of these variables. Chapter V contains more

details about each of these assumptions.

In contrast, the results of 5,000 independent stochastic simulations are presented in this appendix. Each of the 5,000 simulations is determined by

allowing the above variables to vary throughout the long-range period. The

fluctuation in each variable is projected by using standard time-series modeling, a method designed to help make inferences based on historical data.

Generally, each variable is modeled by an equation that captures a relationship between current and prior years’ values of the variable, and introduces
Appendices

174

year-by-year random variation as observed in the historical period. For some

variables, the equations also reflect relationships with other variables.

Parameters for the equations are estimated using historical data for periods

between 25 years and 110 years depending on the nature and quality of data

available. Each time-series equation is designed so that, in the absence of

random variation, the value of the variable would equal the value assumed

under the intermediate set of assumptions.1

For each simulation, values for most of the variables listed above are determined by using Monte Carlo techniques to randomly assign the year-by-year

variations. The one exception is that net other immigration is modeled

directly, rather than individually modeling its components, other immigration

and other emigration. Each simulation produces an estimate of the financial

status of the combined OASI and DI Trust Funds. Results shown in this

appendix reflect the distribution of results from 5,000 simulations of the

model.

The results from this model should be interpreted with caution and with an

understanding of the 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 variables in addition to those mentioned

above (such as labor force participation rates, retirement rates, marriage

rates, and divorce rates) had been allowed to vary randomly. Furthermore,

additional variability could result from incorporating statistical approaches

that would more fully model shifts in the long-range central tendencies of the

variables. The historical period utilized for most variables does not reflect

many substantial shifts. The time-series modeling reflects only what

occurred in the historical period. As a result, the variation indicated in this

appendix should be viewed as the minimum plausible variation for the

future. Substantial shifts, as predicted by many experts and as seen in prior

centuries, are not fully reflected in the current model.

3. Results

Figure VI.E1 presents simulated probability distributions of the annual trust

fund ratios for the combined OASI and DI Trust Funds. The two extreme

lines in this figure illustrate the range within which future annual trust fund

ratios are estimated to occur 95 percent of the time (i.e., a 95-percent confidence interval). In other words, actual future trust fund ratios in a given year

1 More detail on this model, and stochastic modeling in general, is available at

www.socialsecurity.gov/OACT/stochastic/index.html
175

Stochastic Projections

would be expected to exceed the upper bound only 2.5 percent of the time or

to fall below the lower bound 2.5 percent of the time. Other lines in the figure display additional confidence intervals (80-percent, 60-percent, 40-percent, and 20-percent) around future annual trust fund ratios. The median

estimate for each year indicates the trust fund ratio that this model projects

will fall 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 trust fund ratios

based on all stochastic simulations for that year.

The median estimate for each year indicates that the assets of the combined

OASI and DI Trust Funds would be exhausted by the end of 2035 with a

probability of 50 percent. This exhaustion date is one year earlier than the

year of exhaustion (2036) that is projected under the intermediate assumptions. Figure VI.E1 shows that the 95-percent confidence interval for the

trust fund ratio in 2025 ranges from 301 to 119 percent of annual cost. In

comparison, the 2025 trust fund ratios for the low-cost and high-cost alternatives are each outside this range, at 323 and 113 percent, respectively.

Figure VI.E1.—Long-Range OASDI Trust Fund Ratios From Stochastic Modeling

0%

100%

200%

300%

400%

500%

2011 2026 2041 2056 2071 2086

Projection year

50%

97.5%

2.5%

90%

10%
Appendices

176

Figure VI.E2 displays the probability distribution of the year-by-year

OASDI cost rates (i.e., 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. The income rate under the intermediate

assumptions is also included in the figure to give some indication of the patterns of cash flow for the OASDI program. Only the income rate is included,

and not the cost rate, because there is relatively little variation in income

rates throughout the projection period. The lines in figure VI.E2 display the

median set (50th percentile) of estimated annual cost rates and the 95-percent, 80-percent, 60-percent, 40-percent, and 20-percent confidence intervals

expected for future annual cost rates. 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. The projected cost rates for the year 2035 are

14.62 percent of payroll for the low-cost alternative and 19.88 percent of

payroll for the high-cost alternative. These cost rates are close to the limits of

the 95-percent confidence interval (14.50 and 19.74 percent of payroll), as

can be seen in figure VI.E2. By 2085, the cost rates for these alternatives,

12.56 and 25.30 percent of payroll, are still close to the limits of the 95-percent confidence interval (11.35 and 24.57 percent of payroll).

Figure VI.E2.—Long-Range OASDI Cost Rates From Stochastic Modeling

5%

10%

15%

20%

25%

30%

2011 2026 2041 2056 2071 2086

Projection year

50%

97.5%

2.5%

90%

10%

Income Rate
177

Stochastic Projections

Table VI.E1 displays long-range actuarial estimates that illustrate uncertainty

for the combined OASDI program using both the deterministic and stochastic approaches. Actuarial estimates included in the table are for the longrange period, 2011-85. Stochastic estimates are shown for the median (50th

percentile) and for the 95-percent and 80-percent confidence intervals. For

comparison, deterministic estimates are shown for the intermediate, lowcost, and high-cost assumptions. Each individual stochastic estimate displayed in the table represents the level at that percentile from the distribution

of the 5,000 simulations. However, for each given percentile, the stochastic

estimates shown for the different long-range actuarial measures are generally

not from the same stochastic simulation.

The median stochastic estimates displayed in table VI.E1 are, in general,

slightly more optimistic than the intermediate-alternative deterministic estimates. The median estimate of the long-range actuarial balance is

-2.14 percent of taxable payroll, about 0.08 percentage point higher than projected under the intermediate assumptions. The median year that cost first

exceeds non-interest income (and remains in excess of non-interest income

throughout the remainder of the long-range period) is 2016, 6 years later than

projected under the intermediate assumptions. The median year that assets

first become exhausted is 2035, one year earlier than projected under the

intermediate assumptions. The median estimates of the annual cost rate for

the 75th year of the projection period are 17.22 percent of taxable payroll

and 5.74 percent of gross domestic product (GDP). The comparable estimates using the intermediate assumptions are 17.56 percent of payroll and

6.01 percent of GDP.

The 95-percent confidence interval determined by the stochastic modeling

projections can be compared to the range of variation defined by the traditional low-cost and high-cost alternatives. For three measures in table VI.E1

(the actuarial balance, the open group unfunded obligation, and the first year

assets become exhausted), 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 one measure (the first year cost exceeds

non-interest income and remains in excess through 2085), the low-cost and

high-cost estimates are consistent with the bounds of the 95-percent stochastic confidence interval. For the remaining two measures (the annual costs in

the 75th year), 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.
Appendices

178

Table VI.E1.—Long-Range Estimates Relating to the Actuarial Status of

the Combined OASDI Program

[Comparison of deterministic and stochastic results]

Traditional

deterministic 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 . . . . . . -2.22 0.29 -5.59 -2.14 -3.46 -0.85 -4.26 -0.22

Open group unfunded

obligation (in trillions) $6.5 -$1.3 $17.2 $6.4 $11.6 $2.3 $15.5 $0.2

First year cost exceeds

non-interest income

and remains in excess

through 2085. . . . . . . . 2010 a

a The annual balance is projected to be negative for a temporary period, returning to positive levels before the

end of the projection period.

2010 2016 2010 2085 2010 b

b For this percentile, cost does not exceed non-interest income in 2085.

First year assets become

exhaustedc ..........

c For some stochastic simulations, the first year in which trust fund assets become exhausted does not indicate a permanent exhaustion of assets.

2036 d

d The fund is not estimated to be exhausted within the projection period.

2029 2035 2031 2042 2030 2049

Annual cost in 75th year

(percent of taxable

payroll) . . . . . . . . . . . . 17.56 12.56 25.30 17.22 13.15 21.88 11.30 24.57

Annual cost in 75th year

(percent of GDP). . . . . 6.01 4.64 8.03 5.74 3.93 7.50 3.20 8.40
179

OASDI and HI: Percent of Payroll

F. ESTIMATES FOR OASDI AND HI, SEPARATE AND COMBINED

In this appendix, long-range actuarial estimates for the OASDI and Hospital

Insurance (HI) programs are presented separately and on a combined basis.

These estimates facilitate analysis of the adequacy of the income and assets

of these programs relative to their cost under current law. Estimates for the

Supplementary Medical Insurance (SMI) program are not included in this

appendix 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 2011 Medicare Trustees Report.

The emphasis 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 and combining cost and income rates for the OASDI and HI programs as percentages of taxable payroll require 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 being eliminated altogether for the HI program in 1994; (2) a larger proportion of Federal, State,

and local government employees have their wages 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. Nonetheless, in

this section the separately derived rates for the programs are added to produce combined OASDI and HI rates.

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

for employees and their employers that are authorized in the Federal Insurance Contributions Act for these programs.
Appendices

180

Table VI.F2 shows estimated annual income rates and cost rates for the

OASDI program, the HI program, and the combined OASDI and HI programs, based on the low-cost, intermediate, and high-cost sets of assumptions (alternatives I, II, and III) described earlier in this report. All of the tax

rates shown in table VI.F1 are reflected in the income rates. For the HI program, the additional 0.9 percent tax on employees for relatively high earnings is included by increasing the rate shown. That is, HI taxable payroll

represents all earnings subject to the payroll tax for the HI program, and the

Table VI.F1.—Payroll Tax Contribution Rates for the OASDI and HI Programs

[In percent]

Calendar years

Employees and employers,

each

Employees

only Self employed

OASDI

up to basea

a 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 $106,800 for 2011.

HI

all earningsb

b 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 limitc

c Starting in 2013, an additional HI tax of 0.9 percent will be applied for earned income exceeding $200,000

for individuals and $250,000 for married couples filing jointly for Federal income tax. These limits are not

indexed after 2013.

OASDI

up to basea HI

all earningsb HIover limitc

1966 . . . . . . . . . . . . . 3.85 0.35 — 5.80 0.35 —

1967 . . . . . . . . . . . . . 3.90 .50 — 5.90 .50 —

1968 . . . . . . . . . . . . . 3.80 .60 — 5.80 .60 —

1969-70 . . . . . . . . . . 4.20 .60 — 6.30 .60 —

1971-72 . . . . . . . . . . 4.60 .60 — 6.90 .60 —

1973 . . . . . . . . . . . . . 4.85 1.00 — 7.00 1.00 —

1974-77 . . . . . . . . . . 4.95 .90 — 7.00 .90 —

1978 . . . . . . . . . . . . . 5.05 1.00 — 7.10 1.00 —

1979-80 . . . . . . . . . . 5.08 1.05 — 7.05 1.05 —

1981 . . . . . . . . . . . . . 5.35 1.30 — 8.00 1.30 —

1982-83 . . . . . . . . . . 5.40 1.30 — 8.05 1.30 —

1984d ............

d In 1984 only, an immediate credit of 0.3 percent of taxable wages was allowed against the OASDI payroll

tax contributions paid by employees. Similar credits of 2.7 percent, 2.3 percent, and 2.0 percent were

allowed against the combined OASDI and Hospital Insurance (HI) contributions on net earnings from selfemployment in 1984, 1985, and 1986-89, respectively. These credits were offset by reimbursements from

the General Fund of the Treasury. Beginning in 1990, self-employed persons are allowed 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 is then

applied to net earnings after this deduction, but subject to the OASDI base.

5.70 1.30 — 11.40 2.60 —

1985d . . . . . . . . . . . . 5.70 1.35 — 11.40 2.70 —

1986-87d . . . . . . . . . 5.70 1.45 — 11.40 2.90 —

1988-89d . . . . . . . . . 6.06 1.45 — 12.12 2.90 —

1990-2012e ........

e Under Public Law 111-147, most employers were exempt 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. Under Public Law 111-312, the OASDI payroll tax rate is reduced for

2011 by 2 percentage points for employees and for self-employed workers. These temporary reductions in

2010 and 2011 tax revenue due to lower tax rates have been and will be made up by reimbursements from

the General Fund of the Treasury to the OASI and DI Trust Funds.

6.20 1.45 — 12.40 2.90 —

2013 and later. . . . . . 6.20 1.45 0.90 12.40 2.90 0.90
181

OASDI and HI: Percent of Payroll

effective tax rate included in the income rate is 2.9 percent through 2012

with an increase thereafter based on the portion of the total payroll to which

the 0.9 percent applies. These annual rates are intended to indicate the cashflow operation of the programs. Therefore, income rates exclude interest

earned on trust fund assets. Table VI.F2 also shows the differences between

income rates and cost rates, called balances. Estimates shown for the combined trust funds are theoretical because no authority currently exists for borrowing by or transfers among these trust funds.

