THE 2010 ANNUAL REPORT OF THE BOARD OF 

TRUSTEES OF THE FEDERAL OLD-AGE AND SURVIV

INSURANCE AND FEDERAL DISABILITY INSURAN

TRUST FUNDS

COMMUNICATION

FROM

THE BOARD OF TRUSTEES, FEDERAL OLD-AGE 

SURVIVORS INSURANCE AND FEDERAL DISABIL

INSURANCE TRUST FUNDS

TRANSMITTING

THE 2010 ANNUAL REPORT OF THE BOARD OF TRUSTEES OF 

FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND FED

DISABILITY INSURANCE TRUST FUNDS

August 9, 2010.—Referred to the Committee on Ways and Means

 and ordered to be printed

U.S. GOVERNMENT PRINTING OFFICE

57-811 WASHINGTON: 2010
.
LETTER OF TRANSMITTAL

BOARD OF TRUSTEES OF THE

FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND

FEDERAL DISABILITY INSURANCE TRUST FUNDS,

Washington, D.C., August 5, 2010

The Honorable Nancy Pelosi

Speaker of the House of Representatives

Washington, D.C.

The Honorable Joseph R. Biden, Jr.

President of the Senate

Washington, D.C.

Dear Madam Speaker and Mr. President:

We have the honor of transmitting to you the 2010 Annual Report of the Board 

ees of the Federal Old-Age and Survivors Insurance and Federal Disability I

Trust Funds, the 70th such report.

Respectfully,

Timothy F. Geithner, Secretary of

the Treasury, and Managing

Trustee of the Trust Funds.

Hilda L. Solis, Secretary

of Labor, and Trustee.

Kathleen Sebelius, Secretary of

Health and Human Services,

and Trustee.

Michael J. Astrue, Commissio

of Social Security, and Trus

Vacant, Public Trustee. Vacant, Public Trustee.

Jason J. Fichtner, Associate Commissioner,

Office of Retirement Policy, Social Security

Administration, and Acting Secretary,

Board of Trustees.

LETTER OF TRANSMITTAL

BOARD OF TRUSTEES OF THE

FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND

FEDERAL DISABILITY INSURANCE TRUST FUNDS,

Washington, D.C., August 5, 2010

The Honorable Nancy Pelosi

Speaker of the House of Representatives

Washington, D.C.

The Honorable Joseph R. Biden, Jr.

President of the Senate

Washington, D.C.

Dear Madam Speaker and Mr. President:

We have the honor of transmitting to you the 2010 Annual Report of the Board 

ees of the Federal Old-Age and Survivors Insurance and Federal Disability I

Trust Funds, the 70th such report.

Respectfully,

Timothy F. Geithner, Secretary of

the Treasury, and Managing

Trustee of the Trust Funds.

Hilda L. Solis, Secretary

of Labor, and Trustee.

Kathleen Sebelius, Secretary of

Health and Human Services,

and Trustee.

Michael J. Astrue, Commissio

of Social Security, and Trus

Vacant, Public Trustee. Vacant, Public Trustee.

Jason J. Fichtner, Associate Commissioner,

Office of Retirement Policy, Social Security

Administration, and Acting Secretary,

Board of Trustees.
.
CONTENTS

(V)

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

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

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

B. TRUST FUND FINANCIAL OPERATIONS IN 2009 . . . . . . . 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 2009 . . . . . . . . . . . . 22

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

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

3. OASI and DI Trust Funds, Combined . . . . . . . . . . . . . . . . . . 28

B. SOCIAL SECURITY AMENDMENTS SINCE THE

2009 REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

IV. ACTUARIAL ESTIMATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

A. SHORT-RANGE ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . 35

1. Operations of the OASI Trust Fund. . . . . . . . . . . . . . . . . . . . 36

2. Operations of the DI Trust Fund . . . . . . . . . . . . . . . . . . . . . . 39

3. Operations of the Combined OASI and DI Trust Funds . . . . . 42

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

Estimates From the 2009 Report . . . . . . . . . . . . . . . . . . . . . . 44

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 . . . . . 63

6. Test of Long-Range Close Actuarial Balance . . . . . . . . . . . . 66

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

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

A. DEMOGRAPHIC ASSUMPTIONS AND METHODS . . . . . . . 77

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

2. Mortality Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

3. Immigration Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 80

4. Total Population Estimates. . . . . . . . . . . . . . . . . . . . . . . . . . 85

5. Life Expectancy Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . 88

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 . . . . . . . . . . . . . . . . . . . . 98

5. Labor Force and Unemployment Projections . . . . . . . . . . . . . 100

6. Gross Domestic Product Projections . . . . . . . . . . . . . . . . . . . 103

7. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

C. PROGRAM-SPECIFIC ASSUMPTIONS AND METHODS . . . 107

1. Automatically Adjusted Program Parameters. . . . . . . . . . . . . 107

2. Covered Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

3. Taxable Payroll and Payroll Tax Revenue . . . . . . . . . . . . . . . 115

4. Insured Population. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

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

6. Disability Insurance Beneficiaries. . . . . . . . . . . . . . . . . . . . . 124

7. Average Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

8. Benefit Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

9. Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

10. Railroad Retirement Financial Interchange . . . . . . . . . . . . . . 136

11. Military Service Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . 136

12. Income From Taxation of Benefits . . . . . . . . . . . . . . . . . . . . 136
(VII)

VI. APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS. . 138

B. HISTORY OF ACTUARIAL BALANCE ESTIMATES . . . . . . 151

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2019 . . . . . . . . . . . . . . . . . . . . . . 156

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 2010 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 positions,

which are currently vacant, are for members of the public, appointed by the

President and subject to confirmation by the Senate. 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 2010, is the 70th such report.
Overview

2

II. OVERVIEW

A. HIGHLIGHTS

The report’s major findings are summarized below.

In 2009

At the end of 2009, about 53 million people were receiving benefits:

36 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 156 million people had

earnings covered by Social Security and paid payroll taxes. Total expenditures in 2009 were $686 billion. Total income was $807 billion ($689 billion

in tax revenue and $118 billion in interest earnings), and assets held in special issue U.S. Treasury securities grew to $2.5 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 over the next 10 years under the intermediate assumptions,

falling below 100 percent of annual cost by the beginning of 2013 and continuing to decline until the trust fund is exhausted in 2018. Therefore, the DI

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

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

$2,540 billion at the beginning of 2010, or 355 percent of annual cost, to

$3,774 billion at the beginning of 2019, or 309 percent of annual cost in that

year under the intermediate assumptions. Combined assets were projected

for last year’s report to be 360 percent of annual cost at the beginning of

2010 and 327 percent at the beginning of 2019.

Long-Range Results

Under the intermediate assumptions, OASDI cost generally increases more

rapidly than tax income through 2035 because the retirement of the babyboom generation increases the number of beneficiaries much faster than subsequent relatively low-birth-rate generations increase the labor force. From

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

the already retired baby-boom generation. Thereafter, increases in life expectancy generally cause OASDI cost to again increase relative to tax income,

but more slowly than prior to 2035. Annual cost is projected to exceed tax

income in 2010 and 2011, to be less than tax income in 2012 through 2014,

then to exceed tax income in 2015 and remain higher throughout the remain-
3

Highlights

der of the long-range period. Interest earnings on trust fund assets alone will

be sufficient to cover the annual difference between cost and tax revenue

until 2025. The dollar level of the Trust Funds is projected to be drawn down

beginning in 2025 until assets are exhausted in 2037. Individually, the DI

fund is projected to be exhausted in 2018 and the OASI fund in 2040. For the

75-year projection period, the actuarial deficit is 1.92 percent of taxable payroll, 0.08 percentage point smaller than in last year’s report. The open group

unfunded obligation for OASDI over the 75-year period is $5.4 trillion in

present value and is $0.1 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 $5.7 trillion

due to the change in the valuation date.

The OASDI annual cost rate is projected to increase from 13.09 percent of

taxable payroll in 2010 to 16.73 percent in 2035 and to 17.43 percent in

2084, a level that is 4.12 percent of taxable payroll more than the projected

income rate for 2084. For last year’s report, the OASDI cost for 2084 was

estimated at 17.73 percent, or 4.39 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 6.1 percent in 2035, then to decline to 5.9 percent by 2050, and to remain between 5.9 and 6.0 percent through 2084.

Conclusion

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

program is projected to exceed tax income in 2010 and 2011, to be less than

tax income in 2012 through 2014, then to exceed tax income in 2015 and

remain higher throughout the remainder of the long-range period. The combined OASI and DI Trust Funds are projected to increase in dollar level

through 2024, and then to decline and become exhausted and thus unable to

pay scheduled benefits in full on a timely basis in 2037. However, the DI

Trust Fund is projected to become exhausted in 2018, so some action will be

needed in the next few years. At a minimum, a reallocation of the payroll tax

rate between OASI and DI would be necessary, as was done in 1994.
Overview

4

For the combined OASDI Trust Funds to remain solvent throughout the

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

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

increase of 1.84 percentage points,1 scheduled benefits could be reduced

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

reduction of 12.0 percent, general revenue transfers equivalent to $5.4 trillion in present value could be made during the period, or some combination

of approaches could be adopted. Significantly larger changes would be

required to maintain solvency beyond 75 years.

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

that necessary changes can be phased in gradually and workers can be given

time to plan for them. Implementing changes sooner will allow the needed

revenue increases or benefit reductions to be spread over more generations.

Social Security plays a critical role in the lives of 54 million beneficiaries

and 155 million covered workers and their families in 2010. With informed

discussion, creative thinking, and timely legislative action, present and future

Congresses and Presidents can ensure that Social Security continues to protect future generations.

 1 The necessary tax rate increase differs from the 1.92 percent actuarial deficit for two reasons. First, the

necessary tax rate is that required to maintain solvency throughout the period, but not to 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 that is paid in wages.
5

Calendar Year 2009 Operations

B. TRUST FUND FINANCIAL OPERATIONS IN 2009

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

the DI, and the combined OASDI Trust Funds in calendar year 2009.

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

In 2009, net contributions accounted for 83 percent of total trust fund

income. Net 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 2009. The tax rates scheduled under current law for

2009 and later are shown in table II.B2.

Three percent of OASDI Trust Fund income 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 2009, the

combined trust fund assets earned interest at an effective annual rate of 4.9

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

Table II.B1.—Summary of 2009 Trust Fund Financial Operations

(In billions)

OASI DI OASDI

Assets at the end of 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . $2,202.9 $215.8 $2,418.7

Total income in 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 698.2 109.3 807.5

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570.4 96.9 667.3

Taxation of benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.9 2.0 21.9

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107.9 10.5 118.3

Total expenditures in 2009. . . . . . . . . . . . . . . . . . . . . . . . . 564.3 121.5 685.8

Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557.2 118.3 675.5

Railroad Retirement financial interchange . . . . . . . . . . 3.7 .4 4.1

Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . 3.4 2.7 6.2

Net increase in assets in 2009 . . . . . . . . . . . . . . . . . . . . . . 133.9 -12.2 121.7

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

Table II.B2.—Tax Rates for 2009 and Later

OASI DI OASDI

Tax rate for employees and employers, each (in percent) . . . . . . . . . . 5.30 0.90 6.20

Tax rate for self-employed persons (in percent) . . . . . . . . . . . . . . . . . 10.60 1.80 12.40
Overview

6

Trust Funds in 2009 were retirement, survivor, and disability benefits totaling $675.5 billion. The financial interchange with the Railroad Retirement

program resulted in a net payment of $4.1 billion from the combined OASDI

Trust Funds, or about 0.6 percent of total expenditures. The administrative

expenses of the Social Security program were $6.2 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 $121.7 billion in

2009 because income to the combined funds exceeded expenditures. At the

end of 2009, the combined assets of the OASI and the DI Trust Funds were

355 percent of estimated expenditures for 2010, up from an actual level of

353 percent at the end of 2008.
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 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, 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 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 2034. . . . . . 2.0 2.3 1.7

Average annual percentage reduction in total age-sex-adjusted 

death rates from 2034 to 2084 . . . . . . . . . . . . . . . . . . . . . . . . .77 .35 1.24

Average annual net immigration (in thousands) for years 

2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,065 1,370 780

Productivity (total U.S. economy), starting in 2020 . . . . . . . . . . 1.7 2.0 1.4

Average annual percentage change in average wage in covered 

employment from 2019 to 2084 . . . . . . . . . . . . . . . . . . . . . . . 4.0 3.6 4.4

Consumer Price Index (CPI), starting in 2014. . . . . . . . . . . . . . . 2.8 1.8 3.8

Average annual real-wage differential (percent) for years 

2020-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 1.8 .6

Unemployment rate (percent), starting in 2019 . . . . . . . . . . . . . . 5.5 4.5 6.5

Annual trust fund real interest rate (percent), starting in 2020 . . 2.9 3.6 2.1
Overview

8

D. PROJECTIONS OF FUTURE FINANCIAL STATUS

Short-Range Actuarial Estimates

For the short range (2010-2019), 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%

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Calendar year

Historical Estimated

"Minimum" level for short-term financial adequacy
9

Future Financial Status

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 and as

percentages of taxable payroll and gross domestic product (GDP)). Considering 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, the OASDI cost rate is

projected to remain relatively stable for the next 5 years, and then to increase

rapidly before leveling off starting in about 2035. The projected income rate

is stable at about 13 percent throughout the 75-year period except for a dip in

2010 due to the economic recession and to an expected $25 billion downward adjustment to 2010 income that corrects for excess payroll tax revenue

credited to the Trust Funds in earlier years. The cost rate is projected to

exceed the income rate in 2010 and 2011 because of the severity of the recent

recession. The cost rate falls below the income rate in 2012 through 2014 as

the economy recovers, then rises above the income rate again beginning in

2015. After 2015, the difference between the cost rate and the income rate

grows rapidly through 2035.

For 2010 through 2024, trust fund income, including interest income, is more

than is needed to cover costs, so trust fund assets will continue to grow.

Beginning in 2025, trust fund assets will diminish until they become

exhausted in 2037. Tax revenues are projected to be sufficient to support

expenditures at a level of 78 percent of scheduled benefits after trust fund

exhaustion in 2037, declining to 75 percent of scheduled benefits in 2084.
Overview

10

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

There were about 3.0 workers for every OASDI beneficiary in 2009. This

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

through 2008, and is lower for 2009 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 relatively

low-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:

2010-36: 100%

2037: 78%

2084: 75%

Cost: Scheduled but not 

fully payable benefits

Expenditures: Payable benefits = 

income after trust fund exhaustion 

in 2037
11

Future Financial Status

The maximum projected trust fund ratios for the OASI, DI, and combined

funds appear in table II.D1. The year in which the maximum projected trust

fund ratio is attained and the year in which the assets are projected to be

exhausted are shown as well.

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

75-year valuation period as a whole. It is essentially the difference between

income and cost of the program expressed as a percentage of taxable payroll

over 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. This measure should be viewed only as a rough indication of the amount of change

that is needed over the 75-year period as a whole, because the effects of

future changes are unlikely to follow this pattern. In this report, the actuarial

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

Table II.D1.—Projected Maximum Trust Fund Ratios Attained

and Trust Fund Exhaustion Dates

[Under the Intermediate Assumptions]

OASI DI OASDI

Maximum trust fund ratio (percent). . . . . . . . . . . . . . 403 158 355

Year attained. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 2010 2010

Year of trust fund exhaustion. . . . . . . . . . . . . . . . . . . 2040 2018 2037

0

1

2

3

4

1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Historical Estimated
Overview

12

balance under the intermediate assumptions is a deficit of 1.92 percent of

taxable payroll for the combined OASI and DI Trust Funds. The actuarial

deficit was 2.00 percent in the 2009 report and has been in the range of

1.70 percent to 2.23 percent for the prior 15 reports. 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 2.06 percent

of payroll.

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

examine the cumulative value of income less cost, in present value. Figure

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

the inception of the program through each of the next 75 years. The balance

of the combined trust funds is $2.5 trillion in 2010. This cumulative amount

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

trust fund assets, or reserves, through 2036. However, after 2036 this cumulative amount becomes negative, which means that the OASDI Trust Funds

have a net unfunded obligation through each year after 2036. Through the

end of 2084, the combined funds have a present-value unfunded obligation

of $5.4 trillion. This unfunded obligation represents 1.8 percent of future taxable payroll and 0.6 percent of future GDP through the end of the 75-year

projection period. The 0.14 percentage point difference between the

unfunded obligation as a share of taxable payroll (1.78 percent) and the actuarial balance (1.92 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 tax 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 grow

from 4.8 percent in 2010 to about 6.1 percent in 2035, then to decline to

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

2084. Social Security’s scheduled tax revenue is projected to increase from

its current level of about 4.6 percent of GDP to about 4.9 percent of GDP for

2019, as the economy recovers. Thereafter, tax income as a percent of GDP

declines gradually, reaching about 4.6 percent by 2084. Income from payroll

taxes declines generally in relation to GDP in the future because an increasing share of employee compensation is assumed to be provided in fringe benefits, especially for health care, making wages a declining share of GDP.

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

Based on Present Law Tax Rates and Scheduled Benefits

[Present value as of January 1, 2010, in trillions]

-$6

-$5

-$4

-$3

-$2

-$1

$0

$1

$2

$3

2009 2024 2039 2054 2069 2084

Ending year of valuation period

Unfunded obligation

(negative)

Trust fund assets

(positive)

2037
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. Overemphasis on summary

measures alone for a 75-year period can lead to incorrect perceptions and to

policy prescriptions that do not achieve sustainable solvency. Thus, careful

consideration of the trends in annual deficits and unfunded obligations

toward the end of the 75-year period is important. In addition, summary measures for a time period that extends to the infinite horizon are 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 $16.1 trillion in present value, 3.3 percent

of future taxable payroll, or 1.2 percent of future GDP. These calculations of

the shortfall indicate that much larger changes may be required to achieve

solvency beyond the 75-year period as compared to changes needed to balance 75-year period summary measures. The measured unfunded obligation

over the infinite horizon is increased from $15.1 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 $15.9 trillion due to the change in the valuation date. Expressed as a

percentage of taxable payroll, the measured unfunded obligation over the

infinite horizon decreased from 3.4 percent in last year’s report to 3.3 percent

 Figure II.D5.—OASDI Cost and Scheduled Tax Revenue as a Percentage of GDP

0%

2%

4%

6%

8%

10%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Historical Estimated

Cost

Scheduled Tax Revenue
15

Future Financial Status

for this year’s report. As a percentage of GDP, the measured unfunded obligation over the infinite horizon is the same as was estimated for last year’s

report, at 1.2 percent.

Uncertainty of the Projections

Significant uncertainty surrounds the intermediate assumptions. The Trustees

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

use of low-cost (alternative I) and high-cost (alternative III) 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 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, but do not provide any measure of the probability that future outcomes will fall within or outside the ranges shown.

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 before the end of the 75-year period

(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%

600%

700%

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 1.92 percent of taxable payroll for

this year’s report is smaller than the deficit of 2.00 percent of taxable payroll

shown in last year’s report under intermediate assumptions. 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, are the main reason for the decrease in the deficit. This effect for

legislative changes is partially offset by the change in the valuation period.

Finally, changes in several assumptions, methods, and recent data had largely

offsetting effects. For example, the negative effects of lower historical and

projected levels of death rates and near-term higher disability prevalence

roughly offset the positive effects that resulted from updating the samples

used to project future average benefit levels and the model used to project

labor force participation rates. Also, the near-term negative effects on

employment of the slightly deeper recession than assumed last year are offset

by higher than expected real growth in the average earnings level. For a

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

see section IV.B7 on page 71.

 Figure II.D7.—Annual Trust Fund Ratios

0%

100%

200%

300%

400%

500%

2010 2025 2040 2055 2070 2085

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 $5.3 trillion (present discounted value as of January 1, 2009)

to $5.4 trillion (present discounted value as of January 1, 2010). 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 2084. Legislative changes, changes in methods, revisions in

assumptions, and updated data decreased the measured unfunded obligation

by about $0.3 trillion.

This year’s projections of annual balances (noninterest income minus cost)

are lower than those in last year’s report through 2015 and then become

higher throughout the remainder of 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.08 1.93 14.02

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.76 2.25 16.02

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.68 -.32 -2.00

Changes in actuarial balance due to changes in:

Legislation / Regulation . . . . . . . . . . . . . . . . . . . . . . . +.12 +.02 +.14

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

a In changing from the valuation period of last year’s report, which was 2009-83, to the valuation period of

this report, 2010-84, the relatively large negative annual balance for 2084 is included. This change in the

valuation period results in a larger long-range actuarial deficit. The fund balance at the end of 2009, i.e., at

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

-.05 -.01 -.06

Demographic data and assumptions. . . . . . . . . . . . . . -.05 .00 -.05

Economic data and assumptions. . . . . . . . . . . . . . . . . -.01 .00 .00

Disability assumptions . . . . . . . . . . . . . . . . . . . . . . . . +.01 -.02 -.02

Methods and programmatic data . . . . . . . . . . . . . . . . +.04 +.03 +.07

Total change in actuarial balance . . . . . . . . . . . . . . . . . . +.06 +.02 +.08

Shown in this report:

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

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.09 1.92 14.01

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.71 2.22 15.93
19

Future Financial Status

 Figure II.D8.—OASDI Annual Balances: 2009 and 2010 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

2009 Report

2010 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 tax income in 2010 and 2011 due to the economic recession

and to an expected downward adjustment to 2010 income that corrects for

excess payroll tax revenue credited to the Trust Funds in earlier years.

Annual cost is projected to be less than tax income in 2012 through 2014,

and then to exceed tax income beginning in 2015. Thereafter, annual deficits

will increase generally through the remainder of the 75-year projection

period. Social Security’s combined trust funds are projected to allow full

payment of scheduled benefits on a timely basis until the trust funds become

exhausted in 2037. At that time, annual tax income to the trust funds is projected to equal about 78 percent of program cost. By 2084, annual tax

income is projected to be about 75 percent as large as the annual cost of the

OASDI program.

Separately, the OASI and DI funds are projected to have sufficient funds to

pay full benefits on time until 2040 and 2018, respectively. Given that the DI

fund is projected to become exhausted in 2018, some action will almost certainly be needed in the next few years. 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 1.92 percent of taxable payroll—0.08 percentage

point smaller than the 2.00 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 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 14.24 percent. Alternatively, changes could be made that are

equivalent to reducing scheduled benefits by about 12.0 percent. Other ways

of reducing the deficit include transfers of general revenue or some combination of approaches.

If no substantial action is taken until the combined trust funds become

exhausted in 2037, then changes necessary to make Social Security solvent

over the next 75 years will be concentrated on fewer years and fewer generations:
21

Conclusion

 • For example, payroll taxes could be raised to finance scheduled benefits

fully in every year starting in 2037. In this case, the payroll tax would

be increased to about 16.1 percent at the point of trust fund exhaustion

in 2037 and continue rising generally thereafter, reaching about

16.7 percent in 2084.

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

scheduled tax rates in each year beginning in 2037. Under this scenario,

scheduled benefits would be reduced 22 percent at the point of trust

fund exhaustion in 2037, with reductions reaching 25 percent in 2084.

Either of these actions would eliminate the shortfall for the 75-year period as

a whole by specifically eliminating annual deficits after trust fund exhaustion. 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 scheduled tax revenue after 2084. As a result, ensuring solvency

of the system beyond 2084 would likely require further changes beyond

those expected to be needed for 2084.

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

that necessary changes can be phased in gradually and workers can be given

time to plan for them. Implementing changes sooner will allow the needed

revenue increases or benefit reductions to be spread over more generations.

Social Security plays a critical role in the lives of 54 million beneficiaries

and 155 million covered workers and their families in 2010. With informed

discussion, creative thinking, and timely legislative action, present and future

Congresses and Presidents can ensure that Social Security continues to protect future generations.

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

 • www.socialsecurity.gov/oact/tr/2010/index.html

 • www.cms.gov/ReportsTrustFunds/

 • www.treas.gov/offices/economic-policy/social_security.shtml
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 2009

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

DI Trust Funds1 during calendar year 2009. Chapter IV provides projections

for calendar years 2010 through 2085. 

1. OASI Trust Fund

A statement of the income and disbursements of the Federal Old-Age and

Survivors Insurance Trust Fund in calendar year 2009, and of the assets of

the fund at the beginning and end of the calendar year, is presented in table

III.A1. As shown in the table, total trust fund receipts in 2009 amounted to

$698.2 billion, while disbursements totaled $564.3 billion, resulting in an

increase in trust fund assets during 2009 of $133.9 billion. Details of the various components of trust fund income and disbursements are discussed in the

following paragraphs. 

Included in total receipts during calendar year 2009 were $572.5 billion in

employment tax contributions. These contributions were partially offset by

transfers totaling $2.1 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 contributions thus amounted to $570.4 billion in 2009, a decrease of 0.7

percent from the corresponding amount in 2008. This decrease in OASI tax

contributions is due to the net effect of decreased earnings and the increase in

the contribution and benefit base. (Table VI.A1 shows the tax rates and contribution and benefit bases in effect for past years.)

Income based on taxation of benefits amounted to $19.9 billion in 2009.

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. 

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

Calendar Year 2009 Operations

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

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. Accordingly, a transfer of

about $3 thousand was made in 2009, reflecting costs incurred in fiscal year

2008.

Table III.A1.—Operations of the OASI Trust Fund, Calendar Year 2009

[In millions]

Total assets, December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,202,886

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $572,538

Payments from the General Fund of the Treasury for contributions subject to 

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2,146

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570,392

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 156

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,774

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,930

Reimbursement from the general fund for costs of payments

to uninsured persons who attained age 72 before 1968. . . . . . . . . . . . . . . . . . . . . . a

a Between -$0.5 and $0.5 million.

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,982

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

b Includes (1) interest on transfers between the trust fund and the general fund account for the Supplemental

Security Income program due to adjustments in the allocation of administrative expenses, (2) interest arising

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

-95

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 107,886

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

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 698,208

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557,160

Transfer to the DI Trust Fund to correct a trust fund allocation error made on payments to certain dually entitled disabled beneficiaries . . . . . . . . . . . . . . . . . . . . 62

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -59

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 3

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557,166

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . 3,690

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,685

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 758

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,439

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 564,295

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,912

Total assets, December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,336,798
Financial Operations and Legislative Changes

24

The OASI Trust Fund was credited with interest netting $107.9 billion,

which consisted of (1) interest earned on the investments of the trust fund,

(2) interest on transfers between the trust fund and the general fund account

for the Supplemental Security Income program due to adjustments in the

allocation of administrative expenses, (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

$98 thousand, consisted of gifts received under the provisions authorizing

the deposit of money gifts or bequests in the trust funds. 

Of the $564.3 billion in total OASI disbursements, $557.2 billion was for net

benefit payments, including the reimbursable costs of vocational rehabilitation services.1 As described in the 2008 report, in 2007 there was a transfer

of $5.6 billion from the OASI Trust Fund to the DI Trust Fund to correct a

long-standing, but small, error in the allocation between the trust funds of the

cost for certain benefit payments. The error related to payments to certain

dually-entitled disabled adult children that had been made entirely from the

DI Trust Fund, even though a portion should have been paid from the OASI

Trust Fund. In 2009, a relatively small ($0.1 billion) transfer was made to

correct previous estimates of this error and to correct ongoing errors in fiscal

year 2009. Excluding the $0.1 billion interfund transfer due to the trust fund

allocation error, net benefit payments would have been $557.1 billion. This

adjusted amount represents an increase of 9.5 percent over the corresponding

amount in calendar year 2008. This increase is due primarily to (1) an

increase in the total number of beneficiaries and (2) an increase in the average benefit amount. The increase in the average benefit amount in 2009 was

due in large part to the automatic cost-of-living benefit increase of 5.8 percent which became effective for December 2008 under the automatic-adjustment provisions in section 215(i) of the Social Security Act. 

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

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

Board and the Commissioner of Social Security determined that a transfer of

$3.7 billion to the Social Security Equivalent Benefit Account from the

OASI Trust Fund was required in June 2009. 

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

of retired or deceased workers who were receiving 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.
25

Calendar Year 2009 Operations

The remaining $3.4 billion of disbursements from the OASI Trust Fund represented net administrative expenses. The expenses of administering the

OASDI and Medicare programs are allocated and charged directly to each of

the various trust funds through which those programs are financed, on the

basis of provisional estimates. Similarly, the expenses allocated for administering the Supplemental Security Income program are charged directly to the

General Fund of the Treasury on a provisional basis. Periodically, as actual

experience develops and is analyzed, adjustments to the allocations of

administrative expenses for prior periods are made through interfund transfers and transfers between the OASI 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 2009, 78 percent of OASI net administrative expenses represented the cost

of administering the program. Such costs are charged to the trust fund by the

Social Security Administration ($2.7 billion in 2009). In addition, the

Department of the Treasury charges directly to the trust fund certain

expenses ($0.8 billion in 2009) that it incurs in helping to administer the

OASI program. In addition a relatively small adjustment ($454 thousand

in 2009) to administrative expenses is an offset representing income from the

sale of excess supplies and equipment.

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

Treasury for administrative costs incurred by the Social Security Administration in performing certain 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 and with the provision of information to participants in certain pension

plans. Such reimbursements totaled $4 million in 2009.

The assets of the OASI Trust Fund at the end of calendar year 2009 totaled

$2,336.8 billion, consisting of $2,318.8 billion in U.S. Government obligations and cash totaling $18.0 billion. The effective annual rate of interest

earned by the assets of the OASI Trust Fund during calendar year 2009 was

4.8 percent, as compared to 5.1 percent earned during calendar year 2008.

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 2008 and 2009.

The trust fund assets can be invested only in securities that are backed by the

full faith and credit of the United States Government, as required by law.
Financial Operations and Legislative Changes

26

Those 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, 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, 2009, with an interest rate of 3.25 percent, were selected so that

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

over the 15-year period 2010-24. The amount of bonds purchased on June

30, 2009 is 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 2009, 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 2009 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.

Net contributions amounted to $96.9 billion, a decrease of 0.7 percent from

the amount in the preceding calendar year. This decrease is attributable to the

same factors, insofar as they apply to the DI program, which accounted for

the change in contributions to the OASI Trust Fund.

Of the $121.5 billion in total disbursements, $118.3 billion was for net benefit payments. Excluding the $0.1 billion interfund transfer, net benefit payTable III.A2.—Operations of the DI Trust Fund, Calendar Year 2009

[In millions]

Total assets, December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $215,773

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $97,229

Payments from the General Fund of the Treasury for contributions subject to 

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -364

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,865

Income based on taxation of benefit payments:

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

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,951

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,955

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,357

Interest adjustmentsa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

a Includes (1) interest on transfers between the trust fund and the general fund account for the Supplemental

Security Income program due to adjustments in the allocation of administrative expenses, (2) interest arising

from the revised allocation of administrative expenses among the trust funds, and (3) interest on certain

reimbursements to the trust fund.

106

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 10,463

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,283

Disbursements:

Benefit payments:

Monthly benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,329

Transfer from the OASI Trust Fund to correct a trust fund allocation error made 

on payments to certain dually entitled disabled beneficiaries . . . . . . . . . . . . . . . -62

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -30

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 79

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,315

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . 448

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,561

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141

Miscellaneous reimbursements from the general fundb. . . . . . . . . . . . . . . . . . . . . .

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

related to administering the DI program.

40

Total administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,743

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,506

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12,223

Total assets, December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,550
Financial Operations and Legislative Changes

28

ments would have been $118.4 billion. This adjusted amount represents an

increase of 11.3 percent over the corresponding amount in calendar year

2008. 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:

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

average benefit amount. The increase in the average benefit amount in 2009

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

5.8 percent. The increase in the number of DI beneficiaries from 2008 to

2009 was more pronounced than the corresponding increase in the number of

OASI beneficiaries, due to the impact of the economic slowdown on applications for disability benefits. Disability applications for 2009 were nearly

260 thousand above the level for 2008.

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

continue to exceed such income in 2009. In 2009, DI disbursements

exceeded total DI income (including interest), the first time DI assets have

declined on an annual basis since 1993.

The assets of the DI Trust Fund at the end of calendar year 2009 totaled

$203.5 billion, consisting of $199.8 billion in U.S. Government obligations

and cash totaling $3.8 billion. The effective annual rate of interest earned by

the assets of the DI Trust Fund during calendar year 2009 was 5.0 percent, as

compared to 5.2 percent earned during calendar year 2008. 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

2008 and 2009.

3. OASI and DI Trust Funds, Combined

A statement of the operations of the income and disbursements 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 covering OASI and DI separately.
29

Calendar Year 2009 Operations

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

To provide a context for estimates of future trust fund income and expenditures provided later in this report, table III.A4 compares estimates of contributions and benefit payments for calendar year 2009, from the 2005-09

Trustees Reports, to the corresponding actual amounts for 2009.1

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

Calendar Year 2009

[In millions]

Total assets, December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,418,658

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $669,768

Payments from the General Fund of the Treasury for contributions subject to

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2,511

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667,257

Income based on taxation of benefit payments:

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

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,725

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,884

Reimbursement from the general fund for costs of payments

to uninsured persons who attained age 72 before 1968. . . . . . . . . . . . . . . . . . . . . . a

a Between -$0.5 and $0.5 million.

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,338

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

b Includes (1) interest on transfers between the trust funds and the general fund account for the Supplemental

Security Income program due to adjustments in the allocation of administrative expenses, (2) interest arising

from the revised allocation of administrative expenses among the trust funds, and (3) interest on certain

reimbursements to the trust funds.

11

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 118,349

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

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807,490

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 675,488

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -88

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 82

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675,482

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . 4,137

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,247

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 899

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.

36

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,182

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 685,801

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,689

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

 1 Percentage differences are calculated using amounts before rounding to the nearest $0.1 billion.
Financial Operations and Legislative Changes

30

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 unanticipated at the

time the earlier estimates were completed can contribute to such differences.

At the end of calendar year 2009, about 52.5 million persons were receiving

monthly benefits under the OASDI program. Of these persons, about 42.8

million and 9.7 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 2.9 percent and 4.6 percent, respectively, during the calendar year, reflecting increases in the

insured population and effects of the economic downturn. The estimated disTable III.A4.—Comparison of Actual Calendar Year 2009 Trust Fund Operations

With Estimates Made in Prior Reportsa

[Amounts in billions]

a The estimates shown are based on the intermediate assumptions.

Net contributions b

b “Actual” contributions for 2009 reflect adjustments for prior calendar years (see Appendix A on page 140

for description of these adjustments). “Estimated” contributions also include such adjustments, but on an

estimated basis.

Net benefit payments

Amount

Difference

from actual

(percent) Amount

Difference

from actual

(percent)

OASI Trust Fund:

Estimate in 2005 report . . . . . . . . . . . . . . $611.3 7.2 $524.1 -5.9

Estimate in 2006 report . . . . . . . . . . . . . . 620.9 8.9 535.9 -3.8

Estimate in 2007 report . . . . . . . . . . . . . . 623.2 9.3 532.9 -4.3

Estimate in 2008 report . . . . . . . . . . . . . . 618.3 8.4 538.3 -3.4

Estimate in 2009 report . . . . . . . . . . . . . . 579.0 1.5 554.7 -.4

Actual amount . . . . . . . . . . . . . . . . . . . . . 570.4 — c 557.1

c Excludes interfund transfer to correct a trust fund allocation error made on payments to certain disabled

beneficiaries. The transfer amounted to $0.1 billion from OASI to DI.

—

DI Trust Fund:

Estimate in 2005 report . . . . . . . . . . . . . . 103.8 7.2 109.7 -7.3

Estimate in 2006 report . . . . . . . . . . . . . . 105.4 8.9 110.4 -6.8

Estimate in 2007 report . . . . . . . . . . . . . . 105.8 9.3 110.0 -7.1

Estimate in 2008 report . . . . . . . . . . . . . . 105.0 8.4 111.7 -5.6

Estimate in 2009 report . . . . . . . . . . . . . . 98.3 1.5 117.7 -.6

Actual amount . . . . . . . . . . . . . . . . . . . . . 96.9 — c 118.4 —

OASI and DI Trust Funds, combined:

Estimate in 2005 report . . . . . . . . . . . . . . 715.1 7.2 633.8 -6.2

Estimate in 2006 report . . . . . . . . . . . . . . 726.4 8.9 646.2 -4.3

Estimate in 2007 report . . . . . . . . . . . . . . 729.0 9.3 642.9 -4.8

Estimate in 2008 report . . . . . . . . . . . . . . 723.3 8.4 650.0 -3.8

Estimate in 2009 report . . . . . . . . . . . . . . 677.3 1.5 672.4 -.5

Actual amount . . . . . . . . . . . . . . . . . . . . . 667.3 — 675.5 —
31

Calendar Year 2009 Operations

tributions of benefit payments in calendar years 2008 and 2009, 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 charged to the OASI and DI Trust Funds in calendar year 2009 totaled $6.2 billion. This amount represented 0.9 percent of

contribution income and 0.9 percent of expenditures. Corresponding percentages 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.

Table III.A5.—Distribution of Benefit Payments by Type of Beneficiary or Payment, 

Calendar Years 2008 and 2009

[Amounts in millions]

Calendar year 2008 Calendar year 2009

Amount

Percentage

of total Amount

Percentage

of total

Total OASDI benefit payments . . . . . . . . . . $615,357 100.0 $675,488 100.0

OASI benefit payments . . . . . . . . . . . . . . 509,056 82.7 557,160 82.5

DI benefit payments . . . . . . . . . . . . . . . . . 106,301 17.3 118,329 17.5

OASI benefit payments, total. . . . . . . . . . . . 509,056 100.0 557,160 100.0

Monthly benefits:

Retired workers and auxiliaries . . . . . . 409,503 80.4 451,578 81.1

Retired workers . . . . . . . . . . . . . . . . 383,999 75.4 424,044 76.1

Spouses . . . . . . . . . . . . . . . . . . . . . . . 22,022 4.3 23,613 4.2

Children . . . . . . . . . . . . . . . . . . . . . . 3,482 .7 3,922 .7

Survivors of deceased workers. . . . . . . 99,348 19.5 105,380 18.9

Aged widows and widowers. . . . . . . 78,747 15.5 83,572 15.0

Disabled widows and widowers . . . . 1,945 .4 2,067 .4

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

a Less than 0.05 percent.

23 a

Children . . . . . . . . . . . . . . . . . . . . . . 17,041 3.3 18,071 3.2

Widowed mothers and fathers 

caring for child beneficiaries . . . . 1,592 .3 1,647 .3

Uninsured persons generally aged 72 

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

b Less than $0.5 million.

a ba

Lump-sum death payments . . . . . . . . . . . 205 a 201 a

DI benefit payments, total . . . . . . . . . . . . . . 106,301 100.0 118,329 100.0

Disabled workers . . . . . . . . . . . . . . . . . 98,104 92.3 109,549 92.6

Spouses. . . . . . . . . . . . . . . . . . . . . . . . . 534 .5 586 .5

Children . . . . . . . . . . . . . . . . . . . . . . . . 7,664 7.2 8,194 6.9
Financial Operations and Legislative Changes

32

Changes in the invested assets of the OASI and DI funds between the end of

2008 and the end of 2009 are a result of the acquisition and disposition of

securities during calendar year 2009. 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 Contribution Income and of 

Total Expenditures, Calendar Years 2005-09

Calendar year 

OASI Trust Fund DI Trust Fund

OASI and DI

Trust Funds,

combined

Contribution

income

Total

expenditures

Contribution

income

Total

expenditures

Contribution

income

Total

expenditures

2005 . . . . . . . . . . . 0.6 0.7 2.7 2.6 0.9 1.0

2006 . . . . . . . . . . . .6 .7 2.6 2.5 .9 1.0

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

2008 . . . . . . . . . . . .6 .6 2.6 2.3 .9 .9

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

Table III.A7.—Trust Fund Investment Transactions, Calendar Year 2009

[In millions]

OASI

Trust Fund

DI

Trust Fund

OASI and DI

Trust Funds,

combined

Invested assets, December 31, 2008 . . . . . . . . $2,203,404 $215,810 $2,419,213

Acquisitions:

Special issues:

Certificates of indebtedness . . . . . . . . . . . 635,837 101,647 737,484

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

a Amounts shown were purchased on June 30, 2009. The interest rate on such purchases was 3.25 percent.

302,107 9,653 311,760

Total acquisitions . . . . . . . . . . . . . . . . . . . 937,944 111,300 1,049,244

Dispositions:

Special issues:

Certificates of indebtedness . . . . . . . . . . . 663,636 105,655 769,291

Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158,932 21,694 180,626

Total dispositions . . . . . . . . . . . . . . . . . . . 822,567 127,349 949,916

Net increase in invested assets . . . . . . . . . . . . . 115,377 -16,049 99,328

Invested assets, December 31, 2009 . . . . . . . . 2,318,780 199,760 2,518,541
33

Social Security Amendments in 2009

B. SOCIAL SECURITY AMENDMENTS SINCE THE 2009 REPORT

Since the 2009 report was transmitted to Congress on May 12, 2009, several

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

program.

The No Social Security Benefits for Prisoners Act of 2009, Public Law

111-117, was enacted on December 16, 2009. It amends the Social Security

Act to prohibit retroactive payments to individuals during periods for which

such individuals are prisoners, probation or parole violators, or fugitive felons. These retroactive benefits will not be paid until the beneficiary is no

longer a prisoner, probation or parole violator, or fugitive felon. This law is

estimated to have a negligible financial effect on the OASDI program over

the short-range and long-range periods.

The Social Security Disability Applicants’ Access to Professional Representation Act of 2010, Public Law 111-142, was enacted on February 27, 2010.

It includes a provision to permanently extend attorney fee withholding procedures to certain qualified non-attorney representatives. This law is estimated to have a negligible financial effect on the OASDI program over the

short-range and long-range periods.

The Hiring Incentives to Restore Employment (HIRE) Act, Public Law

111-147, was enacted on March 18, 2010. It exempts most employers from

paying the employer share of OASDI tax on wages paid after the date of

enactment and before January 1, 2011 to certain qualified individuals hired

and employed after February 3, 2010. This law has no direct financial effect

on the OASDI program because the tax amounts not paid by employers will

instead be transferred from the General Fund of the Treasury to the OASDI

Trust Funds. However, a small increase in total employment is expected to

result for 2010 due to this tax incentive. This law is estimated to have a negligible financial effect on the OASDI program over the short-range and longrange periods.

The Patient Protection and Affordable Care Act, Public Law 111-148, was

enacted on March 23, 2010. The Health Care and Education Reconciliation

Act of 2010, Public Law 111-152, was enacted on March 30, 2010. These

two laws result in numerous changes in the way health care will be utilized

and paid for in the United States. The main impact of these two laws on the

financial status of the OASDI program is an expected increase in the share of

employee compensation that will be paid in wages covered and taxed by the

OASDI program. Premiums paid by employees and employers for employersponsored group health insurance are excluded from OASDI coverage and
Financial Operations and Legislative Changes

34

thus are not subject to the payroll tax. This exclusion is not altered by the

new laws. However, under these new laws, a combination of federal subsidies for individual insurance through the health benefit exchanges, penalties

for being uninsured or not offering coverage, an excise tax on employersponsored group health insurance cost, and anticipated competitive premiums from health benefit exchanges are expected to slow the rate of growth in

the total cost of employer-sponsored group health insurance. Most of this

cost reduction is assumed to result in an increase in the share of employee

compensation that will be provided in wages that will be subject to the Social

Security payroll tax. These two laws together are estimated to have a significant financial effect on the OASDI program over the short-range and longrange periods.

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

laws. See sections IV.A4 and IV.B7 of this report for further discussion of

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

the OASDI program.
35

Short-Range Estimates

IV. ACTUARIAL ESTIMATES

This chapter presents actuarial estimates of the future financial condition of

the Social Security program. The income, cost, and assets (or shortfall) of the

OASI and DI Trust Funds are projected in dollars for 10 years and as a percentage of taxable payroll, as a percentage of gross domestic product, and in

present-value dollars over the 75-year period. In addition, a variety of measures of the adequacy of current program financing are discussed. This report

carefully 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.

Since assumptions related to these factors are subject to uncertainty, the estimates presented in this section are prepared under three sets of assumptions,

to show a range of possible outcomes. The intermediate set of assumptions,

designated as alternative II, reflects the Trustees’ best estimate of future

experience; the low-cost alternative I is more optimistic and the high-cost

alternative III is more pessimistic for the trust funds’ future financial outlook. The intermediate estimates are shown first in the tables in 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 (2010-19) are presented first, followed by

estimates and measures of actuarial status for the long range (2010-84) and

over the infinite horizon. As an additional illustration of uncertainty, estimated 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 and is generally assessed using

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. Thus, the trust fund ratio represents the proportion of a

year’s cost which could be paid solely with the assets at the beginning of a

year. A trust fund ratio of 100 percent of annual program cost is generally

assumed to provide a reasonable “contingency reserve.” During periods

when trust fund income exceeds disbursements, the excess is held in the trust

funds. To the extent that trust fund assets exceed 100 percent of annual cost,

the excess is dedicated to advance fund a portion of the Social Security program’s future financial obligations. During periods when trust fund disbursements exceed income, as might happen during an economic recession, trust
Actuarial Estimates

36

fund assets are used to meet the shortfall. In the event of recurring shortfalls

for an extended period, the trust funds can allow time for the development,

enactment, and implementation of legislation to restore financial stability 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 of the operations and financial status of

the OASI Trust Fund for the period 2010-19, based on the assumptions

described in chapter V. 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. Also, 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

2019. 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).

