109th Congress, 2d Session – – – – – – – – – – – – – – House Document 109-103

THE 2006 ANNUAL REPORT OF THE BOARD OF 

TRUSTEES OF THE FEDERAL OLD-AGE AND SURVIVORS 

INSURANCE AND FEDERAL DISABILITY INSURANCE 

TRUST FUNDS

COMMUNICATION

FROM

THE BOARD OF TRUSTEES, FEDERAL OLD-AGE AND 

SURVIVORS INSURANCE AND FEDERAL DISABILITY 

INSURANCE TRUST FUNDS

TRANSMITTING

THE 2006 ANNUAL REPORT OF THE BOARD OF TRUSTEES OF THE

FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND FEDERAL

DISABILITY INSURANCE TRUST FUNDS

May 1, 2006.—Referred to the Committee on Ways and Means

 and ordered to be printed

U.S. GOVERNMENT PRINTING OFFICE

26-267 WASHINGTON: 2006
.

.
CONTENTS

(V)

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

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

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

B. TRUST FUND FINANCIAL OPERATIONS IN 2005 . . . . . . . 4

C. ASSUMPTIONS ABOUT THE FUTURE . . . . . . . . . . . . . . . . 6

D. PROJECTIONS OF FUTURE FINANCIAL STATUS . . . . . . . 7

E. CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND

LEGISLATIVE CHANGES IN THE LAST YEAR . . . . . . . . . . 18

A. OPERATIONS OF THE OLD-AGE AND SURVIVORS 

INSURANCE (OASI) AND DISABILITY INSURANCE (DI) 

TRUST FUNDS, IN CALENDAR YEAR 2005 . . . . . . . . . . . . 18

1. OASI Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

2. DI Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

3. OASI and DI Trust Funds, Combined . . . . . . . . . . . . . . . . . . 24

B. SOCIAL SECURITY AMENDMENTS SINCE THE

2005 REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

IV. ACTUARIAL ESTIMATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

A. SHORT-RANGE ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . 29

1. Operations of the OASI Trust Fund. . . . . . . . . . . . . . . . . . . . 30

2. Operations of the DI Trust Fund . . . . . . . . . . . . . . . . . . . . . . 33

3. Operations of the Combined OASI and DI Trust Funds . . . . . 37

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

Estimates From the 2005 Report . . . . . . . . . . . . . . . . . . . . . . 38

B. LONG-RANGE ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . . 40

1. Annual Income Rates, Cost Rates, and Balances . . . . . . . . . . 41

2. Comparison of Workers to Beneficiaries . . . . . . . . . . . . . . . . 46

3. Trust Fund Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

4. Summarized Income Rates, Cost Rates, and Balances . . . . . . 53

5. Additional Measures of OASDI Unfunded Obligations . . . . . 57

6. Test of Long-Range Close Actuarial Balance . . . . . . . . . . . . 61

7. Reasons for Change in Actuarial Balance From Last Report . . 64
(VI)

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

A. DEMOGRAPHIC ASSUMPTIONS AND METHODS . . . . . . . 70

1. Fertility Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

2. Mortality Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

3. Immigration Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 74

4. Total Population Estimates. . . . . . . . . . . . . . . . . . . . . . . . . . 77

5. Life Expectancy Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . 79

B. ECONOMIC ASSUMPTIONS AND METHODS . . . . . . . . . . . 83

1. Productivity Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 83

2. Price Inflation Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . 84

3. Average Earnings Assumptions . . . . . . . . . . . . . . . . . . . . . . 85

4. Assumed Real-Wage Differentials . . . . . . . . . . . . . . . . . . . . 87

5. Labor Force and Unemployment Projections . . . . . . . . . . . . . 89

6. Gross Domestic Product Projections . . . . . . . . . . . . . . . . . . . 91

7. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

C. PROGRAM-SPECIFIC ASSUMPTIONS AND METHODS . . . 96

1. Automatically Adjusted Program Amounts . . . . . . . . . . . . . . 96

2. Covered Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

3. Taxable Payroll and Payroll Tax Revenue . . . . . . . . . . . . . . . 104

4. Insured Population. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

5. Old-Age and Survivors Insurance Beneficiaries. . . . . . . . . . . 107

6. Disability Insurance Beneficiaries. . . . . . . . . . . . . . . . . . . . . 113

7. Average Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

8. Benefit Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

9. Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

10. Railroad Retirement Financial Interchange . . . . . . . . . . . . . . 121

11. Benefits to Uninsured Persons . . . . . . . . . . . . . . . . . . . . . . . 122

12. Military-Service Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . 122

13. Income From Taxation of Benefits . . . . . . . . . . . . . . . . . . . . 122
(VII)

VI. APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS. . 124

B. HISTORY OF ACTUARIAL BALANCE ESTIMATES . . . . . . 138

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2015 . . . . . . . . . . . . . . . . . . . . . . 143

D. LONG-RANGE SENSITIVITY ANALYSIS . . . . . . . . . . . . . . 149

1. Total Fertility Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

2. Death Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150

3. Net Immigration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152

4. Real-Wage Differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

5. Consumer Price Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154

6. Real Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

7. Disability Incidence Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 157

8. Disability Termination Rates . . . . . . . . . . . . . . . . . . . . . . . . 158

E. STOCHASTIC PROJECTIONS. . . . . . . . . . . . . . . . . . . . . . . . 160

1. Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

2. Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

3. Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162

F. ESTIMATES FOR OASDI AND HI, SEPARATE AND 

COMBINED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

1. Estimates as a Percentage of Taxable Payroll. . . . . . . . . . . . . 166

2. Estimates as a Percentage of Gross Domestic Product . . . . . . 171

3. Estimates in Dollars. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176

G. ANALYSIS OF BENEFIT DISBURSEMENTS FROM THE

OASI TRUST FUND WITH RESPECT TO DISABLED 

BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

H. GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192

LIST OF TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208

LIST OF FIGURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212

INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213

STATEMENT OF ACTUARIAL OPINION. . . . . . . . . . . . . . . 218
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THE 2006 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 provides protection against the loss of earnings due to retirement, death, or disability. The OASDI program consists of two separate parts

which pay monthly benefits to workers and their families—Old-Age and

Survivors Insurance (OASI) and Disability Insurance (DI). Under OASI,

monthly benefits are paid to retired workers and their families and to survivors of deceased workers. Under DI, monthly benefits are paid to disabled

workers and their families.

The Board of Trustees was established under the Social Security Act to oversee the financial operations of the OASI and DI Trust Funds. The Board is

composed of six members. Four members serve by virtue of their positions

in the Federal Government: the Secretary of the Treasury, who is the Managing Trustee; the Secretary of Labor; the Secretary of Health and Human Services; and the Commissioner of Social Security. The other two members,

John L. Palmer and Thomas R. Saving, are public representatives initially

appointed by the President on October 28, 2000, and reappointed on April

18, 2006. 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 financial and actuarial status of the OASI

and DI Trust Funds. This annual report, for 2006, is the 66th such report.
Overview

2

II. OVERVIEW

A. HIGHLIGHTS

The report’s major findings are summarized below.

In 2005

At the end of 2005, 48 million people were receiving benefits: 33 million

retired workers and their dependents, 7 million survivors of deceased workers, and 8 million disabled workers and their dependents. During the year an

estimated 159 million people had earnings covered by Social Security and

paid payroll taxes. Total benefits paid in 2005 were $521 billion. Income was

$702 billion, and assets held in special issue U.S. Treasury securities grew to

$1.9 trillion. 

Short-Range Results

The OASI and DI Trust Funds, individually and combined, are adequately

financed over the next 10 years under the intermediate assumptions. The

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

from $1,859 billion at the beginning of 2006, or 329 percent of annual

expenditures, to $3,932 billion at the beginning of 2015, or 409 percent of

annual expenditures in that year. Combined assets were projected in last

year’s report to rise to 337 percent of annual expenditures at the beginning of

2006, and 418 percent at the beginning of 2015. 

Long-Range Results

Under the intermediate assumptions, OASDI cost will increase rapidly

between about 2010 and 2030, due to the retirement of the large baby-boom

generation. After 2030, increases in life expectancy and relatively low fertility rates will continue to increase Social Security system costs, but more

slowly. Annual cost will exceed tax income starting in 2017 at which time

the annual gap will be covered with cash from net redemptions of special

obligations of the Treasury, until these assets are exhausted in 2040. Separately, the DI fund is projected to be exhausted in 2025 and the OASI fund in

2042. For the 75-year projection period, the actuarial deficit is 2.02 percent

of taxable payroll, 0.09 percentage point larger than in last year’s report. The

open group unfunded obligation for OASDI over the 75-year period is $4.6

trillion in present value, $0.6 trillion more than the unfunded obligation estimated a year ago. Trust fund exhaustion is sooner and the unfunded obligation increased more than would occur from changing the valuation period
3

Highlights

alone in this report largely because of a lower assumed ultimate real interest

rate.

The OASDI annual cost rate is projected to increase from 11.22 percent of

taxable payroll in 2006, to 16.71 percent in 2030, and to 18.74 percent in

2080, or to a level that is 5.38 percent of taxable payroll more than the projected income rate for 2080. For last year’s report the annual cost for 2080

was estimated at 19.12 percent of payroll. Expressed in relation to the projected gross domestic product (GDP), OASDI cost is estimated to rise from

the current level of 4.3 percent of GDP, to 6.2 percent in 2030, and to 6.3

percent in 2080. In last year’s report OASDI cost was estimated at 6.4 percent of GDP for 2080. Projected cost for 2080 is lower in this year’s report as

percentages of taxable payroll and GDP largely due to a higher assumed

birth rate.

Conclusion

Annual cost will begin to exceed tax income in 2017 for the combined

OASDI Trust Funds, which are projected to become exhausted and thus

unable to pay scheduled benefits in full on a timely basis in 2040 under the

long-range intermediate assumptions. For the 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 2.02 percentage points, benefits could be reduced during the period in a manner equivalent to an immediate and permanent reduction of 13.3 percent, general revenue transfers equivalent to $4.6 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 deficits should be addressed in a timely way to

allow for a gradual phasing in of the necessary changes and to provide

advance notice to workers. The sooner adjustments are made the smaller and

less abrupt they will have to be. Social Security plays a critical role in the

lives of this year’s 49 million beneficiaries, and 162 million covered workers

and their families. With informed discussion, creative thinking, and timely

legislative action, we will ensure that Social Security continues to protect

future generations.
Overview

4

B. TRUST FUND FINANCIAL OPERATIONS IN 2005

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

the DI and the combined OASDI Trust Funds in calendar year 2005.

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

In 2005, net contributions accounted for 84 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 were

paid on covered earnings up to a specified maximum annual amount, which

was $90,000 in 2005 and is increased each year automatically (to $94,200 in

2006) as the average wage increases. The tax rates scheduled under current

law for 2005 and later are shown in table II.B2.

Two percent of OASDI Trust Fund income came from subjecting up to

50 percent of Social Security benefits above a certain level to Federal personal income taxation, and 13 percent of OASDI income came from interest

earned on investment of OASDI Trust Fund reserves. Social Security’s assets

are invested in interest-bearing securities of the U.S. Government. In 2005

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

Table II.B1.—Summary of 2005 Trust Fund Financial Operations

Amounts (in billions)

OASI DI OASDI

Assets at the end of 2004 . . . . . . . . . . . . . . . . . . . . . . $1,500.6 $186.2 $1,686.8

Total income in 2005 . . . . . . . . . . . . . . . . . . . . . . . . . 604.3 97.4 701.8

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . 506.9 86.1 592.9

Taxation of benefits . . . . . . . . . . . . . . . . . . . . . . . . 13.8 1.1 14.9

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84.0 10.3 94.3

Total expenditures in 2005. . . . . . . . . . . . . . . . . . . . . 441.9 88.0 529.9

Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . 435.4 85.4 520.7

Railroad Retirement financial interchange . . . . . . 3.6 .3 3.9

Administrative expenses . . . . . . . . . . . . . . . . . . . . 3.0 2.3 5.3

Net increase in assets in 2005 . . . . . . . . . . . . . . . . . . 162.4 9.4 171.8

Assets at the end of 2005 . . . . . . . . . . . . . . . . . . . . . . 1,663.0 195.6 1,858.7

Table II.B2.—Tax Rates for 2005 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
5

Calendar Year 2005 Operations

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

OASDI Trust Funds in 2005 went to pay retirement, survivor, and disability

benefits totaling $520.7 billion. The financial interchange with the Railroad

Retirement program resulted in a payment of $3.9 billion from the combined

OASDI Trust Funds, or about 0.7 percent of total expenditures. The administrative expenses of the Social Security program were $5.3 billion, or about

1.0 percent of total expenditures. 

Assets of the trust funds provide a reserve to pay benefits whenever expenditures exceed income. Assets increased by $171.8 billion in 2005 because

income to each fund exceeded expenditures. At the end of 2005, the combined assets of the OASI and the DI Trust Funds were 329 percent of estimated expenditures for 2006.
Overview

6

C. ASSUMPTIONS ABOUT THE FUTURE

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

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

work force, and the level of workers’ earnings. These factors will depend in

turn upon future birth rates, death rates, immigration, marriage and divorce

rates, retirement-age patterns, disability incidence and termination 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, designated as alternative II, 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 on the uncertainty of

the projections.

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

information. This careful review and updating of the assumptions on an

annual basis helps ensure that they provide the Trustees’ best estimate of

future possibilities.

Table II.C1.—Ultimate1 Values of Key Demographic and Economic Assumptions

for the Long-Range (75-year) Projection Period

1 Ultimate values are assumed to be reached within 2 to 25 years. See chapter V for details.

Ultimate assumptions Intermediate Low Cost High Cost

Total fertility rate (children per woman) . . . . . . . . . . . 2.0 2.3 1.7

Average annual percentage reduction in total age-sexadjusted death rates from 2030 to 2080. . . . . . . . . . .70 .33 1.22

Annual net immigration (in thousands) . . . . . . . . . . . . 900 1,300 672.5

Annual percentage change in:

Productivity (total U.S. economy) . . . . . . . . . . . . . . 1.7 2.0 1.4

Average wage in covered employment. . . . . . . . . . . 3.9 3.4 4.4

Consumer Price Index (CPI). . . . . . . . . . . . . . . . . . . 2.8 1.8 3.8

Real-wage differential (percent). . . . . . . . . . . . . . . . . . 1.1 1.6 .6

Unemployment rate (percent). . . . . . . . . . . . . . . . . . . . 5.5 4.5 6.5

Annual trust fund real interest rate (percent) . . . . . . . . 2.9 3.6 2.1
7

Future Financial Status

D. PROJECTIONS OF FUTURE FINANCIAL STATUS

Short-Range Actuarial Estimates

For the short range (2006-2015), the Trustees measure trust fund adequacy

by comparing assets at the beginning of each year to projected program cost

for that year under the intermediate set of assumptions. Having a trust fund

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

least equal to projected outgo during the year—is considered a good indication of a trust fund’s ability to cover most short-term contingencies. Both the

OASI and the DI trust fund ratios under the intermediate assumptions exceed

100 percent throughout the short-range period and therefore satisfy the Trustees’ short-term test for financial adequacy. Figure II.D1 below shows the

trust fund ratios for the combined OASI and DI Trust Funds for the next 10

years.

Long-Range Actuarial Estimates

The financial status of the trust funds over the next 75 years is measured in

terms of 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). Considering

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

[Assets as a percentage of annual expenditures]

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

550%

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Calendar year

Historical Estimated

"Adequate" level for trust fund ratio
Overview

8

Social Security’s cost as a percentage of the total U.S. economic output

(gross domestic product or GDP) provides an additional perspective. 

The year-by-year relationship between income and cost rates shown in figure

II.D2 illustrates the expected pattern of cash flow for the OASDI program

over the full 75-year period. Under the intermediate assumptions, the OASDI

cost rate is projected to decline slightly during 2006 through 2008 and then

increase up to the current level within the next 2 years. It then begins to

increase rapidly and first exceeds the income rate in 2017, producing cashflow deficits thereafter. Despite these cash-flow deficits, beginning in 2017,

redemption of trust fund assets will allow continuation of full benefit payments on a timely basis until 2040, when the trust funds will become

exhausted. This redemption process will require a flow of cash from the

General Fund of the Treasury. Pressures on the Federal Budget will thus

emerge well before 2040. Even if a trust fund’s assets are exhausted, however, tax income will continue to flow into the fund. Present tax rates would

be sufficient to pay 74 percent of scheduled benefits after trust fund exhaustion in 2040 and 70 percent of scheduled benefits in 2080.

Social Security’s cost rate generally will continue rising rapidly through

about 2030 as the baby-boom generation reaches retirement age. Thereafter,

the cost rate is estimated to rise at a slower rate for about 20 years as the

 Figure II.D2.—OASDI Income and Cost Rates Under Intermediate Assumptions

[As a percentage of taxable payroll]

0%

5%

10%

15%

20%

25%

2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Cost: Scheduled and 

payable benefits

Income

Payable benefits as percent

of scheduled benefits:

2006-39: 100%

2040: 74%

2080: 70%

Cost: Scheduled but

not payable benefits

Expenditures: Income = payable 

benefits starting in the year the 

trust funds are exhausted (2040)
9

Future Financial Status

baby boom ages and decreases in size. Continued reductions in death rates

and relatively low birth rates will cause a significant upward shift in the average age of the population and will push the cost rate from 17.6 percent of

taxable payroll in 2050 to 18.7 percent by 2080 under the intermediate

assumptions. In a pay-as-you-go system (with no trust fund assets or borrowing authority), this 18.7-percent cost rate means the combination of the payroll tax (scheduled to total 12.4 percent) and proceeds from income taxes on

benefits (expected to be 1.0 percent of taxable payroll in 2080) would have

to equal 18.7 percent of taxable payroll to pay all currently scheduled benefits. After 2080, the upward shift in the average age of the population is

likely to continue and to increase the gap between OASDI costs and income.

The primary reason that the OASDI cost rate will increase rapidly between

2010 and 2030 is that, as the large baby-boom generation born in the years

1946 through 1965 retires, the number of beneficiaries will increase much

more rapidly than the number of workers. The estimated number of workers

per beneficiary is shown in figure II.D3. In 2005, there were about 3.3 workers for every OASDI beneficiary. The baby-boom generation will have

largely retired by 2030, and the projected ratio of workers to beneficiaries

will be only 2.2 at that time. Thereafter, the number of workers per beneficiary will slowly decline, and the OASDI cost rate will continue to increase

largely due to projected reductions in mortality.

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

0

1

2

3

4

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Historical Estimated
Overview

10

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. This single number summarizes the adequacy of

program financing for the period. When the actuarial balance is negative, the

actuarial deficit can be interpreted as the percentage that would have to be

added to the current law income rate in each of the next 75 years, or subtracted from the cost rate in each year, to bring the funds into actuarial balance. In this report, the actuarial balance under the intermediate assumptions

is a deficit of 2.02 percent of taxable payroll for the combined OASI and DI

Trust Funds. The actuarial deficit was 1.92 percent in the 2005 report and has

been in the range of 1.86 percent to 2.23 percent for the last ten reports.

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). . . . . . . . . . . . . . 462 203 409

Year attained. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 2006 2015

Year of trust fund exhaustion. . . . . . . . . . . . . . . . . . . 2042 2025 2040
11

Future Financial Status

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

examine the cumulative value of taxes less costs, in present value. Figure

II.D4 shows the present value of cumulative OASDI taxes less costs over the

next 75 years. The balance of the combined trust funds peaks at $2.5 trillion

in 2017 (in present value) and then turns downward. This cumulative amount

continues to be positive, indicating trust fund assets, or reserves, through

2039. However, after 2039 this cumulative amount becomes negative, indicating a net unfunded obligation. Through the end of 2080, the combined

funds have a present-value unfunded obligation of $4.6 trillion. This

unfunded obligation represents 1.9 percent of future taxable payroll and

0.7 percent of future GDP, through the end of the 75-year projection period.

 Figure II.D4.—Cumulative OASDI Income Less Cost, Based on Present Law Tax Rates 

and Scheduled Benefits

[Present value as of January 1, 2006, in trillions]

-$5

-$4

-$3

-$2

-$1

$0

$1

$2

$3

2005 2020 2035 2050 2065 2080

Ending year of valuation period

Unfunded obligation

(negative)

Trust fund assets

(positive)

2040
Overview

12

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

cost as a share of U.S. economic output. Figure II.D5 shows that Social

Security’s cost as a percentage of GDP will grow from 4.3 percent in 2006 to

6.2 percent in 2030, and then slightly increase to 6.3 percent in 2080. However, Social Security’s scheduled tax income is projected to be about

4.9 percent of GDP in both 2006 and 2030, and then to decrease to

4.5 percent in 2080.

Even a 75-year period is not long enough to provide a complete picture of

Social Security’s financial condition. Figures II.D2, II.D4, and II.D5 show

that the program’s financial condition continues to worsen at the end of the

period. Overemphasis on summary measures 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

order to provide a more complete description of Social Security’s very longrun financial condition, this report also includes summary measures for a

time period that extends to the infinite horizon. These calculations show that

extending the horizon beyond 75 years continues to increase the unfunded

obligation. Over the infinite horizon, the shortfall (unfunded obligation) is

$13.4 trillion in present value, or 3.7 percent of future taxable payroll and 1.3

percent of future GDP. These calculations of the shortfall indicate that much

larger changes would be required to achieve solvency over the infinite future

 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
13

Future Financial Status

as compared to changes needed to balance 75-year period summary measures. The increase in the measured unfunded obligation over the infinite

horizon from $11.1 trillion in last year’s report to $13.4 trillion in this report

is largely due to the reduction in the real interest rate assumption from 3.0 to

2.9 percent.

Changes From Last Year’s Report

The long-range OASDI actuarial deficit of 2.02 percent of taxable payroll for

this year’s report is somewhat larger than the deficit of 1.92 percent of taxable payroll shown in last year’s report under intermediate assumptions.

Changing the assumed real interest rate and the valuation period are the main

reasons for the increase in the deficit. Changes in data, methods, and other

assumptions combine to have a small positive offsetting effect on the actuarial deficit. For a detailed description of the specific changes identified in

table II.D2 below, see section IV.B.7 on page 64.

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 $4.0 trillion (present discounted value as of January 1, 2005)

to $4.6 trillion (present discounted value as of January 1, 2006). The negative effects of three factors explain most of the measured increase in the

unfunded obligation: lowering the ultimate real interest rate, advancing the

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

Under Intermediate Assumptions

[As a percentage of taxable payroll]

Item OASI DI OASDI

Shown in last year's report:

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.93 1.94 13.87

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.53 2.26 15.79

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.60 -.32 -1.92

Changes in actuarial balance due to changes in:

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

Valuation period1 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 In changing from the valuation period of last year’s report, which was 2005-79, to the valuation period of

this report, 2006-80, the relatively large negative annual balance for 2080 is included. This results in a larger

long-range actuarial deficit. The fund balance at the end of 2005, i.e., at the beginning of the projection

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

-.05 -.01 -.06

Demographic data and assumptions. . . . . . . . . . . . . . +.02 .00 +.03

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

Disability data and assumptions. . . . . . . . . . . . . . . . . -.04 +.01 -.04

Programmatic data and methods . . . . . . . . . . . . . . . . +.04 .00 +.04

Total change in actuarial balance . . . . . . . . . . . . . . . . . . -.08 -.01 -.09

Shown in this report:

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.68 -.33 -2.02

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.95 1.93 13.88

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.63 2.27 15.90
Overview

14

valuation date by 1 year and including the additional year 2080 in the new

valuation period.

Figure II.D6 shows that this year’s projections of annual balances start at a

slightly lower level than those in last year’s report principally because the

cost of living adjustment of 4.1 percent for December 2005 was larger than

had been expected. Over the period 2010 through 2050, annual balances are

similar between the two reports. After 2050, the annual shortfall of program

income is somewhat smaller than projected last year. The assumed higher

ultimate fertility rate is the main reason for this improvement. Section IV.B.7

on page 64 provides a detailed presentation of these changes.

Finally, two changes were made too late to be reflected in the estimates in

this year’s report. First, a new disability adjudication process was promulgated in final regulations on March 31, 2006. This new process will slightly

increase program cost in the first 10 years but is expected to have no significant cost effect thereafter. Second, it was recently discovered that total benefit payments were being over reported due to certain transfers that are made

from the trust funds to the General Fund of the Treasury. This led to a small

overstatement of total benefits estimated for about 10 years into the projection period. Actual payments made to individual beneficiaries have not been

affected by this issue. The transfer process is now correct. The effects of

these two changes are small and will be fully reflected in next year’s report.

 Figure II.D6.—OASDI Annual Balances: 2005 and 2006 Trustees Reports

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

-8%

-6%

-4%

-2%

0%

2%

4%

2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

2005 Report

2006 Report
15

Future Financial Status

Uncertainty of the Projections

Significant uncertainty surrounds the intermediate assumptions. The Trustees

have traditionally used low cost (alternative I) and high cost (alternative III)

assumptions to indicate this uncertainty. Figure II.D7 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 is

characterized by assumptions that improve the financial condition of the trust

funds, including a higher fertility rate, slower improvement in mortality, a

higher real-wage differential, and lower unemployment. The high cost alternative, in contrast, features a lower fertility rate, more rapid declines in mortality, a lower real-wage differential, and higher unemployment.

These three alternatives have traditionally been constructed to provide a reasonable range of possible future experience. However, these alternatives do

not address the probability that actual experience will be within or outside

the range. As an additional way of illustrating uncertainty, this report

includes estimates from a model of the trust funds that provides a probability

distribution of possible future outcomes (see appendix E). The results of this

model suggest that outcomes better than the traditional low cost alternative

and outcomes worse than the high cost alternative have very low probabilities of occurring.

 Figure II.D7.—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
Overview

16

E. CONCLUSION

Under current law the cost of Social Security will soon begin to increase

faster than the program’s income, because of the aging of the baby-boom

generation, expected continuing low fertility, and increasing life expectancy.

Based on the Trustees’ best estimate, program cost will exceed tax revenues

starting in 2017 and throughout the remainder of the 75-year projection

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

payment of benefits until they become exhausted in 2040. At that time

annual tax income to the trust funds is projected to equal about 74 percent of

program costs. Separately, the OASI and DI funds are projected to have sufficient funds to pay full benefits on time until 2042 and 2025, respectively.

By 2080, however, annual tax income is projected to be only about

70 percent as large as the annual cost of the OASDI program. 

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

combined trust funds is 2.02 percent of taxable payroll—somewhat higher

than the 1.92 percent deficit projected in last year’s report. This deficit indicates that financial adequacy of the program for the next 75 years could be

restored if the Social Security payroll tax were immediately and permanently

increased from its current level of 12.4 percent (for employees and employers combined) to 14.42 percent. Alternatively, all current and future benefits

could be immediately reduced by about 13 percent. Other ways of reducing

the deficit include making transfers from general revenues or adopting some

combination of approaches.

If no action were taken until the combined trust funds become exhausted in

2040, larger changes would be required. 

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

fully in every year starting in 2040. In this case, the payroll tax would

be increased to 16.65 percent at the point of trust fund exhaustion in

2040 and continue rising to 17.78 percent in 2080.

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

scheduled tax rates in each year beginning in 2040. Under this scenario,

benefits would be reduced 26 percent at the point of trust fund exhaustion in 2040, with reductions reaching 30 percent in 2080.

Either of these examples would eliminate annual deficits after trust fund

exhaustion. Because of the increasing average age of the population (due to

expected improvement in life expectancy and continued low birth rates),

Social Security’s annual cost will very likely continue to grow faster than

scheduled tax revenues after 2080. As a result, ensuring solvency of the sys-
17

Conclusion

tem beyond 2080 would likely require larger changes than those expected to

be needed for 2080.

The projected trust fund deficits should be addressed in a timely way to

allow for a gradual phasing in of the necessary changes and to provide

advance notice to workers. The sooner adjustments are made the smaller and

less abrupt they will have to be. Social Security plays a critical role in the

lives of this year’s 49 million beneficiaries, and 162 million covered workers

and their families. With informed discussion, creative thinking, and timely

legislative action, we will 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/TR06/index.html

 • www.cms.hhs.gov/ReportsTrustFunds/

 • www.treas.gov/offices/economic-policy/social_security.html
Financial Operations & Legislative Changes

18

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 2005

Detailed information on the operations of the OASI and DI Trust Funds1

during calendar year 2005 is presented in this section. Chapter IV provides

projections for calendar years 2006-80.

1. OASI Trust Fund

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

Survivors Insurance Trust Fund in calendar year 2005, and of the assets of

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

III.A1. Included in total receipts during calendar year 2005 were

$508.7 billion in employment tax contributions. These contributions were

partially offset by transfers totaling $1.9 billion to the General Fund of the

Treasury 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 $506.9 billion, an increase of 7.2 percent

over the amount in the preceding year. The increase in OASI tax contributions from calendar year 2004 to calendar year 2005 is due to increased 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 $13.8 billion in 2005. This

amount is lower than the receipts for 2004 because a sizable positive adjustment was made in 2004 reflecting updated data for prior years. Nearly

99 percent of this income represented amounts credited to the trust funds,

based on estimated Federal personal income taxation of benefits, generally in

advance of the actual receipt of taxes by the Treasury. The remaining

1 percent of the total income from taxation of benefits represented amounts

withheld from the benefits paid to nonresident aliens.

Transfers among the General Fund of the Treasury and the OASI and DI

Trust Funds are made periodically to adjust prior payments for the cost

attributable to the granting of noncontributory wage credits for military service prior to 1957. In 2005, $350,000,000 was transferred from the OASI

Trust Fund to the general fund.

 1 Trust fund data are available by month, quarter, or year on the Social Security website at www.socialsecurity.gov/OACT/ProgData/fundsQuery.html.
19

Calendar Year 2005 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 reimbursable from the General Fund of the Treasury. Accordingly, transfers

totaling $123,236 were made in 2005, reflecting costs incurred in fiscal years

1999-2004.

Table III.A1.—Operations of the OASI Trust Fund, Calendar Year 2005

[In millions]

Total assets, December 31, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,500,622

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $508,718

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

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,855

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506,863

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 145

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,698

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,843

Transfer from the General Fund of the Treasury to adjust previous determinations

of costs attributable to noncontributory wage credits for military service

before 1957 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -350

Reimbursement from the General Fund of the Treasury for costs of payments

to uninsured persons who attained age 72 before 1968. . . . . . . . . . . . . . . . . . . . . . 1/

1 Between -$500,000 and $500,000.

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,025

Interest adjustments2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 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, (3) interest on certain reimbursements to the trust fund, and (4) interest on a transfer to the DI Trust Fund for the cost of vocational

rehabilitation services that had been erroneously charged to that fund.

-46

Net investment income and interest adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 83,979

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1/1

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 604,335

Disbursements:

Benefit payments:

Gross benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436,452

Offset for collected overpayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,079

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -47

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 435,325

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . 3,579

Payment for costs of vocational rehabilitation services for disabled beneficiaries . . . 58

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,237

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 729

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

Miscellaneous reimbursements from the general fund 3 . . . . . . . . . . . . . . . . . . . . .

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

related to administering the OASI program.

-8

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,957

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441,920

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,415

Total assets, December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,663,037
Financial Operations & Legislative Changes

20

The OASI Trust Fund was credited with interest netting $84.0 billion, an

increase of about 6.3 percent over 2004. Credited interest 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 (SSI) program due to adjustments in the allocation of

administrative expenses, (3) interest arising from the revised allocation of

administrative expenses among the trust funds, (4) interest on certain reimbursements to the trust fund (see following discussion of administrative

expenses), and (5) interest on a transfer to the DI Trust Fund for the cost of

vocational rehabilitation services that had been erroneously charged to that

fund. The remaining $2,256 of receipts consisted of gifts received under the

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

funds.

Of the $441.9 billion in total disbursements, $435.3 billion was for net benefit payments. The amount of net benefit payments in calendar year 2005 represents an increase of 4.9 percent over the corresponding amount in calendar

year 2004. This increase was due to (1) an increase in the total number of

beneficiaries and (2) an increase in the average benefit amount primarily

because of the automatic cost-of-living benefit increase of 2.7 percent which

became effective for December 2004 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

$3.6 billion to the Social Security Equivalent Benefit Account from the

OASI Trust Fund was required in June 2005.

A disbursement of $58 million was made in 2005 to cover the costs of vocational rehabilitation services 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 beneficiaries. The $58 million disbursement consisted of (1) a

transfer to the DI Trust Fund of $56 million for costs erroneously charged to

that fund over the period of October 1987 through March 2003, and (2) $2

million for current costs.

The remaining $3.0 billion of disbursements from the OASI Trust Fund represented net administrative expenses. The expenses incurred by various Fed-
21

Calendar Year 2005 Operations

eral agencies for administering the OASDI and Medicare programs are

allocated and charged directly to each of the trust funds through which those

programs are financed, on the basis of provisional estimates. Similarly, the

expenses allocated for administering the SSI 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 effected by interfund transfers

and transfers between the OASI Trust Fund and the general fund account for

the SSI 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.

The vast majority of OASI disbursements recorded as administrative

expenses represent the cost of administering the program and are charged to

the trust fund by the Social Security Administration ($2.2 billion in 2005). In

addition, the Department of the Treasury charges directly to the trust fund

certain expenses that it incurs in helping to administer the OASI program

($729 million in 2005). In addition a relatively small adjustment to administrative expenses is an offset ($251,376 in 2005) 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 providing information to participants in certain pension plans.

Such reimbursements totaled $8 million in 2005.

