THE LONG-RANGE DISABILITY ASSUMPTIONS

FOR THE 2018 TRUSTEES REPORT

OFFICE OF THE CHIEF ACTUARY

SOCIAL SECURITY ADMINISTRATION

June 5, 2018
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DISABILITY

ASSUMPTIONS FOR THE 2018 TRUSTEES REPORT

OFFICE OF THE CHIEF ACTUARY, SSA

TABLE OF CONTENTS PAGE

1 OVERVIEW ................................................................................................................................... 3

2 DISABILITY INCIDENCE ............................................................................................................... 4

2.1 EFFECTS OF ECONOMIC CYCLES AND POLICY CHANGES ON DI INCIDENCE RATES ..................................................4

2.2 ASSUMED FUTURE DISABILITY INCIDENCE RATES ...................................................................................................5

3 DISABILITY DEATH RATE............................................................................................................ 6

4 DISABILITY RECOVERY RATE..................................................................................................... 6

CHART 1: EFFECT OF THE ECONOMY ON DI INCIDENCE .................................................................................................8

CHART 2: NEW DISABLED WORKER AWARDS PER 1,000 EXPOSED (INCIDENCE)...........................................................9

CHART 3: MALE DISABLED WORKER AWARDS PER 1,000 EXPOSED (INCIDENCE) BY AGE GROUP..............................10

CHART 4: FEMALE DISABLED WORKER AWARDS PER 1,000 EXPOSED (INCIDENCE) BY AGE GROUP ..........................11

CHART 5: AGE-SEX-ADJUSTED COMPARISON OF SSA GENERAL POPULATION TO DISABLED WORKER DEATH RATES

..............................................................................................................................................................................12

CHART 6: DISABLED WORKER RECOVERIES PER 1,000 BENEFICIARIES .......................................................................13
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1 Overview

Each year the Board of Trustees of the Federal Old-Age and Survivors Insurance (OASI) and 

Disability Insurance (DI) Trust Funds provides an annual report to the Congress on the financial 

and actuarial status of the OASDI program. The Office of the Chief Actuary (OCACT) produces 

projections of future cost and income based on three separate sets of long-range (75-year) 

assumptions for three key disability variables. The intermediate (alternative II) set of 

assumptions represents the Trustees’ best estimate for future experience, while the low cost 

(alternative I) and high cost (alternative III) sets of assumptions are more and less favorable, 

respectively, from the perspective of program cost as a percent of taxable payroll. In addition, the 

intermediate assumptions serve as the central tendency for the stochastic projections presented in 

the OASDI Trustees Report. This memorandum presents the disability assumptions used in the 

2018 annual report of the Board of Trustees (the “Trustees Report”). 

The disability assumptions are: 

• The ultimate disability incidence rates by age group and sex,

• The ultimate disability death rates by age group and sex, and

• The ultimate disability recovery rates by age group and sex.

For the 2018 Trustees Report, there are no changes to these ultimate assumptions from those 

used for the 2017 Trustees Report. There are also no significant method changes in the disability 

model for the 2018 Trustees Report. Therefore, there is no significant change to the OASDI 

actuarial balance due to disability ultimate assumptions and methods. The following table shows 

the ultimate summary measures for the assumptions. 1

Key Disability Summary Measures for the Long-Range (75-year) Projection Period

2017 Trustees Report and 2018 Trustees Report

2017 Trustees Report 

Alternative

2018 Trustees Report 

Alternative

2017 Trustees Report 

Less 2018 Trustees 

Report 

I II III I II III I II III

Age-sex-adjusted Disability Incidence 

Rate per 1,000 in the last year of the 

75-year projection

4.3 5.4 6.4 4.3 5.4 6.4 0.0 0.0 0.0

Age-sex-adjusted Disability Death 

Rate per 1,000 in the last year of the 

75-year projection

18.1 11.4 6.7 18.4 11.6 6.9 -0.3 -0.2 -0.2

Age-sex-adjusted Disability Recovery 

Rate per 1,000 in the last year of the 

75-year projection

12.5 10.4 8.3 12.5 10.3 8.2 0.0 0.1 0.1

For the 2018 Trustees Report, the ultimate disability incidence, death, and recovery rate 

assumptions are the same as those used for the 2017 Trustees Report. The assumed ultimate 

assumptions are applied for the twentieth projection year and thereafter. During the first ten 

years of the projection period, the long-range model reconciles with projections from the shortrange model. There is a transition between the rates at the end of the short-range period and the 

 1 The ultimate disability assumptions by age group and sex are the same in the 2017 Trustees Report and 2018 

Trustees Report. The ultimate summary measures changed slightly due to data and methodology updates.
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implementation of the ultimate rates as of the twentieth projection year. Recent award-rate data 

indicate a continued decline since the peak in 2010. Reflecting these new data and transitioning 

to the ultimate disability award rates result in an increase (improvement) in the long-range 

OASDI actuarial balance, under the intermediate alternative, of 0.01 percent of taxable payroll.

The remainder of this paper provides details regarding the historical values and future values for 

each of the disability assumptions, and the basis for the assumptions.