After an estimated decline in trust fund income from 2009 to 2010 due to the

economic recession and to an expected $25 billion downward adjustment to

2010 income that corrects for excess payroll tax revenue credited to the Trust

Funds in earlier years, the estimated income shown in table IV.A1 increases

annually under each set of assumptions throughout the remainder of the

short-range projection period. The estimated increases in income reflect

increases in estimated OASDI taxable earnings and growth in interest earn-

 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 been 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.
37

Short-Range Estimates

ings on the invested assets of the trust fund. For each alternative, employment is assumed to decrease in 2010 and is assumed to increase in every year

thereafter through 2019. The number of persons with taxable earnings would

increase on the basis of alternatives I, II, and III from 156 million during calendar year 2009 to about 179 million, 175 million, and 171 million, respectively, in 2019. The total annual amount of taxable earnings is projected to

increase in every year through 2019 for each alternative. Total earnings

increase from $5,288 billion in 2009 to $8,787 billion, $8,869 billion, and

$9,133 billion in 2019, 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)

increases in average earnings in covered employment (reflecting both real

growth and price inflation), (3) increases in the contribution and benefit base

during the period 2010-19 under the automatic-adjustment provisions, and

(4) recovery from the economic recession.

Growth in interest earnings represents a significant component of the overall

increase in trust fund income during this period. Although the effective interest rates payable on trust fund investments are projected to temporarily

decline from current levels through 2011, the continuing rapid increase in

OASI assets will result in a corresponding net increase in interest income. By

2019, interest income to the OASI Trust Fund is projected to be about

17 percent of total trust fund income on the basis of the intermediate assumptions, as compared to 15 percent in 2009.

 1 Note that the pattern, by alternative, of these nominal amounts of total taxable earnings is not what might

be expected, but the reverse, because of the varying inflation assumptions embedded in the respective estimates.

 Figure IV.A1.—Short-Range OASI and DI Trust Fund Ratios

[Assets as a percentage of annual cost]

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Calendar year

DI

OASI

Historical Estimated

"Minimum" level for short-term financial adequacy I

II

III

I

II

III
Actuarial Estimates

38

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

Table IV.A1.—Operations of the OASI Trust Fund, Calendar Years 2005-19a

[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

Totalb

b “Total Income” column includes transfers made between the OASI Trust Fund and the General Fund of the

Treasury that are not included in the separate components of income shown. These transfers consist of payments for (1) the cost of noncontributory wage credits for military service before 1957 and (2) the cost of

benefits to certain uninsured persons who attained age 72 before 1968. In December 2005, $350 million was

transferred from the OASI Trust Fund to the General Fund of the Treasury for the cost of pre-1957 military

service wage credits, and a similar transfer of $90 million is projected to occur in December 2010. After

2010 such transfers are estimated to be less than $500,000 in each year.

Net

contributions

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:

2005 . . $604.3 $506.9 $13.8 $84.0 $441.9 $435.4 $3.0 $3.6 $162.4 $1,663.0 340

2006 . . 642.2 534.8 15.6 91.8 461.0 454.5 3.0 3.5 181.3 1,844.3 361

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

2008 . . 695.5 574.6 15.6 105.3 516.2 509.3 3.2 3.6 179.3 2,202.9 392

2009 . . 698.2 570.4 19.9 107.9 564.3 557.2 3.4 3.7 133.9 2,336.8 390

Intermediate:

2010 . . 686.1 553.4 23.9 108.9 586.2 578.4 3.8 3.9 99.9 2,436.7 399

2011 . . 741.9 604.8 25.1 112.0 607.5 599.7 3.9 3.9 134.4 2,571.1 401

2012 . . 789.7 641.7 27.9 120.1 638.3 630.2 4.1 4.0 151.4 2,722.6 403

2013 . . 845.1 682.3 31.5 131.3 680.4 672.2 4.2 4.0 164.7 2,887.3 400

2014 . . 902.4 724.3 34.8 143.3 728.1 719.7 4.3 4.1 174.2 3,061.5 397

2015 . . 958.9 765.5 38.2 155.2 780.1 771.4 4.4 4.3 178.8 3,240.3 392

2016 . . 1,018.8 809.3 41.9 167.6 836.2 827.3 4.6 4.4 182.6 3,422.9 388

2017 . . 1,078.0 851.5 45.9 180.7 896.9 887.5 4.7 4.7 181.1 3,603.9 382

2018 . . 1,136.9 893.8 49.5 193.7 962.1 952.3 4.9 4.9 174.8 3,778.8 375

2019 . . 1,193.0 934.3 53.3 205.4 1,032.0 1,021.8 5.0 5.1 161.0 3,939.7 366

Low-cost:

2010 . . 688.9 555.9 23.9 109.2 585.9 578.2 3.8 3.9 103.0 2,439.8 399

2011 . . 752.0 613.9 25.1 113.1 607.0 599.1 3.9 3.9 145.1 2,584.9 402

2012 . . 799.9 651.4 27.6 120.9 632.4 624.4 4.1 4.0 167.5 2,752.4 409

2013 . . 854.1 691.8 31.0 131.3 669.1 661.0 4.2 3.9 185.0 2,937.4 411

2014 . . 909.6 732.9 33.9 142.7 709.4 701.1 4.2 4.0 200.2 3,137.6 414

2015 . . 964.0 772.6 36.8 154.6 752.2 743.7 4.3 4.1 211.8 3,349.4 417

2016 . . 1,020.7 813.6 40.0 167.1 798.1 789.5 4.5 4.1 222.6 3,572.0 420

2017 . . 1,075.3 851.4 43.3 180.6 847.6 838.6 4.6 4.4 227.7 3,799.6 421

2018 . . 1,130.7 889.4 46.3 194.9 900.3 891.0 4.7 4.6 230.4 4,030.0 422

2019 . . 1,184.1 925.9 49.4 208.8 956.6 947.0 4.9 4.7 227.6 4,257.6 421

High-cost:

2010 . . 683.7 551.4 23.9 108.5 586.4 578.6 3.8 3.9 97.3 2,434.1 398

2011 . . 735.0 598.0 25.2 111.8 608.1 600.3 3.9 3.9 126.9 2,560.9 400

2012 . . 790.8 639.0 28.2 123.6 645.7 637.7 4.1 4.0 145.1 2,706.0 397

2013 . . 852.2 681.7 32.6 137.9 703.6 695.3 4.2 4.1 148.6 2,854.6 385

2014 . . 913.4 726.9 36.6 149.9 765.4 756.7 4.4 4.3 148.1 3,002.7 373

2015 . . 974.1 772.6 40.6 160.9 828.8 819.7 4.6 4.6 145.2 3,147.9 362

2016 . . 1,038.0 821.0 45.0 172.1 897.8 888.3 4.8 4.7 140.3 3,288.2 351

2017 . . 1,099.3 866.9 49.7 182.7 972.8 962.7 4.9 5.2 126.5 3,414.6 338

2018 . . 1,160.8 914.4 54.2 192.2 1,054.0 1,043.4 5.1 5.5 106.9 3,521.5 324

2019 . . 1,220.5 961.8 59.0 199.7 1,141.7 1,130.6 5.3 5.8 78.8 3,600.3 308
39

Short-Range Estimates

Rising expenditures during 2010-19 reflect automatic benefit increases as

well as the upward trend in the number of beneficiaries and in the average

monthly earnings underlying benefits payable by the program. The growth in

the number of beneficiaries in the past and the expected growth in the future

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 would substantially 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 2010-19 under the three sets of assumptions are shown in

table IV.A2, together with values for actual experience during 2005-09.

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

reflecting most of the same factors described previously in connection with

the OASI Trust Fund. DI Trust Fund assets are projected to continue to

decrease in 2010 under each alternative. Under the low-cost assumptions,

assets would begin to increase again after reaching a low point in 2015.

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 2015.

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 2009-19, the projected annual average growth rate in the number

of DI disabled-worker beneficiaries is roughly 0.8, 2.0, and 3.2 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 incidence are
Actuarial Estimates

40

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 comparable to those projected prior to last

year’s report.1

The proportion of disabled-worker beneficiaries whose benefits terminate in

a given year has also fluctuated in the past. Over the last 20 years, the rates

of benefit termination due to death and the proportion converting to retirement benefits (at attainment of NRA) have declined very gradually. This

trend is attributable, in part, to the lower average age of new beneficiaries.

Declines in mortality for the general population have also led to improved

mortality experience among the disabled-worker beneficiaries. In addition,

conversions to old-age benefits were at a temporarily reduced level for years

2003 through 2008 due to the gradual increase in the 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 throughout the

1970s and early 1980s. Projected rates of recovery terminations in this year’s

report are temporarily elevated in years 2013-18 due to an assumed increase

in funding for the purpose of reducing the backlog of continuing disability

reviews (CDRs). 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 2018. 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.

 1 Historical and projected patterns of disability incidence rates are described in greater detail in section

V.C.6.
41

Short-Range Estimates

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

b“Total Income” column includes transfers made between the DI Trust Fund and the General Fund of the

Treasury that are not included in the separate components of income shown. These transfers consist of payments for the cost of noncontributory wage credits for military service before 1957. In particular, a transfer

was made in December 2007 in the amount of $7.7 million from the General Fund of the Treasury to the DI

Trust Fund. After 2009 such transfers are estimated to be less than $500,000 in each year.

cThe “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.

dThe DI Trust Fund is projected to become exhausted in 2018 and 2015 under the intermediate and the highcost assumptions, respectively. Accordingly, certain trust fund operation values from the year of trust fund

exhaustion through 2019 are not meaningful under present law and are not shown in this table.

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

Table IV.A2.—Operations of the DI Trust Fund, Calendar Years 2005-19a

[Dollar amounts in billions]

Calendar

year

Income Cost Assets

Totalb

Net

contributions

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioc

Historical data:

2005 . . $97.4 $86.1 $1.1 $10.3 $88.0 $85.4 $2.3 $0.3 $9.4 $195.6 212

2006 . . 102.6 90.8 1.2 10.6 94.5 91.7 2.3 .4 8.2 203.8 207

2007 . . 109.9 95.2 1.4 13.2 98.8 95.9 2.5 .4 11.1 214.9 206

2008 . . 109.8 97.6 1.3 11.0 109.0 106.0 2.5 .4 .9 215.8 197

2009 . . 109.3 96.9 2.0 10.5 121.5 118.3 2.7 .4 -12.2 203.5 178

Intermediate:

2010 . . 105.2 94.0 2.0 9.3 128.4 125.0 2.9 .5 -23.2 180.3 158

2011 . . 112.9 102.7 2.2 8.0 134.2 130.4 3.2 .6 -21.3 159.0 134

2012 . . 118.4 109.0 2.5 6.9 141.1 137.1 3.4 .5 -22.7 136.3 113

2013 . . 124.4 115.9 2.9 5.7 147.0 143.0 3.5 .5 -22.6 113.7 93

2014 . . 130.7 123.0 3.1 4.5 153.2 149.0 3.7 .5 -22.5 91.2 74

2015 . . 137.0 130.0 3.4 3.6 159.9 155.6 3.9 .5 -23.0 68.2 57

2016 . . 143.7 137.4 3.7 2.6 167.0 162.4 4.1 .5 -23.3 44.9 41

2017 . . 150.1 144.6 4.0 1.5 174.4 169.6 4.3 .5 -24.3 20.6 26

2018 . . d 151.8 4.3 d 182.1 177.1 4.6 .4 d d 11

2019 . . d 158.6 4.6 d 190.3 185.0 4.8 .4 d dd

Low-cost:

2010 . . 105.6 94.4 1.9 9.3 126.3 122.9 2.9 .5 -20.7 182.9 161

2011 . . 114.6 104.2 2.1 8.3 130.1 126.3 3.2 .6 -15.4 167.4 141

2012 . . 120.5 110.6 2.4 7.5 133.8 129.9 3.4 .5 -13.3 154.1 125

2013 . . 127.1 117.5 2.7 7.0 136.6 132.6 3.5 .5 -9.5 144.6 113

2014 . . 133.9 124.5 2.8 6.6 139.3 135.2 3.6 .5 -5.4 139.3 104

2015 . . 140.6 131.2 3.0 6.4 142.2 137.9 3.8 .5 -1.6 137.6 98

2016 . . 147.8 138.2 3.2 6.5 145.4 141.0 4.0 .5 2.4 140.1 95

2017 . . 154.8 144.6 3.4 6.9 149.2 144.6 4.2 .4 5.7 145.7 94

2018 . . 162.1 151.0 3.6 7.4 153.2 148.4 4.4 .4 8.8 154.6 95

2019 . . 169.1 157.2 3.8 8.1 157.6 152.7 4.6 .4 11.5 166.1 98

High-cost:

2010 . . 104.8 93.6 2.0 9.2 130.6 127.2 2.9 .5 -25.8 177.8 156

2011 . . 111.5 101.5 2.3 7.7 138.4 134.6 3.2 .6 -26.8 150.9 128

2012 . . 117.4 108.5 2.6 6.3 148.6 144.6 3.4 .5 -31.2 119.8 102

2013 . . 123.4 115.8 3.1 4.5 160.0 155.8 3.6 .5 -36.5 83.2 75

2014 . . 129.8 123.4 3.5 2.9 171.2 166.8 3.8 .5 -41.4 41.9 49

2015 . . d 131.2 3.9 d 182.3 177.7 4.0 .5 d d 23

2016 . . d 139.4 4.3 d 193.7 188.9 4.3 .5 d dd

2017 . . d 147.2 4.7 d 205.6 200.5 4.5 .5 d dd

2018 . . d 155.3 5.1 d 218.1 212.7 4.8 .5 d dd

2019 . . d 163.3 5.6 d 231.2 225.6 5.1 .5 d dd
Actuarial Estimates

42

At the beginning of calendar year 2009, the assets of the DI Trust Fund represented 178 percent of annual expenditures. During 2009, DI expenditures

exceeded income, and the trust fund ratio for the beginning of 2010

decreased to about 158 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 94 percent at the beginning of 2017 before increasing to 98 percent at the

beginning of 2019. Under the high-cost assumptions, the assets of the DI

Trust Fund would decline steadily, dipping below the level of annual expenditures during 2012 and becoming completely depleted in 2015.

Assets of the DI Trust Fund were greater than annual expenditures at the

beginning of 2010. Under all three alternatives, however, the DI Trust Fund

does not satisfy the Trustees’ short-range test of financial adequacy. The DI

Trust Fund is projected to be exhausted by the end of 2018 and 2015 for

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 2010-19 for the three alternatives are shown in

table IV.A3, together with figures on actual experience in 2005-09. Because

income and cost for the OASI Trust Fund represent 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.

While combining the operations of the OASI and DI Trust Funds permits an

assessment of the short-range test for the two programs on a combined basis,

in practice assets from one trust fund cannot be shared 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. The value of the combined OASI and DI Trust

Funds in that year shown in table IV.A3 shows that sufficient OASI assets

would be available to pay DI benefits through 2019, but only with legislation

to permit this action.
43

Short-Range Estimates

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 2005-19a

[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

Totalb

b “Total Income” column includes transfers made between the OASI and DI Trust Funds and the General

Fund of the Treasury that are not included in the separate components of income shown. These transfers consist of payments for (1) the cost of noncontributory wage credits for military service before 1957 and (2) the

cost of benefits to certain uninsured persons who attained age 72 before 1968.

Net

contributions

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:

2005 . . $701.8 $592.9 $14.9 $94.3 $529.9 $520.7 $5.3 $3.9 $171.8 $1,858.7 318

2006 . . 744.9 625.6 16.9 102.4 555.4 546.2 5.3 3.8 189.5 2,048.1 335

2007 . . 784.9 656.1 18.6 110.2 594.5 584.9 5.5 4.0 190.4 2,238.5 345

2008 . . 805.3 672.1 16.9 116.3 625.1 615.3 5.7 4.1 180.2 2,418.7 358

2009 . . 807.5 667.3 21.9 118.3 685.8 675.5 6.2 4.1 121.7 2,540.3 353

Intermediate:

2010 . . 791.3 647.4 25.8 118.1 714.6 703.4 6.8 4.4 76.7 2,617.0 355

2011 . . 854.8 707.5 27.3 120.0 741.7 730.1 7.1 4.5 113.1 2,730.1 353

2012 . . 908.1 750.7 30.4 127.0 779.3 767.4 7.5 4.5 128.7 2,858.8 350

2013 . . 969.5 798.2 34.4 137.0 827.4 815.2 7.7 4.5 142.1 3,001.0 346

2014 . . 1,033.0 847.2 38.0 147.8 881.3 868.7 8.0 4.6 151.7 3,152.7 341

2015 . . 1,095.9 895.5 41.6 158.8 940.1 927.0 8.3 4.8 155.8 3,308.5 335

2016 . . 1,162.5 946.7 45.6 170.2 1,003.2 989.7 8.7 4.8 159.3 3,467.8 330

2017 . . 1,228.1 996.1 49.9 182.2 1,071.3 1,057.1 9.0 5.2 156.8 3,624.6 324

2018 . . 1,293.3 1,045.5 53.8 194.0 1,144.2 1,129.4 9.4 5.4 149.1 3,773.7 317

2019 . . 1,355.2 1,092.9 57.9 204.4 1,222.2 1,206.8 9.9 5.6 132.9 3,906.6 309

Low-cost:

2010 . . 794.6 650.3 25.8 118.5 712.3 701.1 6.8 4.4 82.3 2,622.7 357

2011 . . 866.7 718.1 27.2 121.3 737.1 725.4 7.1 4.5 129.6 2,752.3 356

2012 . . 920.4 762.0 30.0 128.4 766.2 754.3 7.5 4.5 154.3 2,906.5 359

2013 . . 981.2 809.3 33.7 138.3 805.7 793.6 7.6 4.4 175.5 3,082.0 361

2014 . . 1,043.4 857.4 36.8 149.3 848.6 836.3 7.9 4.5 194.8 3,276.8 363

2015 . . 1,104.6 903.8 39.8 161.0 894.4 881.7 8.1 4.6 210.2 3,487.0 366

2016 . . 1,168.5 951.8 43.2 173.6 943.5 930.5 8.4 4.6 225.0 3,712.0 370

2017 . . 1,230.1 996.0 46.7 187.4 996.8 983.2 8.8 4.8 233.3 3,945.4 372

2018 . . 1,292.8 1,040.5 49.9 202.4 1,053.5 1,039.5 9.1 4.9 239.2 4,184.6 374

2019 . . 1,353.3 1,083.2 53.2 216.9 1,114.2 1,099.7 9.5 5.1 239.1 4,423.7 376

High-cost:

2010 . . 788.5 645.0 25.9 117.7 717.0 705.9 6.8 4.4 71.5 2,611.8 354

2011 . . 846.5 699.5 27.4 119.6 746.5 734.9 7.1 4.5 100.0 2,711.9 350

2012 . . 908.2 747.5 30.9 129.8 794.3 782.3 7.5 4.5 113.9 2,825.8 341

2013 . . 975.6 797.5 35.7 142.4 863.6 851.2 7.8 4.6 112.1 2,937.8 327

2014 . . 1,043.3 850.3 40.1 152.8 936.5 923.5 8.2 4.8 106.7 3,044.5 314

2015 . . 1,110.0 903.8 44.4 161.7 1,011.1 997.4 8.6 5.1 98.8 3,143.4 301

2016 . . 1,179.9 960.4 49.3 170.3 1,091.5 1,077.2 9.0 5.3 88.4 3,231.8 288

2017 . . 1,246.2 1,014.1 54.5 177.6 1,178.4 1,163.3 9.5 5.7 67.7 3,299.5 274

2018 . . 1,312.6 1,069.7 59.4 183.5 1,272.0 1,256.1 9.9 6.0 40.6 3,340.1 259

2019 . . 1,376.7 1,125.1 64.6 187.0 1,372.9 1,356.2 10.4 6.3 3.8 3,343.9 243
Actuarial Estimates

44

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

From the 2009 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 2009 report, the trust fund ratio for OASI was estimated to reach

394 percent at the beginning of 2018—the tenth projection year from that

report. Based on the change in the short-range valuation period alone, from

2009-18 to 2010-19, the estimated ratio for the tenth year (now 2019) would

be 11 percentage points lower, or 383 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 (2019) to 366 percent.

The enactment of health care reform legislation resulted in a 1 percentage

point decrease in the OASI 2019 trust fund ratio. 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 9 percentage points. The cumulative net

effects of changes in economic data and assumptions, reflecting revised estimates of the effects of the economic recession that started in December 2007,

resulted in a reduction in the trust fund ratio of 2 percentage points by the

beginning of 2019. A decrease in the 2019 trust fund ratio of 2 percentage

points resulted from the combined effects of incorporating recent programmatic data including the further correction of the trust fund allocation error

described in section III.A. Finally, there were several relatively minor

changes in the short-range projection methodology since the 2009 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 was to decrease the ending trust fund ratio by

about 2 percentage points.

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

for the DI Trust Fund and the OASI and DI funds combined under the intermediate assumptions are theoretical because the DI Trust Fund is projected

to be depleted during 2018. The 43 percentage point decrease in the DI trust

fund ratio by the beginning of 2019 (compared with the ratio at the beginning

of 2018 in last year’s report) is largely caused by updates to programmatic

and economic data and assumptions, most of which are attributable to temporarily higher disability incidence and lower payroll tax receipts due to the

recession. The remainder of the change results from the combined effects of
45

Short-Range Estimates

enactment of the health reform legislation, the change in the valuation

period, and several minor changes in methodology.

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 2018 394 40 338

Change in trust fund ratio due to changes in: 

Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1 -1 -1

Valuation period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11 -15 -11

Demographic data and assumptions. . . . . . . . . . . . . . . . . . . . -9 a

a Between -0.5 and 0.5 percent.

-8

Economic data and assumptions. . . . . . . . . . . . . . . . . . . . . . . -2 -4 -2

Programmatic data and assumptions . . . . . . . . . . . . . . . . . . . -2 -24 -5

Projection methods and data. . . . . . . . . . . . . . . . . . . . . . . . . . -2 1 -1

Total change in trust fund ratio . . . . . . . . . . . . . . . . . . . . . . . . . -28 -43 -29

Trust fund ratio shown in this report for calendar year 2019b. . . . 

b Figures for DI, and OASI and DI combined, are theoretical because of the depletion of the DI trust fund in

2018.

366 -3 309
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 like 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, particular attention should be paid to the level and

trend of the annual balances at the end of the long-range period.

The next measure discussed 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. Particular attention should be paid to the level and year of maximum trust fund ratio, to the

year of exhaustion of the funds, and to the stability of the trust fund ratio in

cases where the ratio remains positive at 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 discussed in this section summarize the total income and

cost over valuation periods that extend through 75 years and to 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 a comparison of covered workers to beneficiaries, a generational decomposition of the

infinite horizon unfunded obligation, the test of long-range close actuarial

balance, and the reasons for 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 is considered to 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

indication of this stability is achieving 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
47

Long-Range Estimates

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 sum of the

income from payroll taxes and the income from taxation of benefits,

expressed as a percentage of OASDI taxable payroll for the year. The

OASDI taxable payroll consists of the total earnings that are 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 transfers from the trust funds to the Railroad

Retirement program under the financial-interchange provisions, 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.2

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 about 11 percent of taxable payroll in

recent years to 11.45 percent for 2084, 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 benefittaxation 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 due to the effects of the

recent economic recession, remains fairly stable through 2015 as the economic recovery through this period roughly offsets the effects of the aging

population. From about 2015 to 2035, the cost rate rises rapidly because 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,” and that did apply, before 1984, to net earnings from self-employment

and, before 1988, to income from tips.

 2 In this context, the term balance does not represent the assets of the trust funds, which are sometimes

referred to as the balance in the trust funds.
Actuarial Estimates

48

retirement of the baby-boom generation will increase the number of beneficiaries much faster than subsequent relatively low-birth-rate generations will

increase the labor force. From 2035 to 2050, the cost rate declines somewhat

as the baby-boom generation ages, causing an increase in the average age of

beneficiaries. 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 cost rate rises

slowly because of the projected reductions in death rates, reaching

15.17 percent of taxable payroll for 2084.

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 2010 through 2013, then

rises until it peaks in 2033 at 12.73 percent of payroll. The cost rate then generally declines gradually, reaching 10.79 percent of payroll for 2084, at

which point the income rate reaches 11.19 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 22.18 percent of payroll for 2084, 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 2010, positive from 2011 through

2017, and then negative thereafter. This annual deficit rises rapidly, reaching

3.23 percent of taxable payroll by 2035, and generally rises thereafter

(except for the period 2038-52), reaching 3.72 percent of taxable payroll for

2084.

Under the low-cost assumptions, the projected OASI annual balance is negative in 2010, positive from 2011 through 2020, and then becomes negative,

with the annual deficit peaking at 1.46 percent of taxable payroll for 2033.

Then the annual deficit declines until 2063, when the OASI annual balance

becomes positive, reaching a surplus of 0.40 percent of payroll in 2084.

Under the high-cost assumptions, in contrast, the OASI balance is projected

to be negative in 2010, positive for only 3 years (through 2013), and to be

negative thereafter, with a deficit of 1.69 percent for 2020, 6.06 percent for

2050, and 10.33 percent of payroll for 2084.
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. . . . . 10.79 9.35 1.44 1.81 1.68 .12 12.60 11.03 1.56

2004. . . . . 10.74 9.27 1.46 1.79 1.78 .02 12.53 11.05 1.48

2005. . . . . 10.96 9.31 1.65 1.84 1.85 -.02 12.79 11.16 1.63

2006. . . . . 10.96 9.18 1.78 1.83 1.88 -.05 12.79 11.06 1.73

2007. . . . . 11.03 9.46 1.57 1.84 1.88 -.04 12.87 11.34 1.53

2008. . . . . 10.90 9.53 1.37 1.83 2.01 -.19 12.73 11.55 1.18

2009. . . . . 11.19 10.70 .49 1.87 2.30 -.43 13.07 13.00 .06

Intermediate:

2010. . . . . 10.57 10.74 -.16 1.76 2.35 -.60 12.33 13.09 -.76

2011 . . . . . 11.07 10.68 .39 1.84 2.36 -.52 12.91 13.04 -.12

2012. . . . . 11.03 10.52 .52 1.84 2.32 -.49 12.87 12.84 .03

2013. . . . . 11.06 10.54 .52 1.84 2.28 -.44 12.90 12.82 .08

2014. . . . . 11.08 10.63 .45 1.84 2.24 -.39 12.92 12.86 .06

2015. . . . . 11.10 10.77 .33 1.84 2.21 -.37 12.94 12.98 -.04

2016. . . . . 11.12 10.92 .20 1.84 2.18 -.34 12.96 13.10 -.14

2017. . . . . 11.14 11.14 .01 1.85 2.17 -.32 12.99 13.30 -.32

2018. . . . . 11.17 11.39 -.22 1.85 2.16 -.31 13.01 13.55 -.53

2019. . . . . 11.18 11.68 -.50 1.85 2.15 -.31 13.03 13.84 -.81

2020. . . . . 11.20 11.99 -.79 1.85 2.16 -.31 13.05 14.15 -1.10

2025. . . . . 11.28 13.28 -2.00 1.85 2.25 -.40 13.13 15.54 -2.40

2030. . . . . 11.34 14.20 -2.86 1.85 2.20 -.35 13.19 16.41 -3.21

2035. . . . . 11.37 14.60 -3.23 1.85 2.13 -.28 13.22 16.73 -3.50

2040. . . . . 11.38 14.54 -3.17 1.85 2.10 -.25 13.23 16.64 -3.41

2045. . . . . 11.37 14.31 -2.94 1.85 2.13 -.28 13.23 16.44 -3.22

2050. . . . . 11.37 14.16 -2.80 1.86 2.17 -.31 13.23 16.33 -3.11

2055. . . . . 11.37 14.17 -2.80 1.86 2.20 -.34 13.23 16.37 -3.14

2060. . . . . 11.39 14.29 -2.90 1.86 2.19 -.34 13.24 16.48 -3.24

2065. . . . . 11.40 14.41 -3.02 1.86 2.20 -.35 13.25 16.62 -3.36

2070. . . . . 11.41 14.58 -3.17 1.86 2.23 -.37 13.27 16.81 -3.54

2075. . . . . 11.42 14.79 -3.36 1.86 2.24 -.38 13.28 17.03 -3.75

2080. . . . . 11.44 15.00 -3.56 1.86 2.25 -.39 13.30 17.25 -3.95

2085. . . . . 11.45 15.21 -3.76 1.86 2.26 -.40 13.31 17.47 -4.16

First year balance becomes

negative and remains negative

through 2085 . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . 2015

Low-cost:

2010. . . . . 10.54 10.65 -.11 1.75 2.30 -.55 12.29 12.95 -.66

2011 . . . . . 11.09 10.54 .56 1.85 2.26 -.41 12.94 12.79 .14

2012. . . . . 11.02 10.26 .76 1.83 2.17 -.34 12.86 12.44 .42

2013. . . . . 11.05 10.23 .82 1.84 2.09 -.25 12.88 12.31 .57

2014. . . . . 11.06 10.23 .83 1.84 2.01 -.17 12.90 12.24 .66

2015. . . . . 11.07 10.29 .78 1.84 1.95 -.11 12.91 12.24 .67

2016. . . . . 11.09 10.37 .72 1.84 1.89 -.05 12.93 12.26 .67

2017. . . . . 11.11 10.53 .59 1.84 1.85 -.01 12.95 12.38 .57

2018. . . . . 11.14 10.71 .42 1.84 1.82 .02 12.98 12.54 .44

2019. . . . . 11.14 10.93 .21 1.84 1.80 .04 12.98 12.73 .25
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.

Low-cost (cont.):

2020. . . . . 11.16 11.15 b 1.84 1.78 0.06 13.00 12.93 0.06

2025. . . . . 11.22 12.06 -.84 1.84 1.76 .08 13.06 13.82 -.76

2030. . . . . 11.25 12.62 -1.36 1.84 1.67 .17 13.09 14.28 -1.19

2035. . . . . 11.27 12.70 -1.43 1.84 1.57 .26 13.10 14.28 -1.17

2040. . . . . 11.26 12.40 -1.14 1.84 1.52 .31 13.09 13.92 -.83

2045. . . . . 11.24 11.95 -.71 1.84 1.52 .31 13.08 13.48 -.40

2050. . . . . 11.22 11.62 -.40 1.84 1.52 .31 13.06 13.15 -.09

2055. . . . . 11.22 11.42 -.20 1.84 1.52 .32 13.06 12.94 .12

2060. . . . . 11.21 11.30 -.09 1.84 1.50 .34 13.05 12.80 .25

2065. . . . . 11.21 11.15 .06 1.84 1.49 .35 13.05 12.64 .41

2070. . . . . 11.20 11.00 .20 1.84 1.49 .35 13.04 12.49 .55

2075. . . . . 11.20 10.88 .32 1.84 1.50 .34 13.04 12.38 .66

2080. . . . . 11.19 10.80 .39 1.84 1.51 .33 13.03 12.31 .72

2085. . . . . 11.20 10.80 .40 1.84 1.52 .32 13.03 12.32 .72

First year balance becomes

negative and remains negative

through 2085 . . . . . . . . . . . . . . c . . . . . . . . . . . . . . . . c . . . . . . . . . . . . . . . . c

High-cost:

2010. . . . . 10.61 10.82 -.21 1.76 2.41 -.65 12.37 13.23 -.85

2011 . . . . . 11.04 10.78 .27 1.84 2.45 -.61 12.88 13.23 -.35

2012. . . . . 11.04 10.68 .36 1.84 2.46 -.62 12.88 13.14 -.26

2013. . . . . 11.08 10.91 .17 1.84 2.48 -.64 12.92 13.39 -.47

2014. . . . . 11.10 11.13 -.03 1.85 2.49 -.64 12.95 13.62 -.67

2015. . . . . 11.12 11.33 -.21 1.85 2.49 -.65 12.97 13.83 -.86

2016. . . . . 11.15 11.56 -.41 1.85 2.49 -.64 13.00 14.05 -1.05

2017. . . . . 11.18 11.86 -.69 1.85 2.51 -.65 13.03 14.37 -1.34

2018. . . . . 11.21 12.19 -.99 1.86 2.52 -.67 13.06 14.71 -1.65

2019. . . . . 11.22 12.55 -1.33 1.86 2.54 -.68 13.08 15.09 -2.01

2020. . . . . 11.25 12.94 -1.69 1.86 2.57 -.71 13.11 15.50 -2.40

2025. . . . . 11.35 14.67 -3.32 1.87 2.79 -.92 13.22 17.47 -4.25

2030. . . . . 11.44 16.05 -4.61 1.87 2.81 -.94 13.31 18.85 -5.54

2035. . . . . 11.50 16.90 -5.40 1.87 2.77 -.90 13.37 19.67 -6.30

2040. . . . . 11.53 17.27 -5.74 1.87 2.76 -.89 13.40 20.03 -6.62

2045. . . . . 11.55 17.42 -5.87 1.87 2.84 -.97 13.42 20.26 -6.84

2050. . . . . 11.57 17.63 -6.06 1.88 2.94 -1.06 13.44 20.57 -7.12

2055. . . . . 11.60 18.02 -6.42 1.88 3.02 -1.14 13.48 21.04 -7.57

2060. . . . . 11.63 18.56 -6.93 1.88 3.06 -1.18 13.51 21.62 -8.11

2065. . . . . 11.67 19.17 -7.50 1.88 3.11 -1.23 13.55 22.28 -8.72

2070. . . . . 11.72 19.91 -8.20 1.89 3.17 -1.28 13.60 23.08 -9.48

2075. . . . . 11.77 20.78 -9.01 1.89 3.19 -1.30 13.66 23.97 -10.31

2080. . . . . 11.82 21.60 -9.78 1.89 3.19 -1.30 13.71 24.79 -11.08

2085. . . . . 11.86 22.31 -10.45 1.89 3.17 -1.29 13.75 25.49 -11.74

First year balance becomes

negative and remains negative

through 2085 . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . 2010

a Income rates are modified to include certain transfers 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, returning 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 Cost

rate Balance

Income ratea Cost

rate Balance

Income ratea Cost

rate Balance
51

Long-Range Estimates

Under the intermediate assumptions, the cost rate for DI, which rose substantially from 2.01 percent of taxable payroll in 2008 to 2.35 percent for 2010

due to the economic recession, generally declines to 2.10 percent for 2039,

and increases gradually thereafter to 2.26 percent for 2084. The income rate

increases only very slightly from 1.84 percent of taxable payroll for 2011 to

1.86 percent for 2084. The annual deficit is 0.52 percent in 2011 and reaches

0.40 percent for 2084.

Under the low-cost assumptions, the DI cost rate generally declines from

2.30 percent of payroll for 2010 to 1.52 percent for 2084. 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, reaching 3.18 percent for 2084. The annual deficit is 0.65 percent in 2010 and reaches 1.29 percent for 2084.

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, because alternatives I and III

define a reasonably wide range of demographic and economic conditions, the

resulting estimates delineate a reasonable range for consideration of potential

future program costs.
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 generally rises from about 4.8 percent of GDP currently to a

peak of 6.1 percent in 2035. Then OASDI cost as a percent of GDP is projected to decline to a low of 5.9 percent in 2055 and increase slowly thereafter, reaching a level around 6.0 percent by 2084. 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 expected to remain relatively stable for the

next 5 years, as the economy recovers. Between 2015 and 2035, the cost rate

is expected to rise rapidly primarily because the number of beneficiaries is

expected to rise substantially more rapidly than the number of covered workers as the baby-boom generation retires. Because the baby-boom generation

had low fertility rates relative to their parents, and those low fertility rates are

expected to persist, the ratio of beneficiaries to workers is expected to rise

rapidly and reach a permanently higher level after the baby-boom generation

retires. After 2035, the ratio of beneficiaries to workers 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 . . . . . . . . . 64,975 7,564 — 7,564 8.6 12

1960 . . . . . . . . . 72,293 13,740 522 14,262 5.1 20

1965 . . . . . . . . . 80,437 18,509 1,648 20,157 4.0 25

1970 . . . . . . . . . 92,788 22,618 2,568 25,186 3.7 27

1975 . . . . . . . . . 100,164 26,998 4,125 31,123 3.2 31

1980 . . . . . . . . . 112,623 30,384 4,734 35,117 3.2 31

1985 . . . . . . . . . 120,201 32,763 3,874 36,636 3.3 30

1990 . . . . . . . . . 133,040 35,255 4,204 39,459 3.4 30

1995 . . . . . . . . . 140,818 37,364 5,731 43,096 3.3 31

2000 . . . . . . . . . 154,481 38,556 6,606 45,162 3.4 29

2001 . . . . . . . . . 154,798 38,888 6,780 45,668 3.4 30

2002 . . . . . . . . . 154,220 39,117 7,060 46,176 3.3 30

2003 . . . . . . . . . 154,417 39,315 7,438 46,753 3.3 30

2004 . . . . . . . . . 156,159 39,558 7,810 47,368 3.3 30

2005 . . . . . . . . . 158,511 39,961 8,172 48,133 3.3 30

2006 . . . . . . . . . 160,944 40,435 8,428 48,863 3.3 30

2007 . . . . . . . . . 163,057 40,863 8,739 49,603 3.3 30

2008 . . . . . . . . . 162,485 41,355 9,065 50,420 3.2 31

2009 . . . . . . . . . 156,021 42,385 9,475 51,860 3.0 33

Intermediate:

2010 . . . . . . . . . 155,170 43,527 9,967 53,494 2.9 34

2015 . . . . . . . . . 168,734 50,078 11,454 61,533 2.7 36

2020 . . . . . . . . . 175,961 57,978 11,885 69,863 2.5 40

2025 . . . . . . . . . 180,105 65,561 12,624 78,185 2.3 43

2030 . . . . . . . . . 184,128 72,196 12,756 84,952 2.2 46

2035 . . . . . . . . . 188,600 76,930 12,824 89,754 2.1 48

2040 . . . . . . . . . 193,550 79,493 13,041 92,533 2.1 48

2045 . . . . . . . . . 198,564 80,997 13,551 94,548 2.1 48

2050 . . . . . . . . . 203,425 82,715 14,034 96,749 2.1 48

2055 . . . . . . . . . 208,147 85,123 14,502 99,624 2.1 48

2060 . . . . . . . . . 213,052 88,021 14,822 102,843 2.1 48

2065 . . . . . . . . . 218,064 90,965 15,239 106,204 2.1 49

2070 . . . . . . . . . 223,144 94,241 15,733 109,974 2.0 49

2075 . . . . . . . . . 228,171 97,761 16,177 113,938 2.0 50

2080 . . . . . . . . . 233,014 101,329 16,616 117,945 2.0 51

2085 . . . . . . . . . 237,784 105,031 17,022 122,053 1.9 51
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 2009 level of 33

beneficiaries per 100 covered workers, this ratio is estimated to rise to 46 by

2030 and 48 by 2035 under 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, reaching 51 under the

intermediate assumptions, and 69 under the high-cost assumptions. Under

the low-cost assumptions, this ratio rises to 43 by 2035 and then declines to

Low-cost:

2010 . . . . . . . . . 155,853 43,525 9,923 53,448 2.9 34

2015 . . . . . . . . . 173,296 49,987 10,592 60,580 2.9 35

2020 . . . . . . . . . 180,241 57,530 10,510 68,040 2.6 38

2025 . . . . . . . . . 185,449 64,645 10,711 75,356 2.5 41

2030 . . . . . . . . . 190,463 70,593 10,511 81,103 2.3 43

2035 . . . . . . . . . 196,411 74,529 10,381 84,911 2.3 43

2040 . . . . . . . . . 203,547 76,301 10,467 86,768 2.3 43

2045 . . . . . . . . . 211,541 77,108 10,839 87,947 2.4 42

2050 . . . . . . . . . 220,029 78,336 11,230 89,566 2.5 41

2055 . . . . . . . . . 229,003 80,338 11,645 91,983 2.5 40

2060 . . . . . . . . . 238,494 82,864 12,006 94,870 2.5 40

2065 . . . . . . . . . 248,722 85,347 12,500 97,847 2.5 39

2070 . . . . . . . . . 259,817 88,044 13,112 101,157 2.6 39

2075 . . . . . . . . . 271,509 90,979 13,769 104,748 2.6 39

2080 . . . . . . . . . 283,584 94,334 14,497 108,830 2.6 38

2085 . . . . . . . . . 295,972 98,447 15,216 113,663 2.6 38

High-cost:

2010 . . . . . . . . . 154,769 43,529 10,012 53,541 2.9 35

2015 . . . . . . . . . 164,564 50,189 12,318 62,507 2.6 38

2020 . . . . . . . . . 171,634 58,562 13,357 71,919 2.4 42

2025 . . . . . . . . . 174,766 66,715 14,581 81,296 2.1 47

2030 . . . . . . . . . 177,903 74,193 15,004 89,198 2.0 50

2035 . . . . . . . . . 181,081 79,935 15,220 95,155 1.9 53

2040 . . . . . . . . . 184,009 83,497 15,503 99,001 1.9 54

2045 . . . . . . . . . 186,237 85,877 16,082 101,959 1.8 55

2050 . . . . . . . . . 187,692 88,245 16,584 104,829 1.8 56

2055 . . . . . . . . . 188,470 91,126 17,038 108,164 1.7 57

2060 . . . . . . . . . 189,146 94,409 17,224 111,634 1.7 59

2065 . . . . . . . . . 189,635 97,764 17,452 115,215 1.6 61

2070 . . . . . . . . . 189,588 101,536 17,686 119,222 1.6 63

2075 . . . . . . . . . 189,096 105,585 17,728 123,313 1.5 65

2080 . . . . . . . . . 188,243 109,281 17,648 126,929 1.5 67

2085 . . . . . . . . . 187,225 112,411 17,516 129,927 1.4 69

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

38 by 2085. The significance of these numbers can be seen by comparing

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. Because 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 (and because average benefits rise at about the same

rate as average earnings), it is to be expected that 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 3.0 in 2009. Under the low-cost assumptions, this

ratio declines to 2.3 by 2035, and then generally rises throughout the remainder of the period, reaching 2.6 in 2085. Under the intermediate assumptions,

this ratio declines generally throughout the long range period, reaching 2.1 in

2035 and 1.9 in 2085, while under the high-cost assumptions, this ratio

decreases steadily to 1.4 in 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 at any point in time. 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. Therefore, exhaustion of the assets in either fund during a year would mean there

are no longer sufficient assets in the fund to pay 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 indicates 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 achieves 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 rises

slightly from 399 percent at the beginning of 2010, reaching a peak of

403 percent at the beginning of 2012. Thereafter, the OASI trust fund ratio

declines steadily, with the OASI Trust Fund becoming exhausted in 2040.

The DI trust fund ratio has been declining steadily since 2003, and is estimated to continue to decline from 158 percent at the beginning of 2010 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 355 percent for 2010, with the combined funds becoming exhausted in 2037. In last year’s report, the peak trust

fund ratio for the combined funds was estimated to be 369 percent for 2012

and the year of exhaustion was estimated to be 2037.

Under the intermediate assumptions, OASDI cost is projected to exceed noninterest income in 2010 and 2011 due to increased benefits and reduced tax

revenue as a result of the economic recession, and to an expected $25 billion
57

Long-Range Estimates

downward adjustment to 2010 income that corrects for excess payroll tax

revenue credited to the Trust Funds in earlier years. For 2012-14, however,

non-interest income will exceed cost as the economy recovers. OASDI cash

flow, excluding interest, will then become negative in 2015 due to demographic trends. Throughout the period 2010 through 2024, trust fund income,

including interest income, is more than is needed to cover costs, so combined

trust fund assets will continue to grow. Beginning in 2025, combined trust

fund assets will diminish until assets are exhausted in 2037.

Based on the low-cost assumptions, the trust fund ratio for the DI program

increases from 2017 through the end of the long-range projection period, and

reaches the extremely high level of 1,799 percent for 2085. At the end of the

long-range period, the DI trust fund ratio is rising by 36 percentage points

per year. For the OASI program, the trust fund ratio rises to a peak of 422

percent for 2018, drops to a low of 282 percent for 2048, and rises thereafter

to a level of 457 percent for 2085. At the end of the period, the OASI trust

fund ratio is rising by 8 percentage points per year. For the OASDI program,

the trust fund ratio peaks at 376 percent for 2019, falls to 306 percent for

2041, and increases thereafter, reaching 622 percent for 2085. Because the

trust fund ratios are large and increasing at the end of the long-range period,

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. Thus, under the low-cost assumptions, each program would achieve sustainable solvency.

In contrast, under the high-cost assumptions, the OASI trust fund ratio is

estimated to peak at 400 percent for 2011, thereafter declining to fund

exhaustion by the end of 2032. The DI trust fund ratio is estimated to decline

from 156 percent for 2010 to fund exhaustion by the end of 2015. The combined OASI and DI trust fund ratio is estimated to decline from 354 percent

for 2010 to fund exhaustion by the end of 2029.