The combined OASDI and HI cost rate is projected to rise generally above

current levels under the intermediate and high-cost sets of assumptions, with

the greatest increase occurring during the period 2015-30. Under both the

intermediate and the high-cost assumptions for the combined programs,

annual deficits are projected to occur for each year of the 75-year projection

period. Under the intermediate assumptions, the combined cost rate increases

by 31 percent from its current level by 2085, while under the high-cost

assumptions, the cost rate is projected to more than double by the end of the

projection period. Under the low-cost assumptions, the combined cost rate is

projected to decrease by 12 percent by the end of the period, with positive

annual balances in all years except for 2011-13 and 2023-42.
Appendices

182

Table VI.F2.—OASDI and HI Annual Income Rates, Cost Rates, and Balances,

Calendar Years 2011-85

[As a percentage of taxable payrolla]

Calendar year

OASDI HI Combined

Income

rate

Cost

rate Balance

Income

rate

Cost

rate Balance

Income

rate

Cost

rate Balance

Intermediate:

2011 . . . . . . 12.52 13.35 -0.82 3.14 3.79 -0.65 15.66 17.13 -1.47

2012 . . . . . . 12.87 13.23 -.36 3.16 3.74 -.58 16.02 16.97 -.95

2013 . . . . . . 12.87 13.18 -.31 3.29 3.68 -.40 16.15 16.86 -.71

2014 . . . . . . 12.92 13.18 -.27 3.32 3.63 -.30 16.24 16.81 -.57

2015 . . . . . . 12.94 13.24 -.30 3.35 3.53 -.18 16.29 16.77 -.49

2016 . . . . . . 12.97 13.33 -.36 3.37 3.50 -.14 16.34 16.83 -.49

2017 . . . . . . 13.00 13.46 -.46 3.39 3.50 -.11 16.39 16.96 -.57

2018 . . . . . . 13.03 13.62 -.59 3.41 3.51 -.11 16.43 17.13 -.69

2019 . . . . . . 13.04 13.88 -.84 3.43 3.54 -.12 16.47 17.42 -.95

2020 . . . . . . 13.06 14.20 -1.14 3.45 3.61 -.16 16.51 17.80 -1.29

2025 . . . . . . 13.15 15.67 -2.52 3.54 4.00 -.45 16.69 19.67 -2.98

2030 . . . . . . 13.21 16.66 -3.44 3.63 4.41 -.78 16.84 21.07 -4.23

2035 . . . . . . 13.24 17.01 -3.77 3.70 4.77 -1.07 16.94 21.78 -4.84

2040 . . . . . . 13.25 16.95 -3.71 3.76 4.99 -1.23 17.01 21.94 -4.93

2045 . . . . . . 13.24 16.79 -3.54 3.82 5.08 -1.26 17.07 21.87 -4.80

2050 . . . . . . 13.24 16.69 -3.44 3.89 5.11 -1.22 17.13 21.79 -4.66

2055 . . . . . . 13.25 16.72 -3.47 3.96 5.10 -1.14 17.21 21.82 -4.60

2060 . . . . . . 13.26 16.80 -3.55 4.03 5.10 -1.07 17.29 21.90 -4.61

2065 . . . . . . 13.27 16.87 -3.60 4.10 5.11 -1.01 17.36 21.98 -4.61

2070 . . . . . . 13.27 17.00 -3.73 4.16 5.11 -.95 17.44 22.12 -4.68

2075 . . . . . . 13.29 17.18 -3.89 4.22 5.08 -.86 17.51 22.26 -4.75

2080 . . . . . . 13.30 17.36 -4.06 4.27 5.00 -.73 17.57 22.37 -4.79

2085 . . . . . . 13.31 17.56 -4.24 4.32 4.90 -.58 17.64 22.46 -4.82

Low-cost:

2011 . . . . . . 12.50 13.24 -.74 3.14 3.67 -.53 15.64 16.91 -1.27

2012 . . . . . . 12.88 13.00 -.12 3.15 3.56 -.41 16.03 16.56 -.53

2013 . . . . . . 12.85 12.77 .08 3.28 3.44 -.16 16.13 16.21 -.08

2014 . . . . . . 12.90 12.61 .28 3.31 3.32 -.01 16.21 15.94 .27

2015 . . . . . . 12.91 12.53 .38 3.33 3.16 .17 16.24 15.70 .54

2016 . . . . . . 12.94 12.53 .41 3.35 3.08 .27 16.29 15.61 .68

2017 . . . . . . 12.97 12.61 .36 3.37 3.01 .35 16.33 15.62 .71

2018 . . . . . . 12.99 12.71 .28 3.38 2.97 .41 16.37 15.68 .69

2019 . . . . . . 13.00 12.86 .14 3.40 2.94 .46 16.40 15.80 .60

2020 . . . . . . 13.01 13.05 -.04 3.42 2.93 .48 16.42 15.98 .44

2025 . . . . . . 13.07 14.02 -.95 3.49 2.97 .52 16.56 16.99 -.43

2030 . . . . . . 13.11 14.60 -1.48 3.56 2.98 .57 16.67 17.58 -.91

2035 . . . . . . 13.13 14.62 -1.49 3.61 2.94 .67 16.73 17.56 -.82

2040 . . . . . . 13.11 14.28 -1.17 3.65 2.80 .85 16.77 17.08 -.32

2045 . . . . . . 13.10 13.88 -.78 3.69 2.66 1.04 16.79 16.53 .26

2050 . . . . . . 13.08 13.57 -.48 3.74 2.54 1.20 16.83 16.10 .72

2055 . . . . . . 13.08 13.37 -.29 3.80 2.46 1.34 16.87 15.83 1.04

2060 . . . . . . 13.07 13.19 -.12 3.85 2.44 1.41 16.92 15.63 1.29

2065 . . . . . . 13.06 12.97 .09 3.90 2.44 1.46 16.96 15.41 1.55

2070 . . . . . . 13.05 12.79 .26 3.95 2.44 1.51 17.00 15.24 1.76

2075 . . . . . . 13.05 12.65 .40 4.00 2.43 1.57 17.04 15.08 1.97

2080 . . . . . . 13.04 12.56 .48 4.04 2.39 1.65 17.08 14.95 2.13

2085 . . . . . . 13.04 12.56 .48 4.08 2.34 1.74 17.13 14.90 2.22
183

OASDI and HI: Percent of Payroll

Notes:

1. The income rate excludes interest income.

2. Totals do not necessarily equal the sums of rounded components.

In table VI.F3, values are summarized over the 25-year, 50-year, and 75-year

valuation periods (for which beginning fund balances are included in the

summarized income rates, and the cost of accumulating an ending fund balance equal to 100 percent of annual cost by the end of the period is included

in the summarized cost rates). Estimates shown for the combined trust funds

are theoretical because no authority currently exists for borrowing by or

transfers among these trust funds.

High-cost:

2011 . . . . . . 12.56 13.48 -0.92 3.14 3.91 -0.78 15.70 17.40 -1.70

2012 . . . . . . 12.84 13.52 -.68 3.16 3.93 -.77 16.00 17.45 -1.45

2013 . . . . . . 12.88 13.61 -.73 3.29 3.96 -.66 16.17 17.57 -1.40

2014 . . . . . . 12.94 13.78 -.84 3.34 3.99 -.65 16.28 17.77 -1.49

2015 . . . . . . 12.97 13.96 -1.00 3.36 3.97 -.60 16.33 17.93 -1.60

2016 . . . . . . 13.00 14.16 -1.16 3.39 4.02 -.63 16.39 18.18 -1.79

2017 . . . . . . 13.04 14.40 -1.36 3.41 4.10 -.68 16.45 18.49 -2.04

2018 . . . . . . 13.07 14.69 -1.62 3.44 4.20 -.76 16.51 18.89 -2.38

2019 . . . . . . 13.09 15.05 -1.96 3.46 4.32 -.86 16.55 19.37 -2.82

2020 . . . . . . 13.12 15.49 -2.37 3.49 4.49 -1.00 16.60 19.98 -3.38

2025 . . . . . . 13.24 17.53 -4.29 3.60 5.49 -1.89 16.84 23.02 -6.18

2030 . . . . . . 13.33 19.02 -5.69 3.72 6.70 -2.98 17.04 25.72 -8.68

2035 . . . . . . 13.39 19.88 -6.50 3.82 7.97 -4.15 17.20 27.85 -10.65

2040 . . . . . . 13.42 20.28 -6.86 3.91 9.13 -5.22 17.32 29.41 -12.09

2045 . . . . . . 13.44 20.55 -7.11 3.99 9.98 -5.99 17.43 30.53 -13.10

2050 . . . . . . 13.46 20.84 -7.38 4.08 10.54 -6.46 17.54 31.38 -13.84

2055 . . . . . . 13.49 21.29 -7.80 4.18 10.84 -6.66 17.67 32.13 -14.46

2060 . . . . . . 13.52 21.82 -8.29 4.27 10.94 -6.67 17.79 32.76 -14.96

2065 . . . . . . 13.56 22.38 -8.82 4.35 10.96 -6.61 17.91 33.34 -15.43

2070 . . . . . . 13.60 23.09 -9.49 4.44 10.97 -6.53 18.04 34.06 -16.02

2075 . . . . . . 13.65 23.89 -10.24 4.52 10.90 -6.38 18.17 34.79 -16.62

2080 . . . . . . 13.69 24.65 -10.95 4.60 10.74 -6.14 18.29 35.38 -17.09

2085 . . . . . . 13.73 25.30 -11.56 4.67 10.52 -5.85 18.40 35.81 -17.41

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,

including those hired before 1984, all State and local government employees hired after April 1, 1986, and

railroad employees. Combined OASDI and HI rates are computed as the sum of the separately derived rates

for each program.

Table VI.F2.—OASDI and HI Annual Income Rates, Cost Rates, and Balances,

Calendar Years 2011-85 (Cont.)

[As a percentage of taxable payrolla]

Calendar year

OASDI HI Combined

Income

rate

Cost

rate Balance

Income

rate

Cost

rate Balance

Income

rate

Cost

rate Balance
Appendices

184

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

Under the high-cost assumptions, the combined OASDI and HI system is

projected to experience large actuarial deficits for the 25-year, 50-year, and

75-year valuation periods. Under the intermediate assumptions, actuarial deficits smaller than those for the high-cost assumptions are projected for all

three valuation periods. Under the low-cost assumptions, the combined

OASDI and HI system is projected to have a positive actuarial balance for all

three valuation periods.

Table VI.F3.—Summarized OASDI and HI Income Rates and Cost Rates for Valuation

Periods,a Calendar Years 2011-85

[As a percentage of taxable payrollb]

a Income rates include beginning trust fund balances and cost rates include the cost of reaching an ending

fund target equal to 100 percent of annual cost by 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. Combined OASDI

and HI rates are computed as the sum of the separately derived rates for each program.

Valuation

period

OASDI HI Combined

Income

rate

Cost

rate

Actuarial

balance

Income

rate

Cost

rate

Actuarial

balance

Income

rate

Cost

rate

Actuarial

balance

Intermediate:

25-year:

2011-35 . . . . . . 15.01 15.61 -0.60 3.64 4.14 -0.50 18.65 19.75 -1.09

50-year:

2011-60 . . . . . . 14.25 16.04 -1.78 3.74 4.51 -.78 17.99 20.55 -2.56

75-year:

2011-85 . . . . . . 14.02 16.25 -2.22 3.84 4.63 -.79 17.87 20.88 -3.01

Low-cost:

25-year:

2011-35 . . . . . . 14.93 14.14 .78 3.60 3.17 .43 18.53 17.31 1.22

50-year:

2011-60 . . . . . . 14.14 13.90 .23 3.65 2.91 .74 17.79 16.82 .97

75-year:

2011-85 . . . . . . 13.87 13.58 .29 3.73 2.78 .95 17.60 16.36 1.24

High-cost:

25-year:

2011-35 . . . . . . 15.07 17.32 -2.26 3.70 5.60 -1.90 18.76 22.92 -4.16

50-year:

2011-60 . . . . . . 14.37 18.74 -4.37 3.84 7.50 -3.66 18.21 26.24 -8.03

75-year:

2011-85 . . . . . . 14.20 19.79 -5.59 3.99 8.24 -4.25 18.19 28.03 -9.85
185

OASDI and HI: Percent of GDP

2. Estimates as a Percentage of Gross Domestic Product

This section presents 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 these fund

operations as a percentage of taxable payroll is the most useful approach for

assessing the financial status of the programs (see table IV.B1 and section

IV.B.1), analyzing them as a percentage of GDP provides an additional perspective on these fund operations in relation to the total value of goods and

services produced in the United States.

Table VI.F4 shows estimated income excluding interest, 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 shows the estimated GDP on which these percentages

are based. For OASDI, income excluding interest consists of payroll tax contributions, proceeds from taxation of benefits, and reimbursements from the

General Fund of the Treasury, if any. Cost consists of benefit payments,

administrative expenses, financial interchange with the Railroad Retirement

program, and payments for vocational rehabilitation services for disabled

beneficiaries. For HI, income excluding interest 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. In computing these percentages,

OASDI income and cost are on a cash basis; HI income and cost are on an

incurred basis.

The OASDI annual balance (income excluding interest, less cost) as a percentage of GDP is projected to be negative in 2011 and 2012 under all three

sets of assumptions. On the basis of the low-cost assumptions, the OASDI

annual balance as a percentage of GDP is projected to be positive from 2013

through 2019. After 2019, deficits increase to a peak in 2033 and decrease

thereafter. By 2063, the OASDI balance becomes positive, reaching

0.18 percent of GDP in 2085. On the basis of the intermediate assumptions,

the OASDI balance is projected to be negative for all years of the projection

period. Annual deficits decrease through 2014, increase from 2015 through

2036, decrease from 2037 through 2052, and increase thereafter. On the basis

of the high-cost assumptions, the OASDI balance is projected to be negative

throughout the projection period, with increasing deficits starting in 2013.
Appendices

186

The HI balance as a percentage of GDP is projected to be negative from

2011-14 under the low-cost assumptions, and then positive and increasing

thereafter. Under the intermediate assumptions, the HI balance is projected to

be negative throughout the projection period. Annual deficits decline through

2018, reach a peak in 2045, and decline thereafter. Under the high-cost

assumptions, the HI balance is negative for all years of the projection period.

Annual deficits reach a peak in 2056 and decline thereafter.

The combined OASDI and HI annual balance as a percentage of GDP is projected to be negative throughout the projection period under the intermediate

and high-cost assumptions. Under the low-cost assumptions, the combined

OASDI and HI balance is negative from 2011-13, positive from 2014

through 2023, negative from 2024 through 2040, then positive and rising

thereafter. Under the intermediate assumptions, combined OASDI and HI

annual deficits decline through 2016, then rise, reaching a peak in 2038.

After 2038, annual deficits fluctuate between about 1.7 percent and 1.9 percent of GDP. Combined annual deficits rise after 2013 under the high-cost

assumptions.

By 2085, the combined OASDI and HI annual balances as percentages of

GDP are projected to range from a positive balance of 0.98 percent for the

low-cost assumptions to a deficit of 6.03 percent for the high-cost assumptions. Projected balances differ by a smaller amount for the tenth year, 2020,

ranging from a positive balance of 0.21 percent for the low-cost assumptions

to a deficit of 1.35 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 0.54 percent, based

on the low-cost assumptions, to a deficit of 3.85 percent, based on the highcost assumptions). The 25-year summarized balance varies by a smaller

amount (from a positive balance of 0.49 percent to a deficit of 1.71 percent).