2 Disability Incidence

2.1 Effects of Economic Cycles and Policy Changes on DI Incidence Rates

Disability incidence rates are the proportion of workers in a given year, insured for but not 

receiving disability benefits (exposed population), who file for and are awarded disabled worker 

benefits. The age-sex-adjusted historical and short-range projected alternative II incidence rates 

are shown in Chart 1. A number of specific economic and policy drivers have influenced 

disability program cost historically and will continue to have an effect on disability 

incidence. Periodic economic recessions, as indicated by the civilian unemployment rate in red 

in Chart 1, have been associated with temporary increases in disability incidence. Incidence rates 

tend to increase temporarily in bad economic times. Some individuals who gradually develop 

conditions that would qualify for DI benefits based on the severity of their medicallydeterminable impairment are able to continue work at a level in excess of substantial gainful 

activity (SGA) given the opportunity and needed assistance during a period of strong economic 

activity and demand for workers. But with elevated unemployment rates like those seen in the 

last recession, many of these individuals will lose employment and will seek DI benefits.

The recent recession which began in December 2007 resulted in an increase in disability 

applications and incidence to a peak level in 2010 that was exceeded only by the peak in 

1975. One apparent exception to the relationship between disability incidence and economic 

recessions is the strong recession of 1981-1982. The effect of that recession appears to have 

been offset by the net effects of the 1980 Amendments, which: (1) sharply increased the levels of 

pre-effectuation review of disability allowances and continuing disability reviews of current 

beneficiaries; (2) introduced the extended period of eligibility to encourage work; and (3) 

lowered the maximum family benefit for DI beneficiaries.

Additional policy changes over the years had significant effects on disability incidence. Doubledigit ad-hoc benefit increases in 1970 through 1974 made disability benefits more 

attractive. The 1984 Amendments may have offset the effects of a strong economic recovery 

with increased emphasis on multiple impairments and mental listings, and the requirement to 

show medical improvement for benefit cessation. The SSI outreach to disabled adults likely 

added to the effects of the 1990-1991 recession. Also, the effects of a strong economic recovery 

from 1995 to 2000 on lowering incidence rates may have been enhanced by the 1996 

Amendments which eliminated drug addiction and alcoholism as disabling conditions.

Incidence rates have fallen steeply since 2010 with the recovery from the recent recession. 

Incidence rates have recently dropped to levels well below those expected over the long-term. 
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Future policy changes and economic cycles will undoubtedly continue to cause fluctuations in 

disability incidence rates. 

2.2 Assumed Future Disability Incidence Rates

As previously mentioned, the disability incidence rate (the percent of the exposed population, i.e. 

the disability insured population not already receiving benefits, that is newly awarded benefits in 

the year) rose sharply in the recent recession, and has declined since the peak in 2010 to an 

extraordinarily low level by 2016. Some small portion of this decline has resulted from an 

increase in the disability case backlog, especially at the hearings level. In 2013 and later 

Trustees Reports, consistent with agency Budget assumptions, the backlog is assumed to be 

eliminated, producing the temporarily elevated levels of incidence most recently assumed to be 

for years 2018 through 2022, as seen in the blue line in Chart 1. After 2022, new disabled

worker determinations are projected to be completed on a timely basis.

The Trustees assume that under alternative II, the ultimate age-sex-adjusted disabled worker 

incidence rate will return to about 5.4 new awards per thousand by about 2027, the same ultimate 

level assumed for the 2012 through 2017 Trustees Reports. This ultimate assumed incidence rate 

is slightly above the 5.2 average level experienced from 1990 through 2017. Based on recent 

low incidence rates, the 5.4 ultimate assumption is conservative and prudent, given the 

uncertainty associated with disability assumptions. The Office of the Chief Actuary will 

continue to monitor experience closely. 

The 2011 Technical Panel suggested raising the 2011 Trustees Report ultimate alternative II 

incidence rate assumption of 5.2 to 5.8. The 2015 Technical Panel agreed with the ultimate 

alternative II incidence rate assumption of 5.4 and suggested that OCACT closely monitor 

experience. The Congressional Budget Office raised their ultimate disability incidence rate to 

5.6 for their 2013 through 2015 Long-Term Budget Outlooks, and reduced the assumption to 5.4 

for their 2016 and 2017 reports, matching the Trustees. 

Chart 2 shows age-adjusted historical and projected alternative II incidence rates for males and 

females. For males, this age-adjusted incidence rate has averaged 5.4 from 1990 through 2017

for new disability awards per thousand exposed workers. The female age-adjusted incidence rate 

has averaged 5.0 from 1990 through 2017. Since 1980, the age-adjusted incidence rate for 

females has increased to a level much closer to the rate for men. The Trustees assume that under 

alternative II, the male and female age-adjusted disability incidence rates will be fairly stable in 

the future at 5.5 and 5.3, respectively.

Chart 3 and Chart 4 show the historical and projected alternative II incidence rates by age group

for males and females, respectively. The table below shows the 2018 Trustees Report alternative 

II ultimate incidence rates by age group for 2040. 