Thus, because large, persistent annual deficits are projected under all but the

low-cost assumptions, it is likely that income will eventually need to be

increased, program costs will need to be reduced, or both, in order to prevent

exhaustion of the trust funds.

Even under the high-cost assumptions, however, the combined OASI and DI

funds on hand plus their estimated future income would be able to cover their

combined cost for 19 years (until 2029). Under the intermediate assumptions, the combined starting funds plus estimated future income would be

able to cover cost for 27 years (until 2037). The program would be able to

cover cost for the foreseeable future under the more optimistic low-cost

assumptions. In the 2009 report, the combined trust funds were projected to
Actuarial Estimates

58

become exhausted in 2029 under the high-cost assumptions and in 2037

under the intermediate assumptions.

.

aThe 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.

bThe 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 fund is

estimated to be exhausted are theoretical and are shown for informational purposes only.

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 2010-85

[In percent]

Calendar

year

Intermediate Low-cost High-cost

OASI DI OASDI OASI DI OASDI OASI DI OASDI

2010 . . . . . . . . . . . . . 399 158 355 399 161 357 398 156 354

2011 . . . . . . . . . . . . . 401 134 353 402 141 356 400 128 350

2012 . . . . . . . . . . . . . 403 113 350 409 125 359 397 102 341

2013 . . . . . . . . . . . . . 400 93 346 411 113 361 385 75 327

2014 . . . . . . . . . . . . . 397 74 341 414 104 363 373 49 314

2015 . . . . . . . . . . . . . 392 57 335 417 98 366 362 23 301

2016 . . . . . . . . . . . . . 388 41 330 420 95 370 351 a 288

2017 . . . . . . . . . . . . . 382 26 324 421 94 372 338 a 274

2018 . . . . . . . . . . . . . 375 11 317 422 95 374 324 a 259

2019 . . . . . . . . . . . . . 366 a 309 421 98 376 308 a 243

2020 . . . . . . . . . . . . . 356 a 299 419 102 375 292 a 226

2025 . . . . . . . . . . . . . 293 a 237 397 130 363 192 a 122

2030 . . . . . . . . . . . . . 208 a 154 361 178 340 66 a a

2035 . . . . . . . . . . . . . 110 a 59 324 269 318 aaa

2040 . . . . . . . . . . . . . 5 a a 296 388 307 aaa

2045 . . . . . . . . . . . . . aaa 284 513 310 aaa

2050 . . . . . . . . . . . . . aaa 283 643 324 aaa

2055 . . . . . . . . . . . . . aaa 290 784 348 aaa

2060 . . . . . . . . . . . . . aaa 302 946 377 aaa

2065 . . . . . . . . . . . . . aaa 321 1,116 414 aaa

2070 . . . . . . . . . . . . . aaa 347 1,284 459 aaa

2075 . . . . . . . . . . . . . aaa 380 1,455 510 aaa

2080 . . . . . . . . . . . . . aaa 418 1,624 566 aaa

2085 . . . . . . . . . . . . . aaa 457 1,799 622 aaa

Trust fund is estimated to become

exhausted in. . . . . 2040 2018 2037 bbb 2032 2015 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 and the projected income

from the taxation of scheduled benefits expressed as a percentage of taxable

payroll. The current combined payroll tax rate of 12.4 percent is scheduled to

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,

benefits 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 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.

It may be noted that the payroll tax income expressed as a percentage of taxable payroll, as shown in table IV.B4, is slightly smaller than the actual tax

rates in effect for each period. This is because all OASDI income and cost

amounts are computed on a cash basis and are thus attributed to the year in

which they are intended to be received by or expended from the fund, while

taxable payroll is attributed to the year in which earnings are paid. Because

 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%

1,200%

1,400%

1,600%

1,800%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

OASI

DI

Historical Estimated

III

II

I

I

II III
Actuarial Estimates

60

earnings are paid to workers before the corresponding payroll taxes are credited to the funds, payroll tax income for a given year reflects taxes paid from

a combination of the taxable payrolls for that year and prior years, when payroll was smaller. 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 would indicate that estimated cost for the

period could be met, on average, 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, signals the likelihood of continuing

cash-flow deficits, and implies that the current-law level of financing is not

sustainable.

The values in table IV.B4 show that 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 1.12 percent of

taxable payroll under the low-cost assumptions, -0.25 percent under the

intermediate assumptions, and -1.86 percent under the high-cost assumptions. Thus, 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

0.55 percent under the low-cost assumptions, but would have deficits of

1.45 percent under the intermediate assumptions and 4.00 percent under the

high-cost assumptions. Thus, 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
61

Long-Range Estimates

assumptions. The actuarial balance for this long-range valuation period is

projected to be 0.59 percent of taxable payroll under the low-cost assumptions, -1.92 percent under the intermediate assumptions, and -5.26 percent

under the high-cost assumptions.

Assuming the Trustees’ intermediate assumptions are realized, 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 14.24 percent. Solvency for this period

could also be restored if scheduled benefits for this period were reduced by

12.0 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

14.38 percent for all earnings during this period or a decrease in scheduled

benefits of 12.8 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. It may be noted that the indicated

increase in the payroll tax rate is somewhat larger than the actuarial deficit of

1.92 percent of payroll due to a reduction in the tax base, reflecting the

assumed response of employers and employees to an increase in taxes.

Large annual deficits projected under current law for the end of the longrange period, which exceed 4 percent of payroll under the intermediate

assumptions (see table IV.B1), indicate that the annual cost will very likely

continue to exceed tax revenue after 2084. 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 infinite horizon, the actuarial deficit is estimated to be 3.3 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

15.9 percent. This shortfall could also be eliminated if all current and future

benefits were immediately reduced by 20.7 percent. It may be noted that the

indicated increase in the payroll tax rate is larger than the infinite horizon

actuarial deficit of 3.3 percent of payroll due to the assumed response of

employers and employees to an increase in taxes.
Actuarial Estimates

62

As may be concluded from table IV.B4, the financial condition of the DI program is substantially weaker 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 relative

weakness of the OASI program in the long-term occurs because increases in

longevity have a greater impact on retirement and survivor benefits than on

disability benefits.

.

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

Table IV.B4.—Components of Summarized Income Rates and Cost Rates, 

Calendar Years 2010-84

[As a percentage of taxable payroll]

Valuation period

Summarized income rate Summarized cost rate

Actuarial

balance

Payroll tax

Taxation

of

benefits

Beginning

fund

balance Total Cost

Ending

target

fund Total

OASI:

Intermediate:

2010-34. . . . . 10.57 0.64 1.78 12.98 12.41 0.53 12.93 0.05

2010-59. . . . . 10.58 .71 1.01 12.30 13.25 .21 13.46 -1.17

2010-84. . . . . 10.58 .74 .77 12.09 13.58 .13 13.71 -1.62

Low-cost:

2010-34. . . . . 10.57 .59 1.77 12.92 11.45 .46 11.90 1.02

2010-59. . . . . 10.58 .62 1.00 12.19 11.66 .18 11.84 .36

2010-84. . . . . 10.58 .62 .74 11.95 11.49 .10 11.59 .36

High-cost:

2010-34. . . . . 10.57 .70 1.76 13.03 13.53 .62 14.15 -1.12

2010-59. . . . . 10.58 .82 .99 12.40 15.28 .28 15.55 -3.16

2010-84. . . . . 10.58 .90 .76 12.25 16.41 .17 16.58 -4.33

DI:

Intermediate:

2010-34. . . . . 1.79 .05 .15 2.00 2.22 .08 2.30 -.30

2010-59. . . . . 1.80 .05 .09 1.94 2.19 .03 2.22 -.28

2010-84. . . . . 1.80 .06 .07 1.92 2.20 .02 2.22 -.30

Low-cost:

2010-34. . . . . 1.79 .04 .15 1.99 1.84 .06 1.90 .09

2010-59. . . . . 1.80 .04 .09 1.93 1.70 .02 1.73 .20

2010-84. . . . . 1.80 .04 .06 1.90 1.65 .01 1.67 .24

High-cost:

2010-34. . . . . 1.79 .06 .15 2.01 2.64 .10 2.74 -.73

2010-59. . . . . 1.80 .07 .09 1.95 2.75 .05 2.79 -.84

2010-84. . . . . 1.80 .07 .07 1.94 2.84 .02 2.86 -.93

OASDI:

Intermediate:

2010-34. . . . . 12.36 .69 1.93 14.99 14.63 .60 15.23 -.25

2010-59. . . . . 12.37 .76 1.10 14.23 15.44 .25 15.68 -1.45

2010-84. . . . . 12.38 .80 .83 14.01 15.78 .14 15.93 -1.92

Low-cost:

2010-34. . . . . 12.37 .63 1.92 14.91 13.29 .51 13.80 1.12

2010-59. . . . . 12.37 .66 1.08 14.12 13.37 .20 13.57 .55

2010-84. . . . . 12.38 .66 .81 13.85 13.14 .11 13.26 .59

High-cost:

2010-34. . . . . 12.36 .76 1.91 15.04 16.18 .72 16.90 -1.86

2010-59. . . . . 12.37 .89 1.08 14.35 18.02 .32 18.34 -4.00

2010-84. . . . . 12.38 .98 .83 14.18 19.25 .20 19.44 -5.26
63

Long-Range Estimates

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 tax income over the long-range period, minus

the amount of trust fund assets at the beginning of the projection period,

amounts to $5.4 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 tax income minus cost, plus starting trust fund assets, minus the present value of the ending target trust fund,

amounts to -$5.8 trillion for the OASDI program. The actuarial balance—

this amount expressed as a percentage of taxable payroll for the period—is

therefore -1.92 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 2010 to 2084 for this report) for the evaluation of the long-run financial status of the OASDI program on an open group basis (i.e., including

Table IV.B5.—Components of 75-Year Actuarial Balance

Under Intermediate Assumptions

Item OASI DI OASDI

Present value as of January 1, 2010 (in billions):

A. Payroll tax revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,218 $5,471 $37,689

B. Taxation of benefits revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,256 174 2,430

C. Tax income (A + B). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,474 5,644 40,118

D. Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,369 6,696 48,065

E. Cost minus tax income (D - C) . . . . . . . . . . . . . . . . . . . . . . . . . 6,895 1,052 7,947

F. Trust fund assets at start of period. . . . . . . . . . . . . . . . . . . . . . . 2,337 204 2,540

G. Open group unfunded obligation (E - F) . . . . . . . . . . . . . . . . . . 4,558 848 5,406

H. 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.

384 57 441

I. Income minus cost, plus assets at start of period, minus

ending target trust fund (C - D + F - H = - G - H). . . . . . . . . . . -4,942 -905 -5,847

J. Taxable payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304,530 304,530 304,530

Percent of taxable payroll:

Actuarial balance (100 × I ÷ J). . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.62 -.30 -1.92
Actuarial Estimates

64

taxes and cost for past, current, and future participants through the year

2084). 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

$5.4 trillion. The open group measure indicates 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 2084.

Table IV.B6 also presents the 75-year unfunded obligation as percentages of

future OASDI taxable payroll and GDP through 2084. The 75-year unfunded

obligation as a percentage of taxable payroll is less than the actuarial deficit,

because it excludes the ending target trust fund value (see table IV.B5).

However, there are limitations on what can be conveyed using summarized

measures alone. For example, overemphasis on summary measures (such as

the actuarial balance and open group unfunded obligation) for the 75-year

period can lead to incorrect perceptions and policies that fail to address

financial sustainability for the more distant future. 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 to 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 $16.1 trillion, which is $10.7 trillion larger than

for the 75-year period. The $10.7 trillion increment reflects a significant

financing gap projected for OASDI for years after 2084. Of course, the

degree of uncertainty associated with estimates beyond 2084 is substantial.

The $16.1 trillion infinite horizon open group unfunded obligation amounts

to 3.3 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.
65

Long-Range Estimates

Notes:

1. The present values of future taxable payroll for 2010-84 and for 2010 through the infinite horizon are

$304.5 trillion and $482.6 trillion, respectively.

2. The present values of GDP for 2010-84 and for 2010 through the infinite horizon are $838.2 trillion and

$1,395.4 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

$15.1 trillion in present value. If the assumptions, methods, starting values,

and the law had all remained unchanged, the change in the valuation date to

one year later would have increased the unfunded obligation by about $0.7

trillion to $15.9 trillion. The net effects of changes in law, data, methods, and

other assumptions increased the infinite horizon unfunded obligation by

about $0.3 trillion in present value.

The infinite horizon unfunded obligation is 0.1 percentage point lower than

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 an increase in the

assumed average real wage growth through 2084 reflecting health care legislation, near-term economic and disability assumptions reflecting the recent

economic recession, lower mortality rates, and revisions in labor force projections. 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

$16.1 trillion into components for past, current, and future participants. The

present value of future cost less future taxes over the next 100 years for all

current participants (individuals who attain age 15 or older in 2010) equals

$20.0 trillion. Subtracting the current value of the trust fund gives a closed

group unfunded obligation of $17.4 trillion, which represents the shortfall of

lifetime contributions for all past and current participants relative to the cost

of benefits for them. Future participants, on the other hand, are scheduled to

Table IV.B6.—Unfunded OASDI Obligations for 1935 (Program Inception)

Through the Infinite Horizon,

Based on Intermediate Assumptions

[Present values as of January 1, 2010; 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 taxes, reduced by the amount of trust fund assets at the beginning of

2010. Expressed as percentage of payroll and GDP for the period 2010 through the infinite horizon.

$16.1 3.3 1.2

Unfunded obligation for 1935 through 2084b . . . . . . . . . . . . . . . . 

b Present value of future cost less future taxes through 2084, reduced by the amount of trust fund assets at the

beginning of 2010. Expressed as percentage of payroll and GDP for the period 2010 through 2084.

5.4 1.8 .6
Actuarial Estimates

66

pay $1.3 trillion more into the system than the cost of benefits for them. The

total unfunded obligation, $16.1 trillion, is the sum of the unfunded obligation for current and past participants ($17.4 trillion) and the present value of

cost less taxes for future participants (-$1.3 trillion).

This accounting makes clear that if some generations receive benefits with a

present value exceeding the present value of their contributions, other generations must receive benefits with a present value less than the present value

of their contributions. 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 $16.1 trillion in present value,

3.3 percent of future taxable payroll, or 1.2 percent of future GDP.

Notes:

1. The present value of future taxable payroll for 2010 through the infinite horizon is $482.6 trillion.

2. The present value of GDP for 2010 through the infinite horizon is $1,395.4 trillion.

3. 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, etc., 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

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 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

Table IV.B7.—Present Values of OASDI Cost Less Tax Revenue and Unfunded 

Obligations for Program Participants,

Based on Intermediate Assumptions

[Present values as of January 1, 2010; 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 taxes for current participants . . . $20.0 4.1 1.4

Less current trust fund

(tax accumulations minus expenditures to date for past and current 

participants). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5 .5 .2

Equals unfunded obligation for past and current participants a . . . . . . . .

a This concept is also referred to as the closed group unfunded obligation.

17.4 3.6 1.2

Plus present value of cost less taxes for future participants 

over the infinite horizon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.3 -.3 -.1

Equals unfunded obligation for all participants through the infinite

horizon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.1 3.3 1.2
67

Long-Range Estimates

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 is expected to

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 effectively plan for their retirement.

Table IV.B8 presents a comparison of the estimated 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,

based on the intermediate estimates. Values are shown for only 14 of the valuation periods: those of length 10 years, 15 years, and continuing in 5-year

increments through 75 years. 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 27 years under the intermediate estimates. For valuation periods of greater than 27 years, the estimated actuarial balance is less than the

minimum allowable. For the full 75-year long-range period, the estimated

actuarial balance reaches -11.84 percent of the summarized cost rate, for a

shortfall of 6.84 percent from the minimum allowable balance of -5.0 percent

of the summarized cost rate. Thus, although the OASI program satisfies the

test of short-range financial adequacy (as discussed earlier on page 36), 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
Actuarial Estimates

68

long-range period, the estimated actuarial balance reaches -13.40 percent of

the summarized cost rate, for a shortfall of 8.40 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 42), 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. This difference occurs primarily because 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, 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 24 years under the intermediate estimates. For valuation periods of greater than 24 years, the estimated actuarial balance is

below the minimum allowable balance. The size of the shortfall from the

minimum allowable balance rises gradually, reaching 7.05 percent of the

summarized cost rate for the full 75-year long-range valuation period. Thus,

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 also found to

be 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 smaller

when compared to those shown in last year’s report for the longer valuation

periods.
69

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 rateActuarial

balance

Actuarial

balance

Minimum

allowable

actuarial

balance

OASI:

10-year: 2010-19 . . . . . . . 15.29 12.14 3.15 25.99 0.00

15-year: 2010-24 . . . . . . . 13.97 12.30 1.66 13.51 -.38

20-year: 2010-29 . . . . . . . 13.34 12.63 .71 5.64 -.77

25-year: 2010-34 . . . . . . . 12.98 12.93 .05 .39 -1.15

30-year: 2010-39 . . . . . . . 12.75 13.15 -.40 -3.04 -1.54

35-year: 2010-44 . . . . . . . 12.59 13.28 -.69 -5.23 -1.92

40-year: 2010-49 . . . . . . . 12.46 13.36 -.90 -6.70 -2.31

45-year: 2010-54 . . . . . . . 12.37 13.41 -1.04 -7.78 -2.69

50-year: 2010-59 . . . . . . . 12.30 13.46 -1.17 -8.66 -3.08

55-year: 2010-64 . . . . . . . 12.24 13.51 -1.27 -9.42 -3.46

60-year: 2010-69 . . . . . . . 12.19 13.56 -1.37 -10.09 -3.85

65-year: 2010-74 . . . . . . . 12.15 13.61 -1.46 -10.71 -4.23

70-year: 2010-79 . . . . . . . 12.12 13.66 -1.54 -11.29 -4.62

75-year: 2010-84 . . . . . . . 12.09 13.71 -1.62 -11.84 -5.00

DI:

10-year: 2010-19 . . . . . . . 2.20 2.46 -.26 -10.49 .00

15-year: 2010-24 . . . . . . . 2.09 2.37 -.28 -11.97 -.38

20-year: 2010-29 . . . . . . . 2.03 2.34 -.30 -12.90 -.77

25-year: 2010-34 . . . . . . . 2.00 2.30 -.30 -12.91 -1.15

30-year: 2010-39 . . . . . . . 1.98 2.27 -.29 -12.64 -1.54

35-year: 2010-44 . . . . . . . 1.96 2.25 -.28 -12.49 -1.92

40-year: 2010-49 . . . . . . . 1.95 2.23 -.28 -12.52 -2.31

45-year: 2010-54 . . . . . . . 1.95 2.23 -.28 -12.64 -2.69

50-year: 2010-59 . . . . . . . 1.94 2.22 -.28 -12.76 -3.08

55-year: 2010-64 . . . . . . . 1.93 2.22 -.29 -12.87 -3.46

60-year: 2010-69 . . . . . . . 1.93 2.22 -.29 -12.99 -3.85

65-year: 2010-74 . . . . . . . 1.93 2.22 -.29 -13.13 -4.23

70-year: 2010-79 . . . . . . . 1.92 2.22 -.29 -13.27 -4.62

75-year: 2010-84 . . . . . . . 1.92 2.22 -.30 -13.40 -5.00

OASDI:

10-year: 2010-19 . . . . . . . 17.50 14.60 2.90 19.83 .00

15-year: 2010-24 . . . . . . . 16.05 14.68 1.38 9.39 -.38

20-year: 2010-29 . . . . . . . 15.38 14.96 .41 2.75 -.77

25-year: 2010-34 . . . . . . . 14.99 15.23 -.25 -1.61 -1.15

30-year: 2010-39 . . . . . . . 14.73 15.42 -.69 -4.45 -1.54

35-year: 2010-44 . . . . . . . 14.55 15.53 -.98 -6.28 -1.92

40-year: 2010-49 . . . . . . . 14.42 15.59 -1.17 -7.54 -2.31

45-year: 2010-54 . . . . . . . 14.31 15.64 -1.32 -8.47 -2.69

50-year: 2010-59 . . . . . . . 14.23 15.68 -1.45 -9.24 -3.08

55-year: 2010-64 . . . . . . . 14.17 15.73 -1.56 -9.91 -3.46

60-year: 2010-69 . . . . . . . 14.12 15.77 -1.66 -10.50 -3.85

65-year: 2010-74 . . . . . . . 14.07 15.82 -1.75 -11.05 -4.23

70-year: 2010-79 . . . . . . . 14.04 15.87 -1.84 -11.57 -4.62

75-year: 2010-84 . . . . . . . 14.01 15.93 -1.92 -12.05 -5.00
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%

2019 2024 2029 2034 2039 2044 2049 2054 2059 2064 2069 2074 2079 2084

Ending year of valuation period

Actuarial balance as percentage

of summarized cost rate

Minimum allowable actuarial balance

OASI

OASDI

DI
71

Long-Range Estimates

7. Reasons for Change in Actuarial Balance From Last Report

The estimated effects of various changes from last year’s report to this report

on the long-range actuarial balance under the intermediate assumptions are

listed (by category) in table IV.B9.

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

Since the last report, five laws have been enacted that are expected to have

financial effects on the OASDI program (see section III.B). Two of these

laws, the Patient Protection and Affordable Care Act and the Health Care and

Education Reconciliation Act of 2010, are together estimated to increase the

long-range OASDI actuarial balance by 0.14 percent of taxable payroll.

These two laws affect the Social Security program by increasing the share of

employee compensation that will be paid in wages covered by Social Security, resulting in increases in the rate of growth in average real covered earnings. The other three laws, the Hiring Incentives to Restore Employment Act,

the No Social Security Benefits for Prisoners Act of 2009, and the Social

Security Disability Applicants’ Access to Professional Representation Act of

2010, are each estimated to change the long-range actuarial balance by a

negligible amount (less than 0.005 percent of taxable payroll).

In changing from the valuation period of last year's report, which was

2009-83, to the valuation period of this report, 2010-84, the relatively large

negative annual balance for 2084 is included. This change results in a

Table 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.08 1.93 14.02

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.76 2.25 16.02

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.68 -.32 -2.00

Changes in actuarial balance due to changes in:

Legislation / Regulation . . . . . . . . . . . . . . . . . . . . . . . +.12 +.02 +.14

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

a In changing from the valuation period of last year’s report, which was 2009-83, to the valuation period of

this report, 2010-84, the relatively large negative annual balance for 2084 is included. This change in the

valuation period results in a larger long-range actuarial deficit. The fund balance at the end of 2009, i.e., at

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

-.05 -.01 -.06

Demographic data and assumptions. . . . . . . . . . . . . . -.05 .00 -.05

Economic data and assumptions. . . . . . . . . . . . . . . . . -.01 .00 .00

Disability assumptions . . . . . . . . . . . . . . . . . . . . . . . . +.01 -.02 -.02

Methods and programmatic data . . . . . . . . . . . . . . . . +.04 +.03 +.07

Total change in actuarial balance . . . . . . . . . . . . . . . . . . +.06 +.02 +.08

Shown in this report:

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

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.09 1.92 14.01

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.71 2.22 15.93
Actuarial Estimates

72

decrease in the long-range OASDI actuarial balance of 0.06 percent of taxable payroll. (Note that the trust fund assets at the end of 2009, 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 valuation for 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 reduce the long-range OASDI

actuarial balance by 0.05 percent of taxable payroll. The source contributing

most to this reduction is the inclusion of final mortality data for 2006, which

results in slightly lower starting death rates and faster near-term declines in

death rates than in last year’s report. These lower death rates result in a

decrease in the long-range OASDI actuarial balance of 0.05 percent of taxable payroll. Final data on legal immigration for 2008 are also included in

this year’s report. These data show a lower percentage of immigrants being

female, which results in slightly fewer births in the projection period. The

effect of including these immigration data for 2008 is a decrease in the longrange OASDI actuarial balance of 0.01 percent of taxable payroll. Offsetting

the effect of the immigration change are assumed higher birth rates during

the first 24 years of the projection period. Birth rates for this period are projected to be higher than in last year’s report, based on preliminary birth data

for 2007 and 2008. These changes in birth rates result in an increase in the

long-range OASDI actuarial balance of 0.01 percent of taxable payroll.

The ultimate economic assumptions are unchanged from those in last year’s

report, except for the assumed share of employee compensation that is paid

in wages covered under Social Security. For last year’s report, the share of

employee compensation paid in wages was assumed to decline at a constant

rate of 0.2 percent per year throughout the 75-year projection period, which

reflected the average projected growth rate in pension and health insurance

costs that are not subject to the Social Security payroll tax. This assumption

was consistent with the constant real wage differential of 1.1 percentage

point shown in last year’s report. For this year’s report, this assumption was

changed in two steps: first, the projected growth rates of various components

of compensation were refined so that they are allowed to change over time,

rather than being held constant at a summarized average rate; second, those

growth rates were updated to reflect the estimated effects of legislation

enacted since last year’s report. The first step of this change results in a small

reduction in the long-range OASDI actuarial balance of 0.01 percent of taxable payroll. The second step increases the long-range OASDI actuarial balance by an estimated 0.14 percent of taxable payroll, as described in the

preceding paragraph discussing the effects of laws enacted since the prior
73

Long-Range Estimates

year’s report. For additional details of this change, see sections V.B3 and

V.B4 of this report.

Updating starting values, changes in near-term economic growth rate

assumptions, and the first step of the change in the projected share of

employee compensation that is paid in the form of wages subject to OASDI

payroll tax have a combined negligible effect on the long-range OASDI actuarial balance. In last year’s report, the recession was projected to reach a bottom in the first half of 2009 and to return to full-employment levels in 2015.

For this year’s report, we now know that the recession actually did reach bottom in the second quarter of 2009, but with higher unemployment and lower

wages and OASDI taxable earnings than were projected last year. Furthermore, the recovery to a stable full-employment path for the economy is now

projected to be completed in 2018 rather than 2015. The deeper and longerlasting trough in economic activity results in lower employment and taxable

earnings over the short-range period and lower cost beginning in the latter

half of the short-range period.

This report includes new starting data and changes in near-term disability

assumptions that combine to reduce the long-range OASDI actuarial balance

by 0.02 percent of taxable payroll. In the early portion of the projection

period, higher disability incidence rates and lower termination rates are

assumed, reflecting the deeper recession and slower recovery than was

assumed in last year’s report. As a result, the number of disabled-worker

beneficiaries is now projected to be about 100,000 higher at the end of 2010

and about 300,000 higher at the end of 2015 than in last year’s report.

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 increase the long-range

OASDI actuarial balance by 0.07 percent of taxable payroll. One significant

change was made to the method for calculating death rates for 2007-09,

years following the year of final data. Death rates at very old ages for these

years were lowered to make the trend in population more consistent with the

trend indicated by Social Security administrative records for this time period.

These reductions result in slightly lower death rates at older ages throughout

the projection period. This mortality change results in a decrease in the longrange OASDI actuarial balance of about 0.08 percent of taxable payroll.

Another significant change is related 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 2004 sample to a

2006 sample. The update of this sample results in an increase in the longrange OASDI actuarial balance of about 0.10 percent of taxable payroll. A
Actuarial Estimates

74

third significant change is an update to the labor force participation model to

account for more recent data and more significant factors affecting participation. This methodological improvement changes the composition of the projected labor force, with fewer teenage and more female and older workers.

This improvement results in an increase in the long-range OASDI actuarial

balance of about 0.05 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 0.06 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 increase the actuarial balance by 0.14 percent of payroll. Thus, the actuarial balance changes

from -2.00 percent of taxable payroll in last year's report to -1.92 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.

The annual balance for 2010 in this report is 1.13 percent of payroll lower

than was projected in last year's report due to a deeper recession and slower

 Figure IV.B5.—OASDI Annual Balances: 2009 and 2010 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

2009 Report

2010 Report
75

Long-Range Estimates

recovery than had been expected, and to an expected $25 billion downward

adjustment to 2010 income that corrects for excess payroll tax revenue credited to the Trust Funds in earlier years. However, over the next 5 years, the

difference between the annual balances in the two reports declines rapidly as

the economy recovers and the share of employee compensation that is paid in

taxable wages declines more slowly due to the recent health care legislation.

For the period 2016 through 2083, the annual balances in this report are

higher than those in last year’s report by an average amount of about

0.27 percent of taxable payroll. This increase is mainly due to the health care

legislation enacted in March 2010, the updated sample used for the projection of average benefit levels for workers who will become eligible in the

future, and the updated modeling of labor force participation. By the end of

last year’s 75-year projection period (2083), the difference in the annual balances is 0.26 percent of payroll. The annual deficit for 2083 is 4.08 percent

of taxable payroll in this report compared to 4.34 percent for 2083 in last

year's report.
Assumptions and Methods

76

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 and the level and distribution of earnings. Similarly, program cost will depend on how these factors affect the size and composition

of the beneficiary population and the general level of benefits.

Basic assumptions are developed for several of these factors based on analysis of historical trends and conditions, and on expected future conditions.

These factors include fertility, mortality, immigration, marriage, divorce,

productivity, inflation, average earnings, unemployment, 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, interest rates, and

program-specific factors. All factors included in any consistent set of

assumptions are interrelated directly or indirectly. It is also important to note

that these interrelationships can, and do, change over time.

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.

Because projections of these factors and their interrelationships are inherently uncertain, 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. In terms of 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. The probability is very

low that all the factors and interactions would differ in the same direction

from those expected for long periods of time. Outcomes with overall longrange cost as low as (or lower than) the low-cost scenario or as high as (or

higher than) the high-cost scenario also have a very low probability. This

report also includes a stochastic projection that provides a probability distribution of possible future outcomes that is centered around the intermediate

assumptions. These possible outcomes are discussed in Appendix E.

Although these three sets of demographic and economic assumptions have

been developed to provide a broad range of possible outcomes, the resulting
77

Demographic Assumptions and Methods

estimates should be interpreted with care. The estimates are not intended to

be specific predictions of the future financial status of the OASDI program,

but rather they are intended to be indicators of the expected trend and 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 move from recently experienced levels or trends,

toward long-range ultimate values, generally over the next 25 years. Ultimate values or trends reached by the end of the 75-year long-range period are

generally maintained at these levels or trends for extrapolations beyond 75

years.

The assumed ultimate values, which are generally reached within the first 25

years (and apply thereafter through the end of the 75-year long-range period)

for both the demographic and the economic factors, 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. The rationales for selecting these assumptions are discussed in the following three

sections.

 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, submit a request via our Internet request form 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/TR10/index.html.
Assumptions and Methods

78

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 are applied to the total number

of women, for all marital statuses, in the midyear population at each age.

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, reaching 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 2.12 in 2006.

These variations in the total fertility rate resulted from changes in many factors, including social attitudes, economic conditions, and birth-control practices. 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 highcost assumptions, respectively. These assumptions are unchanged from those

used in last year’s report.

Based on preliminary data for 2007 and 2008, the total fertility rate is

assumed to remain at a level of 2.12 children per woman for 2007 and

decrease to 2.09 for both 2008 and 2009. These levels are slightly higher

than those estimated in last year’s report for the intermediate assumptions.

For all three alternatives, the total fertility rate is then assumed to follow a

gradual trend toward the selected ultimate level, which is reached in 2034.

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

 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.
79

Demographic Assumptions and Methods

death rates, probabilities of death by single year of age and sex were calculated.

Historical death rates (for years 1900-2006) used in developing estimates for

this report 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 2006. Death rates by cause of death at all ages

for years 1979-2006 were produced by the NCHS. 

The total age-sex-adjusted death rate2 declined at an average rate3 of

1.09 percent per year between 1900 and 2006. Between 1979 and 2006, the

period for which death rates were analyzed by cause, the total age-sexadjusted death rate (for all causes combined) declined at an average rate of

0.89 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 0.78 percent per year between 1900 and

2006. Between 1982 and 2006, the age-sex-adjusted death rate for these ages

declined at an average annual rate of 0.69 percent.

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 2034 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.

After 2006, 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 1986 and 2006, to the ultimate

 1 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.
Assumptions and Methods

80

annual percentage reductions by age group, sex, and cause of death assumed

for 2034 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 1986 and 2006.

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 slightly 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 2006 and a new method of estimating death rates for years between

the final data year and the Trustees Report year.

After adjustment for changes in the age-sex distribution of the population,

the resulting total death rates are projected to decline at ultimate average

annual rates of about 0.35 percent, 0.77 percent, and 1.24 percent between

2034 and 2084 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

0.32 percent, 0.70 percent, and 1.17 percent between 2034 and 2084 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 and developments 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

immigration, and other emigration. Legal immigration consists of persons
81

Demographic Assumptions and Methods

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 1,000,000 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, reaching about 1,200,000 for 2005 and 2006. For 2007 and

2008, 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.

For the intermediate alternative, the remaining backlog of pending applications is assumed to be eliminated by the end of 2010, and thereafter legal

 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.
Assumptions and Methods

82

immigration is assumed to be 1,000,000 persons per year. 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 are the same ratios used in last year’s report.

Combining the annual legal immigration and emigration assumptions results

in ultimate net legal immigration of 750,000 persons per year under the intermediate alternative. 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 9.7 million persons as of January 1,

2000, increasing to about 12.8 million persons as of January 1, 2006. 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 average number of persons entering the other-immigrant population in

the period 2000 through 2006 is estimated to have been about 1.5 million per

year. During the same period, the number of other immigrants who left the

Social Security area or adjusted status to become LPRs is estimated to have

averaged about 960,000 per year. Thus, annual net other immigration during

this time period is estimated to have averaged approximately 540,000 persons.

For the intermediate assumptions, annual other immigration is assumed to

continue at the level of 1.5 million persons throughout the projection period.

For the low- and high-cost scenarios, future annual other immigration is

assumed to average 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.

The annual number of other immigrants who leave the Social Security area is

estimated based on modeled departures, disaggregated into two groups, for

the period 2000-05. The first departing group is set at fixed annual numbers

of departures, by age and sex, which remain constant throughout the projection period. This first group is directly related to the number of other immigrants who are assumed to have recently entered the Social Security area.

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
83

Demographic Assumptions and Methods

Security area. 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 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 decreased from a level averaging about 590,000 per

year in the period 2000 through 2003, to about 465,000 in 2006, which

reflects an increase in the number of other immigrants adjusting to LPR status as a result of the effort to reduce the backlog of applications for LPR status. Under the intermediate assumptions, the backlog of applications is

expected to be eliminated in 2010 and net other immigration in 2011 is projected to be about 425,000 persons. After 2011, net other immigration is projected to decline steadily to about 275,000 in 2068 and to remain fairly stable

thereafter. The decline in net other immigration is attributable to the increasing number of other immigrants residing in the Social Security area. This

increase in the number of other immigrants results in an increase in the number who emigrate out of the area based on the rates of departure described

above. All other components of other immigration and emigration are set at

fixed levels after 2010, 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 about 315,000 persons. Net other immigration is estimated to average about 410,000 persons per year under the lowcost assumptions and 220,000 persons per year under the high-cost assumptions.

The total level of net immigration (legal and other combined) is estimated to

average 1,065,000 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 1,370,000 persons per year. Under the

high-cost assumptions, total net immigration is estimated to average 780,000

persons per year.

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
Assumptions and Methods

84

attracted to other countries or that the U.S. borders could be tightened in the

future.

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 5,993.6 410,000 375,000

1985 . . . . . . . . . 1.83 984.2 303.6 5,777.6 435,000 375,000

1990 . . . . . . . . . 2.07 931.2 289.4 5,451.1 500,000 550,000

1995 . . . . . . . . . 1.98 913.9 277.3 5,397.5 575,000 550,000

1996 . . . . . . . . . 1.98 900.4 266.1 5,367.2 665,000 550,000

1997 . . . . . . . . . 1.97 885.1 253.6 5,332.5 570,000 550,000

1998 . . . . . . . . . 2.00 878.3 246.9 5,325.2 490,000 550,000

1999 . . . . . . . . . 2.01 884.4 245.0 5,387.5 520,000 550,000

2000 . . . . . . . . . 2.05 875.7 243.4 5,328.3 670,000 625,000

2001 . . . . . . . . . 2.03 867.4 243.6 5,260.7 795,000 495,000

2002 . . . . . . . . . 2.03 863.7 242.8 5,236.6 730,000 550,000

2003 . . . . . . . . . 2.06 851.6 241.5 5,148.2 575,000 685,000

2004 . . . . . . . . . 2.06 820.2 235.2 4,940.6 750,000 505,000

2005 . . . . . . . . . 2.07 822.3 236.3 4,949.3 870,000 440,000

2006 . . . . . . . . . 2.12 799.6 233.9 4,783.5 910,000 465,000

2007f . . . . . . . . 2.12 806.4 229.8 4,866.8 800,000 555,000

2008f . . . . . . . . 2.09 797.6 226.5 4,819.6 830,000 480,000

2009f. . . . . . . . . 2.09 789.1 223.3 4,773.5 810,000 445,000

Intermediate: 

2010 . . . . . . . . . 2.08 784.4 220.7 4,754.2 780,000 435,000

2015 . . . . . . . . . 2.07 755.8 208.2 4,611.7 750,000 400,000

2020 . . . . . . . . . 2.05 723.8 196.7 4,435.7 750,000 375,000

2025 . . . . . . . . . 2.03 692.1 185.9 4,256.6 750,000 355,000

2030 . . . . . . . . . 2.01 661.8 175.8 4,084.5 750,000 335,000

2035 . . . . . . . . . 2.00 633.4 166.4 3,922.1 750,000 315,000

2040 . . . . . . . . . 2.00 606.8 157.7 3,769.8 750,000 300,000

2045 . . . . . . . . . 2.00 581.9 149.5 3,627.4 750,000 290,000

2050 . . . . . . . . . 2.00 558.6 141.8 3,494.1 750,000 285,000

2055 . . . . . . . . . 2.00 536.8 134.6 3,369.2 750,000 280,000

2060 . . . . . . . . . 2.00 516.4 127.9 3,252.0 750,000 280,000

2065 . . . . . . . . . 2.00 497.2 121.7 3,141.8 750,000 280,000

2070 . . . . . . . . . 2.00 479.1 115.8 3,038.1 750,000 275,000

2075 . . . . . . . . . 2.00 462.1 110.2 2,940.4 750,000 275,000

2080 . . . . . . . . . 2.00 446.1 105.1 2,848.2 750,000 275,000

2085 . . . . . . . . . 2.00 431.0 100.2 2,761.1 750,000 275,000
85

Demographic Assumptions and Methods

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

Low-cost: 

2010 . . . . . . . . . 2.10 789.7 222.4 4,785.3 910,000 535,000

2015 . . . . . . . . . 2.14 785.0 217.4 4,782.1 960,000 565,000

2020 . . . . . . . . . 2.18 773.4 212.2 4,725.7 960,000 515,000

2025 . . . . . . . . . 2.22 759.7 207.0 4,652.1 960,000 475,000

2030 . . . . . . . . . 2.27 745.6 201.9 4,574.6 960,000 440,000

2035 . . . . . . . . . 2.30 731.7 197.0 4,497.1 960,000 415,000

2040 . . . . . . . . . 2.30 718.1 192.3 4,421.3 960,000 390,000

2045 . . . . . . . . . 2.30 705.0 187.8 4,347.9 960,000 375,000

2050 . . . . . . . . . 2.30 692.3 183.4 4,276.8 960,000 365,000

2055 . . . . . . . . . 2.30 680.1 179.1 4,207.9 960,000 355,000

2060 . . . . . . . . . 2.30 668.2 175.0 4,141.1 960,000 350,000

2065 . . . . . . . . . 2.30 656.6 171.1 4,076.4 960,000 350,000

2070 . . . . . . . . . 2.30 645.5 167.2 4,013.6 960,000 350,000

2075 . . . . . . . . . 2.30 634.7 163.5 3,952.7 960,000 345,000

2080 . . . . . . . . . 2.30 624.2 159.9 3,893.6 960,000 345,000

2085 . . . . . . . . . 2.30 614.0 156.5 3,836.2 960,000 345,000

High-cost:

2010 . . . . . . . . . 2.07 779.0 219.0 4,723.1 660,000 335,000

2015 . . . . . . . . . 1.99 725.5 200.1 4,425.3 560,000 240,000

2020 . . . . . . . . . 1.92 671.7 183.9 4,106.9 560,000 240,000

2025 . . . . . . . . . 1.84 621.6 169.4 3,805.8 560,000 235,000

2030 . . . . . . . . . 1.76 576.0 156.3 3,532.0 560,000 225,000

2035 . . . . . . . . . 1.70 535.0 144.4 3,285.8 560,000 215,000

2040 . . . . . . . . . 1.70 498.0 133.5 3,064.9 560,000 210,000

2045 . . . . . . . . . 1.70 464.7 123.6 2,866.8 560,000 205,000

2050 . . . . . . . . . 1.70 434.6 114.5 2,688.6 560,000 205,000

2055 . . . . . . . . . 1.70 407.3 106.2 2,527.8 560,000 205,000

2060 . . . . . . . . . 1.70 382.6 98.7 2,382.4 560,000 210,000

2065 . . . . . . . . . 1.70 360.1 91.7 2,250.5 560,000 210,000

2070 . . . . . . . . . 1.70 339.6 85.4 2,130.4 560,000 210,000

2075 . . . . . . . . . 1.70 320.9 79.5 2,020.8 560,000 210,000

2080 . . . . . . . . . 1.70 303.7 74.1 1,920.5 560,000 210,000

2085 . . . . . . . . . 1.70 287.9 69.1 1,828.4 560,000 210,000

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

2034.

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 legalized under the Immigration Reform and Control Act

of 1986.

e Net other annual immigration is estimated to have averaged 375,000 persons over the period 1980-89 and

550,000 persons over the period 1990-99.

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
Assumptions and Methods

86

area by age, sex, and marital status as of January 1 of each year 2009 through

2085. The starting Social Security area population for January 1, 2008, is

based on the Census Bureau’s estimate of the residents of the 50 States and

D.C., and U.S. Armed Forces overseas, with several adjustments. These

adjustments reflect mortality assumptions for the aged population since 2000

that are consistent with Medicare and Social Security data, estimates of the

net undercount in the 2000 census, and the inclusion of U.S. citizens living

abroad (including residents of U.S. territories) and 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).
87

Demographic Assumptions and Methods

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 . . . . . . . . . . . . . . 54,466 92,841 12,811 160,118 0.138 0.725

1960 . . . . . . . . . . . . . . 73,076 99,818 17,278 190,172 .173 .905

1965 . . . . . . . . . . . . . . 80,052 104,805 19,070 203,927 .182 .946

1970 . . . . . . . . . . . . . . 80,864 112,996 20,899 214,759 .185 .901

1975 . . . . . . . . . . . . . . 78,776 122,579 23,254 224,609 .190 .832

1980 . . . . . . . . . . . . . . 74,929 134,110 26,196 235,236 .195 .754

1985 . . . . . . . . . . . . . . 73,401 144,851 29,122 247,374 .201 .708

1990 . . . . . . . . . . . . . . 75,154 153,316 31,981 260,452 .209 .699

1995 . . . . . . . . . . . . . . 79,541 160,871 34,339 274,751 .213 .708

2000 . . . . . . . . . . . . . . 82,650 170,059 35,419 288,128 .208 .694

2005 . . . . . . . . . . . . . . 84,321 180,063 37,017 301,401 .206 .674

2009c . . . . . . . . . . . . . 85,846 187,571 39,925 313,343 .213 .671

Intermediate:

2010 . . . . . . . . . . . . . . 86,074 189,513 40,674 316,262 .215 .669

2015 . . . . . . . . . . . . . . 87,723 195,790 47,078 330,592 .240 .688

2020 . . . . . . . . . . . . . . 90,392 199,420 54,936 344,748 .275 .729

2025 . . . . . . . . . . . . . . 93,082 201,463 63,837 358,383 .317 .779

2030 . . . . . . . . . . . . . . 95,169 204,227 71,602 370,998 .351 .817

2035 . . . . . . . . . . . . . . 96,981 208,988 76,335 382,304 .365 .829

2040 . . . . . . . . . . . . . . 98,626 215,058 78,896 392,580 .367 .825

2045 . . . . . . . . . . . . . . 100,399 221,423 80,414 402,236 .363 .817

2050 . . . . . . . . . . . . . . 102,417 226,812 82,451 411,680 .364 .815

2055 . . . . . . . . . . . . . . 104,616 231,349 85,353 421,319 .369 .821

2060 . . . . . . . . . . . . . . 106,691 235,610 89,081 431,381 .378 .831

2065 . . . . . . . . . . . . . . 108,569 240,713 92,597 441,879 .385 .836

2070 . . . . . . . . . . . . . . 110,379 245,869 96,338 452,585 .392 .841

2075 . . . . . . . . . . . . . . 112,252 250,604 100,411 463,267 .401 .849

2080 . . . . . . . . . . . . . . 114,226 255,192 104,354 473,772 .409 .857

2085 . . . . . . . . . . . . . . 116,240 259,520 108,380 484,140 .418 .866

Low-cost:

2010 . . . . . . . . . . . . . . 86,124 189,588 40,672 316,383 .215 .669

2015 . . . . . . . . . . . . . . 88,815 197,138 46,949 332,902 .238 .689

2020 . . . . . . . . . . . . . . 93,273 202,021 54,465 349,760 .270 .731

2025 . . . . . . . . . . . . . . 98,538 205,271 62,803 366,612 .306 .786

2030 . . . . . . . . . . . . . . 104,001 209,208 69,784 382,992 .334 .831

2035 . . . . . . . . . . . . . . 109,582 215,580 73,591 398,754 .341 .850

2040 . . . . . . . . . . . . . . 114,800 224,016 75,207 414,024 .336 .848

2045 . . . . . . . . . . . . . . 119,977 233,449 75,910 429,337 .325 .839

2050 . . . . . . . . . . . . . . 125,456 242,583 77,344 445,383 .319 .836

2055 . . . . . . . . . . . . . . 131,197 251,644 79,808 462,650 .317 .839

2060 . . . . . . . . . . . . . . 137,139 261,017 83,115 481,271 .318 .844

2065 . . . . . . . . . . . . . . 143,153 271,837 86,110 501,100 .317 .843

2070 . . . . . . . . . . . . . . 149,155 283,549 89,166 521,870 .314 .840

2075 . . . . . . . . . . . . . . 155,209 295,789 92,413 543,411 .312 .837

2080 . . . . . . . . . . . . . . 161,435 308,336 95,938 565,709 .311 .835

2085 . . . . . . . . . . . . . . 167,879 320,742 100,243 588,865 .313 .836
Assumptions and Methods

88

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. It is thus closely related to the age-sex-adjusted death rate that is 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.