Summarized rates are calculated on the present-value basis and include the

trust fund balances on January 1, 2011 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.)
187

OASDI and HI: Percent of GDP

Table VI.F4.—OASDI and HI Annual and Summarized Income, Cost, and Balance

as a Percentage of GDP, Calendar Years 2011-85

Calendar year

Percentage of GDP GDP in

dollars

(billions)

OASDI HI Combined

Incomea Cost Balance Incomea Cost Balance Incomea Cost Balance

Intermediate:

2011 . . . . . . 4.55 4.85 -0.30 1.42 1.71 -0.29 5.97 6.56 -0.59 $15,231

2012 . . . . . . 4.71 4.84 -.13 1.44 1.71 -.27 6.15 6.55 -.40 15,949

2013 . . . . . . 4.73 4.84 -.12 1.51 1.69 -.18 6.24 6.54 -.30 16,807

2014 . . . . . . 4.76 4.86 -.10 1.54 1.68 -.14 6.29 6.53 -.24 17,719

2015 . . . . . . 4.78 4.89 -.11 1.55 1.64 -.09 6.33 6.53 -.20 18,626

2016 . . . . . . 4.82 4.95 -.13 1.57 1.63 -.06 6.39 6.58 -.20 19,496

2017 . . . . . . 4.85 5.02 -.17 1.59 1.64 -.05 6.44 6.66 -.22 20,366

2018 . . . . . . 4.88 5.10 -.22 1.60 1.65 -.05 6.48 6.75 -.27 21,312

2019 . . . . . . 4.89 5.21 -.31 1.61 1.67 -.05 6.50 6.87 -.37 22,297

2020 . . . . . . 4.89 5.32 -.43 1.62 1.70 -.07 6.52 7.02 -.50 23,315

2025 . . . . . . 4.87 5.81 -.94 1.65 1.86 -.21 6.52 7.66 -1.15 29,190

2030 . . . . . . 4.85 6.12 -1.27 1.67 2.03 -.36 6.53 8.15 -1.63 36,547

2035 . . . . . . 4.84 6.22 -1.38 1.70 2.19 -.49 6.53 8.40 -1.87 45,934

2040 . . . . . . 4.81 6.16 -1.35 1.72 2.27 -.56 6.53 8.43 -1.91 57,792

2045 . . . . . . 4.78 6.06 -1.28 1.73 2.30 -.57 6.51 8.36 -1.85 72,644

2050 . . . . . . 4.74 5.98 -1.23 1.75 2.30 -.55 6.49 8.28 -1.78 91,063

2055 . . . . . . 4.71 5.95 -1.23 1.77 2.28 -.51 6.48 8.22 -1.74 113,949

2060 . . . . . . 4.68 5.93 -1.25 1.79 2.26 -.47 6.47 8.20 -1.72 142,539

2065 . . . . . . 4.65 5.91 -1.26 1.80 2.25 -.45 6.46 8.16 -1.71 178,452

2070 . . . . . . 4.62 5.92 -1.30 1.82 2.24 -.42 6.44 8.15 -1.71 223,301

2075 . . . . . . 4.59 5.94 -1.35 1.83 2.21 -.37 6.43 8.15 -1.72 279,159

2080 . . . . . . 4.57 5.97 -1.40 1.85 2.16 -.32 6.42 8.13 -1.71 348,661

2085 . . . . . . 4.55 6.01 -1.45 1.86 2.11 -.25 6.41 8.11 -1.70 435,071

Summarized rates: b

25-year:

2011-35 . . . 5.55 5.77 -.22 1.69 1.92 -.23 7.24 7.69 -.45

50-year:

2011-60 . . . 5.21 5.86 -.65 1.71 2.07 -.36 6.92 7.93 -1.01

75-year

2011-85 . . . 5.06 5.86 -.80 1.74 2.10 -.36 6.80 7.96 -1.16

Low-cost:

2011 . . . . . . 4.54 4.81 -.27 1.42 1.66 -.24 5.96 6.47 -.51 15,305

2012 . . . . . . 4.71 4.76 -.04 1.44 1.63 -.19 6.15 6.38 -.23 16,115

2013 . . . . . . 4.72 4.69 .03 1.51 1.58 -.07 6.23 6.27 -.05 17,091

2014 . . . . . . 4.75 4.65 .10 1.53 1.53 c 6.28 6.18 .10 18,081

2015 . . . . . . 4.78 4.64 .14 1.54 1.46 .08 6.32 6.10 .22 19,036

2016 . . . . . . 4.82 4.66 .15 1.56 1.43 .12 6.37 6.10 .28 19,901

2017 . . . . . . 4.85 4.72 .13 1.57 1.41 .17 6.43 6.13 .30 20,740

2018 . . . . . . 4.89 4.78 .11 1.59 1.39 .19 6.48 6.18 .30 21,607

2019 . . . . . . 4.91 4.86 .05 1.60 1.38 .22 6.51 6.24 .27 22,512

2020 . . . . . . 4.92 4.93 -.01 1.60 1.38 .23 6.52 6.31 .21 23,450

2025 . . . . . . 4.90 5.26 -.36 1.63 1.38 .24 6.53 6.64 -.11 28,795

2030 . . . . . . 4.89 5.45 -.55 1.65 1.38 .27 6.54 6.83 -.29 35,305

2035 . . . . . . 4.89 5.45 -.56 1.67 1.36 .31 6.56 6.81 -.25 43,471

2040 . . . . . . 4.88 5.31 -.43 1.69 1.30 .39 6.57 6.61 -.04 53,734

2045 . . . . . . 4.87 5.15 -.29 1.71 1.23 .48 6.57 6.38 .19 66,554

2050 . . . . . . 4.85 5.03 -.18 1.72 1.17 .55 6.58 6.20 .38 82,404

2055 . . . . . . 4.84 4.95 -.11 1.75 1.13 .62 6.59 6.08 .51 102,054

2060 . . . . . . 4.83 4.88 -.05 1.77 1.12 .65 6.60 6.00 .60 126,548

2065 . . . . . . 4.82 4.79 .03 1.79 1.12 .67 6.62 5.91 .70 157,228

2070 . . . . . . 4.82 4.72 .10 1.81 1.12 .69 6.63 5.84 .79 195,562

2075 . . . . . . 4.81 4.67 .15 1.83 1.11 .72 6.64 5.78 .87 243,366

2080 . . . . . . 4.81 4.63 .18 1.85 1.10 .76 6.66 5.73 .93 302,757

2085 . . . . . . 4.82 4.64 .18 1.87 1.08 .80 6.69 5.72 .98 376,292
Appendices

188

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

The difference between trust fund operations expressed as percentages of

taxable payroll and those expressed as percentages of GDP can be understood by analyzing the estimated ratios of OASDI taxable payroll to GDP,

which are presented in table VI.F5. HI taxable payroll is about 26 percent

larger than the OASDI taxable payroll throughout the long-range period (see

appendix VI.F.1 for a detailed description of the difference). The cost as a

Low-cost (cont.):

Summarized rates: b

25-year:

2011-35 . . . 5.57 5.28 0.29 1.67 1.47 0.20 7.24 6.75 0.49

50-year:

2011-60 . . . 5.26 5.18 .09 1.69 1.35 .34 6.95 6.53 .43

75-year

2011-85 . . . 5.15 5.05 .11 1.72 1.29 .44 6.88 6.33 .54

High-cost:

2011 . . . . . . 4.57 4.90 -.33 1.42 1.77 -.35 5.98 6.67 -.69 $15,124

2012 . . . . . . 4.69 4.94 -.25 1.44 1.79 -.35 6.13 6.73 -.60 15,806

2013 . . . . . . 4.72 4.99 -.27 1.51 1.82 -.31 6.24 6.81 -.57 16,649

2014 . . . . . . 4.76 5.06 -.31 1.54 1.84 -.30 6.30 6.91 -.61 17,553

2015 . . . . . . 4.77 5.14 -.37 1.56 1.84 -.28 6.33 6.98 -.65 18,540

2016 . . . . . . 4.80 5.23 -.43 1.58 1.88 -.30 6.38 7.11 -.72 19,559

2017 . . . . . . 4.84 5.34 -.50 1.60 1.92 -.32 6.44 7.26 -.82 20,594

2018 . . . . . . 4.87 5.47 -.60 1.62 1.98 -.36 6.48 7.44 -.96 21,642

2019 . . . . . . 4.88 5.61 -.73 1.63 2.04 -.41 6.51 7.65 -1.14 22,749

2020 . . . . . . 4.87 5.76 -.88 1.64 2.11 -.47 6.52 7.87 -1.35 23,922

2025 . . . . . . 4.85 6.42 -1.57 1.67 2.55 -.87 6.52 8.96 -2.45 30,533

2030 . . . . . . 4.82 6.89 -2.06 1.70 3.07 -1.37 6.53 9.96 -3.43 39,025

2035 . . . . . . 4.80 7.13 -2.33 1.73 3.62 -1.89 6.53 10.75 -4.22 50,039

2040 . . . . . . 4.76 7.20 -2.44 1.76 4.11 -2.35 6.52 11.31 -4.79 64,037

2045 . . . . . . 4.72 7.21 -2.49 1.78 4.44 -2.66 6.49 11.65 -5.16 81,581

2050 . . . . . . 4.67 7.22 -2.56 1.79 4.63 -2.84 6.46 11.86 -5.40 103,352

2055 . . . . . . 4.62 7.29 -2.67 1.81 4.71 -2.89 6.43 11.99 -5.56 130,363

2060 . . . . . . 4.57 7.37 -2.80 1.83 4.69 -2.86 6.40 12.06 -5.66 164,102

2065 . . . . . . 4.52 7.46 -2.94 1.84 4.64 -2.80 6.36 12.10 -5.74 206,444

2070 . . . . . . 4.47 7.59 -3.12 1.86 4.58 -2.73 6.33 12.18 -5.85 259,064

2075 . . . . . . 4.43 7.76 -3.32 1.87 4.50 -2.63 6.30 12.26 -5.96 324,238

2080 . . . . . . 4.39 7.91 -3.51 1.88 4.38 -2.51 6.27 12.29 -6.02 405,035

2085 . . . . . . 4.36 8.03 -3.67 1.88 4.25 -2.36 6.24 12.27 -6.03 505,453

Summarized rates: b

25-year:

2011-35 . . . 5.52 6.34 -.83 1.71 2.59 -.88 7.23 8.93 -1.71

50-year:

2011-60 . . . 5.15 6.72 -1.57 1.74 3.40 -1.66 6.89 10.12 -3.23

75-year

2011-85 . . . 4.98 6.94 -1.96 1.77 3.66 -1.89 6.75 10.60 -3.85

a Income for individual years excludes interest on the trust funds. Interest is implicitly reflected in all summarized values.

b Summarized rates are calculated on the present-value basis and include the value of the trust funds on

January 1, 2011 and the cost of reaching a target trust fund level equal to 100 percent of annual cost at the end

of the period.

c Between -0.005 and 0.005 percent of GDP.

Table VI.F4.—OASDI and HI Annual and Summarized Income, Cost, and Balance

as a Percentage of GDP, Calendar Years 2011-85 (Cont.)

Calendar year

Percentage of GDP GDP in

dollars

(billions)

OASDI HI Combined

Incomea Cost Balance Incomea Cost Balance Incomea Cost Balance
189

OASDI and HI: Percent of GDP

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 are based on the projected increases in U.S. employment,

labor productivity, average hours worked, and the GDP deflator. Projections

of taxable payroll reflect the projected 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, projected growth in taxable payroll differs from

projected growth in GDP primarily due to the assumed trend in the ratio of

wages to total employee compensation—i.e., wages plus fringe benefits. The

ratio of earnings to total worker compensation declined at an average annual

rate of 0.24 percent for the 40 years from 1969 to 2009. For the 10-year periods 1969-79, 1979-89, 1989-99, and 1999-2009, the average annual rates of

change were -0.62, -0.14, 0.13 and -0.33 percent, respectively. Ultimate

future annual rates of decline in the ratio of wages to employee compensation are assumed to be 0.0, 0.1, and 0.2 percent for the low-cost, intermediate, and high-cost assumptions, respectively. Another factor in the decline in

the ratio of taxable payroll to GDP in most recent years is the decline in the

ratio of taxable wages to covered wages, due to the relatively greater

increases in wages for persons earning above the contribution and benefit

base. Compared to the period 1983-2007, the projected taxable-to-covered

wage ratio for 2011-20 is assumed to decline at a slower pace, with no further decline thereafter.

Table VI.F5.—Ratio of OASDI Taxable Payroll to GDP, Calendar Years 2011-85

Calendar year Intermediate Low-cost High-cost

2011 . . . . . . . . . . . . . . . . . . . . . . . . . 0.363 0.363 0.363

2012 . . . . . . . . . . . . . . . . . . . . . . . . . .366 .366 .365

2013 . . . . . . . . . . . . . . . . . . . . . . . . . .367 .368 .367

2014 . . . . . . . . . . . . . . . . . . . . . . . . . .368 .369 .367

2015 . . . . . . . . . . . . . . . . . . . . . . . . . .369 .370 .368

2016 . . . . . . . . . . . . . . . . . . . . . . . . . .371 .372 .369

2017 . . . . . . . . . . . . . . . . . . . . . . . . . .373 .374 .371

2018 . . . . . . . . . . . . . . . . . . . . . . . . . .375 .376 .372

2019 . . . . . . . . . . . . . . . . . . . . . . . . . .375 .378 .373

2020 . . . . . . . . . . . . . . . . . . . . . . . . . .375 .378 .372

2025 . . . . . . . . . . . . . . . . . . . . . . . . . .370 .375 .366

2030 . . . . . . . . . . . . . . . . . . . . . . . . . .367 .373 .362

2035 . . . . . . . . . . . . . . . . . . . . . . . . . .365 .372 .359

2040 . . . . . . . . . . . . . . . . . . . . . . . . . .363 .372 .355

2045 . . . . . . . . . . . . . . . . . . . . . . . . . .361 .371 .351

2050 . . . . . . . . . . . . . . . . . . . . . . . . . .358 .371 .347

2055 . . . . . . . . . . . . . . . . . . . . . . . . . .356 .370 .342

2060 . . . . . . . . . . . . . . . . . . . . . . . . . .353 .370 .338

2065 . . . . . . . . . . . . . . . . . . . . . . . . . .351 .369 .333

2070 . . . . . . . . . . . . . . . . . . . . . . . . . .348 .369 .329

2075 . . . . . . . . . . . . . . . . . . . . . . . . . .346 .369 .325

2080 . . . . . . . . . . . . . . . . . . . . . . . . . .344 .369 .321

2085 . . . . . . . . . . . . . . . . . . . . . . . . . .342 .369 .317
Appendices

190

3. Estimates in Dollars

This section presents long-range projections in dollars of the operations of

the combined OASI and DI Trust Funds and in some cases the HI Trust

Fund. Meaningful comparison of current dollar values over long periods of

time can be difficult because of the effect of inflation. Some means of

removing inflation is thus generally desirable. Several economic series or

indices are provided to allow current dollars to be adjusted for changes in

prices, wages, and certain other aspects of economic growth during the projection period.