The assets of the OASI Trust Fund at the end of calendar year 2005 totaled

$1,663.0 billion (10.8 percent more than at the end of 2004), consisting of

$1,663.7 billion in U.S. Government obligations and, as an offset, an extension of credit amounting to $0.7 billion against securities to be redeemed

within the following few days. The effective annual rate of interest earned by

the assets of the OASI Trust Fund during calendar year 2005 was

5.4 percent, as compared to 5.7 percent earned during calendar year 2004. A

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

and year of maturity at the end of each calendar year 2004 and 2005 can be

found in appendix A.

All securities held by the trust funds are backed by the full faith and credit of

the United States Government, as required by law. 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
Financial Operations & Legislative Changes

22

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, 2005, with an interest rate of 4.125 percent, were selected so that

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

over the 15-year period 2006-20. The amount of bonds purchased on June

30, 2005 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 2005, and of the assets of the fund at the

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

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 $86.1 billion, an increase of 7.2 percent from

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

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

change in contributions to the OASI Trust Fund.

Of the $88.0 billion in total disbursements, $85.4 billion was for net benefit

payments. This represents an increase of 9.2 percent over the corresponding

amount of benefit payments in calendar year 2004. This increase in DI benefit payments is due to the same factors that resulted in the net increase in

benefit payments from the OASI Trust Fund. However, the number of persons receiving benefits from the DI Trust Fund increased more rapidly in

2005 than the number receiving benefits from the OASI Trust Fund largely

due to a) the current ages of the baby-boom generation, b) the scheduled

increase in the normal retirement age (NRA), and c) the special administrative action, undertaken by SSA beginning in 2001, to identify and award

benefits from the DI Trust Fund to a substantial number of current and

former recipients of SSI benefits whose disability-insured status under the DI

program was not previously recognized. Total DI disbursements started to

exceed non-interest income in 2005, but were still less than total income,

including interest.
23

Calendar Year 2005 Operations

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

The assets of the DI Trust Fund at the end of calendar year 2005 totaled

$195.6 billion, consisting of $195.7 billion in U.S. Government obligations

and, as an offset, an extension of credit amounting to $0.1 billion against

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

annual rate of interest earned by the assets of the DI Trust Fund during calendar year 2005 was 5.5 percent, compared to 5.7 percent earned during calendar year 2004. A detailed listing of DI Trust Fund holdings by type of

security, interest rate, and year of maturity at the end of each calendar year

2004 and 2005 can be found in appendix A.

Table III.A2.—Operations of the DI Trust Fund, Calendar Year 2005

[In millions]

Total assets, December 31, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $186,217

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $86,392

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

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -315

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,077

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 5

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,068

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,073

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,221

Interest adjustments1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 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, (3) interest on certain reimbursements to the trust fund, and (4) interest on a transfer to the DI Trust Fund for the cost of vocational

rehabilitation services that had been erroneously charged to that fund.

52

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 10,273

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,423

Disbursements:

Benefit payments:

Gross benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,945

Offset for collected overpayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -551

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -21

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,373

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . 338

Payment for costs of vocational rehabilitation services for disabled beneficiaries . . . -9

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,190

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

Miscellaneous reimbursements from the general fund2. . . . . . . . . . . . . . . . . . . . . .

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

related to administering the DI program.

-2

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,315

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,018

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,405

Total assets, December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,623
Financial Operations & Legislative Changes

24

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. For a discussion of the nature of these income and

expenditure transactions, reference should be made to the two preceding subsections covering OASI and DI separately.

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

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

Calendar Year 2005

[In millions]

Total assets, December 31, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,686,839

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $595,110

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

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2,170

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 592,940

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 150

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,766

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,916

Transfer from the General Fund of the Treasury to adjust previous determinations

of costs attributable to noncontributory wage credits for military service

before 1957 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -350

Reimbursement from the General Fund of the Treasury for costs of payments

to uninsured persons who attained age 72 before 1968. . . . . . . . . . . . . . . . . . . . . . 1/

1 Between -$500,000 and $500,000.

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,246

Interest adjustments2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 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.

6

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 94,252

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1/1

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701,758

Disbursements:

Benefit payments:

Gross benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522,397

Offset for collected overpayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,630

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -68

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520,699

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . 3,917

Payment for costs of vocational rehabilitation services for disabled beneficiaries . . . 50

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,427

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 856

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

Miscellaneous reimbursements from the general fund3. . . . . . . . . . . . . . . . . . . . . .

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

related to administering the OASI and DI programs.

-10

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,272

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 529,938

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171,821

Total assets, December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,858,660
25

Calendar Year 2005 Operations

To provide a context for estimates of future trust fund income and expenditures provided later in this report, table III.A4 compares past estimates of

contributions and benefit payments for calendar year 2005, as shown in the

2001-05 Annual Reports, with the corresponding actual amounts in 2005.1

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 previously 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. For example, in the case of DI benefit payments, the special

administrative action, noted in the previous subsection and described in

 1 Estimated amounts used to calculate percentage errors are before rounding to amounts shown in the annual

reports.

Table III.A4.—Comparison of Actual Calendar Year 2005 Trust Fund Operations

With Estimates Made in Prior Reports1

[Amounts in billions]

1 The estimates shown are based on the intermediate assumptions.

Net contributions 2

2 “Actual” contributions for 2005 reflect adjustments for prior calendar years (see appendix A on page 126

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

estimated basis.

Benefit payments 3

3 Includes payments, if any, for vocational rehabilitation services furnished to disabled persons receiving

benefits because of their disabilities.

Amount

Difference

from actual

(percent) Amount

Difference

from actual

(percent)

OASI Trust Fund:

Estimate in 2001 report . . . . . . . . . . . . . . $540.5 6.6 $449.9 3.3

Estimate in 2002 report . . . . . . . . . . . . . . 531.2 4.8 436.5 .3

Estimate in 2003 report . . . . . . . . . . . . . . 514.8 1.6 429.9 -1.3

Estimate in 2004 report . . . . . . . . . . . . . . 504.2 -.5 427.3 -1.8

Estimate in 2005 report . . . . . . . . . . . . . . 496.7 -2.0 433.7 -.4

Actual amount . . . . . . . . . . . . . . . . . . . . . 506.9 — 435.4 —

DI Trust Fund:

Estimate in 2001 report . . . . . . . . . . . . . . 91.8 6.6 81.4 -4.7

Estimate in 2002 report . . . . . . . . . . . . . . 90.2 4.8 80.7 -5.4

Estimate in 2003 report . . . . . . . . . . . . . . 87.4 1.6 84.0 -1.7

Estimate in 2004 report . . . . . . . . . . . . . . 85.6 -.6 81.4 -4.6

Estimate in 2005 report . . . . . . . . . . . . . . 84.3 -2.0 83.9 -1.7

Actual amount . . . . . . . . . . . . . . . . . . . . . 86.1 — 85.4 —

OASI and DI Trust Funds, combined:

Estimate in 2001 report . . . . . . . . . . . . . . 632.3 6.6 531.2 2.0

Estimate in 2002 report . . . . . . . . . . . . . . 621.4 4.8 517.3 -.7

Estimate in 2003 report . . . . . . . . . . . . . . 602.2 1.6 513.8 -1.3

Estimate in 2004 report . . . . . . . . . . . . . . 589.8 -.5 508.8 -2.3

Estimate in 2005 report . . . . . . . . . . . . . . 581.0 -2.0 517.6 -.6

Actual amount . . . . . . . . . . . . . . . . . . . . . 592.9 — 520.7 —
Financial Operations & Legislative Changes

26

greater detail in the section on short-range estimates, has affected the estimates. Both the size of the resulting workload and the schedule for the completion of these cases have been revised several times over the past 4 years.

The evolving understanding of this special workload played a significant role

in the past variation in estimates for DI benefits in 2005.

At the end of calendar year 2005, about 48.4 million persons were receiving

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

40.1 million and 8.3 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 1.0 percent

and 4.6 percent, respectively, during the calendar year. The estimated distributions of benefit payments in calendar years 2004 and 2005, by type of beneficiary, are shown in table III.A5 for each trust fund separately.

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

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

Calendar Years 2004 and 2005

[Amounts in millions]

Calendar year 2004 Calendar year 2005

Amount

Percentage

of total Amount

Percentage

of total

Total OASDI benefit payments . . . . . . . . . . $493,212 100.0 $520,699 100.0

OASI benefit payments . . . . . . . . . . . . . . 415,031 84.1 435,325 83.6

DI benefit payments . . . . . . . . . . . . . . . . . 78,180 15.9 85,373 16.4

OASI benefit payments, total. . . . . . . . . . . . 415,031 100.0 435,325 100.0

Monthly benefits:

Retired workers and auxiliaries . . . . . . 327,100 78.8 345,056 79.3

Retired workers . . . . . . . . . . . . . . . . 304,224 73.3 321,670 73.9

Spouses . . . . . . . . . . . . . . . . . . . . . . . 20,162 4.9 20,497 4.7

Children . . . . . . . . . . . . . . . . . . . . . . 2,714 .7 2,888 .7

Survivors of deceased workers. . . . . . . 87,726 21.1 90,064 20.7

Aged widows and widowers. . . . . . . 70,096 16.9 71,745 16.5

Disabled widows and widowers . . . . 1,555 .4 1,659 .4

Parents . . . . . . . . . . . . . . . . . . . . . . . 24 1/

1 Less than 0.05 percent.

24 1/1

Children . . . . . . . . . . . . . . . . . . . . . . 14,537 3.5 15,101 3.5

Widowed mothers and fathers 

caring for child beneficiaries . . . . 1,515 .4 1,535 .4

Uninsured persons generally aged 72 

before 1968 . . . . . . . . . . . . . . . . . . . 2/

2 Less than $500,000.

1/1 2/1 1/1

Lump-sum death payments . . . . . . . . . . . 205 1/1 206 1/1

DI benefit payments, total . . . . . . . . . . . . . . 78,180 100.0 85,373 100.0

Disabled workers . . . . . . . . . . . . . . . . . 71,665 91.7 78,361 91.8

Spouses. . . . . . . . . . . . . . . . . . . . . . . . . 454 .6 483 .6

Children . . . . . . . . . . . . . . . . . . . . . . . . 6,061 7.8 6,529 7.6
27

Calendar Year 2005 Operations

Net administrative expenses charged to the OASI and DI Trust Funds in calendar year 2005 totaled $5.3 billion. This amount represented 0.9 percent of

contribution income and 1.0 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.

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

2004 and the end of 2005 are a result of the acquisition and disposition of

securities during calendar year 2005. Table III.A7 presents these investment

transactions for each trust fund separately and combined. Tables VI.A5 and

VI.A6, presented in appendix A, show the assets of the OASI and DI Trust

Funds at the end of calendar years 2004 and 2005. 

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 2001-05

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

2001 . . . . . . . . . . . 0.4 0.5 2.3 2.8 0.7 0.8

2002 . . . . . . . . . . . .5 .5 2.7 3.0 .8 .9

2003 . . . . . . . . . . . .6 .6 2.6 2.7 .9 1.0

2004 . . . . . . . . . . . .5 .6 2.7 2.7 .8 .9

2005 . . . . . . . . . . . .6 .7 2.7 2.6 .9 1.0

Table III.A7.—Trust Fund Investment Transactions, Calendar Year 2005

[In millions]

OASI

Trust Fund

DI

Trust Fund

OASI and DI

Trust Funds,

combined

Invested assets, December 31, 2004 . . . . . . . . $1,500,764 $186,221 $1,686,985

Acquisitions:

Special issues:

Certificates of indebtedness . . . . . . . . . . . 563,120 92,534 655,654

Bonds1 . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 Amounts shown were purchased on June 30, 2005. The interest rate on such purchases was 4.125 percent.

253,823 22,395 276,218

Public issues:2

2 Dash indicates no holdings at any time during the year; zero indicates holdings during part of the year but

no transactions. All public issues held by the DI Trust Fund were redeemed in February 2005.

Treasury bonds . . . . . . . . . . . . . . . . . . . . . —00

Total acquisitions . . . . . . . . . . . . . . . . . . . 816,943 114,928 931,872

Dispositions:

Special issues:

Certificates of indebtedness . . . . . . . . . . . 549,922 92,721 642,643

Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,059 12,684 116,743

Public issues:2

Treasury bonds . . . . . . . . . . . . . . . . . . . . . — 30 30

Total dispositions . . . . . . . . . . . . . . . . . . . 653,982 105,435 759,416

Net increase in invested assets. . . . . . . . . . . . . 162,962 9,494 172,456

Invested assets, December 31, 2005 . . . . . . . . 1,663,726 195,715 1,859,441
Financial Operations & Legislative Changes

28

B. SOCIAL SECURITY AMENDMENTS SINCE THE 2005 REPORT

Since the 2005 Annual Report was transmitted to Congress on March 23,

2005, there has been no legislation enacted that would have a significant

effect on the financial status of the OASDI program. 
29

Short-Range Estimates

IV. ACTUARIAL ESTIMATES

This chapter presents actuarial estimates of the future financial condition of

the Social Security program. These estimates include projected income and

cost of the OASI and DI Trust Funds, in dollars over the next 10 years and as

a percentage of taxable payroll or in present-value dollars over the full

75-year period, along with a discussion of a variety of measures of the adequacy of current program financing. In this report we carefully distinguish

between (1) the cost (or obligations) of the program, which includes, for the

future, all benefits scheduled under current law, and (2) expenditures (disbursements or outgo), which include actual payments for the past and only

the portion of the cost of the program 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 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 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 (2006-15) are presented first, followed by estimates and measures of actuarial status for the long range (2006-80) and for

the infinite future. As an additional illustration of uncertainty, estimated

probability distributions of certain measures are presented in appendix E.

A. SHORT-RANGE ESTIMATES

In the short range, the adequacy of the trust fund level is generally measured

by the “trust fund ratio,” which is defined to be the assets at the beginning of

the year expressed as a percentage of the projected cost for the year. Thus,

the trust fund ratio represents the proportion of a year’s cost which can be

paid with the funds available at the beginning of the year. During periods

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

funds which serve 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 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.
Actuarial Estimates

30

The test of financial adequacy over the short-range projection period is applicable to the OASI and DI Trust Funds individually and on a combined basis.

The requirements of this test are as follows: If the estimated trust fund ratio

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 ratio is initially less than 100 percent,

then it must be projected to reach a level of at least 100 percent within

5 years and to remain at or above 100 percent throughout the remainder of

the 10-year period. In addition, the fund’s estimated assets at the beginning

of each month of the 10-year period must be sufficient to cover that month’s

disbursements. This test is applied on the basis of the intermediate estimates.

Failure to meet this test by either trust fund is an indication that solvency of

the program over the next 10 years is in question and that legislative action is

needed to improve the short-range financial adequacy of the program.

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 2006-15, 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 rapidly 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 steadily increasing amount through

the end of 2015. 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).

The increases in estimated income shown in table IV.A1 under each set of

assumptions reflect increases in estimated OASDI taxable earnings and

growth in interest earnings on the invested assets of the trust fund. For each

alternative, employment and earnings are assumed to increase in every year

through 2015. The number of persons with taxable earnings would increase

on the basis of alternatives I, II, and III from 159 million during calendar

year 2005 to about 176 million, 172 million, and 169 million, respectively, in

2015. The total annual amount of taxable earnings is projected to increase

from $4,770 billion in 2005 to $7,685 billion, $7,733 billion, and

 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.
31

Short-Range Estimates

$8,017 billion, in 2015, 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 (20-64) population

increases, (2) increases in average earnings in covered employment (reflecting both real growth and price inflation), and (3) increases in the contribution

and benefit base in 2006-15 under the automatic-adjustment provisions.

Growth in interest earnings represents a significant component of the overall

increase in trust fund income during this period. Although interest rates payable on trust fund investments are not assumed to change substantially from

current levels, the continuing rapid increase in OASI assets will result in a

corresponding increase in interest income. By 2015, interest income to the

OASI Trust Fund is projected to be about 19.8 percent of total trust fund

income on the basis of the intermediate assumptions, as compared to

13.9 percent in 2005.

 1 Note that the pattern, by alternative, of these nominal amounts of total wages 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%

550%

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Calendar year

OASI

DI

Historical Estimated

"Adequate" level for trust fund ratio

I

II

III

I

II

III
Actuarial Estimates

32

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

Table IV.A1.—Operations of the OASI Trust Fund, Calendar Years 2001-151

[Amounts in billions]

1 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

Total2

2 “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. Transfers for the cost of pre-1957

military service noncontributory wage credits were: (1) $414 million from the General Fund of Treasury to

the OASI Trust Fund in February 2002, and (2) $350 million from the trust fund to the general fund in

December 2005.

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

ratio3

3 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:

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

Intermediate:

2006 . . 638.8 532.6 15.7 90.5 468.1 461.7 2.9 3.5 170.7 1,833.7 355

2007 . . 673.5 557.7 17.3 98.5 489.2 482.7 3.0 3.5 184.3 2,018.0 375

2008 . . 719.9 590.4 20.3 109.2 512.8 506.3 3.0 3.6 207.1 2,225.0 394

2009 . . 763.1 620.9 20.2 122.0 542.5 535.9 3.0 3.6 220.7 2,445.7 410

2010 . . 810.4 652.5 22.3 135.7 575.7 569.1 3.0 3.7 234.7 2,680.4 425

2011 . . 861.2 684.8 26.1 150.3 611.7 605.3 3.0 3.4 249.5 2,929.9 438

2012 . . 911.0 716.8 29.0 165.2 653.0 646.1 3.0 3.9 258.0 3,187.9 449

2013 . . 960.0 747.6 32.2 180.3 699.2 692.1 3.1 4.0 260.8 3,448.8 456

2014 . . 1,010.6 780.3 34.6 195.7 749.1 741.8 3.1 4.2 261.4 3,710.2 460

2015 . . 1,062.5 814.7 37.3 210.6 802.5 795.0 3.2 4.3 260.0 3,970.2 462

Low Cost:

2006 . . 639.4 533.5 15.7 90.3 467.9 461.4 2.9 3.5 171.6 1,834.6 355

2007 . . 674.8 560.1 17.2 97.4 487.8 481.3 3.0 3.5 186.9 2,021.5 376

2008 . . 718.2 591.1 20.2 106.9 509.4 502.9 3.0 3.6 208.8 2,230.4 397

2009 . . 759.5 620.9 19.9 118.7 534.1 527.6 2.9 3.6 225.3 2,455.7 418

2010 . . 804.6 651.3 21.7 131.6 560.8 554.3 2.9 3.6 243.8 2,699.5 438

2011 . . 854.0 682.9 25.2 145.9 589.6 583.4 3.0 3.3 264.4 2,963.9 458

2012 . . 903.8 714.6 27.7 161.5 622.8 616.1 3.0 3.7 281.0 3,244.9 476

2013 . . 953.2 745.5 30.4 177.4 660.0 653.3 3.0 3.7 293.2 3,538.1 492

2014 . . 1,003.2 777.4 32.4 193.4 700.1 693.2 3.1 3.8 303.1 3,841.1 505

2015 . . 1,053.8 809.8 34.5 209.6 742.8 735.7 3.1 4.0 311.1 4,152.2 517

High Cost:

2006 . . 629.2 524.8 15.7 88.7 468.2 461.8 2.9 3.5 161.0 1,824.0 355

2007 . . 650.2 537.6 17.4 95.3 492.5 485.9 3.0 3.5 157.7 1,981.8 370

2008 . . 699.2 572.9 20.6 105.8 518.4 511.8 3.0 3.6 180.9 2,162.6 382

2009 . . 737.4 598.4 20.5 118.5 550.1 543.4 3.0 3.7 187.3 2,349.9 393

2010 . . 794.6 635.7 23.0 135.8 594.2 587.4 3.1 3.8 200.3 2,550.3 395

2011 . . 874.9 684.9 27.8 162.2 650.3 643.5 3.2 3.6 224.6 2,774.9 392

2012 . . 942.1 728.3 31.6 182.2 710.9 703.4 3.3 4.2 231.3 3,006.1 390

2013 . . 998.7 766.6 35.6 196.5 773.6 765.8 3.3 4.5 225.1 3,231.2 389

2014 . . 1,052.4 805.2 38.7 208.5 836.8 828.6 3.4 4.8 215.6 3,446.8 386

2015 . . 1,106.5 844.3 42.0 220.2 903.7 895.2 3.5 5.1 202.7 3,649.5 381
33

Short-Range Estimates

Rising expenditures during 2006-15 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 which 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, and assets are

therefore estimated to increase substantially.

The portion of the OASI Trust Fund 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 and is used to meet various Federal outlays or to reduce the amount of publicly-held Federal debt.

Interest on these securities is paid to the trust fund and, when the securities

mature or are redeemed prior to maturity, general fund revenues flow to the

trust fund. Thus, the investment operations of the trust fund result in various

cash flows between the trust fund and the General Fund of the Treasury.

Currently, the excess of tax income to the OASI Trust Fund over the fund’s

expenditures is borrowed by the general fund, resulting in a substantial net

cash flow to the general fund. As discussed in the following section on page

50, this cash flow will reverse sometime in the next 10-20 years. Thereafter,

increasingly larger amounts will be needed from trust fund assets to meet

benefit payments and other expenditures. Revenue from the General Fund of

the Treasury will be drawn upon to provide the necessary cash. The accumulation and subsequent redemption of substantial trust fund assets has important public policy and economic implications that extend well beyond the

operation of the OASDI program itself.

2. Operations of the DI Trust Fund

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

calendar years 2006-15 under the three sets of assumptions are shown in

table IV.A2, together with values for actual experience in 2001-05. Income is

generally projected to increase steadily under each alternative, reflecting

most of the same factors described previously in connection with the OASI

Trust Fund. The estimates indicate that the assets of the DI Trust Fund would

also continue to increase throughout the next 10 years under the low cost

assumptions, but would peak in 2012 and then begin to decline under the

intermediate assumptions. Under the high cost assumptions, DI assets would

increase through 2006 and decline steadily thereafter until exhaustion in

2015.
Actuarial Estimates

34

Expenditures are 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, under all three sets of assumptions, the number of DI beneficiaries in current-payment status is projected to continue increasing

throughout the short-range projection period. Over the period 2005-15, the

projected annual average growth rate in the number of DI worker beneficiaries is roughly 1.3, 2.7, and 4.1 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, at which

higher rates of disability incidence are experienced.

Annual increases in incidence rates over the period 2001-03 represented a

notable departure from the experience of the preceding decade, which generally showed modest annual declines in the age-sex-adjusted disability incidence rate.1 Over the past two years however, this growth in the incidence

rate has subsided, and the rate has remained stable, although at a level somewhat higher than experienced during the late 1990s. The increases in 2001-

03 were likely due in large part to the slowdown in economic growth experienced during that period. However, a special administrative activity undertaken by SSA beginning in 2001 has also contributed slightly to the upsurge

in disabled worker awards. This special workload was the result of discovering a substantial number of current or former recipients of Supplemental

Security Income (SSI) benefits whose disability-insured status under the DI

program was not previously recognized. As this special disability workload

is processed over the next several years, the resulting disability awards will

contribute to temporarily higher incidence rates than would have been

expected as part of longer term underlying trends.

Estimates of the total size of this special workload, and the total time

required to process these claims, remain roughly the same as assumed for the

2005 report. However, the schedule for processing this workload assumed in

this report envisions a somewhat more uniform distribution of cases over the

next several years than was assumed in the 2005 report. After the last of the

special workload cases is processed, the incidence of disability award projected in this report is estimated to drop back somewhat from recent levels,

consistent with an assumed return to faster economic growth. Incidence rates

are then expected to return to levels roughly in line with those assumed in

last year’s report under the three alternative sets of assumptions.

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

V.C.6.
35

Short-Range Estimates

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

Table IV.A2.—Operations of the DI Trust Fund, Calendar Years 2001-151

[Amounts in billions]

1 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

Total2

2 “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 is

expected to be made in December 2006 in the amount of $7.3 million from the General Fund of the Treasury

to the DI Trust Fund. Thereafter 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

ratio3

3 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:

2001 . . $83.9 $74.9 $0.8 $8.2 $61.4 $59.6 $1.7 4/

4 Less than $50 million.

$22.5 $141.0 193

2002 . . 87.4 77.3 .9 9.2 67.9 65.7 2.0 $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

2005 . . 97.4 86.1 1.1 10.3 88.0 85.4 2.3 .3 9.4 195.6 212

Intermediate:

2006 . . 102.2 90.4 1.3 10.4 96.1 93.5 2.3 .3 6.0 201.6 203

2007 . . 106.7 94.7 1.4 10.6 101.8 99.0 2.5 .3 4.9 206.5 198

2008 . . 112.8 100.3 1.7 10.9 107.3 104.5 2.5 .4 5.5 212.0 192

2009 . . 118.4 105.4 1.7 11.2 113.4 110.4 2.7 .4 4.9 217.0 187

2010 . . 124.2 110.8 2.0 11.4 121.2 117.9 2.8 .4 3.1 220.0 179

2011 . . 130.3 116.3 2.3 11.7 126.6 123.1 3.0 .5 3.7 223.7 174

2012 . . 136.3 121.7 2.7 11.9 135.1 131.5 3.2 .5 1.1 224.9 166

2013 . . 141.9 127.0 3.0 11.9 142.5 138.6 3.4 .5 -0.5 224.3 158

2014 . . 147.6 132.5 3.2 11.9 150.4 146.3 3.5 .5 -2.8 221.5 149

2015 . . 153.5 138.3 3.4 11.7 158.8 154.6 3.7 .5 -5.4 216.2 139

Low Cost:

2006 . . 102.3 90.6 1.3 10.5 94.6 91.9 2.3 .3 7.7 203.4 207

2007 . . 107.2 95.1 1.4 10.7 98.5 95.7 2.5 .3 8.7 212.0 206

2008 . . 113.2 100.4 1.6 11.1 102.0 99.1 2.5 .4 11.2 223.2 208

2009 . . 118.8 105.4 1.6 11.8 105.4 102.4 2.6 .4 13.4 236.6 212

2010 . . 124.9 110.6 1.8 12.5 109.9 106.6 2.8 .4 15.0 251.6 215

2011 . . 131.5 116.0 2.1 13.5 112.2 108.8 2.9 .4 19.3 271.0 224

2012 . . 138.3 121.3 2.3 14.6 117.1 113.5 3.1 .5 21.2 292.2 231

2013 . . 145.0 126.6 2.6 15.9 120.8 117.1 3.3 .5 24.2 316.4 242

2014 . . 151.9 132.0 2.7 17.2 125.0 121.1 3.4 .5 26.9 343.3 253

2015 . . 159.0 137.5 2.8 18.7 129.5 125.5 3.6 .4 29.5 372.8 265

High Cost:

2006 . . 100.7 89.1 1.3 10.2 99.2 96.6 2.3 .3 1.4 197.0 197

2007 . . 102.7 91.3 1.5 9.9 107.7 104.9 2.5 .4 -5.0 192.0 183

2008 . . 108.7 97.3 1.9 9.6 115.9 113.1 2.5 .4 -7.2 184.8 166

2009 . . 112.6 101.6 1.9 9.1 124.7 121.6 2.6 .4 -12.0 172.8 148

2010 . . 118.5 108.0 2.3 8.3 137.3 134.0 2.9 .5 -18.8 154.0 126

2011 . . 126.4 116.3 2.8 7.3 149.3 145.6 3.1 .5 -22.9 131.1 103

2012 . . 132.9 123.7 3.3 5.9 164.6 160.7 3.4 .5 -31.7 99.4 80

2013 . . 138.2 130.2 3.8 4.2 177.6 173.4 3.6 .6 -39.4 60.0 56

2014 . . 143.2 136.7 4.1 2.4 190.6 186.3 3.8 .6 -47.4 12.6 31

2015 . . 5/

5 Under the high cost assumptions, the DI Trust Fund is projected to be exhausted in early 2015. Therefore,

certain trust fund operation values for that year are not meaningful under present law and are not shown in

this table.

143.4 4.5 5/1 204.5 199.9 4.0 .6 5/1 5/1 6
Actuarial Estimates

36

The proportion of DI 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 or conversion to retirement benefits (at attainment of

normal retirement age) have declined very gradually. This trend is attributable, in part, to the lower average age of new beneficiaries. However, some

recent program changes and health trends have also led to improved mortality experience among the DI disabled worker beneficiaries. 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 levels of recovery terminations for this

year’s report remain consistent with last year’s report. The overall termination rate (reflecting all causes) is projected to remain near the 2003 level

before increasing back to higher levels in 2009 when the gradual increase in

the normal retirement age temporarily ceases.

At the beginning of calendar year 2005, the assets of the DI Trust Fund represented 212 percent of annual expenditures. During 2005, DI expenditures

started to exceed non-interest income. However, total DI income exceeded

DI expenditures but only by $9.4 billion, contributing to a decrease in the

trust fund ratio for the beginning of 2006 to about 203 percent. Under the

intermediate set of assumptions, total income is estimated to exceed expenditures through 2012. The excess of expenditures over income beginning in

2013 and the projected decline in the trust fund ratio to 139 percent by the

beginning of 2015 are early warnings of the eventual shortfall in available DI

Trust Fund assets needed to cover program cost—projected under the intermediate assumptions to occur after the end of the short-range period.

Under the low cost assumptions, the trust fund ratio would increase to

265 percent at the beginning of 2015. Under the high cost assumptions, the

assets of the DI Trust Fund would decline steadily, dipping below the level of

1 year’s expenditures near the beginning of 2011, and is projected to become

completely depleted early in 2015.

Because DI assets were greater than 1 year’s expenditures at the beginning of

2006 and would remain above that level throughout 2007-15, the DI Trust

Fund satisfies the Trustees’ short-range test of financial adequacy under both

the intermediate and low cost assumptions. However, under the high cost

assumptions the DI Trust Fund fails to meet the short-range test of financial

adequacy, because assets fall below 1 year’s expenditures by the end of the

short-range period, as described above (see also figure IV.A1).
37

Short-Range Estimates

3. Operations of the Combined OASI and DI Trust Funds

The estimated operations and status of the OASI and DI Trust Funds, combined, during calendar years 2006-15 on the basis of the three alternatives,

are shown in table IV.A3, together with figures on actual experience in

2001-05. 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 high cost scenario, table IV.A2 shows that the DI Trust Fund

becomes exhausted in 2015. The value of the combined OASI and DI Trust

Funds in that year shown in table IV.A3 implies that OASI assets could be

made available to pay DI benefits once the DI Trust Fund is exhausted.

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

Calendar Years 2001-151

[Amounts in billions]

Calendar

year

Income Cost Assets

Total2

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

ratio3

Historical data:

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

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

Intermediate:

2006 . . 740.9 623.1 17.0 100.9 564.2 555.2 5.3 3.8 176.7 2,035.3 329

2007 . . 780.1 652.4 18.7 109.1 591.0 581.7 5.5 3.9 189.1 2,224.5 344

2008 . . 832.7 690.6 22.1 120.0 620.1 610.7 5.5 3.9 212.6 2,437.1 359

2009 . . 881.5 726.4 21.9 133.2 655.9 646.2 5.6 4.0 225.6 2,662.7 372

2010 . . 934.7 763.3 24.3 147.1 696.9 687.0 5.8 4.1 237.8 2,900.4 382

2011 . . 991.5 801.1 28.5 162.0 738.3 728.4 6.0 3.9 253.2 3,153.7 393

2012 . . 1,047.3 838.5 31.7 177.0 788.2 777.6 6.2 4.4 259.1 3,412.8 400

2013 . . 1,101.9 874.5 35.2 192.2 841.7 830.7 6.5 4.5 260.3 3,673.1 405

2014 . . 1,158.2 912.8 37.9 207.6 899.5 888.2 6.7 4.7 258.6 3,931.7 408

2015 . . 1,216.0 953.0 40.7 222.3 961.4 949.6 6.9 4.8 254.6 4,186.4 409
Actuarial Estimates

38

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

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

From the 2005 Report

The factors underlying the changes in the intermediate estimates for the

OASI, DI and the combined funds from last year’s annual report to this

report are analyzed in table IV.A4. In the 2005 Annual Report, the trust fund

ratio for OASI was estimated to reach 468 percent at the beginning of

2014—the tenth projection year from that report. If there had been no

changes to the projections, the estimated ratio at the beginning of 2015

would be 1 percentage point higher than at the beginning of 2014, or

469 percent. There were changes, however, to reflect the latest actual data, as

well as adjustments to the assumptions for future years. The resulting ratio

shown in this report for the tenth projection year (2015) is 462 percent. The

net effect of changes in demographic assumptions over the short-range

period resulted in essentially no change in the tenth-year trust fund ratio. The

Low Cost:

2006 . . $741.7 $624.1 $16.9 $100.7 $562.4 $553.4 $5.3 $3.8 $179.3 $2,038.0 330

2007 . . 781.9 655.2 18.6 108.1 586.3 577.0 5.5 3.9 195.6 2,233.6 348

2008 . . 831.4 691.5 21.9 118.0 611.4 602.0 5.4 3.9 220.0 2,453.6 365

2009 . . 878.3 726.3 21.5 130.5 639.5 630.0 5.6 4.0 238.7 2,692.3 384

2010 . . 929.5 761.9 23.6 144.1 670.7 660.9 5.7 4.0 258.8 2,951.1 401

2011 . . 985.5 798.9 27.3 159.4 701.8 692.2 5.9 3.8 283.7 3,234.8 420

2012 . . 1,042.1 836.0 30.0 176.1 739.9 729.6 6.1 4.1 302.2 3,537.0 437

2013 . . 1,098.3 872.0 32.9 193.3 780.9 770.4 6.3 4.2 317.4 3,854.4 453

2014 . . 1,155.1 909.4 35.0 210.7 825.1 814.4 6.5 4.3 330.0 4,184.4 467

2015 . . 1,212.9 947.3 37.3 228.3 872.3 861.2 6.7 4.4 340.5 4,525.0 480

High Cost:

2006 . . 729.9 613.9 17.0 99.0 567.5 558.4 5.3 3.8 162.4 2,021.1 328

2007 . . 752.9 628.8 18.9 105.2 600.2 590.8 5.5 3.9 152.7 2,173.8 337

2008 . . 808.0 670.2 22.4 115.4 634.3 624.9 5.4 4.0 173.7 2,347.4 343

2009 . . 850.0 700.0 22.4 127.6 674.8 665.0 5.6 4.1 175.3 2,522.7 348

2010 . . 913.1 743.7 25.3 144.1 731.5 721.4 5.9 4.2 181.5 2,704.3 345

2011 . . 1,001.3 801.3 30.6 169.5 799.5 789.1 6.3 4.1 201.8 2,906.0 338

2012 . . 1,075.0 852.0 34.9 188.1 875.5 864.1 6.6 4.7 199.5 3,105.5 332

2013 . . 1,136.9 896.8 39.4 200.7 951.2 939.2 6.9 5.1 185.6 3,291.2 326

2014 . . 1,195.6 942.0 42.8 210.8 1,027.4 1,014.8 7.2 5.4 168.2 3,459.4 320

2015 . . 1,253.7 987.7 46.4 219.5 1,108.2 1,095.1 7.5 5.7 145.4 3,604.8 312

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

2 “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. 3 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.