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. Cohort life expectancy is

shown in table V.A4 for those born on January 1 of each calendar year and

for those attaining age 65 on January 1 of each calendar year.

High-cost:

2010 . . . . . . . . . . . . . . 86,027 189,441 40,677 316,145 0.215 0.669

2015 . . . . . . . . . . . . . . 86,671 194,503 47,226 328,400 .243 .688

2020 . . . . . . . . . . . . . . 87,619 196,925 55,496 340,039 .282 .727

2025 . . . . . . . . . . . . . . 87,857 197,802 65,078 350,737 .329 .773

2030 . . . . . . . . . . . . . . 86,753 199,436 73,781 359,971 .370 .805

2035 . . . . . . . . . . . . . . 85,071 202,634 79,616 367,321 .393 .813

2040 . . . . . . . . . . . . . . 83,514 206,408 83,298 373,220 .404 .808

2045 . . . . . . . . . . . . . . 82,393 209,808 85,776 377,976 .409 .802

2050 . . . . . . . . . . . . . . 81,654 211,605 88,507 381,766 .418 .804

2055 . . . . . . . . . . . . . . 81,223 211,857 91,864 384,944 .434 .817

2060 . . . . . . . . . . . . . . 80,535 211,364 95,954 387,853 .454 .835

2065 . . . . . . . . . . . . . . 79,531 211,267 99,880 390,678 .473 .849

2070 . . . . . . . . . . . . . . 78,518 210,603 104,169 393,290 .495 .867

2075 . . . . . . . . . . . . . . 77,702 208,835 108,928 395,465 .522 .894

2080 . . . . . . . . . . . . . . 77,076 206,751 113,149 396,975 .547 .920

2085 . . . . . . . . . . . . . . 76,510 204,586 116,703 397,799 .570 .944

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
89

Demographic Assumptions and Methods

Tables V.A3 and V.A4 present historical and projected life expectancy calculated on both period and cohort bases. 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.
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 age 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 79.5 16.1 19.1

2002 . . . . 74.2 79.5 16.2 19.1

2003 . . . . 74.4 79.6 16.3 19.2

2004 . . . . 74.8 80.0 16.7 19.5

2005 . . . . 74.8 80.0 16.7 19.5

2006 . . . . 75.1 80.2 17.0 19.7

2007b . . . 75.2 80.1 17.0 19.6

2008b . . . 75.4 80.2 17.1 19.6

2009b . . .

b Estimated.

75.6 80.3 17.2 19.7

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

2010 . . . . 75.8 80.4 17.3 19.7 75.7 80.3 17.2 19.7 75.9 80.5 17.3 19.8

2015 . . . . 76.5 80.8 17.6 19.9 76.0 80.4 17.3 19.6 77.0 81.2 18.0 20.2

2020 . . . . 77.1 81.2 18.0 20.2 76.3 80.5 17.5 19.7 78.0 82.0 18.6 20.8

2025 . . . . 77.7 81.7 18.3 20.5 76.5 80.7 17.6 19.8 79.0 82.8 19.2 21.4

2030 . . . . 78.3 82.2 18.7 20.8 76.8 80.9 17.8 19.9 79.9 83.6 19.8 22.0

2035 . . . . 78.8 82.7 19.0 21.1 77.0 81.1 17.9 20.1 80.7 84.4 20.4 22.6

2040 . . . . 79.3 83.1 19.3 21.4 77.3 81.4 18.0 20.2 81.5 85.1 21.0 23.1

2045 . . . . 79.8 83.6 19.6 21.7 77.5 81.6 18.2 20.3 82.3 85.8 21.5 23.6

2050 . . . . 80.3 84.0 19.9 22.0 77.8 81.8 18.3 20.4 83.1 86.5 22.0 24.1

2055 . . . . 80.8 84.4 20.2 22.3 78.0 82.0 18.4 20.6 83.8 87.1 22.5 24.6

2060 . . . . 81.2 84.8 20.5 22.6 78.3 82.1 18.5 20.7 84.5 87.7 22.9 25.0

2065 . . . . 81.7 85.2 20.7 22.9 78.5 82.3 18.7 20.8 85.1 88.3 23.4 25.4

2070 . . . . 82.1 85.6 21.0 23.1 78.7 82.5 18.8 20.9 85.8 88.8 23.8 25.8

2075 . . . . 82.5 86.0 21.2 23.4 78.9 82.7 18.9 21.0 86.4 89.3 24.3 26.2

2080 . . . . 82.9 86.3 21.5 23.6 79.1 82.9 19.0 21.1 86.9 89.8 24.7 26.6

2085 . . . . 83.3 86.7 21.7 23.9 79.3 83.0 19.1 21.3 87.5 90.3 25.1 27.0
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 age 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 on January 1 of the calendar year is based on a combination

of actual and estimated death rates for birth years 1940 through 2006. For birth years after 2006, these values

are based solely on estimated death rates.

At age 65 c

c Age 65 cohort life expectancy for those attaining age 65 on January 1 of calendar years 1940 though 2006

are either based on actual death rates or on a combination of actual and estimated death rates. After 2006

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 . . . . 70.1 76.1 12.7 14.7 69.8 75.8 12.7 14.7 70.4 76.6 12.7 14.7

1945 . . . . 71.9 77.7 13.0 15.4 71.4 77.2 13.0 15.4 72.4 78.4 13.0 15.4

1950 . . . . 73.1 79.0 13.1 16.2 72.5 78.2 13.1 16.2 73.9 79.9 13.1 16.2

1955 . . . . 73.8 79.6 13.1 16.7 73.0 78.6 13.1 16.7 74.9 80.9 13.1 16.7

1960 . . . . 74.6 80.1 13.2 17.4 73.5 78.9 13.2 17.4 76.0 81.6 13.2 17.4

1965 . . . . 75.5 80.7 13.5 18.0 74.1 79.3 13.5 18.0 77.2 82.5 13.5 18.0

1970 . . . . 76.6 81.5 13.8 18.5 75.0 79.8 13.8 18.5 78.7 83.7 13.8 18.5

1975 . . . . 77.6 82.3 14.2 18.7 75.7 80.3 14.2 18.7 79.9 84.7 14.2 18.7

1980 . . . . 78.5 83.0 14.7 18.8 76.3 80.8 14.7 18.8 81.2 85.6 14.7 18.8

1985 . . . . 79.2 83.6 15.4 19.0 76.8 81.2 15.3 19.0 82.2 86.5 15.4 19.0

1990 . . . . 79.9 84.1 15.9 19.2 77.2 81.5 15.9 19.2 83.1 87.3 16.0 19.3

1995 . . . . 80.6 84.7 16.5 19.5 77.6 81.8 16.4 19.3 84.1 88.0 16.6 19.6

1996 . . . . 80.7 84.8 16.7 19.5 77.7 81.9 16.6 19.4 84.3 88.2 16.8 19.7

1997 . . . . 80.8 84.9 16.8 19.6 77.7 81.9 16.7 19.4 84.4 88.3 16.9 19.8

1998 . . . . 80.9 85.0 16.9 19.6 77.8 82.0 16.8 19.4 84.6 88.4 17.1 19.9

1999 . . . . 81.0 85.1 17.1 19.7 77.9 82.0 16.9 19.5 84.7 88.6 17.3 20.0

2000 . . . . 81.1 85.2 17.2 19.8 77.9 82.1 17.0 19.5 84.9 88.7 17.4 20.1

2001 . . . . 81.2 85.2 17.3 19.9 78.0 82.1 17.1 19.6 85.0 88.8 17.6 20.2

2002 . . . . 81.3 85.3 17.4 19.9 78.0 82.1 17.1 19.6 85.2 88.9 17.7 20.3

2003 . . . . 81.4 85.4 17.5 20.0 78.1 82.2 17.2 19.6 85.3 89.0 17.9 20.4

2004 . . . . 81.5 85.5 17.6 20.1 78.1 82.2 17.3 19.7 85.5 89.2 18.0 20.6

2005 . . . . 81.6 85.5 17.7 20.1 78.1 82.2 17.3 19.7 85.6 89.3 18.1 20.7

2006 . . . . 81.7 85.6 17.8 20.2 78.2 82.3 17.4 19.7 85.8 89.4 18.3 20.8

2007 . . . . 81.8 85.7 17.9 20.2 78.3 82.3 17.4 19.7 85.9 89.5 18.4 20.9

2008 . . . . 81.9 85.8 18.0 20.3 78.3 82.4 17.5 19.8 86.1 89.7 18.6 21.0

2009 . . . . 82.0 85.9 18.0 20.4 78.4 82.4 17.5 19.8 86.2 89.8 18.7 21.1

2010 . . . . 82.1 86.0 18.1 20.4 78.4 82.5 17.5 19.8 86.4 89.9 18.9 21.2

2015 . . . . 82.6 86.4 18.5 20.8 78.7 82.7 17.7 19.9 87.1 90.5 19.5 21.9

2020 . . . . 83.0 86.8 18.8 21.1 78.9 82.9 17.8 20.1 87.7 91.1 20.2 22.5

2025 . . . . 83.4 87.1 19.2 21.4 79.1 83.1 18.0 20.2 88.4 91.6 20.8 23.1

2030 . . . . 83.8 87.5 19.5 21.7 79.4 83.3 18.1 20.3 89.0 92.1 21.4 23.7

2035 . . . . 84.2 87.8 19.8 22.0 79.6 83.4 18.2 20.4 89.5 92.6 22.0 24.2

2040 . . . . 84.6 88.1 20.1 22.3 79.8 83.6 18.4 20.6 90.1 93.0 22.5 24.8

2045 . . . . 85.0 88.5 20.4 22.6 80.0 83.8 18.5 20.7 90.6 93.5 23.0 25.3

2050 . . . . 85.3 88.8 20.7 22.9 80.2 84.0 18.6 20.8 91.1 93.9 23.5 25.7

2055 . . . . 85.7 89.1 21.0 23.2 80.4 84.1 18.7 20.9 91.6 94.4 24.0 26.2

2060 . . . . 86.0 89.3 21.2 23.5 80.6 84.3 18.9 21.0 92.1 94.8 24.5 26.6

2065 . . . . 86.3 89.6 21.5 23.7 80.8 84.5 19.0 21.2 92.6 95.2 24.9 27.0

2070 . . . . 86.7 89.9 21.8 24.0 81.0 84.6 19.1 21.3 93.0 95.6 25.3 27.4

2075 . . . . 87.0 90.2 22.0 24.2 81.2 84.8 19.2 21.4 93.5 96.0 25.8 27.8

2080 . . . . 87.3 90.4 22.3 24.5 81.4 84.9 19.3 21.5 93.9 96.4 26.2 28.2

2085 . . . . 87.6 90.7 22.5 24.7 81.6 85.1 19.5 21.6 94.3 96.8 26.6 28.6
Assumptions and Methods

92

B. ECONOMIC ASSUMPTIONS AND METHODS

The basic economic assumptions are embodied in three alternatives that are

designed to provide a reasonable range of effects on Social Security’s financial status. The intermediate assumptions reflect the Trustees’ consensus

expectation of an underlying general trend toward moderate economic

growth throughout the projection period and the expected levels of various

economic parameters. The low-cost assumptions represent a more optimistic

outlook and assume relatively strong economic growth and relatively optimistic levels for other parameters. The high-cost assumptions represent a relatively pessimistic scenario, with weak economic growth in the short-range

period and relatively pessimistic levels for other parameters. For this report,

all three sets of assumptions include a gradual recovery from the recession

that started in December 2007.

Actual economic data was available through the fourth quarter of 2009 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) above the long-term sustainable trend level. Economic

growth subsequently weakened with the level of output reaching the sustainable trend level by the first quarter of 2008, and a bottom in the economic

cycle for the second quarter of 2009. The actual growth rate in real GDP was

positive for the third quarter of 2009 and strongly positive for the fourth

quarter. For the intermediate and low-cost alternatives, the current recession

was projected to be followed by a recovery period with economic growth

sufficient to return output to the sustainable trend level, but not beyond that

level. For the high-cost alternative, the economy is assumed to experience a

longer period of slow growth before returning to the sustainable level of output. Under all three sets of assumptions the economy is assumed to reach and

maintain a sustainable, potential trend level of output by the end of 2019.

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 (NBER). Access date March 3, 2009.

http://www.nber.org/cycles/dec2008.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

1968 to 2008, annual increases in total productivity averaged 1.7 percent, the

result of average annual increases of 1.7, 1.3, 1.5, and 2.2 percent for the 10-

year periods 1968-78, 1978-88, 1988-98, and 1998-2008, respectively. For

2009, the estimated annual change in productivity is 2.5 percent.

It is most 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 also averaged

1.7 percent over the last five complete economic cycles (measured from peak

to peak), covering the 41-year period from 1966 to 2007. 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 2009 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 3.7 percent for 2010 and 1.6 percent for 2011. Thereafter, the

annual change is assumed to average 1.5 percent through 2019. The annual

rate is assumed to reach its ultimate value of 1.7 percent in 2020 when the

economy has fully recovered. For the low-cost assumptions, the annual

change in productivity is assumed to be 4.2 percent for 2010 and 1.7 percent

for 2011. The annual change is assumed to average 1.6 percent over the 2011

to 2019 period, and reach its ultimate value of 2.0 percent thereafter. For the

high-cost assumptions, the annual change in productivity is assumed to be

3.3 percent for 2010 and 1.4 percent for 2011. The annual change is assumed

 1 Historical levels of real GDP are from the Bureau of Economic Analysis’ (BEA) National Income and

Product Accounts (NIPA). Historical total hours worked is an unpublished series provided by the Bureau of

Labor Statistics (BLS), and is for all U.S. Armed Forces and civilian employment.
Assumptions and Methods

94

to average 1.4 percent over the 2011 to 2019 period, and remain at that value

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 4.6 percent for

the 40 years from 1968 to 2008, the result of average annual increases of 6.5,

6.0, 3.2, and 2.8 percent for the 10-year periods 1968-78, 1978-88, 1988-98,

and 1998-2008, respectively. The GDP deflator increased at an average

annual rate of 4.1 percent from 1968 to 2008, the result of average annual

increases of 6.3, 5.2, 2.5, and 2.4 percent for the same respective 10-year

periods. For 2009, the annual change was -0.7 percent for the CPI and is estimated to be 1.2 percent for the GDP deflator.

The ultimate annual increases in the CPI are assumed 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 2009

report, and reflect a belief that future inflationary shocks will likely be offset

by succeeding periods of relatively slow inflation due to persistent international competition, and that future monetary policy will be similar to that of

the last 20 years with its strong emphasis on holding the growth rate in prices

to relatively low levels.

For the intermediate assumptions, the annual change in the CPI is assumed to

be 2.0 percent for 2010. As the economy moves on a path toward full

employment, the annual change is assumed to increase gradually from 1.7

percent in 2011 to the ultimate growth rate of 2.8 percent in 2014 and later.

Because the actual level of the CPI in the third quarter of 2009 was below the

level of the CPI in the third quarter of 2008, there was no automatic cost-ofliving benefit increase for December 2009. Because the assumed level of the

CPI in the third quarter of 2010 is still below the level of the CPI in the third

quarter of 2008, no automatic cost-of-living benefit increase is projected for

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

average 1.5 percent for 2010 and 2011. The annual change in the CPI is

assumed to increase from 1.6 percent for 2012 to its ultimate assumed annual

change of 1.8 percent for 2013 and later. For the high-cost assumptions, the
95

Economic Assumptions and Methods

annual change in the CPI is assumed to average 2.3 percent for 2010 and

2011. The annual change in the CPI is assumed to increase from 4.3 percent

for 2012 to 4.4 percent for 2013, then decrease to its ultimate assumed

annual change of 3.8 percent for 2014 and later.

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. For the 2010 report, the ultimate annual increase in the GDP

deflator is assumed to be equal to the annual increases in the CPI minus a

0.3, 0.4, and 0.5 percentage point price differential 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, for the 2010 report, 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 are the same ultimate price differentials and GDP

deflator growth rates assumed for the 2009 report.

The price differential is estimated to be -1.8 percentage points for 2009.

Under the intermediate assumptions, the price differential is projected to be

0.7 percentage point for 2010. This swing in the price differential is due to

the decline in oil prices for 2009 and the projected rise to a higher level for

2010. 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 after 2010 as the

economy recovers. The price differential is assumed to be 0.3 percentage

point in 2011 and 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 and

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 in certain circumstances,

the 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. mili-
Assumptions and Methods

96

tary 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. Assumed future growth rates in productivity and the GDP

deflator are discussed in the previous two sections.

The average annual change in average hours worked was -0.3 percent over

the last 40 years, and -0.7, -0.1, 0.3, and -0.6 percent for the 10-year periods

1968-78, 1978-88, 1988-98, and 1998-2008, 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.

For the 2010 report, 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 2009 report.

The average annual change in the ratio of earnings to compensation was -0.2

percent from 1968 to 2008. 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.

For the 2009 report, the assumed ultimate annual rates of change in the ratio

of wages to employee compensation were -0.1, -0.2, and -0.3 percent for the

low-cost, intermediate, and high-cost assumptions, respectively. For each

alternative, a constant ultimate annual rate of change in the ratio of wages to

employee compensation was assumed. For this year’s report, this assumption

was changed in two steps: first, the projected growth rates of various components of compensation were refined so that they are allowed to change over

time, rather than being held constant at a summarized average rate; second,

these projected “baseline” growth rates were updated to reflect the estimated

effects of legislation since last year’s report.

In the first step, specific annual baseline assumptions were made for the

growth in the pension and health insurance components of compensation.

The share of employee compensation used for pension costs that are exempt
97

Economic Assumptions and Methods

from the payroll tax is assumed to increase as life expectancy and potential

time in retirement increase. The share of employee compensation used to pay

for the cost of employer-sponsored group health insurance, which is exempt

from the payroll tax, is now assumed to vary annually, consistent with trends

assumed for components of health care cost in the national economy.

Together, these changes result in somewhat slower growth in non-taxable

components of compensation early and late in the 75-year projection period,

and faster growth in the middle of the period, than assumed for last year’s

report. However, the average annual decrease in the ratio of wages to compensation over the 75-year period is unchanged at 0.2 percent for the intermediate assumptions.

In the second step, the annual baseline rates of change in the ratio of wages

to employee compensation were adjusted to reflect new legislation. In March

2010, the Patient Protection and Affordable Care Act and the Health Care

and Education Reconciliation Act became law. This new legislation is not

assumed to affect future growth in total economic output or total compensation. However, this legislation is assumed to affect the components of compensation and, in particular, the annual growth rates in employer-sponsored

group health insurance. Compared to the baseline, the projected average

annual growth rate for the total cost of employer-sponsored group health

insurance is lower, and the average annual rate of decline in the ratio of

wages to compensation is correspondingly lower by about 0.1 percent. Most

of this change is due to the assumption that an excise tax on employer-sponsored group health insurance, effective beginning in 2018, will lead to slower

growth in the total cost of employer-sponsored group health insurance. Such

effect of the excise tax on employer-sponsored group health insurance is

expected to increase over time because the threshold premium levels above

which the tax applies are indexed by all-items CPI, which is assumed to

grow slower than the cost of providing health insurance. These projections

for annual percent changes in employer-sponsored group health insurance

cost on a year-by-year basis are consistent with national health estimates

from the Office of the Actuary at the Centers for Medicare and Medicaid

Services.

For the 2010 report, 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 lowcost, intermediate, and high-cost assumptions, respectively. Under the intermediate assumptions, the ratio of wages to employee compensation is projected to decline from 0.810 for 2009 to 0.742 for 2084. The ratio of

compensation to GDP is assumed to be stable at 0.648 after 2019.
Assumptions and Methods

98

The projected average annual growth rate in average U.S. earnings from

2019 to 2084 is about 4.0 percent for the intermediate assumptions. This

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. Thus, the assumed average annual growth rates in the average covered wage from 2019 to 2084 are 3.6, 4.0, and 4.4 percent for the low-cost,

intermediate, and high-cost assumptions, respectively. For the intermediate

assumptions, the annual rate of change in the average covered wage is

assumed to be -0.6 percent for 2009, which reflects the recession low point.

As the economy recovers, the annual rate of change in the average covered

wage is assumed to average 4.5 percent from 2010 to 2012 and 4.4 percent

from 2013 to 2019. Thereafter, the assumed average annual rate of change in

the average covered wage is 4.0 percent.

4. Assumed Real-Wage Differentials

For simplicity, 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 1969 through 2008, the real-wage differential averaged 0.8 percentage point, the result of averages of 0.8, 0.3, 1.1, and

0.8 percentage points for the 10-year periods 1969-78, 1979-88, 1989-98,

and 1999-2008, respectively.

For the years 2020-84, 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

0.0 percentage point for 2009. For the intermediate assumptions, the realwage differential is projected to be 3.1 percentage points for 2010 and to

average 2.3 percentage points from 2011 to 2013, reflecting the economic

recovery. Thereafter, the real-wage differential is assumed to gradually
99

Economic Assumptions and Methods

decline to 1.3 percentage points in 2019 and to average 1.2 percentage points

from 2019 to 2084. For the low-cost assumptions, the real-wage differential

is projected to be 3.6 percentage points for 2010 and to average

2.2 percentage points from 2010 to 2019 and 1.8 percentage points from

2019 to 2084. For the high-cost assumptions, the real-wage differential is

projected to be 2.4 percentage points for 2010, to vary between 1.4 and

1.8 percentage points between 2011 and 2016, and then to decline to

0.8 percentage point by 2019 and to average 0.6 percentage point from 2019

to 2084.

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

1999 . . . . . . . . . . 2.8 .1 .5 1.5 4.9 2.2 2.7

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 .4

2004 . . . . . . . . . . 2.4 .7 .0 2.8 4.7 2.6 2.1

2005 . . . . . . . . . . 1.5 -.4 -.2 3.3 3.6 3.5 .1

2006 . . . . . . . . . . .8 .5 .0 3.3 4.7 3.2 1.5

2007 . . . . . . . . . . 1.5 .2 -.4 2.9 4.7 2.9 1.8

2008 . . . . . . . . . . 1.4 -.2 -.5 2.1 2.0 4.1 -2.1

2009 . . . . . . . . . . 2.5 -.9 -1.2 1.2 -.6 -.7 .0

Intermediate: 

2010 . . . . . . . . . . 3.7 .2 -.4 1.3 5.1 2.0 3.1

2011 . . . . . . . . . . 1.6 .1 .4 1.4 3.8 1.7 2.2

2012 . . . . . . . . . . 1.5 .2 .4 1.9 4.7 2.3 2.4

2013 . . . . . . . . . . 1.5 .1 .2 2.3 4.8 2.7 2.2

2014 . . . . . . . . . . 1.4 -.2 .1 2.4 4.6 2.8 1.8

2015 . . . . . . . . . . 1.4 -.2 .0 2.4 4.3 2.8 1.5

2016 . . . . . . . . . . 1.3 .0 .0 2.4 4.4 2.8 1.6

2017 . . . . . . . . . . 1.5 .0 .0 2.4 4.3 2.8 1.5

2018 . . . . . . . . . . 1.5 .1 .0 2.4 4.2 2.8 1.4

2019 . . . . . . . . . . 1.5 -.1 .0 2.4 4.1 2.8 1.3

2015 to 2020. . . . 1.5 .0 .0 2.4 4.2 2.8 1.4

2020 to 2084. . . . 1.7 -.1 .0 2.4 4.0 2.8 1.2
Assumptions and Methods

100

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 subgroup 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 size of the labor force decreased from an

average of about 2.1 percent during the 1970s and 1980s to about 1.1 percent

from 1990 to 2009. Further slowing of labor force growth is projected due to

a substantial slowing of growth in the working age population in the

Low-cost: 

2010 . . . . . . . . . . 4.2 0.2 -0.3 1.2 5.5 1.8 3.6

2011 . . . . . . . . . . 1.7 .1 .5 .9 3.6 1.1 2.5

2012 . . . . . . . . . . 1.4 .3 .5 1.3 4.2 1.6 2.6

2013 . . . . . . . . . . 1.4 .1 .3 1.5 4.1 1.8 2.3

2014 . . . . . . . . . . 1.4 -.1 .2 1.5 3.9 1.8 2.1

2015 . . . . . . . . . . 1.3 -.2 .1 1.5 3.6 1.8 1.8

2016 . . . . . . . . . . 1.6 .1 .1 1.5 3.9 1.8 2.1

2017 . . . . . . . . . . 1.8 .1 .1 1.5 3.7 1.8 1.9

2018 . . . . . . . . . . 1.9 .2 .1 1.5 3.7 1.8 1.9

2019 . . . . . . . . . . 1.9 .0 .1 1.5 3.8 1.8 2.0

2015 to 2020. . . . 1.8 .1 .1 1.5 3.7 1.8 1.9

2020 to 2084. . . . 2.0 .0 .1 1.5 3.6 1.8 1.8

High-cost: 

2010 . . . . . . . . . . 3.3 .2 -.5 1.3 4.6 2.1 2.4

2011 . . . . . . . . . . 1.4 .1 .3 2.0 4.1 2.5 1.7

2012 . . . . . . . . . . 1.2 .2 .3 3.8 6.1 4.3 1.7

2013 . . . . . . . . . . 1.5 .0 .1 3.9 6.2 4.4 1.8

2014 . . . . . . . . . . 1.5 -.2 .0 3.3 5.5 3.8 1.7

2015 . . . . . . . . . . 1.5 -.3 -.1 3.3 5.2 3.8 1.4

2016 . . . . . . . . . . 1.3 .0 -.1 3.3 5.2 3.8 1.4

2017 . . . . . . . . . . 1.2 .0 -.1 3.3 4.7 3.8 .9

2018 . . . . . . . . . . 1.3 .0 -.1 3.3 4.7 3.8 .9

2019 . . . . . . . . . . 1.4 -.1 -.1 3.3 4.6 3.8 .8

2015 to 2020. . . . 1.3 -.1 -.1 3.3 4.7 3.8 .9

2020 to 2084. . . . 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 unrounded annual percentage change in the average

annual wage in covered employment less the unrounded annual percentage change in the Consumer Price

Index. For rows with a range of years listed, the value is the average of unrounded annual values of the differential.

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
101

Economic Assumptions and Methods

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 2019. Thereafter, the labor

force is projected to increase by 0.5 percent per year between 2019 and 2050,

and by 0.4 percent 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 using demographic and economic assumptions specific to each alternative. However, the

participation rates are not highly sensitive to most of the demographic and

economic assumptions. Accordingly, the projected labor force participation

rates do not vary substantially into the future and across alternatives.

Historically, labor force participation rates have been influenced substantially by 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. The overall decline was facilitated by the large numbers of workers entering the labor force from the babyboom generation, and from the female population in general, during this

period. This increasing supply of labor allowed employers to offer earlyretirement options that were attractive. Between the mid-1980s and about

1995, participation rates roughly stabilized for males and increased for

females. Since 1995, however, participation rates for both sexes at ages 50

and over have generally risen significantly. This rise reflects a decrease in

early-out options and relatively strong economic growth.

For the future, changes in available benefit levels from Social Security and

increases in the normal retirement age are expected to encourage work at

older ages. Some of these factors are modeled directly. However, other factors, such as the trend away from private defined-benefit pension plans (that

often provide incentives to retire) toward defined-contribution plans, are

expected to provide additional upward pressure on labor force participation

rates. In addition to this shift in private pensions, the aging of the population

is expected to both increase the demand for workers and, through improved

health associated with greater life expectancy, improve the ability of the

older population to work. Longer life expectancy will also increase the assets

needed to live comfortably through retirement years, thus encouraging workers to stay employed longer. In order to account for these effects, which are

directly or indirectly related to increases in life expectancy, projected participation rates for prime age and older males and females are adjusted upward

in relation to assumed increases in life expectancy. For the intermediate pro-
Assumptions and Methods

102

jections, this adjustment for changes related to life expectancy adds about

1.6 percent to the total labor force by 2084.

For men age 16 and over, the projected age-adjusted labor force participation

rates for 2084 are 73.0, 72.1, and 71.2 percent for the low-cost, intermediate,

and high-cost assumptions, respectively, compared to the 2008 level of

73.0 percent. (Age-adjusted labor force participation rates are adjusted to the

2008 age distribution of the civilian noninstitutional U.S. population.) These

rates reflect the net effect of increases due to assumed improvements in life

expectancy and decreases due to higher assumed disability prevalence rates

and an increasing proportion of males who never marry. For women age 16

and over, the projected age-adjusted labor force participation rates for 2084

are 61.0, 60.4, and 59.6 percent, for the low-cost, intermediate, and high-cost

assumptions, respectively, compared to the 2008 level of 59.5 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 2019, total civilian rates are

presented without adjustment for the changing age-sex distribution of the

population. For years after 2019, unemployment rates are presented as agesex-adjusted rates (using the age-sex distribution of the 2008 civilian labor

force). Age-sex-adjusted rates allow for more meaningful comparisons

across longer time periods. The effect of this adjustment through 2019 is

small.

The total civilian unemployment rate reflects the projected levels of unemployment for various age-sex subgroups of the population. The unemployment rate for each subgroup is projected based on a specification (consistent

with Okun’s Law1) 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 2019. The ultimate assumed unemployment rates

are 4.5, 5.5, and 6.5 percent for the low-cost, intermediate, and high-cost

 1 Okun’s Law is an empirical relationship between the change in the aggregate unemployment rate and the

percentage change in real GDP.
103

Economic Assumptions and Methods

assumptions, respectively. These values are the same as those assumed for

the 2009 report.

6. Gross Domestic Product Projections

The real growth rate in GDP equals the combined growth rates for total

employment, productivity, and average hours worked. 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. For

the 40-year period from 1968 to 2008, the average growth rate in real GDP

was 3.0 percent, combining the approximate growth rates of 1.5, 1.7, and

-0.3 percent for its components—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 2009 to 2019, the approximate sum of component growth rates of 1.1 percent for total employment, 1.7 percent for productivity, and 0.1 percent for average hours worked. This projected average

annual growth in real GDP of 3.0 percent can also be separated into an

underlying sustainable trend rate of change of 2.3 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 10.0 percent in 2009 to its assumed ultimate level of 5.5 percent in 2018. After 2019, no economic cycles are projected. Accordingly, the projected annual growth rate in real GDP is

determined by the projected full-employment growth rate for total employment and the assumed full-employment growth rates for 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, annual growth in real GDP is projected to

average 3.5 percent over the decade ending in 2019. The relatively faster

growth is due mostly to higher assumed rates of growth for employment and

worker productivity. For the high-cost assumptions, annual growth in real

GDP is projected to average 2.4 percent for the decade ending in 2019.

7. Interest Rates

The 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
Assumptions and Methods

104

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 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, 1969-2008, and for each of the 10-year subperiods, 1969-78, 1979-88,

1989-98, and 1999-2008. For the 40-year period, the real interest rate averaged 2.8 percent per year. For the four 10-year subperiods, the real interest

rates averaged 0.3, 4.5, 4.3, and 2.2 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 2009 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 3.6 percent for 2008,

which means that assets newly invested in 2008 would increase by

3.6 percent a year later, with interest. Because average prices actually

declined from 2008 to 2009 by 0.7 percent, the purchasing power of assets

invested in 2008 actually increased by about 4.4 percent a year later. Therefore, the annual real interest rate for 2009 is 4.4 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 6.1 percent in

2014 before declining to the ultimate assumed level of 5.7 percent for 2019.

For the low-cost assumptions, the average annual nominal interest rate is

assumed to reach an ultimate level of about 5.4 percent for 2018. For the

high-cost assumptions, it is assumed to peak at 7.0 percent for 2013, and then

decline to an ultimate rate of about 5.9 percent by 2018.
105

Economic Assumptions and Methods

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

1999 . . . . . . . . . . . . 4.2 1.2 1.5 4.8 5.9 3.4

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 2.1 4.7 1.9

2008 . . . . . . . . . . . . 5.8 .8 -.5 .4 3.6 .6

2009 . . . . . . . . . . . . 9.3 -.1 -3.7 -2.4 2.9 4.4

Intermediate: 

2010 . . . . . . . . . . . . 10.0 -.2 -.9 2.3 3.4 .9

2011 . . . . . . . . . . . . 9.5 .7 1.2 3.3 4.5 1.7

2012 . . . . . . . . . . . . 8.6 1.1 2.0 4.0 5.6 2.2

2013 . . . . . . . . . . . . 7.7 1.1 2.1 3.9 6.0 2.9

2014 . . . . . . . . . . . . 7.0 1.1 1.9 3.5 6.1 3.2

2015 . . . . . . . . . . . . 6.3 .9 1.6 3.1 5.9 3.3

2016 . . . . . . . . . . . . 5.8 .9 1.4 2.7 5.9 3.1

2017 . . . . . . . . . . . . 5.6 .8 1.0 2.5 5.8 3.1

2018 . . . . . . . . . . . . 5.5 .6 .7 2.2 5.8 3.0

2019 . . . . . . . . . . . . 5.5 .5 .5 2.1 5.7 3.0

2020 . . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2025 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2030 . . . . . . . . . . . . 5.5 .5 .5 2.1 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 2.1 5.7 2.9

2055 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2060 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2065 . . . . . . . . . . . . 5.5 .4 .4 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: 

2010 . . . . . . . . . . . . 9.8 .0 -.6 3.2 3.6 1.1

2011 . . . . . . . . . . . . 9.0 .9 1.8 4.2 4.5 2.5

2012 . . . . . . . . . . . . 7.8 1.4 2.7 4.6 5.3 2.9

2013 . . . . . . . . . . . . 6.7 1.5 2.6 4.5 5.5 3.5

2014 . . . . . . . . . . . . 5.7 1.4 2.4 4.0 5.5 3.7

2015 . . . . . . . . . . . . 4.9 1.2 2.1 3.6 5.5 3.7

2016 . . . . . . . . . . . . 4.5 1.1 1.5 3.2 5.4 3.7

2017 . . . . . . . . . . . . 4.5 .9 .9 2.8 5.3 3.6

2018 . . . . . . . . . . . . 4.5 .5 .5 2.5 5.4 3.6

2019 . . . . . . . . . . . . 4.5 .4 .4 2.4 5.4 3.6
Assumptions and Methods

106

Low-cost: (Cont.)

2020 . . . . . . . . . . . . 4.5 0.7 0.7 2.7 5.4 3.6

2025 . . . . . . . . . . . . 4.5 .5 .5 2.6 5.4 3.6

2030 . . . . . . . . . . . . 4.5 .6 .6 2.7 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 .8 .8 2.9 5.4 3.6

2050 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2055 . . . . . . . . . . . . 4.5 .8 .8 2.9 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: 

2010 . . . . . . . . . . . . 10.1 -.4 -1.2 1.5 3.2 .8

2011 . . . . . . . . . . . . 9.8 .5 .8 2.6 4.9 .7

2012 . . . . . . . . . . . . 9.3 .7 1.2 2.8 6.9 .6

2013 . . . . . . . . . . . . 8.8 .7 1.3 2.9 7.0 2.5

2014 . . . . . . . . . . . . 8.1 .7 1.5 3.0 6.5 3.2

2015 . . . . . . . . . . . . 7.5 .7 1.3 2.8 6.4 2.7

2016 . . . . . . . . . . . . 7.1 .7 1.2 2.4 6.2 2.6

2017 . . . . . . . . . . . . 6.8 .6 .9 2.0 6.0 2.4

2018 . . . . . . . . . . . . 6.6 .6 .8 2.0 5.9 2.2

2019 . . . . . . . . . . . . 6.5 .6 .7 2.0 5.9 2.1

2020 . . . . . . . . . . . . 6.5 .4 .4 1.7 5.9 2.1

2025 . . . . . . . . . . . . 6.5 .3 .3 1.6 5.9 2.1

2030 . . . . . . . . . . . . 6.5 .4 .4 1.6 5.9 2.1

2035 . . . . . . . . . . . . 6.5 .4 .4 1.7 5.9 2.1

2040 . . . . . . . . . . . . 6.5 .3 .3 1.6 5.9 2.1

2045 . . . . . . . . . . . . 6.5 .2 .2 1.5 5.9 2.1

2050 . . . . . . . . . . . . 6.5 .1 .1 1.4 5.9 2.1

2055 . . . . . . . . . . . . 6.5 .1 .1 1.3 5.9 2.1

2060 . . . . . . . . . . . . 6.5 .0 .0 1.3 5.9 2.1

2065 . . . . . . . . . . . . 6.5 .0 .0 1.3 5.9 2.1

2070 . . . . . . . . . . . . 6.5 .0 .0 1.2 5.9 2.1

2075 . . . . . . . . . . . . 6.5 -.1 -.1 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 2020 and later are adjusted to the age-sex distribution of the civilian

labor force in 2008. 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, in practice, are

compounded 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.

Table V.B2.—Additional Economic Factors (Cont.)

Calendar year 

Average annual

unemployment

ratea

Annual percentage changeb in—

Average annual interest 

rate

Labor

forcec Total

employmentd RealGDPe Nominalf Realg
107

Program Assumptions and Methods

C. PROGRAM-SPECIFIC ASSUMPTIONS AND METHODS

The demographic and economic assumptions and methods described in the

previous sections are used in a set of models to project future income and

cost under the OASDI program. In some cases, the economic assumptions

result in the direct calculation of program parameters as described in the following subsection. These parameters affect the level of payroll taxes collected and the level of benefits paid and are calculated using formulas

described explicitly in the Social Security Act. In other cases, the combination of demographic and economic assumptions are used indirectly to drive

more complicated models that project the numbers of future workers covered

under OASDI and the levels of their covered earnings, as well as the numbers of future beneficiaries and the expected levels of their benefits. The following subsections provide brief descriptions of the derivations of these

program-specific factors.

1. Automatically Adjusted Program Parameters

The Social Security Act specifies that certain program parameters affecting

the determination of OASDI benefits and taxes are to be adjusted annually 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. These automatic adjustments are based 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 2019. 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, as well as the AWI series and the values of many of

the wage-indexed program parameters. In each table, the 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, there

was no cost-of-living adjustment. Under all three sets of economic

 1 Details of these indexation procedures are published annually in the Federal Register, and are also available at www.socialsecurity.gov/OACT/COLA/index.html.
Assumptions and Methods

108

assumptions, no cost-of-living adjustment is projected for December of

2010. Cost-of-living adjustments are projected to return for December

2011 and later. 

 • 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 that are 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.
109

Program Assumptions and Methods

Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and 

Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2019

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

Intermediate:

2009 . . . . . . . . . . . g.0 41,067.93 -.6 g106,800 g 14,160 g37,680

2010 . . . . . . . . . . . .0 43,083.76 4.9 g106,800 g14,160 g37,680

2011 . . . . . . . . . . . 1.2 44,686.82 3.7 106,800 14,160 37,680

2012 . . . . . . . . . . . 2.4 46,758.30 4.6 113,700 15,120 40,200

2013 . . . . . . . . . . . 2.7 48,977.62 4.7 118,200 15,720 41,640

2014 . . . . . . . . . . . 2.8 51,215.47 4.6 123,600 16,440 43,680

2015 . . . . . . . . . . . 2.8 53,396.92 4.3 129,300 17,160 45,720

2016 . . . . . . . . . . . 2.8 55,737.60 4.4 135,300 18,000 47,760

2017 . . . . . . . . . . . 2.8 58,103.49 4.2 141,000 18,720 49,800

2018 . . . . . . . . . . . 2.8 60,522.33 4.2 147,300 19,560 51,960

2019 . . . . . . . . . . . 2.8 63,017.19 4.1 153,600 20,400 54,240
Assumptions and Methods

110

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 2019. 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:

2009 . . . . . . . . . . . g0.0 $41,067.59 -0.6 g$106,800 g$14,160 g$37,680

2010 . . . . . . . . . . . .0 43,233.23 5.3 g106,800 g14,160 g37,680

2011 . . . . . . . . . . . .4 44,759.07 3.5 106,800 14,160 37,680

2012 . . . . . . . . . . . 1.7 46,620.50 4.2 114,300 15,120 40,320

2013 . . . . . . . . . . . 1.8 48,494.23 4.0 118,200 15,720 41,760

2014 . . . . . . . . . . . 1.8 50,372.83 3.9 123,300 16,320 43,440

2015 . . . . . . . . . . . 1.8 52,169.53 3.6 128,100 17,040 45,240

2016 . . . . . . . . . . . 1.8 54,201.02 3.9 133,200 17,640 47,040

2017 . . . . . . . . . . . 1.8 56,224.83 3.7 137,700 18,240 48,720

2018 . . . . . . . . . . . 1.8 58,334.76 3.8 143,100 18,960 50,520

2019 . . . . . . . . . . . 1.8 60,532.75 3.8 148,500 19,680 52,440

High-cost:

2009 . . . . . . . . . . . g.0 41,067.51 -.6 g106,800 g14,160 g37,680

2010 . . . . . . . . . . . .0 42,879.81 4.4 g106,800 g14,160 g37,680

2011 . . . . . . . . . . . 2.2 44,589.32 4.0 106,800 14,160 37,680

2012 . . . . . . . . . . . 4.6 47,228.82 5.9 113,400 15,000 39,960

2013 . . . . . . . . . . . 4.3 50,100.69 6.1 117,900 15,600 41,640

2014 . . . . . . . . . . . 3.8 52,867.76 5.5 124,800 16,560 44,040

2015 . . . . . . . . . . . 3.8 55,603.42 5.2 132,300 17,520 46,800

2016 . . . . . . . . . . . 3.8 58,469.81 5.2 139,800 18,480 49,320

2017 . . . . . . . . . . . 3.8 61,242.02 4.7 147,000 19,440 51,840

2018 . . . . . . . . . . . 3.8 64,147.61 4.7 154,500 20,520 54,600

2019 . . . . . . . . . . . 3.8 67,083.66 4.6 161,700 21,480 57,120

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 2019.

c Amounts for 1979-81 were specified by Public Law 95-216. The bases for years after 1989 were increased

slightly by changes to the indexing procedure, as 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, 1975-2019 (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
111

Program Assumptions and Methods

 • Bend points in the formula used to compute the maximum total amount

of monthly benefits payable on the basis of the earnings 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 2010

 Figure V.C2.—Maximum-Family-Benefit Formula for Those Newly Eligible in 2010
Assumptions and Methods

112

 • 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, it 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 1978-2019

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
113

Program Assumptions and Methods

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:

2011 . . . . . . . . . $756 $4,556 $966 $1,394 $1,818 $1,120 $79,200

2012 . . . . . . . . . 793 4,780 1,013 1,463 1,908 1,170 84,600

2013 . . . . . . . . . 823 4,958 1,051 1,517 1,979 1,210 87,600

2014 . . . . . . . . . 861 5,188 1,100 1,587 2,070 1,270 91,800

2015 . . . . . . . . . 901 5,434 1,152 1,663 2,169 1,330 96,000

2016 . . . . . . . . . 943 5,682 1,205 1,739 2,268 1,390 100,500

2017 . . . . . . . . . 983 5,924 1,256 1,813 2,364 1,450 104,700

2018 . . . . . . . . . 1,026 6,184 1,311 1,892 2,468 1,510 109,500

2019 . . . . . . . . . 1,069 6,446 1,367 1,973 2,573 1,570 114,000

Low-cost:

2011 . . . . . . . . . 756 4,556 966 1,394 1,818 1,120 79,200

2012 . . . . . . . . . 796 4,797 1,017 1,468 1,914 1,170 84,900

2013 . . . . . . . . . 824 4,966 1,053 1,520 1,982 1,210 87,900

2014 . . . . . . . . . 858 5,172 1,096 1,583 2,064 1,260 91,500

2015 . . . . . . . . . 893 5,380 1,141 1,646 2,147 1,310 95,100

2016 . . . . . . . . . 927 5,589 1,185 1,710 2,230 1,360 98,700

2017 . . . . . . . . . 960 5,788 1,227 1,771 2,310 1,410 102,300

2018 . . . . . . . . . 998 6,013 1,275 1,840 2,400 1,470 106,200

2019 . . . . . . . . . 1,035 6,238 1,322 1,909 2,489 1,520 110,400

High-cost:

2011 . . . . . . . . . 756 4,556 966 1,394 1,818 1,120 79,200

2012 . . . . . . . . . 789 4,757 1,008 1,456 1,899 1,160 84,000

2013 . . . . . . . . . 821 4,947 1,049 1,514 1,974 1,210 87,600

2014 . . . . . . . . . 869 5,240 1,111 1,603 2,091 1,280 92,700

2015 . . . . . . . . . 922 5,559 1,178 1,701 2,218 1,360 98,400

2016 . . . . . . . . . 973 5,866 1,243 1,795 2,341 1,430 103,800

2017 . . . . . . . . . 1,023 6,169 1,308 1,888 2,462 1,510 109,200

2018 . . . . . . . . . 1,076 6,487 1,375 1,985 2,589 1,580 114,600

2019 . . . . . . . . . 1,127 6,795 1,440 2,079 2,712 1,660 120,300

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 1978-2019

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
Assumptions and Methods

114

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), and thus 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 number of persons who

have any OASDI covered earnings (subject to the OASDI payroll tax) at any

time during the year. For those aged 16 and over, projected covered employment is the sum of age-sex components, each of which is projected as a ratio

to the CPS concept of employment. 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. The projection

methodology accounts for changes in the business cycle, the quarterly pattern of growth in employment within each year, changes in non-OASDI covered employment, the increase in coverage of Federal civilian employment

as a result of the 1983 Social Security Amendments, and changes in the numTable 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
115

Program Assumptions and Methods

ber 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 71.3, 69.8, and 68.2 percent for 2084 for

the low-cost, intermediate, and high-cost assumptions, respectively, compared to the 2008 level of about 70.6 percent. (Age-adjusted covered worker

rates are adjusted to the 2008 age distribution of the Social Security area

population.) For females, the projected age-adjusted coverage rate changes

from 62.8 percent for 2008 to 64.7, 63.5, and 62.0 percent for 2084 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 tax rate,

yields the total amount of taxes due from wages and self-employed 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 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; thus taxable self-employment earnings

were weighted to reflect this difference in tax rate. Also, prior to 1988,

employers were exempt from paying Social Security 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-
Assumptions and Methods

116

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 for 2002,

then fell in subsequent years to reach 82.3 for 2007. The average annual rate

of change in the ratio was about -0.4 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 85.3 for 2009, largely

due to a recession-induced reduction in the relative amount of wages of high

earners. The taxable earnings ratio is projected to decline as the economy

recovers, reaching levels for 2019 of 83.6, 82.8, and 82.1 percent for the

low-cost, intermediate, and high-cost assumptions, respectively. After 2019,

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, taking into account the lag

between the time the tax liability is incurred and taxes are collected. In the

case of wages, employers are required to deposit withholding taxes with the

Treasury on a schedule determined by the amount of tax liability incurred.