Table VI.F6 presents five indices that may be used to adjust dollar amounts,

over time, to produce appropriately comparable values. Any series of values

can be adjusted by dividing the value for each year by the corresponding

index values for the year.

One of the most common forms of standardization is based on 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 (CPI-W, hereafter

referred to as CPI). This index is used to determine annual increases in

OASDI monthly benefits payable after the year of initial eligibility. The CPI

is assumed to increase ultimately at annual rates of 1.8, 2.8, and 3.8 percent

for the low-cost, intermediate, and high-cost sets of assumptions, respectively. Constant-dollar values (those adjusted using the CPI index in table

VI.F6) indicate the relative purchasing power of the values over time, and

are provided in table VI.F7.

Another type of standardization 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.

This index is used to make annual adjustments to many earnings-related

quantities embodied in the Social Security Act, such as the contribution and

benefit base. The growth in the average annual wage is assumed to average

3.6, 4.0, and 4.4 percent under the low-cost, intermediate, and high-cost

assumptions, respectively, between 2020 and 2085. 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, adjusted for the

lower effective tax rate on multiple-employer excess wages. A series of val-
191

OASDI and HI: Estimates in Dollars

ues, 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.

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 appendix VI.F.2) indicate their relative share of the total output of the economy.

No explicit assumptions are made about growth in taxable payroll or GDP.

These series are computed reflecting the other more 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.

The series of interest-rate factors included here is based on the average of the

assumed annual interest rates for special public-debt obligations issuable to

the trust funds for each year. This series is slightly different from the interest

rates used to create summarized values elsewhere in this report, where the

actual yield on currently-held trust fund assets is used for each year. Ultimate

nominal interest rates, which in practice are compounded semiannually, are

assumed to be approximately 5.4, 5.7, and 5.9 percent for the low-cost, intermediate, and high-cost assumptions, respectively.
Appendices

192

Table VI.F6.—Selected Economic Variables, Calendar Years 2010-85

[GDP and taxable payroll in billions]

Calendar year

Adjusted

CPIa Averagewage indexb Taxablepayrollc

Gross

domestic

product

Compound

interest-rate

factord

Intermediate:

2010 . . . . . . . . . . . . . 98.78 $41,843.71 $5,316 $14,654 0.9700

2011 . . . . . . . . . . . . . 100.00 43,517.83 5,532 15,231 1.0000

2012 . . . . . . . . . . . . . 101.66 45,435.49 5,834 15,949 1.0447

2013 . . . . . . . . . . . . . 103.59 47,489.90 6,175 16,807 1.0978

2014 . . . . . . . . . . . . . 105.62 49,462.43 6,527 17,719 1.1558

2015 . . . . . . . . . . . . . 107.73 51,398.64 6,879 18,626 1.2165

2016 . . . . . . . . . . . . . 109.89 53,430.36 7,240 19,496 1.2792

2017 . . . . . . . . . . . . . 112.26 55,551.37 7,600 20,366 1.3457

2018 . . . . . . . . . . . . . 115.18 57,969.43 7,983 21,312 1.4212

2019 . . . . . . . . . . . . . 118.40 60,406.32 8,361 22,297 1.5036

2020 . . . . . . . . . . . . . 121.72 62,760.16 8,738 23,315 1.5906

2025 . . . . . . . . . . . . . 139.74 75,917.46 10,813 29,190 2.1068

2030 . . . . . . . . . . . . . 160.43 92,292.47 13,429 36,547 2.7904

2035 . . . . . . . . . . . . . 184.18 112,470.97 16,780 45,934 3.6957

2040 . . . . . . . . . . . . . 211.45 137,096.03 20,995 57,792 4.8949

2045 . . . . . . . . . . . . . 242.76 166,774.21 26,217 72,644 6.4832

2050 . . . . . . . . . . . . . 278.71 202,573.04 32,624 91,063 8.5867

2055 . . . . . . . . . . . . . 319.97 245,901.05 40,533 113,949 11.3729

2060 . . . . . . . . . . . . . 367.35 298,355.68 50,338 142,539 15.0631

2065 . . . . . . . . . . . . . 421.74 361,967.60 62,568 178,452 19.9506

2070 . . . . . . . . . . . . . 484.18 439,090.87 77,728 223,301 26.4240

2075 . . . . . . . . . . . . . 555.87 532,980.73 96,530 279,159 34.9978

2080 . . . . . . . . . . . . . 638.18 647,482.90 119,865 348,661 46.3536

2085 . . . . . . . . . . . . . 732.67 787,361.54 148,855 435,071 61.3940

Low-cost:

2010 . . . . . . . . . . . . . 98.89 41,840.52 5,318 14,661 .9691

2011 . . . . . . . . . . . . . 100.00 43,599.58 5,559 15,305 1.0000

2012 . . . . . . . . . . . . . 101.15 45,522.96 5,897 16,115 1.0443

2013 . . . . . . . . . . . . . 102.42 47,535.08 6,282 17,091 1.0971

2014 . . . . . . . . . . . . . 103.82 49,370.46 6,666 18,081 1.1540

2015 . . . . . . . . . . . . . 105.34 51,143.06 7,044 19,036 1.2144

2016 . . . . . . . . . . . . . 106.98 53,057.41 7,410 19,901 1.2763

2017 . . . . . . . . . . . . . 108.76 55,112.98 7,765 20,740 1.3419

2018 . . . . . . . . . . . . . 110.68 57,323.29 8,134 21,607 1.4135

2019 . . . . . . . . . . . . . 112.67 59,503.79 8,502 22,512 1.4905

2020 . . . . . . . . . . . . . 114.70 61,577.65 8,864 23,450 1.5717

2025 . . . . . . . . . . . . . 125.40 73,015.00 10,794 28,795 2.0508

2030 . . . . . . . . . . . . . 137.10 87,012.41 13,174 35,305 2.6758

2035 . . . . . . . . . . . . . 149.89 103,819.01 16,192 43,471 3.4913

2040 . . . . . . . . . . . . . 163.88 123,885.72 19,993 53,734 4.5554

2045 . . . . . . . . . . . . . 179.16 147,615.41 24,723 66,554 5.9438

2050 . . . . . . . . . . . . . 195.88 175,713.27 30,554 82,404 7.7554

2055 . . . . . . . . . . . . . 214.16 209,112.12 37,788 102,054 10.1190

2060 . . . . . . . . . . . . . 234.14 248,955.19 46,802 126,548 13.2031

2065 . . . . . . . . . . . . . 255.98 296,404.22 58,083 157,228 17.2272

2070 . . . . . . . . . . . . . 279.86 352,835.43 72,166 195,562 22.4777

2075 . . . . . . . . . . . . . 305.98 420,266.82 89,767 243,366 29.3285

2080 . . . . . . . . . . . . . 334.52 500,987.30 111,712 302,757 38.2673

2085 . . . . . . . . . . . . . 365.73 597,685.57 139,010 376,292 49.9304
193

OASDI and HI: Estimates in Dollars

Table VI.F7 shows estimated operations of the combined OASI and DI Trust

Funds in constant 2011 dollars (i.e., adjusted by the CPI indexing series as

discussed above). The following items are presented in the table: income

excluding interest, interest income, total income, total cost, and assets at the

end of the year. Income excluding interest consists of payroll tax contributions, income from taxation of benefits, and reimbursements from the General Fund of the Treasury, if any. Cost consists of benefit payments,

administrative expenses, financial interchange with the Railroad Retirement

program, and payments for vocational rehabilitation services for disabled

beneficiaries. These estimates are based on the low-cost, intermediate, and

high-cost sets of assumptions.

High-cost:

2010 . . . . . . . . . . . . . 98.45 $41,836.85 $5,314 $14,645 0.9701

2011 . . . . . . . . . . . . . 100.00 43,363.65 5,496 15,124 1.0000

2012 . . . . . . . . . . . . . 102.38 45,401.07 5,776 15,806 1.0474

2013 . . . . . . . . . . . . . 105.25 47,667.29 6,104 16,649 1.1044

2014 . . . . . . . . . . . . . 108.41 49,918.31 6,450 17,553 1.1668

2015 . . . . . . . . . . . . . 111.88 52,343.69 6,823 18,540 1.2348

2016 . . . . . . . . . . . . . 115.46 54,993.37 7,226 19,559 1.3067

2017 . . . . . . . . . . . . . 119.38 57,690.56 7,637 20,594 1.3829

2018 . . . . . . . . . . . . . 123.68 60,485.28 8,055 21,642 1.4637

2019 . . . . . . . . . . . . . 128.38 63,329.45 8,475 22,749 1.5512

2020 . . . . . . . . . . . . . 133.26 66,140.81 8,891 23,922 1.6448

2025 . . . . . . . . . . . . . 160.58 81,562.75 11,181 30,533 2.1990

2030 . . . . . . . . . . . . . 193.50 101,100.40 14,127 39,025 2.9400

2035 . . . . . . . . . . . . . 233.16 125,769.72 17,940 50,039 3.9306

2040 . . . . . . . . . . . . . 280.96 156,518.55 22,733 64,037 5.2550

2045 . . . . . . . . . . . . . 338.56 194,265.42 28,633 81,581 7.0257

2050 . . . . . . . . . . . . . 407.96 240,635.32 35,821 103,352 9.3930

2055 . . . . . . . . . . . . . 491.59 297,752.07 44,613 130,363 12.5579

2060 . . . . . . . . . . . . . 592.37 367,917.01 55,432 164,102 16.7894

2065 . . . . . . . . . . . . . 713.80 454,431.01 68,821 206,444 22.4466

2070 . . . . . . . . . . . . . 860.13 561,214.67 85,218 259,064 30.0099

2075 . . . . . . . . . . . . . 1,036.46 693,500.40 105,300 324,238 40.1218

2080 . . . . . . . . . . . . . 1,248.93 857,733.04 129,967 405,035 53.6409

2085 . . . . . . . . . . . . . 1,504.96 1,062,040.43 160,398 505,453 71.7153

a The adjusted CPI is the CPI-W indexed to calendar year 2011.

b The average wage index is used to automatically adjust the contribution and benefit base and other wageindexed program amounts. (See “Average wage index” in the glossary.)

c Taxable payroll consists of 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 multipleemployer “excess wages.”

d The compound interest-rate factor is based on 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 2010-85 (Cont.)

[GDP and taxable payroll in billions]

Calendar year

Adjusted

CPIa Average

wage indexb Taxablepayrollc

Gross

domestic

product

Compound

interest-rate

factord
Appendices

194

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

Table VI.F7.—Operations of the Combined OASI and DI Trust Funds,

in Constant 2011 Dollars,a Calendar Years 2011-85

[In billions]

a The adjusted CPI indexing series shown in table VI.F6 is used to adjust from current to constant dollars.

Calendar year

Income

excluding

interest

Interest

income

Total

income Cost

Assets at

end of year

Intermediate:

2011 . . . . . . . . . . . . . $692.8 $114.9 $807.7 $738.4 $2,678.2

2012 . . . . . . . . . . . . . 738.5 114.2 852.7 759.4 2,727.9

2013 . . . . . . . . . . . . . 766.9 116.5 883.4 785.6 2,774.8

2014 . . . . . . . . . . . . . 798.2 120.0 918.3 814.7 2,824.9

2015 . . . . . . . . . . . . . 826.2 123.7 949.9 845.6 2,873.8

2016 . . . . . . . . . . . . . 854.6 127.3 981.9 878.0 2,921.3

2017 . . . . . . . . . . . . . 880.2 130.9 1,011.2 911.4 2,959.4

2018 . . . . . . . . . . . . . 902.9 135.5 1,038.4 943.7 2,979.0

2019 . . . . . . . . . . . . . 921.1 139.2 1,060.3 980.2 2,978.1

2020 . . . . . . . . . . . . . 937.6 141.5 1,079.1 1,019.1 2,956.9

2025 . . . . . . . . . . . . . 1,017.4 146.0 1,163.5 1,212.8 2,551.5

2030 . . . . . . . . . . . . . 1,105.9 95.2 1,201.1 1,394.3 1,570.7

2035b ............

b Estimates for later years are not shown because the combined OASI and DI Trust Funds are estimated to

become exhausted in 2036 under the intermediate assumptions and in 2029 under the high-cost assumptions.

1,206.5 14.1 1,220.6 1,550.1 57.7

Low-cost:

2011 . . . . . . . . . . . . . 695.0 115.0 809.9 735.9 2,683.0

2012 . . . . . . . . . . . . . 750.8 115.3 866.1 757.9 2,760.9

2013 . . . . . . . . . . . . . 788.0 119.3 907.3 783.1 2,850.6

2014 . . . . . . . . . . . . . 828.0 124.9 952.9 810.0 2,955.1

2015 . . . . . . . . . . . . . 863.3 131.1 994.5 838.1 3,068.9

2016 . . . . . . . . . . . . . 896.2 137.7 1,033.8 867.7 3,187.8

2017 . . . . . . . . . . . . . 925.7 144.9 1,070.6 900.2 3,306.1

2018 . . . . . . . . . . . . . 954.6 153.6 1,108.2 934.0 3,423.0

2019 . . . . . . . . . . . . . 980.9 162.1 1,143.0 970.4 3,535.2

2020 . . . . . . . . . . . . . 1,005.3 169.9 1,175.2 1,008.3 3,639.6

2025 . . . . . . . . . . . . . 1,125.3 212.1 1,337.4 1,207.0 4,027.6

2030 . . . . . . . . . . . . . 1,260.2 220.2 1,480.4 1,402.8 4,149.7

2035 . . . . . . . . . . . . . 1,417.9 218.3 1,636.1 1,579.2 4,098.0

2040 . . . . . . . . . . . . . 1,600.0 215.7 1,815.7 1,742.6 4,052.9

2045 . . . . . . . . . . . . . 1,807.3 221.5 2,028.8 1,914.7 4,178.6

2050 . . . . . . . . . . . . . 2,040.9 238.3 2,279.2 2,115.9 4,513.7

2055 . . . . . . . . . . . . . 2,307.5 266.7 2,574.2 2,359.3 5,067.4

2060 . . . . . . . . . . . . . 2,612.7 307.2 2,919.9 2,637.1 5,856.4

2065 . . . . . . . . . . . . . 2,963.5 366.5 3,330.0 2,943.2 7,014.3

2070 . . . . . . . . . . . . . 3,365.7 450.7 3,816.4 3,299.2 8,653.8

2075 . . . . . . . . . . . . . 3,827.3 565.4 4,392.7 3,710.6 10,882.6

2080 . . . . . . . . . . . . . 4,355.1 716.6 5,071.7 4,194.2 13,810.4

2085 . . . . . . . . . . . . . 4,957.3 907.1 5,864.4 4,774.1 17,484.5

High-cost:

2011 . . . . . . . . . . . . . 690.4 114.7 805.2 741.1 2,673.1

2012 . . . . . . . . . . . . . 724.4 113.1 837.4 762.6 2,685.7

2013 . . . . . . . . . . . . . 747.1 114.1 861.2 789.5 2,684.2

2014 . . . . . . . . . . . . . 769.9 116.0 885.9 819.9 2,672.1

2015 . . . . . . . . . . . . . 790.8 117.4 908.2 851.5 2,645.9

2016 . . . . . . . . . . . . . 813.7 118.4 932.1 886.1 2,609.9

2017 . . . . . . . . . . . . . 834.1 119.0 953.0 920.9 2,556.2

2018 . . . . . . . . . . . . . 851.3 118.7 969.9 956.5 2,480.8

2019 . . . . . . . . . . . . . 864.2 116.6 980.8 993.4 2,377.4

2020 . . . . . . . . . . . . . 875.1 112.8 987.9 1,033.4 2,244.9

2025b . . . . . . . . . . . . 921.6 74.9 996.5 1,220.5 1,156.9
195

OASDI and HI: Estimates in Dollars

Figure VI.F1 provides a comparison of annual cost with total annual income

(including interest) and annual income excluding interest, for the OASDI

program under intermediate assumptions. All values are expressed in constant 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 will exceed

non-interest income in each year of the projection period; (2) total annual

income, which includes interest earnings on trust fund assets, will be sufficient to cover annual cost for years 2011 through 2022; and (3) total annual

income will not be sufficient to cover annual cost for years beginning in

2023. From 2023 through 2035 (the year preceding the year of trust fund

exhaustion), annual cost will be covered by drawing down combined trust

fund assets.