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

Calendar Years 2001-151 (Cont.)

[Amounts in billions]

Calendar

year

Income Cost Assets

Total2

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

ratio3
39

Short-Range Estimates

cumulative net effects of changes in economic data and assumptions (including re-estimates of future tax revenue consistent with recent revisions to historical data) resulted in a reduction in the trust fund ratio of 11 percentage

points by the beginning of 2015. A partially offsetting increase in the 2015

trust fund ratio was due to the net effect of various factors labeled collectively as “programmatic data and assumptions.” Finally there were no

changes in the short-range projection methodology since the 2005 report that

resulted in significant changes in the ending trust fund ratio.

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. As with OASI, the largest effect on

the DI trust fund ratio at the beginning of 2015 was due to revised economic

assumptions, although the change in the valuation period and updates for a

variety of programmatic assumptions have contributed to the total 23 percentage point reduction.

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 2014 468 162 417

Change in trust fund ratio due to changes in: 

Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —

Valuation period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 -8 -1

Demographic data and assumptions. . . . . . . . . . . . . . . . . . . . 1/

1 Change in trust fund ratio of less than 0.5 percentage point.

1/1 1/1

Economic data and assumptions. . . . . . . . . . . . . . . . . . . . . . . -11 -11 -11

Programmatic data and assumptions . . . . . . . . . . . . . . . . . . . 4 -4 2

Projection methods and data. . . . . . . . . . . . . . . . . . . . . . . . . . 1/1 1/1 1/1

Total change in trust fund ratio . . . . . . . . . . . . . . . . . . . . . . . . . -6 -23 -8

Trust fund ratio shown in this report for calendar year 2015. . . . . 462 139 409
Actuarial Estimates

40

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.

In assessing the financial condition of the program, particular attention

should be paid to the level of the annual balances at the end of the long-range

period and the time at which the annual balances may change from positive

to negative values. 

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 can

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 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 adequate

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 future 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 adequate for the 75-year period as a whole.

(Financial adequacy, or solvency, for each year is determined by whether the

trust fund is zero or 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 in succeeding reports is also important when considering the

actuarial status of the program. One indication of this stability, or sustainable

solvency, is the behavior of the trust fund ratio at the end of the projection
41

Long-Range Estimates

period. If trust fund ratios for the last several years of the long-range period

are positive and constant or rising, then it is likely that subsequent Trustees

Reports will also show projections of financial adequacy (assuming no

changes in demographic and economic assumptions, or the law). The actuarial balance and the open group unfunded obligation for the infinite future

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 tax

contribution rate and the ratio of income from taxation of benefits to the

OASDI taxable payroll for the year. The OASDI taxable payroll consists of

the total earnings which are subject to OASDI taxes, with some relatively

small adjustments.1 As such, it excludes net investment income and reimbursements from the General Fund of the Treasury for the costs associated

with special monthly payments to certain uninsured persons who attained

age 72 before 1968 and who have fewer than 3 quarters of coverage.

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,

special monthly payments to certain uninsured persons who have 3 or more

quarters of coverage (and whose payments are therefore not reimbursable

from the General Fund of the Treasury), 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. (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.)

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 due to the gradually increasing effect of the tax-

 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) which apply to

multiple-employer “excess wages,” and which did apply, before 1984, to net earnings from self-employment

and, before 1988, to income from tips.
Actuarial Estimates

42

ation of benefits. The pattern of the cost rate is much different. It is projected

to remain fairly stable for the next several years. However, from about 2010

to 2030 the cost rate increases rapidly as the baby-boom generation reaches

retirement age. Thereafter, the cost rate rises steadily, but slowly, reflecting

projected reductions in death rates and continued relatively low birth rates,

reaching 16.27 percent of taxable payroll for 2080. By comparison, the

income rate reaches 11.49 percent of taxable payroll for 2080.

Projected income rates under the low cost and high cost sets of assumptions

are very similar to those projected for the intermediate assumptions as they

are largely a reflection of the tax rates specified in the law. OASI cost rates

for the low cost and high cost assumptions differ significantly from those

projected for the intermediate assumptions, but follow generally similar patterns. For the low cost assumptions, the cost rate declines somewhat for the

first 4 years, and then rises, reaching the current level around 2013 and a

peak of 13.16 percent of payroll for 2035. The cost rate then declines gradually, reaching a level of 11.74 percent of payroll for 2080 (at which point the

income rate reaches 11.24 percent). For the high cost assumptions, the cost

rate rises generally throughout the 75-year period. It rises at a relatively fast

pace between 2010 and 2030 because of the aging of the baby-boom generation. Subsequently, the projected cost rate continues rising and reaches

23.35 percent of payroll for 2080 (at which point the income rate reaches

11.88 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 positive for 12 years (through 2017) and is negative thereafter. This annual deficit rises rapidly, reaching over 2 percent of

taxable payroll by 2026, and continues rising thereafter, to a level of

4.78 percent of taxable payroll for 2080.

Under the low cost assumptions, the projected OASI annual balance is positive for 16 years (through 2021) and thereafter is negative. The annual deficit

under the low cost assumptions rises to a peak of 1.88 percent of taxable payroll for 2035, but declines over the next 15 years, as the effect of the babyboom generation diminishes and the assumed higher fertility rates increase

the size of the work force. The deficit under the low cost assumptions continues to decline, but at a relatively slow pace over the period 2051 through

2080. Under the high cost assumptions, however, the OASI balance is projected to be positive for only 9 years (through 2014) and to be negative thereafter, with a deficit of 1.74 percent for 2020, 7.08 percent for 2050, and

11.47 percent of payroll for 2080.
43

Long-Range Estimates

Table IV.B1.—Estimated Annual Income Rates, Cost Rates, and Balances

Calendar Years 1990-2080

[As a percentage of taxable payroll]

Calendar 

year

OASI DI OASDI

Income

rate1 Cost

rate Balance

Income

rate1 Costrate Balance

Income

rate1 Costrate Balance

Historical data:

1990. . . . . 11.32 9.66 1.66 1.17 1.09 0.09 12.49 10.74 1.75

1991. . . . . 11.44 10.15 1.29 1.21 1.18 .03 12.65 11.33 1.32

1992. . . . . 11.43 10.27 1.16 1.21 1.27 -.06 12.64 11.54 1.10

1993. . . . . 11.40 10.37 1.03 1.21 1.35 -.14 12.61 11.73 .88

1994. . . . . 10.70 10.22 .48 1.89 1.40 .49 12.59 11.62 .97

1995. . . . . 10.70 10.22 .48 1.88 1.44 .44 12.59 11.67 .92

1996. . . . . 10.73 10.06 .68 1.89 1.48 .41 12.62 11.53 1.09

1997. . . . . 10.93 9.83 1.09 1.71 1.44 .28 12.64 11.27 1.37

1998. . . . . 10.96 9.45 1.51 1.72 1.42 .30 12.68 10.87 1.81

1999. . . . . 10.99 9.09 1.90 1.72 1.42 .30 12.71 10.51 2.20

2000. . . . . 10.89 8.97 1.92 1.80 1.42 .38 12.69 10.40 2.29

2001. . . . . 10.89 9.08 1.80 1.82 1.48 .34 12.71 10.56 2.14

2002. . . . . 10.91 9.30 1.62 1.82 1.60 .22 12.74 10.90 1.84

2003. . . . . 10.89 9.33 1.56 1.82 1.68 .14 12.71 11.01 1.70

2004. . . . . 10.92 9.30 1.63 1.82 1.78 .05 12.75 11.08 1.67

2005. . . . . 10.88 9.30 1.59 1.82 1.85 -.03 12.71 11.15 1.56

Intermediate:

2006. . . . . 10.91 9.31 1.60 1.83 1.91 -.09 12.74 11.22 1.52

2007. . . . . 10.93 9.23 1.70 1.83 1.92 -.09 12.75 11.15 1.61

2008. . . . . 10.96 9.18 1.78 1.83 1.92 -.09 12.80 11.10 1.69

2009. . . . . 10.94 9.23 1.71 1.83 1.93 -.10 12.77 11.16 1.61

2010. . . . . 10.96 9.33 1.64 1.83 1.96 -.13 12.79 11.29 1.50

2011 . . . . . 11.00 9.45 1.56 1.84 1.95 -.12 12.84 11.40 1.44

2012. . . . . 11.03 9.64 1.39 1.84 1.99 -.16 12.87 11.63 1.23

2013. . . . . 11.05 9.89 1.16 1.84 2.02 -.17 12.90 11.91 .99

2014. . . . . 11.07 10.15 .92 1.84 2.04 -.19 12.91 12.19 .72

2015. . . . . 11.08 10.41 .67 1.84 2.06 -.22 12.93 12.48 .45

2020. . . . . 11.18 11.87 -.70 1.85 2.11 -.27 13.02 13.99 -.97

2025. . . . . 11.26 13.26 -2.00 1.85 2.24 -.39 13.11 15.50 -2.38

2030. . . . . 11.34 14.44 -3.10 1.86 2.28 -.42 13.19 16.71 -3.52

2035. . . . . 11.38 15.09 -3.71 1.86 2.27 -.42 13.24 17.36 -4.12

2040. . . . . 11.40 15.22 -3.82 1.86 2.29 -.44 13.26 17.51 -4.25

2045. . . . . 11.40 15.14 -3.74 1.86 2.37 -.51 13.26 17.51 -4.25

2050. . . . . 11.41 15.15 -3.74 1.86 2.40 -.54 13.27 17.55 -4.28

2055. . . . . 11.42 15.25 -3.83 1.86 2.43 -.57 13.28 17.68 -4.40

2060. . . . . 11.43 15.44 -4.00 1.86 2.43 -.56 13.30 17.87 -4.57

2065. . . . . 11.45 15.65 -4.20 1.87 2.44 -.58 13.31 18.09 -4.78

2070. . . . . 11.47 15.90 -4.44 1.87 2.44 -.58 13.33 18.35 -5.01

2075. . . . . 11.48 16.09 -4.61 1.87 2.46 -.59 13.34 18.54 -5.20

2080. . . . . 11.49 16.27 -4.78 1.87 2.47 -.60 13.36 18.74 -5.38

First year balance becomes

negative and remains negative

through 2080 . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . 2017

Low Cost:

2006. . . . . 10.91 9.28 1.63 1.83 1.88 -.05 12.74 11.15 1.58

2007. . . . . 10.92 9.18 1.75 1.83 1.85 -.03 12.75 11.03 1.72

2008. . . . . 10.96 9.11 1.85 1.83 1.82 .01 12.79 10.93 1.86

2009. . . . . 10.94 9.09 1.85 1.83 1.79 .03 12.77 10.89 1.88

2010. . . . . 10.95 9.10 1.85 1.83 1.78 .05 12.78 10.89 1.90

2011 . . . . . 10.99 9.13 1.86 1.83 1.74 .09 12.82 10.87 1.95

2012. . . . . 11.01 9.22 1.79 1.83 1.73 .10 12.84 10.96 1.89

2013. . . . . 11.03 9.36 1.67 1.84 1.71 .12 12.87 11.08 1.79

2014. . . . . 11.04 9.52 1.52 1.84 1.70 .14 12.88 11.22 1.65

2015. . . . . 11.05 9.70 1.35 1.84 1.69 .15 12.89 11.39 1.50
Actuarial Estimates

44

Notes:

1. The income rate excludes interest income and certain transfers from the General Fund of the Treasury.

2. Some historical values are subject to change due to revisions of taxable payroll.

3. Totals do not necessarily equal the sums of rounded components.

Under the intermediate assumptions, the cost rate for DI generally increases

over the long-range period from 1.91 percent of taxable payroll for 2006,

reaching 2.47 for 2080. The income rate increases only very slightly from

Low Cost (cont.):

2020. . . . . 11.13 10.90 0.23 1.84 1.67 0.17 12.96 12.57 0.39

2025. . . . . 11.20 12.03 -.83 1.84 1.73 .11 13.04 13.76 -.72

2030. . . . . 11.25 12.85 -1.60 1.84 1.73 .12 13.09 14.58 -1.49

2035. . . . . 11.28 13.16 -1.88 1.84 1.70 .14 13.12 14.86 -1.74

2040. . . . . 11.28 12.98 -1.70 1.84 1.70 .15 13.12 14.67 -1.55

2045. . . . . 11.27 12.64 -1.38 1.84 1.73 .12 13.11 14.37 -1.26

2050. . . . . 11.26 12.40 -1.14 1.84 1.72 .12 13.10 14.13 -1.02

2055. . . . . 11.26 12.24 -.99 1.84 1.72 .12 13.10 13.97 -.86

2060. . . . . 11.25 12.14 -.89 1.84 1.70 .14 13.10 13.84 -.74

2065. . . . . 11.25 12.02 -.77 1.85 1.70 .15 13.09 13.72 -.62

2070. . . . . 11.25 11.90 -.66 1.85 1.70 .15 13.09 13.60 -.51

2075. . . . . 11.24 11.78 -.54 1.85 1.71 .14 13.09 13.49 -.41

2080. . . . . 11.24 11.74 -.50 1.85 1.72 .12 13.09 13.47 -.38

First year balance becomes

negative and remains negative

through 2080 . . . . . . . . . . . . . . 2022 . . . . . . . . . . . . . . . . 2/ . . . . . . . . . . . . . . . . 2022

High Cost:

2006. . . . . 10.92 9.53 1.38 1.83 2.02 -.19 12.75 11.56 1.19

2007. . . . . 10.94 9.55 1.39 1.83 2.09 -.26 12.77 11.64 1.13

2008. . . . . 10.98 9.57 1.41 1.83 2.14 -.31 12.81 11.71 1.11

2009. . . . . 10.96 9.72 1.24 1.83 2.20 -.37 12.80 11.92 .87

2010. . . . . 10.98 9.87 1.11 1.84 2.28 -.44 12.82 12.15 .67

2011 . . . . . 11.03 10.03 .99 1.84 2.30 -.46 12.87 12.34 .53

2012. . . . . 11.06 10.32 .74 1.85 2.39 -.54 12.91 12.71 .20

2013. . . . . 11.09 10.66 .43 1.85 2.45 -.60 12.94 13.11 -.17

2014. . . . . 11.11 10.98 .13 1.85 2.50 -.65 12.96 13.48 -.52

2015. . . . . 11.13 11.31 -.19 1.86 2.56 -.70 12.98 13.87 -.89

2020. . . . . 11.23 12.98 -1.74 1.86 2.67 -.81 13.09 15.64 -2.55

2025. . . . . 11.33 14.58 -3.25 1.87 2.82 -.95 13.20 17.40 -4.20

2030. . . . . 11.43 16.13 -4.70 1.87 2.89 -1.02 13.30 19.02 -5.72

2035. . . . . 11.50 17.23 -5.73 1.87 2.92 -1.04 13.37 20.14 -6.77

2040. . . . . 11.54 17.82 -6.28 1.88 2.98 -1.10 13.42 20.80 -7.38

2045. . . . . 11.57 18.20 -6.63 1.88 3.12 -1.24 13.45 21.32 -7.87

2050. . . . . 11.60 18.68 -7.08 1.88 3.21 -1.33 13.49 21.89 -8.40

2055. . . . . 11.64 19.25 -7.61 1.89 3.31 -1.42 13.53 22.56 -9.03

2060. . . . . 11.68 19.98 -8.30 1.89 3.34 -1.45 13.57 23.33 -9.75

2065. . . . . 11.73 20.82 -9.09 1.89 3.40 -1.51 13.62 24.22 -10.59

2070. . . . . 11.79 21.76 -9.97 1.89 3.40 -1.51 13.68 25.16 -11.48

2075. . . . . 11.84 22.60 -10.77 1.89 3.41 -1.52 13.73 26.01 -12.28

2080. . . . . 11.88 23.35 -11.47 1.89 3.42 -1.52 13.77 26.76 -12.99

First year balance becomes

negative and remains negative

through 2080 . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . 2013

1 Historical income rates are modified to include adjustments to the lump-sum payments received in 1983

from the General Fund of the Treasury for the cost of noncontributory wage credits for military service in

1940-56.

2 After 2007, the annual balance is projected to remain positive throughout the remainder of the projection

period.

Table IV.B1.—Estimated Annual Income Rates, Cost Rates, and Balances

Calendar Years 1990-2080 (Cont.)

[As a percentage of taxable payroll]

Calendar 

year

OASI DI OASDI

Income

rate1 Costrate Balance

Income

rate1 Costrate Balance

Income

rate1 Costrate Balance
45

Long-Range Estimates

1.83 percent of taxable payroll for 2006 to 1.87 percent for 2080. The annual

deficit is about 0.09 percent in 2006 and reaches 0.60 percent for 2080.

Under the low cost assumptions, the DI cost rate is fairly stable over the

long-range period, reaching 1.72 percent for 2080. The annual balance is

negative for the first 2 years and is positive throughout the remainder of the

long-range period. For the high cost assumptions, DI cost rises much more,

reaching 3.42 percent for 2080. Annual deficits began in 2005 and reach

1.52 percent for 2080.

Figure IV.B1 shows in graphical form 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 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 fact that

an increasing share of individual benefits will be subject to taxation, because

benefit taxation threshold amounts are not indexed.

The patterns of the annual balances for OASI and DI are suggested by 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

46

The cost of the OASDI program has been discussed in this section in relation

to taxable payroll, which is a program-related concept that is very useful in

analyzing the financial status of the OASDI program. The cost can also be

discussed in relation to broader economic concepts, such as the gross domestic product (GDP), which is the total value of goods and services produced

during the year in the United States. OASDI cost generally rises from about

4.3 percent of GDP currently to about 6.3 percent of GDP by the end of the

75-year projection period under alternative II. Discussion of both the cost

and the taxable payroll of the OASDI program in relation to GDP is presented in appendix VI.F.2 beginning on page 171.

2. Comparison of Workers to Beneficiaries

The primary reason that the estimated OASDI cost rate increases rapidly

after 2010 is that the number of beneficiaries is projected to increase more

rapidly than the number of covered workers. This occurs because the relatively large number of persons born during the baby-boom will reach retirement age, and begin to receive benefits, while the relatively small number of

persons born during the subsequent period of low fertility rates will comprise

the labor force. A comparison of the numbers of covered workers and beneficiaries is shown in table IV.B2.

 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

Income rates

OASI cost rates

DI cost rates

Historical Estimated

OASI

DI III

II

I

III

II

I
47

Long-Range Estimates

Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2080

Calendar year

Covered

workers1

(in thousands)

Beneficiaries2 (in thousands) Covered

workers per

OASDI

beneficiary

OASDI

beneficiaries

per 100

covered

OASI DI OASDI workers

Historical data:

1945 . . . . . . . . . 46,390 1,106 — 1,106 41.9 2

1950 . . . . . . . . . 48,280 2,930 — 2,930 16.5 6

1955 . . . . . . . . . 65,200 7,563 — 7,563 8.6 12

1960 . . . . . . . . . 72,530 13,740 522 14,262 5.1 20

1965 . . . . . . . . . 80,680 18,509 1,648 20,157 4.0 25

1970 . . . . . . . . . 93,090 22,618 2,568 25,186 3.7 27

1975 . . . . . . . . . 100,200 26,998 4,125 31,123 3.2 31

1980 . . . . . . . . . 113,649 30,384 4,734 35,117 3.2 31

1985 . . . . . . . . . 120,575 32,776 3,874 36,650 3.3 30

1990 . . . . . . . . . 133,692 35,266 4,204 39,471 3.4 30

1991 . . . . . . . . . 132,989 35,786 4,388 40,174 3.3 30

1992 . . . . . . . . . 133,920 36,313 4,716 41,029 3.3 31

1993 . . . . . . . . . 136,137 36,757 5,083 41,840 3.3 31

1994 . . . . . . . . . 138,804 37,082 5,435 42,517 3.3 31

1995 . . . . . . . . . 141,107 37,376 5,731 43,107 3.3 31

1996 . . . . . . . . . 143,576 37,521 5,977 43,498 3.3 30

1997 . . . . . . . . . 146,445 37,705 6,087 43,792 3.3 30

1998 . . . . . . . . . 149,421 37,825 6,250 44,075 3.4 29

1999 . . . . . . . . . 152,152 37,934 6,433 44,366 3.4 29

2000 . . . . . . . . . 155,046 38,560 6,606 45,166 3.4 29

2001 . . . . . . . . . 155,416 38,888 6,780 45,668 3.4 29

2002 . . . . . . . . . 154,818 39,116 7,060 46,176 3.4 30

2003 . . . . . . . . . 154,946 39,314 7,438 46,752 3.3 30

2004 . . . . . . . . . 156,986 39,557 7,810 47,367 3.3 30

2005 . . . . . . . . . 159,147 39,961 8,172 48,133 3.3 30

Intermediate:

2010 . . . . . . . . . 167,774 43,329 9,596 52,925 3.2 32

2015 . . . . . . . . . 171,938 49,488 10,406 59,894 2.9 35

2020 . . . . . . . . . 176,415 57,219 11,132 68,350 2.6 39

2025 . . . . . . . . . 179,417 64,619 12,021 76,640 2.3 43

2030 . . . . . . . . . 182,093 71,300 12,410 83,710 2.2 46

2035 . . . . . . . . . 185,004 75,906 12,670 88,576 2.1 48

2040 . . . . . . . . . 188,119 78,249 13,022 91,271 2.1 49

2045 . . . . . . . . . 191,409 79,861 13,618 93,479 2.0 49

2050 . . . . . . . . . 194,424 81,568 13,950 95,518 2.0 49

2055 . . . . . . . . . 197,329 83,546 14,323 97,869 2.0 50

2060 . . . . . . . . . 200,201 85,851 14,509 100,361 2.0 50

2065 . . . . . . . . . 203,122 88,302 14,815 103,117 2.0 51

2070 . . . . . . . . . 205,908 90,927 15,035 105,963 1.9 51

2075 . . . . . . . . . 208,816 93,256 15,334 108,591 1.9 52

2080 . . . . . . . . . 211,631 95,581 15,644 111,225 1.9 53

Low Cost:

2010 . . . . . . . . . 168,984 43,310 9,036 52,346 3.2 31

2015 . . . . . . . . . 175,593 49,368 9,176 58,544 3.0 33

2020 . . . . . . . . . 181,170 56,728 9,424 66,152 2.7 37

2025 . . . . . . . . . 185,428 63,707 9,956 73,663 2.5 40

2030 . . . . . . . . . 189,840 69,797 10,148 79,945 2.4 42

2035 . . . . . . . . . 195,069 73,730 10,334 84,064 2.3 43

2040 . . . . . . . . . 201,229 75,422 10,655 86,077 2.3 43

2045 . . . . . . . . . 208,157 76,572 11,201 87,773 2.4 42

2050 . . . . . . . . . 215,474 77,989 11,559 89,548 2.4 42

2055 . . . . . . . . . 223,126 79,863 11,984 91,847 2.4 41

2060 . . . . . . . . . 231,201 82,089 12,316 94,406 2.4 41

2065 . . . . . . . . . 239,925 84,363 12,805 97,169 2.5 40

2070 . . . . . . . . . 249,130 86,779 13,305 100,085 2.5 40

2075 . . . . . . . . . 258,778 89,232 13,932 103,164 2.5 40

2080 . . . . . . . . . 268,666 92,257 14,578 106,835 2.5 40
Actuarial Estimates

48

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 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 readily seen by considering the projected number of

OASDI beneficiaries per 100 covered workers. As compared to the 2005

level of 30 beneficiaries per 100 covered workers, this ratio is estimated to

rise significantly by 2080 to 40 under the low cost assumptions, 53 under the

intermediate assumptions, and 70 under the high cost assumptions. 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.

High Cost:

2010 . . . . . . . . . 163,064 43,366 10,379 53,745 3.0 33

2015 . . . . . . . . . 168,855 49,674 11,916 61,589 2.7 36

2020 . . . . . . . . . 172,764 57,861 13,014 70,876 2.4 41

2025 . . . . . . . . . 175,173 65,775 14,236 80,011 2.2 46

2030 . . . . . . . . . 176,892 73,225 14,771 87,996 2.0 50

2035 . . . . . . . . . 178,166 78,797 15,094 93,892 1.9 53

2040 . . . . . . . . . 179,018 82,174 15,486 97,660 1.8 55

2045 . . . . . . . . . 179,523 84,721 16,152 100,873 1.8 56

2050 . . . . . . . . . 179,132 87,197 16,465 103,662 1.7 58

2055 . . . . . . . . . 178,477 89,776 16,778 106,554 1.7 60

2060 . . . . . . . . . 177,391 92,636 16,786 109,422 1.6 62

2065 . . . . . . . . . 175,919 95,645 16,858 112,502 1.6 64

2070 . . . . . . . . . 174,173 98,816 16,700 115,516 1.5 66

2075 . . . . . . . . . 172,279 101,376 16,543 117,919 1.5 68

2080 . . . . . . . . . 170,212 103,391 16,398 119,789 1.4 70

1 Workers who are paid at some time during the year for employment on which OASDI taxes are due.

2 Beneficiaries with monthly benefits in current-payment status as of June 30.

Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2080 (Cont.)

Calendar year

Covered

workers1

(in thousands)

Beneficiaries2 (in thousands) Covered

workers per

OASDI

beneficiary

OASDI

beneficiaries

per 100

covered

OASI DI OASDI workers
49

Long-Range Estimates

Table IV.B2 also shows that the number of covered workers per OASDI beneficiary, which was about 3.3 in 2005, is estimated to decline in the future.

Based on the intermediate assumptions, the ratio declines to 2.1 by 2032, and

1.9 workers per beneficiary by 2069. Based on the low cost assumptions, for

which high fertility rates and small reductions in death rates are assumed, the

ratio declines to 2.3 by 2032, and then rises back to a level of 2.5 by 2061.

Based on the high cost assumptions, for which low fertility rates and large

reductions in death rates are assumed, the decline is much greater, reaching

1.8 by 2039, and 1.4 workers per beneficiary by 2077.

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. For any year in

which the projected trust fund ratio is positive (i.e., the trust fund holds

assets at the beginning of the year), but is not positive for the following year

the trust fund is projected to become exhausted during the year. Under

present law, the OASI and DI Trust Funds do not currently have the authority

to borrow. Therefore, exhaustion of the assets in either fund during a year

would mean there are no longer sufficient assets in the fund to cover the full

amount of benefits scheduled for the year under present law.

The trust fund ratio also serves an additional important purpose in assessing

the actuarial status of the program. When the financing is adequate for the

 Figure IV.B2.—Number of OASDI Beneficiaries Per 100 Covered Workers

0

10

20

30

40

50

60

70

80

90

100

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Historical Estimated

III

II

I
Actuarial Estimates

50

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 toward the end of the period is level (or increasing), then

projected adequacy for the long-range period is likely to continue for subsequent reports.

Table IV.B3 shows, by alternative, the estimated trust fund ratios (without

regard to advance tax transfers that would be effected after the end of the

10-year, short-range period) 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, reflecting the effect of the provision for advance tax

transfers.

Based on the intermediate assumptions, the OASI trust fund ratio rises

steadily from 355 percent at the beginning of 2006, reaching a peak of

462 percent at the beginning of 2015. This increase in the OASI trust fund

ratio results from the fact that the annual income rate (which excludes interest) exceeds annual outgo for several years (see table IV.B1). Thereafter, the

OASI trust fund ratio declines steadily, with the OASI Trust Fund becoming

exhausted in 2042. The DI trust fund ratio has followed a pattern that is similar but unfolded more rapidly. The DI trust fund ratio is estimated to decline

steadily from 203 percent at the beginning of 2006 until becoming exhausted

in 2025.

The trust fund ratio for the combined OASI and DI Trust Funds rises from

329 percent for 2006 to a peak of 409 percent at the beginning of 2015.

Thereafter, the ratio declines, with the combined funds becoming exhausted

in 2040. Based on the intermediate estimates in last year’s report, the peak

fund ratio for the combined funds was estimated to be 418 percent for 2015

and the year of exhaustion was estimated to be 2041.

The trust fund ratio for the OASDI program first declines in 2016, about

1 year before annual expenditures begin to exceed noninterest income. This

occurs because the increase in trust fund assets during 2015, which reflects

interest income and a small excess of noninterest income over cost, occurs at

a slower rate than does the increase in the annual cost of the program

between 2015 and 2016.

After 2015 the dollar amount of assets is projected to continue to rise through

the beginning of 2027 because interest income more than offsets the shortfall

in noninterest income. Beginning in 2017, the OASDI program is projected

to experience increasingly large cash-flow shortfalls that will require the

trust funds to redeem special public-debt obligations of the General Fund of

the Treasury. This will differ from the experience of recent years when the
51

Long-Range Estimates

trust funds have been net lenders to the General Fund of the Treasury. The

change in the cash flow between the trust funds and the general fund is

expected to have important public policy and economic implications that go

well beyond the operation of the OASDI program itself.

Based on the low cost assumptions, the trust fund ratio for the DI program

increases throughout the long-range projection period, reaching the

extremely high level of 1,374 percent for 2080. At the end of the long-range

period, the DI trust fund ratio is rising by 21 percentage points per year.

Thus, subsequent reports are likely to contain projections of adequate longrange financing of the DI program under a similar optimistic set of assumptions. For the OASI program, the trust fund ratio rises to a peak of

535 percent for 2019, dropping thereafter to a level of 276 percent by 2080.

At the end of the period the OASI trust fund ratio is declining by 1 percentage point per year. The long-term outlook for the DI program is improved

more than for the OASI program largely because lower assumed disability

incidence rates have a substantial effect on the DI program but little net

effect on the OASI program. For the OASDI program, the trust fund ratio

peaks at 508 percent for 2021, falls to 387 percent for 2060, and increases

thereafter, reaching 416 percent for 2080. Thus, due to the size of the trust

fund ratios and their near stability, subsequent Trustees Reports are likely to

contain projections of adequate long-range financing of the OASI and combined OASI and DI program under the low cost assumptions. A stable trust

fund ratio at the end of the valuation period indicates that the actuarial balance for Trustees Reports in subsequent years can be expected to remain

about the same as long as assumptions are realized.

In contrast, under the high cost assumptions, the OASI trust fund ratio is estimated to peak at 395 percent for 2010, thereafter declining to fund exhaustion by the end of 2033. The DI trust fund ratio is estimated to decline from

197 percent for 2006 to fund exhaustion by the end of 2015. The combined

OASDI trust fund ratio is estimated to rise to a peak of 348 percent for 2009,

declining thereafter to fund exhaustion by the end of 2030.

Thus, because large ultimate cost rates are projected under all but the low

cost assumptions, it is likely that income will eventually need to be

increased, and/or program costs will need to be reduced in order to prevent

the trust funds from becoming exhausted.

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 24 years into the future (until 2030). Under the intermediate assumptions the combined starting funds plus estimated future income

would be able to cover cost for about 34 years into the future (until 2040).

The program would be able to cover cost for the foreseeable future under the
Actuarial Estimates

52

more optimistic low cost assumptions. In the 2005 report, the combined trust

funds were projected to become exhausted in 2030 under the high cost

assumptions and in 2041 under the intermediate assumptions.

.

Note: See definition of trust fund ratio on page 207. The combined ratios shown for years after the DI fund is

estimated to be exhausted are theoretical and are shown for informational purposes only.

A graphical 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 graphical illustration of the trust fund ratios for the combined

trust funds is shown in figure II.D7 on page 15.