Disability Award Rates per 1,000 Exposed for 2040, 2018 Trustees Report Alternative II

15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64

Male 0.3 1.6 1.9 2.2 3.1 4.3 5.8 9.4 15.3 20.3

Female 0.3 1.2 1.6 2.4 3.3 4.5 6.1 9.5 14.0 16.1

Age Group
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Because the low-cost and high-cost alternative ultimate disability incidence rates are determined 

by adjusting the incidence rates from the intermediate alternative down and up by roughly 20

percent, respectively, rates for these alternatives are not included in the charts. 

3 Disability Death Rate

Death rates are much higher for the disabled population than the general population, as seen in 

Chart 5. Base probabilities of death (from Actuarial Study No. 123) by duration, age, and sex 

are applied to the disabled worker population. In the first year of the projection period, the death 

rate is determined by fitting an exponential curve to historical death rates for disabled workers by 

age group and sex. For the rest of the projection period, death rate improvement factors are 

applied to the base probabilities of death to reflect the same rate of improvement as the general 

population for that age group and sex. The incorporation of higher than expected 2017 disabled 

worker death experience results in higher projected disability death rates for the 2018 Trustees 

Report. From the age-sex-adjusted death rate of 25.4 per thousand beneficiaries in 2017, this rate 

decreases to 11.6 per thousand for 2092 under the intermediate assumptions. The low-cost and 

high-cost alternative disability death rates are determined by increasing and decreasing by 7.5

percent, respectively, the death rate in the first year of the projection period. Then the general 

population mortality improvement for that alternative is applied to project death rates for the 

remainder of the 75-year period.

The 2011 Technical Panel recommended a more rapid decline in disability mortality rates for 

both men and women from 2020 through 2030. The 2015 Technical Panel stated that they were 

comfortable with the Trustees’ assumption. 

4 Disability Recovery Rate

Beneficiaries stop receiving disability benefits when they (1) die, (2) covert to a retired-worker 

benefit at normal retirement age, (3) recover from their medically-determinable disabling 

condition, or (4) return to work for an extended period. Disabled worker beneficiaries who return 

to substantial work for an extended period are deemed to have recovered, and their benefits are 

then terminated. The recovery rate is the ratio of the number of recoveries for reasons (3) and (4) 

to the average number of disabled worker beneficiaries during the year. Base probabilities of 

recovery (from Actuarial Study No. 123) by duration, age, and sex are applied to the disabled

worker population. 

Chart 6 shows age-sex-adjusted historical and projected alternative II recovery rates. The rate of 

recovery is, at times, affected by budget appropriations for continuing disability reviews, with no 

general upward or downward trend since 1985. The ultimate disability recovery rate under the 

intermediate alternative is equal to the average recovery rate by age group and sex for the years 

1985-2005, excluding 1997. The averaging period begins in 1985, after the Social Security 

Disability Benefits Reform Act of 1984 created medical improvement standards for continuing 

disability reviews. The spike in recoveries in 1997 when drug and alcohol addictions were 

eliminated as bases for disability entitlement is excluded from the calculation.

The resulting ultimate age-sex-adjusted recovery rate for disabled workers is 10.3 per thousand

beneficiaries for alternative II. Recovery rates by age, sex, and duration reach ultimate levels in 
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the twentieth year of the projection period. Because the low-cost and high-cost alternative 

ultimate disability recovery rates are determined by adjusting the recovery rates from the 

intermediate alternative up and down by roughly 20 percent, respectively, rates for these 

alternatives are not included in the chart. 

The 2011 Technical Panel suggested reducing the ultimate alternative II recovery rate 

assumption to 8.7. The 2015 Technical Panel recommended reducing the ultimate alternative II 

recovery rate assumption from 10.4 to 10.1.
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Chart 1: Effect of the Economy on DI Incidence

Note: The projections reflect the Trustees’ assumptions for the 2018 Trustees Report.

Social Security Administration

Office of the Chief Actuary

June 5, 2018
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Chart 2: New Disabled Worker Awards per 1,000 Exposed (Incidence)

Age-Adjusted (2000)

Note: The projections reflect the Trustees’ assumptions for the 2018 Trustees Report.

Social Security Administration

Office of the Chief Actuary

June 5, 2018
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Chart 3: Male Disabled Worker Awards per 1,000 Exposed (Incidence) by Age Group

Age-Adjusted (2000)

Note: The projections reflect the Trustees’ assumptions for the 2018 Trustees Report.

Social Security Administration

Office of the Chief Actuary

June 5, 2018
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Chart 4: Female Disabled Worker Awards per 1,000 Exposed (Incidence) by Age Group

Age-Adjusted (2000)

Note: The projections reflect the Trustees’ assumptions for the 2018 Trustees Report.

Social Security Administration

Office of the Chief Actuary

June 5, 2018
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Chart 5: Age-Sex-Adjusted Comparison of SSA General Population to Disabled Worker Death Rates

Social Security Administration

Office of the Chief Actuary

June 5, 2018
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Chart 6: Disabled Worker Recoveries per 1,000 Beneficiaries

Age-Sex-Adjusted (2000)

Note: The projections reflect the Trustees’ assumptions for the 2018 Trustees Report.

Social Security Administration

Office of the Chief Actuary

June 5, 2018