Table VI.F8 shows estimated 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: income excluding interest,

interest income, total income, total cost, and assets at the end of the year.

These estimates, based on the low-cost, intermediate, and high-cost sets of

Figure VI.F1.—Estimated OASDI Income and Cost in Constant 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 2040

Calendar year

Cost

Total income

Income excluding interest
Appendices

196

demographic and economic assumptions, are presented to facilitate independent analysis.

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

Table VI.F8.—Operations of the Combined OASI and DI Trust Funds,

in Current Dollars, Calendar Years 2011-85

[In billions]

Calendar year

Income

excluding

interest

Interest

income

Total

income Cost

Assets at

end of year

Intermediate:

2011 . . . . . . . . . . . . . $692.8 $114.9 $807.7 $738.4 $2,678.2

2012 . . . . . . . . . . . . . 750.7 116.1 866.8 772.0 2,773.0

2013 . . . . . . . . . . . . . 794.4 120.7 915.1 813.8 2,874.3

2014 . . . . . . . . . . . . . 843.1 126.8 969.9 860.5 2,983.7

2015 . . . . . . . . . . . . . 890.1 133.3 1,023.4 911.0 3,096.1

2016 . . . . . . . . . . . . . 939.1 139.8 1,079.0 964.8 3,210.2

2017 . . . . . . . . . . . . . 988.1 147.0 1,135.1 1,023.1 3,322.2

2018 . . . . . . . . . . . . . 1,040.0 156.1 1,196.0 1,086.9 3,431.3

2019 . . . . . . . . . . . . . 1,090.6 164.8 1,255.4 1,160.6 3,526.1

2020 . . . . . . . . . . . . . 1,141.2 172.2 1,313.4 1,240.4 3,599.1

2025 . . . . . . . . . . . . . 1,421.8 204.0 1,625.8 1,694.8 3,565.5

2030 . . . . . . . . . . . . . 1,774.2 152.7 1,926.9 2,236.8 2,519.9

2035a ............

a Estimates for later years are not shown because the combined OASI and DI Trust Funds are estimated to

become exhausted in 2036 under the intermediate assumptions and in 2029 under the high-cost assumptions.

2,222.2 26.0 2,248.2 2,854.9 106.2

Low-cost:

2011 . . . . . . . . . . . . . 695.0 115.0 809.9 735.9 2,683.0

2012 . . . . . . . . . . . . . 759.4 116.7 876.0 766.5 2,792.5

2013 . . . . . . . . . . . . . 807.1 122.2 929.3 802.1 2,919.7

2014 . . . . . . . . . . . . . 859.6 129.6 989.3 840.9 3,068.0

2015 . . . . . . . . . . . . . 909.4 138.1 1,047.6 882.9 3,232.7

2016 . . . . . . . . . . . . . 958.7 147.3 1,106.0 928.3 3,410.4

2017 . . . . . . . . . . . . . 1,006.8 157.6 1,164.4 979.0 3,595.8

2018 . . . . . . . . . . . . . 1,056.6 170.0 1,226.6 1,033.8 3,788.6

2019 . . . . . . . . . . . . . 1,105.2 182.6 1,287.8 1,093.3 3,983.1

2020 . . . . . . . . . . . . . 1,153.1 194.8 1,347.9 1,156.5 4,174.5

2025 . . . . . . . . . . . . . 1,411.1 266.0 1,677.1 1,513.6 5,050.6

2030 . . . . . . . . . . . . . 1,727.7 301.9 2,029.7 1,923.2 5,689.3

2035 . . . . . . . . . . . . . 2,125.3 327.2 2,452.4 2,367.1 6,142.6

2040 . . . . . . . . . . . . . 2,622.0 353.4 2,975.5 2,855.7 6,641.8

2045 . . . . . . . . . . . . . 3,238.1 396.9 3,634.9 3,430.5 7,486.6

2050 . . . . . . . . . . . . . 3,997.7 466.8 4,464.5 4,144.7 8,841.4

2055 . . . . . . . . . . . . . 4,941.6 571.2 5,512.8 5,052.7 10,852.2

2060 . . . . . . . . . . . . . 6,117.2 719.3 6,836.6 6,174.4 13,711.9

2065 . . . . . . . . . . . . . 7,586.0 938.1 8,524.1 7,534.1 17,955.2

2070 . . . . . . . . . . . . . 9,419.3 1,261.4 10,680.6 9,233.3 24,218.9

2075 . . . . . . . . . . . . . 11,710.4 1,730.1 13,440.5 11,353.4 33,297.9

2080 . . . . . . . . . . . . . 14,568.8 2,397.2 16,966.0 14,030.4 46,198.8

2085 . . . . . . . . . . . . . 18,130.5 3,317.7 21,448.1 17,460.6 63,946.5

High-cost:

2011 . . . . . . . . . . . . . 690.4 114.7 805.2 741.1 2,673.1

2012 . . . . . . . . . . . . . 741.6 115.8 857.4 780.8 2,749.7

2013 . . . . . . . . . . . . . 786.3 120.1 906.4 831.0 2,825.2

2014 . . . . . . . . . . . . . 834.7 125.7 960.4 888.8 2,896.8

2015 . . . . . . . . . . . . . 884.7 131.3 1,016.0 952.6 2,960.2

2016 . . . . . . . . . . . . . 939.5 136.7 1,076.2 1,023.0 3,013.4

2017 . . . . . . . . . . . . . 995.7 142.0 1,137.7 1,099.4 3,051.7

2018 . . . . . . . . . . . . . 1,052.9 146.7 1,199.6 1,183.1 3,068.3

2019 . . . . . . . . . . . . . 1,109.5 149.7 1,259.2 1,275.4 3,052.1

2020 . . . . . . . . . . . . . 1,166.2 150.3 1,316.5 1,377.1 2,991.5

2025a . . . . . . . . . . . . 1,479.8 120.2 1,600.1 1,959.9 1,857.6
197

OASDI and HI: Estimates in Dollars

Table VI.F9 shows, in current dollars, estimated annual income (excluding

interest) and estimated annual 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 described earlier in this report. For OASDI, income excluding interest

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 benefit payments, administrative expenses, financial interchange

with the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries. For HI, income excluding interest

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. Income and cost estimates are shown on a cash basis for the OASDI

program and on an incurred basis for the HI program.

Table VI.F9 also shows the difference between income excluding interest

and cost, which is called the balance. The balance indicates the size of the

difference between non-interest income and cost.
Appendices

198

Table VI.F9.—OASDI and HI Annual Income Excluding Interest, Cost, and

Balance in Current Dollars, Calendar Years 2011-85

[In billions]

Calendar

year

OASDI HI Combined

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance

Intermediate:

2011 . . . . . $693 $738 -$46 $216 $261 -$45 $909 $999 -$90

2012 . . . . . 751 772 -21 230 272 -42 980 1,044 -64

2013 . . . . . 794 814 -19 254 285 -31 1,048 1,099 -50

2014 . . . . . 843 861 -17 272 297 -25 1,115 1,158 -42

2015 . . . . . 890 911 -21 289 305 -16 1,179 1,216 -37

2016 . . . . . 939 965 -26 306 318 -12 1,245 1,283 -38

2017 . . . . . 988 1,023 -35 323 334 -10 1,311 1,357 -45

2018 . . . . . 1,040 1,087 -47 341 352 -11 1,381 1,439 -58

2019 . . . . . 1,091 1,161 -70 360 372 -12 1,450 1,532 -82

2020 . . . . . 1,141 1,240 -99 378 395 -17 1,519 1,636 -117

2025 . . . . . 1,422 1,695 -273 480 542 -62 1,902 2,237 -335

2030 . . . . . 1,774 2,237 -463 611 743 -132 2,386 2,980 -594

2035 . . . . . 2,222 2,855 -633 779 1,004 -225 3,001 3,859 -858

2040 . . . . . 2,781 3,560 -778 991 1,315 -323 3,773 4,874 -1,101

2045 . . . . . 3,472 4,401 -929 1,258 1,673 -415 4,731 6,074 -1,343

2050 . . . . . 4,321 5,444 -1,123 1,593 2,092 -499 5,914 7,536 -1,622

2055 . . . . . 5,371 6,777 -1,406 2,016 2,594 -578 7,387 9,371 -1,984

2060 . . . . . 6,674 8,459 -1,785 2,549 3,223 -674 9,223 11,682 -2,459

2065 . . . . . 8,300 10,554 -2,254 3,221 4,015 -795 11,520 14,569 -3,049

2070 . . . . . 10,318 13,216 -2,898 4,063 4,993 -930 14,381 18,209 -3,828

2075 . . . . . 12,825 16,583 -3,758 5,119 6,163 -1,044 17,944 22,746 -4,802

2080 . . . . . 15,940 20,810 -4,870 6,439 7,540 -1,101 22,379 28,350 -5,971

2085 . . . . . 19,814 26,132 -6,318 8,092 9,172 -1,080 27,906 35,303 -7,398

Low-cost:

2011 . . . . . 695 736 -41 217 254 -37 912 990 -78

2012 . . . . . 759 767 -7 232 262 -30 991 1,029 -37

2013 . . . . . 807 802 5 257 270 -13 1,064 1,072 -8

2014 . . . . . 860 841 19 276 277 -1 1,136 1,118 18

2015 . . . . . 909 883 27 293 278 15 1,202 1,161 41

2016 . . . . . 959 928 30 310 285 25 1,268 1,213 55

2017 . . . . . 1,007 979 28 326 292 34 1,333 1,271 62

2018 . . . . . 1,057 1,034 23 343 301 42 1,400 1,335 65

2019 . . . . . 1,105 1,093 12 360 311 49 1,465 1,404 61

2020 . . . . . 1,153 1,156 -3 376 323 53 1,529 1,480 50

2025 . . . . . 1,411 1,514 -102 468 398 70 1,879 1,911 -32

2030 . . . . . 1,728 1,923 -196 582 489 94 2,310 2,412 -102

2035 . . . . . 2,125 2,367 -242 726 592 135 2,852 2,959 -107

2040 . . . . . 2,622 2,856 -234 907 696 211 3,530 3,552 -22

2045 . . . . . 3,238 3,431 -192 1,135 817 318 4,373 4,247 126

2050 . . . . . 3,998 4,145 -147 1,421 965 457 5,419 5,109 310

2055 . . . . . 4,942 5,053 -111 1,783 1,155 628 6,725 6,208 517

2060 . . . . . 6,117 6,174 -57 2,241 1,418 823 8,358 7,592 765

2065 . . . . . 7,586 7,534 52 2,817 1,763 1,054 10,403 9,297 1,106

2070 . . . . . 9,419 9,233 186 3,544 2,193 1,351 12,963 11,426 1,537

2075 . . . . . 11,710 11,353 357 4,459 2,710 1,749 16,169 14,063 2,106

2080 . . . . . 14,569 14,030 538 5,609 3,321 2,287 20,178 17,352 2,826

2085 . . . . . 18,130 17,461 670 7,052 4,047 3,005 25,183 21,508 3,675
199

OASDI and HI: Estimates in Dollars

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

Table VI.F10 shows projected future benefit amounts payable upon retirement at either the normal retirement age (NRA) or age 65, for workers attaining age 65 in 2011 and subsequent years. Illustrative benefit levels are shown

for workers with four separate pre-retirement earnings patterns. All estimates

are based on the intermediate assumptions in this report. Benefit amounts are

shown in constant 2011 dollars (adjusted to 2011 levels by the CPI indexing

series shown in table VI.F6). Benefit amounts are also shown as percentages

of the career-average relative earnings level for each case, wage indexed to

the year prior to retirement. These percentages thus represent the benefit

“replacement rate” of the career-average level of earnings.