Table IV.B3.—Estimated Trust Fund Ratios, Calendar Years 2006-80

[In percent]

Calendar

year

Intermediate Low Cost High Cost

OASI DI OASDI OASI DI OASDI OASI DI OASDI

2006 . . . . . . . . . . . . . 355 203 329 355 207 330 355 197 328

2007 . . . . . . . . . . . . . 375 198 344 376 206 348 370 183 337

2008 . . . . . . . . . . . . . 394 192 359 397 208 365 382 166 343

2009 . . . . . . . . . . . . . 410 187 372 418 212 384 393 148 348

2010 . . . . . . . . . . . . . 425 179 382 438 215 401 395 126 345

2011 . . . . . . . . . . . . . 438 174 393 458 224 420 392 103 338

2012 . . . . . . . . . . . . . 449 166 400 476 231 437 390 80 332

2013 . . . . . . . . . . . . . 456 158 405 492 242 453 389 56 326

2014 . . . . . . . . . . . . . 460 149 408 505 253 467 386 31 320

2015 . . . . . . . . . . . . . 462 139 409 517 265 480 381 6 312

2020 . . . . . . . . . . . . . 436 86 383 534 332 507 324 1/1 246

2025 . . . . . . . . . . . . . 373 17 321 513 389 497 224 1/1 141

2030 . . . . . . . . . . . . . 282 1/

1 The trust fund is estimated to be exhausted by the beginning of this year. The last line of the table shows the

specific year of trust fund exhaustion.

233 471 451 469 95 1/1 9

2035 . . . . . . . . . . . . . 176 1/1 130 426 530 438 1/1 1/1 1/1

2040 . . . . . . . . . . . . . 60 1/1 16 390 612 415 1/1 1/1 1/1

2045 . . . . . . . . . . . . . 1/1 1/1 1/1 363 679 401 1/1 1/1 1/1

2050 . . . . . . . . . . . . . 1/1 1/1 1/1 342 760 393 1/1 1/1 1/1

2055 . . . . . . . . . . . . . 1/1 1/1 1/1 325 845 389 1/1 1/1 1/1

2060 . . . . . . . . . . . . . 1/1 1/1 1/1 309 949 387 1/1 1/1 1/1

2065 . . . . . . . . . . . . . 1/1 1/1 1/1 296 1,054 390 1/1 1/1 1/1

2070 . . . . . . . . . . . . . 1/1 1/1 1/1 286 1,164 396 1/1 1/1 1/1

2075 . . . . . . . . . . . . . 1/1 1/1 1/1 280 1,269 405 1/1 1/1 1/1

2080 . . . . . . . . . . . . . 1/1 1/1 1/1 276 1,374 416 1/1 1/1 1/1

Trust fund is estimated to become

exhausted in. . . . . 2042 2025 2040 2/

2 The fund is not estimated to be exhausted within the projection period.

2/1 2/1 2033 2015 2030
53

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 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. This is because increasing

income from taxation of benefits reflects not only rising benefit and income

levels, but also the fact that benefit-taxation threshold amounts are not

indexed. 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 results from the fact that all OASDI

income and cost dollar amounts presented in this report are computed on a

cash basis, i.e., amounts are attributed to the year in which they are intended

to be received by, or expended from, the fund, while taxable payroll is attrib-

 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%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

OASI

DI

Historical Estimated

III II

I

I

III II
Actuarial Estimates

54

uted to the year in which earnings are paid. Because earnings are paid to

workers before the corresponding payroll taxes are credited to the funds,

payroll tax income for a particular year reflects a combination of the taxable

payrolls from that year and from 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 that is slightly

less 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

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. Combined with a falling

trust fund ratio, this signals the possibility of continuing cash-flow deficits,

implying 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 the low cost and intermediate assumptions. For the 25-year

valuation period the summarized values indicate actuarial balances of

1.82 percent of taxable payroll under the low cost assumptions, 0.66 percent

under the intermediate assumptions, and -0.82 percent under the high cost

assumptions. Thus, the program is more than adequately financed for the

25-year valuation period under all but the high cost projections. For the

50-year valuation period the OASDI program would have a positive actuarial

balance of 0.58 percent under the low cost assumptions, but would have deficits of 1.26 percent under the intermediate assumptions and 3.60 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.
55

Long-Range Estimates

For the entire 75-year valuation period, the combined OASDI program

would again have actuarial deficits except under the low cost set of assumptions. The actuarial balance for this long-range valuation period is projected

to be 0.35 percent of taxable payroll under the low cost assumptions,

-2.02 percent under the intermediate assumptions, and -5.17 percent under

the high cost assumptions.

Assuming the Trustees’ intermediate assumptions are realized, the deficit of

2.02 percent of payroll indicates that financial adequacy of the program for

the next 75 years could be restored if the Social Security payroll tax rate

were increased for current and future earnings from 12.4 percent (combined

employee-employer shares) to 14.42 percent. Alternatively, all current and

future benefits could be reduced by 13.3 percent (or there could be some

combination of tax increases and benefit reductions). Changes of this magnitude would be sufficient to eliminate the actuarial deficit over the 75-year

projection period.

However, large annual deficits projected under current law for the end of the

long-range period, which exceed 5 percent of payroll under the intermediate

assumptions, indicate that the annual cost will very likely continue to exceed

tax revenues after 2080. As a result, ensuring continued adequate financing

would eventually require larger changes than those needed to restore actuarial balance for the 75-year period. For the infinite future, the actuarial deficit

is estimated to be 3.7 percent of taxable payroll under the intermediate

assumptions. This means that the projected infinite horizon shortfall could be

eliminated with an immediate increase in the combined payroll tax rate from

12.4 percent to about 16.1 percent. This shortfall could also be eliminated if

all current and future benefits were immediately reduced by 22 percent.

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, relative to the level of program costs.
Actuarial Estimates

56

.

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

Table IV.B5 presents the components and the calculation of the long-range

(75-year) actuarial balance under the intermediate assumptions. The present

value of future cost less future tax income over the long-range period, minus

the amount of trust fund assets at the beginning of the projection period,

amounts to $4.6 trillion for the OASDI program. This amount is referred to

as the 75-year “open group unfunded obligation.” 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

Table IV.B4.—Components of Summarized Income Rates and Cost Rates, 

Calendar Years 2006-80

[As a percentage of taxable payroll]

Valuation period

Income rate Cost rate

Actuarial

balance

Payroll

tax

Taxation

of

benefits

Beginning

fund

balance Total

Disbursements

Ending

fund

balance Total

OASI:

Intermediate:

2006-30. . . . . 10.59 0.52 1.49 12.60 11.28 0.50 11.79 0.81

2006-55. . . . . 10.59 .64 .87 12.10 12.87 .21 13.08 -.99

2006-80. . . . . 10.59 .68 .68 11.95 13.51 .12 13.63 -1.68

Low Cost:

2006-30. . . . . 10.59 .48 1.49 12.56 10.51 .44 10.95 1.61

2006-55. . . . . 10.59 .56 .87 12.02 11.45 .18 11.63 .39

2006-80. . . . . 10.59 .58 .67 11.83 11.57 .10 11.67 .17

High Cost:

2006-30. . . . . 10.58 .57 1.50 12.65 12.26 .58 12.84 -.19

2006-55. . . . . 10.58 .73 .86 12.18 14.65 .28 14.93 -2.75

2006-80. . . . . 10.59 .83 .67 12.08 16.11 .17 16.28 -4.19

DI:

Intermediate:

2006-30. . . . . 1.80 .04 .18 2.02 2.09 .08 2.17 -.15

2006-55. . . . . 1.80 .05 .10 1.95 2.19 .03 2.23 -.27

2006-80. . . . . 1.80 .05 .08 1.93 2.25 .02 2.27 -.33

Low Cost:

2006-30. . . . . 1.80 .04 .17 2.01 1.73 .06 1.79 .22

2006-55. . . . . 1.80 .04 .10 1.94 1.73 .02 1.75 .19

2006-80. . . . . 1.80 .04 .08 1.92 1.72 .01 1.73 .18

High Cost:

2006-30. . . . . 1.80 .05 .18 2.03 2.56 .10 2.66 -.63

2006-55. . . . . 1.80 .06 .10 1.96 2.77 .05 2.81 -.85

2006-80. . . . . 1.80 .07 .08 1.95 2.90 .02 2.93 -.98

OASDI:

Intermediate:

2006-30. . . . . 12.38 .57 1.67 14.62 13.37 .58 13.96 .66

2006-55. . . . . 12.38 .69 .98 14.05 15.06 .25 15.31 -1.26

2006-80. . . . . 12.38 .74 .76 13.88 15.76 .14 15.90 -2.02

Low Cost:

2006-30. . . . . 12.38 .52 1.66 14.57 12.24 .50 12.74 1.82

2006-55. . . . . 12.39 .60 .97 13.95 13.18 .20 13.38 .58

2006-80. . . . . 12.39 .62 .75 13.75 13.29 .11 13.40 .35

High Cost:

2006-30. . . . . 12.38 .63 1.67 14.68 14.82 .68 15.50 -.82

2006-55. . . . . 12.38 .80 .97 14.14 17.42 .32 17.74 -3.60

2006-80. . . . . 12.38 .90 .75 14.03 19.01 .19 19.21 -5.17
57

Long-Range Estimates

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

-$4.9 trillion for the OASDI program. Expressed as a percentage of taxable

payroll for the period, this is the actuarial balance of -2.02 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 2006 to 2080 for this report) for the evaluation of the long-run financial status of the OASDI program on an open group basis (i.e., including

taxes and cost for past, current and future participants through the year

2080). 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

$4.6 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 of all participants are included, through the year

2080, but some or all of their future scheduled benefits, for years after 2080,

are excluded. 

Table IV.B5.—Components of 75-Year Actuarial Balance

Under Intermediate Assumptions (2006-80)

Item OASI DI OASDI

Present value as of January 1, 2006 (in billions):

a. Payroll tax revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,903 $4,399 $30,301

b. Taxation of benefits revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,675 132 1,806

c. Tax income (a + b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,577 4,530 32,107

d. Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,058 5,499 38,557

e. Cost minus tax income (d - c) . . . . . . . . . . . . . . . . . . . . . . . . . . 5,481 969 6,449

f. Trust fund assets at start of period. . . . . . . . . . . . . . . . . . . . . . . 1,663 196 1,859

g. Open group unfunded obligation (e - f). . . . . . . . . . . . . . . . . . . 3,818 773 4,591

h. Ending target trust fund1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

1The 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.

298 45 343

i. Income minus cost, plus assets at start of period, minus

ending target trust fund (c - d + f - h = - g - h) . . . . . . . . . . . . . -4,116 -818 -4,934

j. Taxable payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244,670 244,670 244,670

Percent of taxable payroll:

Actuarial balance (100 × i ÷ j) . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.68 -.33 -2.02
Actuarial Estimates

58

Table IV.B6 also presents the 75-year unfunded obligation as percentages of

future OASDI taxable payroll and gross domestic product (GDP) through

2080. 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 of summary measures (such as

the actuarial balance and open group unfunded obligation) for the 75-year

period can lead to incorrect perceptions and policy that fail to address financial sustainability for the more distant future. This 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).

Another limitation is that continued, and possibly increasing, annual shortfalls after the period are not reflected in the 75-year summarized measures.

In order to provide a fuller description of long-run unfunded obligations of

the OASDI program, this section presents estimates of obligations that

extend to the infinite horizon. The extension assumes that the current-law

OASDI program and the demographic and most economic trends used for

the 75-year projection continue indefinitely. The one exception is that the

ultimate assumed real-wage differential for the long-range period of

1.1 percent is increased to 1.2 percent for each year after 2080. This change

essentially maintains consistency with the assumed reduction in the growth

of health care expenditures after 2080. (See the Medicare Trustees Report.)

The values in table IV.B6 indicate that extending the calculations beyond

2080 adds $8.8 trillion in unfunded obligations to the amount estimated

through 2080. That is, over the infinite horizon, the OASDI open group

unfunded obligations are projected to be $13.4 trillion. The $8.8 trillion

increment reflects a significant financing gap projected for OASDI after

2080. Of course, the degree of uncertainty associated with estimates beyond

2080 is substantial.

In last year’s report the unfunded obligation over the infinite horizon was

reported as $11.1 trillion in present value as of January 1, 2005. The change

to the later valuation date for this report, January 1, 2006, tends to increase

the measured deficit by about $0.6 trillion. The change in projected trust

fund interest rates, primarily the assumption that ultimate trust fund real

interest rates would be 2.9 percent, rather than 3.0 percent, increased the

measured deficit by about $1.4 trillion. In addition, the net effects of changes

in data, methods, and other assumptions increased the infinite horizon

unfunded obligation by approximately $0.3 trillion. See section IV.B.7 for

details regarding changes in data, methods, and assumptions.
59

Long-Range Estimates

As noted in the previous section, the $13.4 trillion infinite future open group

unfunded obligation may also be expressed as a percentage of the taxable

payroll over that period. This actuarial deficit for the infinite future is

3.7 percent of taxable payroll under the intermediate assumptions,

0.2 percent higher than in last year’s report. This unfunded obligation can

also be expressed as a percentage of GDP over the infinite future and is

1.3 percent on that basis. These relative measures of the unfunded obligation

over the infinite future express its magnitude in relation to the resources that

are potentially available to finance the shortfall.

Notes:

1. The present values of future taxable payroll for 2006-80 and for 2006 through the infinite horizon are

$244.7 trillion and $366.6 trillion, respectively.

2. The present values of GDP for 2006-80 and for 2006 through the infinite horizon are $670.1 trillion and

$1,057.4 trillion, respectively.

b. Unfunded Obligations for Past, Current, and Future Participants

The future unfunded obligation of the OASDI program may also be viewed

from a generational perspective. This perspective is generally associated

with assessment of the financial condition of a program that is intended or

required to be financed on a fully-advance-funded basis. However, analysis

from this perspective can also provide insights into the implications of payas-you-go financing, the basis that has been used for the OASDI program.

The first line of table IV.B7 shows that the present value of future cost less

future taxes over the next 100 years for all current participants equals

$15.1 trillion. For this purpose, current participants are defined as individuals

who are age 15 or older at the beginning of 2006. Subtracting the current

value of the trust fund (the accumulated value of past OASDI taxes less cost)

gives a closed group (excluding all future participants) unfunded obligation

of $13.3 trillion. This value represents the shortfall of lifetime contributions

for all past and current participants relative to the lifetime costs associated

with their generations. For a fully-advance-funded program this value would

be equal to zero.

Table IV.B6.—Unfunded OASDI Obligations for 1935 (Program Inception)

Through the Infinite Horizon

[Present values as of January 1, 2006; 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 horizon1. . . . . 

1 Present value of future cost less future taxes, reduced by the amount of trust fund assets at the beginning of

2006. Expressed as percentage of payroll and GDP for the period 2006 through the infinite horizon.

$13.4 3.7 1.3

Unfunded obligation for 1935 through 20802 . . . . . . . . . . . . . . . . 

2 Present value of future cost less future taxes through 2080, reduced by the amount of trust fund assets at the

beginning of 2006. Expressed as percentage of payroll and GDP for the period 2006 through 2080.

4.6 1.9 .7
Actuarial Estimates

60

For Social Security benefits to be adequately financed for the infinite future,

the scheduled taxes or benefits of current and future participants in the system must be adjusted to fully offset the shortfall due to past and current participants. Future participants, as a whole, are projected to pay, in present

value, taxes that are approximately $0.1 trillion less than the cost of providing benefits they are scheduled to receive over the infinite future. For the

2005 report, on a present value basis, future participants were projected to

pay about $0.9 trillion more, in taxes, than the total cost of benefits they

would receive over the infinite future. This amount changed primarily

because of the lower ultimate real trust fund interest rate of 2.9 percent,

assumed for this report. This lower ultimate interest rate causes the measured

values of all future taxes and benefits to increase. Measured values of more

distant transactions increase relatively more. For future participants, the measured present value of scheduled benefits increases relatively more than the

present value of scheduled taxes.

Thus, the remaining long run financing gap that program reforms must ultimately close for the infinite future is estimated to be $13.4 trillion in present

value. This can be achieved by raising additional revenue or reducing benefits (or some combination) for current and future participants so that the

present value of the additional revenue or reduced benefits for the infinite

future is equivalent to 3.7 percent of taxable payroll or 1.3 percent of GDP.

Notes:

1. The present value of future taxable payroll for 2006 through the infinite horizon is $366.6 trillion.

2. The present value of GDP for 2006 through the infinite horizon is $1,057.4 trillion.

3. Totals do not necessarily equal the sums of rounded components.

Table IV.B7.—Present Values of OASDI Cost Less Tax Revenue and Unfunded 

Obligations for Program Participants

[Present values as of January 1, 2006; 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 . . . $15.1 4.1 1.4

Less current trust fund

(tax accumulations minus expenditures to date for past and current 

participants). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9 .5 .2

Equals unfunded obligation for past and current participants1 . . . . . . . .

1This concept is also referred to as the closed group unfunded obligation.

13.3 3.6 1.3

Plus present value of cost less taxes for future participants 

for the infinite future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 2/

2 Less than 0.05 percent of taxable payroll.

3/

3 Less than 0.05 percent of GDP.

Equals unfunded obligation for all participants through the infinite

horizon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.4 3.7 1.3
61

Long-Range Estimates

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

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. It is recognized that 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

length 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.
Actuarial Estimates

62

For the OASI program, the estimated actuarial balance as a percentage of the

summarized cost rate exceeds the minimum allowable for valuation periods

of length 10 through 35 years under the intermediate estimates. For valuation

periods of length greater than 35 years, the estimated actuarial balance is less

than the minimum allowable. For the full 75-year long-range period the estimated actuarial balance reaches -12.34 percent of the summarized cost rate,

for a shortfall of 7.34 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 30), it is not in long-range close actuarial balance.

For the DI program, the estimated actuarial balance as a percentage of the

summarized cost rate exceeds the minimum allowable balance for valuation

periods of length 10 through 13 years under the intermediate estimates. For

valuation periods of length greater than 13 years, the estimated actuarial balance is less than the minimum allowable. For the full 75-year long-range

period the estimated actuarial balance reaches -14.76 percent of the summarized cost rate, for a shortfall of 9.76 percent, from the minimum allowable

balance of -5.0 percent of the summarized cost rate. Thus, the DI program,

although meeting the short-range test of financial adequacy, is not in longrange 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 longrange actuarial deficits are more comparable over the entire 75-year period.

This occurs because much more of the increase in the long-range cost due to

the aging of the large 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 length 10 through 32 years under the intermediate estimates.

For valuation periods of length greater than 32 years, the estimated actuarial

balance is below the minimum allowable balance. The size of the shortfall

from the minimum allowable balance rises gradually, reaching 7.68 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 similar

to those shown in last year’s report.
63

Long-Range Estimates

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

Table IV.B8.—Comparison of Estimated 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 years: 2006-2015. . . . . 14.41 10.63 3.79 35.62 0.00

15 years: 2006-2020. . . . . 13.37 10.88 2.49 22.86 -.38

20 years: 2006-2025. . . . . 12.88 11.32 1.56 13.77 -.77

25 years: 2006-2030. . . . . 12.60 11.79 .81 6.89 -1.15

30 years: 2006-2035. . . . . 12.43 12.20 .22 1.81 -1.54

35 years: 2006-2040. . . . . 12.31 12.53 -.22 -1.76 -1.92

40 years: 2006-2045. . . . . 12.22 12.76 -.54 -4.25 -2.31

45 years: 2006-2050. . . . . 12.15 12.94 -.79 -6.10 -2.69

50 years: 2006-2055. . . . . 12.10 13.08 -.99 -7.55 -3.08

55 years: 2006-2060. . . . . 12.05 13.21 -1.16 -8.77 -3.46

60 years: 2006-2065. . . . . 12.02 13.33 -1.31 -9.83 -3.85

65 years: 2006-2070. . . . . 11.99 13.44 -1.45 -10.76 -4.23

70 years: 2006-2075. . . . . 11.97 13.54 -1.57 -11.60 -4.62

75 years: 2006-2080. . . . . 11.95 13.63 -1.68 -12.34 -5.00

DI:

10 years: 2006-2015. . . . . 2.24 2.17 .06 2.85 .00

15 years: 2006-2020. . . . . 2.11 2.14 -.03 -1.52 -.38

20 years: 2006-2025. . . . . 2.05 2.15 -.10 -4.69 -.77

25 years: 2006-2030. . . . . 2.02 2.17 -.15 -7.00 -1.15

30 years: 2006-2035. . . . . 1.99 2.18 -.18 -8.45 -1.54

35 years: 2006-2040. . . . . 1.98 2.19 -.21 -9.54 -1.92

40 years: 2006-2045. . . . . 1.97 2.20 -.23 -10.60 -2.31

45 years: 2006-2050. . . . . 1.96 2.21 -.26 -11.53 -2.69

50 years: 2006-2055. . . . . 1.95 2.23 -.27 -12.33 -3.08

55 years: 2006-2060. . . . . 1.95 2.24 -.29 -12.98 -3.46

60 years: 2006-2065. . . . . 1.94 2.24 -.30 -13.53 -3.85

65 years: 2006-2070. . . . . 1.94 2.25 -.32 -14.00 -4.23

70 years: 2006-2075. . . . . 1.93 2.26 -.33 -14.40 -4.62

75 years: 2006-2080. . . . . 1.93 2.27 -.33 -14.76 -5.00

OASDI:

10 years: 2006-2015. . . . . 16.65 12.80 3.85 30.05 .00

15 years: 2006-2020. . . . . 15.48 13.03 2.45 18.84 -.38

20 years: 2006-2025. . . . . 14.93 13.47 1.46 10.82 -.77

25 years: 2006-2030. . . . . 14.62 13.96 .66 4.73 -1.15

30 years: 2006-2035. . . . . 14.42 14.38 .04 .26 -1.54

35 years: 2006-2040. . . . . 14.28 14.71 -.43 -2.92 -1.92

40 years: 2006-2045. . . . . 14.18 14.96 -.78 -5.18 -2.31

45 years: 2006-2050. . . . . 14.11 15.15 -1.04 -6.89 -2.69

50 years: 2006-2055. . . . . 14.05 15.31 -1.26 -8.25 -3.08

55 years: 2006-2060. . . . . 14.00 15.45 -1.45 -9.38 -3.46

60 years: 2006-2065. . . . . 13.96 15.57 -1.61 -10.36 -3.85

65 years: 2006-2070. . . . . 13.93 15.69 -1.76 -11.23 -4.23

70 years: 2006-2075. . . . . 13.90 15.80 -1.90 -12.00 -4.62

75 years: 2006-2080. . . . . 13.88 15.90 -2.02 -12.68 -5.00
Actuarial Estimates

64

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.

 Figure IV.B4.—Test of Long-Range Close Actuarial Balance

[Comparison of estimated long-range actuarial balances with the minimum 

allowable for close actuarial balance under intermediate assumptions]

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080

Ending year of valuation period

 Actuarial balance as percentage

 of summarized cost rate

 Minimum allowable actuarial balance

OASI

OASDI

DI
65

Long-Range Estimates

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

No legislative changes have been enacted since the past report that directly

affect the financing of the OASDI program (see section III.B).

In changing from the valuation period of last year’s report, which was

2005-79, to the valuation period of this report, 2006-80, the relatively large

negative annual balance for 2080 is included. This results in a larger longrange actuarial deficit. (Note that the fund balance at the end of 2005, which

includes the cumulative net effects of program financing for all past years, is

included in the 75-year actuarial balance.)

Changes in demographic starting values and in the transition to ultimate

assumptions, as well as a change in the ultimate total fertility rate, have the

overall effect of increasing (improving) the long-range actuarial balance by

0.03 percent of taxable payroll. The ultimate total fertility rate is changed

from 1.95 children per woman in last year’s report to 2.0. In addition, fertility rates for the first 25 years of the projection period are higher based on

newly available birth data from the NCHS and newly revised population data

from the Census Bureau for 2000 through 2003. The changes in fertility

result in an increase (improvement) in the long-range actuarial balance of

about 0.06 percent of taxable payroll. Ultimate mortality assumptions are

unchanged from last year’s report. However, final mortality data for 2002

indicated a slightly larger than expected decline in death rates at older ages

and a slightly smaller decline at younger ages. The updates to the mortality

Table IV.B9.—Reasons for Change in the 75-Year Actuarial Balance

Under Intermediate Assumptions

[As a percentage of taxable payroll]

Item OASI DI OASDI

Shown in last year's report:

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.93 1.94 13.87

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.53 2.26 15.79

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.60 -.32 -1.92

Changes in actuarial balance due to changes in:

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

Valuation period1 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 In changing from the valuation period of last year’s report, which was 2005-79, to the valuation period of

this report, 2006-80, the relatively large negative annual balance for 2079 is included. This results in a larger

long-range actuarial deficit. The fund balance at the end of 2005, i.e., at the beginning of the projection

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

-.05 -.01 -.06

Demographic data and assumptions. . . . . . . . . . . . . . +.02 .00 +.03

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

Disability data and assumptions. . . . . . . . . . . . . . . . . -.04 +.01 -.04

Programmatic data and methods . . . . . . . . . . . . . . . . +.04 .00 +.04

Total change in actuarial balance . . . . . . . . . . . . . . . . . . -.08 -.01 -.09

Shown in this report:

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.68 -.33 -2.02

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.95 1.93 13.88

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.63 2.27 15.90
Actuarial Estimates

66

data result in a decrease (worsening) in the long-range actuarial balance of

about 0.03 percent of taxable payroll.

Several changes in the economic assumptions in this year’s report (see section IV.B), result in a net reduction (worsening) in the long-range actuarial

balance of about 0.06 percent of taxable payroll. First, the ultimate annual

real interest rate assumed for long-term U.S. Government securities is

decreased from 3.0 percent in last year’s report to 2.9 percent in this year’s

report reflecting lower realized yields on Treasury securities in recent years

and the belief that lower yields will persist. This change in the ultimate real

interest rate results in a reduction (worsening) in the long-range actuarial balance of about 0.07 percent of taxable payroll. However, the projected annual

real interest rates on new trust fund investments during the first 10 years of

the projection period are overall slightly higher in this year’s report than for

the same period in last year’s report, offsetting a small portion of the negative effect of the change in the ultimate real interest rate assumption. In addition to changes in the assumed interest rates, the ultimate assumed annual

rate of change in labor productivity is increased in this year’s report, from

1.6 percent to 1.7 percent. The effect of increased productivity growth, alone,

tends to raise the real-wage differential thus increasing (improving) the longrange actuarial balance by about 0.11 percent of taxable payroll. Finally, the

ultimate assumed differential between the annual change in the Consumer

Price Index for Urban Wage Earners and Clerical Workers (CPI) and the

annual change in the gross domestic product (GDP) deflator is increased

from 0.3 to 0.4 percentage point. The effect of this change is to lower the

real-wage differential, decreasing (worsening) the long-range actuarial balance by about 0.11 percent of taxable payroll, thus offsetting essentially the

entire effect of the ultimate assumed rate of increasing change in labor productivity.

New data on disability result in reducing (worsening) the long-range actuarial balance by 0.04 percent of taxable payroll. More recent data on disability

mortality and improvements in the calculations of the historical disability

mortality rates at the oldest ages result in a lower proportion of old-age beneficiaries with earlier disability entitlement than was estimated in last year’s

report. Because retired workers who are converted from disabled worker status have lower average benefit levels than those not converted, these revisions increase the overall average benefit for retirees and thus reduce

(worsen) the long-range actuarial balance.

One significant methodological improvement and several updates of program-specific data were made for projections in the 2006 report. These

changes to programmatic data and methods result in a combined increase

(improvement) in the long-range OASDI actuarial balance of about
67

Long-Range Estimates

0.04 percent of payroll including interaction. The major cause of this positive

change in the actuarial balance is the inclusion of an additional year of more

recent program-specific data. The one significant change in methodology is a

revision in the method for projecting the number of minor children of retired

workers to reflect the recent trend toward a lower number of child beneficiaries. This reduction of minor child beneficiaries compared to last year’s

report results in an increase (improvement) in the OASDI actuarial balance

by about 0.01 percent of payroll.

If no changes in assumptions or methods were made for this report and actual

experience had met expectations since the last report, the OASDI long-range

actuarial deficit would, nonetheless, have increased by 0.06 percent of taxable payroll from the level estimated for last year’s report due to the change

in the valuation period (see table IV.B9). The changes made in data, assumptions, and methods for this report, together, make the increase in the deficit

about 50 percent larger than the increase in the deficit due solely to the new

valuation period. This is indicated by the total 0.09 percentage point increase

in the deficit, which, after rounding, increases the deficit from 1.92 percent

to 2.02 percent of taxable payroll.

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.

 Figure IV.B5.—OASDI Annual Balances: 2005 and 2006 Reports

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

-8%

-6%

-4%

-2%

0%

2%

4%

2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

2005 Report

2006 Report
Actuarial Estimates

68

The projected annual balances in this report start at a lower level than those

in last year’s report largely due to worse than expected recent economic

experience. Over the period 2010 through 2050, annual balances are similar

between the two reports. After 2050, however, the annual balances in this

year’s report are larger due to the impact of the higher fertility rates. The

annual deficit for 2079 is 5.35 percent of taxable payroll in this report compared to 5.70 percent for 2079 in last year’s report.
69

Demographic Assumptions and Methods

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

The future income and cost of the OASDI program will depend on many

demographic, economic, and program-specific factors. Trust fund income

will depend on how these factors affect the size and composition of the

working population 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 projected using methods

that reflect historical and expected future relationships to the basic assumptions. These include total population, life expectancy, labor force, gross

domestic product, interest rates, and many program-specific factors. It

should be noted that 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 recent experience and new information about future conditions, and

are revised if warranted.

Because projections of these factors and their interrelationships are inherently uncertain, a range of estimates is shown in this report on the basis of

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 the most optimistic, and the high cost is the most 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 assumptions and interactions would differ in the same direction from those expected. Outcomes

with overall cost as low as (or lower than) the low cost scenario or as high as

(or higher than) the high cost scenario are also very low probability.

Although these three sets of demographic and economic assumptions have

been developed to provide a broad range of possible outcomes, the resulting

estimates should be interpreted with care. The estimates are not intended to

be specific predictions of the future financial status of the OASDI program,
Assumptions & Methods

70

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 2 to 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. One exception is for real wage growth, as described in section IV.B.5.

The ultimate values assumed after the first 2 to 25 years (and 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 somewhat 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. Fertility Assumptions

Fertility (birth rate) assumptions are developed for women by single year of

age, from 14 to 49. They are applied to the total number of women in the

population at each age, for all marital statuses.

 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 on the Social Security website 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;

or write to: Office of the Chief Actuary, 700 Altmeyer Building, 6401 Security Boulevard, Baltimore, MD

21235; or call (410) 965-3015. This entire report, along with supplemental year-by-year tables, may also be

found at www.socialsecurity.gov/OACT/TR/TR06/index.html.
71

Demographic Assumptions and Methods

Historically, fertility rates in the United States have fluctuated widely. The

total fertility rate1 decreased from 3.3 children per woman after World War I

to 2.1 during the Great Depression, rose to 3.7 in 1957, and then fell to 1.7 in

1976. After 1976, the total fertility rate began to rise again, reaching a level

of 2.07 for 1990. Since then, the total fertility rate has remained fairly stable,

around 2.0 children per woman.

These variations in fertility rates have resulted from changes in many factors,

including social attitudes, economic conditions, and the use of birth-control

methods. Future fertility rates may be expected to remain close to recent levels. The recent historical and projected trends in certain population characteristics, such as the rising 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 a continued relatively low fertility rate. Based on consideration of these factors, ultimate total fertility rates of 2.3, 2.0 and 1.7 children per woman were selected for the low cost, intermediate, and high cost

assumptions, respectively. For each alternative, the total fertility rate is

assumed to gradually trend from the estimated level of 2.05 for 2003, reaching the selected ultimate level for 2030 and later.

The ultimate total fertility rates for the intermediate and low cost assumptions are increased from the rates of 1.95 and 2.2 children per woman,

respectively, in last year’s report. The ultimate total fertility rate for the high

cost assumption is unchanged from last year’s report. The increase in the

ultimate total fertility rates for the intermediate and low cost assumptions is

based primarily on the persistently higher than previously assumed levels of

total fertility rates in recent years. Since 1990, the total fertility rate has been

at least 2.0 children per woman in all but three years and never below 1.97

children per woman.

In addition, total fertility rates for years prior to 2030 are slightly higher than

in last year's report due to incorporating additional birth data for 2003 and

revised population data for 2000-03. These recent birth and population data

result in slightly higher starting levels that remain at higher levels through

2029. 

 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 2.1 would ultimately result in a nearly constant population if net immigration were zero and if death rates were constant.
Assumptions & Methods

72

2. Mortality Assumptions

Mortality (death rate) assumptions are developed by single year of age, sex,

and cause of death.

Death rates in the United States since 1900 have declined substantially, but at

varying rates. Historical rates (for years 1900-2002) used in preparing this

report were calculated for ages below 65 (and for all ages prior to 1968)

using data from the National Center for Health Statistics (NCHS).1 For ages

65 and over, Medicare final data were used for years 1968 through 2002.

Also used are death rates by cause of death produced by the NCHS for years

1979-2002.

The total age-sex-adjusted death rate2 declined at an average rate3 of

1.05 percent per year between 1900 and 2002. Between 1979 and 2002, the

period for which death rates are analyzed by cause, the total age-sex-adjusted

death rate (for all causes combined) declined at an average rate of

0.71 percent per year.

Historical death rates have 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 0.72 percent per year between 1900 and 2002.

Between 1979 and 2002 the age-sex-adjusted death rate for these ages

declined at an average annual rate of 0.47 percent.

Reductions in death rates have resulted from many factors, including

increased medical knowledge and 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,

sex, and cause of death were selected for 2030 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 greater. These three sets of ultimate annual percentage

reductions are unchanged from those used in last year’s report.

 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.
73

Demographic Assumptions and Methods

After 2002, the reductions in central death rates for alternative II are

assumed to change rapidly from the average annual reductions by age, sex,

and cause of death observed between 1982 and 2002, to the ultimate annual

percentage reductions by age, sex, and cause of death assumed for 2030 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 1982 and 2002.