(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.) Self-employed workers are required to make estimated tax payments on their earnings four times during the year, as well as

making up any under-estimate on their individual income tax return. The pattern of actual receipts by the Treasury is taken into account when estimating

self-employed tax collections.

4. Insured Population

Eligibility for benefits under the OASDI program requires some minimal

level of work in covered employment. This requirement is established by a

worker’s 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. Since then, this amount has been adjusted each year according to

changes in the AWI. Its value in 2010 is $1,120.

There are three types of insured status that can be acquired by a worker

under the OASDI program. Each of these statuses is determined by the number and recency of QCs earned. Fully insured status is acquired by any

worker whose total number of QCs is greater than or equal to the number of
117

Program Assumptions and Methods

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. Disability insured status is acquired by any fully insured worker

over age 30 who has accumulated 20 QCs during the 40-quarter period ending with the current quarter; any 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; and any

fully insured worker under age 24 who has accumulated six QCs during the

12-quarter period ending with the current quarter. Currently insured status is

acquired by any worker who 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.

Historical estimates of the fully insured population, as a percentage of the

Social Security area population, are made by age and sex for each birth

cohort beginning with 1900. These percentages are based on 30,000 simulated work histories for each sex and birth cohort, which are constructed

from past coverage rates, median earnings, and amounts required for crediting QCs. These work histories are developed in a model that assumes that

persons who have recently been out of covered employment are likely to

remain out of covered employment. This model is aligned such that the simulated fully insured percentages reproduce fairly closely the fully insured

percentages estimated from the Continuous Work History Sample from 1970

to date. The fully insured population for future years is projected using this

model, reflecting estimated future coverage rates, median earnings, and

amounts required for crediting QCs.

Historical estimates of the disability insured population, as a percentage of

the fully insured population, are made by age and sex for each birth cohort

beginning with 1900. These percentages are based on the same simulated

work histories used to project the fully insured percentages. Additional
Assumptions and Methods

118

adjustments are made to bring the simulated disability insured percentages

into close agreement with those estimated from the Continuous Work History

Sample. The principal adjustment is for periods of disability (which are not

explicitly taken into account in the model). These periods (which reduce the

normally applicable QC requirements) have a negligible effect on fully

insured status at retirement age, but a substantial effect on disability insured

status. The disability insured population for future years is projected using

this model, reflecting projections of the fully insured population.

Projections of the currently insured population are not made. This is 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.

Under this procedure, 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 82.5 for December 31, 2007, to 90.3, 90.0, and 89.8 for

December 31, 2085, under alternatives I, II, and III, respectively. The percentage for females is projected to increase significantly, while that 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 90.6, while that for females is projected to increase from 74.2 to 89.5.

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. In 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 less

those insured persons entitled to retired-worker, disabled-worker, agedwidow(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 not

previously converted from disabled-worker beneficiary status is projected as

a percentage of the exposed population, i.e., the aged fully insured population less 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
119

Program Assumptions and Methods

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. As the

NRA increases, the number of retired-worker beneficiaries not automatically

converted from disabled-worker beneficiary status as a percentage of the

exposed population is gradually adjusted downward.

For the long-range period, the number of retired-worker beneficiaries previously converted from disabled-worker beneficiaries is calculated separately

in a manner consistent with the calculation of disabled-worker beneficiaries.

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.

In the long-range period, aged-spouse beneficiaries are estimated separately

for those married and divorced. The number of married aged-spouse beneficiaries 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 is estimated by applying

the same factors to the number of divorced persons aged 62 and over in the

population, with three differences. First, an additional factor is required to

reflect the probability that the person’s former earner spouse is still alive

(otherwise, the person may be entitled to a divorced widow(er)’s benefit).

Second, a factor is required to reflect the probability that the marriage to the

earner spouse lasted at least 10 years. Third, factor (3) above is not applied
Assumptions and Methods

120

because, effective January 1985, a divorced person is generally no longer

required to wait to receive benefits until the former earner 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. The number of entitled children is projected for each age under 18 from the latest beneficiary data by reflecting

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, representing the probabilities that the parent is alive,

aged 62 or over, insured, and receiving a retired-worker benefit. Another factor is applied representing the probability that the child is attending a secondary school.

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, disabled children are projected in a manner similar to that for student

children with the inclusion of a factor reflecting the probability of being disabled before age 22.

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, 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 care who are already receiving benefits. In the long-range period, young-spouse beneficiaries with a child in

their care are projected as a proportion of the number of child beneficiaries

of retired workers, taking into account 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) beneficia-
121

Program Assumptions and Methods

ries are projected in conjunction with the retired-worker beneficiaries. Uninsured aged-widow(er) 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. In the long-range

period, 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. In

addition, some insured widow(er)s who had not applied for their retiredworker benefits are assumed to receive widow(er)’s benefits. Also, the same

factors are applied to the number of divorced persons aged 60 and over in the

population, with additional factors representing the probability that the person’s former earner spouse is deceased and that the marriage lasted at least

10 years.

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 factor representing the probability that the parent is aged 62 or

over 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
Assumptions and Methods

122

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, disabled-child-survivor beneficiaries are projected in a

manner similar to that for student-child-survivor beneficiaries, with the

inclusion of a factor reflecting the probability of being disabled before

age 22.

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, 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 longrange period, mother-survivor and father-survivor beneficiaries, assuming

they are not remarried, are estimated from the number of child-survivor beneficiaries, taking into account projected changes in average family size.

The number of parent-survivor beneficiaries is projected based on the historical pattern of the number of such beneficiaries.

Table V.C4 shows the projected number of beneficiaries under the OASI program by type of benefit. 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.

Estimates of the number and amount of such residual payments are made

separately for spouses and widow(er)s.
123

Program Assumptions and Methods

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

1986 . . . . . . . . . . 22,985 3,086 450 4,927 350 1,878 9 33,685

1987 . . . . . . . . . . 23,444 3,090 439 4,983 329 1,837 8 34,129

1988 . . . . . . . . . . 23,862 3,088 432 5,013 318 1,809 7 34,529

1989 . . . . . . . . . . 24,331 3,095 422 5,057 312 1,782 6 35,004

1990 . . . . . . . . . . 24,841 3,104 421 5,098 304 1,777 6 35,551

1991 . . . . . . . . . . 25,293 3,106 425 5,142 301 1,792 5 36,064

1992 . . . . . . . . . . 25,762 3,115 431 5,187 294 1,808 5 36,603

1993 . . . . . . . . . . 26,109 3,098 436 5,207 289 1,837 5 36,981

1994 . . . . . . . . . . 26,412 3,069 440 5,218 283 1,865 4 37,292

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

Intermediate:

2010 . . . . . . . . . . 34,603 2,350 575 4,314 157 1,914 2 43,914

2015 . . . . . . . . . . 41,236 2,343 673 4,310 147 1,936 1 50,646

2020 . . . . . . . . . . 49,413 2,274 747 4,268 141 1,969 2 58,813

2025 . . . . . . . . . . 56,969 2,224 812 4,193 130 1,946 2 66,275

2030 . . . . . . . . . . 63,440 2,278 849 4,160 124 1,934 2 72,786

2035 . . . . . . . . . . 68,027 2,186 865 4,150 122 1,929 2 77,281

2040 . . . . . . . . . . 70,592 2,055 878 4,090 120 1,916 2 79,652

2045 . . . . . . . . . . 72,296 1,959 887 3,999 116 1,892 2 81,150

2050 . . . . . . . . . . 74,201 1,927 915 3,879 114 1,867 2 82,905

2055 . . . . . . . . . . 76,703 2,030 941 3,767 111 1,849 2 85,402

2060 . . . . . . . . . . 79,537 2,180 964 3,687 109 1,832 2 88,310

2065 . . . . . . . . . . 82,354 2,349 974 3,678 107 1,809 2 91,272

2070 . . . . . . . . . . 85,447 2,507 995 3,742 104 1,786 2 94,583

2075 . . . . . . . . . . 88,761 2,623 1,019 3,838 101 1,762 2 98,106

2080 . . . . . . . . . . 92,154 2,713 1,041 3,941 99 1,742 2 101,692

2085 . . . . . . . . . . 95,693 2,801 1,068 4,020 97 1,725 2 105,405
Assumptions and Methods

124

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 satisfy the

disability insured requirements, who 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 who have not

yet attained NRA. Spouses and children of such disabled workers may also

Low-cost:

2010 . . . . . . . . . . 34,599 2,350 575 4,314 157 1,914 2 43,911

2015 . . . . . . . . . . 41,115 2,346 676 4,301 149 1,953 1 50,542

2020 . . . . . . . . . . 48,864 2,245 752 4,275 141 2,050 2 58,329

2025 . . . . . . . . . . 55,850 2,180 823 4,224 129 2,093 2 65,301

2030 . . . . . . . . . . 61,516 2,204 875 4,220 121 2,171 2 71,108

2035 . . . . . . . . . . 65,205 2,077 903 4,237 117 2,260 2 74,801

2040 . . . . . . . . . . 66,899 1,913 927 4,188 115 2,339 2 76,383

2045 . . . . . . . . . . 67,860 1,789 948 4,091 114 2,400 2 77,204

2050 . . . . . . . . . . 69,232 1,732 994 3,960 115 2,452 2 78,486

2055 . . . . . . . . . . 71,282 1,809 1,032 3,838 116 2,503 2 80,581

2060 . . . . . . . . . . 73,699 1,912 1,072 3,747 119 2,563 2 83,113

2065 . . . . . . . . . . 76,018 2,014 1,097 3,723 122 2,627 2 85,602

2070 . . . . . . . . . . 78,523 2,088 1,136 3,761 125 2,691 2 88,326

2075 . . . . . . . . . . 81,266 2,127 1,179 3,823 128 2,752 2 91,275

2080 . . . . . . . . . . 84,468 2,169 1,228 3,892 130 2,817 2 94,707

2085 . . . . . . . . . . 88,398 2,228 1,290 3,962 133 2,885 2 98,897

High-cost:

2010 . . . . . . . . . . 34,607 2,350 575 4,315 157 1,913 2 43,918

2015 . . . . . . . . . . 41,378 2,340 669 4,319 146 1,919 1 50,773

2020 . . . . . . . . . . 50,094 2,312 744 4,260 142 1,892 2 59,446

2025 . . . . . . . . . . 58,319 2,280 802 4,159 132 1,807 2 67,500

2030 . . . . . . . . . . 65,744 2,373 826 4,093 123 1,719 2 74,879

2035 . . . . . . . . . . 71,417 2,326 831 4,052 119 1,639 2 80,386

2040 . . . . . . . . . . 75,036 2,231 830 3,979 113 1,561 2 83,752

2045 . . . . . . . . . . 77,631 2,166 826 3,895 105 1,483 2 86,107

2050 . . . . . . . . . . 80,188 2,156 837 3,792 98 1,417 2 88,490

2055 . . . . . . . . . . 83,145 2,295 847 3,699 92 1,367 2 91,446

2060 . . . . . . . . . . 86,366 2,484 852 3,632 85 1,316 2 94,737

2065 . . . . . . . . . . 89,573 2,727 845 3,629 79 1,261 2 98,115

2070 . . . . . . . . . . 93,117 2,987 847 3,702 73 1,206 2 101,932

2075 . . . . . . . . . . 96,886 3,199 851 3,812 67 1,154 2 105,970

2080 . . . . . . . . . . 100,300 3,363 849 3,936 62 1,109 2 109,621

2085 . . . . . . . . . . 103,209 3,484 845 4,029 57 1,066 2 112,693

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
125

Program Assumptions and Methods

receive DI benefits provided they satisfy certain criteria, primarily age

requirements.

The number of disabled workers receiving benefits in a given year (i.e., in

current-payment status) is projected using standard actuarial methods that

reflect future new benefit awards, terminations due to death and recovery,

and conversions from disabled-worker to retired-worker beneficiary status

after which benefits are paid from the OASI Trust Fund.

The prevalence of disability results from the likelihood of becoming disabled

(incidence) as well as the likelihood that disability ceases (termination). Disability prevalence is expressed as the ratio of the number of disabled-worker

beneficiaries in current-payment status to the disability insured population.

This ratio is referred to as the disability prevalence rate. The balance of this

section describes the methods and assumptions used for projecting the number of disabled-worker beneficiaries. Incidence rates and termination rates

are the key factors in these projections. This section describes these rates as

well as the projected beneficiary population and prevalence rates.

a. Disability Incidence

The number of new benefit awards each year divided by the number of individuals who meet insured requirements but are not yet receiving benefits (the

disability exposed population) is referred to as the disability incidence rate.

New awards are projected for each year by applying assumed age-sex-specific disability incidence rates to the projected disability exposed population

by age and sex. Projections of the disability insured population are described

in section V.C.4 of this report.

For the first 10 years of the projection period (through 2019) 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 to briefly drop below

the general trend level on the assumption that some of the earlier additional

awards will be cases that would have applied in a later year. After 2019, agesex-specific incidence rates are assumed to trend toward the ultimate rates

assumed for the long-range projections and to reach these ultimate rates in

2029. These ultimate age-sex-specific disability incidence rates were
Assumptions and Methods

126

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 5.3 awards per thousand exposed population.

This level is about 2 percent higher than the average rate for the historical

period 1970 through 2009. 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. For the 2010 report, the

ultimate assumed age-sex-adjusted incidence rates are essentially the same as

in last year’s report.

Historical incidence rates and assumed incidence rates under the three alternatives are illustrated in figure V.C3. Incidence rates have varied substantially during the historical period since 1970. This variation is attributed to a

variety of demographic and economic factors, along with the effects of

changes due to legislation and program administration.2 The solid lines in

figure V.C3 show the incidence rate, age-sex adjusted to the distribution of

the disability exposed population for 2000. Such adjustment facilitates meaningful comparisons over long periods of time by focusing on the likelihood

of becoming disabled, and excluding the effects of a changing distribution of

the population toward ages where disability is inherently more or less likely.

Gross (unadjusted) incidence rates are also shown in figure V.C3 in dashed

lines. Unadjusted rates are influenced by the changing age-sex distribution of

the exposed population over time. 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

disability incidence is low. After 1995, the gross rate rose relative to the

age-sex-adjusted rate, reflecting 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 smaller cohorts born in the 1970s. As these

 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.

 2 A more detailed discussion of the recent history of the DI program is presented in Actuarial Study 118,

“Social Security Disability Insurance Program Worker Experience,” June 2005. This study may be found at

www.socialsecurity.gov/OACT/NOTES/s2000s.html.
127

Program Assumptions and Methods

smaller cohorts age past NRA, by about 2050, the gross incidence rate

returns to a higher relative level under the intermediate assumptions. Thereafter, the gross rate remains higher, reflecting the persistently higher average

age of the working-age population, which is largely due to lower birth rates

since 1965.

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, in the long-range period (post-2019) termination rates are also

assumed to vary by duration of entitlement to disabled-worker benefits.

 Figure V.C3.—DI Disability Incidence Rates, 1970-2085

[Awards per thousand disability exposed]

0

1

2

3

4

5

6

7

8

9

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Gross incidence rates

Age-sex-adjusted 

incidence rates

I

II

III

Historical Estimated
Assumptions and Methods

128

In the short-range period (through 2019), the age-sex-adjusted death rate

(adjusted to the 2000 disabled-worker population) under the intermediate

assumptions is projected to gradually decline from 27.2 deaths per thousand

beneficiaries in 2009 to about 22.6 per thousand by 2019.1 The age-sexadjusted recovery rate under the intermediate assumptions is assumed to rise

from a relatively low level of 9.1 per thousand beneficiaries in 2009 (reflecting temporarily lower levels of continuing disability reviews) to 11.6 per

thousand beneficiaries by 2019. Under low-cost and high-cost assumptions,

total age-sex-adjusted termination rates due to death and recovery are

assumed to increase or decrease, respectively, roughly 10-14 percent relative

to the intermediate assumptions.

For the long-range period (post-2019), death and recovery rates are projected

relative to rates by age, sex, and duration of entitlement over the base period

1996-2000.2 The ultimate age-sex-adjusted recovery rate for disabled workers is assumed to be about 10.9 per thousand beneficiaries. Ultimate age-sexadjusted recovery rates for low-cost and high-cost alternatives are assumed

to reach about 13.2 and 8.7 recoveries per thousand beneficiaries, respectively. For all three sets of assumptions, the ultimate recovery rates are

reached in the twentieth year of the projection period (2029). 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 agesex-adjusted death rate of 27.2 per thousand beneficiaries in 2009, rates of

19.4, 11.0, and 7.0 per thousand disabled-worker beneficiaries are projected

for 2085 under the low-cost, intermediate, and high-cost assumptions,

respectively.

Figure V.C4 illustrates gross and age-sex-adjusted total termination rates for

disabled-worker beneficiaries for the historical period since 1970, and for the

projection period through 2085. In the near term, between 2013 and 2018,

recovery terminations are projected to be elevated as SSA works down the

current 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. The gross rate is influenced by

changes in the age-sex distribution of the beneficiary population. A shift in

the beneficiary population to older ages, as when the baby-boom generation

 1 Projections are developed separately for the short range (through 2019) and for the long range (after 2019).

While short-range assumptions vary within the 10-year short-range period, the full phase-in to the ultimate

assumptions is not achieved until 2029. Death rates differ in this regard as explained in the text.

 2 The termination rate analysis was based on work presented in Actuarial Study 118, “Social Security Disability Insurance Program Worker Experience,” June 2005. This study may be found at

www.socialsecurity.gov/OACT/NOTES/s2000s.html.
129

Program Assumptions and Methods

moves into pre-retirement ages, results in an increase in the gross death termination rate as long as death rates by age and sex are constant or declining.

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 are converted 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

 Figure V.C4.—DI Disability Termination Rates, 1970-2085

[Terminations per thousand disabled-worker beneficiaries]

0

20

40

60

80

100

120

140

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Gross termination rates

Age-sex-adjusted termination 

rates

II

III

I

Historical Estimated
Assumptions and Methods

130

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 conversion 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 fall, largely

because of declines in death rates. Incidence rates have varied widely and are

assumed for the intermediate projection (on an age-sex-adjusted basis) to

remain 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 7.8 million at

the end of 2009, to 12.0 million, 13.8 million, and 14.7 million at the end of

2085, under the low-cost, intermediate, and high-cost assumptions, respec-

 Figure 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]
131

Program Assumptions and Methods

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 disability insured]

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

1986. . . . . . . . . . . . 2,725 301 965 3,991 25 27

1987. . . . . . . . . . . . 2,782 291 968 4,041 25 27

1988. . . . . . . . . . . . 2,826 281 963 4,070 25 27

1989. . . . . . . . . . . . 2,891 271 962 4,124 25 27

1990. . . . . . . . . . . . 3,007 266 989 4,261 25 28

1991. . . . . . . . . . . . 3,191 266 1,052 4,509 26 29

1992. . . . . . . . . . . . 3,464 271 1,151 4,886 28 31

1993. . . . . . . . . . . . 3,721 273 1,255 5,249 30 33

1994. . . . . . . . . . . . 3,958 271 1,350 5,579 32 34

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 49 41

2009. . . . . . . . . . . . 7,788 159 1,749 9,695 51 43
Assumptions and Methods

132

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

Intermediate:

2010. . . . . . . . . . . . 8,227 165 1,847 10,240 54 44

2015. . . . . . . . . . . . 9,290 168 2,034 11,492 59 46

2020. . . . . . . . . . . . 9,669 158 2,096 11,923 60 46

2025. . . . . . . . . . . . 10,312 179 2,202 12,692 58 47

2030. . . . . . . . . . . . 10,281 183 2,282 12,746 56 48

2035. . . . . . . . . . . . 10,317 175 2,346 12,838 55 48

2040. . . . . . . . . . . . 10,518 170 2,397 13,085 55 48

2045. . . . . . . . . . . . 10,985 175 2,444 13,604 56 48

2050. . . . . . . . . . . . 11,398 187 2,499 14,084 56 48

2055. . . . . . . . . . . . 11,760 209 2,571 14,540 57 48

2060. . . . . . . . . . . . 11,997 214 2,645 14,856 57 48

2065. . . . . . . . . . . . 12,348 222 2,715 15,286 57 48

2070. . . . . . . . . . . . 12,768 232 2,780 15,781 58 49

2075. . . . . . . . . . . . 13,150 235 2,841 16,226 58 49

2080. . . . . . . . . . . . 13,513 242 2,904 16,659 59 49

2085. . . . . . . . . . . . 13,842 248 2,971 17,060 59 49

Low-cost:

2010. . . . . . . . . . . . 8,129 162 1,816 10,107 53 44

2015. . . . . . . . . . . . 8,547 151 1,857 10,555 54 43

2020. . . . . . . . . . . . 8,495 136 1,861 10,493 52 40

2025. . . . . . . . . . . . 8,680 145 1,906 10,732 48 39

2030. . . . . . . . . . . . 8,376 139 1,963 10,477 45 38

2035. . . . . . . . . . . . 8,225 126 2,028 10,380 43 38

2040. . . . . . . . . . . . 8,279 116 2,100 10,496 42 37

2045. . . . . . . . . . . . 8,585 117 2,178 10,879 42 36

2050. . . . . . . . . . . . 8,883 123 2,266 11,272 41 36

2055. . . . . . . . . . . . 9,178 137 2,367 11,683 41 36

2060. . . . . . . . . . . . 9,420 138 2,488 12,047 40 36

2065. . . . . . . . . . . . 9,795 142 2,620 12,556 40 37

2070. . . . . . . . . . . . 10,276 146 2,753 13,175 40 37

2075. . . . . . . . . . . . 10,808 150 2,886 13,844 41 37

2080. . . . . . . . . . . . 11,394 157 3,019 14,570 41 37

2085. . . . . . . . . . . . 11,965 164 3,157 15,286 41 37

High-cost:

2010. . . . . . . . . . . . 8,325 169 1,879 10,373 55 45

2015. . . . . . . . . . . . 10,038 186 2,211 12,435 64 51

2020. . . . . . . . . . . . 10,913 183 2,349 13,445 68 53

2025. . . . . . . . . . . . 11,972 217 2,503 14,692 69 55

2030. . . . . . . . . . . . 12,207 234 2,572 15,013 68 58

2035. . . . . . . . . . . . 12,420 234 2,590 15,244 68 59

2040. . . . . . . . . . . . 12,747 231 2,578 15,555 69 59

2045. . . . . . . . . . . . 13,341 243 2,557 16,140 71 59

2050. . . . . . . . . . . . 13,824 258 2,552 16,635 73 60

2055. . . . . . . . . . . . 14,203 289 2,577 17,069 74 60

2060. . . . . . . . . . . . 14,362 294 2,587 17,242 75 60

2065. . . . . . . . . . . . 14,593 307 2,577 17,476 77 61

2070. . . . . . . . . . . . 14,823 323 2,555 17,701 78 61

2075. . . . . . . . . . . . 14,875 324 2,531 17,730 79 61

2080. . . . . . . . . . . . 14,799 326 2,511 17,637 79 61

2085. . . . . . . . . . . . 14,676 324 2,500 17,500 79 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 disability insured]

Calendar year

Disabledworker

beneficiaries

Auxiliary beneficiaries

Total

beneficiaries

Disability

prevalence rates

Spouse Child Gross

Age-sexadjusted
133

Program Assumptions and Methods

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 simply be combined because their denominators differ.

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, where 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

 Figure V.C6.—DI Disability Prevalence Rates, 1970-2085

[Rate per thousand disability insured]

0

10

20

30

40

50

60

70

80

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Gross prevalence rates

Age-sex-adjusted prevalence 

rates

III

III

II

II

I

I

Historical Estimated
Assumptions and Methods

134

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

1995, reflecting 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 baby-boom generation into ages with higher disability prevalence rates.

The age-sex-adjusted disability prevalence rate for ages through 64 is projected to grow from 42.6 per thousand disability insured at the end of 2009,

to 49.1 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 37.0 per thousand and increase

to 61.5 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.

The projection of auxiliary beneficiaries is generally based on the projected

number of disabled-worker beneficiaries. In the short-range period (2010-

19), incidence and termination rates are projected for each category of auxiliary beneficiary. After 2019, 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.
135

Program Assumptions and Methods

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 since the year of initial entitlement, reflecting 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 developed using a combination of the

actual earnings histories associated with a sample of 2006 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 2019 is based on historical experience and the expected growth in average wages. Additionally, estimates for the first several years of the projection are provided by the Office

of Budget of the Social Security Administration. For years after 2019,

administrative expenses are assumed to increase because of increases in the
Assumptions and Methods

136

number of beneficiaries and increases in the average wage, which will more

than offset assumed improvements in administrative productivity.

10.Railroad Retirement Financial Interchange

Railroad workers are covered under a separate multi-tiered plan, the first tier

being very similar to OASDI coverage. An annual financial interchange

between the Railroad Retirement fund and the OASI and DI funds reflects

the difference between (1) the amount of OASDI benefits that would be paid

to railroad workers and their families if railroad employment had been covered under the OASDI program, plus administrative expenses associated

with these benefits, and (2) the amount of OASDI payroll tax and income tax

that would be received with allowances for interest from railroad workers.

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 0.04 percent of taxable

payroll to the OASDI program.

11. Military Service Transfers

Beginning in 1966, the OASI and DI Trust Funds were reimbursed 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 transfer in

1983 to include all future costs attributable to the wage credits. The amendments also require adjustments to that 1983 transfer every fifth year, beginning with 1985, to account for actual data.

12.Income From Taxation of Benefits

Under present law, the OASI and DI Trust Funds are credited with the additional income taxes attributable to the taxation of up to the first 50 percent of

OASI and DI benefit payments. (The remainder of the income taxes attributable to 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, income to the trust funds from such taxation 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.
137

Program Assumptions and Methods

For the long-range period, income to the trust funds from such taxation is

estimated by applying projected ratios of taxation of OASI and DI benefits to

total OASI and DI benefit payments. Because the income thresholds used for

benefit taxation are, by law, constant in the future, 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 used in the projection

are based on information from the Office of Tax Analysis (OTA) in the

Department of the Treasury, by eliminating the current threshold amounts

completely for taxation of Social Security benefits in its tax model. Subsequently, based on recent Current Population Survey data, the Office of the

Chief Actuary makes a downward adjustment to OTA’s ultimate ratios for

relative changes in the projected 75th year OASDI beneficiary population in

the most recent Trustees Report.
Appendices

138

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 contributions payable by

workers, their employers, and individuals with self-employment income, in

work covered by the OASDI program. All employees, and their employers,

in covered employment are required to pay contributions with respect to their

wages. Employees, and their employers, are also required to pay contributions with respect to cash tips, if the individual’s monthly cash tips amount to

at least $20. All self-employed persons are required to pay 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 contributions, or taxes, are computed on wages or

net earnings from self-employment, or both wages and net self-employment

earnings combined, up to a specified maximum annual amount. The 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 per-
139

History of Trust Fund Operations

sons who first become eligible to receive benefits in 1979 or later, the earnings used in the computation of benefits are indexed to reflect increases in

average wage levels.

The contribution, or tax, rates applicable under current law in each calendar

year and the allocation of these rates between the OASI and DI Trust Funds

are shown in table VI.A1.1 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. The contribution and benefit base

for each year through 2010 is also shown in table VI.A1.

 1 The contribution rates for the Hospital Insurance (HI) program, and for the OASDI and HI programs combined, are shown in table VI.F1.

Table VI.A1.—Contribution and Benefit Base and Contribution Rates

Calendar years

Contribution

and benefit 

base

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

1986a . . . . . . . . . . . $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
Appendices

140

All contributions are collected by the Internal Revenue Service and deposited in the General Fund of the Treasury. The contributions are immediately

and automatically appropriated to the trust funds on an estimated basis. The

exact amount of contributions received is not known initially because the

OASDI and HI contributions and individual income taxes are not separately

identified in collection reports received by the Internal Revenue Service.

Periodic adjustments are subsequently made to the extent that the estimates

are found to differ from the amounts of contributions actually payable as

determined from reported earnings. Adjustments are also made to account

for any refunds to employees (with more than one employer) who paid contributions on wages in excess of the contribution and benefit base. 

Beginning in 1984, up to one-half of an individual’s or couple’s OASDI benefits was subject to Federal income taxation under certain circumstances.

Effective for taxable years beginning after 1993, the maximum percentage of

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

2010. . . . . . . . . . . . 106,800 6.200 5.300 .900 12.4000 10.6000 1.8000

2011 and later . . . . b 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 contributions paid by employees, which resulted in an effective contribution rate of 5.4 percent. The appropriations of

contributions to the trust funds, however, were based on the combined employee-employer rate of 11.4 percent,

as if the credit for employees did not apply. 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. 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 Subject to automatic adjustment based on increases in average wages.

Table VI.A1.—Contribution and Benefit Base and Contribution Rates (Cont.)

Calendar years

Contribution

and benefit 

base

Contribution rates (percent)

Employees and employers, each Self-employed

OASDI OASI DI OASDI OASI DI
141

History of Trust Fund Operations

benefits subject to taxation was increased 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

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.

 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.
Appendices

142

Income is also affected by provisions of the Social Security Act for

(1) transfers between the General Fund of the Treasury and the OASI and DI

Trust Funds for any adjustments to prior payments for the cost arising from

the granting of noncontributory wage credits for military service prior to

1957, according to periodic determinations, and (2) the receipt of unconditional money gifts or bequests made for the benefit of the trust funds or any

activity financed through the funds.

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, transfers

between the Railroad Retirement program’s Social Security Equivalent Benefit Account and the trust funds are 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 net worth of facilities and other fixed capital assets is not carried in the

statements of the operations of the trust funds presented in this report. This is

because the value of fixed capital assets is not available in the form of a

financial asset redeemable for the payment of benefits or administrative

expenditures, and therefore is not considered in assessing the actuarial status

of the trust funds.
143

History of Trust Fund Operations

Table VI.A2.— Operations of the OASI Trust Fund,

Calendar Years 1937-2009

[Dollar amounts in billions]

Calendar

year

Income Expenditures Assets

Totala

Net

contributionsb

Taxation of

benefits

Net

interest c Total

Benefit

paymentsd

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioe

1937 . . $0.8 $0.8 — fff — — $0.8 $0.8 —

1938 . . .4 .4 — fff — — .4 1.1 7,660

1939 . . .6 .6 — fff — — .6 1.7 8,086

1940 . . .4 .3 — f $0.1 f f — .3 2.0 2,781

1941 . . .8 .8 — $0.1 .1 $0.1 f — .7 2.8 1,782

1942 . . 1.1 1.0 — .1 .2 .1 f — .9 3.7 1,737

1943 . . 1.3 1.2 — .1 .2 .2 f — 1.1 4.8 1,891

1944 . . 1.4 1.3 — .1 .2 .2 f — 1.2 6.0 2,025

1945 . . 1.4 1.3 — .1 .3 .3 f — 1.1 7.1 1,975

1946 . . 1.4 1.3 — .2 .4 .4 f — 1.0 8.2 1,704

1947 . . 1.7 1.6 — .2 .5 .5 f — 1.2 9.4 1,592

1948 . . 2.0 1.7 — .3 .6 .6 $0.1 — 1.4 10.7 1,542

1949 . . 1.8 1.7 — .1 .7 .7 .1 — 1.1 11.8 1,487

1950 . . 2.9 2.7 — .3 1.0 1.0 .1 — 1.9 13.7 1,156

1951 . . 3.8 3.4 — .4 2.0 1.9 .1 — 1.8 15.5 698

1952 . . 4.2 3.8 — .4 2.3 2.2 .1 — 1.9 17.4 681

1953 . . 4.4 3.9 — .4 3.1 3.0 .1 — 1.3 18.7 564

1954 . . 5.6 5.2 — .4 3.7 3.7 .1 f 1.9 20.6 500

1955 . . 6.2 5.7 — .5 5.1 5.0 .1 f 1.1 21.7 405

1956 . . 6.7 6.2 — .5 5.8 5.7 .1 f .9 22.5 371

1957 . . 7.4 6.8 — .6 7.5 7.3 .2 f -.1 22.4 300

1958 . . 8.1 7.6 — .6 8.6 8.3 .2 $0.1 -.5 21.9 259

1959 . . 8.6 8.1 — .5 10.3 9.8 .2 .3 -1.7 20.1 212

1960 . . 11.4 10.9 — .5 11.2 10.7 .2 .3 .2 20.3 180

1961 . . 11.8 11.3 — .5 12.4 11.9 .2 .3 -.6 19.7 163

1962 . . 12.6 12.1 — .5 14.0 13.4 .3 .4 -1.4 18.3 141

1963 . . 15.1 14.5 — .5 14.9 14.2 .3 .4 .1 18.5 123

1964 . . 16.3 15.7 — .6 15.6 14.9 .3 .4 .6 19.1 118

1965 . . 16.6 16.0 — .6 17.5 16.7 .3 .4 -.9 18.2 109

1966 . . 21.3 20.6 — .6 19.0 18.3 .3 .4 2.3 20.6 96

1967 . . 24.0 23.1 — .8 20.4 19.5 .4 .5 3.7 24.2 101

1968 . . 25.0 23.7 — .9 23.6 22.6 .5 .4 1.5 25.7 103

1969 . . 29.6 27.9 — 1.2 25.2 24.2 .5 .5 4.4 30.1 102

1970 . . 32.2 30.3 — 1.5 29.8 28.8 .5 .6 2.4 32.5 101

1971 . . 35.9 33.7 — 1.7 34.5 33.4 .5 .6 1.3 33.8 94

1972 . . 40.1 37.8 — 1.8 38.5 37.1 .7 .7 1.5 35.3 88

1973 . . 48.3 46.0 — 1.9 47.2 45.7 .6 .8 1.2 36.5 75

1974 . . 54.7 52.1 — 2.2 53.4 51.6 .9 .9 1.3 37.8 68

1975 . . 59.6 56.8 — 2.4 60.4 58.5 .9 1.0 -.8 37.0 63

1976 . . 66.3 63.4 — 2.3 67.9 65.7 1.0 1.2 -1.6 35.4 54

1977 . . 72.4 69.6 — 2.2 75.3 73.1 1.0 1.2 -2.9 32.5 47

1978 . . 78.1 75.5 — 2.0 83.1 80.4 1.1 1.6 -5.0 27.5 39

1979 . . 90.3 87.9 — 1.8 93.1 90.6 1.1 1.4 -2.9 24.7 30

1980 . . 105.8 103.5 — 1.8 107.7 105.1 1.2 1.4 -1.8 22.8 23

1981 . . 125.4 122.6 — 2.1 126.7 123.8 1.3 1.6 -1.3 21.5 18

1982 . . 125.2 123.7 — .8 142.1 138.8 1.5 1.8 g .6 22.1 15

1983 . . 150.6 138.3 — 6.7 153.0 149.2 1.5 2.3 -2.4 19.7 14

1984 . . 169.3 164.1 $2.8 2.3 161.9 157.8 1.6 2.4 7.4 27.1 20
Appendices

144

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

1985 . . $184.2 $177.0 $3.2 $1.9 $171.2 $167.2 $1.6 $2.3 g$8.7 $35.8 24

1986 . . 197.4 190.7 3.4 3.1 181.0 176.8 1.6 2.6 g3.2 39.1 28

1987 . . 210.7 202.7 3.3 4.7 187.7 183.6 1.5 2.6 23.1 62.1 30

1988 . . 240.8 229.8 3.4 7.6 200.0 195.5 1.8 2.8 40.8 102.9 41

1989 . . 264.7 250.2 2.4 12.0 212.5 208.0 1.7 2.8 52.2 155.1 59

1990 . . 286.7 267.5 4.8 16.4 227.5 223.0 1.6 3.0 59.1 214.2 78

1991 . . 299.3 272.6 5.9 20.8 245.6 240.5 1.8 3.4 53.7 267.8 87

1992 . . 311.2 281.0 5.9 24.3 259.9 254.9 1.8 3.1 51.3 319.2 103

1993 . . 323.3 290.9 5.3 27.0 273.1 267.8 2.0 3.4 50.2 369.3 117

1994 . . 328.3 293.3 5.0 29.9 284.1 279.1 1.6 3.4 44.1 413.5 130

1995 . . 342.8 304.6 5.5 32.8 297.8 291.6 2.1 4.1 45.0 458.5 139

1996 . . 363.7 321.6 6.5 35.7 308.2 302.9 1.8 3.6 55.5 514.0 149

1997 . . 397.2 349.9 7.4 39.8 322.1 316.3 2.1 3.7 75.1 589.1 160

1998 . . 424.8 371.2 9.1 44.5 332.3 326.8 1.9 3.7 92.5 681.6 177

1999 . . 457.0 396.4 10.9 49.8 339.9 334.4 1.8 3.7 117.2 798.8 201

2000 . . 490.5 421.4 11.6 57.5 358.3 352.7 2.1 3.5 132.2 931.0 223

2001 . . 518.1 441.5 11.9 64.7 377.5 372.3 2.0 3.3 140.6 1,071.5 247

2002 . . 539.7 455.2 12.9 71.2 393.7 388.1 2.1 3.5 146.0 1,217.5 272

2003 . . 543.8 456.1 12.5 75.2 406.0 399.8 2.6 3.6 137.8 1,355.3 300

2004 . . 566.3 472.8 14.6 79.0 421.0 415.0 2.4 3.6 145.3 1,500.6 322

2005 . . 604.3 506.9 13.8 84.0 441.9 435.4 3.0 3.6 162.4 1,663.0 340

2006 . . 642.2 534.8 15.6 91.8 461.0 454.5 3.0 3.5 181.3 1,844.3 361

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

2008 . . 695.5 574.6 15.6 105.3 516.2 509.3 3.2 3.6 179.3 2,202.9 392

2009 . . 698.2 570.4 19.9 107.9 564.3 557.2 3.4 3.7 133.9 2,336.8 390

a Includes payments from the General Fund of the Treasury to the trust funds (1) in 1947-51 and in 1966 and

later, costs of noncontributory wage credits for military service performed before 1957; (2) in 1971-82, costs of

deemed wage credits for military service performed after 1956; and (3) in 1968 and later, costs of benefits to certain uninsured persons who attained age 72 before 1968. Differences in past year total income and sum of individual column amounts are due to these payments. OASI historical payments from the General Fund of the

Treasury may be found at www.socialsecurity.gov/OACT/STATS/table4a1.html.

b Beginning in 1983, includes transfers from the General Fund of the Treasury representing contributions that

would have been paid on deemed wage credits for military service in 1957 through 2001, if such credits were

considered to be covered wages.

c 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. The amount shown for 1985 includes an interest adjustment of $88 million

on unnegotiated checks issued before April 1985.

d 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.

e 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. 

f Between -$50 million and $50 million.

g 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 1937-2009 (Cont.)

[Dollar amounts in billions]

Calendar

year

Income Expenditures Assets

Totala

Net

contributionsb

Taxation of

benefits

Net

interest c Total

Benefit

paymentsd

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioe
145

History of Trust Fund Operations

Table VI.A3.— Operations of the DI Trust Fund, 

Calendar Years 1957-2009

[Dollar amounts in billions]

Calendar

year

Income Expenditures Assets

Total a

Net

contributionsb

Taxation of

benefits

Net

interest c Total

Benefit

paymentsd

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioe

1957 . . $0.7 $0.7 — f $0.1 $0.1 f — $0.6 $0.6 —

1958 . . 1.0 1.0 — f .3 .2 f — .7 1.4 249

1959 . . .9 .9 — f .5 .5 $0.1 f .4 1.8 284

1960 . . 1.1 1.0 — $0.1 .6 .6 f f .5 2.3 304

1961 . . 1.1 1.0 — .1 1.0 .9 .1 f .1 2.4 239

1962 . . 1.1 1.0 — .1 1.2 1.1 .1 f -.1 2.4 206

1963 . . 1.2 1.1 — .1 1.3 1.2 .1 f -.1 2.2 183

1964 . . 1.2 1.2 — .1 1.4 1.3 .1 f -.2 2.0 159

1965 . . 1.2 1.2 — .1 1.7 1.6 .1 f -.4 1.6 121

1966 . . 2.1 2.0 — .1 1.9 1.8 .1 f .1 1.7 82

1967 . . 2.4 2.3 — .1 2.1 2.0 .1 f .3 2.0 83

1968 . . 3.5 3.3 — .1 2.5 2.3 .1 f 1.0 3.0 83

1969 . . 3.8 3.6 — .2 2.7 2.6 .1 f 1.1 4.1 111

1970 . . 4.8 4.5 — .3 3.3 3.1 .2 f 1.5 5.6 126

1971 . . 5.0 4.6 — .4 4.0 3.8 .2 f 1.0 6.6 140

1972 . . 5.6 5.1 — .4 4.8 4.5 .2 f .8 7.5 140

1973 . . 6.4 5.9 — .5 6.0 5.8 .2 f .5 7.9 125

1974 . . 7.4 6.8 — .5 7.2 7.0 .2 f .2 8.1 110

1975 . . 8.0 7.4 — .5 8.8 8.5 .3 f -.8 7.4 92

1976 . . 8.8 8.2 — .4 10.4 10.1 .3 f -1.6 5.7 71

1977 . . 9.6 9.1 — .3 11.9 11.5 .4 f -2.4 3.4 48

1978 . . 13.8 13.4 — .3 13.0 12.6 .3 f .9 4.2 26

1979 . . 15.6 15.1 — .4 14.2 13.8 .4 f 1.4 5.6 30

1980 . . 13.9 13.3 — .5 15.9 15.5 .4 f -2.0 3.6 35

1981 . . 17.1 16.7 — .2 17.7 17.2 .4 f -.6 3.0 21

1982 . . 22.7 22.0 — .5 18.0 17.4 .6 f g -.4 2.7 17

1983 . . 20.7 18.0 — 1.6 18.2 17.5 .6 f 2.5 5.2 15

1984 . . 17.3 15.9 $0.2 1.2 18.5 17.9 .6 f -1.2 4.0 35

1985 . . 19.3 17.2 .2 .9 19.5 18.8 .6 f g2.4 6.3 27

1986 . . 19.4 18.4 .2 .8 20.5 19.9 .6 $0.1 g1.5 7.8 38

1987 . . 20.3 19.7 f .6 21.4 20.5 .8 .1 -1.1 6.7 44

1988 . . 22.7 22.0 .1 .6 22.5 21.7 .7 .1 .2 6.9 38

1989 . . 24.8 24.0 .1 .7 23.8 22.9 .8 .1 1.0 7.9 38

1990 . . 28.8 28.5 .1 .9 25.6 24.8 .7 .1 3.2 11.1 40

1991 . . 30.4 29.1 .2 1.1 28.6 27.7 .8 .1 1.8 12.9 39

1992 . . 31.4 30.1 .2 1.1 32.0 31.1 .8 .1 -.6 12.3 40

1993 . . 32.3 31.2 .3 .8 35.7 34.6 1.0 .1 -3.4 9.0 35

1994 . . 52.8 51.4 .3 1.2 38.9 37.7 1.0 .1 14.0 22.9 23

1995 . . 56.7 54.4 .3 2.2 42.1 40.9 1.1 .1 14.6 37.6 55

1996 . . 60.7 57.3 .4 3.0 45.4 44.2 1.2 f 15.4 52.9 83

1997 . . 60.5 56.0 .5 4.0 47.0 45.7 1.3 .1 13.5 66.4 113

1998 . . 64.4 59.0 .6 4.8 49.9 48.2 1.6 .2 14.4 80.8 133

1999 . . 69.5 63.2 .7 5.7 53.0 51.4 1.5 .1 16.5 97.3 152

2000 . . 77.9 71.1 .7 6.9 56.8 55.0 1.6 .2 21.1 118.5 171

2001 . . 83.9 74.9 .8 8.2 61.4 59.6 1.7 f 22.5 141.0 193

2002 . . 87.4 77.3 .9 9.2 67.9 65.7 2.0 .2 19.5 160.5 208

2003 . . 88.1 77.4 .9 9.7 73.1 70.9 2.0 .2 15.0 175.4 219

2004 . . 91.4 80.3 1.1 10.0 80.6 78.2 2.2 .2 10.8 186.2 218
Appendices

146

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

2005 . . $97.4 $86.1 $1.1 $10.3 $88.0 $85.4 $2.3 $0.3 $9.4 $195.6 212

2006 . . 102.6 90.8 1.2 10.6 94.5 91.7 2.3 .4 8.2 203.8 207

2007 . . 109.9 95.2 1.4 13.2 98.8 95.9 2.5 .4 11.1 214.9 206

2008 . . 109.8 97.6 1.3 11.0 109.0 106.0 2.5 .4 .9 215.8 197

2009 . . 109.3 96.9 2.0 10.5 121.5 118.3 2.7 .4 -12.2 203.5 178

a Includes payments from the General Fund of the Treasury to the trust funds (1) beginning in 1966 and later,

costs of noncontributory wage credits for military service performed before 1957, and (2) in 1971-82, costs of

deemed wage credits for military service performed after 1956. Differences in past year total income and sum of

individual column amounts are due to these payments. DI historical payments from the General Fund of the

Treasury may be found at www.socialsecurity.gov/OACT/STATS/table4a2.html.

b Beginning in 1983, includes transfers from the General Fund of the Treasury representing contributions that

would have been paid on deemed wage credits for military service in 1957 through 2001, if such credits were

considered to be covered wages.

c 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. The amount shown for 1985 includes an interest adjustment of

$14.8 million on unnegotiated checks issued before April 1985.

d 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.

e 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.

f Between -$50 million and $50 million.

g Reflects interfund borrowing and subsequent repayment of loans. In 1982, $5.1 billion was loaned to the OASI

Trust Funds and was repaid in 1985 ($2.5 billion) and 1986 ($2.5 billion).