The NRA was 65 for individuals who reached age 62 before 2000, was then

increased to age 66 during the period 2000-05 (at a rate of 2 months per year

as workers attained age 62), and is scheduled to increase to age 67 during the

period 2017-22 (also by 2 months per year as workers attain age 62). Thus,

for the illustrative cases shown in table VI.F10, the benefit levels shown for

High-cost:

2011 . . . . . $690 $741 -$51 $214 $267 -$53 $905 $1,008 -$104

2012 . . . . . 742 781 -39 228 283 -56 969 1,064 -95

2013 . . . . . 786 831 -45 252 303 -51 1,038 1,134 -96

2014 . . . . . 835 889 -54 271 323 -53 1,105 1,212 -107

2015 . . . . . 885 953 -68 289 341 -52 1,174 1,294 -120

2016 . . . . . 939 1,023 -84 309 367 -58 1,249 1,390 -142

2017 . . . . . 996 1,099 -104 330 396 -66 1,326 1,495 -170

2018 . . . . . 1,053 1,183 -130 350 428 -78 1,403 1,611 -208

2019 . . . . . 1,109 1,275 -166 371 464 -93 1,481 1,739 -259

2020 . . . . . 1,166 1,377 -211 392 505 -113 1,559 1,882 -324

2025 . . . . . 1,480 1,960 -480 510 777 -267 1,990 2,737 -747

2030 . . . . . 1,883 2,687 -805 665 1,199 -534 2,548 3,886 -1,338

2035 . . . . . 2,401 3,567 -1,166 867 1,811 -944 3,269 5,378 -2,110

2040 . . . . . 3,050 4,611 -1,560 1,125 2,630 -1,505 4,176 7,241 -3,065

2045 . . . . . 3,848 5,883 -2,035 1,450 3,623 -2,174 5,298 9,507 -4,209

2050 . . . . . 4,822 7,466 -2,644 1,855 4,788 -2,933 6,677 12,254 -5,577

2055 . . . . . 6,018 9,498 -3,480 2,364 6,134 -3,770 8,382 15,632 -7,249

2060 . . . . . 7,497 12,094 -4,598 3,003 7,696 -4,693 10,500 19,791 -9,291

2065 . . . . . 9,331 15,402 -6,071 3,805 9,579 -5,774 13,136 24,981 -11,845

2070 . . . . . 11,590 19,675 -8,085 4,806 11,878 -7,072 16,396 31,553 -15,157

2075 . . . . . 14,372 25,152 -10,780 6,052 14,591 -8,539 20,424 39,743 -19,318

2080 . . . . . 17,799 32,034 -14,235 7,601 17,749 -10,148 25,399 49,783 -24,383

2085 . . . . . 22,030 40,576 -18,546 9,525 21,463 -11,938 31,555 62,039 -30,484

Table VI.F9.—OASDI and HI Annual Income Excluding Interest, Cost, and

Balance in Current Dollars, Calendar Years 2011-85 (Cont.)

[In billions]

Calendar

year

OASDI HI Combined

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance
Appendices

200

retirement at 65 are lower than the levels shown for retirement at NRA, primarily because of the actuarial reduction for early (pre-NRA) retirement.

Four different pre-retirement earnings patterns are represented in table

VI.F10. Three of these cases are workers with scaled-earnings patterns,1

reflecting low, medium, and high career-average levels of pre-retirement

earnings starting at age 21. The fourth case is the steady maximum earner.

The three scaled-earnings cases have earnings patterns that reflect differences by age in the probability of work and in average earnings levels experienced by insured workers during the period 1991-2007. The general, careeraverage level of earnings for the scaled cases is set relative to the national

average wage index (AWI) so that benefit levels are consistent with levels

for “steady-earnings” cases presented in the 2000 and earlier Trustees

Reports. For the scaled medium earner, the general, career-average earnings

level is set at about equal to the AWI. For the scaled low and high earners,

the general, career-average earnings level is set at about 45 percent and 160

percent of the AWI, respectively. The steady maximum earner is assumed to

have earnings at (or above) the contribution and benefit base for each year

starting at age 22 and prior to retirement.

As noted above, the scaled-earnings cases were constructed so that their

career-average earnings levels are consistent with those of the corresponding

steady low, average, and high earners presented in the 2000 and earlier Trustees Reports. As a result, values in this table are essentially comparable to

those in earlier reports. Scaled-earnings cases are now used instead of

steady-earnings cases because they more accurately illustrate the differences

in benefit levels under the wide variety of reform proposals considered in

recent years.

1 More details on scaled-earnings patterns are provided in Actuarial Note Number 2010.3, which may be

found at www.socialsecurity.gov/OACT/NOTES/ran3/an2010-3.html.
201

OASDI and HI: Estimates in Dollars

Table VI.F10.—Annual Scheduled Benefit Amountsa for Retired Workers

With Various Pre-Retirement Earnings Patterns

Based on Intermediate Assumptions, Calendar Years 2011-85

Year attain age 65b

Retirement at normal retirement age Retirement at age 65

Age at

retirement

Constant

2011

dollars c Percent ofearnings

Age at

retirement

Constant

2011

dollarsc Percent ofearnings

Scaled low earnings:d

2011 . . . . . . . . . . . 66:0 $11,041 57.3 65:0 $10,398 55.2

2015 . . . . . . . . . . . 66:0 11,201 53.2 65:0 10,454 50.6

2020 . . . . . . . . . . . 66:2 12,441 55.0 65:0 11,473 51.4

2025 . . . . . . . . . . . 67:0 13,317 55.4 65:0 11,543 49.1

2030 . . . . . . . . . . . 67:0 14,040 55.1 65:0 12,168 48.9

2035 . . . . . . . . . . . 67:0 14,868 55.0 65:0 12,884 48.8

2040 . . . . . . . . . . . 67:0 15,782 55.0 65:0 13,680 48.8

2045 . . . . . . . . . . . 67:0 16,756 55.1 65:0 14,522 48.8

2050 . . . . . . . . . . . 67:0 17,756 55.2 65:0 15,390 48.9

2055 . . . . . . . . . . . 67:0 18,789 55.2 65:0 16,284 48.9

2060 . . . . . . . . . . . 67:0 19,864 55.3 65:0 17,216 49.0

2065 . . . . . . . . . . . 67:0 20,996 55.3 65:0 18,196 49.0

2070 . . . . . . . . . . . 67:0 22,186 55.3 65:0 19,228 49.0

2075 . . . . . . . . . . . 67:0 23,444 55.2 65:0 20,318 49.0

2080 . . . . . . . . . . . 67:0 24,787 55.2 65:0 21,482 48.9

2085 . . . . . . . . . . . 67:0 26,230 55.1 65:0 22,732 48.9

Scaled medium earnings:e

2011 . . . . . . . . . . . 66:0 18,204 42.5 65:0 17,134 40.9

2015 . . . . . . . . . . . 66:0 18,464 39.5 65:0 17,238 37.5

2020 . . . . . . . . . . . 66:2 20,505 40.8 65:0 18,913 38.1

2025 . . . . . . . . . . . 67:0 21,958 41.1 65:0 19,031 36.4

2030 . . . . . . . . . . . 67:0 23,136 40.9 65:0 20,048 36.2

2035 . . . . . . . . . . . 67:0 24,508 40.8 65:0 21,237 36.2

2040 . . . . . . . . . . . 67:0 26,009 40.8 65:0 22,542 36.2

2045 . . . . . . . . . . . 67:0 27,615 40.9 65:0 23,931 36.2

2050 . . . . . . . . . . . 67:0 29,264 40.9 65:0 25,363 36.3

2055 . . . . . . . . . . . 67:0 30,961 41.0 65:0 26,832 36.3

2060 . . . . . . . . . . . 67:0 32,734 41.0 65:0 28,371 36.3

2065 . . . . . . . . . . . 67:0 34,598 41.0 65:0 29,983 36.3

2070 . . . . . . . . . . . 67:0 36,560 41.0 65:0 31,686 36.3

2075 . . . . . . . . . . . 67:0 38,631 41.0 65:0 33,480 36.3

2080 . . . . . . . . . . . 67:0 40,843 40.9 65:0 35,397 36.3

2085 . . . . . . . . . . . 67:0 43,222 40.9 65:0 37,458 36.3

Scaled high earnings:f

2011 . . . . . . . . . . . 66:0 24,127 35.2 65:0 22,717 33.9

2015 . . . . . . . . . . . 66:0 24,469 32.7 65:0 22,839 31.1

2020 . . . . . . . . . . . 66:2 27,178 33.8 65:0 25,060 31.6

2025 . . . . . . . . . . . 67:0 29,102 34.0 65:0 25,220 30.1

2030 . . . . . . . . . . . 67:0 30,662 33.8 65:0 26,578 30.0

2035 . . . . . . . . . . . 67:0 32,473 33.8 65:0 28,146 30.0

2040 . . . . . . . . . . . 67:0 34,470 33.8 65:0 29,875 30.0

2045 . . . . . . . . . . . 67:0 36,598 33.8 65:0 31,719 30.0

2050 . . . . . . . . . . . 67:0 38,783 33.9 65:0 33,610 30.0

2055 . . . . . . . . . . . 67:0 41,031 33.9 65:0 35,561 30.1

2060 . . . . . . . . . . . 67:0 43,383 33.9 65:0 37,599 30.1

2065 . . . . . . . . . . . 67:0 45,849 33.9 65:0 39,737 30.1

2070 . . . . . . . . . . . 67:0 48,450 33.9 65:0 41,990 30.1

2075 . . . . . . . . . . . 67:0 51,197 33.9 65:0 44,369 30.1

2080 . . . . . . . . . . . 67:0 54,128 33.9 65:0 46,911 30.0

2085 . . . . . . . . . . . 67:0 57,278 33.8 65:0 49,641 30.0
Appendices

202

Steady maximum earnings:g

2011 . . . . . . . . . . . 66:0 $28,879 28.6 65:0 $27,004 27.6

2015 . . . . . . . . . . . 66:0 29,797 26.3 65:0 27,659 25.0

2020 . . . . . . . . . . . 66:2 33,250 27.0 65:0 30,544 25.2

2025 . . . . . . . . . . . 67:0 35,813 27.2 65:0 30,806 24.0

2030 . . . . . . . . . . . 67:0 37,778 27.1 65:0 32,508 23.9

2035 . . . . . . . . . . . 67:0 40,025 27.0 65:0 34,442 23.8

2040 . . . . . . . . . . . 67:0 42,442 27.0 65:0 36,524 23.8

2045 . . . . . . . . . . . 67:0 45,060 27.1 65:0 38,780 23.9

2050 . . . . . . . . . . . 67:0 47,682 27.2 65:0 41,038 23.9

2055 . . . . . . . . . . . 67:0 50,354 27.3 65:0 43,338 24.0

2060 . . . . . . . . . . . 67:0 53,242 27.3 65:0 45,827 24.0

2065 . . . . . . . . . . . 67:0 56,271 27.3 65:0 48,433 24.0

2070 . . . . . . . . . . . 67:0 59,459 27.3 65:0 51,179 24.0

2075 . . . . . . . . . . . 67:0 62,831 27.2 65:0 54,080 24.0

2080 . . . . . . . . . . . 67:0 66,436 27.2 65:0 57,183 24.0

2085 . . . . . . . . . . . 67:0 70,302 27.2 65:0 60,510 23.9

a Annual scheduled benefit amounts are the total for the 12-month period starting with the month of

retirement.

b Assumed to attain age 65 in January of the year.

c The adjustment for constant dollars is made using the adjusted CPI indexing series shown in table VI.F6.

d Career-average earnings at about 45 percent of the national average wage index (AWI).

e Career-average earnings at about 100 percent of the AWI.

f Career-average earnings at about 160 percent of the AWI.

g Earnings for each year equal to the contribution and benefit base.

Table VI.F10.—Annual Scheduled Benefit Amountsa for Retired Workers

With Various Pre-Retirement Earnings Patterns

Based on Intermediate Assumptions, Calendar Years 2011-85 (Cont.)

Year attain age 65b

Retirement at normal retirement age Retirement at age 65

Age at

retirement

Constant

2011

dollars c Percent ofearnings

Age at

retirement

Constant

2011

dollarsc Percent ofearnings
203

OASI Expenditures for 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, monthly benefits have been payable from the OASI

Trust Fund to disabled children aged 18 and over of retired and deceased

workers in those cases for which the disability began before age 18. The age

before which disability is required to have begun was subsequently changed

to age 22. Effective February 1968, reduced monthly benefits have been payable from the OASI Trust Fund 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.

On December 31, 2010, about 996,000 persons were receiving monthly benefits from the OASI Trust Fund because of their disabilities or the disabilities

of children. This total includes approximately 27,000 mothers and fathers

(wives or husbands under normal retirement age of retired-worker 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. Benefits paid from the OASI Trust Fund to the persons

described above totaled $8,854 million in calendar year 2010. Table VI.G1

shows these and similar figures for selected calendar years during 1960-

2010, and estimated experience for 2011-20 based on the intermediate set of

assumptions.
Appendices

204

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; benefit payments in millions]

Calendar year

Disabled beneficiaries, end of year Amount of benefit paymentsa

a Beginning in 1966, this includes payments for vocational rehabilitation services.

Total Children b

b This also includes certain mothers and fathers (see text).

Widowswidowers c

c In 1984 and later years, only disabled widows and widowers aged 50-59 are included because disabled

widows and widowers age 60 and older would be 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, this reflects 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)

as compared to the higher nondisabled widow’s and widower’s benefits that would otherwise be payable. In

1984 and later years, only benefit payments to disabled widows and widowers aged 50-59 are included (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 6,458 5,556 843

2006 . . . . . . . . . 840 732 108 6,741 5,852 885

2007 . . . . . . . . . 851 744 107 7,051 6,181 867

2008 . . . . . . . . . 922 813 109 7,685 6,776 905

2009 . . . . . . . . . 969 857 112 8,592 7,618 971

2010 . . . . . . . . . 996 879 117 8,854 7,848 1,004

Estimates under the intermediate assumptions:

2011 . . . . . . . . . 1,016 897 120 9,156 8,112 1,039

2012 . . . . . . . . . 1,035 914 121 9,461 8,390 1,065

2013 . . . . . . . . . 1,054 932 122 9,865 8,759 1,098

2014 . . . . . . . . . 1,071 949 122 10,283 9,154 1,121

2015 . . . . . . . . . 1,088 966 122 10,724 9,572 1,143

2016 . . . . . . . . . 1,102 982 120 11,171 10,003 1,158

2017 . . . . . . . . . 1,116 997 118 11,628 10,446 1,172

2018 . . . . . . . . . 1,128 1,012 116 12,122 10,926 1,185

2019 . . . . . . . . . 1,141 1,027 114 12,698 11,477 1,210

2020 . . . . . . . . . 1,154 1,041 113 13,319 12,062 1,246
205

OASI Expenditures for Disabled

Total benefit payments from the OASI Trust Fund with respect to disabled

beneficiaries are estimated to increase from $9,156 million in calendar year

2011 to $13,319 million in calendar year 2020, based on the intermediate

assumptions.