Projections of age-sex-adjusted death rates are presented in table V.A1 for

the total (all ages), for under age 65, and for ages 65 and over. Under the

intermediate assumptions, these projected age-sex-adjusted death rates are

slightly higher than the death rates in last year’s report. New data for 2002

results in age-sex-adjusted death rates throughout the projection period that

are slightly higher than those in last year’s report.

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 0.33 percent, 0.70 percent, and 1.22 percent between

2030 and 2080 for alternatives I, II, and III, respectively. In keeping with the

patterns observed in the historical data, future rates of decline are assumed to

be greater for younger ages than for older ages, but to a substantially lesser

degree than in the past. Accordingly, age-sex-adjusted death rates for ages 65

and over are projected to decline at average annual rates of about

0.29 percent, 0.67 percent, and 1.16 percent between 2030 and 2080 for

alternatives I, II, and III, respectively.

There is a wide range of opinion among experts on the likely rate of future

decline in death rates. For example, the 2003 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 life

style will be closely monitored to determine what further modifications to

the assumed ultimate rates of decline in mortality may be warranted for

future reports.
Assumptions & Methods

74

3. Immigration Assumptions

Legal immigration1 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 580,0002 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 837,0002 persons per year during the

period 1992 through 2004. The number of legal immigrants in 2004 is estimated to be 946,000 persons.

For 2004, net legal immigration (after considering emigration) is estimated

to be about 710,000 persons. Net other immigration is estimated to be

400,000 persons. For 2005, net legal immigration is estimated to be 675,000

for the intermediate, 720,000 for low cost and 630,000 for the high cost

assumptions. Net other immigration for 2005 is estimated to be 400,000 persons for all three assumptions.

The ultimate annual net immigration assumptions are unchanged from those

in last year’s report. After 2005, the annual number of net legal immigrants is

projected to reach the ultimate level in 2007. The ultimate level of annual net

other immigrants is projected to be reached in 2026 under the intermediate

and low cost assumptions and in 2016 under the high cost assumptions.

The total level of net immigration (legal and other, combined) under the

intermediate projection is assumed to be 1,075,000 persons in 2006, and

900,000 persons3 in 2026 and for each year afterward. For the low cost

assumptions, net immigration is assumed to increase slightly from a level of

1,270,000 persons in 2006 to an ultimate level of 1,300,000 persons4 for

each year 2026 and later. Under the high cost assumptions, net immigration

is assumed to be 810,000 persons in 2006, and 672,500 persons5 for each

year after 2015.

 1 Consistent with the U.S. Citizenship and Immigration Services, legal immigrants are individuals admitted

to the U.S. for legal permanent residence.

 2 Excludes those persons admitted under the Immigration Reform and Control Act of 1986.

 3 600,000 net legal immigrants plus 300,000 net other immigrants.

 4 850,000 net legal immigrants plus 450,000 net other immigrants.

 5 472,500 net legal immigrants plus 200,000 net other immigrants.
75

Demographic Assumptions and Methods

There is a very wide range of opinion about the future course of immigration

for the United States. Some, like the 2003 Technical Panel mentioned in the

previous section, believe that immigration will increase substantially in the

future. Others believe that potential immigrants may be attracted to other

countries or that the U.S. borders could be tightened in the future.
Assumptions & Methods

76

Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2080

Calendar year

Total

fertility

rate1

Age-sex-adjusted death rate2

per 100,000, by age Net immigration

Total Under 65 65 and over Legal3 Other4

Historical data:

1940 . . . . . . . . . 2.23 1,779.1 673.0 9,569.0 45,950

1945 . . . . . . . . . 2.42 1,586.6 601.8 8,522.4 55,069

1950 . . . . . . . . . 3.03 1,435.6 499.4 8,028.3 170,594

1955 . . . . . . . . . 3.50 1,334.2 442.8 7,612.2 209,779

1960 . . . . . . . . . 3.61 1,330.9 436.9 7,626.7 201,276

1965 . . . . . . . . . 2.88 1,304.6 430.0 7,464.0 232,400

1970 . . . . . . . . . 2.43 1,224.3 422.6 6,870.7 278,928

1975 . . . . . . . . . 1.77 1,099.0 369.5 6,236.4 294,303

1980 . . . . . . . . . 1.82 1,035.9 331.9 5,993.6 410,348 375,000

1985 . . . . . . . . . 1.84 984.2 303.6 5,777.6 433,449 375,000

1990 . . . . . . . . . 2.07 931.2 289.4 5,451.1 501,065 550,000

1991 . . . . . . . . . 2.06 918.8 286.2 5,373.5 548,000 550,000

1992 . . . . . . . . . 2.04 906.2 280.2 5,315.3 620,986 550,000

1993 . . . . . . . . . 2.02 928.0 283.1 5,470.0 644,696 550,000

1994 . . . . . . . . . 2.00 916.2 280.5 5,392.7 583,390 550,000

1995 . . . . . . . . . 1.98 913.9 277.3 5,397.5 573,719 550,000

1996 . . . . . . . . . 1.98 900.4 266.1 5,367.2 662,284 550,000

1997 . . . . . . . . . 1.97 885.1 253.6 5,332.5 571,800 550,000

1998 . . . . . . . . . 2.00 878.3 246.9 5,325.2 489,360 550,000

1999 . . . . . . . . . 2.01 884.3 245.0 5,386.6 523,037 550,000

2000 . . . . . . . . . 2.06 875.6 243.4 5,328.3 677,579 550,000

2001 . . . . . . . . . 2.03 867.4 243.6 5,260.7 798,126 550,000

2002 . . . . . . . . . 2.02 863.6 242.7 5,236.6 730,689 550,000

20035 . . . . . . . . 2.05 860.6 234.1 5,272.2 574,429 550,000

20045 . . . . . . . . 2.04 856.4 231.3 5,258.7 709,606 400,000

20055 . . . . . . . . 2.03 852.5 228.6 5,246.9 675,000 400,000

Intermediate: 

2010 . . . . . . . . . 2.03 829.2 216.4 5,145.1 600,000 400,000

2015 . . . . . . . . . 2.02 798.7 205.9 4,974.0 600,000 400,000

2020 . . . . . . . . . 2.01 767.1 196.2 4,787.2 600,000 350,000

2025 . . . . . . . . . 2.01 736.4 187.3 4,604.0 600,000 350,000

2030 . . . . . . . . . 2.00 707.4 178.9 4,429.7 600,000 300,000

2035 . . . . . . . . . 2.00 680.1 171.0 4,265.4 600,000 300,000

2040 . . . . . . . . . 2.00 654.5 163.6 4,111.7 600,000 300,000

2045 . . . . . . . . . 2.00 630.6 156.7 3,967.5 600,000 300,000

2050 . . . . . . . . . 2.00 608.0 150.2 3,832.2 600,000 300,000

2055 . . . . . . . . . 2.00 586.8 144.1 3,705.0 600,000 300,000

2060 . . . . . . . . . 2.00 566.9 138.3 3,585.3 600,000 300,000

2065 . . . . . . . . . 2.00 548.1 132.8 3,472.5 600,000 300,000

2070 . . . . . . . . . 2.00 530.3 127.6 3,366.1 600,000 300,000

2075 . . . . . . . . . 2.00 513.5 122.8 3,265.5 600,000 300,000

2080 . . . . . . . . . 2.00 497.6 118.1 3,170.4 600,000 300,000
77

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

area by age, sex, and marital status as of January 1 of each year 2005 through

2080. The starting Social Security area population for January 1, 2004, is

based on the Census Bureau’s estimate of the residents of the 50 States and

Low Cost: 

2010 . . . . . . . . . 2.11 854.4 223.3 5,298.9 850,000 550,000

2015 . . . . . . . . . 2.15 844.5 217.6 5,259.4 850,000 550,000

2020 . . . . . . . . . 2.20 830.7 211.9 5,188.8 850,000 500,000

2025 . . . . . . . . . 2.25 816.0 206.3 5,109.8 850,000 500,000

2030 . . . . . . . . . 2.30 801.3 200.9 5,029.8 850,000 450,000

2035 . . . . . . . . . 2.30 787.0 195.8 4,951.1 850,000 450,000

2040 . . . . . . . . . 2.30 773.3 190.8 4,875.2 850,000 450,000

2045 . . . . . . . . . 2.30 760.0 186.1 4,802.0 850,000 450,000

2050 . . . . . . . . . 2.30 747.3 181.6 4,731.4 850,000 450,000

2055 . . . . . . . . . 2.30 735.0 177.2 4,663.3 850,000 450,000

2060 . . . . . . . . . 2.30 723.2 173.0 4,597.6 850,000 450,000

2065 . . . . . . . . . 2.30 711.8 169.0 4,534.1 850,000 450,000

2070 . . . . . . . . . 2.30 700.8 165.2 4,472.8 850,000 450,000

2075 . . . . . . . . . 2.30 690.2 161.4 4,413.6 850,000 450,000

2080 . . . . . . . . . 2.30 679.9 157.9 4,356.3 850,000 450,000

High Cost:

2010 . . . . . . . . . 1.95 803.3 208.7 4,990.5 472,500 250,000

2015 . . . . . . . . . 1.89 750.5 191.8 4,685.2 472,500 250,000

2020 . . . . . . . . . 1.82 699.5 176.6 4,381.6 472,500 200,000

2025 . . . . . . . . . 1.76 652.0 162.9 4,096.4 472,500 200,000

2030 . . . . . . . . . 1.70 608.4 150.4 3,833.4 472,500 200,000

2035 . . . . . . . . . 1.70 568.4 139.0 3,591.9 472,500 200,000

2040 . . . . . . . . . 1.70 531.8 128.7 3,371.1 472,500 200,000

2045 . . . . . . . . . 1.70 498.4 119.2 3,168.8 472,500 200,000

2050 . . . . . . . . . 1.70 467.7 110.5 2,983.2 472,500 200,000

2055 . . . . . . . . . 1.70 439.5 102.5 2,812.7 472,500 200,000

2060 . . . . . . . . . 1.70 413.6 95.2 2,655.8 472,500 200,000

2065 . . . . . . . . . 1.70 389.8 88.5 2,511.3 472,500 200,000

2070 . . . . . . . . . 1.70 367.8 82.3 2,378.0 472,500 200,000

2075 . . . . . . . . . 1.70 347.5 76.7 2,254.7 472,500 200,000

2080 . . . . . . . . . 1.70 328.7 71.4 2,140.7 472,500 200,000

1The 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

2030.

2 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.

3 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.

4 Net other annual immigration is estimated to have averaged 375,000 persons over the period 1980-89 and

550,000 over the period 1990-99.

5 Preliminary or estimated.

Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2080 (Cont.)

Calendar year

Total

fertility

rate1

Age-sex-adjusted death rate2

per 100,000, by age Net immigration

Total Under 65 65 and over Legal3 Other4
Assumptions & Methods

78

D.C., and U.S. Armed Forces overseas. The base estimate is adjusted for net

census undercount and increased for other U.S. citizens living abroad

(including residents of U.S. territories) and for 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.

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).

Table V.A2.—Social Security Area Population as of July 1 and Dependency Ratios,

Calendar Years 1950-2080

Calendar year

Population (in thousands) Dependency ratio

Under 20 20-64

65 and

over Total Aged1 Total2

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 . . . . . . . . . . . . . . 80,132 104,795 19,091 204,018 .182 .947

1970 . . . . . . . . . . . . . . 80,684 113,158 20,923 214,765 .185 .898

1975 . . . . . . . . . . . . . . 78,437 122,857 23,305 224,599 .190 .828

1980 . . . . . . . . . . . . . . 74,568 134,428 26,237 235,233 .195 .750

1985 . . . . . . . . . . . . . . 73,211 144,957 29,167 247,335 .201 .706

1990 . . . . . . . . . . . . . . 75,060 153,368 32,029 260,458 .209 .698

1995 . . . . . . . . . . . . . . 79,621 160,844 34,322 274,786 .213 .708

2000 . . . . . . . . . . . . . . 82,581 170,275 35,431 288,287 .208 .693

20053 . . . . . . . . . . . . . 83,963 181,457 36,902 302,323 .203 .666

Intermediate:

2010 . . . . . . . . . . . . . . 84,895 190,083 39,762 314,741 .209 .656

2015 . . . . . . . . . . . . . . 85,796 195,496 45,910 327,202 .235 .674

2020 . . . . . . . . . . . . . . 87,547 198,213 53,510 339,269 .270 .712

2025 . . . . . . . . . . . . . . 88,597 199,789 62,343 350,729 .312 .755

2030 . . . . . . . . . . . . . . 90,133 200,644 70,017 360,794 .349 .798

2035 . . . . . . . . . . . . . . 91,288 203,518 74,645 369,451 .367 .815

2040 . . . . . . . . . . . . . . 92,268 207,416 77,172 376,856 .372 .817

2045 . . . . . . . . . . . . . . 93,199 211,166 79,014 383,379 .374 .816

2050 . . . . . . . . . . . . . . 94,318 213,935 81,257 389,510 .380 .821

2055 . . . . . . . . . . . . . . 95,550 216,474 83,651 395,675 .386 .828

2060 . . . . . . . . . . . . . . 96,760 218,777 86,543 402,079 .396 .838

2065 . . . . . . . . . . . . . . 97,897 221,816 88,980 408,693 .401 .842

2070 . . . . . . . . . . . . . . 98,968 224,244 92,103 415,315 .411 .852

2075 . . . . . . . . . . . . . . 100,039 227,337 94,451 421,827 .415 .856

2080 . . . . . . . . . . . . . . 101,159 230,137 96,918 428,214 .421 .861
79

Demographic Assumptions and Methods

Notes:

1. Historical data are subject to revision.

2. Totals do not necessarily equal the sums of rounded components.

5. Life Expectancy Estimates

Life expectancy, or average remaining number of years expected prior to

death, is a useful analytical concept. Life expectancy is calculated in two different forms, for two separate purposes.

Period life expectancy is calculated for a given year using the actual or

expected death rates at each age for that year. It is a useful summary statistic

for illustrating the overall level of the death rates experienced in a single

year. It is thus closely related to the age-sex-adjusted death rate that is disLow Cost:

2010 . . . . . . . . . . . . . . 85,973 191,168 39,692 316,833 0.208 0.657

2015 . . . . . . . . . . . . . . 88,679 197,977 45,601 332,257 .230 .678

2020 . . . . . . . . . . . . . . 92,960 202,147 52,815 347,922 .261 .721

2025 . . . . . . . . . . . . . . 97,235 205,286 61,098 363,618 .298 .771

2030 . . . . . . . . . . . . . . 102,342 208,219 68,059 378,621 .327 .818

2035 . . . . . . . . . . . . . . 107,043 213,877 71,892 392,811 .336 .837

2040 . . . . . . . . . . . . . . 111,418 221,232 73,670 406,320 .333 .837

2045 . . . . . . . . . . . . . . 115,772 229,058 74,965 419,795 .327 .833

2050 . . . . . . . . . . . . . . 120,368 236,575 76,931 433,874 .325 .834

2055 . . . . . . . . . . . . . . 125,278 244,420 79,252 448,950 .324 .837

2060 . . . . . . . . . . . . . . 130,437 252,563 82,088 465,088 .325 .841

2065 . . . . . . . . . . . . . . 135,597 262,150 84,373 482,120 .322 .839

2070 . . . . . . . . . . . . . . 140,681 271,923 87,226 499,830 .321 .838

2075 . . . . . . . . . . . . . . 145,804 282,746 89,634 518,184 .317 .833

2080 . . . . . . . . . . . . . . 151,116 293,433 92,711 537,259 .316 .831

High Cost:

2010 . . . . . . . . . . . . . . 83,919 189,254 39,854 313,027 .211 .654

2015 . . . . . . . . . . . . . . 83,222 193,753 46,302 323,277 .239 .669

2020 . . . . . . . . . . . . . . 82,716 195,532 54,398 332,646 .278 .701

2025 . . . . . . . . . . . . . . 80,894 196,074 63,956 340,924 .326 .739

2030 . . . . . . . . . . . . . . 79,403 195,523 72,591 347,517 .371 .777

2035 . . . . . . . . . . . . . . 77,668 196,363 78,331 352,363 .399 .794

2040 . . . . . . . . . . . . . . 76,040 197,608 81,995 355,644 .415 .800

2045 . . . . . . . . . . . . . . 74,518 198,124 84,844 357,486 .428 .804

2050 . . . . . . . . . . . . . . 73,323 197,061 87,860 358,244 .446 .818

2055 . . . . . . . . . . . . . . 72,209 195,349 90,799 358,358 .465 .834

2060 . . . . . . . . . . . . . . 70,946 193,039 94,181 358,166 .488 .855

2065 . . . . . . . . . . . . . . 69,654 190,977 97,158 357,790 .509 .873

2070 . . . . . . . . . . . . . . 68,427 187,736 100,942 357,105 .538 .902

2075 . . . . . . . . . . . . . . 67,308 185,048 103,612 355,968 .560 .924

2080 . . . . . . . . . . . . . . 66,274 182,183 105,844 354,301 .581 .945

1 Population aged 65 and over, divided by population aged 20-64.

2 Sum of population aged 65 and over, and population under age 20, divided by population aged 20-64.

3 Preliminary or estimated.

Table V.A2.—Social Security Area Population as of July 1 and Dependency Ratios,

Calendar Years 1950-2080 (Cont.)

Calendar year

Population (in thousands) Dependency ratio

Under 20 20-64

65 and

over Total Aged1 Total2
Assumptions & Methods

80

cussed 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.

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. This is because death

rates for any given age tend to decline as time passes and the cohort grows

older.
81

Demographic Assumptions and Methods

Table V.A3.—Period Life Expectancy1

1The 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.

Calendar

year

Low Cost Intermediate High Cost

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

Historical data:

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 . . . . 67.1 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

1991 . . . . 72.0 79.0 15.2 19.2

1992 . . . . 72.3 79.2 15.3 19.3

1993 . . . . 72.1 79.0 15.2 19.0

1994 . . . . 72.3 79.1 15.3 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

20032 . . . 74.5 79.5 16.2 19.0

20042 . . .

2 Preliminary or estimated.

74.7 79.6 16.2 19.0

20052 . . . 74.8 79.6 16.3 19.0

Projected:

2010 . . . . 75.1 79.6 16.4 18.9 75.5 79.9 16.6 19.1 75.9 80.2 16.9 19.4

2015 . . . . 75.4 79.7 16.5 19.0 76.0 80.3 17.0 19.4 76.8 81.0 17.4 19.8

2020 . . . . 75.6 79.9 16.6 19.1 76.6 80.7 17.3 19.7 77.7 81.7 18.0 20.3

2025 . . . . 75.9 80.2 16.8 19.2 77.1 81.2 17.6 20.0 78.6 82.4 18.5 20.9

2030 . . . . 76.2 80.4 16.9 19.3 77.6 81.6 17.9 20.2 79.4 83.1 19.0 21.4

2035 . . . . 76.4 80.6 17.0 19.4 78.1 82.0 18.2 20.5 80.2 83.8 19.5 21.9

2040 . . . . 76.7 80.8 17.1 19.5 78.5 82.4 18.4 20.8 80.9 84.5 20.0 22.4

2045 . . . . 76.9 81.0 17.2 19.6 79.0 82.8 18.7 21.1 81.7 85.1 20.5 22.8

2050 . . . . 77.2 81.1 17.3 19.8 79.4 83.1 19.0 21.3 82.4 85.8 21.0 23.3

2055 . . . . 77.4 81.3 17.5 19.9 79.8 83.5 19.3 21.6 83.1 86.4 21.5 23.8

2060 . . . . 77.6 81.5 17.6 20.0 80.3 83.9 19.5 21.9 83.7 86.9 22.0 24.2

2065 . . . . 77.8 81.7 17.7 20.1 80.7 84.2 19.8 22.1 84.4 87.5 22.4 24.6

2070 . . . . 78.0 81.8 17.8 20.2 81.0 84.5 20.0 22.3 85.0 88.0 22.8 25.1

2075 . . . . 78.2 82.0 17.9 20.3 81.4 84.8 20.3 22.6 85.6 88.6 23.3 25.5

2080 . . . . 78.4 82.2 18.0 20.4 81.8 85.1 20.5 22.8 86.2 89.1 23.7 25.9
Assumptions & Methods

82

Table V.A4.—Cohort Life Expectancy1

1The 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

Low Cost Intermediate High Cost

At birth2

2 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 prior to 2003. For birth years after 2002, these values are

based solely on estimated death rates.

At age 65 3

3 Age 65 cohort life expectancy for those attaining age 65 on January 1 of the calendar years before 1975 is

based on actual data. For 1975 through 2002, these values are based on a combination of actual and estimated death rates. After 2002, these values are based solely on estimated death rates.

At birth2 At age 653 At birth2 At age 65 3

Male Female Male Female Male Female Male Female Male Female Male Female

1940 . . . . 69.3 75.3 12.7 14.7 69.6 75.7 12.7 14.7 70.0 76.2 12.7 14.7

1945 . . . . 70.8 76.6 13.0 15.4 71.3 77.2 13.0 15.4 71.9 78.0 13.0 15.4

1950 . . . . 71.8 77.6 13.1 16.2 72.5 78.4 13.1 16.2 73.4 79.4 13.1 16.2

1955 . . . . 72.3 78.0 13.1 16.7 73.2 79.0 13.1 16.7 74.4 80.3 13.1 16.7

1960 . . . . 72.8 78.3 13.2 17.4 73.9 79.5 13.2 17.4 75.4 81.1 13.2 17.4

1965 . . . . 73.4 78.6 13.5 18.0 74.8 80.1 13.5 18.0 76.6 81.9 13.5 18.0

1970 . . . . 74.2 79.2 13.8 18.5 75.9 80.8 13.8 18.5 78.0 83.0 13.8 18.5

1975 . . . . 74.9 79.7 14.2 18.7 76.8 81.5 14.2 18.7 79.2 84.0 14.2 18.7

1980 . . . . 75.6 80.1 14.7 18.7 77.7 82.2 14.7 18.7 80.5 84.9 14.7 18.7

1985 . . . . 76.0 80.5 15.2 18.8 78.4 82.7 15.2 18.8 81.5 85.8 15.2 18.9

1990 . . . . 76.4 80.8 15.6 18.8 79.0 83.2 15.7 19.0 82.4 86.5 15.8 19.1

1991 . . . . 76.5 80.8 15.7 18.8 79.1 83.3 15.8 19.0 82.6 86.7 15.9 19.1

1992 . . . . 76.6 80.9 15.8 18.8 79.2 83.4 15.9 19.0 82.8 86.8 16.0 19.2

1993 . . . . 76.6 80.9 15.9 18.9 79.3 83.5 16.0 19.0 83.0 87.0 16.1 19.2

1994 . . . . 76.7 81.0 15.9 18.9 79.5 83.6 16.1 19.1 83.2 87.1 16.2 19.3

1995 . . . . 76.8 81.1 16.0 18.9 79.6 83.7 16.2 19.1 83.4 87.3 16.3 19.4

1996 . . . . 76.9 81.1 16.1 18.9 79.7 83.8 16.3 19.2 83.6 87.4 16.5 19.4

1997 . . . . 76.9 81.2 16.2 18.9 79.8 83.9 16.4 19.2 83.7 87.6 16.6 19.5

1998 . . . . 77.0 81.2 16.2 18.9 79.9 83.9 16.5 19.3 83.9 87.7 16.7 19.6

1999 . . . . 77.0 81.3 16.3 18.9 80.0 84.0 16.6 19.3 84.0 87.8 16.9 19.7

2000 . . . . 77.1 81.3 16.4 19.0 80.1 84.1 16.7 19.4 84.2 88.0 17.0 19.8

2001 . . . . 77.2 81.3 16.4 19.0 80.2 84.2 16.7 19.4 84.3 88.1 17.1 19.9

2002 . . . . 77.2 81.4 16.4 19.0 80.2 84.2 16.8 19.5 84.5 88.2 17.2 20.0

2003 . . . . 77.3 81.4 16.5 19.0 80.4 84.3 16.9 19.5 84.6 88.4 17.3 20.1

2004 . . . . 77.3 81.5 16.5 19.0 80.5 84.4 17.0 19.6 84.8 88.5 17.5 20.2

2005 . . . . 77.4 81.5 16.5 19.0 80.6 84.5 17.0 19.6 85.0 88.6 17.6 20.3

2010 . . . . 77.6 81.7 16.7 19.1 81.0 84.9 17.4 19.9 85.7 89.3 18.2 20.8

2015 . . . . 77.9 81.9 16.8 19.3 81.4 85.2 17.7 20.2 86.4 89.9 18.8 21.3

2020 . . . . 78.1 82.1 16.9 19.4 81.9 85.5 18.0 20.5 87.1 90.4 19.3 21.9

2025 . . . . 78.3 82.2 17.0 19.5 82.2 85.9 18.3 20.8 87.7 91.0 19.9 22.4

2030 . . . . 78.5 82.4 17.2 19.6 82.6 86.2 18.6 21.1 88.3 91.5 20.4 22.9

2035 . . . . 78.7 82.6 17.3 19.7 83.0 86.5 18.9 21.4 88.9 92.0 21.0 23.4

2040 . . . . 78.9 82.7 17.4 19.8 83.3 86.8 19.2 21.6 89.5 92.5 21.5 23.9

2045 . . . . 79.1 82.9 17.5 20.0 83.7 87.1 19.4 21.9 90.0 93.0 22.0 24.4

2050 . . . . 79.3 83.0 17.6 20.1 84.0 87.4 19.7 22.1 90.6 93.4 22.5 24.9

2055 . . . . 79.5 83.2 17.7 20.2 84.4 87.6 20.0 22.4 91.1 93.9 22.9 25.3

2060 . . . . 79.7 83.3 17.8 20.3 84.7 87.9 20.2 22.6 91.6 94.3 23.4 25.8

2065 . . . . 79.9 83.4 17.9 20.4 85.0 88.1 20.5 22.9 92.1 94.8 23.9 26.2

2070 . . . . 80.0 83.6 18.0 20.5 85.3 88.4 20.7 23.1 92.5 95.2 24.3 26.6

2075 . . . . 80.2 83.7 18.1 20.6 85.6 88.6 21.0 23.3 93.0 95.6 24.8 27.1

2080 . . . . 80.3 83.8 18.2 20.7 85.9 88.9 21.2 23.6 93.5 96.0 25.2 27.5
83

Economic Assumptions and Methods

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 moderate economic growth throughout the projection period.

The low cost assumptions represent a more optimistic outlook, with relatively strong economic growth. The high cost assumptions represent a relatively pessimistic scenario, with weak economic growth and two recessions

in the short-range period. 

Based on the latest data and estimates, the economy is assumed to have been

above its sustainable potential level of output and employment during the latter half of 2005. Under all three sets of assumptions the economy is assumed

to reach the sustainable, potential level of output by the end of the shortrange period. Economic cycles are not included in the assumptions beyond

the first 5 to 10 years of the projection period because they have little effect

on the long-range estimates of financial status. 

This report also includes a stochastic projection that provides a probability

distribution of possible future outcomes that is centered around the Trustees’

intermediate assumptions. Additional economic assumptions and modeling

are required for these projections. These are discussed in appendix E.

The following sections 1 through 4 present the principal economic assumptions for the three alternatives that are summarized in table V.B1. The subsequent sections 5 through 7 present additional economic factors, summarized

in table V.B2, that are critical to the projections of the future financial status

of the combined OASI and DI Trust Funds.

1. Productivity Assumptions

Total U.S. economy productivity is defined as the ratio of real gross domestic

product (GDP) to hours worked by all workers.1 The rate of change in totaleconomy productivity is a major determinant in the growth of average earnings. For the 40 years from 1964 to 2004, annual increases in total productivity averaged 1.8 percent, the result of average annual increases of 2.1, 1.4,

1.4, and 2.2 percent for the 10-year periods 1964-74, 1974-84, 1984-94, and

1994-2004, respectively. However, it should be noted that this growth rate of

 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 civilian and military wage and salary workers and the self-employed.
Assumptions & Methods

84

1.8 percent reflects a shift of employment from low (farm) to high (nonfarm)

productivity sectors that is not expected to continue in the future.

Because productivity growth can vary substantially within economic cycles,

it is more useful to consider historical average growth rates for complete economic cycles. The annual increase in total productivity averaged 1.6 percent

over the last four complete economic cycles (measured from peak to peak),

covering the 34-year period from 1966 to 2000. The annual increase in total

productivity averaged 2.2, 1.2, 1.3, and 1.6 percent over the economic cycles

1966-73, 1973-78, 1978-89, 1989-2000, respectively.

The ultimate annual increases in productivity are assumed to be 2.0, 1.7, and

1.4 percent for the low cost, intermediate, and high cost assumptions, respectively. These rates of increase are each 0.1 percentage point higher than those

used in the 2005 report. The change reflects the belief that recent strong

growth in productivity, after the relatively poor performance from 1973 to

1989, 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 average about 2.1 percent over the 2005 to 2007 period, then

gradually decline to the ultimate assumed level of 1.7 percent by 2013. For

the low cost assumptions, the annual change in productivity decreases gradually from about 2.2 percent over the 2005 to 2011 period to the ultimate

assumed level of 2.0 percent by 2013. For the high cost assumptions, the

annual change in productivity decreases from 2.0 percent for 2005 to a

cyclic low of 0.4 percent for 2006. Thereafter, the annual change in productivity varies with economic cycles until reaching its ultimate growth rate of

1.4 percent for 2015.

2. Price Inflation Assumptions

Future changes in the Consumer Price Index for Urban Wage Earners and

Clerical Workers (hereafter denoted as CPI) will directly affect the OASDI

program through the automatic cost-of-living benefit increases. Future

changes in the GDP chain-type price index (hereafter, the GDP deflator)

affect the nominal levels of GDP, wages, self-employment income, average

earnings, and taxable payroll.

Historically, the CPI increased by an average of 4.5 percent for the 40 years

from 1964 to 2004, the result of average annual increases of 4.7, 7.6, 3.5, and

2.4 percent for the 10-year periods 1964-74, 1974-84, 1984-94, and 1994-

2004, respectively. The GDP deflator increased by 4.1 percent for 1964 to

2004, and by 4.6, 6.9, 2.9, and 1.9 percent annually for the same respective

10-year periods.
85

Economic Assumptions and Methods

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 2005 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 the recent

past, with its strong emphasis on holding the growth rate in prices to relatively low levels.

For each alternative, the ultimate annual increase in the GDP deflator is

assumed to be equal to the annual increases in the CPI minus a

0.4 percentage point price differential. This differential is based primarily on

methodological differences in the construction of the two indices, and is

0.1 percentage point larger than the one used in the 2005 report. The larger

differential reflects additional data indicating that the effects of the methodological differences are greater than previously estimated. Hence, for the

intermediate assumptions, the ultimate annual increase in the GDP deflator is

2.4 percent, equal to the 2.8 percent assumed ultimate annual increase in the

CPI less the 0.4 percentage point price differential. Similarly, the ultimate

annual increases in the GDP deflator are 1.4 and 3.4 percent for the low cost

and high cost assumptions, respectively.

For the intermediate assumptions, the annual change in the CPI is assumed to

decrease from 3.5 percent for 2005 to 2.9 percent for 2006 and 2.3 percent

for 2007. The annual change in the CPI increases over the next 2 years to the

assumed ultimate rate of 2.8 percent as of 2009. For the low cost assumptions, the annual change in the CPI decreases from 2.7 percent for 2006 to

1.9 percent for 2007, then to the assumed ultimate rate of 1.8 percent for

2008. For the high cost assumptions, the annual change in the CPI mostly

increases from 3.4 percent for 2006 to 5.7 percent by 2010, then decreases to

its assumed ultimate rate of 3.8 percent as of 2014. The price differential,

defined as the percent change in the CPI less the GDP deflator percent

change, is estimated to be 0.8 percentage point for 2005. For all three alternatives, the price differential is projected to be approximately 0.7 percentage

point for 2006, and 0.4 percentage point for 2007 and later.

3. Average Earnings Assumptions

The level of average (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, increases in the level of average

wages in the U.S. economy directly affect the indexation, under the automatic-adjustment provisions in the law, of the OASDI benefit formulas, the
Assumptions & Methods

86

contribution and benefit base, the exempt amounts under the retirement earnings test, the amount of earnings required for a quarter of coverage, and

under 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. military and total civilian (household) 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 -0.2 percent over

the last 40 years, and -0.5, -0.3, 0.1, and -0.2 percent for the 10-year periods

1964-74, 1974-84, 1984-94 and 1994-2004, respectively. Though the historical data by 10-year periods suggest that the future trend growth rate in average hours worked may be negative, other evidence indicates differently.

Analysis of recent employment and Census data implies that the decline for

the most recent 10-year period is overstated. 

For the 2006 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 2005

report.

The average annual change in the ratio of earnings to compensation was

-0.3 percent from 1964 to 2004. For wage workers, the assumed ultimate

annual rates of change are -0.1, -0.2, and -0.3 percent for the ratio of earnings

to compensation, for the low cost, intermediate, and high cost assumptions,

respectively. Under the intermediate assumptions, the ratio of wages to

employee compensation is projected to decline from 0.803 for 2005 to 0.697

for 2080. The ratio of compensation to GDP is assumed to be stable.