Table VI.A3.— Operations of the DI Trust Fund, 

Calendar Years 1957-2009 (Cont.)

[Dollar amounts in billions]

Calendar

year

Income Expenditures Assets

Total a

Net

contributionsb

Taxation of

benefits

Net

interest c Total

Benefit

paymentsd

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioe
147

History of Trust Fund Operations

Table VI.A4.— Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1957-2009

[Dollar amounts in billions]

Calendar

year

Income Expenditures Assets

Total a

Net

contributionsb

Taxation of

benefits

Net

interestc Total

Benefit

paymentsd

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioe

1957 . . $8.1 $7.5 — $0.6 $7.6 $7.4 $0.2 f $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 f 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 — .7 20.9 20.1 .4 .5 2.5 22.3 95

1967 . . 26.4 25.4 — .9 22.5 21.4 .5 .5 3.9 26.3 99

1968 . . 28.5 27.0 — 1.0 26.0 25.0 .6 .5 2.5 28.7 101

1969 . . 33.3 31.5 — 1.3 27.9 26.8 .6 .5 5.5 34.2 103

1970 . . 37.0 34.7 — 1.8 33.1 31.9 .6 .6 3.9 38.1 103

1971 . . 40.9 38.3 — 2.0 38.5 37.2 .7 .6 2.4 40.4 99

1972 . . 45.6 42.9 — 2.2 43.3 41.6 .9 .7 2.3 42.8 93

1973 . . 54.8 51.9 — 2.4 53.1 51.5 .8 .8 1.6 44.4 80

1974 . . 62.1 58.9 — 2.7 60.6 58.6 1.1 .9 1.5 45.9 73

1975 . . 67.6 64.3 — 2.9 69.2 67.0 1.2 1.0 -1.5 44.3 66

1976 . . 75.0 71.6 — 2.7 78.2 75.8 1.2 1.2 -3.2 41.1 57

1977 . . 82.0 78.7 — 2.5 87.3 84.7 1.4 1.2 -5.3 35.9 47

1978 . . 91.9 88.9 — 2.3 96.0 93.0 1.4 1.6 -4.1 31.7 37

1979 . . 105.9 103.0 — 2.2 107.3 104.4 1.5 1.5 -1.5 30.3 30

1980 . . 119.7 116.7 — 2.3 123.6 120.6 1.5 1.4 -3.8 26.5 25

1981 . . 142.4 139.4 — 2.2 144.4 141.0 1.7 1.6 -1.9 24.5 18

1982 . . 147.9 145.7 — 1.4 160.1 156.2 2.1 1.8 g .2 24.8 15

1983 . . 171.3 156.3 — 8.3 171.2 166.7 2.2 2.3 .1 24.9 14

1984 . . 186.6 180.1 $3.0 3.4 180.4 175.7 2.3 2.4 6.2 31.1 21

1985 . . 203.5 194.1 3.4 2.7 190.6 186.1 2.2 2.4 g11.1 42.2 24

1986 . . 216.8 209.1 3.7 3.9 201.5 196.7 2.2 2.7 g 4.7 46.9 29

1987 . . 231.0 222.4 3.2 5.3 209.1 204.1 2.4 2.6 21.9 68.8 31

1988 . . 263.5 251.8 3.4 8.2 222.5 217.1 2.5 2.9 41.0 109.8 41

1989 . . 289.4 274.2 2.5 12.7 236.2 230.9 2.4 2.9 53.2 163.0 57

1990 . . 315.4 296.1 5.0 17.2 253.1 247.8 2.3 3.0 62.3 225.3 75

1991 . . 329.7 301.7 6.1 21.9 274.2 268.2 2.6 3.5 55.5 280.7 82

1992 . . 342.6 311.1 6.1 25.4 291.9 286.0 2.7 3.2 50.7 331.5 96

1993 . . 355.6 322.1 5.6 27.9 308.8 302.4 3.0 3.4 46.8 378.3 107

1994 . . 381.1 344.7 5.3 31.1 323.0 316.8 2.7 3.5 58.1 436.4 117

1995 . . 399.5 359.0 5.8 35.0 339.8 332.6 3.1 4.1 59.7 496.1 128

1996 . . 424.5 378.9 6.8 38.7 353.6 347.1 3.0 3.6 70.9 567.0 140

1997 . . 457.7 406.0 7.9 43.8 369.1 362.0 3.4 3.7 88.6 655.5 154

1998 . . 489.2 430.2 9.7 49.3 382.3 375.0 3.5 3.8 107.0 762.5 171

1999 . . 526.6 459.6 11.6 55.5 392.9 385.8 3.3 3.8 133.7 896.1 194

2000 . . 568.4 492.5 12.3 64.5 415.1 407.6 3.8 3.7 153.3 1,049.4 216

2001 . . 602.0 516.4 12.7 72.9 438.9 431.9 3.7 3.3 163.1 1,212.5 239

2002 . . 627.1 532.5 13.8 80.4 461.7 453.8 4.2 3.6 165.4 1,378.0 263

2003 . . 631.9 533.5 13.4 84.9 479.1 470.8 4.6 3.7 152.8 1,530.8 288

2004 . . 657.7 553.0 15.7 89.0 501.6 493.3 4.5 3.8 156.1 1,686.8 305
Appendices

148

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 2008

and 2009. These assets are separated by interest rate and year of maturity.

Bonds issued to the trust funds in 2009 had an interest rate of 3.25 percent,

compared with an interest rate of 4 percent for bonds issued in 2008.

2005 . . $701.8 $592.9 $14.9 $94.3 $529.9 $520.7 $5.3 $3.9 $171.8 $1,858.7 318

2006 . . 744.9 625.6 16.9 102.4 555.4 546.2 5.3 3.8 189.5 2,048.1 335

2007 . . 784.9 656.1 18.6 110.2 594.5 584.9 5.5 4.0 190.4 2,238.5 345

2008 . . 805.3 672.1 16.9 116.3 625.1 615.3 5.7 4.0 180.2 2,418.7 358

2009 . . 807.5 667.3 21.9 118.3 685.8 675.5 6.2 4.1 121.7 2,540.3 353

a Includes payments from the General Fund of the Treasury to the trust funds (1) beginning in 1966 and later,

costs of noncontributory wage credits for military service performed before 1957; (2) in 1971-82, costs of

deemed wage credits for military service performed after 1956; and (3) in 1968 and later, costs of benefits to certain uninsured persons who attained age 72 before 1968. Differences in past year total income and sum of individual column amounts are due to these payments. OASDI historical payments from the General Fund of the

Treasury may be found at www.socialsecurity.gov/OACT/STATS/table4a3.html.

b Beginning in 1983, includes transfers from the General Fund of the Treasury representing contributions that

would have been paid on deemed wage credits for military service in 1957 through 2001, if such credits were

considered to be covered wages.

c 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. The amount shown for 1985 includes an interest adjustment of

$102.8 million on unnegotiated checks issued before April 1985.

d 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.

e 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.

f Between -$50 million and $50 million.

g 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 1957-2009 (Cont.)

[Dollar amounts in billions]

Calendar

year

Income Expenditures Assets

Total a

Net

contributionsb

Taxation of

benefits

Net

interestc Total

Benefit

paymentsd

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioe
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.A5.—Assets of the OASI Trust Fund, End of Calendar Years 2008 and 2009

[In thousands]

December 31, 2008 December 31, 2009

Obligations sold only to the trust funds (special issues): 

Certificates of indebtedness:

2.750 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $68,361,774 —

2.875 percent, 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $52,423,996

3.750 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,420,648 —

3.875 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,440,134 —

Bonds:

3.250 percent, 2011-12 . . . . . . . . . . . . . . . . . . . . . . . . . . . — 21,256,540

3.250 percent, 2013-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . — 31,884,813

3.250 percent, 2016-23 . . . . . . . . . . . . . . . . . . . . . . . . . . . — 85,026,160

3.250 percent, 2024. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 153,311,163

3.500 percent, 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,513,751 —

3.500 percent, 2011-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,568,755 47,568,755

3.500 percent, 2016-17 . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,027,504 19,027,504

3.500 percent, 2018. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,900,994 86,900,994

4.000 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,526,627 —

4.000 percent, 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,075,192 —

4.000 percent, 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,075,192 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, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,516,946 —

4.125 percent, 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,516,946 9,423,199

4.125 percent, 2011-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,652,514 94,652,514

4.125 percent, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,585,700 106,585,700

4.625 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,167,664 —

4.625 percent, 2010-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,005,984 55,005,984

4.625 percent, 2016-18 . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,502,989 27,502,989

4.625 percent, 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,068,657 96,068,657

5.000 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,454,234 —

5.000 percent, 2010-11 . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,908,466 24,908,466

5.000 percent, 2012-21 . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,542,320 124,542,320

5.000 percent, 2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,607,701 130,607,701

5.125 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,567,865 —

5.125 percent, 2010-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,678,660 115,678,660

5.125 percent, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,567,769 11,567,769

5.125 percent, 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,153,469 118,153,469

5.250 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,235,912 —

5.250 percent, 2010-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,415,472 55,415,472

5.250 percent, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,235,911 9,235,911

5.250 percent, 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,387,242 77,387,242

5.625 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,621,438 —

5.625 percent, 2010-11 . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,242,876 19,242,876

5.625 percent, 2012-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,485,748 38,485,748

5.625 percent, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,151,331 68,151,331

5.875 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,169,273 —

5.875 percent, 2010-12 . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,507,819 18,507,819

5.875 percent, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,258,869 43,258,869

6.000 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,693,627 —

6.000 percent, 2010-11 . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,387,254 13,387,254

6.000 percent, 2012-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,387,256 13,387,256

6.000 percent, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,952,497 49,952,497

6.500 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,008,650 —

6.500 percent, 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,320,240 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, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,975,271 —

6.875 percent, 2010-11 . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,950,544 7,950,544

6.875 percent, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,089,596 37,089,596

7.000 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,371,480 —

7.000 percent, 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,371,480 3,371,480

7.000 percent, 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,114,324 33,114,324

7.250 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,311,591 —

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,203,403,639 2,318,780,487

Undisbursed balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -518,033 18,017,594

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,202,885,606 2,336,798,081
Appendices

150

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 2008 and 2009

[In thousands]

December 31, 2008 December 31, 2009

Obligations sold only to the trust funds (special issues):

Certificates of indebtedness: 

2.750 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,743,419 —

2.875 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . — $3,735,389

Bonds:

3.250 percent, 2012-14 . . . . . . . . . . . . . . . . . . . . . . . . . — 2,632,680

3.250 percent, 2015-16 . . . . . . . . . . . . . . . . . . . . . . . . . — 1,755,118

3.250 percent, 2017-20 . . . . . . . . . . . . . . . . . . . . . . . . . — 3,510,240

3.500 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,115,128 —

3.500 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,115,128 —

3.500 percent, 2012-15 . . . . . . . . . . . . . . . . . . . . . . . . . 4,460,508 4,460,508

3.500 percent, 2016-17 . . . . . . . . . . . . . . . . . . . . . . . . . 2,230,256 2,230,256

3.500 percent, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,378,384 11,378,384

4.000 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 622,572 —

4.000 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . 622,572 —

4.000 percent, 2012-16 . . . . . . . . . . . . . . . . . . . . . . . . . 3,112,860 3,112,860

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, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 677,386 —

4.125 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . 677,386 —

4.125 percent, 2012-17 . . . . . . . . . . . . . . . . . . . . . . . . . 4,064,310 4,064,310

4.125 percent, 2018-19 . . . . . . . . . . . . . . . . . . . . . . . . . 1,354,772 1,354,772

4.125 percent, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,911,283 12,911,283

4.625 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 855,497 —

4.625 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . 855,497 615,351

4.625 percent, 2012-15 . . . . . . . . . . . . . . . . . . . . . . . . . 3,421,992 3,421,992

4.625 percent, 2016-18 . . . . . . . . . . . . . . . . . . . . . . . . . 2,566,491 2,566,491

4.625 percent, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,233,881 12,233,881

5.000 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 476,586 —

5.000 percent, 2011-19 . . . . . . . . . . . . . . . . . . . . . . . . . 4,289,274 4,289,274

5.000 percent, 2020-21 . . . . . . . . . . . . . . . . . . . . . . . . . 953,168 953,168

5.000 percent, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,052,982 14,052,982

5.125 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 665,131 —

5.125 percent, 2011-17 . . . . . . . . . . . . . . . . . . . . . . . . . 4,655,917 4,655,917

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, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,363,407 —

5.250 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,363,407 1,363,407

5.250 percent, 2012-16 . . . . . . . . . . . . . . . . . . . . . . . . . 6,817,040 6,817,040

5.250 percent, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,263,256 10,263,256

5.625 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,524,968 —

5.625 percent, 2011-13 . . . . . . . . . . . . . . . . . . . . . . . . . 4,574,904 4,574,904

5.625 percent, 2014-15 . . . . . . . . . . . . . . . . . . . . . . . . . 3,049,934 3,049,934

5.625 percent, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,899,848 8,899,848

5.875 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 916,286 —

5.875 percent, 2011-12 . . . . . . . . . . . . . . . . . . . . . . . . . 1,832,572 1,832,572

5.875 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,361,805 5,361,805

6.000 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,966 —

6.000 percent, 2011-12 . . . . . . . . . . . . . . . . . . . . . . . . . 1,391,932 1,391,932

6.000 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,967 695,967

6.000 percent, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,057,772 6,057,772

6.500 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,317,108 —

6.500 percent, 2011-13 . . . . . . . . . . . . . . . . . . . . . . . . . 3,951,324 3,951,324

6.500 percent, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,317,109 1,317,109

6.500 percent, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,374,881 7,374,881

6.875 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,445,520 —

6.875 percent, 2011-12 . . . . . . . . . . . . . . . . . . . . . . . . . 8,891,040 8,891,040

7.000 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,608,382 —

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,809,564 199,760,403

Undisbursed balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36,763 3,789,242

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,772,801 203,549,645
151

History of Actuarial Balances

B. HISTORY OF ACTUARIAL BALANCE ESTIMATES

This appendix chronicles the history of the principal summary measure of

long-range actuarial status, namely the actuarial balance, 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. Conceptually, 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 tax 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.

It should be noted that 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. Instead, a simpler method that approximates the

results of the present-value approach, called the average-cost method, was

used during that period. 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

similarly calculated, 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
Appendices

152

the program was partially advance funded, rather than being funded on a

pay-as-you-go basis. Also, because of 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 reports 1982-2009, along with the

estimates for the current report. The values shown are based on the alternative II assumptions, or alternative II-B for years prior to 1991.
153

History of Actuarial Balances

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 balance for 1987. Various changes in assumptions and methods for the 1988

Table VI.B1.—Long-Range OASDI Actuarial Balancesa as Shown

in the Trustees Reports for 1982-2010

[As a percentage of taxable payroll]

a Values shown are based on the alternative II assumptions for 1991-2010, and on the alternative II-B

assumptions for 1982-90.

Year of report

Summarized

income rate

Summarized cost rateActuarial

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
Appendices

154

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

due to the change in valuation period and changes in demographic assump-
155

History of Actuarial Balances

tions. 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.

Changes affecting the actuarial balance shown for the 2010 report are

described in section IV.B.7 Reasons for Change in Actuarial Balance From

Last Report.
Appendices

156

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2019

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

2009, 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.

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

Table VI.C1.—Operations of the OASI Trust Fund, Fiscal Year 2009

[In millions]

Total assets, September 30, 2008 $2,150,052

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $573,375

Payments from the General Fund of the Treasury for contributions subject to 

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2,146

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 571,228

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 153

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,814

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,967

Reimbursement from the general fund for costs of payments to uninsured persons who attained age 72 before 1968 . . . . . . . . . . . . . . . . . . . . . . . . . . . a

a Between -$0.5 and $0.5 million.

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,226

Net Interest adjustmentsb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Includes (1) interest on transfers between the trust fund and the general fund account for the Supplemental

Security Income program due to adjustments in the allocation of administrative expenses, (2) interest arising

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

-95

Net investment income and interest adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 107,131

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

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697,326

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 544,478

Transfer to the DI Trust Fund to correct a trust fund allocation error made on payments to certain dually entitled disabled beneficiaries . . . . . . . . . . . . . . . . . . . . 62

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -59

Payment for costs of vocational rehabilitation services for disabled beneficiaries 3

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 544,484

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . . 3,690

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,607

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 767

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,369

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551,542

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,784

Total assets, September 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,295,835
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 2009

[In millions]

Total assets, September 30, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $216,239

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $97,372

Payments from the General Fund of the Treasury for contributions subject to 

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -364

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,008

Income based on taxation of benefit payments:

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

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,837

Total income from taxation of benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,841

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,726

Interest adjustmentsa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

a Includes (1) interest on transfers between the trust fund and the general fund account for the Supplemental

Security Income program due to adjustments in the allocation of administrative expenses, (2) interest arising

from the revised allocation of administrative expenses among the trust funds, and (3) interest on certain

reimbursements to the trust fund.

107

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 10,832

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,681

Disbursements:

Benefit payments:

Monthly benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,087

Transfer from the OASI Trust Fund to correct a trust fund allocation error made on 

payments to certain dually entitled disabled beneficiaries . . . . . . . . . . . . . . . . . -62

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -30

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 78

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,073

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . . 448

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,439

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

Miscellaneous reimbursements from the general fundb. . . . . . . . . . . . . . . . . . . . . .

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

related to administering the DI program.

42

Total administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,623

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,144

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8,462

Total assets, September 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207,777
Appendices

158

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

Estimates of the operations and status of the OASI, DI and the combined

OASI and DI Trust Funds during fiscal years (12 months ending on September 30) 2005-19 are presented in tables VI.C4, VI.C5 and VI.C6, respectively.

Table VI.C3.—Operations of the Combined OASI and DI Trust Funds, Fiscal Year 2009

[In millions]

Total assets, September 30, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,366,291

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $670,747

Payments from the General Fund of the Treasury for contributions subject to 

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2,511

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668,236

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 156

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,651

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,807

Reimbursement from the general fund for costs of payments to uninsured persons who attained age 72 before 1968 . . . . . . . . . . . . . . . . . . . . . . . . . . . a

a Between -$0.5 and $0.5 million.

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,952

Net Interest adjustmentsb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Includes (1) interest on transfers between the trust funds and the general fund account for the Supplemental

Security Income program due to adjustments in the allocation of administrative expenses, (2) interest arising

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

11

Net investment income and interest adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 117,963

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

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807,007

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 659,565

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -89

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 81

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 659,557

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . . 4,137

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,046

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 909

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.

38

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,992

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669,686

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,321

Total assets, September 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,503,612
159

Fiscal Year Operations and Projections

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

Table VI.C4.—Operations of the OASI Trust Fund, Fiscal Years 2005-19

[Dollar amounts in billions]

Fiscal 

year

Income Cost Assets

Totala

a “Total Income” column includes transfers made between the OASI Trust Fund and the General Fund of the

Treasury that are not included in the separate components of income shown. These transfers consist of payments for (1) the cost of noncontributory wage credits for military service before 1957 and (2) the cost of

benefits to certain uninsured persons who attained age 72 before 1968. In December 2005, $350 million was

transferred from the OASI Trust Fund to the General Fund of the Treasury for the cost of pre-1957 military

service wage credits, and a similar transfer of $90 million is projected to occur in December 2010. After

December 2010 such transfers are estimated to be less than $500,000 in each year.

Net

contributions

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:

2005 . . $600.0 $503.0 $15.3 $81.7 $436.9 $430.4 $2.9 $3.6 $163.1 $1,615.6 332

2006 . . 632.2 530.0 15.2 87.3 455.6 449.2 2.9 3.5 176.6 1,792.2 355

2007 . . 663.4 553.4 16.7 93.3 488.6 481.8 3.2 3.6 174.8 1,967.0 367

2008 . . 692.9 573.8 16.4 102.7 509.9 503.0 3.3 3.6 183.0 2,150.1 386

2009 . . 697.3 571.2 19.0 107.1 551.5 544.5 3.4 3.7 145.8 2,295.8 390

Intermediate:

2010 . . 684.6 553.5 22.4 108.6 580.7 573.1 3.7 3.9 103.9 2,399.7 395

2011 . . 729.4 594.8 24.7 110.0 602.1 594.3 3.9 3.9 127.3 2,527.0 399

2012 . . 774.8 631.9 27.2 115.7 630.3 622.3 4.0 4.0 144.5 2,671.5 401

2013 . . 829.7 673.5 30.6 125.5 669.6 661.4 4.2 4.0 160.1 2,831.6 399

2014 . . 885.0 714.0 34.0 137.0 716.0 707.6 4.3 4.1 168.9 3,000.5 395

2015 . . 940.7 753.6 37.3 149.8 766.9 758.2 4.4 4.3 173.8 3,174.3 391

2016 . . 1,005.6 803.4 40.9 161.3 821.9 813.0 4.5 4.4 183.7 3,358.0 386

2017 . . 1,061.1 842.4 44.8 173.9 881.6 872.2 4.7 4.7 179.5 3,537.6 381

2018 . . 1,120.7 884.5 48.6 187.7 945.5 935.8 4.8 4.9 175.2 3,712.8 374

2019 . . 1,176.5 925.1 52.3 199.1 1,014.3 1,004.1 5.0 5.1 162.3 3,875.0 366

Low-cost:

2010 . . 685.7 554.7 22.4 108.6 580.6 572.9 3.7 3.9 105.2 2,401.0 395

2011 . . 738.9 603.5 24.7 110.8 601.7 593.8 3.9 3.9 137.3 2,538.3 399

2012 . . 784.5 640.9 27.0 116.7 625.8 617.8 4.0 4.0 158.8 2,697.1 406

2013 . . 839.0 683.2 30.1 125.7 659.7 651.6 4.1 3.9 179.3 2,876.4 409

2014 . . 893.1 722.6 33.2 137.3 699.2 690.9 4.2 4.0 193.9 3,070.4 411

2015 . . 945.9 761.1 36.1 148.7 741.3 732.9 4.3 4.1 204.6 3,274.9 414

2016 . . 1,008.6 808.6 39.2 160.8 786.4 777.8 4.4 4.1 222.2 3,497.2 416

2017 . . 1,059.2 843.3 42.5 173.4 835.1 826.1 4.6 4.4 224.1 3,721.3 419

2018 . . 1,114.9 881.3 45.5 188.1 886.9 877.7 4.7 4.6 228.0 3,949.3 420

2019 . . 1,167.9 917.5 48.6 201.8 942.3 932.8 4.8 4.7 225.6 4,175.0 419

High-cost:

2010 . . 683.5 552.5 22.4 108.5 580.9 573.2 3.7 3.9 102.6 2,398.5 395

2011 . . 722.2 588.0 24.8 109.5 602.6 594.8 3.9 3.9 119.5 2,518.0 398

2012 . . 773.0 629.1 27.4 116.6 636.0 628.0 4.0 4.0 137.1 2,655.0 396

2013 . . 835.4 672.6 31.5 131.3 688.8 680.5 4.2 4.1 146.6 2,801.6 385

2014 . . 895.8 715.9 35.6 144.3 749.7 741.1 4.4 4.3 146.1 2,947.7 374

2015 . . 954.5 759.4 39.6 155.5 812.7 803.6 4.5 4.6 141.8 3,089.5 363

2016 . . 1,024.5 814.1 43.9 166.6 880.2 870.8 4.7 4.7 144.3 3,233.8 351

2017 . . 1,082.8 856.9 48.5 177.4 953.9 943.8 4.9 5.2 128.9 3,362.7 339

2018 . . 1,144.7 903.6 53.1 188.0 1,033.4 1,022.9 5.1 5.5 111.3 3,474.0 325

2019 . . 1,205.3 951.4 57.8 196.1 1,119.5 1,108.5 5.3 5.8 85.7 3,559.7 310
Appendices

160

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

Table VI.C5.—Operations of the DI Trust Fund, Fiscal Years 2005-19

[Dollar amounts in billions]

Fiscal 

year

Income Cost Assets

Totala

a “Total Income” column includes transfers made between the DI Trust Fund and the General Fund of the

Treasury that are not included in the separate components of income shown. These transfers consist of payments for the cost of noncontributory wage credits for military service before 1957. In particular, a transfer

was made in December 2007 in the amount of $7.7 million from the General Fund of the Treasury to the DI

Trust Fund. After 2009 such transfers are estimated to be less than $500,000 in each year.

Net

contributions

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:

2005 . . $96.8 $85.4 $1.2 $10.2 $86.4 $83.7 $2.3 $0.3 $10.4 $193.3 212

2006 . . 101.6 90.0 1.2 10.4 92.9 90.1 2.4 .4 8.6 201.9 208

2007 . . 108.4 94.0 1.4 13.1 96.8 94.0 2.4 .4 11.6 213.6 209

2008 . . 109.8 97.4 1.4 11.0 107.2 104.2 2.5 .4 2.7 216.2 199

2009 . . 109.7 97.0 1.8 10.8 118.1 115.1 2.6 .4 -8.5 207.8 183

Intermediate:

2010 . . 105.8 94.0 1.9 9.9 126.6 123.1 2.9 .5 -20.8 187.0 164

2011 . . 111.7 101.0 2.1 8.6 132.9 129.2 3.2 .6 -21.3 165.7 141

2012 . . 117.2 107.3 2.4 7.5 139.5 135.6 3.4 .5 -22.3 143.5 119

2013 . . 123.4 114.4 2.8 6.3 145.7 141.7 3.5 .5 -22.3 121.2 98

2014 . . 129.4 121.2 3.1 5.1 151.7 147.5 3.6 .5 -22.2 99.0 80

2015 . . 135.4 128.0 3.3 4.0 158.3 153.9 3.8 .5 -22.9 76.0 63

2016 . . 143.1 136.4 3.6 3.1 165.2 160.7 4.0 .5 -22.1 53.9 46

2017 . . 149.1 143.1 3.9 2.1 172.5 167.8 4.3 .5 -23.5 30.5 31

2018 . . 155.3 150.2 4.2 .9 180.2 175.2 4.5 .4 -24.8 5.6 17

2019 . . c

c The DI Trust Fund is projected to be exhausted in fiscal years 2019 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 2019 are not meaningful under present law and are not shown in this table.

157.1 4.5 c 188.2 183.0 4.8 .4 c c 3

Low-cost:

2010 . . 105.9 94.2 1.9 9.9 125.3 121.9 2.9 .5 -19.3 188.4 166

2011 . . 113.3 102.5 2.1 8.7 129.2 125.4 3.2 .6 -15.9 172.5 146

2012 . . 119.1 108.8 2.3 7.9 133.0 129.1 3.4 .5 -14.0 158.5 130

2013 . . 125.8 116.0 2.6 7.2 136.1 132.1 3.5 .5 -10.2 148.3 116

2014 . . 132.3 122.7 2.8 6.7 138.6 134.5 3.6 .5 -6.4 141.9 107

2015 . . 138.6 129.2 3.0 6.4 141.5 137.3 3.7 .5 -2.8 139.1 100

2016 . . 146.9 137.3 3.1 6.5 144.6 140.2 3.9 .5 2.4 141.5 96

2017 . . 153.2 143.2 3.4 6.6 148.2 143.6 4.1 .4 5.0 146.4 95

2018 . . 160.4 149.6 3.5 7.2 152.2 147.5 4.3 .4 8.2 154.6 96

2019 . . 167.3 155.8 3.7 7.8 156.5 151.6 4.6 .4 10.8 165.4 99

High-cost:

2010 . . 105.6 93.8 1.9 9.9 127.9 124.5 2.9 .5 -22.3 185.5 162

2011 . . 110.5 99.8 2.2 8.4 136.8 133.1 3.2 .6 -26.3 159.2 136

2012 . . 116.4 106.8 2.6 7.1 146.1 142.2 3.4 .5 -29.7 129.5 109

2013 . . 122.6 114.2 3.0 5.4 157.3 153.2 3.5 .5 -34.6 94.9 82

2014 . . 128.7 121.6 3.4 3.7 168.4 164.1 3.7 .5 -39.7 55.2 56

2015 . . 134.6 129.0 3.8 1.9 179.5 175.0 4.0 .5 -44.9 10.3 31

2016 . . c 138.2 4.2 c 190.9 186.1 4.2 .5 c c 5

2017 . . c 145.5 4.6 c 202.6 197.7 4.5 .5 c cc

2018 . . c 153.4 5.0 c 214.9 209.7 4.8 .5 c cc

2019 . . c 161.6 5.5 c 227.9 222.3 5.0 .5 c cc
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 2005-19

[Dollar amounts in billions]

Fiscal

year

Income Cost Assets

Totala

a “Total Income” column includes transfers made between the OASI and DI Trust Funds and the General

Fund of the Treasury that are not included in the separate components of income shown. These transfers

consist of payments for (1) the cost of noncontributory wage credits for military service before 1957 and

(2) the cost of benefits to certain uninsured persons who attained age 72 before 1968.

Net

contributions

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:

2005 . . $696.8 $588.4 $16.5 $91.8 $523.3 $514.2 $5.2 $3.9 $173.5 $1,808.9 313

2006 . . 733.7 620.0 16.4 97.7 548.5 539.3 5.3 3.8 185.2 1,994.2 330

2007 . . 771.8 647.4 18.0 106.4 585.3 575.8 5.5 4.0 186.5 2,180.6 341

2008 . . 802.7 671.2 17.8 113.7 617.0 607.2 5.8 4.1 185.7 2,366.3 353

2009 . . 807.0 668.2 20.8 118.0 669.7 659.6 6.0 4.1 137.3 2,503.6 353

Intermediate:

2010 . . 790.3 647.5 24.3 118.5 707.3 696.2 6.6 4.4 83.1 2,586.7 354

2011 . . 841.1 695.8 26.9 118.5 735.1 723.5 7.1 4.5 106.0 2,692.7 352

2012 . . 892.0 739.2 29.6 123.2 769.8 757.8 7.4 4.5 122.2 2,814.9 350

2013 . . 953.1 787.9 33.4 131.8 815.3 803.1 7.6 4.5 137.8 2,952.8 345

2014 . . 1,014.4 835.2 37.1 142.1 867.7 855.1 7.9 4.6 146.7 3,099.4 340

2015 . . 1,076.1 881.6 40.7 153.8 925.2 912.2 8.2 4.8 150.9 3,250.3 335

2016 . . 1,148.7 939.8 44.6 164.4 987.1 973.7 8.6 4.8 161.6 3,412.0 329

2017 . . 1,210.2 985.5 48.8 175.9 1,054.1 1,040.0 9.0 5.2 156.1 3,568.0 324

2018 . . 1,276.1 1,034.7 52.8 188.6 1,125.7 1,111.0 9.3 5.4 150.3 3,718.4 317

2019 . . 1,337.8 1,082.1 56.8 198.8 1,202.5 1,187.2 9.8 5.6 135.3 3,853.7 309

Low-cost:

2010 . . 791.7 648.9 24.3 118.5 705.8 694.8 6.6 4.4 85.8 2,589.5 355

2011 . . 852.2 706.0 26.8 119.5 730.8 719.3 7.1 4.5 121.4 2,710.8 354

2012 . . 903.6 749.7 29.3 124.6 758.8 746.9 7.4 4.5 144.8 2,855.6 357

2013 . . 964.8 799.2 32.7 132.9 795.7 783.7 7.6 4.4 169.1 3,024.7 359

2014 . . 1,025.4 845.4 36.0 144.0 837.8 825.5 7.8 4.5 187.6 3,212.3 361

2015 . . 1,084.5 890.3 39.0 155.2 882.8 870.1 8.1 4.6 201.7 3,414.0 364

2016 . . 1,155.5 945.9 42.3 167.3 930.9 918.0 8.4 4.6 224.6 3,638.6 367

2017 . . 1,212.4 986.6 45.8 180.0 983.3 969.8 8.7 4.8 229.1 3,867.7 370

2018 . . 1,275.3 1,030.9 49.1 195.3 1,039.1 1,025.1 9.0 4.9 236.2 4,103.9 372

2019 . . 1,335.2 1,073.2 52.3 209.6 1,098.8 1,084.3 9.4 5.1 236.4 4,340.3 373

High-cost:

2010 . . 789.1 646.3 24.3 118.4 708.7 697.7 6.6 4.4 80.3 2,583.9 353

2011 . . 832.6 687.8 27.0 117.9 739.4 727.9 7.1 4.5 93.2 2,677.2 349

2012 . . 889.5 735.9 30.0 123.6 782.1 770.2 7.4 4.5 107.4 2,784.5 342

2013 . . 958.0 786.8 34.5 136.7 846.1 833.7 7.7 4.6 111.9 2,896.5 329

2014 . . 1,024.5 837.5 39.0 148.0 918.1 905.2 8.1 4.8 106.4 3,002.9 315

2015 . . 1,089.1 888.4 43.4 157.4 992.3 978.7 8.5 5.1 96.9 3,099.8 303

2016 . . 1,166.5 952.3 48.0 166.2 1,071.1 1,056.9 8.9 5.3 95.4 3,195.2 289

2017 . . 1,229.6 1,002.5 53.2 173.9 1,156.5 1,141.5 9.4 5.7 73.0 3,268.2 276

2018 . . 1,296.3 1,057.0 58.1 181.1 1,248.3 1,232.5 9.8 6.0 48.0 3,316.2 262

2019 . . 1,361.6 1,113.0 63.3 185.4 1,347.4 1,330.8 10.3 6.3 14.3 3,330.4 246
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.

Because the annual payroll tax rate is constant for the entire 75-year valuation period, the income rate varies only slightly with changes in assumptions

and, therefore, 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 2009 level and to reach the various ultimate values in 2034.
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 16.35 to 15.52 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 0.04 percent of taxable

payroll, the 75-year actuarial balance varies over a much wider range, from

-2.29 to -1.56 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

2034.

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: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.98 14.99 14.99

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.25 14.23 14.22

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.06 14.01 13.96

Summarized cost rate:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.21 15.23 15.26

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.79 15.68 15.58

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.35 15.93 15.52

Actuarial balance:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.23 -.25 -.27

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.54 -1.45 -1.36

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.29 -1.92 -1.56

Annual balance for 2084 . . . . . . . . . . . . . . . . . . . . . . . . . . -6.37 -4.12 -2.30

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2038 2037 2037
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 2009-84. 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 0.33 percent, 0.79 percent, and 1.32 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 15.06 percent (for an

average annual death-rate reduction of 0.33 percent) to 15.42 percent (for an

average annual death-rate reduction of 1.32 percent). The 75-year cost rate

increases from 15.29 to 16.61 percent. The actuarial balance decreases from

-0.07 to -0.43 percent for the 25-year period, and from -1.30 to -2.58 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 2009 and 2084. The overall decreases from the age-sex-adjusted death rate in

2009 to the corresponding rate in 2084 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 0.33 percent from the alternative I

assumptions, 0.79 percent from the alternative II assumptions, and 1.32 percent from the alternative III

assumptions. All other assumptions used for this analysis are from alternative II.

0.33 percent 0.79 percent 1.32 percent

Summarized income rate:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.99 14.99 14.99

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.22 14.23 14.25

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.98 14.01 14.04

Summarized cost rate:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.06 15.23 15.42

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.24 15.68 16.17

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.29 15.93 16.61

Actuarial balance:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.07 -.25 -.43

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.02 -1.45 -1.92

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.30 -1.92 -2.58

Annual balance for 2084 . . . . . . . . . . . . . . . . . . . . . . . . . . -2.70 -4.12 -5.52

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2040 2037 2036
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, thereby resulting 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, 780,000 persons, 1,065,000 persons, and

1,370,000 persons, consistent with for 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

15.36 percent of taxable payroll (for average annual net immigration of

780,000 persons) to 15.10 percent (for average annual net immigration of

1,370,000 persons). For the 50-year period, it decreases from 15.88 percent

to 15.48 percent, and for the 75-year period, it decreases from 16.16 percent

to 15.69 percent. The actuarial balance increases from -0.34 to -0.14 percent

for the 25-year period, from -1.62 to -1.28 percent for the 50-year period,

and from -2.12 to -1.72 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 780,000 from the alternative III

assumptions, 1,065,000 from the alternative II assumptions, and 1,370,000 from the alternative I assumptions. All other assumptions used for this analysis are from alternative II.

780,000 1,065,000 1,370,000

Summarized income rate:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.01 14.99 14.96

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.27 14.23 14.20

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.04 14.01 13.97

Summarized cost rate:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.36 15.23 15.10

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.88 15.68 15.48

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.16 15.93 15.69

Actuarial balance:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.34 -.25 -.14

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.62 -1.45 -1.28

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.12 -1.92 -1.72

Annual balance for 2084 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.52 -4.12 -3.75

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2037 2037 2039
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 15.86 percent (for a realwage differential of 0.6 percentage point) to 14.61 percent (for a differential

of 1.8 percentage points). For the 50-year period, it decreases from 16.61 to

14.76 percent, and for the 75-year period it decreases from 16.95 to

14.90 percent. The actuarial balance increases from -0.73 to +0.24 percent

for the 25-year period, from -2.20 to -0.70 percent for the 50-year period,

and from -2.74 to -1.09 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 are not affected by

changes in wages, but only in prices. Each 0.5-percentage-point increase in

the assumed real-wage differential increases the long-range actuarial balance

by about 0.69 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: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.13 14.99 14.85

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.41 14.23 14.06

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.21 14.01 13.82

Summarized cost rate:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.86 15.23 14.61

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.61 15.68 14.76

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.95 15.93 14.90

Actuarial balance:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.73 -.25 +.24

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.20 -1.45 -.70

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.74 -1.92 -1.09

Annual balance for 2084 . . . . . . . . . . . . . . . . . . . . . . . . . . -5.82 -4.12 -2.59

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2034 2037 2046
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

15.39 (for CPI increases of 1.8 percent) to 15.06 percent (for CPI increases

of 3.8 percent). For the 50-year period, it decreases from 15.89 to

15.46 percent, and for the 75-year period, it decreases from 16.15 to

15.68 percent. The actuarial balance increases from -0.36 to -0.12 percent for

the 25-year period, from -1.62 to -1.26 percent for the 50-year period, and

from -2.12 to -1.71 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: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.03 14.99 14.94

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.27 14.23 14.20

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.04 14.01 13.98

Summarized cost rate:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.39 15.23 15.06

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.89 15.68 15.46

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.15 15.93 15.68

Actuarial balance:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.36 -.25 -.12

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.62 -1.45 -1.26

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.12 -1.92 -1.71

Annual balance for 2084 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.39 -4.12 -3.82

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2036 2037 2039
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, thereby resulting in lower cost rates. The effect of each 1.0-percentagepoint increase in the rate of change assumed for the CPI is an increase in the

long-range actuarial balance of 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), resulting 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 15.36 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 to be 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: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.87 14.99 15.08

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.09 14.23 14.36

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.85 14.01 14.15

Summarized cost rate:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.36 15.23 15.12

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.86 15.68 15.53

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.16 15.93 15.74

Actuarial balance:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.49 -.25 -.04

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.77 -1.45 -1.17

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.30 -1.92 -1.58

Annual balance for 2084 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.12 -4.12 -4.12

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2036 2037 2039
Appendices

170

15.12 percent (for an ultimate real interest rate of 3.6 percent). For the 50-

year period, it decreases from 15.86 to 15.53 percent, and for the 75-year

period, it decreases from 16.16 to 15.74 percent. The actuarial balance

increases from -0.49 to -0.04 percent for the 25-year period, from -1.77 to

-1.17 percent for the 50-year period, and from -2.30 to -1.58 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 2029. In comparison to the historical period 1970 through 2009, the ultimate age-sex-adjusted incidence

rate is 2 percent higher 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 15.01 percent (for the relatively low rates assumed for

alternative I) to 15.46 percent (for the relatively high rates assumed for

alternative III). For the 50-year period, it increases from 15.41 to 15.96 percent, and for the 75-year period, it increases from 15.64 to 16.22 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: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.98 14.99 14.99

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.23 14.23 14.24

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.00 14.01 14.01

Summarized cost rate:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.01 15.23 15.46

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.41 15.68 15.96

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.64 15.93 16.22

Actuarial balance:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.02 -.25 -.47

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.18 -1.45 -1.72

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.64 -1.92 -2.20

Annual balance for 2084 . . . . . . . . . . . . . . . . . . . . . . . . . . -3.78 -4.12 -4.44

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2040 2037 2036
171

Long-Range Sensitivity Analysis

The actuarial balance decreases from -0.02 to -0.47 percent for the 25-year

period, from -1.18 to -1.72 percent for the 50-year period, and from -1.64 to

-2.20 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 60 percent lower than the level in 2009. For alternative I, the age-sexadjusted death rate is assumed to decline to a level in 2085 that is about

29 percent lower than the level in 2009. For alternative III, the age-sexadjusted death rate is assumed to decline to a level in 2085 that is about

74 percent lower than the level in 2009.

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 2029 is

about 11 recoveries per thousand disabled-worker beneficiaries. For alternative I, the age-sex-adjusted recovery rate in 2029 is about 13 recoveries per

thousand disabled-worker beneficiaries. For alternative III, the age-sexadjusted recovery rate in 2029 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 15.19 percent (for the relatively high termination rates

assumed for alternative I) to 15.27 percent (for the relatively low termination

rates assumed for alternative III). For the 50-year period, it increases from

15.63 to 15.73 percent, and for the 75-year period, it increases from 15.87 to

15.97 percent. The actuarial balance decreases from -0.21 to -0.29 percent

for the 25-year period, from -1.40 to -1.50 percent for the 50-year period,

and from -1.86 to -1.96 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: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.99 14.99 14.99

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.23 14.23 14.23

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.01 14.01 14.01

Summarized cost rate:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.19 15.23 15.27

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.63 15.68 15.73

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.87 15.93 15.97

Actuarial balance:

25-year: 2010-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.21 -.25 -.29

50-year: 2010-59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.40 -1.45 -1.50

75-year: 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.86 -1.92 -1.96

Annual balance for 2084 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.03 -4.12 -4.16

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2038 2037 2037
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. It is intended to

supplement the traditional methods of examining such uncertainty and to

illustrate the potential value of stochastic techniques.

1. Background

The Trustees Report has traditionally shown additional 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.

It should be noted that this model is subject to further development. Future

improvements and refinements are expected to be more likely 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 assuming separate,

specified values for each of these variables. More details about each of these

assumptions can be found in section V.