In calendar year 2010, 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 latter

fund to all children and spouses of disabled-worker beneficiaries) totaled

$133,100 million. Of this amount, $8,854 million or 6.7 percent represented

payments from the OASI Trust Fund. Table VI.G2 presents these and similar

figures for selected calendar years during 1960-2010 and estimates for calendar years 2011-20.
Appendices

206

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 Benefit payments to disabled workers and their children and spouses.

OASI Trust Fund

Amount c

c Benefit payments to disabled children aged 18 and over, to certain mothers and fathers (see text), and to

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 . . . . . . . . . 91,843 85,386 6,458 7.0

2006 . . . . . . . . . 99,186 92,446 6,741 6.8

2007 . . . . . . . . . 106,197 99,147 7,051 6.6

2008 . . . . . . . . . 114,061 106,376 7,685 6.7

2009 . . . . . . . . . 127,000 118,407 8,592 6.8

2010 . . . . . . . . . 133,100 124,245 8,854 6.7

Estimates under the intermediate assumptions:

2011 . . . . . . . . . 138,529 129,373 9,156 6.6

2012 . . . . . . . . . 144,750 135,289 9,461 6.5

2013 . . . . . . . . . 149,924 140,060 9,865 6.6

2014 . . . . . . . . . 155,163 144,880 10,283 6.6

2015 . . . . . . . . . 160,490 149,766 10,724 6.7

2016 . . . . . . . . . 166,181 155,010 11,171 6.7

2017 . . . . . . . . . 172,313 160,685 11,628 6.7

2018 . . . . . . . . . 179,168 167,046 12,122 6.8

2019 . . . . . . . . . 187,329 174,632 12,698 6.8

2010 . . . . . . . . . 196,120 182,801 13,319 6.8
207

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.

Assets. 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 relating to future trends in certain key factors that

affect the balance in 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. Three sets of demographic,

economic, and program-specific assumptions are presented in this report:

• 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 characterized as a low-cost set—it assumes relatively

rapid economic growth, low inflation, and favorable (from the standpoint of program financing) demographic and program-specific conditions.

• Alternative III is characterized as a high-cost set—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

208

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 in specified periods.
209

Glossary

Benefit termination. See “Termination.”

Best estimate assumptions. See “Assumptions.”

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 of whom serve automatically 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 the other two members to serve as public representatives.

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 on this basis.

Closed group unfunded obligation. This measure is computed like the

open group unfunded obligation except that individuals under the age of 15

(or not yet born) are excluded. In other words, only persons who attain age

15 or older during the first year of the projection period are included in the

calculations.

Constant dollars. Amounts adjusted by the CPI to the value of the dollar in

a particular year.

Consumer Price Index—CPI. An official measure of inflation in consumer

prices. In this report, all references to the CPI relate 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 VI.A1. See “HI contribution base.”

Contributions. See “Payroll tax contributions.”

Cost. The cost for a year includes scheduled benefit payments, 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.
Appendices

210

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.

• 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 on the basis of services for wages in covered employment and/or on

the basis of income from covered self-employment.

Creditable earnings. Wage or self-employment earnings posted to a

worker’s earnings record, upon which eligibility for and amount of benefits

on that worker’s record is based. The contribution and benefit base determines 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.

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 are applicable for

January benefits 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.”

Deterministic 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.

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.
211

Glossary

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

during the year.

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 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 the individual’s 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.”

Federal Insurance Contributions Act—FICA. Provision authorizing payroll taxes on the wages of employed persons to provide for Retirement, Survivors, and Disability Insurance, and for Hospital Insurance. Workers and

their employers pay the tax in equal amounts.
Appendices

212

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 position it would have been in if railroad employment had

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 2011 began October 1, 2010, and will end September 30,

2011.

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.

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.

• Payroll tax revenue forgone under the provisions of Public Laws 111-

147 and 111-312.

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.
213

Glossary

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 set 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 assets held by the fund during the period. The

effective rate of interest thus represents a measure of the overall average

interest earnings on the fund’s portfolio of assets.

Interfund borrowing. The borrowing of assets by a trust fund (OASI, DI, or

HI) from another of the trust funds when the first fund is in danger of

exhaustion. Interfund borrowing was permitted by the Social Security Act

only during 1982 through 1987; all amounts borrowed were to be repaid

prior to the end of 1989. The only exercise of this authority occurred in 1982,

when the OASI Trust Fund borrowed assets from the DI and HI Trust Funds.

The final repayment of borrowed amounts occurred in 1986.

Intermediate assumptions. See “Assumptions.”
Appendices

214

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. Long-range actuarial estimates are made for

this period because it is approximately the maximum remaining lifetime of

current Social Security participants.

Low-cost assumptions. See “Assumptions.”

Lump-sum death benefit. 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 to bring the total within the maximum. 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 to cover the cost of hospitalization, medical care, and

some related services for most people age 65 and over. In 1972, coverage

was extended to people receiving Social Security Disability Insurance payments for 2 years and people with End-Stage Renal Disease. In 2006, prescription drug coverage was also added. Medicare consists of two separate

but coordinated programs—Hospital Insurance (HI, Part A) and Supplementary Medical Insurance (SMI). The SMI program is composed of three separate accounts—the Part B Account, the Part D Account, and the Transitional

Assistance 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. Health insurance protection

is available to Medicare beneficiaries without regard to income.
215

Glossary

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.”

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 discretionary increases in the base under the 1977 amendments had not

been enacted. The Social Security Amendments of 1972 provided for automatic annual indexing of the contribution and benefit base. The Social Security Amendments of 1977 provided ad hoc increases to the bases for

1979-81, with subsequent bases updated in accordance with the normal

indexing procedure. See table V.C2.

Open group unfunded obligation. This measure is computed as the excess

of the present value of the projected cost of the program over a specified

time period (for example the next 75 years or the infinite horizon) over the

sum of: (1) the value of trust fund assets at the beginning of the period; and

(2) the present value of the projected non-interest income of the program,

assuming scheduled tax rates and benefit levels.

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.
Appendices

216

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 assets, 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 assets built up only to the extent needed to prevent

exhaustion 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.

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 future stream

of payments (either income or cost). The present value of a future stream of

payments may be thought of as the lump-sum amount that, if invested today,
217

Glossary

together with interest earnings would be just enough to meet each of the payments as they fell due. Present values are used widely in calculations involving financial transactions over long periods of time to account for the time

value of money (interest). For the purpose of present-value calculations for

this report, values are discounted by the effective yield on trust fund assets.

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

the amount used as a base for computing all types of benefits payable on the

basis of one 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 2011, a worker receives one quarter of coverage (up to a total of

four) for each $1,120 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, somewhat 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 interchange between the Railroad Retirement program and the

Social Security program.

Reallocation of payroll tax rates. An increase in the payroll tax rate payable to 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.
Appendices

218

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 (62) at which a fully insured individual

first becomes eligible to receive retired-worker benefits.

Retirement test. See “Earnings test.”

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. Short-range actuarial estimates are prepared

for this period to comply with the mandated short-range test of financial adequacy. The Social Security Act requires estimates for 5 years; estimates are

prepared 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 20 titles, of which four have been repealed. Title II

of the Social Security Act authorized the Old-Age, Survivors, and Disability

Insurance program.

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 considered solvent over any period for which the trust funds

maintain a positive level of assets throughout the period.

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
219

Glossary

value at any time and carry interest rates determined by law (see “Interest

rate”). See tables VI.A5 and VI.A6 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 20o 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. Distributions of potential outcomes are derived from a large number of simulations, each of which

reflects random variation in the variable(s).

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 is earning 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.

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. For purposes of evaluating 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 used in determining summarized cost

rates 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. For purposes of evaluating the financial

adequacy of the program, the summarized income rate is adjusted to include

assets 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 balance

at the beginning of the period plus the present value of non-interest income
Appendices

220

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

is achieved when the program has positive 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 and/or self-employment income, in employment

covered by the OASDI and/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

wages, does not exceed the contribution and benefit base. For HI beginning

in 1994, all of net earnings from self-employment.

Taxable wages. See “Taxable earnings.”

Taxation of benefits. During 1984-93, up to one-half of an individual’s or a

couple’s OASDI benefits was potentially subject to Federal income taxation

under certain circumstances. The revenue derived from this provision was

allocated 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 maximum portion of OASDI benefits potentially subject to taxation was increased to

85 percent. The additional revenue derived from taxation of benefits in

excess of one-half, up to 85 percent, is allocated to the HI Trust Fund.

Taxes. See “Payroll tax contributions” and “Taxation of benefits.”

Termination. Cessation of payment of a specific type of benefit because the

beneficiary is no longer entitled to receive it. 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).
221

Glossary

Test of long-range close actuarial balance. Summarized income rates and

cost rates are calculated for each of 66 valuation periods within the full 75-

year long-range projection period. The first of these periods consists of the

next 10 years. Each succeeding period becomes longer by 1 year, culminating with the period consisting of the next 75 years. The long-range test is met

if, for each of the 66 valuation periods, the actuarial balance is not less than

zero or is negative by, at most, a specified percentage of the summarized cost

rate for the same time period. The percentage allowed for a negative actuarial balance is 0 percent for the 10-year period, grading uniformly to 5 percent

for the full 75-year period. The criterion for meeting the test is less stringent

for the longer periods in recognition of the greater uncertainty associated

with estimates for more distant years. The test is applied to OASI and DI

separately, as well as combined, 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, then it must be projected to remain at or above

100 percent throughout the 10-year projection period;

• Alternatively, if the fund ratio is initially less than 100 percent, it must

be projected to reach a level of at least 100 percent within 5 years (and

not be depleted at any time during this period) and then remain at or

above 100 percent throughout the remainder of the 10-year period.

These conditions apply to each trust fund separately, as well as to the combined funds, and are evaluated 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

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 in which are

deposited the payroll taxes received under the Federal Insurance Contributions Act and the Self-Employment Contributions Act, as well as 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. Funds not withdrawn for current monthly or service benefits, the financial interchange, and

administrative expenses are invested in interest-bearing securities backed by

the full faith and credit of the U.S. Government, as required by law; the interest earned is also deposited in the trust funds.
Appendices

222

• Old-Age and Survivors Insurance (OASI). The trust fund used for

paying monthly benefits to retired-worker (old-age) beneficiaries and

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 and 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. Defined as the assets 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 could be paid solely with the

assets at the beginning of the year.

Unfunded obligation. See “Open group unfunded obligation” and “Closed

group unfunded obligation”.

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 is 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

enable them to return to gainful employment. Reimbursement from the trust

funds for the costs of such services is made only in those cases in which the

services contributed to the successful rehabilitation of the beneficiaries.
223

Glossary

Year of exhaustion. The year in which a trust fund would become unable to

pay benefits when due because the assets of the fund were depleted.
List of Tables

224

II. OVERVIEW

II.B1 Summary of 2010 Trust Fund Financial Operations ........ 5

II.B2 Payroll Tax Contribution Rates for 2010 and Later ......... 5

II.C1 Long-Range Values of Key Demographic and Economic

Assumptions for the 75-year Projection Period............ 7

II.D1 Projected Maximum Trust Fund Ratios During the

Long-Range Period and Trust Fund Exhaustion Dates . . . . . . 11

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

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 18

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND

LEGISLATIVE CHANGES IN THE LAST YEAR

III.A1 Operations of the OASI Trust Fund, Calendar Year 2010 . . . . 24

III.A2 Operations of the DI Trust Fund, Calendar Year 2010 . . . . . . . 27

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

Calendar Year 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

III.A4 Comparison of Actual Calendar Year 2010 Trust Fund

Operations With Estimates Made in Prior Reports . . . . . . . . . 30

III.A5 Distribution of Benefit Payments by Type of Beneficiary or

Payment, Calendar Years 2009 and 2010 . . . . . . . . . . . . . . . . 31

III.A6 Administrative Expenses as a Percentage of Non-interest

Income and of Total Expenditures, Calendar Years 2006-10 . . 32

III.A7 Trust Fund Investment Transactions, Calendar Year 2010 . . . . 32

IV. ACTUARIAL ESTIMATES

IV.A1 Operations of the OASI Trust Fund,

Calendar Years 2006-20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

IV.A2 Operations of the DI Trust Fund,

Calendar Years 2006-20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

IV.A3 Operations of the Combined OASI and DI Trust Funds,

Calendar Years 2006-20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

IV.A4 Reasons for Change in Trust Fund Ratios at the Beginning

of the Tenth Year of Projection . . . . . . . . . . . . . . . . . . . . . . . 45

IV.B1 Annual Income Rates, Cost Rates, and Balances,

Calendar Years 1990-2085 . . . . . . . . . . . . . . . . . . . . . . . . . . 49

IV.B2 Covered Workers and Beneficiaries,

Calendar Years 1945-2085 . . . . . . . . . . . . . . . . . . . . . . . . . . 53
List of Tables

225

IV.B3 Trust Fund Ratios, Calendar Years 2011-85 . . . . . . . . . . . . . . 58

IV.B4 Components of Summarized Income Rates and Cost Rates,

Calendar Years 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

IV.B5 Components of 75-Year Actuarial Balance

Under Intermediate Assumptions . . . . . . . . . . . . . . . . . . . . . 64

IV.B6 Unfunded OASDI Obligations for 1935 (Program Inception)

Through the Infinite Horizon,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 66

IV.B7 Present Values of OASDI Cost Less Non-interest Income

and Unfunded Obligations for Program Participants,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 67

IV.B8 Comparison of Long-Range Actuarial Balances With the

Minimum Allowable in the Test for Close Actuarial Balance,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 71

IV.B9 Reasons for Change in the 75-Year Actuarial Balance,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 72

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

V.A1 Principal Demographic Assumptions,

Calendar Years 1940-2085 . . . . . . . . . . . . . . . . . . . . . . . . . . 85

V.A2 Social Security Area Population as of July 1 and

Dependency Ratios, Calendar Years 1950-2085 . . . . . . . . . . . 88

V.A3 Period Life Expectancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

V.A4 Cohort Life Expectancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

V.B1 Principal Economic Assumptions . . . . . . . . . . . . . . . . . . . . . 98

V.B2 Additional Economic Factors . . . . . . . . . . . . . . . . . . . . . . . . 104

V.C1 Cost-of-Living Benefit Increases, Average Wage Index,

Contribution and Benefit Bases, and Retirement Earnings

Test Exempt Amounts, 1975-2020. . . . . . . . . . . . . . . . . . . . . 108

V.C2 Values for Selected Wage-Indexed Program Parameters,

Calendar Years 1978-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . 111

V.C3 Legislated Changes in Normal Retirement Age and Delayed

Retirement Credits, for Persons Reaching Age 62 in

Each Year 1986 and Later. . . . . . . . . . . . . . . . . . . . . . . . . . . 113