Thus, the ultimate projected annual growth rate in average U.S. earnings is

about 3.9 percent for the intermediate assumptions. This reflects assumed

ultimate annual growth rates of about 1.7, -0.2, 0.0, and 2.4 percent for productivity, the ratio of earnings to compensation, average hours worked, and

the GDP deflator, respectively. Similarly, the ultimate projected annual

growth rate in average nominal U.S. earnings is 3.4 percent for the low cost

assumptions and 4.4 percent for the high cost assumptions.

Over long periods of time the average annual growth rates in average U.S.

earnings and average earnings in OASDI covered employment are expected
87

Economic Assumptions and Methods

to be very close to the average annual growth rates in the average wage in

OASDI covered employment (henceforth the average covered wage). Thus,

the assumed ultimate annual growth rates in the average covered wage are

3.4, 3.9, 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 estimated to be 4.4 percent for

2005, and assumed to fall to 4.1 percent for 2006 then rise to average about

4.4 percent from 2007 to 2009. Thereafter, the annual rate of change in the

average covered wage declines generally until reaching its assumed ultimate

annual growth rate of 3.9 percent for 2015 and later.

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.

Over the 40-year period, 1965-2004, the real-wage differential averaged

0.9 percentage point, the result of averages of 1.1, 0.1, 0.8, and

1.7 percentage points for the 10-year periods 1965-74, 1975-84, 1985-94,

and 1995-2004, respectively. The assumed ultimate annual average covered

real-wage differentials are 1.6, 1.1, and 0.6 percentage point(s) for the low

cost, intermediate, and high cost assumptions, respectively.

Based on preliminary data, the real-wage differential is estimated to be

1.0 percentage point for 2005. For the intermediate assumptions, the realwage differential is projected to rise to about 1.2 and 2.2 percentage points in

2006 and 2007, respectively. The real-wage differential is then projected to

fall to 1.8 percentage points for 2008, 1.6 percentage points for 2009, and to

the ultimate assumed differential of 1.1 percentage points (3.9 percent nominal wage growth less 2.8 percent CPI inflation) by 2015.

For the low cost assumptions, the real-wage differential is assumed to be in

the range of 1.0 percentage point to 2.3 percentage points between 2005 and

2014, moving to the ultimate assumed real-wage differential of

1.6 percentage points thereafter. For the high cost assumptions, the real-wage

differential for the short-range period is projected to fluctuate between -1.2

and 2.2 percentage points, eventually stabilizing at about 0.6 percentage

point after 2015.
Assumptions & Methods

88

Table V.B1.—Principal Economic Assumptions

Calendar year 

Annual percentage change1 in—

Realwage

differential2

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. . . . 1.0 -.6 -.2 7.3 8.7 8.9 -.3

1980 to 1985. . . . 1.7 -.2 .0 5.2 6.7 5.2 1.4

1985 to 1990. . . . 1.3 .1 -.1 3.2 4.7 3.8 .9

1990 to 1995. . . . 1.1 -.2 .4 2.5 3.6 3.0 .6

1995 to 2000. . . . 2.1 .4 .1 1.7 5.3 2.4 2.9

2000 to 2005. . . . 2.6 -.6 -.7 2.3 2.8 2.5 .4

1995 . . . . . . . . . . .1 .7 1.0 2.0 4.7 2.9 1.8

1996 . . . . . . . . . . 2.4 1.1 -.2 1.9 4.0 2.9 1.1

1997 . . . . . . . . . . 1.6 .8 .7 1.7 5.6 2.3 3.3

1998 . . . . . . . . . . 2.0 .2 .7 1.1 6.1 1.3 4.7

1999 . . . . . . . . . . 2.4 .1 .4 1.4 4.9 2.2 2.7

2000 . . . . . . . . . . 2.3 .1 -1.1 2.2 6.1 3.5 2.6

2001 . . . . . . . . . . 2.0 -.3 -1.3 2.4 2.0 2.7 -.8

2002 . . . . . . . . . . 3.0 -1.5 -1.0 1.7 .7 1.4 -.7

2003 . . . . . . . . . . 3.1 -.9 -1.3 2.0 2.7 2.2 .5

2004 . . . . . . . . . . 3.0 -.2 .1 2.6 4.4 2.6 1.8

20053 . . . . . . . . . 2.0 -.3 -.2 2.7 4.4 3.5 1.0

Intermediate: 

2006 . . . . . . . . . . 2.1 .0 -.4 2.2 4.1 2.9 1.2

2007 . . . . . . . . . . 2.1 .0 .0 1.9 4.4 2.3 2.2

2008 . . . . . . . . . . 2.0 .0 .0 2.2 4.4 2.6 1.8

2009 . . . . . . . . . . 1.9 -.1 .0 2.4 4.4 2.8 1.6

2010 . . . . . . . . . . 1.9 -.1 .0 2.4 4.3 2.8 1.5

2011 . . . . . . . . . . 1.8 -.1 .0 2.4 4.2 2.8 1.4

2012 . . . . . . . . . . 1.8 -.2 .0 2.4 4.2 2.8 1.4

2013 . . . . . . . . . . 1.7 -.2 .0 2.4 3.9 2.8 1.1

2014 . . . . . . . . . . 1.7 -.2 .0 2.4 3.8 2.8 1.0

2015 . . . . . . . . . . 1.7 -.2 .0 2.4 3.9 2.8 1.1

2015 to 2020. . . . 1.7 -.2 .0 2.4 3.8 2.8 1.0

2020 to 2080. . . . 1.7 -.2 .0 2.4 3.9 2.8 1.1

Low Cost: 

2006 . . . . . . . . . . 2.2 0.0 -0.3 2.0 4.1 2.7 1.4

2007 . . . . . . . . . . 2.2 .0 .1 1.5 4.2 1.9 2.3

2008 . . . . . . . . . . 2.2 .0 .1 1.4 3.9 1.8 2.1

2009 . . . . . . . . . . 2.2 .0 .1 1.4 3.9 1.8 2.1

2010 . . . . . . . . . . 2.1 -.1 .1 1.4 3.8 1.8 2.0

2011 . . . . . . . . . . 2.2 -.1 .1 1.4 3.8 1.8 2.0

2012 . . . . . . . . . . 2.1 -.1 .1 1.4 3.8 1.8 2.0

2013 . . . . . . . . . . 2.0 -.1 .1 1.4 3.5 1.8 1.7

2014 . . . . . . . . . . 2.0 -.1 .1 1.4 3.5 1.8 1.7

2015 . . . . . . . . . . 2.0 -.1 .1 1.4 3.4 1.8 1.6

2015 to 2020. . . . 2.0 -.1 .1 1.4 3.4 1.8 1.6

2020 to 2080. . . . 2.0 -.1 .1 1.4 3.4 1.8 1.6
89

Economic Assumptions and Methods

5. Labor Force and Unemployment Projections

The civilian labor force is projected by age, sex, marital status, and presence

of children. Projections of the labor force participation rates for each subgroup take into account the percentages of the population that are disabled or

in the military, the levels of Social Security retirement benefits, the state of

the economy, and changes in life expectancy. The projections also include a

“lagged-cohort effect” that applies changes 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 2004. Further slowing of labor force growth is projected due to

a substantial slowing of growth in the working age population in the future—

a natural consequence of the baby-boom generation approaching retirement

and the succeeding lower-birth-rate cohorts reaching working age. Under the

intermediate assumptions, the labor force is projected to increase by about

0.9 percent per year, on average, through 2015. Thereafter, the labor force is

projected to increase much more slowly, averaging 0.5 percent over the 2015

to 2020 period, and 0.3 percent over the remainder of the 75-year projection

period.

High Cost: 

2006 . . . . . . . . . . 0.4 -0.1 -0.5 2.7 2.2 3.4 -1.2

2007 . . . . . . . . . . 2.6 .0 -.1 2.3 5.0 2.7 2.2

2008 . . . . . . . . . . 1.9 -.1 -.1 2.4 4.6 2.8 1.8

2009 . . . . . . . . . . .2 -.2 -.1 4.0 3.8 4.4 -.6

2010 . . . . . . . . . . 2.1 -.2 -.1 5.3 6.9 5.7 1.1

2011 . . . . . . . . . . 2.1 -.3 -.1 5.2 7.4 5.6 1.9

2012 . . . . . . . . . . 1.3 -.3 -.1 4.3 5.6 4.7 .9

2013 . . . . . . . . . . 1.3 -.3 -.1 3.5 4.5 3.9 .5

2014 . . . . . . . . . . 1.3 -.3 -.1 3.4 4.3 3.8 .5

2015 . . . . . . . . . . 1.4 -.3 -.1 3.4 4.3 3.8 .5

2015 to 2020. . . . 1.4 -.3 -.1 3.4 4.3 3.8 .5

2020 to 2080. . . . 1.4 -.3 -.1 3.4 4.4 3.8 .6

1 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. 2 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.

3 Historical data are not available for the full year. Estimated values vary slightly by alternative and are

shown for the intermediate alternative.

Table V.B1.—Principal Economic Assumptions (Cont.)

Calendar year 

Annual percentage change1 in—

Realwage

differential2

Productivity

(Total U.S.

economy)

Earnings as

a percent of

compensation

Average

hours

worked

GDP

price

index

Average

annual wage

in covered

employment

Consumer

Price

Index
Assumptions & Methods

90

The ultimate 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. Little

variation in the structural relationship is assumed, and participation rates are

not highly sensitive to most of the demographic and economic assumptions.

Thus, the ultimate projected labor force participation rates vary modestly

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. These overall declines were

facilitated by the large numbers of workers entering the labor force from the

baby-boom 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, these rates roughly stabilized for males and increased for females.

Since 1995, however, participation rates at ages 50 and over have generally

risen significantly, reflecting 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, and the effects of modifying the earnings test are expected to encourage work at higher ages. Some of these factors are modeled directly. However, other factors, like the trend away from

private defined-benefit pension plans that often provided incentives to retire

and 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 amount of assets that will be needed to

live comfortably through retirement years, also influencing 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 projections, this

adjustment for changes related to life expectancy adds about 1.5 percent to

the total labor force by 2080.

For men age 16 and over, the projected age-adjusted labor force participation

rates for 2080 are 72.7, 73.3, and 74.0 percent for the low cost, intermediate,

and high cost assumptions, respectively, compared to the 2004 level of
91

Economic Assumptions and Methods

73.4 percent. (Age-adjusted labor force participation rates are adjusted to the

2004 age distribution of the civilian noninstitutional U.S. population.) These

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 are never married. For women

age 16 and over, the projected age-adjusted labor force participation rates for

2080 are 61.1, 61.3, and 61.3 percent, for the low cost, intermediate, and

high cost assumptions, respectively, compared to the 2004 level of

59.5 percent. These projections are the net effect 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 never married, separated, widowed, or divorced.

The unemployment rate presented in table V.B2 is in the most commonly

cited form, the civilian rate. For years through 2015, total rates are presented

without adjustment for the changing age-sex distribution of the population.

For years after 2015, unemployment rates are presented as total age-sex

adjusted rates (using the age-sex distribution of the 2004 civilian labor

force). Age-sex adjusted rates allow for more meaningful comparisons

across longer time periods.

The total 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

Law) relating changes in the unemployment rate to the changes in the economic cycle, as measured by the ratio of the actual to potential GDP. For

each alternative, the total 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 2015. After 2015, the age-sex-adjusted rate is stable because the ratio of actual to potential GDP is assumed to be constant.

The ultimate assumed unemployment rates are 4.5, 5.5, and 6.5 percent for

the low cost, intermediate, and high cost assumptions, respectively. These are

the same values assumed for the 2005 report.

6. Gross Domestic Product Projections

The real growth rate in gross domestic product (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
Assumptions & Methods

92

unemployment rates. For the 40-year period from 1964 to 2004, the average

growth rate in real GDP was 3.2 percent, combining the approximate growth

rates of 1.7, 1.8, and -0.2 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 2.6 percent from 2005 to 2015, a slower rate than the

3.2 percent average observed over the historical 40-year period from 1964 to

2004. This slowdown is primarily due to slower projected growth in total

employment. For the low cost assumptions, annual growth in real GDP is

projected to average 3.2 percent over the decade ending in 2015. The relatively faster growth is due mostly to a higher assumed rate of growth in

worker productivity. For the high cost assumptions, real GDP is assumed to

fall in the first three quarters of 2006, resulting in a total decline in real GDP

of 1.1 percent. After 10 quarters of recovery, a second recession, with a total

decline in real GDP of 1.7 percent, is assumed to begin in the second quarter

of 2009 and last 3 quarters. After the second recession, a moderate economic

recovery is assumed through 2012, with continued modest economic growth

thereafter. For the high cost assumptions, annual growth in real GDP is projected to average 1.9 percent for the decade ending in 2015.

After 2015, no economic cycles are assumed for the three alternatives. Thus,

projected rates of growth in real GDP are determined by the projected fullemployment rate of growth for total employment, and the assumed fullemployment rates of growth for total U.S. economy productivity and average

hours worked. For the intermediate assumptions, the projected rate of growth

for real GDP falls toward the assumed productivity growth rate because of

the projected decline in labor force growth over the period. By 2080, the

growth in real GDP slows to about 1.9 percent, due to the assumed ultimate

percent changes of about 0.3, 1.7, and 0.0 for total employment, productivity,

and average hours worked, respectively. These projected growth rates are

higher than those assumed for the 2005 report, due to the higher (more optimistic) assumptions for the fertility and total productivity growth rates.

7. Interest Rates

The average annual nominal and real interest rates are presented in table

V.B2. The nominal rate is the average of the nominal interest rates for special

U.S. Government obligations issuable to the trust funds in each of the 12

months of the year. Interest for these securities is generally compounded

semiannually. The real interest rate (ex post) is defined to be 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
93

Economic Assumptions and Methods

each year reflects the actual realized (historical) or expected (future) annual

real yield on securities issuable in the prior year.

For 2005, the average annual nominal interest rate for securities newly issuable to the trust funds was 4.3 percent, unchanged from 2004. However,

because CPI growth is expected to be lower for 2006 than for 2005, the real

interest rate is expected to rise from 0.8 percent for 2005 to 1.4 percent for

2006.

In developing a reasonable range of assumed ultimate future real interest

rates for the three alternatives, historical experience was examined for the 40

years, 1965-2004, and for each of the 10-year subperiods, 1965-74, 1975-84,

1985-94, and 1995-2004. For the 40-year period, the real interest rate averaged 2.9 percent per year. For the four 10-year subperiods, the real interest

rates averaged 0.9, 1.9, 5.2, and 3.5 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. The ultimate

real yields, which are assumed to be reached by the end of the short-range

period, are 0.1 percentage point lower than those assumed in the 2005 report.

The lower assumed rates reflect recent low realized rates, particularly on

Treasury inflation-protected securities (TIPS), and an expectation that low

real interest rates will persist. 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.

For the 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 from

4.3 percent for 2005 to 5.9 percent for 2009 through 2011, reflecting a recovering economy along with a higher rate of inflation. Thereafter, the nominal

interest rate falls to the ultimate assumed level of 5.7 percent for 2014. For

the low cost assumptions, the average annual nominal interest rate is

assumed to reach an ultimate level of about 5.4 percent for 2013. For the

high cost assumptions, it is assumed to peak at 8.9 percent for 2011, and then

decline to an ultimate rate of about 5.9 percent for 2014.
Assumptions & Methods

94

Table V.B2.—Additional Economic Factors

Calendar year 

Average annual

unemployment rate1

Annual percentage change2 in—

Average annual interest 

rate

Labor

force3 Total

employment4 RealGDP5 Nominal6 Real7

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 3.3 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 4.1 6.2 3.9

2000 to 2005. . . . . . 5.4 .9 .7 2.6 4.6 2.5

1995 . . . . . . . . . . . . 5.6 1.0 1.4 2.5 6.9 4.2

1996 . . . . . . . . . . . . 5.4 1.2 1.4 3.7 6.6 4.0

1997 . . . . . . . . . . . . 4.9 1.8 2.2 4.5 6.6 4.3

1998 . . . . . . . . . . . . 4.5 1.0 1.4 4.2 5.6 5.3

1999 . . . . . . . . . . . . 4.2 1.2 1.5 4.4 5.9 3.4

2000 . . . . . . . . . . . . 4.0 2.3 2.5 3.7 6.2 2.4

2001 . . . . . . . . . . . . 4.8 .8 .0 .8 5.2 3.5

2002 . . . . . . . . . . . . 5.8 .8 -.3 1.6 4.9 3.9

2003 . . . . . . . . . . . . 6.0 1.1 .9 2.7 4.1 2.6

2004 . . . . . . . . . . . . 5.5 .6 1.1 4.2 4.3 1.5

20058 . . . . . . . . . . . 5.1 1.3 1.8 3.6 4.3 .8

Intermediate: 

2006 . . . . . . . . . . . . 4.9 1.5 1.7 3.4 4.9 1.4

2007 . . . . . . . . . . . . 4.8 1.1 1.2 3.3 5.2 2.6

2008 . . . . . . . . . . . . 4.8 1.1 1.0 3.0 5.7 2.6

2009 . . . . . . . . . . . . 4.9 .9 .8 2.6 5.9 2.9

2010 . . . . . . . . . . . . 5.1 .8 .7 2.6 5.9 3.1

2011 . . . . . . . . . . . . 5.2 .8 .7 2.5 5.9 3.1

2012 . . . . . . . . . . . . 5.3 .7 .6 2.3 5.8 3.1

2013 . . . . . . . . . . . . 5.4 .5 .3 2.0 5.8 3.0

2014 . . . . . . . . . . . . 5.5 .5 .4 2.0 5.7 2.9

2015 . . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2020 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2025 . . . . . . . . . . . . 5.5 .3 .3 1.9 5.7 2.9

2030 . . . . . . . . . . . . 5.5 .3 .3 1.9 5.7 2.9

2035 . . . . . . . . . . . . 5.5 .3 .3 2.0 5.7 2.9

2040 . . . . . . . . . . . . 5.5 .3 .3 2.0 5.7 2.9

2045 . . . . . . . . . . . . 5.5 .3 .3 2.0 5.7 2.9

2050 . . . . . . . . . . . . 5.5 .3 .3 2.0 5.7 2.9

2055 . . . . . . . . . . . . 5.5 .3 .3 2.0 5.7 2.9

2060 . . . . . . . . . . . . 5.5 .3 .3 1.9 5.7 2.9

2065 . . . . . . . . . . . . 5.5 .3 .3 2.0 5.7 2.9

2070 . . . . . . . . . . . . 5.5 .3 .3 2.0 5.7 2.9

2075 . . . . . . . . . . . . 5.5 .3 .3 2.0 5.7 2.9

2080 . . . . . . . . . . . . 5.5 .3 .3 1.9 5.7 2.9

Low Cost: 

2006 . . . . . . . . . . . . 4.7 1.5 1.8 3.8 4.8 1.6

2007 . . . . . . . . . . . . 4.8 1.2 1.2 3.5 4.8 2.8

2008 . . . . . . . . . . . . 4.8 1.2 1.1 3.5 5.2 3.0

2009 . . . . . . . . . . . . 4.8 1.0 1.0 3.3 5.5 3.4

2010 . . . . . . . . . . . . 4.8 1.0 1.0 3.2 5.5 3.7

2011 . . . . . . . . . . . . 4.8 .9 1.0 3.3 5.6 3.7

2012 . . . . . . . . . . . . 4.7 .9 .9 3.2 5.6 3.8

2013 . . . . . . . . . . . . 4.6 .7 .8 2.9 5.4 3.8

2014 . . . . . . . . . . . . 4.5 .6 .7 2.9 5.4 3.7

2015 . . . . . . . . . . . . 4.5 .6 .6 2.8 5.4 3.6
95

Economic Assumptions and Methods

Low Cost: (Cont.)

2020 . . . . . . . . . . . . 4.5 0.6 0.5 2.6 5.4 3.6

2025 . . . . . . . . . . . . 4.5 .4 .4 2.5 5.4 3.6

2030 . . . . . . . . . . . . 4.5 .4 .4 2.5 5.4 3.6

2035 . . . . . . . . . . . . 4.5 .6 .6 2.6 5.4 3.6

2040 . . . . . . . . . . . . 4.5 .6 .6 2.7 5.4 3.6

2045 . . . . . . . . . . . . 4.5 .7 .7 2.8 5.4 3.6

2050 . . . . . . . . . . . . 4.5 .7 .7 2.8 5.4 3.6

2055 . . . . . . . . . . . . 4.5 .7 .7 2.8 5.4 3.6

2060 . . . . . . . . . . . . 4.5 .7 .7 2.8 5.4 3.6

2065 . . . . . . . . . . . . 4.5 .7 .7 2.8 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 .7 .7 2.8 5.4 3.6

High Cost: 

2006 . . . . . . . . . . . . 5.8 1.1 .3 .3 4.2 .9

2007 . . . . . . . . . . . . 6.2 .7 .3 2.8 5.4 1.5

2008 . . . . . . . . . . . . 5.9 1.0 1.3 3.1 5.9 2.5

2009 . . . . . . . . . . . . 6.4 .7 .1 .2 6.3 1.6

2010 . . . . . . . . . . . . 7.2 .5 -.3 1.6 8.2 .7

2011 . . . . . . . . . . . . 6.6 .8 1.5 3.6 8.9 2.7

2012 . . . . . . . . . . . . 6.4 .8 .9 2.1 7.3 4.3

2013 . . . . . . . . . . . . 6.5 .5 .4 1.6 6.2 3.4

2014 . . . . . . . . . . . . 6.5 .5 .5 1.7 5.9 2.4

2015 . . . . . . . . . . . . 6.5 .5 .5 1.8 5.9 2.1

2020 . . . . . . . . . . . . 6.5 .4 .4 1.7 5.9 2.1

2025 . . . . . . . . . . . . 6.5 .2 .2 1.5 5.9 2.1

2030 . . . . . . . . . . . . 6.5 .1 .1 1.4 5.9 2.1

2035 . . . . . . . . . . . . 6.5 .1 .1 1.4 5.9 2.1

2040 . . . . . . . . . . . . 6.5 .1 .1 1.4 5.9 2.1

2045 . . . . . . . . . . . . 6.5 .0 .0 1.3 5.9 2.1

2050 . . . . . . . . . . . . 6.5 -.1 -.1 1.2 5.9 2.1

2055 . . . . . . . . . . . . 6.5 -.1 -.1 1.2 5.9 2.1

2060 . . . . . . . . . . . . 6.5 -.2 -.2 1.1 5.9 2.1

2065 . . . . . . . . . . . . 6.5 -.2 -.2 1.0 5.9 2.1

2070 . . . . . . . . . . . . 6.5 -.2 -.2 1.1 5.9 2.1

2075 . . . . . . . . . . . . 6.5 -.3 -.3 1.0 5.9 2.1

2080 . . . . . . . . . . . . 6.5 -.2 -.2 1.0 5.9 2.1

1The unemployment rates for 2016 and later are adjusted to the age-sex distribution of the civilian labor

force in 2004. All other rates are unadjusted.

2 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. 3 The U.S. civilian labor force concept is used here.

4 Total of civilian and military employment in the U.S. economy.

5 The real GDP (gross domestic product) is the value of total output of goods and services in 2000 dollars. 6 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.

7 The average annual real interest rate reflects the realized or expected annual real yield for each year on

securities issuable in the prior year.

8 Historical data are not available for the full year. Estimated values vary slightly by alternative and are

shown for the intermediate assumptions.

Table V.B2.—Additional Economic Factors (Cont.)

Calendar year 

Average annual

unemployment

rate1

Annual percentage change2 in—

Average annual interest 

rate

Labor

force3 Total

employment4 RealGDP5 Nominal6 Real7
Assumptions & Methods

96

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, and the numbers of

future beneficiaries and the expected levels of their benefits. The following

subsections provide brief descriptions of the derivations of these programspecific factors.

1. Automatically Adjusted Program Amounts

The Social Security Act specifies that certain program amounts affecting the

determination of OASDI benefits are to be adjusted annually, in general, to

reflect changes in the economy. The law prescribes specific formulas that,

when applied to reported statistics, produce automatic revisions in these program amounts and hence in the benefit-computation procedures. These automatic adjustments are based upon measured changes in the national average

wage index (AWI) and the CPI.1 In this section, values are shown for program amounts that are subject to automatic adjustment, from the time that

such adjustments became effective through 2015. Projected values for future

years are based on the economic assumptions described in the preceding section of this report.

The following two tables present the historical and projected values of the

CPI-based benefit increases, as well as the AWI series and the values of

many of the wage-indexed program amounts. 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 which have been applied to OASDI

benefits under automatic cost-of-living adjustment provisions in the

Social Security Act, based on increases in the CPI.

 1 Details of these indexation procedures are published annually in the Federal Register, and are also available on the Social Security website at www.socialsecurity.gov/OACT/COLA/index.html.
97

Program Assumptions and Methods

 • The annual levels of and percentage increases in the AWI. Under section 215(b)(3) of the Social Security Act, the AWI for each year after

1950 is used to index the taxable earnings of most workers first becoming eligible for benefits in 1979 or later. This procedure converts a

worker’s past earnings to approximately their equivalent values near the

time of the worker’s retirement or other eligibility, and these indexed

values are used to calculate the worker’s benefit. The AWI is also used

to adjust most of the other program amounts that are subject to the automatic-adjustment provisions.

 • The OASDI contribution and benefit base—the maximum amount of

earnings subject to the OASDI payroll tax in the specified year.

 • The 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 normal retirement age. The retirement test does not apply beginning with the attainment of normal retirement age.
Assumptions & Methods

98

Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and 

Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2015

Calendar year

OASDI

benefit

increases1

(percent)

Average

wage index (AWI) 2 OASDI

contribution

and benefit

base 3

Retirement earnings

test exempt amount

Amount

Increase

(percent)

Under

NRA4 At NRA5

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 . . . . . . . . . . . 62.5 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

Intermediate:

2005 . . . . . . . . . . . 7 4.1 37,197.43 4.3 790,000 712,000 731,800

2006 . . . . . . . . . . . 2.3 38,695.99 4.0 794,200 712,480 733,240

2007 . . . . . . . . . . . 2.2 40,375.23 4.3 98,400 13,080 34,680

2008 . . . . . . . . . . . 2.6 42,112.24 4.3 102,300 13,560 36,120

2009 . . . . . . . . . . . 2.8 43,916.42 4.3 106,800 14,160 37,680

2010 . . . . . . . . . . . 2.8 45,798.28 4.3 111,300 14,760 39,240

2011 . . . . . . . . . . . 2.8 47,707.59 4.2 116,100 15,360 40,920

2012 . . . . . . . . . . . 2.8 49,695.49 4.2 120,900 16,080 42,720

2013 . . . . . . . . . . . 2.8 51,632.49 3.9 126,000 16,680 44,520

2014 . . . . . . . . . . . 2.8 53,603.73 3.8 131,400 17,400 46,320

2015 . . . . . . . . . . . 2.8 55,677.10 3.9 136,500 18,120 48,120

Low Cost:

2005 . . . . . . . . . . . 74.1 37,207.16 4.4 790,000 712,000 731,800

2006 . . . . . . . . . . . 2.1 38,717.74 4.1 794,200 712,480 733,240

2007 . . . . . . . . . . . 1.9 40,294.22 4.1 98,400 13,080 34,680

2008 . . . . . . . . . . . 1.8 41,843.44 3.8 102,300 13,560 36,120

2009 . . . . . . . . . . . 1.8 43,431.83 3.8 106,500 14,160 37,560

2010 . . . . . . . . . . . 1.8 45,075.49 3.8 110,700 14,640 39,000

2011 . . . . . . . . . . . 1.8 46,758.63 3.7 114,900 15,240 40,560

2012 . . . . . . . . . . . 1.8 48,513.49 3.8 119,100 15,840 42,000

2013 . . . . . . . . . . . 1.8 50,208.20 3.5 123,600 16,440 43,680

2014 . . . . . . . . . . . 1.8 51,920.30 3.4 128,100 17,040 45,240

2015 . . . . . . . . . . . 1.8 53,679.86 3.4 132,600 17,640 46,800
99

Program Assumptions and Methods

Other wage-indexed amounts 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 2005, and also shows projected amounts through 2015. These other wage-indexed program amounts

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. 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. Figure V.C1 presents the PIA formula for 2006.

High Cost:

2005 . . . . . . . . . . . 74.1 $37,138.78 4.2 7$90,000 7$12,000 7$31,800

2006 . . . . . . . . . . . 2.9 37,968.14 2.2 794,200 712,480 733,240

2007 . . . . . . . . . . . 2.6 39,792.92 4.8 98,100 12,960 34,680

2008 . . . . . . . . . . . 2.9 41,576.39 4.5 100,200 13,320 35,400

2009 . . . . . . . . . . . 4.6 43,136.48 3.8 105,000 13,920 37,080

2010 . . . . . . . . . . . 5.9 46,029.79 6.7 109,800 14,520 38,760

2011 . . . . . . . . . . . 5.4 49,405.86 7.3 114,000 15,120 40,200

2012 . . . . . . . . . . . 4.6 52,179.65 5.6 121,500 16,080 42,960

2013 . . . . . . . . . . . 3.9 54,531.83 4.5 130,500 17,280 46,080

2014 . . . . . . . . . . . 3.8 56,892.43 4.3 138,000 18,240 48,720

2015 . . . . . . . . . . . 3.8 59,333.06 4.3 144,000 19,080 50,880

1 Effective with benefits payable for June in each year 1975-82, and for December in each year after 1982. 2 See table VI.F6 for projected dollar amounts of the AWI beyond 2015.

3 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. 4 Normal retirement age. See table V.C3 for specific values.

5 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 in the year prior to the month

of NRA attainment. Amounts for 1978-82 specified by Public Law 95-216; for 1996-2002, Public Law

104-121.

6 Originally determined as 2.4 percent, but pursuant to Public Law 106-554, is effectively 2.5 percent. 7 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, 1975-2015 (Cont.)

Calendar year

OASDI

benefit

increases1

(percent)

Average

wage index (AWI) 2 OASDI

contribution

and benefit

base 3

Retirement earnings

test exempt amount

Amount

Increase

(percent)

Under

NRA4 At NRA5
Assumptions & Methods

100

 • 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

relies on four intervals and percentages. Figure V.C2 presents the maximum-family-benefit formula for 2006.

 Figure V.C1.—Primary-Insurance-Amount Formula for the 2006 Cohort

 Figure V.C2.—Maximum-Family-Benefit Formula for the 2006 Cohort

90%

15%

32%

$0

$500

$1,000

$1,500

$2,000

$2,500

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000

Average Indexed Monthly Earnings

Primary Insurance Amount .

First

bend point

($656)

Second

bend point

($3,955)

272%

150%

175% 134%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$0 $500 $1,000 $1,500 $2,000

Primary Insurance Amount

Maximum family benefit .

Third

bend point

($1,578)

Second

bend point

($1,210)

First

bend point

($838)
101

Program Assumptions and Methods

 • The amount of earnings required in a year to be credited with a quarter

of coverage (QC). The number and timing of QCs earned is used to

determine an individual’s insured status—the basic requirement for

benefit eligibility under OASDI.

 • The old-law contribution and benefit base—the OASDI contribution

and benefit base that would have been in effect in each year after 1978

under the automatic-adjustment provisions as in effect before the enactment of the 1977 amendments. This old-law base is used in determining

special-minimum benefits for certain workers who have many years of

low earnings in covered employment. 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.—Selected Wage-Indexed Program Amounts, 

Calendar Years 1978-2015

Calendar year

AIME bend

points in PIA

formula1

PIA bend points

in maximumfamily-benefit formula2

Earnings

required for

a quarter of

coverage

Old-law

contribution

and benefit

base3 First Second First Second Third

Historical data:

1978 . . . . . . . . . 4/ 4/1 4/1 4/1 4/1 5 $250 4/1

1979 . . . . . . . . . 5 $180 5 $1,085 5 $230 5 $332 5 $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
Assumptions & Methods

102

Intermediate:

2007 . . . . . . . . . $685 $4,127 $875 $1,263 $1,647 $1,010 $72,900

2008 . . . . . . . . . 712 4,293 910 1,314 1,713 1,050 75,900

2009 . . . . . . . . . 743 4,480 950 1,371 1,788 1,090 79,200

2010 . . . . . . . . . 775 4,672 990 1,430 1,865 1,140 82,500

2011 . . . . . . . . . 808 4,872 1,033 1,491 1,944 1,190 86,100

2012 . . . . . . . . . 843 5,081 1,077 1,555 2,028 1,240 90,000

2013 . . . . . . . . . 878 5,293 1,122 1,620 2,112 1,290 93,600

2014 . . . . . . . . . 915 5,514 1,169 1,687 2,200 1,350 97,500

2015 . . . . . . . . . 950 5,728 1,214 1,753 2,286 1,400 101,400

Low Cost:

2007 . . . . . . . . . 685 4,128 875 1,263 1,647 1,010 72,900

2008 . . . . . . . . . 713 4,296 911 1,314 1,714 1,050 75,900

2009 . . . . . . . . . 742 4,471 948 1,368 1,784 1,090 79,200

2010 . . . . . . . . . 770 4,642 984 1,421 1,853 1,130 82,200

2011 . . . . . . . . . 799 4,819 1,021 1,474 1,923 1,180 85,200

2012 . . . . . . . . . 830 5,001 1,060 1,530 1,996 1,220 88,500

2013 . . . . . . . . . 861 5,188 1,100 1,587 2,070 1,270 91,800

2014 . . . . . . . . . 893 5,382 1,141 1,647 2,148 1,310 95,100

2015 . . . . . . . . . 924 5,570 1,181 1,705 2,223 1,360 98,400

High Cost:

2007 . . . . . . . . . 684 4,120 873 1,261 1,644 1,010 72,900

2008 . . . . . . . . . 699 4,212 893 1,289 1,681 1,030 74,400

2009 . . . . . . . . . 732 4,415 936 1,351 1,762 1,080 78,000

2010 . . . . . . . . . 765 4,613 978 1,411 1,841 1,130 81,600

2011 . . . . . . . . . 794 4,786 1,015 1,464 1,910 1,170 84,600

2012 . . . . . . . . . 847 5,107 1,083 1,563 2,038 1,250 90,300

2013 . . . . . . . . . 909 5,481 1,162 1,677 2,188 1,340 96,900

2014 . . . . . . . . . 960 5,789 1,227 1,771 2,310 1,410 102,300

2015 . . . . . . . . . 1,004 6,050 1,283 1,851 2,414 1,480 107,100

1 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. 2 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. 3 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. 4 No provision in law for this amount in this year.