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 reflected in the historical period. For some

variables, the equations additionally reflect relationships with other variables. Parameters for the equations are estimated using historical data for

periods between 20 years and 110 years depending on the nature and quality

of data available. Each time-series equation is designed such 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 of the model, 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 rather than individually modeling 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 model simulations.

The results from this model should be interpreted with caution and with an

understanding of the inherent 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. In addition, results would differ if random variations had been

applied to additional variables (such as labor force participation rates, retirement rates, marriage rates, and divorce rates) besides those mentioned above.

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

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

Simulated probability distributions of the annual trust fund ratios for the

combined OASI and DI Trust Funds are shown in figure VI.E1. 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 would be expected to exceed the upper bound only 2.5 percent of

 1 More detail on this model, and stochastic modeling in general, is available at

www.socialsecurity.gov/OACT/stochastic/index.html
175

Stochastic Projections 

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 is projected

by this model to fall exactly in the middle of possible outcomes for that year.

It is important to note that 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 2037 with a

probability of 50 percent. This exhaustion date is the same as the year of

exhaustion projected under the intermediate assumptions. Figure VI.E1

shows that the 95-percent confidence interval for the trust fund ratio in 2025

ranges from 336 to 129 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 363 and 122 percent, respectively. By 2084, the range represented

by the low-cost and high-cost projections increases substantially beyond the

boundaries of the 95-percent stochastic confidence interval, as seen from the

values for the open group unfunded obligation in table VI.E1. This increased

variation of the alternatives relative to the stochastic confidence interval is

also seen in the positive trust fund ratio for the low-cost scenario for 2084.

 Figure VI.E1.—Annual Trust Fund Ratios

0%

100%

200%

300%

400%

500%

2010 2025 2040 2055 2070 2085

Projection year

50%

97.5%

2.5%

90%

10%
Appendices

176

The probability distribution of the year-by-year OASDI cost rates (i.e., cost

as a percentage of taxable payroll) is shown in figure VI.E2. The range of the

cost rates widens as the projections move further into the future, reflecting

increasing uncertainty. The income rate under the intermediate assumptions

is also included in the figure in order to give some indication of the patterns

of cash flow for the OASDI program. Only this income rate is included

because of the relatively small 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. It is important to note that 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

for the low-cost and high-cost alternatives described earlier are 14.28 percent

of payroll and 19.67 percent of payroll, respectively. These are close to the

limits of the 95-percent confidence interval (14.55 and 19.17 percent of payroll), as can be seen in figure VI.E2. By 2084, the cost rates for these alternatives, 12.31 and 25.36 percent of payroll, are still close to the limits of the

95-percent confidence interval (13.04 and 24.35 percent of payroll).

 Figure VI.E2.—Annual Cost Rates

5%

10%

15%

20%

25%

30%

2010 2025 2040 2055 2070 2085

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, 2010-84. 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.

Median stochastic estimates for the actuarial measures displayed in table

VI.E1 are, in general, slightly more pessimistic for the combined OASI and

DI Trust Funds than the deterministic estimates projected under the intermediate assumptions. The median estimate of the long-range actuarial balance

is -2.01 percent of taxable payroll, about 0.09 percentage point lower than

projected under the intermediate assumptions. The median year for which

cost first exceeds tax income and remains in excess of tax income throughout

the remainder of the long-range period is 2016. This is 1 year later than projected under the intermediate assumptions. The median year for which assets

first become exhausted is 2037. This is the same year as projected under the

intermediate assumptions. The median estimates of the annual cost rate for

the 75th year of the projection period are 17.62 percent of taxable payroll

and 6.05 percent of gross domestic product (GDP). The comparable estimates using the intermediate assumptions are 17.43 percent of payroll and

6.02 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 four of the measures in table

VI.E1 (the actuarial balance, the open group unfunded obligation, the first

year assets become exhausted, and the annual cost in the 75th year of the

projection period expressed as a percentage of payroll), the 95-percent stochastic confidence interval is narrower than the range defined by the lowcost and high-cost alternatives. That is, 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. In contrast, for one of the

measures in the table (the annual cost in the 75th year of the projection

period expressed as a percentage of GDP), the 95-percent stochastic confidence interval includes the estimates under the low-cost and high-cost alternatives. For the remaining measure in the table (the first year cost exceeds

tax income and remains in excess through 2084), the low-cost estimate of a
Appendices

178

surplus in 2084 and the high-cost estimate of a deficit in all of the projection

years are consistent with the bounds of the 95-percent stochastic confidence

interval.

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 . . . . . . -1.92 0.59 -5.26 -2.01 -3.12 -1.00 -3.75 -0.51

Open group unfunded 

obligation (in trillions) $5.4 -$2.2 $15.5 $5.7 $9.5 $2.7 $11.8 $1.2

First year cost exceeds tax 

income and remains in 

excess through 2084 . . 2015 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 2058 2010 b

b For this percentile, cost does not exceed tax income in 2084.

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.

2037 d

d The fund is not estimated to be exhausted within the projection period.

2029 2037 2032 2045 2030 2055

Annual cost in 75th year 

(percent of taxable

payroll) . . . . . . . . . . . . 17.43 12.31 25.36 17.62 14.41 21.59 13.04 24.35

Annual cost in 75th year 

(percent of GDP). . . . . 6.02 4.59 8.12 6.05 4.83 7.54 4.30 8.52
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. Estimates for the HI

program shown in this appendix reflect the effects of the Patient Protection

and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010. For more information on Medicare estimates see the

2010 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, combined OASDI and HI rates shown in this section are computed by adding the

separately derived rates for the programs.

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. The OASDI and HI contribution rates for employees and

their employers that are authorized in the Federal Insurance Contributions

Act for these programs are shown in table VI.F1.
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

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.

Table VI.F1.—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 2010.

HI

all earnings

HI

over limitb

b 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 HIall earnings

HI

over limitb

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 —

1984c . . . . . . . . . . . .

c See footnote a under table VI.A1 in the appendix titled “History of OASI and DI Trust Fund Operations”

for a description of tax credits allowed against the combined OASDI and HI taxes on net earnings from selfemployment in 1984-89.

5.70 1.30 — 11.40 2.60 —

1985 . . . . . . . . . . . . . 5.70 1.35 — 11.40 2.70 —

1986-87 . . . . . . . . . . 5.70 1.45 — 11.40 2.90 —

1988-89 . . . . . . . . . . 6.06 1.45 — 12.12 2.90 —

1990-2012 . . . . . . . . 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

The combined OASDI and HI cost rate is projected to generally rise 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, 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 33 percent from its current

level by 2084, 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

11 percent by the end of the period, with positive annual balances in all years

except for 2010-11 and 2025-38.
Appendices

182

Table VI.F2.—OASDI and HI Annual Income Rates, Cost Rates, and Balances,

Calendar Years 2010-85

[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:

2010 . . . . . . 12.33 13.09 -0.76 3.17 3.66 -0.49 15.50 16.75 -1.25

2011 . . . . . . 12.91 13.04 -.12 3.18 3.63 -.46 16.09 16.67 -.58

2012 . . . . . . 12.87 12.84 .03 3.19 3.55 -.36 16.06 16.40 -.33

2013 . . . . . . 12.90 12.82 .08 3.31 3.47 -.16 16.21 16.29 -.08

2014 . . . . . . 12.92 12.86 .06 3.33 3.41 -.09 16.25 16.28 -.03

2015 . . . . . . 12.94 12.98 -.04 3.35 3.33 .02 16.28 16.30 -.02

2016 . . . . . . 12.96 13.10 -.14 3.37 3.31 .06 16.33 16.41 -.09

2017 . . . . . . 12.99 13.30 -.32 3.39 3.31 .07 16.38 16.62 -.24

2018 . . . . . . 13.01 13.55 -.53 3.40 3.35 .06 16.42 16.89 -.47

2019 . . . . . . 13.03 13.84 -.81 3.42 3.39 .03 16.45 17.23 -.78

2020 . . . . . . 13.05 14.15 -1.10 3.44 3.46 -.02 16.49 17.61 -1.12

2025 . . . . . . 13.13 15.54 -2.40 3.53 3.87 -.34 16.66 19.41 -2.74

2030 . . . . . . 13.19 16.41 -3.21 3.62 4.31 -.69 16.81 20.71 -3.90

2035 . . . . . . 13.22 16.73 -3.50 3.69 4.68 -.99 16.91 21.40 -4.49

2040 . . . . . . 13.23 16.64 -3.41 3.75 4.89 -1.14 16.98 21.54 -4.56

2045 . . . . . . 13.23 16.44 -3.22 3.81 4.99 -1.18 17.04 21.43 -4.39

2050 . . . . . . 13.23 16.33 -3.11 3.88 5.00 -1.13 17.10 21.34 -4.24

2055 . . . . . . 13.23 16.37 -3.14 3.95 4.99 -1.04 17.18 21.36 -4.18

2060 . . . . . . 13.24 16.48 -3.24 4.02 4.99 -.98 17.26 21.48 -4.22

2065 . . . . . . 13.25 16.62 -3.36 4.08 5.00 -.92 17.34 21.62 -4.28

2070 . . . . . . 13.27 16.81 -3.54 4.15 5.01 -.86 17.41 21.82 -4.40

2075 . . . . . . 13.28 17.03 -3.75 4.21 4.99 -.78 17.49 22.02 -4.53

2080 . . . . . . 13.30 17.25 -3.95 4.26 4.92 -.66 17.56 22.18 -4.62

2085 . . . . . . 13.31 17.47 -4.16 4.31 4.83 -.52 17.62 22.30 -4.68

Low-cost:

2010 . . . . . . 12.29 12.95 -.66 3.17 3.53 -.36 15.46 16.48 -1.02

2011 . . . . . . 12.94 12.79 .14 3.17 3.45 -.28 16.11 16.25 -.14

2012 . . . . . . 12.86 12.44 .42 3.19 3.27 -.08 16.04 15.71 .34

2013 . . . . . . 12.88 12.31 .57 3.30 3.13 .17 16.18 15.45 .73

2014 . . . . . . 12.90 12.24 .66 3.31 3.03 .29 16.21 15.26 .95

2015 . . . . . . 12.91 12.24 .67 3.33 2.89 .44 16.24 15.13 1.11

2016 . . . . . . 12.93 12.26 .67 3.34 2.82 .53 16.27 15.08 1.19

2017 . . . . . . 12.95 12.38 .57 3.36 2.77 .59 16.31 15.15 1.16

2018 . . . . . . 12.98 12.54 .44 3.37 2.75 .63 16.35 15.28 1.07

2019 . . . . . . 12.98 12.73 .25 3.39 2.73 .66 16.37 15.46 .91

2020 . . . . . . 13.00 12.93 .06 3.40 2.74 .67 16.40 15.67 .73

2025 . . . . . . 13.06 13.82 -.76 3.47 2.79 .68 16.53 16.61 -.08

2030 . . . . . . 13.09 14.28 -1.19 3.54 2.83 .71 16.63 17.11 -.48

2035 . . . . . . 13.10 14.28 -1.17 3.59 2.80 .79 16.69 17.07 -.38

2040 . . . . . . 13.09 13.92 -.83 3.63 2.68 .95 16.72 16.60 .13

2045 . . . . . . 13.08 13.48 -.40 3.67 2.55 1.12 16.75 16.03 .72

2050 . . . . . . 13.06 13.15 -.09 3.72 2.44 1.27 16.78 15.59 1.19

2055 . . . . . . 13.06 12.94 .12 3.77 2.38 1.39 16.83 15.32 1.51

2060 . . . . . . 13.05 12.80 .25 3.83 2.36 1.46 16.88 15.16 1.72

2065 . . . . . . 13.05 12.64 .41 3.88 2.37 1.51 16.93 15.01 1.92

2070 . . . . . . 13.04 12.49 .55 3.93 2.37 1.56 16.97 14.86 2.11

2075 . . . . . . 13.04 12.38 .66 3.98 2.36 1.61 17.01 14.74 2.27

2080 . . . . . . 13.03 12.31 .72 4.02 2.33 1.69 17.05 14.64 2.41

2085 . . . . . . 13.03 12.32 .72 4.06 2.29 1.78 17.10 14.61 2.49
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:

2010 . . . . . . 12.37 13.23 -0.85 3.17 3.78 -0.61 15.55 17.01 -1.46

2011 . . . . . . 12.88 13.23 -.35 3.18 3.82 -.64 16.07 17.05 -.98

2012 . . . . . . 12.88 13.14 -.26 3.20 3.85 -.66 16.08 17.00 -.92

2013 . . . . . . 12.92 13.39 -.47 3.32 3.85 -.52 16.24 17.24 -.99

2014 . . . . . . 12.95 13.62 -.67 3.35 3.86 -.52 16.29 17.48 -1.19

2015 . . . . . . 12.97 13.83 -.86 3.37 3.84 -.47 16.34 17.67 -1.33

2016 . . . . . . 13.00 14.05 -1.05 3.39 3.90 -.51 16.39 17.95 -1.56

2017 . . . . . . 13.03 14.37 -1.34 3.42 3.99 -.57 16.45 18.36 -1.91

2018 . . . . . . 13.06 14.71 -1.65 3.44 4.11 -.67 16.50 18.82 -2.32

2019 . . . . . . 13.08 15.09 -2.01 3.46 4.24 -.78 16.54 19.33 -2.80

2020 . . . . . . 13.11 15.50 -2.40 3.48 4.41 -.93 16.59 19.92 -3.33

2025 . . . . . . 13.22 17.47 -4.25 3.60 5.45 -1.85 16.82 22.91 -6.10

2030 . . . . . . 13.31 18.85 -5.54 3.71 6.68 -2.97 17.02 25.53 -8.52

2035 . . . . . . 13.37 19.67 -6.30 3.81 8.01 -4.21 17.17 27.68 -10.50

2040 . . . . . . 13.40 20.03 -6.62 3.89 9.15 -5.26 17.29 29.18 -11.88

2045 . . . . . . 13.42 20.26 -6.84 3.98 9.97 -5.99 17.40 30.23 -12.83

2050 . . . . . . 13.44 20.57 -7.12 4.07 10.47 -6.40 17.51 31.04 -13.53

2055 . . . . . . 13.48 21.04 -7.57 4.16 10.71 -6.55 17.63 31.75 -14.12

2060 . . . . . . 13.51 21.62 -8.11 4.25 10.78 -6.53 17.76 32.40 -14.64

2065 . . . . . . 13.55 22.28 -8.72 4.34 10.80 -6.46 17.89 33.07 -15.19

2070 . . . . . . 13.60 23.08 -9.48 4.42 10.81 -6.39 18.02 33.89 -15.87

2075 . . . . . . 13.66 23.97 -10.31 4.51 10.77 -6.26 18.16 34.73 -16.57

2080 . . . . . . 13.71 24.79 -11.08 4.58 10.63 -6.04 18.29 35.42 -17.13

2085 . . . . . . 13.75 25.49 -11.74 4.65 10.43 -5.77 18.40 35.91 -17.51

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 2010-85 (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 2010-84

[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,

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.

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:

2010-34 . . . . . . 14.99 15.23 -0.25 3.64 3.94 -0.30 18.63 19.18 -0.55

50-year:

2010-59 . . . . . . 14.23 15.68 -1.45 3.72 4.35 -.63 17.96 20.04 -2.08

75-year:

2010-84 . . . . . . 14.01 15.93 -1.92 3.83 4.49 -.66 17.84 20.42 -2.58

Low-cost:

25-year:

2010-34 . . . . . . 14.91 13.80 1.12 3.60 2.99 .61 18.52 16.79 1.72

50-year:

2010-59 . . . . . . 14.12 13.57 .55 3.64 2.78 .86 17.76 16.35 1.41

75-year:

2010-84 . . . . . . 13.85 13.26 .59 3.72 2.67 1.05 17.56 15.92 1.64

High-cost:

25-year:

2010-34 . . . . . . 15.04 16.90 -1.86 3.69 5.39 -1.70 18.73 22.29 -3.56

50-year:

2010-59 . . . . . . 14.35 18.34 -4.00 3.83 7.32 -3.49 18.18 25.67 -7.49

75-year:

2010-84 . . . . . . 14.18 19.44 -5.26 3.97 8.08 -4.11 18.15 27.52 -9.37
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. The estimated GDP on which these percentages are based is also

shown in table VI.F4. For OASDI, income excluding interest consists of payroll-tax contributions and proceeds from taxation of benefits. Cost consists of

benefit payments, administrative expenses, net transfers from the trust funds

to 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) and proceeds from taxation of OASDI benefits. 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 2010 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 2011

through 2020. After 2020, deficits increase to a peak in 2032 and decrease

thereafter. By 2052, the OASDI balance becomes positive, reaching

0.27 percent of GDP in 2084. On the basis of the intermediate assumptions

the OASDI balance is projected to be positive for 2012-14, and negative for

all other years of the projection period. Annual deficits start in 2015, increase

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.

The HI balance as a percentage of GDP is projected to be negative from

2010-12 under the low-cost assumptions, and then positive and generally
Appendices

186

increasing thereafter. Under the intermediate assumptions, the HI balance is

projected to be negative from 2010-14, positive from 2015-19, and negative

thereafter. Annual deficits start in 2020, increase through 2044, and decline

steadily 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 2010-11, positive from 2012

through 2025, negative from 2026 through 2037, then positive and steadily

rising thereafter. Under the intermediate assumptions, combined OASDI and

HI annual deficits decline through 2015, then rise, reaching a peak in 2038.

After 2038, annual deficits fluctuate between about 1.6 percent and 1.8 percent of GDP. Combined annual deficits rise steadily after 2012 under the

high-cost assumptions.

By 2084, the combined OASDI and HI annual balances as percentages of

GDP are projected to range from a positive balance of 1.08 percent for the

low-cost assumptions to a deficit of 6.10 percent for the high-cost assumptions. Projected balances differ by a smaller amount for the tenth year, 2019,

ranging from a positive balance of 0.41 percent for the low-cost assumptions

to a deficit of 1.12 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 0.71 percent, based

on the low-cost assumptions, to a deficit of 3.69 percent, based on the highcost assumptions). The 25-year summarized balance varies by a smaller

amount (from a positive balance of 0.70 percent to a deficit of 1.47 percent).

Summarized rates are calculated on the present-value basis including the

trust fund balances on January 1, 2010, 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 2010-85

Calendar year

Percentage of GDP GDP in

dollars

(billions)

OASDI HI Combined

Incomea Cost Balance Incomea Cost Balance Incomea Cost Balance

Intermediate:

2010 . . . . . . 4.56 4.84 -0.28 1.44 1.66 -0.22 6.00 6.50 -0.50 $14,775

2011 . . . . . . 4.75 4.80 -.04 1.45 1.66 -.21 6.20 6.46 -.25 15,465

2012 . . . . . . 4.77 4.76 .01 1.47 1.63 -.17 6.24 6.39 -.15 16,382

2013 . . . . . . 4.78 4.75 .03 1.53 1.61 -.07 6.31 6.36 -.04 17,411

2014 . . . . . . 4.80 4.78 .02 1.55 1.59 -.04 6.35 6.36 -.02 18,446

2015 . . . . . . 4.81 4.83 -.02 1.56 1.55 .01 6.37 6.38 -.01 19,472

2016 . . . . . . 4.84 4.90 -.05 1.58 1.55 .03 6.42 6.45 -.03 20,485

2017 . . . . . . 4.86 4.98 -.12 1.59 1.56 .03 6.45 6.54 -.08 21,507

2018 . . . . . . 4.88 5.08 -.20 1.60 1.58 .03 6.49 6.66 -.17 22,510

2019 . . . . . . 4.89 5.20 -.30 1.61 1.60 .01 6.50 6.80 -.29 23,524

2020 . . . . . . 4.89 5.30 -.41 1.62 1.63 -.01 6.51 6.93 -.42 24,607

2025 . . . . . . 4.87 5.77 -.89 1.65 1.80 -.16 6.52 7.57 -1.05 30,797

2030 . . . . . . 4.86 6.05 -1.18 1.67 1.99 -.32 6.54 8.04 -1.50 38,555

2035 . . . . . . 4.85 6.14 -1.29 1.70 2.15 -.45 6.55 8.29 -1.74 48,369

2040 . . . . . . 4.83 6.08 -1.25 1.72 2.24 -.52 6.55 8.32 -1.77 60,794

2045 . . . . . . 4.80 5.97 -1.17 1.74 2.27 -.54 6.54 8.24 -1.70 76,335

2050 . . . . . . 4.77 5.89 -1.12 1.76 2.27 -.51 6.53 8.16 -1.63 95,661

2055 . . . . . . 4.74 5.87 -1.12 1.78 2.25 -.47 6.52 8.11 -1.59 119,636

2060 . . . . . . 4.71 5.87 -1.15 1.80 2.23 -.44 6.51 8.10 -1.59 149,631

2065 . . . . . . 4.69 5.88 -1.19 1.81 2.22 -.41 6.50 8.10 -1.60 187,168

2070 . . . . . . 4.66 5.90 -1.24 1.83 2.21 -.38 6.49 8.11 -1.62 234,061

2075 . . . . . . 4.63 5.94 -1.31 1.85 2.19 -.34 6.48 8.13 -1.65 292,476

2080 . . . . . . 4.61 5.98 -1.37 1.86 2.15 -.29 6.47 8.13 -1.66 365,033

2085 . . . . . . 4.60 6.03 -1.44 1.87 2.10 -.22 6.47 8.13 -1.66 455,253

Summarized rates: b

25-year:

 2010-34 . . . 5.57 5.66 -.09 1.69 1.83 -.14 7.26 7.49 -.23

50-year:

 2010-59 . . . 5.23 5.76 -.53 1.71 2.01 -.29 6.94 7.77 -.82

75-year

 2010-84 . . . 5.09 5.79 -.70 1.74 2.04 -.30 6.83 7.83 -1.00

Low-cost:

2010 . . . . . . 4.54 4.78 -.24 1.44 1.61 -.17 5.98 6.39 -.41 14,890

2011 . . . . . . 4.76 4.71 .05 1.45 1.58 -.13 6.21 6.29 -.07 15,649

2012 . . . . . . 4.78 4.62 .16 1.47 1.51 -.04 6.24 6.13 .12 16,580

2013 . . . . . . 4.80 4.58 .21 1.53 1.45 .08 6.32 6.03 .29 17,576

2014 . . . . . . 4.82 4.57 .25 1.54 1.41 .13 6.36 5.98 .38 18,559

2015 . . . . . . 4.83 4.58 .25 1.55 1.35 .20 6.38 5.93 .46 19,521

2016 . . . . . . 4.87 4.62 .25 1.57 1.32 .25 6.43 5.94 .50 20,441

2017 . . . . . . 4.89 4.67 .22 1.58 1.30 .28 6.47 5.98 .49 21,329

2018 . . . . . . 4.91 4.75 .17 1.59 1.29 .30 6.50 6.04 .46 22,192

2019 . . . . . . 4.93 4.83 .10 1.60 1.29 .31 6.53 6.12 .41 23,071

2020 . . . . . . 4.93 4.90 .02 1.61 1.29 .32 6.53 6.19 .34 24,057

2025 . . . . . . 4.92 5.20 -.29 1.63 1.31 .32 6.54 6.51 .03 29,583

2030 . . . . . . 4.91 5.36 -.45 1.65 1.32 .33 6.57 6.68 -.12 36,348

2035 . . . . . . 4.91 5.35 -.44 1.67 1.30 .37 6.59 6.66 -.07 44,789

2040 . . . . . . 4.91 5.22 -.31 1.69 1.25 .44 6.60 6.47 .13 55,441

2045 . . . . . . 4.90 5.05 -.15 1.71 1.19 .52 6.61 6.23 .37 68,773

2050 . . . . . . 4.89 4.92 -.03 1.73 1.14 .59 6.62 6.05 .56 85,326

2055 . . . . . . 4.88 4.84 .04 1.75 1.10 .65 6.63 5.94 .69 105,860

2060 . . . . . . 4.87 4.78 .09 1.78 1.10 .68 6.65 5.88 .77 131,443

2065 . . . . . . 4.87 4.71 .15 1.80 1.10 .70 6.67 5.81 .85 163,441

2070 . . . . . . 4.86 4.66 .20 1.82 1.10 .72 6.68 5.76 .93 203,535

2075 . . . . . . 4.86 4.61 .25 1.84 1.09 .75 6.70 5.71 .99 253,561

2080 . . . . . . 4.86 4.59 .27 1.86 1.08 .78 6.72 5.67 1.05 315,714

2085 . . . . . . 4.87 4.60 .27 1.89 1.06 .82 6.75 5.66 1.09 392,795
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:

 2010-34 . . . 5.60 5.18 0.42 1.68 1.40 0.28 7.28 6.58 0.70

50-year:

 2010-59 . . . 5.30 5.09 .21 1.70 1.30 .40 6.99 6.38 .61

75-year

 2010-84 . . . 5.19 4.97 .22 1.73 1.24 .49 6.92 6.21 .71

High-cost:

2010 . . . . . . 4.57 4.89 -.32 1.44 1.72 -.28 6.02 6.61 -.59 14,667

2011 . . . . . . 4.74 4.86 -.13 1.45 1.74 -.29 6.19 6.61 -.42 15,350

2012 . . . . . . 4.75 4.85 -.10 1.47 1.77 -.30 6.22 6.62 -.40 16,381

2013 . . . . . . 4.76 4.93 -.17 1.54 1.78 -.24 6.29 6.71 -.41 17,511

2014 . . . . . . 4.78 5.03 -.25 1.55 1.79 -.24 6.33 6.82 -.49 18,636

2015 . . . . . . 4.79 5.11 -.32 1.57 1.79 -.22 6.36 6.90 -.54 19,789

2016 . . . . . . 4.82 5.21 -.39 1.59 1.83 -.24 6.41 7.04 -.63 20,941

2017 . . . . . . 4.84 5.34 -.50 1.60 1.87 -.27 6.45 7.21 -.77 22,070

2018 . . . . . . 4.86 5.47 -.61 1.62 1.93 -.32 6.48 7.41 -.93 23,245

2019 . . . . . . 4.86 5.61 -.75 1.63 2.00 -.37 6.49 7.60 -1.12 24,488

2020 . . . . . . 4.86 5.75 -.89 1.64 2.07 -.44 6.49 7.82 -1.33 25,718

2025 . . . . . . 4.84 6.39 -1.55 1.67 2.53 -.86 6.51 8.92 -2.41 32,760

2030 . . . . . . 4.82 6.83 -2.01 1.70 3.07 -1.36 6.52 9.90 -3.37 41,802

2035 . . . . . . 4.80 7.06 -2.26 1.73 3.65 -1.92 6.53 10.71 -4.18 53,411

2040 . . . . . . 4.77 7.13 -2.36 1.76 4.13 -2.37 6.53 11.26 -4.73 68,159

2045 . . . . . . 4.73 7.14 -2.41 1.78 4.46 -2.68 6.51 11.59 -5.09 86,564

2050 . . . . . . 4.68 7.16 -2.48 1.80 4.63 -2.83 6.48 11.79 -5.31 109,432

2055 . . . . . . 4.64 7.24 -2.60 1.82 4.68 -2.86 6.45 11.92 -5.46 137,686

2060 . . . . . . 4.59 7.35 -2.76 1.83 4.65 -2.82 6.43 12.00 -5.57 173,017

2065 . . . . . . 4.55 7.47 -2.93 1.85 4.61 -2.76 6.40 12.08 -5.68 217,204

2070 . . . . . . 4.50 7.64 -3.14 1.86 4.55 -2.69 6.37 12.20 -5.83 271,938

2075 . . . . . . 4.47 7.84 -3.37 1.87 4.48 -2.60 6.34 12.32 -5.98 339,702

2080 . . . . . . 4.43 8.01 -3.58 1.89 4.37 -2.49 6.31 12.38 -6.07 423,609

2085 . . . . . . 4.39 8.15 -3.75 1.89 4.25 -2.35 6.29 12.39 -6.10 527,853

Summarized rates: b

25-year:

 2010-34 . . . 5.52 6.20 -.68 1.71 2.50 -.79 7.23 8.70 -1.47

50-year:

 2010-59 . . . 5.16 6.60 -1.44 1.74 3.33 -1.59 6.91 9.93 -3.03

75-year

 2010-84 . . . 5.00 6.86 -1.85 1.77 3.61 -1.83 6.77 10.46 -3.69

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 including the value of the trust funds on

January 1, 2010, and the cost of reaching a target trust fund level equal to 100 percent of annual cost at the end

of the period.

Table VI.F4.—OASDI and HI Annual and Summarized Income, Cost, and Balance

as a Percentage of GDP, Calendar Years 2010-85 (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 implicit price 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

0.22 percent for the 40 years from 1968 to 2008. For the 10-year periods

1968-78, 1978-88, 1988-98, and 1998-2008, the average annual rates of change

were -0.63, -0.16, 0.11 and -0.19 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 2010-19 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 2010-85 

Calendar year Intermediate Low-cost High-cost

2010 . . . . . . . . . . . . . . . . . . . . . . . . . 0.369 0.369 0.370

2011 . . . . . . . . . . . . . . . . . . . . . . . . . .368 .368 .368

2012 . . . . . . . . . . . . . . . . . . . . . . . . . .370 .372 .369

2013 . . . . . . . . . . . . . . . . . . . . . . . . . .371 .372 .368

2014 . . . . . . . . . . . . . . . . . . . . . . . . . .371 .374 .369

2015 . . . . . . . . . . . . . . . . . . . . . . . . . .372 .374 .370

2016 . . . . . . . . . . . . . . . . . . . . . . . . . .374 .376 .371

2017 . . . . . . . . . . . . . . . . . . . . . . . . . .374 .377 .372

2018 . . . . . . . . . . . . . . . . . . . . . . . . . .375 .379 .372

2019 . . . . . . . . . . . . . . . . . . . . . . . . . .376 .379 .371

2020 . . . . . . . . . . . . . . . . . . . . . . . . . .375 .379 .371

2025 . . . . . . . . . . . . . . . . . . . . . . . . . .371 .377 .366

2030 . . . . . . . . . . . . . . . . . . . . . . . . . .369 .375 .362

2035 . . . . . . . . . . . . . . . . . . . . . . . . . .367 .375 .359

2040 . . . . . . . . . . . . . . . . . . . . . . . . . .365 .375 .356

2045 . . . . . . . . . . . . . . . . . . . . . . . . . .363 .374 .352

2050 . . . . . . . . . . . . . . . . . . . . . . . . . .361 .374 .348

2055 . . . . . . . . . . . . . . . . . . . . . . . . . .358 .374 .344

2060 . . . . . . . . . . . . . . . . . . . . . . . . . .356 .373 .340

2065 . . . . . . . . . . . . . . . . . . . . . . . . . .354 .373 .336

2070 . . . . . . . . . . . . . . . . . . . . . . . . . .351 .373 .331

2075 . . . . . . . . . . . . . . . . . . . . . . . . . .349 .373 .327

2080 . . . . . . . . . . . . . . . . . . . . . . . . . .347 .373 .323

2085 . . . . . . . . . . . . . . . . . . . . . . . . . .345 .373 .320
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.

Analysts select the index that provides the most useful standard for adjusting

dollar amounts, over time, in order to produce appropriately comparable values. Table VI.F6 presents five such indices for adjustment. Adjustment of

any series of values is accomplished 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. One such price index is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W,

hereafter referred to as CPI), which is published by the Bureau of Labor Statistics, Department of Labor. This is the index 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.

Constant-dollar values 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 average annual wage is assumed to increase ultimately by

3.6, 4.0, and 4.4 percent under the low-cost, intermediate, and high-cost

assumptions, respectively. 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
191

OASDI and HI: Estimates in Dollars

lower effective tax rate on multiple-employer excess wages. A series of values, divided by the taxable payroll, indicates the percentage of payroll that

each value represents, and thus the extent to which the series of values

increases or decreases as a percent of payroll over time.

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 2009-85

[GDP and taxable payroll in billions]

Calendar year

Adjusted

CPIa Average

wage indexb Taxablepayrollc

Gross

domestic

product

Compound

interest-rate

factord

Intermediate:

2009 . . . . . . . . . . . . . 98.03 $41,067.93 $5,273 $14,256 0.9671

2010 . . . . . . . . . . . . . 100.00 43,083.76 5,459 14,775 1.0000

2011 . . . . . . . . . . . . . 101.66 44,686.82 5,690 15,465 1.0456

2012 . . . . . . . . . . . . . 104.00 46,758.30 6,069 16,382 1.1047

2013 . . . . . . . . . . . . . 106.79 48,977.62 6,454 17,411 1.1723

2014 . . . . . . . . . . . . . 109.78 51,215.47 6,852 18,446 1.2444

2015 . . . . . . . . . . . . . 112.85 53,396.92 7,243 19,472 1.3195

2016 . . . . . . . . . . . . . 116.01 55,737.60 7,656 20,485 1.3981

2017 . . . . . . . . . . . . . 119.26 58,103.49 8,052 21,507 1.4810

2018 . . . . . . . . . . . . . 122.60 60,522.33 8,446 22,510 1.5674

2019 . . . . . . . . . . . . . 126.03 63,017.19 8,834 23,524 1.6581

2020 . . . . . . . . . . . . . 129.56 65,464.98 9,226 24,607 1.7540

2025 . . . . . . . . . . . . . 148.74 79,200.41 11,431 30,797 2.3231

2030 . . . . . . . . . . . . . 170.76 96,312.61 14,215 38,555 3.0769

2035 . . . . . . . . . . . . . 196.05 117,373.41 17,746 48,369 4.0753

2040 . . . . . . . . . . . . . 225.07 143,066.89 22,198 60,794 5.3976

2045 . . . . . . . . . . . . . 258.40 174,083.99 27,713 76,335 7.1490

2050 . . . . . . . . . . . . . 296.66 211,536.51 34,504 95,661 9.4686

2055 . . . . . . . . . . . . . 340.58 256,839.61 42,876 119,636 12.5409

2060 . . . . . . . . . . . . . 391.01 311,681.52 53,269 149,631 16.6101

2065 . . . . . . . . . . . . . 448.90 378,209.64 66,177 187,168 21.9996

2070 . . . . . . . . . . . . . 515.37 458,871.71 82,183 234,061 29.1378

2075 . . . . . . . . . . . . . 591.68 557,029.59 102,035 292,476 38.5922

2080 . . . . . . . . . . . . . 679.28 676,754.77 126,624 365,033 51.1142

2085 . . . . . . . . . . . . . 779.86 822,998.71 157,169 455,253 67.6993

Low-cost:

2009 . . . . . . . . . . . . . 98.20 41,067.59 5,274 14,256 .9650

2010 . . . . . . . . . . . . . 100.00 43,233.23 5,500 14,890 1.0000

2011 . . . . . . . . . . . . . 101.12 44,759.07 5,761 15,649 1.0453

2012 . . . . . . . . . . . . . 102.73 46,620.50 6,161 16,580 1.1012

2013 . . . . . . . . . . . . . 104.58 48,494.23 6,543 17,576 1.1627

2014 . . . . . . . . . . . . . 106.46 50,372.83 6,934 18,559 1.2277

2015 . . . . . . . . . . . . . 108.38 52,169.53 7,309 19,521 1.2962

2016 . . . . . . . . . . . . . 110.33 54,201.02 7,695 20,441 1.3672

2017 . . . . . . . . . . . . . 112.31 56,224.83 8,050 21,329 1.4412

2018 . . . . . . . . . . . . . 114.33 58,334.76 8,404 22,192 1.5197

2019 . . . . . . . . . . . . . 116.39 60,532.75 8,753 23,071 1.6025

2020 . . . . . . . . . . . . . 118.49 62,648.10 9,119 24,057 1.6901

2025 . . . . . . . . . . . . . 129.54 74,338.99 11,138 29,583 2.2052

2030 . . . . . . . . . . . . . 141.63 88,638.49 13,641 36,348 2.8773

2035 . . . . . . . . . . . . . 154.84 105,809.55 16,792 44,789 3.7542

2040 . . . . . . . . . . . . . 169.29 126,345.96 20,777 55,441 4.8984

2045 . . . . . . . . . . . . . 185.08 150,688.00 25,750 68,773 6.3913

2050 . . . . . . . . . . . . . 202.35 179,545.87 31,910 85,326 8.3393

2055 . . . . . . . . . . . . . 221.23 213,867.25 39,559 105,860 10.8810

2060 . . . . . . . . . . . . . 241.87 254,789.09 49,080 131,443 14.1973

2065 . . . . . . . . . . . . . 264.44 303,529.46 60,976 163,441 18.5243

2070 . . . . . . . . . . . . . 289.11 361,540.51 75,869 203,535 24.1702

2075 . . . . . . . . . . . . . 316.08 430,887.51 94,488 253,561 31.5368

2080 . . . . . . . . . . . . . 345.57 513,905.28 117,698 315,714 41.1487

2085 . . . . . . . . . . . . . 377.81 613,437.97 146,619 392,795 53.6900
193

OASDI and HI: Estimates in Dollars

Table VI.F7 shows estimated operations of the combined OASI and DI Trust

Funds in constant 2010 dollars (i.e., adjusted by the CPI indexing series as

discussed above). Items included in the table are: 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 and income

from taxation of benefits. Cost consists of benefit payments, administrative

expenses, net transfers from the OASI and DI Trust Funds to the Railroad

Retirement program under the financial-interchange provisions, 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:

2009 . . . . . . . . . . . . . 97.93 $41,067.51 $5,273 $14,256 0.9688

2010 . . . . . . . . . . . . . 100.00 42,879.81 5,422 14,667 1.0000

2011 . . . . . . . . . . . . . 102.46 44,589.32 5,642 15,350 1.0495

2012 . . . . . . . . . . . . . 106.89 47,228.82 6,043 16,381 1.1228

2013 . . . . . . . . . . . . . 111.59 50,100.69 6,449 17,511 1.2029

2014 . . . . . . . . . . . . . 115.89 52,867.76 6,878 18,636 1.2827

2015 . . . . . . . . . . . . . 120.29 55,603.42 7,313 19,789 1.3656

2016 . . . . . . . . . . . . . 124.86 58,469.81 7,768 20,941 1.4514

2017 . . . . . . . . . . . . . 129.61 61,242.02 8,200 22,070 1.5399

2018 . . . . . . . . . . . . . 134.53 64,147.61 8,645 23,245 1.6317

2019 . . . . . . . . . . . . . 139.65 67,083.66 9,096 24,488 1.7290

2020 . . . . . . . . . . . . . 144.95 69,972.93 9,534 25,718 1.8324

2025 . . . . . . . . . . . . . 174.67 86,323.23 11,986 32,760 2.4498

2030 . . . . . . . . . . . . . 210.48 107,085.62 15,141 41,802 3.2753

2035 . . . . . . . . . . . . . 253.62 133,249.31 19,181 53,411 4.3789

2040 . . . . . . . . . . . . . 305.62 165,832.14 24,260 68,159 5.8544

2045 . . . . . . . . . . . . . 368.27 205,894.53 30,495 86,564 7.8271

2050 . . . . . . . . . . . . . 443.76 255,196.20 38,106 109,432 10.4644

2055 . . . . . . . . . . . . . 534.73 315,826.99 47,377 137,686 13.9904

2060 . . . . . . . . . . . . . 644.35 390,378.51 58,802 173,017 18.7045

2065 . . . . . . . . . . . . . 776.44 482,347.64 72,883 217,204 25.0069

2070 . . . . . . . . . . . . . 935.61 595,869.20 90,065 271,938 33.4331

2075 . . . . . . . . . . . . . 1,127.41 736,528.90 111,100 339,702 44.6984

2080 . . . . . . . . . . . . . 1,358.53 911,214.93 136,902 423,609 59.7595

2085 . . . . . . . . . . . . . 1,637.03 1,128,606.16 168,729 527,853 79.8955

a The adjusted CPI is the CPI-W indexed to calendar year 2010.

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 2009-85 (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 2010 Dollars,a Calendar Years 2010-85

[In billions]

a The adjustment from current to constant dollars is by the adjusted CPI indexing series shown in table

VI.F6.

Calendar year

Income

excluding

interest

Interest

income

Total

income Cost

Assets at

end of year

Intermediate:

2010 . . . . . . . . . . . . . $673.2 $118.1 $791.3 $714.6 $2,617.0

2011 . . . . . . . . . . . . . 722.8 118.1 840.8 729.6 2,685.4

2012 . . . . . . . . . . . . . 751.0 122.1 873.1 749.3 2,748.8

2013 . . . . . . . . . . . . . 779.7 128.2 907.9 774.8 2,810.3

2014 . . . . . . . . . . . . . 806.4 134.6 941.0 802.8 2,871.9

2015 . . . . . . . . . . . . . 830.4 140.7 971.1 833.0 2,931.8

2016 . . . . . . . . . . . . . 855.4 146.7 1,002.1 864.8 2,989.2

2017 . . . . . . . . . . . . . 877.0 152.8 1,029.8 898.3 3,039.3

2018 . . . . . . . . . . . . . 896.7 158.3 1,054.9 933.3 3,078.1

2019 . . . . . . . . . . . . . 913.1 162.2 1,075.3 969.8 3,099.8

2020 . . . . . . . . . . . . . 929.1 164.8 1,094.0 1,007.4 3,101.9

2025 . . . . . . . . . . . . . 1,009.3 159.2 1,168.5 1,194.0 2,798.5

2030 . . . . . . . . . . . . . 1,098.2 115.2 1,213.4 1,365.7 1,948.0

2035b . . . . . . . . . . . .

b Estimates for later years are not shown because the combined OASI and DI Trust Funds are estimated to

become exhausted in 2037 under the intermediate assumptions and in 2029 under the high-cost assumptions.

1,196.9 44.3 1,241.2 1,514.2 623.3

Low-cost: 

2010 . . . . . . . . . . . . . 676.0 118.5 794.6 712.3 2,622.7

2011 . . . . . . . . . . . . . 737.1 120.0 857.1 728.9 2,721.7

2012 . . . . . . . . . . . . . 770.9 125.0 895.9 745.8 2,829.2

2013 . . . . . . . . . . . . . 806.1 132.2 938.3 770.5 2,947.1

2014 . . . . . . . . . . . . . 839.9 140.2 980.1 797.1 3,078.0

2015 . . . . . . . . . . . . . 870.7 148.6 1,019.3 825.3 3,217.5

2016 . . . . . . . . . . . . . 901.8 157.3 1,059.1 855.2 3,364.6

2017 . . . . . . . . . . . . . 928.4 166.9 1,095.3 887.5 3,512.8

2018 . . . . . . . . . . . . . 953.7 177.0 1,130.7 921.5 3,660.0

2019 . . . . . . . . . . . . . 976.3 186.4 1,162.7 957.3 3,800.7

2020 . . . . . . . . . . . . . 1,000.2 195.6 1,195.8 995.3 3,933.9

2025 . . . . . . . . . . . . . 1,122.5 235.0 1,357.6 1,188.2 4,478.8

2030 . . . . . . . . . . . . . 1,261.1 254.0 1,515.1 1,375.8 4,816.5

2035 . . . . . . . . . . . . . 1,421.1 267.5 1,688.6 1,548.1 5,066.9

2040 . . . . . . . . . . . . . 1,607.0 285.4 1,892.4 1,708.5 5,420.6

2045 . . . . . . . . . . . . . 1,819.2 318.1 2,137.3 1,874.9 6,070.0

2050 . . . . . . . . . . . . . 2,060.0 369.9 2,429.9 2,073.5 7,084.7

2055 . . . . . . . . . . . . . 2,334.6 443.3 2,777.9 2,313.8 8,513.2

2060 . . . . . . . . . . . . . 2,648.5 539.9 3,188.4 2,597.2 10,385.0

2065 . . . . . . . . . . . . . 3,008.2 666.0 3,674.2 2,913.7 12,831.8

2070 . . . . . . . . . . . . . 3,422.0 830.1 4,252.1 3,277.8 16,014.6

2075 . . . . . . . . . . . . . 3,896.7 1,041.2 4,937.8 3,699.4 20,104.1

2080 . . . . . . . . . . . . . 4,438.9 1,308.4 5,747.3 4,192.7 25,273.9

2085 . . . . . . . . . . . . . 5,058.4 1,639.4 6,697.9 4,780.7 31,664.4

High-cost:

2010 . . . . . . . . . . . . . 670.8 117.7 788.5 717.0 2,611.8

2011 . . . . . . . . . . . . . 709.5 116.7 826.2 728.6 2,646.8

2012 . . . . . . . . . . . . . 728.2 121.5 849.6 743.1 2,643.5

2013 . . . . . . . . . . . . . 746.7 127.6 874.3 773.9 2,632.6

2014 . . . . . . . . . . . . . 768.4 131.9 900.2 808.1 2,627.1

2015 . . . . . . . . . . . . . 788.3 134.4 922.7 840.5 2,613.1

2016 . . . . . . . . . . . . . 808.6 136.4 945.0 874.2 2,588.2

2017 . . . . . . . . . . . . . 824.5 137.0 961.5 909.2 2,545.7

2018 . . . . . . . . . . . . . 839.3 136.4 975.6 945.5 2,482.7

2019 . . . . . . . . . . . . . 851.9 133.9 985.8 983.1 2,394.5

2020 . . . . . . . . . . . . . 862.0 129.4 991.4 1,019.8 2,278.5

2025 b . . . . . . . . . . . . 907.2 79.9 987.1 1,198.5 1,249.7
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, as shown in table VI.F7. The difference between the income

values for each year is equal to the trust fund interest earnings. Thus the figure illustrates the fact that, under intermediate assumptions, combined

OASDI cost will be payable from (1) current tax income alone from 2012

through 2014, (2) current tax income plus amounts from the trust funds that

are less than annual interest income for years 2010, 2011, and 2015 through

2024, and (3) current tax income plus amounts from the trust funds that are

greater than annual interest income for years 2025 through 2036 (the year

preceding the year of trust fund exhaustion).