V.C4 OASI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1945-2085 . . . . . . . . . . . . . . . . 122

V.C5 DI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1960-2085 . . . . . . . . . . . . . . . . 130
List of Tables

226

VI. APPENDICES

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS

VI.A1 Contribution and Benefit Base and Payroll Tax

Contribution Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

VI.A2 Operations of the OASI Trust Fund,

Calendar Years 1937-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . 142

VI.A3 Operations of the DI Trust Fund,

Calendar Years 1957-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . 144

VI.A4 Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1957-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . 146

VI.A5 Assets of the OASI Trust Fund,

End of Calendar Years 2009 and 2010 . . . . . . . . . . . . . . . . . . 148

VI.A6 Assets of the DI Trust Fund,

End of Calendar Years 2009 and 2010 . . . . . . . . . . . . . . . . . . 149

B. HISTORY OF ACTUARIAL BALANCE ESTIMATES

VI.B1 Long-Range OASDI Actuarial Balances as Shown

in the Trustees Reports for 1982-2011 . . . . . . . . . . . . . . . . . . 152

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2020

VI.C1 Operations of the OASI Trust Fund, Fiscal Year 2010. . . . . . . 156

VI.C2 Operations of the DI Trust Fund, Fiscal Year 2010 . . . . . . . . . 157

VI.C3 Operations of the Combined OASI and DI Trust Funds,

Fiscal Year 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

VI.C4 Operations of the OASI Trust Fund, Fiscal Years 2006-20 . . . 159

VI.C5 Operations of the DI Trust Fund, Fiscal Years 2006-20 . . . . . . 160

VI.C6 Operations of the Combined OASI and DI Trust Funds,

Fiscal Years 2006-20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

D. LONG-RANGE SENSITIVITY ANALYSIS

VI.D1 Sensitivity to Varying Fertility Assumptions . . . . . . . . . . . . . 163

VI.D2 Sensitivity to Varying Death-Rate Assumptions . . . . . . . . . . . 164

VI.D3 Sensitivity to Varying Net-Immigration Assumptions . . . . . . . 166

VI.D4 Sensitivity to Varying Real-Wage Assumptions . . . . . . . . . . . 167

VI.D5 Sensitivity to Varying CPI-Increase Assumptions. . . . . . . . . . 168

VI.D6 Sensitivity to Varying Real-Interest Assumptions . . . . . . . . . . 169

VI.D7 Sensitivity to Varying Disability Incidence Assumptions. . . . . 170

VI.D8 Sensitivity to Varying Disability Termination Assumptions. . . 172
List of Tables

227

E. STOCHASTIC PROJECTIONS

VI.E1 Long-Range Estimates Relating to the Actuarial Status of

the Combined OASDI Program. . . . . . . . . . . . . . . . . . . . . . . 178

F. ESTIMATES FOR OASDI AND HI,

SEPARATE AND COMBINED

VI.F1 Payroll Tax Contribution Rates for the OASDI and

HI Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180

VI.F2 OASDI and HI Annual Income Rates, Cost Rates, and

Balances, Calendar Years 2011-85. . . . . . . . . . . . . . . . . . . . . 182

VI.F3 Summarized OASDI and HI Income Rates and Cost Rates

for Valuation Periods, Calendar Years 2011-85. . . . . . . . . . . . 184

VI.F4 OASDI and HI Annual and Summarized Income, Cost, and

Balance as a Percentage of GDP, Calendar Years 2011-85. . . . 187

VI.F5 Ratio of OASDI Taxable Payroll to GDP,

Calendar Years 2011-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

VI.F6 Selected Economic Variables, Calendar Years 2010-85 . . . . . . 192

VI.F7 Operations of the Combined OASI and DI Trust Funds,

in Constant 2011 Dollars, Calendar Years 2011-85 . . . . . . . . . 194

VI.F8 Operations of the Combined OASI and DI Trust Funds,

in Current Dollars, Calendar Years 2011-85 . . . . . . . . . . . . . . 196

VI.F9 OASDI and HI Annual Income Excluding Interest, Cost,

and Balance in Current Dollars, Calendar Years 2011-85 . . . . 198

VI.F10 Annual Scheduled Benefit Amounts for Retired Workers

With Various Pre-Retirement Earnings Patterns Based on

Intermediate Assumptions, Calendar Years 2011-85 . . . . . . . . 201

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 . . . . . . . . . . . . . . . . . 204

VI.G2 Benefit Disbursements Under the OASDI Program

With Respect to Disabled Beneficiaries . . . . . . . . . . . . . . . . . 206
List of Figures

228

II. OVERVIEW

II.D1 Short-Range OASDI Trust Fund Ratio.................. 8

II.D2 OASDI Income, Cost, and Expenditures as Percentages

of Taxable Payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

II.D3 Number of Covered Workers Per OASDI Beneficiary. . . . . . . 11

II.D4 Cumulative Scheduled OASDI Income Less Cost,

From 1937 Through Selected Years. . . . . . . . . . . . . . . . . . . . 13

II.D5 OASDI Cost and Non-interest Income as

a Percentage of GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

II.D6 Long-Range OASDI Trust Fund Ratios Under

Alternative Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

II.D7 Long-Range OASDI Trust Fund Ratios

From Stochastic Modeling . . . . . . . . . . . . . . . . . . . . . . . . . . 17

II.D8 OASDI Annual Balances: 2010 and 2011 Trustees Reports. . . 19

IV. ACTUARIAL ESTIMATES

IV.A1 Short-Range OASI and DI Trust Fund Ratios. . . . . . . . . . . . . 37

IV.B1 Long-Range OASI and DI Annual Income Rates and

Cost Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

IV.B2 Number of OASDI Beneficiaries Per 100 Covered Workers . . 55

IV.B3 Long-Range OASI and DI Trust Fund Ratios. . . . . . . . . . . . . 59

IV.B4 Test of Long-Range Close Actuarial Balance . . . . . . . . . . . . . 70

IV.B5 OASDI Annual Balances: 2010 and 2011 Trustees Reports. . . 75

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

V.C1 Primary-Insurance-Amount Formula for Those

Newly Eligible in 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

V.C2 Maximum-Family-Benefit Formula for Those

Newly Eligible in 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

V.C3 DI Disability Incidence Rates, 1970-2085 . . . . . . . . . . . . . . . 126

V.C4 DI Disability Termination Rates, 1970-2085 . . . . . . . . . . . . . 128

V.C5 Comparison of DI Disability Incidence Rates,

Termination Rates and Conversion Ratios

Under Intermediate Assumptions, 1970-2085. . . . . . . . . . . . . 129

V.C6 DI Disability Prevalence Rates, 1970-2085 . . . . . . . . . . . . . . 132
List of Figures

229

VI. APPENDICES

VI.E1 Long-Range OASDI Trust Fund Ratios

From Stochastic Modeling . . . . . . . . . . . . . . . . . . . . . . . . . . 175

VI.E2 Long-Range OASDI Cost Rates

From Stochastic Modeling . . . . . . . . . . . . . . . . . . . . . . . . . . 176

VI.F1 Estimated OASDI Income and Cost in Constant Dollars,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 195
Index

230

A

Actuarial balance 9, 11, 46, 114, 150, 162

Actuarial balance, long-range test 71

Actuarial deficit 3, 11, 20, 61, 184

Actuarial estimates, LR 46

Actuarial estimates, SR 34

Adjusted program amounts 106

Administrative expenses 5, 31, 47, 134, 141, 156, 185, 193

Advance tax transfers 56, 143

Amendments 33

Annual balance 18, 46, 72

Assets 2, 5, 8, 25, 34, 141, 156, 169, 179, 191

Assumptions 2, 8, 47, 77, 92, 106, 150, 162, 180, 185, 190, 203

Automatic cost-of-living benefit increase 38, 94, 106

Auxiliary benefits 116

Average benefits 133

Average earnings assumptions 95

Average indexed monthly earnings (AIME) 109

Average wage index 106, 190

Award 118

B

Baby-boom generation 2, 20, 40, 48, 52, 100, 124

Bend points 109

Beneficiaries, DI 123

Beneficiary 10, 38, 52, 77, 107, 153, 163, 185, 193, 203

Beneficiary, OASI 118

Benefit payments 5, 35, 47, 134, 141, 156, 168, 185, 193, 205

Benefit termination 7, 40

Best estimate 7, 20, 34, 77

Board of Trustees 34, 92, 137

C

Close actuarial balance 46, 67

Closed group unfunded obligation 67, 209

Constant dollars 195

Consumer Price Index 94, 168, 190, 208

Contribution and benefit base 37, 95, 107, 138, 190, 208

Contributions 5, 137, 156, 179, 185, 193, 207

Cost 2

Cost rate 3, 9, 47, 114, 179

Cost-of-living adjustment 106

Covered earnings 5, 106, 189

Covered employment 7, 37, 95, 113, 137, 167
231

Index

Covered worker 54, 113, 165

Creditable earnings 210

Current dollars 190

Current-payment status 40, 128, 129, 130, 208

D

Deemed wage credit 47, 114

Delayed retirement credit 112

Demographic assumptions 7, 18, 34, 47, 78, 100, 106, 150, 191, 207

Deterministic model 173, 178, 210

DI beneficiaries 123

Disability 137, 165, 203

Disability conversion ratio 128

Disability incidence rate 77, 124, 126, 165, 170, 207

Disability Insurance Trust Fund 209

Disability prevalence rate 130, 132

Disability termination rate 171

Disabled-worker benefit 126, 211

Disbursements 22, 23, 24, 27, 28, 29, 34, 156, 157, 158, 204, 205

E

Earnings 2, 5, 37, 47, 95, 107, 137, 151, 179, 189, 190, 207

Earnings test 95, 107, 208

Economic assumptions 7, 18, 34, 44, 47, 92, 100, 106, 150, 191, 207

Excess wages 47, 114, 190

Expenditures 5, 7, 26, 32, 34, 38, 41, 141, 211

F

Federal Insurance Contributions Act 179, 216

Fertility assumptions 78

Financial interchange 5, 134, 141

Fiscal year 82, 143, 155

Full advance funding 212

G

General Fund of the Treasury 36, 38, 39, 42, 139, 143, 145, 147, 159, 160,

161, 207

General fund reimbursement 212

Gross domestic product 3, 52, 77, 93, 102, 185

Gross domestic product projections 102

H

High-cost assumptions 7, 15, 34, 35, 48, 77, 92, 127, 162, 177, 180, 185,

190, 207

Hospital Insurance program 138, 179, 214

Hospital Insurance Trust Fund 185
Index

232

I

Immigration 7, 77, 78, 81, 85, 165, 173, 207, 213

Immigration assumptions 81

Income rate 3, 9, 47, 179

Inflation 7, 77, 94, 190, 207

Inflation assumptions 94

Insured population 7, 115

Insured status 111

Interest 37, 102, 140, 150, 156, 181, 185, 191, 207

Interest rate 38, 77, 150, 169, 191, 207

Interest rate projections 102

Interest rates 7

Interfund borrowing 143, 213

Intermediate assumptions 7, 34, 38, 40, 48, 77, 127, 162, 181, 185, 190,

194, 195, 196, 203, 207

L

Labor force projections 99

Legal immigration 82, 86, 214

Life expectancy 3, 20, 77, 89, 99, 214

Life expectancy estimates 89

Long range 9, 46, 78, 118, 150, 179, 185, 190

Low-cost assumptions 7, 15, 34, 48, 77, 92, 127, 162, 177, 180, 190, 207

Lump-sum death payment 134

M

Medicare 80, 214

Military service 36, 39, 42, 47, 95, 114, 135, 137, 143, 145, 147, 159, 160,

161

N

National average wage index 106, 190

Normal retirement age 107, 123, 199, 210

O

OASI beneficiaries 118

Old-Age and Survivors Insurance Trust Fund 137, 209

Old-law base 111

Open group unfunded obligation 3, 9, 18, 46, 63, 64, 177, 209, 215

Other immigration 82, 166, 215
233

Index

P

Par value 141

Partial advance funding 216

Pay-as-you-go financing 150

Payroll taxes 2, 21, 62, 106, 114, 153, 162, 179, 193

Population estimates 86

Population in the Social Security area 37, 55, 86, 113, 166

Present value 150

Primary insurance amount (PIA) 109

Productivity assumptions 93

Q

Quarters of coverage 115

R

Railroad Retirement 47, 111, 134, 141, 156, 157, 158, 179, 185, 193, 209

Reallocation of tax rates 217

Real-wage differential 97, 166

Recession 9, 30, 38

Retired-worker benefit 118, 165, 203

Retirement age 40, 107, 199, 210

Retirement earnings test 95, 107

Retirement eligibility age 1, 165

S

Self-employment 47, 94, 114, 137, 180, 216

Self-Employment Contributions Act 216, 218

Sensitivity analysis 162

Short range 8, 34, 118

Social Security Act 106, 141, 190, 203, 209

Social Security amendments 33

Solvency 46, 218

Special public-debt obligation 38, 105, 140, 169, 191

Stochastic projections 173

Substantial gainful activity 123, 210

Summarized balance 186

Summarized income and cost rates 60, 150, 162, 183, 207

Supplemental Security Income 156

Supplementary Medical Insurance program 179, 214

Survivor benefit 2, 6, 121, 208
Index

234

T

Taxable earnings 37, 55, 107, 137, 151, 189, 208

Taxable payroll 3, 9, 20, 47, 94, 114, 150, 163, 179, 185, 190, 209

Taxable self-employment income 137, 220

Taxable wages 115, 139, 180, 220

Taxation of benefits 5, 47, 135, 185, 193, 213

Taxes 5, 106, 137, 180

Termination 40, 77

Termination rate 7, 40, 118, 171, 207

Test of short-range financial adequacy 35, 68, 218

Total fertility rate 79, 162

Trust fund financial operations 5, 22, 35, 137

Trust fund ratio 8, 34, 46, 56, 143, 159, 222

U

Unemployment projections 99

Unfunded obligation 3, 9, 12, 14, 18, 46, 63, 64, 67, 177, 209, 215, 222

Unnegotiated check 156

V

Valuation period 11, 46, 150, 162, 183, 207

Vocational rehabilitation 47, 141, 157, 185, 193, 205, 209

Y

Year of exhaustion 9, 11, 21, 46, 58
235

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