5 Amount specified for first year by Social Security Amendments of 1977; amounts for subsequent years

subject to automatic-adjustment provisions.

Table V.C2.—Selected Wage-Indexed Program Amounts, 

Calendar Years 1978-2015 (Cont.)

Calendar year

AIME bend

points in PIA

formula1

PIA bend points

in maximumfamily-benefit formula2

Earnings

required for

a quarter of

coverage

Old-law

contribution

and benefit

base3 First Second First Second Third
103

Program Assumptions and Methods

In addition to the program amounts 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 normal retirement age and in the delayed

retirement credits. Table V.C3 shows the scheduled changes in these two

important items and their effect on benefits expressed as a percentage of PIA.

2. Covered Employment

Projections of the total labor force and unemployment rate 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 at any time during the year. For those aged 16 and over,

projected covered employment is the sum of age-sex components, each of

Table V.C3.—Legislated Changes in Normal Retirement Age and Delayed Retirement

Credits, for Persons Reaching Age 62 in Each Year 1986 and Later

Year of birth

Year of

attainment of

age 62

Normal

retirement

age (NRA)

Credit for each 

year of delayed 

retirement after

NRA (percent)

Benefit, as a percentage of PIA, 

beginning at age —

62 65 66 67 70

1924 . . . . . . . . 1986. . . . . . . . 65 . . . . . . . . 3 80 100 103 106 115

1925 . . . . . . . . 1987. . . . . . . . 65 . . . . . . . . 3 1/2 80 100 103 1/2 107 117 1/2

1926 . . . . . . . . 1988. . . . . . . . 65 . . . . . . . . 3 1/2 80 100 103 1/2 107 117 1/2

1927 . . . . . . . . 1989. . . . . . . . 65 . . . . . . . . 4 80 100 104 108 120

1928 . . . . . . . . 1990. . . . . . . . 65 . . . . . . . . 4 80 100 104 108 120

1929 . . . . . . . . 1991. . . . . . . . 65 . . . . . . . . 4 1/2 80 100 104 1/2 109 122 1/2

1930 . . . . . . . . 1992. . . . . . . . 65 . . . . . . . . 4 1/2 80 100 104 1/2 109 122 1/2

1931 . . . . . . . . 1993. . . . . . . . 65 . . . . . . . . 5 80 100 105 110 125

1932 . . . . . . . . 1994. . . . . . . . 65 . . . . . . . . 5 80 100 105 110 125

1933 . . . . . . . . 1995. . . . . . . . 65 . . . . . . . . 5 1/2 80 100 105 1/2 111 127 1/2

1934 . . . . . . . . 1996. . . . . . . . 65 . . . . . . . . 5 1/2 80 100 105 1/2 111 127 1/2

1935 . . . . . . . . 1997. . . . . . . . 65 . . . . . . . . 6 80 100 106 112 130

1936 . . . . . . . . 1998. . . . . . . . 65 . . . . . . . . 6 80 100 106 112 130

1937 . . . . . . . . 1999. . . . . . . . 65 . . . . . . . . 6 1/2 80 100 106 1/2 113 132 1/2

1938 . . . . . . . . 2000. . . . . . . . 65, 2 mo . . . 6 1/2 79 1/6 98 8/9 105 5/12 111 11/12 131 5/12

1939 . . . . . . . . 2001. . . . . . . . 65, 4 mo . . . 7 78 1/3 97 7/9 104 2/3 111 2/3 132 2/3

1940 . . . . . . . . 2002. . . . . . . . 65, 6 mo . . . 7 77 1/2 96 2/3 103 1/2 110 1/2 131 1/2

1941 . . . . . . . . 2003. . . . . . . . 65, 8 mo . . . 7 1/2 76 2/3 95 5/9 102 1/2 110 132 1/2

1942 . . . . . . . . 2004. . . . . . . . 65, 10 mo . . 7 1/2 75 5/6 94 4/9 101 1/4 108 3/4 131 1/4

1943-54 . . . . . 2005-16 . . . . . 66 . . . . . . . . 8 75 93 1/3 100 108 132

1955 . . . . . . . . 2017. . . . . . . . 66, 2 mo . . . 8 74 1/6 92 2/9 98 8/9 106 2/3 130 2/3

1956 . . . . . . . . 2018. . . . . . . . 66, 4 mo . . . 8 73 1/3 91 1/9 97 7/9 105 1/3 129 1/3

1957 . . . . . . . . 2019. . . . . . . . 66, 6 mo . . . 8 72 1/2 90 96 2/3 104 128

1958 . . . . . . . . 2020. . . . . . . . 66, 8 mo . . . 8 71 2/3 88 8/9 95 5/9 102 2/3 126 2/3

1959 . . . . . . . . 2021. . . . . . . . 66, 10 mo . . 8 70 5/6 87 7/9 94 4/9 101 1/3 125 1/3

1960 & later . . 2022 & later . 67 . . . . . . . . 8 70 86 2/3 93 1/3 100 124
Assumptions & Methods

104

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 number 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 projected age-adjusted coverage rate

for males age 16 and over, changes from its 2004 level of about 72.4 percent

to 72.5, 72.5, and 72.6 percent for 2080 for the low cost, intermediate, and

high cost assumptions, respectively. (Age-adjusted covered worker rates are

adjusted to the 2004 age distribution of the Social Security area population.)

For females, the projected age-adjusted coverage rate changes from its 2004

level of 61.9 percent to 63.9, 63.5, and 63.2 percent for 2080 for the low

cost, intermediate, and high cost assumptions, respectively.

3. Taxable Payroll and Payroll Tax Revenue

The OASDI taxable payroll is the amount of earnings in a year which, 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 selfemployment 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. Also, from 1983 through 2001, taxable payroll

includes deemed wage credits for military service. Prior to 1984, the selfemployed tax rate was less than the combined employee-employer rate, thus

taxable self-employed earnings were weighted to reflect this. Also, prior to

1988, employers were exempt from Social Security tax on part of their

employees’ tips; taxable payroll was reduced by half of this exempt amount

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, each of which is based on the pro-
105

Program Assumptions and Methods

jected 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 portion of covered earnings that is taxable

(i.e. at or below the base) was about 89.8, 87.0, and 82.9 percent for 1983,

1994, and 2000, respectively. This ratio of taxable earnings to covered earnings rose to about 85.9 in 2002 and 2003. Our preliminary estimate for 2005

is 83.8 percent, about the same as in 1999. The average annual rate of change

in the ratio was about -0.3 percent between 1983 and 2005. This decline was

mainly due to a relative increase in wages for high wage earners.

However, some of the decline since 1983 is believed to be due to the change

in the age-sex distribution of the workforce (as the baby-boom generation

moved into ages of higher relative earnings). This and other factors are

expected to cause continued declines through 2015 in the intermediate and

high cost alternatives. The projected taxable earnings ratios in 2015 are 84.0,

83.2, and 82.4 for the low cost, intermediate, and high cost assumptions,

respectively. This represents average annual rates of change from 2006 of

0.0, -0.1, and -0.2 percent. After 2015, the taxable to covered ratio is held

approximately constant.

Payroll tax revenue is computed by applying the appropriate tax rates to taxable wages and self-employment income, taking into account the lag

between the time the tax liability is incurred and when the 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 to, for

companies with very large payrolls, the next banking day after wages are

paid.) Self-employed workers are required to make estimated tax payments

on their earnings four times during the year, as well as making up any underestimate on their individual income tax return. The pattern of actual receipts

by the Treasury is taken into account when estimating self-employed 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 quarterly reporting of earnings was replaced by annual reporting,
Assumptions & Methods

106

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 2006 is $970.

There are three types of insured status which 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

years elapsed after the year of attainment of age 21 (and at least 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. One of the requirements of eligibility for

these benefits is the insured status of the worker. 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 by a model which 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 sim-
107

Program Assumptions and Methods

ulated 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 with the additional inputs of estimated future coverage rates, median

earnings, and amounts required for crediting QCs.

Projections 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 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.

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 81.2 for December 31, 2003, to 89.2, 90.1, and 90.8 for

December 31, 2080, 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

93.5 to 92.1, while that for females is projected to increase from 72.0 to 88.4.

5. Old-Age and Survivors Insurance Beneficiaries

The number of OASI beneficiaries is projected for each type of benefit separately, by the sex of the worker on whose earnings the benefits are based, and

by the age of the beneficiary. For selected types of benefits, the number of

beneficiaries is also projected by marital status.

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, aged

widow(er)’s, or aged spouse’s benefits, and by applying termination rates to

the number of persons already receiving retired-worker benefits.
Assumptions & Methods

108

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 disability benefits and insured

persons entitled to widow(er)’s benefits. For age 62, a linear regression is

developed based on the relationship between the historical exposed percentage and the labor force participation rate. The regression coefficients are then

used to project the percentage based on the projected labor force participation rate for age 62. The percentage for ages 70 and over is assumed to be

nearly 100, because the retirement earnings test does not apply after normal

retirement age and the delayed retirement credit does not apply after age 70.

The percentage for each age 63 through 69 is projected from the December

31, 2005 retired-worker beneficiaries data with an adjustment for changes in

the portion of the primary insurance amount that is payable at each age of

entitlement. As the normal retirement age increases, the number of retiredworker beneficiaries not automatically converted from disabled-worker beneficiary status as a percentage of the exposed population is gradually

adjusted downward at each age 63 through 69.

For the long-range period also, 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 “wage

earners.” In the short-range period, insured aged-spouse beneficiaries are

projected concurrently with the retired-worker beneficiaries. Uninsured

aged-spouse beneficiaries are projected, on the other hand, 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 by marital status.

To the number of spouses aged 62 and over in the population, a series of factors are applied, representing the probabilities that the spouse and the wage

earner meet all of the conditions of eligibility—i.e., the probabilities that (1)

the wage earner is 62 or over, (2) the wage earner is insured, (3) the wage

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
109

Program Assumptions and Methods

prevalence rate is applied to calculate the estimated number of aged-spouse

beneficiaries.

In addition, the same factors are applied 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

wage-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 wage-earner spouse was at least 10 years

in duration. Third, factor (3) above is not applied because, effective for January 1985, a divorced person generally need not wait to receive benefits until

the former wage-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 where 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 wage-earner parent. The number of entitled children is

projected for each age under 18 from the latest beneficiary data by reflecting

changes in the following: the number of children in the population and the

proportion of retired workers age 62 to 71 to the population age 20 to 71. For

student beneficiaries, factors are applied to the number of children age 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, age 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. Another factor is applied representing the probability

that the disabled chid is entitled to a benefit based on both parents’ earnings.

In the short-range period, the number of entitled young-spouse beneficiaries

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
Assumptions & Methods

110

by applying termination rates to the number of young spouses already receiving benefits. In the long-range period, young-spouse beneficiaries are projected as a proportion of the projected 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, insured aged-widow(er) beneficiaries are

projected concurrently with the retired-worker beneficiaries. Uninsured

aged-widow(er) beneficiaries are projected, on the other hand, 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 wage 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 retired-worker 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 wage-earner spouse is deceased and that the marriage was at least 10 years in duration.

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 50 up 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 eligible for 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.
111

Program Assumptions and Methods

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.

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 some persons who also receive a residual benefit

consisting of the excess of an auxiliary benefit over their retired-worker benefit. Estimates of the number of such residual payments are made separately

for spouses and widow(er)s.
Assumptions & Methods

112

Table V.C4.—OASI Beneficiaries With Benefits in Current-Payment Status 

at the End of Calendar Years 1945-2080

[In thousands]

Calendar year

Retired workers and auxiliaries Survivors

Worker Spouse Child Total

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 4,863 372 1,918 10 33,123

1986 . . . . . . . . . . 22,985 3,088 450 4,931 350 1,878 9 33,691

1987 . . . . . . . . . . 23,444 3,090 439 4,984 329 1,837 8 34,130

1988 . . . . . . . . . . 23,862 3,086 432 5,028 318 1,809 7 34,542

1989 . . . . . . . . . . 24,331 3,093 422 5,071 312 1,782 6 35,017

1990 . . . . . . . . . . 24,841 3,101 421 5,111 304 1,777 6 35,562

1991 . . . . . . . . . . 25,293 3,104 425 5,158 301 1,792 5 36,078

1992 . . . . . . . . . . 25,762 3,112 431 5,205 294 1,808 5 36,618

1993 . . . . . . . . . . 26,109 3,094 436 5,224 289 1,837 5 36,994

1994 . . . . . . . . . . 26,412 3,066 440 5,232 283 1,865 4 37,303

1995 . . . . . . . . . . 26,679 3,026 441 5,225 275 1,884 4 37,534

1996 . . . . . . . . . . 26,905 2,970 442 5,211 242 1,898 4 37,672

1997 . . . . . . . . . . 27,282 2,922 441 5,053 230 1,893 3 37,825

1998 . . . . . . . . . . 27,518 2,864 439 4,990 221 1,884 3 37,918

1999 . . . . . . . . . . 27,784 2,811 442 4,944 212 1,885 3 38,081

2000 . . . . . . . . . . 28,505 2,798 459 4,901 203 1,878 3 38,748

2001 . . . . . . . . . . 28,843 2,742 467 4,828 197 1,890 3 38,969

2002 . . . . . . . . . . 29,195 2,681 477 4,770 194 1,908 2 39,226

2003 . . . . . . . . . . 29,537 2,622 480 4,705 190 1,910 2 39,446

2004 . . . . . . . . . . 29,952 2,569 482 4,642 184 1,901 2 39,733

2005 . . . . . . . . . . 30,461 2,524 488 4,569 178 1,903 2 40,126

Intermediate:

2010 . . . . . . . . . . 34,363 2,427 559 4,390 164 1,876 1 43,781

2015 . . . . . . . . . . 40,983 2,392 625 4,277 159 1,897 1 50,332

2020 . . . . . . . . . . 48,598 2,447 701 4,203 153 1,920 2 58,025

2025 . . . . . . . . . . 55,636 2,606 748 4,251 157 1,929 2 65,327

2030 . . . . . . . . . . 62,160 2,552 784 4,283 156 1,936 2 71,872

2035 . . . . . . . . . . 66,553 2,477 786 4,306 154 1,936 2 76,214

2040 . . . . . . . . . . 68,807 2,446 783 4,297 150 1,917 2 78,401

2045 . . . . . . . . . . 70,398 2,510 788 4,282 146 1,889 2 80,015

2050 . . . . . . . . . . 72,085 2,586 811 4,250 142 1,861 2 81,735

2055 . . . . . . . . . . 74,021 2,719 818 4,236 138 1,830 2 83,763

2060 . . . . . . . . . . 76,258 2,807 832 4,241 134 1,798 2 86,072

2065 . . . . . . . . . . 78,636 2,889 841 4,296 131 1,770 2 88,564

2070 . . . . . . . . . . 81,162 2,940 858 4,361 127 1,746 2 91,197

2075 . . . . . . . . . . 83,349 2,997 864 4,425 124 1,723 2 93,482

2080 . . . . . . . . . . 85,574 3,077 880 4,466 120 1,701 2 95,819
113

Program Assumptions and Methods

Notes: 

1. The number of beneficiaries does not include uninsured individuals who receive benefits under Section

228 of the Social Security Act. Costs are reimbursed from the General Fund of the Treasury for most of

these individuals.

2. Totals do not necessarily equal the sums of rounded components.

6. Disability Insurance Beneficiaries

Benefits are paid from the DI Trust Fund to individuals who satisfy the disability-insured requirements, who are unable to engage in substantial gainful

activity due to medically determinable physical or mental impairment severe

enough to satisfy the requirements of the program, and who have not yet

attained normal retirement age. Spouses and children of such disabled workers may also receive DI benefits provided they satisfy certain criteria, mostly

depending upon age or the age of a child in the care of the non-disabled

spouse. In projecting future benefit outlays from the DI Trust Fund, the number of DI beneficiaries is projected for each type of beneficiary separately, by

Low Cost:

2010 . . . . . . . . . . 34,326 2,429 562 4,386 165 1,889 1 43,758

2015 . . . . . . . . . . 40,784 2,403 634 4,259 164 1,947 1 50,193

2020 . . . . . . . . . . 47,918 2,426 717 4,228 150 2,054 2 57,495

2025 . . . . . . . . . . 54,400 2,573 778 4,316 150 2,146 2 64,365

2030 . . . . . . . . . . 60,203 2,492 830 4,387 147 2,242 2 70,302

2035 . . . . . . . . . . 63,839 2,387 845 4,429 144 2,327 2 73,973

2040 . . . . . . . . . . 65,394 2,323 854 4,415 142 2,388 2 75,518

2045 . . . . . . . . . . 66,524 2,343 875 4,375 142 2,431 2 76,691

2050 . . . . . . . . . . 67,918 2,391 914 4,306 142 2,463 2 78,135

2055 . . . . . . . . . . 69,764 2,479 938 4,251 143 2,498 2 80,075

2060 . . . . . . . . . . 71,893 2,529 971 4,217 145 2,541 2 82,297

2065 . . . . . . . . . . 74,065 2,578 996 4,230 148 2,590 2 84,608

2070 . . . . . . . . . . 76,346 2,602 1,032 4,260 151 2,639 2 87,032

2075 . . . . . . . . . . 78,659 2,633 1,062 4,304 153 2,688 2 89,500

2080 . . . . . . . . . . 81,547 2,688 1,110 4,354 155 2,739 2 92,594

High Cost:

2010 . . . . . . . . . . 34,416 2,426 557 4,396 163 1,864 1 43,824

2015 . . . . . . . . . . 41,234 2,389 617 4,303 153 1,848 1 50,546

2020 . . . . . . . . . . 49,410 2,509 686 4,175 154 1,782 2 58,718

2025 . . . . . . . . . . 57,068 2,719 719 4,174 154 1,706 2 66,541

2030 . . . . . . . . . . 64,486 2,716 743 4,159 150 1,636 2 73,891

2035 . . . . . . . . . . 69,912 2,691 735 4,158 142 1,564 2 79,205

2040 . . . . . . . . . . 73,208 2,722 722 4,157 132 1,485 2 82,428

2045 . . . . . . . . . . 75,691 2,848 715 4,169 121 1,411 2 84,958

2050 . . . . . . . . . . 78,117 2,959 724 4,169 112 1,348 2 87,431

2055 . . . . . . . . . . 80,624 3,134 719 4,182 102 1,284 2 90,046

2060 . . . . . . . . . . 83,428 3,253 717 4,201 94 1,218 2 92,912

2065 . . . . . . . . . . 86,365 3,381 711 4,261 86 1,159 2 95,965

2070 . . . . . . . . . . 89,454 3,458 713 4,323 78 1,106 2 99,135

2075 . . . . . . . . . . 91,846 3,541 701 4,380 72 1,058 2 101,600

2080 . . . . . . . . . . 93,800 3,607 695 4,388 66 1,013 2 103,570

Table V.C4.—OASI Beneficiaries With Benefits in Current-Payment Status 

at the End of Calendar Years 1945-2080 (Cont.)

[In thousands]

Calendar year

Retired workers and auxiliaries Survivors

Worker Spouse Child Total

WidowwidowerMotherfather Child Parent
Assumptions & Methods

114

the sex of the disabled worker on whose earnings the benefits are based, and

the age of the beneficiary. Such projections are accomplished using standard

actuarial methods reflecting future additions to the DI rolls through awards

of new benefits, and subtractions from the rolls due to death, recovery, or

administrative conversion upon attainment of normal retirement age from

status as a disabled-worker beneficiary to status as a retired-worker beneficiary. The long-range and short-range models used to make these projections

are both constructed from this basic outline, but differ in some details reflecting their respective uses.

The number of new entitlements to disabled-worker benefits during each

year is projected by applying assumed age-sex-specific disability incidence

rates to the projected disability-exposed population.1 Long-range ultimate

disability incidence rates are selected based on careful analysis of historical

patterns and expected future conditions, including the impact of scheduled

increases in the normal retirement age.2 Incidence rates for the first half of

the short-range period reflect the most recent actual experience along with

consideration of other factors expected to affect the processing of disability

claims in the near term. Over the latter half of the short-range period, incidence rates are assumed to trend into levels consistent with the long-range

ultimate incidence rate assumptions.

These assumed incidence rates are summarized in figure V.C3 and table

V.C5. As illustrated in figure V.C3, incidence rates have varied within a wide

range over the past 30 years. Although not completely understood, this variation is attributed in large part to a variety of demographic and economic factors, along with the effects of changes due to legislation and program

administration.3 The solid lines in figure V.C3 illustrate values of the summarized incidence rate, age-sex adjusted to the distribution of the disabilityexposed population for 2000. Such adjustment facilitates meaningful comparisons over long periods of time. From a historically high level of about

7.2 awards per thousand insured in 1975, age-sex-adjusted rates declined to

about 3.7 per thousand by 1982. Following a gradual trend upward, rates

increased to about 5.8 per thousand by 1992, but declined from that point to

 1 The disability-exposed population is the disability-insured population that is not currently entitled for disabled-worker benefits.

 2 Incidence rates are adjusted upward to account for the additional workers who are expected to file for disability benefits rather than for reduced retirement benefits that are even more reduced when the NRA is

greater than age 65.

 3 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 can be found on

the Internet at www.socialsecurity.gov/OACT/NOTES/as118/DI-WrkerExper_Foreword.html.
115

Program Assumptions and Methods

about 4.7 per thousand in 2000. As described in chapter IV, in the discussion

of the short-range DI estimates, the incidence rate experience for 2001-05,

and the projections for 2006-10, are affected by a one-time special workload.

In addition to historical values, figure V.C3 displays the age-sex-adjusted

short-range incidence rates under the three alternative sets of assumptions.

Gross (unadjusted) incidence rates are also shown in figure V.C3 in dashed

lines. These unadjusted rates are heavily influenced by the changing age-sex

distribution of the exposed population over time. This is especially noticeable in the period after 2000 when the aging baby-boom generation will be

concentrated in the ages of highest disability incidence.

Table V.C5 presents the long-range ultimate incidence rate assumptions agesex adjusted to the disability-exposed population as of January 1, 2000. The

table also indicates the year in which the ultimate values are attained, along

with an indication of the relationship between those ultimate rates and the

rates for the base period (1994-96) that was used to develop relative levels of

disability incidence by age and sex for long-range assumptions.

 Figure V.C3.—DI Disabled Worker Incidence Rates, 1970-2015

[Awards per thousand disability exposed]

0

1

2

3

4

5

6

7

8

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Calendar year

Gross incidence rates

Age-sex adjusted

incidence rates

Historical Projected

II

III

I
Assumptions & Methods

116

The number of disabled-worker beneficiaries having their benefits terminated during each year is projected by applying assumed termination rates to

the disabled-worker population. The termination rates are developed by age,

sex, and reason for termination.1 In addition, in the long-range period, termination rates are also assumed to vary by duration of entitlement to disabledworker benefits. To this number of terminations is added the number of disabled-worker beneficiaries who would be automatically converted to retiredworker beneficiaries upon attainment of the normal retirement age.

In the short-range period, gross death rates under the intermediate assumptions are projected to gradually decline to about 28 deaths per thousand disabled workers. The pattern of projected recovery rates under the intermediate

assumptions is consistent with assumed levels of continuing disability

reviews required to fulfill the legislative mandate for regular reviews of all

disabled beneficiaries. Under low cost (high cost) assumptions, terminations

due to death, recovery, and other reasons increase (decrease) to levels

roughly 9-10 percent higher (lower) than those under the intermediate

assumptions.

For the 2006 Trustees Report the base period for death and recovery rates

was updated from 1991-95 to 1996-20002. Projection factors to be applied to

the base period were chosen so that the age-adjusted rates for males and

females would be roughly equal to the age-adjusted rates in last year’s Trustees Report.

Table V.C5.—Long-Range Ultimate Disabled Worker Age-Sex-Adjusted 

Incidence Rates1

1 Number of annual new disabled-worker entitlements per thousand disability-exposed, age-sex-adjusted to

the disability-exposed population as of January 1, 2000.

Ultimate

incidence rate

Year ultimate

rate is attained2

2 The transition to ultimate incidence rates is generally completed in 2025. However, for ages 61 through 66

incidence rates are adjusted through 2027 in order to reflect increases in the normal retirement age (NRA)

that are scheduled in the law.

Percent change from

base period 3 to ultimate rate

3 Base period rate for long-range incidence rate assumptions is 5.4 per thousand representing the average

age-sex-adjusted incidence rate for 1994-96.

Intermediate assumption . . . . . . . . . 5.8 2027 +7

Low cost assumption . . . . . . . . . . . . 4.6 2027 -15

High cost assumption. . . . . . . . . . . . 6.9 2027 +28

 1 Reasons for termination reflected in the projections include death, recovery and (in the short range only) a

small residual category of terminations for special administrative reasons.

 2 For an analysis of these two periods see Actuarial Study 118, “Social Security Disability Insurance Program Worker Experience,” June 2005. This study can be found on the Social Security website at

www.socialsecurity.gov/OACT/NOTES/as118/DI-WrkerExper_Foreword.html.
117

Program Assumptions and Methods

For the long-range period, projection of death rates and recovery rates begins

with an analysis of such rates split by age, sex, and duration of entitlement

over the base period 1996-2000.1 For all three sets of assumptions the ultimate recovery rates are reached in the twentieth year of the projection

period. Under the intermediate assumptions ultimate recovery rates are

assumed to be lower than the base period rate by 1 percent for males and

higher than the base period rate by 16 percent for females. Death rates over

the long-range period are assumed to change gradually, at about the same

trend as for death rates in the general population, reaching levels in 2080

which are lower than the base period level by 57 percent for males and

55 percent for females.

Under the low cost assumptions, recovery rates and death rates are assumed

to be higher than the corresponding levels assumed for the intermediate

assumptions. Ultimate recovery rates are assumed to be higher than the base

period rate by 19 percent for males and by 40 percent for females, while

death rates are assumed to change gradually reaching levels for 2080 which

are lower than the base period level by 40 percent for males and 38 percent

for females.

Under the high cost assumptions, recovery rates and death rates are assumed

to be lower than the corresponding levels assumed for the intermediate

assumptions. Ultimate recovery rates are assumed to be lower than the base

period rate by 21 percent for males and by 7 percent for females, while death

rates are assumed to change gradually reaching levels for 2080 which are

lower than the base period level by 74 percent for both males and females.

These detailed projections of disabled-worker entitlements and terminations

are combined using standard multiple decrement techniques to produce numbers of disabled workers in current-payment status over the 75-year projection period. The projection is presented in table V.C6. As indicated in that

table, the number of disabled workers in current-payment status is projected

to grow from 6.5 million at the end of 2005, to 11.4 million, 12.6 million, or

13.7 million at the end of 2080, under the low cost, intermediate, or high cost

assumptions, respectively. Of course, much of this growth is a direct result of

the growth and aging of the population described earlier in this chapter.

Another way to view this projected growth in disabled workers is to compare

the size of the projected disabled-worker population to the size of the under-

 1 The termination rate analysis was based on work presented in Actuarial Study 118, “Social Security Disability Insurance Program Worker Experience,” June 2005. This study can be found on the Social Security

website at www.socialsecurity.gov/OACT/NOTES/as118/DI-WrkerExper_Foreword.html.
Assumptions & Methods

118

lying disability-insured population reflecting the age-sex distribution of the

insured population as of January 1, 2000. Such a ratio eliminates the effects

of the aging population and is referred to as the disabled worker age-sexadjusted prevalence rate. Expressed in these terms, the prevalence of disability is projected to grow from 38.5 per thousand disability insured at the

beginning of 2005, to 47.4 per thousand, and 60.4 per thousand at the beginning of 2080, under the intermediate, and high cost assumptions, respectively. Under the low cost assumptions, the disability prevalence rate is

projected to decrease to 35.8 per thousand.

Table V.C6 also 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 children, the child must be either

(1) under age 18, (2) age 18 or 19 and still a student in high school, or (3)

over age 18 and disabled prior to age 22. In the case of spouses, the spouse

must either be at least age 62, or have an eligible child beneficiary who is

either under age 16 or disabled in his or her care. 

In general, such auxiliary beneficiaries are projected in a manner that is

related to the projected number of disabled-worker beneficiaries. In the

short-range period, this is accomplished for family members of disabledworker beneficiaries by projecting incidence and termination rates for each

category of auxiliary beneficiary. In the long-range period, 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 insured and disabled. Spouses eligible because

they have an eligible child in care are projected relative to the projected number of such children. The remaining categories of children and spouses are

projected in relation to the projected number of disabled-worker beneficiaries.
119

Program Assumptions and Methods

Table V.C6.—DI Beneficiaries With Benefits in Current-Payment Status at the End of 

Calendar Years 1960-2080

[In thousands]

Calendar year

Disabled

worker

Auxiliaries

Spouse Child Total

Historical data:

1960. . . . . . . . . . . . . . . . . . . . . . . . . . 455 77 155 687

1965. . . . . . . . . . . . . . . . . . . . . . . . . . 988 193 558 1,739

1970. . . . . . . . . . . . . . . . . . . . . . . . . . 1,493 283 889 2,665

1975. . . . . . . . . . . . . . . . . . . . . . . . . . 2,488 453 1,411 4,351

1980. . . . . . . . . . . . . . . . . . . . . . . . . . 2,856 462 1,359 4,677

1985. . . . . . . . . . . . . . . . . . . . . . . . . . 2,653 306 945 3,904

1986. . . . . . . . . . . . . . . . . . . . . . . . . . 2,725 301 965 3,991

1987. . . . . . . . . . . . . . . . . . . . . . . . . . 2,782 291 968 4,041

1988. . . . . . . . . . . . . . . . . . . . . . . . . . 2,826 281 963 4,070

1989. . . . . . . . . . . . . . . . . . . . . . . . . . 2,891 271 962 4,124

1990. . . . . . . . . . . . . . . . . . . . . . . . . . 3,007 266 989 4,261

1991. . . . . . . . . . . . . . . . . . . . . . . . . . 3,191 266 1,052 4,509

1992. . . . . . . . . . . . . . . . . . . . . . . . . . 3,464 271 1,151 4,886

1993. . . . . . . . . . . . . . . . . . . . . . . . . . 3,721 273 1,255 5,249

1994. . . . . . . . . . . . . . . . . . . . . . . . . . 3,958 271 1,350 5,579

1995. . . . . . . . . . . . . . . . . . . . . . . . . . 4,179 264 1,409 5,852

1996. . . . . . . . . . . . . . . . . . . . . . . . . . 4,378 224 1,463 6,065

1997. . . . . . . . . . . . . . . . . . . . . . . . . . 4,501 207 1,438 6,146

1998. . . . . . . . . . . . . . . . . . . . . . . . . . 4,691 190 1,446 6,327

1999. . . . . . . . . . . . . . . . . . . . . . . . . . 4,870 176 1,468 6,514

2000. . . . . . . . . . . . . . . . . . . . . . . . . . 5,036 165 1,466 6,667

2001. . . . . . . . . . . . . . . . . . . . . . . . . . 5,268 157 1,482 6,907

2002. . . . . . . . . . . . . . . . . . . . . . . . . . 5,539 152 1,526 7,217

2003. . . . . . . . . . . . . . . . . . . . . . . . . . 5,869 151 1,571 7,590

2004. . . . . . . . . . . . . . . . . . . . . . . . . . 6,198 153 1,599 7,950

2005. . . . . . . . . . . . . . . . . . . . . . . . . . 6,519 157 1,633 8,309

Intermediate:

2010. . . . . . . . . . . . . . . . . . . . . . . . . . 7,757 183 1,753 9,693

2015. . . . . . . . . . . . . . . . . . . . . . . . . . 8,475 183 1,807 10,465

2020. . . . . . . . . . . . . . . . . . . . . . . . . . 9,090 192 1,896 11,178

2025. . . . . . . . . . . . . . . . . . . . . . . . . . 9,852 231 2,031 12,114

2030. . . . . . . . . . . . . . . . . . . . . . . . . . 10,011 233 2,177 12,422

2035. . . . . . . . . . . . . . . . . . . . . . . . . . 10,187 238 2,284 12,709

2040. . . . . . . . . . . . . . . . . . . . . . . . . . 10,474 251 2,358 13,083

2045. . . . . . . . . . . . . . . . . . . . . . . . . . 10,992 269 2,408 13,670

2050. . . . . . . . . . . . . . . . . . . . . . . . . . 11,261 278 2,450 13,989

2055. . . . . . . . . . . . . . . . . . . . . . . . . . 11,570 289 2,495 14,354

2060. . . . . . . . . . . . . . . . . . . . . . . . . . 11,701 290 2,541 14,532

2065. . . . . . . . . . . . . . . . . . . . . . . . . . 11,966 299 2,589 14,854

2070. . . . . . . . . . . . . . . . . . . . . . . . . . 12,113 299 2,632 15,044

2075. . . . . . . . . . . . . . . . . . . . . . . . . . 12,387 308 2,672 15,367

2080. . . . . . . . . . . . . . . . . . . . . . . . . . 12,645 315 2,713 15,673
Assumptions & Methods

120

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

7. Average Benefits

Average benefits are projected by type of benefit 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

award, average awarded PIAs, and increases thereto since the year of award,

reflecting automatic benefit increases, recomputations to reflect additional

covered earnings, and other factors. Average awarded PIAs are calculated

from projected earnings histories, which are developed using a combination

of the actual earnings histories associated with a sample of awards made in

2003, and more recent actual earnings levels by age and sex for covered

workers.