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.

Items included in the table are: 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 demographic and

economic assumptions, are presented to facilitate independent analysis.

 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

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 2010-85

[In billions]

Calendar year

Income

excluding

interest

Interest

income

Total

income Cost

Assets at

end of year

Intermediate:

2010 . . . . . . . . . . . . . $673.2 $118.1 $791.3 $714.6 $2,617.0

2011 . . . . . . . . . . . . . 734.8 120.0 854.8 741.7 2,730.1

2012 . . . . . . . . . . . . . 781.1 127.0 908.1 779.3 2,858.8

2013 . . . . . . . . . . . . . 832.6 137.0 969.5 827.4 3,001.0

2014 . . . . . . . . . . . . . 885.2 147.8 1,033.0 881.3 3,152.7

2015 . . . . . . . . . . . . . 937.1 158.8 1,095.9 940.1 3,308.5

2016 . . . . . . . . . . . . . 992.3 170.2 1,162.5 1,003.2 3,467.8

2017 . . . . . . . . . . . . . 1,045.9 182.2 1,228.1 1,071.3 3,624.6

2018 . . . . . . . . . . . . . 1,099.3 194.0 1,293.3 1,144.2 3,773.7

2019 . . . . . . . . . . . . . 1,150.8 204.4 1,355.2 1,222.2 3,906.6

2020 . . . . . . . . . . . . . 1,203.8 213.5 1,417.3 1,305.2 4,018.7

2025 . . . . . . . . . . . . . 1,501.3 236.8 1,738.0 1,775.9 4,162.5

2030 . . . . . . . . . . . . . 1,875.3 196.6 2,072.0 2,332.1 3,326.4

2035a . . . . . . . . . . . .

a Estimates for later years are not shown because the combined OASI and DI Trust Funds are estimated to

become exhausted in 2037 under the intermediate assumptions and in 2029 under the high-cost assumptions.

2,346.6 86.8 2,433.4 2,968.5 1,222.0

Low-cost:

2010 . . . . . . . . . . . . . 676.0 118.5 794.6 712.3 2,622.7

2011 . . . . . . . . . . . . . 745.3 121.3 866.7 737.1 2,752.3

2012 . . . . . . . . . . . . . 792.0 128.4 920.4 766.2 2,906.5

2013 . . . . . . . . . . . . . 843.0 138.3 981.2 805.7 3,082.0

2014 . . . . . . . . . . . . . 894.2 149.3 1,043.4 848.6 3,276.8

2015 . . . . . . . . . . . . . 943.6 161.0 1,104.6 894.4 3,487.0

2016 . . . . . . . . . . . . . 994.9 173.6 1,168.5 943.5 3,712.0

2017 . . . . . . . . . . . . . 1,042.7 187.4 1,230.1 996.8 3,945.4

2018 . . . . . . . . . . . . . 1,090.4 202.4 1,292.8 1,053.5 4,184.6

2019 . . . . . . . . . . . . . 1,136.4 216.9 1,353.3 1,114.2 4,423.7

2020 . . . . . . . . . . . . . 1,185.1 231.7 1,416.9 1,179.3 4,661.2

2025 . . . . . . . . . . . . . 1,454.2 304.5 1,758.6 1,539.3 5,801.9

2030 . . . . . . . . . . . . . 1,786.0 359.8 2,145.8 1,948.5 6,821.5

2035 . . . . . . . . . . . . . 2,200.4 414.3 2,614.6 2,397.1 7,845.8

2040 . . . . . . . . . . . . . 2,720.5 483.2 3,203.7 2,892.4 9,176.5

2045 . . . . . . . . . . . . . 3,367.0 588.8 3,955.8 3,470.1 11,234.5

2050 . . . . . . . . . . . . . 4,168.4 748.5 4,916.9 4,195.8 14,335.9

2055 . . . . . . . . . . . . . 5,164.7 980.8 6,145.5 5,118.7 18,833.8

2060 . . . . . . . . . . . . . 6,405.9 1,305.9 7,711.8 6,281.7 25,118.4

2065 . . . . . . . . . . . . . 7,954.9 1,761.1 9,716.0 7,704.8 33,932.0

2070 . . . . . . . . . . . . . 9,893.2 2,399.8 12,293.0 9,476.3 46,299.6

2075 . . . . . . . . . . . . . 12,316.7 3,290.9 15,607.6 11,693.0 63,545.4

2080 . . . . . . . . . . . . . 15,339.5 4,521.5 19,861.0 14,488.9 87,339.7

2085 . . . . . . . . . . . . . 19,111.5 6,194.0 25,305.5 18,062.0 119,632.5

High-cost:

2010 . . . . . . . . . . . . . 670.8 117.7 788.5 717.0 2,611.8

2011 . . . . . . . . . . . . . 727.0 119.6 846.5 746.5 2,711.9

2012 . . . . . . . . . . . . . 778.4 129.8 908.2 794.3 2,825.8

2013 . . . . . . . . . . . . . 833.2 142.4 975.6 863.6 2,937.8

2014 . . . . . . . . . . . . . 890.4 152.8 1,043.3 936.5 3,044.5

2015 . . . . . . . . . . . . . 948.2 161.7 1,110.0 1,011.1 3,143.4

2016 . . . . . . . . . . . . . 1,009.7 170.3 1,179.9 1,091.5 3,231.8

2017 . . . . . . . . . . . . . 1,068.6 177.6 1,246.2 1,178.4 3,299.5

2018 . . . . . . . . . . . . . 1,129.1 183.5 1,312.6 1,272.0 3,340.1

2019 . . . . . . . . . . . . . 1,189.7 187.0 1,376.7 1,372.9 3,343.9

2020 . . . . . . . . . . . . . 1,249.5 187.6 1,437.1 1,478.2 3,302.8

2025 a . . . . . . . . . . . . 1,584.6 139.5 1,724.1 2,093.4 2,182.9
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 and proceeds from taxation of OASDI

benefits. Cost consists of benefit payments, administrative expenses, net

transfers from the trust funds to 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) and proceeds from the taxation of

OASDI benefits. 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 tax income and cost.
Appendices

198

Table VI.F9.—OASDI and HI Annual Income Excluding Interest, Cost, and

Balance in Current Dollars, Calendar Years 2010-85

[In billions]

Calendar

year

OASDI HI Combined

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance

Intermediate:

2010 . . . . . $673 $715 -$41 $213 $246 -$33 $886 $960 -$74

2011 . . . . . 735 742 -7 225 257 -32 959 999 -39

2012 . . . . . 781 779 2 241 268 -27 1,022 1,047 -25

2013 . . . . . 833 827 5 267 279 -13 1,099 1,107 -8

2014 . . . . . 885 881 4 285 292 -7 1,170 1,174 -3

2015 . . . . . 937 940 -3 304 302 2 1,241 1,242 -1

2016 . . . . . 992 1,003 -11 323 318 5 1,315 1,321 -6

2017 . . . . . 1,046 1,071 -25 342 335 7 1,388 1,406 -18

2018 . . . . . 1,099 1,144 -45 361 355 6 1,460 1,499 -39

2019 . . . . . 1,151 1,222 -71 379 376 3 1,530 1,599 -68

2020 . . . . . 1,204 1,305 -101 398 401 -2 1,602 1,706 -104

2025 . . . . . 1,501 1,776 -275 507 556 -49 2,008 2,332 -324

2030 . . . . . 1,875 2,332 -457 645 769 -123 2,521 3,101 -580

2035 . . . . . 2,347 2,968 -622 822 1,042 -220 3,168 4,010 -842

2040 . . . . . 2,937 3,694 -758 1,046 1,364 -319 3,982 5,058 -1,076

2045 . . . . . 3,665 4,557 -892 1,327 1,736 -409 4,992 6,293 -1,301

2050 . . . . . 4,563 5,636 -1,073 1,681 2,169 -489 6,244 7,805 -1,561

2055 . . . . . 5,673 7,018 -1,344 2,126 2,689 -563 7,799 9,706 -1,907

2060 . . . . . 7,054 8,781 -1,726 2,689 3,343 -654 9,744 12,123 -2,380

2065 . . . . . 8,771 10,996 -2,225 3,397 4,162 -765 12,168 15,158 -2,990

2070 . . . . . 10,903 13,812 -2,909 4,285 5,176 -891 15,188 18,988 -3,800

2075 . . . . . 13,552 17,374 -3,822 5,398 6,400 -1,002 18,950 23,774 -4,824

2080 . . . . . 16,837 21,843 -5,006 6,788 7,842 -1,054 23,624 29,685 -6,060

2085 . . . . . 20,920 27,455 -6,535 8,528 9,551 -1,023 29,448 37,006 -7,558

Low-cost:

2010 . . . . . 676 712 -36 215 239 -25 891 952 -61

2011 . . . . . 745 737 8 227 247 -20 973 984 -12

2012 . . . . . 792 766 26 243 250 -6 1,035 1,016 19

2013 . . . . . 843 806 37 268 255 13 1,111 1,061 51

2014 . . . . . 894 849 46 286 261 25 1,180 1,109 71

2015 . . . . . 944 894 49 303 263 40 1,246 1,157 89

2016 . . . . . 995 944 51 320 270 50 1,315 1,213 102

2017 . . . . . 1,043 997 46 337 278 59 1,380 1,274 105

2018 . . . . . 1,090 1,054 37 353 287 66 1,443 1,341 103

2019 . . . . . 1,136 1,114 22 369 298 71 1,506 1,412 94

2020 . . . . . 1,185 1,179 6 386 310 76 1,571 1,490 82

2025 . . . . . 1,454 1,539 -85 481 387 95 1,936 1,926 9

2030 . . . . . 1,786 1,948 -162 600 480 120 2,386 2,429 -42

2035 . . . . . 2,200 2,397 -197 749 584 165 2,950 2,981 -31

2040 . . . . . 2,720 2,892 -172 938 692 246 3,659 3,584 74

2045 . . . . . 3,367 3,470 -103 1,176 817 359 4,543 4,287 256

2050 . . . . . 4,168 4,196 -27 1,476 970 506 5,645 5,166 479

2055 . . . . . 5,165 5,119 46 1,856 1,170 686 7,020 6,288 732

2060 . . . . . 6,406 6,282 124 2,336 1,443 893 8,742 7,725 1,017

2065 . . . . . 7,955 7,705 250 2,941 1,796 1,145 10,896 9,501 1,395

2070 . . . . . 9,893 9,476 417 3,706 2,238 1,468 13,599 11,714 1,885

2075 . . . . . 12,317 11,693 624 4,670 2,775 1,895 16,987 14,468 2,519

2080 . . . . . 15,340 14,489 851 5,882 3,412 2,470 21,221 17,900 3,321

2085 . . . . . 19,111 18,062 1,049 7,405 4,170 3,235 26,516 22,232 4,285
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 2010 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. The benefit amounts

are shown in constant 2010 dollars (adjusted to 2010 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, benefit levels shown for

High-cost:

2010 . . . . . $671 $717 -$46 $212 $252 -$41 $883 $970 -$87

2011 . . . . . 727 747 -20 223 268 -45 950 1,014 -64

2012 . . . . . 778 794 -16 241 290 -49 1,019 1,084 -65

2013 . . . . . 833 864 -30 269 311 -42 1,102 1,175 -73

2014 . . . . . 890 937 -46 290 334 -45 1,180 1,271 -91

2015 . . . . . 948 1,011 -63 311 354 -44 1,259 1,365 -107

2016 . . . . . 1,010 1,092 -82 333 383 -50 1,342 1,474 -132

2017 . . . . . 1,069 1,178 -110 354 413 -59 1,423 1,592 -169

2018 . . . . . 1,129 1,272 -143 376 449 -73 1,505 1,721 -216

2019 . . . . . 1,190 1,373 -183 399 489 -90 1,589 1,862 -273

2020 . . . . . 1,250 1,478 -229 421 533 -112 1,670 2,012 -341

2025 . . . . . 1,585 2,093 -509 547 828 -281 2,131 2,921 -790

2030 . . . . . 2,015 2,855 -840 712 1,282 -570 2,727 4,137 -1,410

2035 . . . . . 2,564 3,772 -1,208 925 1,949 -1,023 3,490 5,721 -2,231

2040 . . . . . 3,251 4,858 -1,607 1,198 2,816 -1,618 4,449 7,674 -3,225

2045 . . . . . 4,093 6,179 -2,086 1,539 3,857 -2,317 5,632 10,036 -4,403

2050 . . . . . 5,123 7,838 -2,714 1,967 5,064 -3,097 7,090 12,901 -5,811

2055 . . . . . 6,384 9,969 -3,585 2,501 6,441 -3,939 8,886 16,410 -7,524

2060 . . . . . 7,946 12,715 -4,769 3,174 8,050 -4,876 11,119 20,765 -9,645

2065 . . . . . 9,878 16,235 -6,357 4,016 10,002 -5,987 13,894 26,237 -12,344

2070 . . . . . 12,250 20,789 -8,538 5,064 12,382 -7,318 17,314 33,171 -15,857

2075 . . . . . 15,171 26,625 -11,454 6,368 15,217 -8,849 21,539 41,842 -20,303

2080 . . . . . 18,762 33,936 -15,174 7,987 18,520 -10,533 26,750 52,456 -25,707

2085 . . . . . 23,196 43,002 -19,806 9,999 22,407 -12,408 33,195 65,410 -32,214

Table VI.F9.—OASDI and HI Annual Income Excluding Interest, Cost, and

Balance in Current Dollars, Calendar Years 2010-85 (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 for 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 1991-2006. 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 that were shown in the 2000 and earlier Trustees

Reports. For the scaled medium earner, the general, career-average earnings

level is 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 prior to

retirement starting at age 22.

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 that were illustrated in the 2000 and

earlier Trustees Reports. As a result, values in this table for benefits under

the present-law Social Security benefit formula are essentially comparable to

those in earlier reports. Scaled-earnings cases are now being 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 are provided on scaled-earnings patterns in the Social Security Administration Actuarial Note

Number 2009.3, which may be found at www.socialsecurity.gov/OACT/NOTES/ran3/an2009-3.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 2010-85 

Year attain age 65b

Retirement at normal retirement age Retirement at age 65

Age at

retirement

Constant

2010

dollars c Percent ofearnings

Age at

retirement

Constant

2010

dollars c Percent ofearnings

 Scaled low earnings:d

2010 . . . . . . . . . . . 66:0 $10,729 56.3 65:0 $10,164 55.0

2015 . . . . . . . . . . . 66:0 11,271 54.4 65:0 10,519 51.5

2020 . . . . . . . . . . . 66:2 12,229 55.2 65:0 11,280 51.5

2025 . . . . . . . . . . . 67:0 13,055 55.4 65:0 11,313 49.1

2030 . . . . . . . . . . . 67:0 13,763 55.1 65:0 11,925 48.9

2035 . . . . . . . . . . . 67:0 14,578 55.0 65:0 12,633 48.8

2040 . . . . . . . . . . . 67:0 15,474 55.0 65:0 13,408 48.8

2045 . . . . . . . . . . . 67:0 16,425 55.1 65:0 14,235 48.8

2050 . . . . . . . . . . . 67:0 17,411 55.2 65:0 15,091 48.9

2055 . . . . . . . . . . . 67:0 18,430 55.2 65:0 15,973 48.9

2060 . . . . . . . . . . . 67:0 19,491 55.2 65:0 16,891 48.9

2065 . . . . . . . . . . . 67:0 20,603 55.3 65:0 17,856 48.9

2070 . . . . . . . . . . . 67:0 21,775 55.3 65:0 18,872 49.0

2075 . . . . . . . . . . . 67:0 23,014 55.2 65:0 19,945 48.9

2080 . . . . . . . . . . . 67:0 24,336 55.2 65:0 21,091 48.9

2085 . . . . . . . . . . . 67:0 25,752 55.1 65:0 22,319 48.9

Scaled medium earnings:e

2010 . . . . . . . . . . . 66:0 17,676 41.7 65:0 16,752 40.8

2015 . . . . . . . . . . . 66:0 18,590 40.4 65:0 17,341 38.2

2020 . . . . . . . . . . . 66:2 20,159 40.9 65:0 18,586 38.2

2025 . . . . . . . . . . . 67:0 21,517 41.1 65:0 18,647 36.4

2030 . . . . . . . . . . . 67:0 22,675 40.8 65:0 19,652 36.2

2035 . . . . . . . . . . . 67:0 24,023 40.8 65:0 20,817 36.2

2040 . . . . . . . . . . . 67:0 25,497 40.7 65:0 22,098 36.2

2045 . . . . . . . . . . . 67:0 27,071 40.8 65:0 23,460 36.2

2050 . . . . . . . . . . . 67:0 28,694 40.9 65:0 24,866 36.3

2055 . . . . . . . . . . . 67:0 30,371 40.9 65:0 26,321 36.3

2060 . . . . . . . . . . . 67:0 32,115 41.0 65:0 27,833 36.3

2065 . . . . . . . . . . . 67:0 33,950 41.0 65:0 29,423 36.3

2070 . . . . . . . . . . . 67:0 35,883 41.0 65:0 31,099 36.3

2075 . . . . . . . . . . . 67:0 37,923 40.9 65:0 32,865 36.3

2080 . . . . . . . . . . . 67:0 40,099 40.9 65:0 34,752 36.3

2085 . . . . . . . . . . . 67:0 42,435 40.9 65:0 36,777 36.2

Scaled high earnings:f

2010 . . . . . . . . . . . 66:0 23,430 34.6 65:0 22,212 33.8

2015 . . . . . . . . . . . 66:0 24,625 33.4 65:0 22,979 31.6

2020 . . . . . . . . . . . 66:2 26,713 33.9 65:0 24,630 31.6

2025 . . . . . . . . . . . 67:0 28,519 34.0 65:0 24,713 30.1

2030 . . . . . . . . . . . 67:0 30,053 33.8 65:0 26,047 30.0

2035 . . . . . . . . . . . 67:0 31,838 33.8 65:0 27,590 30.0

2040 . . . . . . . . . . . 67:0 33,795 33.8 65:0 29,286 30.0

2045 . . . . . . . . . . . 67:0 35,881 33.8 65:0 31,094 30.0

2050 . . . . . . . . . . . 67:0 38,029 33.9 65:0 32,955 30.0

2055 . . . . . . . . . . . 67:0 40,249 33.9 65:0 34,885 30.1

2060 . . . . . . . . . . . 67:0 42,566 33.9 65:0 36,892 30.1

2065 . . . . . . . . . . . 67:0 44,997 33.9 65:0 38,996 30.1

2070 . . . . . . . . . . . 67:0 47,557 33.9 65:0 41,216 30.1

2075 . . . . . . . . . . . 67:0 50,259 33.9 65:0 43,558 30.1

2080 . . . . . . . . . . . 67:0 53,143 33.9 65:0 46,058 30.0

2085 . . . . . . . . . . . 67:0 56,239 33.8 65:0 48,741 30.0
Appendices

202

Steady maximum earnings:g

2010 . . . . . . . . . . . 66:0 $27,955 28.3 65:0 $26,292 27.7

2015 . . . . . . . . . . . 66:0 29,954 26.9 65:0 27,797 25.4

2020 . . . . . . . . . . . 66:2 32,639 27.2 65:0 29,987 25.3

2025 . . . . . . . . . . . 67:0 35,046 27.3 65:0 30,147 24.0

2030 . . . . . . . . . . . 67:0 36,986 27.1 65:0 31,824 23.9

2035 . . . . . . . . . . . 67:0 39,199 27.0 65:0 33,731 23.8

2040 . . . . . . . . . . . 67:0 41,572 27.1 65:0 35,773 23.9

2045 . . . . . . . . . . . 67:0 44,144 27.1 65:0 37,992 23.9

2050 . . . . . . . . . . . 67:0 46,723 27.2 65:0 40,212 23.9

2055 . . . . . . . . . . . 67:0 49,392 27.2 65:0 42,513 24.0

2060 . . . . . . . . . . . 67:0 52,241 27.3 65:0 44,964 24.0

2065 . . . . . . . . . . . 67:0 55,222 27.3 65:0 47,533 24.0

2070 . . . . . . . . . . . 67:0 58,363 27.3 65:0 50,234 24.0

2075 . . . . . . . . . . . 67:0 61,683 27.2 65:0 53,092 24.0

2080 . . . . . . . . . . . 67:0 65,228 27.2 65:0 56,143 24.0

2085 . . . . . . . . . . . 67:0 69,031 27.2 65:0 59,415 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 2010-85 (Cont.) 

Year attain age 65b

Retirement at normal retirement age Retirement at age 65

Age at

retirement

Constant

2010

dollars c Percent of

earnings

Age at

retirement

Constant

2010

dollars c 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 this 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, 2009, about 969,000 persons were receiving monthly benefits from the OASI Trust Fund because of their disabilities or the disabilities

of children. This total includes 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 this trust fund to the persons described above totaled

$8,592 million in calendar year 2009. Table VI.G1 shows these and similar

figures for selected calendar years during 1960-2009, and estimated experience for 2010-19 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, includes payments for vocational rehabilitation services.

Total Children b

b Also includes certain mothers and fathers (see text).

Widowswidowers c

c In 1984 and later years, 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, 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

1986 . . . . . . . . . 614 565 49 2,219 2,022 197

1987 . . . . . . . . . 629 580 49 2,331 2,128 203

1988 . . . . . . . . . 640 591 48 2,518 2,307 211

1989 . . . . . . . . . 651 602 49 2,680 2,459 221

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 7,687 6,778 905

2009 . . . . . . . . . 969 857 112 8,592 7,618 971

Estimates under the intermediate assumptions:

2010 . . . . . . . . . 985 871 114 8,825 7,834 986

2011 . . . . . . . . . 1,000 885 115 9,004 8,006 993

2012 . . . . . . . . . 1,014 899 116 9,315 8,293 1,015

2013 . . . . . . . . . 1,028 913 116 9,743 8,688 1,046

2014 . . . . . . . . . 1,041 927 115 10,201 9,121 1,068

2015 . . . . . . . . . 1,053 939 113 10,685 9,580 1,091

2016 . . . . . . . . . 1,063 952 111 11,179 10,058 1,106

2017 . . . . . . . . . 1,072 963 108 11,688 10,552 1,121

2018 . . . . . . . . . 1,080 974 106 12,214 11,064 1,134

2019 . . . . . . . . . 1,089 985 104 12,769 11,593 1,159
205

OASI Expenditures for Disabled

Total benefit payments from the OASI Trust Fund with respect to disabled

beneficiaries are estimated to increase from $8,808 million in calendar year

2010 to $12,741 million in calendar year 2019, based on the intermediate

assumptions.

In calendar year 2009, 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

$127,000 million. Of this amount, $8,592 million or 6.8 percent represented

payments from the OASI Trust Fund. These and similar figures for selected

calendar years during 1960-2009 and estimates for calendar years 2010-19

are presented in table VI.G2.

Table VI.G2.—Benefit Disbursements Under the OASDI Program

With Respect to Disabled Beneficiaries

[Amounts in millions]

Calendar year Total a DI Trust Fund b

OASI Trust Fund

Amount c 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 d 92,446 6,741 6.8

2007 . . . . . . . . . 106,197 e 99,147 7,051 6.6

2008 . . . . . . . . . 114,063 e106,376 7,687 6.7

2009 . . . . . . . . . 127,000 e118,407 8,592 6.8
Appendices

206

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

Estimates under the intermediate assumptions:

2010 . . . . . . . . . $133,884 $125,060 $8,825 6.6

2011 . . . . . . . . . 139,479 130,475 9,004 6.5

2012 . . . . . . . . . 146,482 137,167 9,315 6.4

2013 . . . . . . . . . 152,740 142,997 9,743 6.4

2014 . . . . . . . . . 159,219 149,019 10,201 6.4

2015 . . . . . . . . . 166,283 155,598 10,685 6.4

2016 . . . . . . . . . 173,652 162,473 11,179 6.4

2017 . . . . . . . . . 181,338 169,650 11,688 6.4

2018 . . . . . . . . . 189,372 177,157 12,214 6.4

2019 . . . . . . . . . 197,844 185,076 12,769 6.5

a Beginning in 1966, includes payments for vocational rehabilitation services.

b Benefit payments to disabled workers and their children and spouses.

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).

d Excludes reimbursement of $0.7 billion for excess amounts of voluntary income tax withholding in 1999-

2005.

e Excludes interfund transfers to correct a trust fund allocation error made on payments to certain disabled

beneficiaries. These transfers amounted to $3.3 billion in 2007, $0.3 billion in 2008, and $0.1 billion in 2009

from OASI to DI.

Table VI.G2.—Benefit Disbursements Under the OASDI Program

With Respect to Disabled Beneficiaries (Cont.)

[Amounts in millions]

Calendar year Total a DI Trust Fund b

OASI Trust Fund

Amount c Percentage of total
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. Reimbursements were made from the trust funds to

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 in

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 amount of 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 other two

members are appointed by the President to serve as public representatives.

Cash flow. The cash flow for the OASI and DI Trust Funds is defined generally as actual or projected revenue and costs reflecting the levels of tax rates

and benefits scheduled in the law. Net cash flow is the difference between tax

revenue 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). Historical values for the CPI-W are published by the Bureau of Labor Statistics, Department of Labor.

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. 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.
Appendices

210

Generally, employers withhold contributions from wages, add an equal

amount of contributions, and pay both on a current basis. Also referred to as

taxes.

Cost. The cost for a year is defined to include scheduled benefit payments,

administrative expenses, net transfers from the trust funds to the Railroad

Retirement program under the financial-interchange provisions, and payments for vocational rehabilitation services for disabled beneficiaries; it

excludes transfers under the interfund borrowing provisions.

Cost-of-living adjustment. See “Automatic cost-of-living benefit increase.”

Cost rate. The cost rate for a year is the ratio of the cost of the program to

the taxable payroll for the year.

Covered earnings. Earnings in employment covered by the OASDI program.

Covered employment. All employment for which earnings are creditable

for Social Security purposes. Almost all employment is covered under the

program. 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 maximum amount of creditable earnings for each worker in a calendar year is determined by the contribution and

benefit base.

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
211

Glossary

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.

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, net transfers from the trust funds to the Railroad Retirement program under the financial-interchange provisions, and payments for vocational rehabilitation services for disabled beneficiaries; excludes transfers

under the interfund borrowing provisions.

Earnings. Unless otherwise qualified, all wages from employment and net

earnings from self-employment, whether or not they are taxable or covered.
Appendices

212

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 pays taxes (usually as a result of working for more

than one employer during a year). Employee 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 taxes

on the wages of employed persons to provide for Retirement, Survivors, and

Disability Insurance, and for Hospital Insurance. The tax is paid in equal

amounts by workers and their employers.

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 2010 began October 1, 2009, and will end September 30,

2010.

Full advance funding. A financing scheme in which taxes or 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 liability 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. Transfers from the General Fund of the

Treasury to the trust funds for specific purposes defined in the law, such as:

 • Payments corresponding to the employee-employer taxes on deemed

wage credits for military personnel.
213

Glossary

 • Interest on checks which are not negotiated 6 months after the month of

issue. (For checks issued before October, 1989, the principal was

returned to the trust funds as a general fund reimbursement; since that

time, the principal amount is automatically returned to the issuing fund

when the check is uncashed after a year.)

 • Administrative expenses incurred as a result of furnishing information

on deferred vested benefits to pension plan participants, as required by

the Employee Retirement Income Security Act of 1974 (Public Law 93-

406).

Gross domestic product—GDP. The total dollar value of all goods and services produced by labor and property located in the United States, regardless

of who supplies the labor or property.

HI contribution base. Annual dollar amount above which earnings in

employment covered under the HI program are not taxable. (Also referred to

as maximum contribution base, taxable maximum, and maximum taxable.)

Beginning in 1994, the HI contribution base was eliminated.

High-cost assumptions. See “Assumptions.”

Hospital Insurance (HI) Trust Fund. See “Trust fund.”

Immigration. See “Legal immigration” and “Other immigration.”

Income. Income for a given year is the sum of tax revenue on a liability

basis (payroll-tax contributions and income from the taxation of scheduled

benefits) and interest credited to the trust funds.

Income rate. Ratio of income from tax revenue on a liability basis (payrolltax contributions and income from the taxation of scheduled benefits) to the

OASDI taxable payroll for the year.

Infinite horizon. The period extending into the indefinite future.

Inflation. An increase in the volume of money and credit relative to available goods, resulting in an increase in the general price level.

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
Appendices

214

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.”

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 residence 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.
215

Glossary

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.

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
Appendices

216

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 tax 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 residence status, such as undocumented immigrants and

temporary workers and students.

Outgo. See “Disbursements.”

Par value. The value printed on the face of a bond. For both public and special issues held by the trust funds, par value is also the redemption value at

maturity.

Partial advance funding. A financing scheme in which taxes are scheduled

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 taxes

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 scheme in which taxes are scheduled

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, however, 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 taxes. A tax levied on the gross wages of workers. See tables VI.A1

and VI.F1.

Population in the Social Security area. See “Social Security area population.”
217

Glossary

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,

together with interest earnings would be just enough to meet each of the payments as they fell due. Present values are widely used 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 2010, 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 tax rates. An increase in the 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 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 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 because of the 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. The OldAge, Survivors, and Disability Insurance program is authorized by title II of

the Social Security Act.

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 balance 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. Because a trust fund level of about

1 year’s cost is considered to be an adequate reserve for unforeseen contingencies, 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 tax

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 the total income from taxes
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. SSI is funded through the General Fund of the Treasury

and administered by the Social Security Administration.

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 tax

rate, it yields the total amount of 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 “Contributions.”

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 taxes received under the Federal Insurance Contributions Act

and the Self-Employment Contributions Act, as well as 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 transfers of Federal general revenues. Funds not withdrawn for current monthly or service benefits, the

financial interchange, and administrative expenses are invested in interestbearing Federal securities, 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 a 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 check is administratively cancelled by the Department of the Treasury, and the issuing trust fund is reimbursed 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 2009 Trust Fund Financial Operations . . . . . . . . 5

II.B2 Tax Rates for 2009 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 Attained

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 2009 . . . . 23

III.A2 Operations of the DI Trust Fund, Calendar Year 2009 . . . . . . . 27

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

Calendar Year 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

III.A4 Comparison of Actual Calendar Year 2009 Trust Fund

Operations With Estimates Made in Prior Reports . . . . . . . . . 30

III.A5 Distribution of Benefit Payments by Type of Beneficiary or 

Payment, Calendar Years 2008 and 2009 . . . . . . . . . . . . . . . . 31

III.A6 Administrative Expenses as a Percentage of Contribution

Income and of Total Expenditures, Calendar Years 2005-09 . . 32

III.A7 Trust Fund Investment Transactions, Calendar Year 2009 . . . . 32

IV. ACTUARIAL ESTIMATES

IV.A1 Operations of the OASI Trust Fund, Calendar Years 2005-19 . 38

IV.A2 Operations of the DI Trust Fund, Calendar Years 2005-19 . . . 41

IV.A3 Operations of the Combined OASI and DI Trust Funds,

Calendar Years 2005-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

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

IV.B3 Trust Fund Ratios, Calendar Years 2010-85 . . . . . . . . . . . . . . 58
List of Tables

225

IV.B4 Components of Summarized Income Rates and Cost Rates, 

Calendar Years 2010-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

IV.B5 Components of 75-Year Actuarial Balance

Under Intermediate Assumptions . . . . . . . . . . . . . . . . . . . . . 63

IV.B6 Unfunded OASDI Obligations for 1935 (Program Inception)

Through the Infinite Horizon,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 65

IV.B7 Present Values of OASDI Cost Less Tax Revenue and Unfunded 

Obligations for Program Participants,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 66

IV.B8 Comparison of Long-Range Actuarial Balances With the

Minimum Allowable in the Test for Close Actuarial Balance,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 69

IV.B9 Reasons for Change in the 75-Year Actuarial Balance,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 71

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

V.A1 Principal Demographic Assumptions,

Calendar Years 1940-2085 . . . . . . . . . . . . . . . . . . . . . . . . . . 84

V.A2 Social Security Area Population as of July 1 and

Dependency Ratios, Calendar Years 1950-2085 . . . . . . . . . . . 87

V.A3 Period Life Expectancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

V.A4 Cohort Life Expectancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

V.B1 Principal Economic Assumptions . . . . . . . . . . . . . . . . . . . . . 99

V.B2 Additional Economic Factors . . . . . . . . . . . . . . . . . . . . . . . . 105

V.C1 Cost-of-Living Benefit Increases, Average Wage Index, 

Contribution and Benefit Bases, and Retirement Earnings

Test Exempt Amounts, 1975-2019. . . . . . . . . . . . . . . . . . . . . 109

V.C2 Values for Selected Wage-Indexed Program Parameters, 

Calendar Years 1978-2019 . . . . . . . . . . . . . . . . . . . . . . . . . . 112

V.C3 Legislated Changes in Normal Retirement Age and Delayed 

Retirement Credits, for Persons Reaching Age 62 in

Each Year 1986 and Later. . . . . . . . . . . . . . . . . . . . . . . . . . . 114

V.C4 OASI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1945-2085 . . . . . . . . . . . . . . . . 123

V.C5 DI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1960-2085 . . . . . . . . . . . . . . . . 131
List of Tables

226

VI. APPENDICES

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS

VI.A1 Contribution and Benefit Base and Contribution Rates . . . . . . 139

VI.A2 Operations of the OASI Trust Fund,

Calendar Years 1937-2009 . . . . . . . . . . . . . . . . . . . . . . . . . . 143

VI.A3 Operations of the DI Trust Fund,

Calendar Years 1957-2009 . . . . . . . . . . . . . . . . . . . . . . . . . . 145

VI.A4 Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1957-2009 . . . . . . . . . . . . . . . . . . . . . . . . . . 147

VI.A5 Assets of the OASI Trust Fund, End of Calendar Years

2008 and 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

VI.A6 Assets of the DI Trust Fund, End of Calendar Years

2008 and 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150

B. HISTORY OF ACTUARIAL BALANCE ESTIMATES

VI.B1 Long-Range OASDI Actuarial Balances as Shown

in the Trustees Reports for 1982-2010 . . . . . . . . . . . . . . . . . . 153

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2019

VI.C1 Operations of the OASI Trust Fund, Fiscal Year 2009. . . . . . . 156

VI.C2 Operations of the DI Trust Fund, Fiscal Year 2009 . . . . . . . . . 157

VI.C3 Operations of the Combined OASI and DI Trust Funds,

Fiscal Year 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

VI.C4 Operations of the OASI Trust Fund, Fiscal Years 2005-19 . . . 159

VI.C5 Operations of the DI Trust Fund, Fiscal Years 2005-19 . . . . . . 160

VI.C6 Operations of the Combined OASI and DI Trust Funds,

Fiscal Years 2005-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 Contribution Rates for the OASDI and HI Programs. . . . . . . . 180

VI.F2 OASDI and HI Annual Income Rates, Cost Rates, and

Balances, Calendar Years 2010-85 . . . . . . . . . . . . . . . . . . . . 182

VI.F3 Summarized OASDI and HI Income Rates and Cost Rates for 

Valuation Periods, Calendar Years 2010-84 . . . . . . . . . . . . . . 184

VI.F4 OASDI and HI Annual and Summarized Income, Cost, and

Balance as a Percentage of GDP, Calendar Years 2010-85. . . . 187

VI.F5 Ratio of OASDI Taxable Payroll to GDP,

Calendar Years 2010-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

VI.F6 Selected Economic Variables, Calendar Years 2009-85 . . . . . . 192

VI.F7 Operations of the Combined OASI and DI Trust Funds,

in Constant 2010 Dollars, Calendar Years 2010-85 . . . . . . . . . 194

VI.F8 Operations of the Combined OASI and DI Trust Funds, 

in Current Dollars, Calendar Years 2010-85 . . . . . . . . . . . . . . 196

VI.F9 OASDI and HI Annual Income Excluding Interest, Cost, and

Balance in Current Dollars, Calendar Years 2010-85 . . . . . . . 198

VI.F10 Annual Scheduled Benefit Amounts for Retired Workers

With Various Pre-Retirement Earnings Patterns Based on

Intermediate Assumptions, Calendar Years 2010-85 . . . . . . . . 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 . . . . . . . . . . . . . . . . . 205
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 OASDI Income Less Cost, Based on

Present Law Tax Rates and Scheduled Benefits . . . . . . . . . . . 13

II.D5 OASDI Cost and Scheduled Tax Revenue as a

Percentage of GDP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

II.D6 Long-Range OASDI Trust Fund Ratios Under

Alternative Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

II.D7 Annual Trust Fund Ratios. . . . . . . . . . . . . . . . . . . . . . . . . . . 17

II.D8 OASDI Annual Balances: 2009 and 2010 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: 2009 and 2010 Trustees Reports. . . 74

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

V.C1 Primary-Insurance-Amount Formula for Those

Newly Eligible in 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

V.C2 Maximum-Family-Benefit Formula for Those

Newly Eligible in 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

V.C3 DI Disability Incidence Rates, 1970-2085 . . . . . . . . . . . . . . . 127

V.C4 DI Disability Termination Rates, 1970-2085 . . . . . . . . . . . . . 129

V.C5 Comparison of DI Disability Incidence Rates,

Termination Rates and Conversion Ratios Under

Intermediate Assumptions, 1970-2085. . . . . . . . . . . . . . . . . . 130

V.C6 DI Disability Prevalence Rates, 1970-2085 . . . . . . . . . . . . . . 133
List of Figures

229

VI. APPENDICES

VI.E1 Annual Trust Fund Ratios. . . . . . . . . . . . . . . . . . . . . . . . . . . 175

VI.E2 Annual Cost Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176

VI.F1 Estimated OASDI Income and Cost in Constant Dollars,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 195
Index

230

A

Actuarial balance 9, 11, 46, 115, 151, 162

Actuarial balance, long-range test 69

Actuarial deficit 3, 11, 20, 60, 184

Actuarial estimates, LR 46

Actuarial estimates, SR 35

Adjusted program amounts 107

Administrative expenses 5, 31, 47, 135, 142, 156, 185, 193

Advance tax transfers 56, 144

Amendments 33

Annual balance 18, 46, 71

Assets 2, 5, 8, 25, 35, 47, 142, 156, 169, 179, 191

Assumptions 2, 8, 47, 76, 92, 107, 151, 162, 180, 185, 190, 203

Automatic cost-of-living benefit increase 39, 94, 107

Auxiliary benefits 117

Average benefits 135

Average earnings assumptions 95

Average indexed monthly earnings (AIME) 110

Average wage index 107, 190

Award 118

B

Baby-boom generation 2, 20, 39, 48, 52, 101, 126

Bend points 110

Beneficiaries, DI 124

Beneficiary 10, 39, 52, 76, 108, 154, 163, 185, 193, 203

Beneficiary, OASI 118

Benefit payments 5, 36, 47, 135, 142, 156, 168, 185, 193, 205

Benefit termination 7, 40

Best estimate 7, 20, 35, 76

Board of Trustees 35, 92, 138

C

Close actuarial balance 46, 66

Closed group unfunded obligation 66, 209

Constant dollars 195

Consumer Price Index 94, 168, 190, 208

Contribution and benefit base 37, 95, 108, 139, 190, 208

Contributions 5, 138, 156, 179, 185, 193, 207

Cost 2

Cost rate 3, 9, 47, 115, 179

Cost-of-living adjustment 107

Covered earnings 5, 107, 189

Covered employment 7, 37, 95, 114, 138, 167
231

Index

Covered worker 54, 114, 165

Creditable earnings 210

Current dollars 190

Current-payment status 39, 125, 129, 130, 131, 208

D

Deemed wage credit 47, 115

Delayed retirement credit 113

Demographic assumptions 7, 18, 35, 47, 77, 101, 107, 151, 191, 207

Deterministic model 173, 178, 211

DI beneficiaries 124

Disability 138, 165, 203

Disability conversion ratio 129

Disability incidence rate 76, 125, 127, 165, 170, 207

Disability Insurance Trust Fund 209

Disability prevalence rate 125, 131, 133

Disability termination rate 171

Disabled-worker benefit 127, 211

Disbursements 22, 23, 24, 27, 29, 35, 156, 157, 158, 204, 205

E

Earnings 2, 5, 36, 47, 95, 108, 138, 152, 179, 189, 190, 207

Earnings test 95, 108, 208

Economic assumptions 7, 18, 35, 44, 47, 92, 101, 107, 151, 191, 207

Excess wages 47, 115, 191

Expenditures 5, 7, 26, 32, 35, 39, 42, 142, 143, 145, 147, 211

F

Federal Insurance Contributions Act 179, 209

Fertility assumptions 78

Financial interchange 5, 136, 142

Fiscal year 81, 144, 156

Full advance funding 212

G

General Fund of the Treasury 38, 39, 140, 207

General fund reimbursement 212

Gross domestic product 3, 52, 76, 93, 103, 185

Gross domestic product projections 103

H

High-cost assumptions 7, 15, 35, 36, 48, 76, 92, 128, 162, 177, 180, 185,

190, 207

Hospital Insurance program 139, 179, 215

Hospital Insurance Trust Fund 185
Index

232

I

Immigration 7, 76, 77, 80, 84, 165, 173, 207, 213

Immigration assumptions 80

Income rate 3, 9, 47, 179

Inflation 7, 76, 94, 190, 207

Inflation assumptions 94

Insured population 7, 116

Insured status 112

Interest 36, 104, 141, 151, 156, 180, 185, 191, 207

Interest rate 37, 76, 151, 169, 191, 207

Interest rate projections 103

Interfund borrowing 144, 210

Intermediate assumptions 7, 35, 37, 39, 48, 76, 128, 162, 181, 185, 190,

194, 195, 196, 203, 207

L

Labor force projections 100

Legal immigration 81, 85, 214

Life expectancy 2, 20, 76, 88, 100, 214

Life expectancy estimates 88

Long range 9, 46, 77, 92, 118, 151, 179, 185, 190

Low-cost assumptions 7, 15, 35, 48, 76, 92, 128, 162, 177, 180, 190, 207

Lump-sum death payment 135

M

Medicare 79, 215

Military service 38, 47, 95, 115, 136, 138, 212

N

National average wage index 107, 190

Normal retirement age 108, 124, 199, 210

O

OASI beneficiaries 118

Old-Age and Survivors Insurance Trust Fund 138, 209

Old-law base 112

Open group unfunded obligation 3, 9, 18, 46, 63, 177, 209, 215

Other immigration 81, 166, 216
233

Index

P

Par value 141

Partial advance funding 216

Pay-as-you-go financing 151

Payroll taxes 2, 21, 61, 107, 115, 154, 162, 179, 193

Population estimates 85

Population in the Social Security area 37, 55, 85, 114, 166

Present value 151

Primary insurance amount (PIA) 110

Productivity assumptions 93

Q

Quarters of coverage 116

R

Railroad Retirement 47, 112, 136, 142, 156, 179, 185, 193, 210

Reallocation of tax rates 217

Real-wage differential 98, 166

Recession 35

Retired-worker benefit 118, 165, 203

Retirement age 40, 108, 199, 210

Retirement earnings test 95, 108

Retirement eligibility age 1, 165

S

Self-employment 47, 94, 115, 138, 180, 209

Self-Employment Contributions Act 209, 218

Sensitivity analysis 162

Short range 8, 35, 92, 118

Social Security Act 107, 141, 190, 203, 209

Social Security amendments 33

Solvency 14, 46, 218

Special public-debt obligation 39, 106, 141, 169, 191

Stochastic projections 173

Substantial gainful activity 124, 211

Summarized balance 186

Summarized income and cost rates 60, 151, 162, 183, 207

Supplemental Security Income 156

Supplementary Medical Insurance program 179, 215

Survivor benefit 2, 6, 121, 208
Index

234

T

Taxable earnings 36, 55, 108, 138, 152, 189, 208

Taxable payroll 3, 9, 20, 47, 94, 115, 151, 163, 179, 185, 190, 210

Taxable self-employment income 138, 220

Taxable wages 116, 140, 220

Taxation of benefits 5, 47, 136, 185, 193, 213

Taxes 5, 107, 138, 180, 210

Termination 40, 76

Termination rate 7, 40, 118, 171, 207

Test of short-range financial adequacy 36, 67, 218

Total fertility rate 78, 162

Trust fund financial operations 5, 22, 36, 138

Trust fund ratio 8, 35, 46, 56, 144, 159, 222

U

Unemployment projections 100

Unfunded obligation 3, 9, 12, 14, 18, 46, 63, 66, 177, 209, 215, 222

Unnegotiated check 144, 156

V

Valuation period 11, 46, 151, 162, 183, 207

Vocational rehabilitation 47, 142, 157, 185, 193, 205, 210

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