Low Cost:

2010. . . . . . . . . . . . . . . . . . . . . . . . . . 7,272 167 1,626 9,064

2015. . . . . . . . . . . . . . . . . . . . . . . . . . 7,445 157 1,577 9,178

2020. . . . . . . . . . . . . . . . . . . . . . . . . . 7,662 155 1,619 9,437

2025. . . . . . . . . . . . . . . . . . . . . . . . . . 8,096 178 1,741 10,015

2030. . . . . . . . . . . . . . . . . . . . . . . . . . 8,088 170 1,892 10,151

2035. . . . . . . . . . . . . . . . . . . . . . . . . . 8,176 166 2,025 10,367

2040. . . . . . . . . . . . . . . . . . . . . . . . . . 8,402 169 2,138 10,709

2045. . . . . . . . . . . . . . . . . . . . . . . . . . 8,838 180 2,232 11,251

2050. . . . . . . . . . . . . . . . . . . . . . . . . . 9,101 186 2,315 11,601

2055. . . . . . . . . . . . . . . . . . . . . . . . . . 9,418 192 2,413 12,024

2060. . . . . . . . . . . . . . . . . . . . . . . . . . 9,639 193 2,525 12,356

2065. . . . . . . . . . . . . . . . . . . . . . . . . . 10,019 200 2,645 12,864

2070. . . . . . . . . . . . . . . . . . . . . . . . . . 10,385 202 2,763 13,350

2075. . . . . . . . . . . . . . . . . . . . . . . . . . 10,907 211 2,879 13,997

2080. . . . . . . . . . . . . . . . . . . . . . . . . . 11,425 220 2,996 14,641

High Cost:

2010. . . . . . . . . . . . . . . . . . . . . . . . . . 8,423 206 1,928 10,557

2015. . . . . . . . . . . . . . . . . . . . . . . . . . 9,742 214 2,078 12,033

2020. . . . . . . . . . . . . . . . . . . . . . . . . . 10,682 241 2,170 13,093

2025. . . . . . . . . . . . . . . . . . . . . . . . . . 11,762 301 2,294 14,358

2030. . . . . . . . . . . . . . . . . . . . . . . . . . 12,065 316 2,408 14,789

2035. . . . . . . . . . . . . . . . . . . . . . . . . . 12,346 331 2,463 15,140

2040. . . . . . . . . . . . . . . . . . . . . . . . . . 12,723 355 2,478 15,555

2045. . . . . . . . . . . . . . . . . . . . . . . . . . 13,357 382 2,469 16,208

2050. . . . . . . . . . . . . . . . . . . . . . . . . . 13,647 390 2,464 16,502

2055. . . . . . . . . . . . . . . . . . . . . . . . . . 13,946 402 2,452 16,799

2060. . . . . . . . . . . . . . . . . . . . . . . . . . 13,963 397 2,427 16,788

2065. . . . . . . . . . . . . . . . . . . . . . . . . . 14,062 408 2,401 16,870

2070. . . . . . . . . . . . . . . . . . . . . . . . . . 13,891 400 2,368 16,659

2075. . . . . . . . . . . . . . . . . . . . . . . . . . 13,791 403 2,336 16,530

2080. . . . . . . . . . . . . . . . . . . . . . . . . . 13,673 401 2,308 16,382

Table V.C6.—DI Beneficiaries With Benefits in Current-Payment Status at the End of 

Calendar Years 1960-2080 (Cont.)

[In thousands]

Calendar year

Disabled

worker

Auxiliaries

Spouse Child Total
121

Program Assumptions and Methods

For several types of benefits—retired-worker, aged-spouse, and agedwidow(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 2015 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. For years after 2015, administrative expenses are assumed to

increase because of increases in the number of beneficiaries and increases in

the average wage which will more than offset assumed improvements in

administrative productivity.

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 is made

reflecting 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 and 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.
Assumptions & Methods

122

The effect of the financial interchange with the Railroad Retirement program

is evaluated on the basis of trends similar to those used in estimating the cost

of OASDI benefits. The resulting effect is annual short-range costs of about

$4-5 billion and a long-range summarized cost of 0.03 percent of taxable

payroll to the OASDI program.

11. Benefits to Uninsured Persons

Some older persons had little or no chance to become fully insured for Social

Security benefits during their working lifetimes. Special payments from the

OASI Trust Fund may be granted to uninsured persons who either:

(1) attained age 72 before 1968, or (2) attained age 72 in 1968 or later and

had 3 quarters of coverage for each year after 1966 and before the year of

attainment of age 72. Benefits and costs associated with uninsured persons of

the first type above are reimbursable from the General Fund of the Treasury.

All projected costs associated with reimbursable and non-reimbursable payments to uninsured persons are insignificant.

12.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.

13.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.

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
123

Program Assumptions and Methods

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. Thus, 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 are estimated by eliminating the current threshold amounts for taxation of OASDI benefits completely

and adjusting the OASDI beneficiary distribution in a recent Current Population Survey for the projected 75th year age-sex distribution of the SSA beneficiary population.
Appendices

124

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. The tables at the end

of this section present the historical operations of the separate trust funds

since their inception, as well as 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-
125

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 2006 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

19841. . . . . . . . . . . 37,800 5.700 5.200 .500 11.4000 10.4000 1.0000

19851. . . . . . . . . . . 39,600 5.700 5.200 .500 11.4000 10.4000 1.0000

19861. . . . . . . . . . . 42,000 5.700 5.200 .500 11.4000 10.4000 1.0000

19871. . . . . . . . . . . 43,800 5.700 5.200 .500 11.4000 10.4000 1.0000

19881. . . . . . . . . . . 45,000 6.060 5.530 .530 12.1200 11.0600 1.0600
Appendices

126

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

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

19891. . . . . . . . . . . $48,000 6.060 5.530 0.530 12.1200 11.0600 1.0600

1990 . . . . . . . . . . . 51,300 6.200 5.600 .600 12.4000 11.2000 1.2000

1991. . . . . . . . . . . . 53,400 6.200 5.600 .600 12.4000 11.2000 1.2000

1992. . . . . . . . . . . . 55,500 6.200 5.600 .600 12.4000 11.2000 1.2000

1993. . . . . . . . . . . . 57,600 6.200 5.600 .600 12.4000 11.2000 1.2000

1994. . . . . . . . . . . . 60,600 6.200 5.260 .940 12.4000 10.5200 1.8800

1995. . . . . . . . . . . . 61,200 6.200 5.260 .940 12.4000 10.5200 1.8800

1996. . . . . . . . . . . . 62,700 6.200 5.260 .940 12.4000 10.5200 1.8800

1997. . . . . . . . . . . . 65,400 6.200 5.350 .850 12.4000 10.7000 1.7000

1998. . . . . . . . . . . . 68,400 6.200 5.350 .850 12.4000 10.7000 1.7000

1999. . . . . . . . . . . . 72,600 6.200 5.350 .850 12.4000 10.7000 1.7000

2000. . . . . . . . . . . . 76,200 6.200 5.300 .900 12.4000 10.6000 1.8000

2001. . . . . . . . . . . . 80,400 6.200 5.300 .900 12.4000 10.6000 1.8000

2002. . . . . . . . . . . . 84,900 6.200 5.300 .900 12.4000 10.6000 1.8000

2003. . . . . . . . . . . . 87,000 6.200 5.300 .900 12.4000 10.6000 1.8000

2004. . . . . . . . . . . . 87,900 6.200 5.300 .900 12.4000 10.6000 1.8000

2005. . . . . . . . . . . . 90,000 6.200 5.300 .900 12.4000 10.6000 1.8000

2006. . . . . . . . . . . . 94,200 6.200 5.300 .900 12.4000 10.6000 1.8000

2007 and later . . . . 2/ 6.200 5.300 .900 12.4000 10.6000 1.8000

1 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.

2 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
127

History of Trust Fund Operations

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 which 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. Just 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 revenues resulting from the increase to 85 percent are 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

128

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; (2) annual reimbursements from the

General Fund of the Treasury to the OASI Trust Fund for any costs arising

from the special monthly cash payments to certain uninsured persons—i.e.,

those who attained age 72 before 1968 and who generally are not eligible for

cash benefits under other provisions of the OASDI program; and (3) 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.
129

History of Trust Fund Operations

Table VI.A2.—Historical Operations of the OASI Trust Fund, 

Calendar Years 1937-2005

[Amounts in billions]

Calendar

year

Income Expenditures Assets

Total1

Net

contributions2

Taxation of

benefits

Net

interest3 Total

Benefit

pay- ments4

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

Fund

ratio5

1937 . . . $0.8 $0.8 — 6/ 6/1 6/1 — — $0.8 $0.8 100

1938 . . . .4 .4 — 6/1 6/1 6/1 — — .4 1.1 7,660

1939 . . . .6 .6 — 6/1 6/1 6/1 — — .6 1.7 8,086

1940 . . . .4 .3 — 6/1 $0.1 6/1 6/1 — .3 2.0 2,781

1941 . . . .8 .8 — $0.1 .1 $0.1 6/1 — .7 2.8 1,782

1942 . . . 1.1 1.0 — .1 .2 .1 6/1 — .9 3.7 1,737

1943 . . . 1.3 1.2 — .1 .2 .2 6/1 — 1.1 4.8 1,891

1944 . . . 1.4 1.3 — .1 .2 .2 6/1 — 1.2 6.0 2,025

1945 . . . 1.4 1.3 — .1 .3 .3 6/1 — 1.1 7.1 1,975

1946 . . . 1.4 1.3 — .2 .4 .4 6/1 — 1.0 8.2 1,704

1947 . . . 1.7 1.6 — .2 .5 .5 6/1 — 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 6/1 1.9 20.6 500

1955 . . . 6.2 5.7 — .5 5.1 5.0 .1 6/1 1.1 21.7 405

1956 . . . 6.7 6.2 — .5 5.8 5.7 .1 6/1 .9 22.5 371

1957 . . . 7.4 6.8 — .6 7.5 7.3 .2 6/1 -.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
Appendices

130

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

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 .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

1985 . . . 184.2 177.0 3.2 1.9 171.2 167.2 1.6 2.3 78.7 35.8 24

1986 . . . 197.4 190.7 3.4 3.1 181.0 176.8 1.6 2.6 7 3.2 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

1 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 on the Internet at www.socialsecurity.gov/OACT/STATS/t4a1Income.html.

2 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.

3 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 Annual

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.

4 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.

5 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.

6 Less than $50 million.

7 Reflects offset for repayment from the OASI Trust Fund of amounts borrowed from the DI and HI Trust Funds

in 1982. The amount repaid in 1985 was $4.4 billion; in 1986, the amount was $13.2 billion.

Table VI.A2.—Historical Operations of the OASI Trust Fund, 

Calendar Years 1937-2005 (Cont.)

[Amounts in billions]

Calendar

year

Income Expenditures Assets

Total1

Net

contributions2

Taxation of

benefits

Net

interest3 Total

Benefit

payments4

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

Fund

ratio5
131

History of Trust Fund Operations

Table VI.A3.—Historical Operations of the DI Trust Fund, 

Calendar Years 1957-2005

[Amounts in billions]

Calendar

year

Income Expenditures Assets

Total 1

Net

contributions2

Taxation of

benefits

Net

interest3 Total

Benefit

pay- ments4

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

Fund

ratio5

1957. . . $0.7 $0.7 — 6/ $0.1 $0.1 6/1 — $0.6 $0.6 100

1958. . . 1.0 1.0 — 6/1 .3 .2 6/1 — .7 1.4 249

1959. . . .9 .9 — 6/1 .5 .5 $0.1 6/1 .4 1.8 284

1960. . . 1.1 1.0 — $0.1 .6 .6 6/1 6/1 .5 2.3 304

1961. . . 1.1 1.0 — .1 1.0 .9 .1 6/1 .1 2.4 239

1962. . . 1.1 1.0 — .1 1.2 1.1 .1 6/1 -.1 2.4 206

1963. . . 1.2 1.1 — .1 1.3 1.2 .1 6/1 -.1 2.2 183

1964. . . 1.2 1.2 — .1 1.4 1.3 .1 6/1 -.2 2.0 159

1965. . . 1.2 1.2 — .1 1.7 1.6 .1 6/1 -.4 1.6 121

1966. . . 2.1 2.0 — .1 1.9 1.8 .1 6/1 .1 1.7 82

1967. . . 2.4 2.3 — .1 2.1 2.0 .1 6/1 .3 2.0 83

1968. . . 3.5 3.3 — .1 2.5 2.3 .1 6/1 1.0 3.0 83

1969. . . 3.8 3.6 — .2 2.7 2.6 .1 6/1 1.1 4.1 111

1970. . . 4.8 4.5 — .3 3.3 3.1 .2 6/1 1.5 5.6 126

1971. . . 5.0 4.6 — .4 4.0 3.8 .2 6/1 1.0 6.6 140

1972. . . 5.6 5.1 — .4 4.8 4.5 .2 6/1 .8 7.5 140

1973. . . 6.4 5.9 — .5 6.0 5.8 .2 6/1 .5 7.9 125

1974. . . 7.4 6.8 — .5 7.2 7.0 .2 6/1 .2 8.1 110

1975. . . 8.0 7.4 — .5 8.8 8.5 .3 6/1 -.8 7.4 92

1976. . . 8.8 8.2 — .4 10.4 10.1 .3 6/1 -1.6 5.7 71

1977. . . 9.6 9.1 — .3 11.9 11.5 .4 6/1 -2.4 3.4 48

1978. . . 13.8 13.4 — .3 13.0 12.6 .3 6/1 .9 4.2 26

1979. . . 15.6 15.1 — .4 14.2 13.8 .4 6/1 1.4 5.6 30

1980. . . 13.9 13.3 — .5 15.9 15.5 .4 6/1 -2.0 3.6 35

1981. . . 17.1 16.7 — .2 17.7 17.2 .4 6/1 -.6 3.0 21

1982. . . 22.7 22.0 — .5 18.0 17.4 .6 6/1 -.4 2.7 17

1983. . . 20.7 18.0 — 1.6 18.2 17.5 .6 6/1 2.5 5.2 15

1984. . . 17.3 15.9 $0.2 1.2 18.5 17.9 .6 6/1 -1.2 4.0 35

1985. . . 19.3 17.2 .2 .9 19.5 18.8 .6 6/1 72.4 6.3 27

1986. . . 19.4 18.4 .2 .8 20.5 19.9 .6 $0.1 71.5 7.8 38

1987. . . 20.3 19.7 6/1 .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 6/1 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 6/1 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

2005. . . 97.4 86.1 1.1 10.3 88.0 85.4 2.3 .3 9.4 195.6 212
Appendices

132

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

1 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 on the Internet at www.socialsecurity.gov/OACT/STATS/t4a2Income.html.

2 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.

3 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 Annual

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.

4 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.

5 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.

6 Less than $50 million.

7 Reflects offset for repayment from the OASI Trust Fund of amounts borrowed from the DI Trust Fund in 1982.

An amount of $2.5 billion was repaid in each year 1985 and 1986.
133

History of Trust Fund Operations

Table VI.A4.—Historical Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1957-2005

[Amounts in billions]

Calendar

year

Income Expenditures Assets

Total1

Net

contributions2

Taxation of

benefits

Net

interest3 Total

Benefit

pay- ments4

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

Fund

ratio5

1957 . . . $8.1 $7.5 — $0.6 $7.6 $7.4 $0.2 6/ $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 6/1 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 .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 2.4 711.1 42.2 24

1986 . . . 216.8 209.1 3.7 3.9 201.5 196.7 2.2 2.7 7 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

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

134

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 calendar year 2004 and

2005. These assets are separated by interest rate and year of maturity. Assets

grouped with multiple years of maturity are distributed evenly across those

years. Bonds issued to the trust funds in 2005 had an interest rate of 4.125

percent, compared with an interest rate of 4.625 percent for bonds issued in

2004.

1 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 on the Internet at www.socialsecurity.gov/OACT/STATS/t4a3Income.html.

2 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.

3 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 Annual

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.

4 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.

5 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.

6 Less than $50 million.

7 Reflects offset for repayment from the OASI Trust Fund of amounts borrowed from the HI Trust Fund in 1982.

The amount repaid in 1985 was $1.8 billion; in 1986, the amount was $10.6 billion.
135

History of Trust Fund Operations

Note: Special issues are always purchased at par value. Therefore, book value and par value are the same for

each special issue, and the common value is shown above. Where the maturity years are grouped, the

amount maturing in each year is the amount shown divided by the number of years.

Table VI.A5.—Assets of the OASI Trust Fund, End of Calendar Years 2004 and 2005

[In thousands]

December 31, 2004 December 31, 2005

Obligations sold only to the trust funds (special issues): 

Certificates of indebtedness:

4.375 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . $71,489,553 —

4.625 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,452,489 —

4.625 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . — $94,140,199

Bonds:

3.5 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,513,752 —

3.5 percent, 2007-15. . . . . . . . . . . . . . . . . . . . . . . . . . . 85,623,759 85,623,759

3.5 percent, 2016-17. . . . . . . . . . . . . . . . . . . . . . . . . . . 19,027,504 19,027,504

3.5 percent, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,900,994 86,900,994

4.125 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . — 10,516,947

4.125 percent, 2008-19. . . . . . . . . . . . . . . . . . . . . . . . . — 126,203,352

4.125 percent, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . — 106,585,700

4.625 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,167,662 —

4.625 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,167,662 9,167,662

4.625 percent, 2008-15. . . . . . . . . . . . . . . . . . . . . . . . . 73,341,312 73,341,312

4.625 percent, 2016-18. . . . . . . . . . . . . . . . . . . . . . . . . 27,502,989 27,502,989

4.625 percent, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,068,657 96,068,657

5.250 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,709,768 —

5.250 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,235,911 9,235,911

5.250 percent, 2007-15. . . . . . . . . . . . . . . . . . . . . . . . . 83,123,208 83,123,208

5.250 percent, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,235,911 9,235,911

5.250 percent, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,387,242 77,387,242

5.625 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,621,438 —

5.625 percent, 2006-11 . . . . . . . . . . . . . . . . . . . . . . . . . 57,728,628 57,728,628

5.625 percent, 2012-15. . . . . . . . . . . . . . . . . . . . . . . . . 38,485,748 38,485,748

5.625 percent, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,151,331 68,151,331

5.875 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,169,273 —

5.875 percent, 2006-12. . . . . . . . . . . . . . . . . . . . . . . . . 43,184,911 43,184,911

5.875 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,258,869 43,258,869

6 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,693,627 —

6 percent, 2006-11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,161,762 40,161,762

6 percent, 2012-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,387,256 13,387,256

6 percent, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,952,497 49,952,497

6.25 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,150,975 —

6.25 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,150,975 3,150,975

6.25 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,150,974 3,150,974

6.25 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,350,034 23,350,034

6.5 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,008,650 —

6.5 percent, 2006-09. . . . . . . . . . . . . . . . . . . . . . . . . . . 44,034,600 44,034,600

6.5 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,320,240 38,320,240

6.5 percent, 2011-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,309,584 34,309,584

6.5 percent, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,529,893 58,529,893

6.875 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,975,271 —

6.875 percent, 2006-09. . . . . . . . . . . . . . . . . . . . . . . . . 15,901,084 15,901,084

6.875 percent, 2010-11 . . . . . . . . . . . . . . . . . . . . . . . . . 7,950,544 7,950,544

6.875 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,089,596 37,089,596

7 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,371,480 —

7 percent, 2006-10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,857,400 16,857,400

7 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,114,324 33,114,324

7.25 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,961,556 —

7.25 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,961,556 3,961,556

7.25 percent, 2007-08. . . . . . . . . . . . . . . . . . . . . . . . . . 7,923,114 7,923,114

7.25 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,311,591 27,311,591

7.375 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,575,474 —

7.375 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,575,474 3,575,474

7.375 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,199,060 20,199,060

8.125 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,611,348 —

8.125 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,623,586 16,623,586

8.75 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,012,238 —

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,764,334 1,663,725,978

Undisbursed balances1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

1 Negative figures represent an extension of credit against securities to be redeemed within the following

few days.

-142,184 -688,652

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,622,150 1,663,037,326
Appendices

136

Table VI.A6.—Assets of the DI Trust Fund, End of Calendar Years 2004 and 2005

[In thousands]

December 31, 2004 December 31, 2005

Investments in public-debt obligations:

Obligations sold only to the trust funds (special issues):

Certificates of indebtedness: 

4.375 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . $8,525,861 —

4.625 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . — $8,339,100

Bonds: 

3.5 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,115,128 —

3.5 percent, 2007-11 . . . . . . . . . . . . . . . . . . . . . . . . . 5,575,640 5,575,640

3.5 percent, 2012-15 . . . . . . . . . . . . . . . . . . . . . . . . . 4,460,508 4,460,508

3.5 percent, 2016-17 . . . . . . . . . . . . . . . . . . . . . . . . . 2,230,256 2,230,256

3.5 percent, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,378,384 11,378,384

4.125 percent, 2007-11 . . . . . . . . . . . . . . . . . . . . . . . — 3,386,930

4.125 percent, 2012-17 . . . . . . . . . . . . . . . . . . . . . . . — 4,064,310

4.125 percent, 2018-19 . . . . . . . . . . . . . . . . . . . . . . . — 1,354,772

4.125 percent, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . — 12,911,283

4.625 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . 855,496 —

4.625 percent, 2007-08 . . . . . . . . . . . . . . . . . . . . . . . 1,710,992 1,710,992

4.625 percent, 2009-11 . . . . . . . . . . . . . . . . . . . . . . . 2,566,491 2,566,491

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

5.250 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . 1,363,408 —

5.250 percent, 2007-11 . . . . . . . . . . . . . . . . . . . . . . . 6,817,035 6,817,035

5.250 percent, 2012-16 . . . . . . . . . . . . . . . . . . . . . . . 6,817,040 6,817,040

5.250 percent, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . 10,263,256 10,263,256

5.625 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . 1,524,967 —

5.625 percent, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . 10,674,776 10,674,776

5.625 percent, 2014-15 . . . . . . . . . . . . . . . . . . . . . . . 3,049,934 3,049,934

5.625 percent, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . 8,899,848 8,899,848

5.875 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . 916,286 159,252

5.875 percent, 2007-12 . . . . . . . . . . . . . . . . . . . . . . . 5,497,716 5,497,716

5.875 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . 5,361,805 5,361,805

6 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 627,727 —

6 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,965 695,965

6 percent, 2007-12 . . . . . . . . . . . . . . . . . . . . . . . . . . 4,175,796 4,175,796

6 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,967 695,967

6 percent, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,057,772 6,057,772

6.5 percent, 2005 3,464,768 —

6.5 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,464,768 3,464,768

6.5 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,464,767 3,464,767

6.5 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,381,228 4,381,228

6.5 percent, 2009-13 . . . . . . . . . . . . . . . . . . . . . . . . . 6,585,540 6,585,540

6.5 percent, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,317,109 1,317,109

6.5 percent, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,374,881 7,374,881

6.875 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . 265,250 —

6.875 percent, 2006-07 . . . . . . . . . . . . . . . . . . . . . . . 530,500 530,500

6.875 percent, 2008-09 . . . . . . . . . . . . . . . . . . . . . . . 530,498 530,498

6.875 percent, 2010-12 . . . . . . . . . . . . . . . . . . . . . . . 13,336,560 13,336,560

7 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,116,151 —

7 percent, 2006-08 . . . . . . . . . . . . . . . . . . . . . . . . . . 3,348,453 3,348,453

7 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,180,271 4,180,271

7.375 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . 47,601 —

7.375 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . 47,601 47,601

7.375 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . 916,460 916,460

8.125 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . 150,161 —

8.125 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . 868,859 868,859

8.75 percent, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . 718,698 —

Total obligations sold only to the trust funds 

(special issues). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186,190,542 195,714,687
137

History of Trust Fund Operations

Note: Special issues are always purchased at par value. Therefore, book value and par value are the same for

each special issue, and the common value is shown above. Where the maturity years are grouped for special

issues, the amount maturing in each year is the amount shown divided by the number of years.

Public issues: 

Treasury bond: 

11.75 percent, 2010. . . . . . . . . . . . . . . . . . . . . . . . . . $30,250 —

Total investments in public issues at par value, as 

shown above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,250 —

Unamortized premium or discount, net . . . . . . . . . . . . -106 —

Total investments in public issues at book value . . . . . 30,144 —

Total investments in public-debt obligations (book value1) 186,220,686 $195,714,687

Undisbursed balances2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3,381 -91,890

Total assets (book value 1) . . . . . . . . . . . . . . . . . . . . . . . . . . 186,217,305 195,622,797

1 Par value, plus unamortized premium or less discount outstanding.

2 Negative figures represent 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 2004 and 2005 (Cont.)

[In thousands]

December 31, 2004 December 31, 2005
Appendices

138

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 Annual Report, was

not used for the annual reports of 1973-87. Instead, a simpler method that

approximates the results of the present-value approach, called the averagecost 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.
139

History of Actuarial Balances

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

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 annual 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 annual reports 1982-2005, 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.
Appendices

140

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

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. 

Table VI.B1.—Long-Range OASDI Actuarial Balances 1 as Shown 

in the Trustees Reports for 1982-2006

[As a percentage of taxable payroll]

1 Values shown are based on the alternative II assumptions for 1991-2006, and on the alternative II-B

assumptions for 1982-90.

Year of report

Summarized

income rate

Summarized

cost rate

Actuarial

balance

Change from

previous year

1982 . . . . . . . . . . . . . . . . . . . . . . . . . . 12.27 14.09 -1.82 2/1

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 2/

2 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
141

History of Actuarial Balances

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 assumptions. For the 2004 report, increases due to changing the method of projecting benefit levels for higher earners more than offset decreases in the

actuarial balance arising from the change in the valuation period and the net
Appendices

142

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.

Changes affecting the actuarial balance shown for the 2006 report are

described in section IV.B.7 Reasons for Change in Actuarial Balance From

Last Report.
143

Fiscal Year Operations and Projections

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2015

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 2005, 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 2005

[In millions]

Total assets, September 30, 2004 $1,452,550

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $505,212

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

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2,213

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502,998

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 146

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,186

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,332

Reimbursement from the general fund for costs of payments to uninsured persons who attained age 72 before 1968 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1/

1 Less than $500,000.

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,708

Interest adjustments2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 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, (3) interest on certain reimbursements to the trust fund, and (4) interest on a transfer to the DI Trust Fund for the cost of vocational rehabilitation services that had been erroneously charged to that fund.

-46

Net investment income and interest adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 81,662

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1/1

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 599,992

Disbursements:

Benefit payments:

Gross benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431,469

Offset for collected overpayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,041

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -48

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430,381

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . . 3,579

Payment for costs of vocational rehabilitation services for disabled beneficiaries . . . 58

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,348

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 566

Offsetting receipts from sales of supplies, materials, etc. . . . . . . . . . . . . . . . . . . . . -5

Miscellaneous reimbursements from the general fund 3 . . . . . . . . . . . . . . . . . . . . . 

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

related to administering the OASI program.

-8

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,900

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436,919

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,073

Total assets, September 30, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,615,623
Appendices

144

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

Table VI.C2.—Operations of the DI Trust Fund, Fiscal Year 2005

[In millions]

Total assets, September 30, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $182,893

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $85,790

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

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -372

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,418

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 5

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,159

Total income from taxation of benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,164

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,128

Interest adjustments1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 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, (3) interest on certain reimbursements to the trust fund, and (4) interest on a transfer to the DI Trust Fund for the cost of vocational

rehabilitation services that had been erroneously charged to that fund.

55

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 10,183

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,765

Disbursements:

Benefit payments:

Gross benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,293

Offset for collected overpayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -539

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -21

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,733

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . . 338

Payment for costs of vocational rehabilitation services for disabled beneficiaries . . . -12

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,204

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

Miscellaneous reimbursements from the general fund2. . . . . . . . . . . . . . . . . . . . . .

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

related to administering the DI program.

-2

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,301

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,360

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,405

Total assets, September 30, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193,298
145

Fiscal Year Operations and Projections

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) 2001-15 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 2005

[In millions]

Total assets, September 30, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,635,443

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $591,002

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

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2,585

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588,417

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 150

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,345

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,495

Reimbursement from the general fund for costs of payments to uninsured persons who attained age 72 before 1968 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1/

1 Less than $500,000.

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,837

Interest adjustments2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 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.

9

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 91,845

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1/1

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 696,757

Disbursements:

Benefit payments:

Gross benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515,762

Offset for collected overpayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,580

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -68

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514,114

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . . 3,917

Payment for costs of vocational rehabilitation services for disabled beneficiaries . . . 47

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,553

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665

Offsetting receipts from sales of supplies, materials, etc. . . . . . . . . . . . . . . . . . . . . -5

Miscellaneous reimbursements from the general fund3 . . . . . . . . . . . . . . . . . . . . . .

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

related to administering the OASI and DI programs.

-11

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,201

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 523,279

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,478

Total assets, September 30, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,808,922
Appendices

146

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

Table VI.C4.—Operations of the OASI Trust Fund in Fiscal Years 2001-15

[Amounts in billions]

Fiscal 

year

Income Cost Assets

Total1

1 “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. Transfers for the cost of pre1957 military service noncontributory wage credits were: (1) $414 million from the General Fund of the

Treasury to the OASI Trust Fund in February 2002, and (2) $350 million from the trust fund to the general

fund in December 2005. Such transfers are estimated to be less than $500,000 in each year after fiscal year

2006.

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

ratio2

2 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:

2001 . . $513.8 $440.8 $11.8 $61.2 $373.0 $367.7 $2.1 $3.3 $140.8 $1,033.8 239

2002 . . 529.3 448.1 12.6 68.1 389.5 383.9 2.1 3.5 139.7 1,173.6 265

2003 . . 542.3 456.0 12.3 74.0 402.8 396.7 2.5 3.6 139.5 1,313.1 291

2004 . . 556.5 466.8 13.3 76.4 417.1 411.2 2.3 3.6 139.5 1,452.6 315

2005 . . 600.0 503.0 15.3 81.7 436.9 430.4 2.9 3.6 163.1 1,615.6 332

Intermediate:

2006 . . 629.8 528.1 15.2 86.9 461.5 455.1 3.0 3.5 168.3 1,783.9 350

2007 . . 660.4 549.2 16.9 94.3 483.8 477.3 3.0 3.5 176.6 1,960.5 369

2008 . . 706.0 583.2 19.6 103.3 506.7 500.1 3.0 3.6 199.4 2,159.9 387

2009 . . 747.7 612.0 20.2 115.5 534.7 528.2 3.0 3.6 213.0 2,372.9 404

2010 . . 796.8 646.4 21.8 128.7 567.2 560.6 3.0 3.7 229.6 2,602.5 418

2011 . . 848.1 680.0 25.2 142.9 602.4 596.0 3.0 3.4 245.7 2,848.2 432

2012 . . 895.9 709.8 28.3 157.8 642.4 635.5 3.0 3.9 253.5 3,101.7 443

2013 . . 944.6 740.6 31.4 172.6 687.4 680.3 3.1 4.0 257.2 3,358.9 451

2014 . . 993.7 771.7 34.0 188.0 736.5 729.3 3.1 4.2 257.1 3,616.0 456

2015 . . 1,044.1 804.1 36.6 203.4 789.0 781.5 3.2 4.3 255.2 3,871.2 458

Low Cost:

2006 . . 630.1 528.4 15.1 86.9 461.4 454.9 3.0 3.5 168.7 1,784.3 350

2007 . . 662.7 552.1 16.8 93.8 482.8 476.2 3.0 3.5 179.9 1,964.2 370

2008 . . 704.9 583.8 19.5 101.7 503.8 497.3 3.0 3.6 201.1 2,165.3 390

2009 . . 744.8 612.1 20.0 112.7 527.6 521.1 2.9 3.6 217.1 2,382.5 410

2010 . . 791.6 645.3 21.3 125.0 554.0 547.5 2.9 3.6 237.7 2,620.1 430

2011 . . 841.0 678.2 24.3 138.5 582.2 575.9 2.9 3.3 258.9 2,879.0 450

2012 . . 888.3 707.6 27.1 153.7 614.2 607.5 3.0 3.7 274.1 3,153.1 469

2013 . . 937.5 738.4 29.7 169.4 650.4 643.7 3.0 3.7 287.1 3,440.2 485

2014 . . 986.5 769.3 31.9 185.4 690.0 683.1 3.0 3.8 296.6 3,736.7 499

2015 . . 1,035.2 799.7 33.9 201.5 731.9 724.9 3.1 4.0 303.3 4,040.0 511

High Cost:

2006 . . 625.6 524.2 15.2 86.6 461.6 455.1 3.0 3.5 164.1 1,779.7 350

2007 . . 636.4 528.5 16.9 91.0 486.3 479.8 3.0 3.5 150.1 1,929.8 366

2008 . . 686.4 566.2 19.8 100.4 511.7 505.1 3.0 3.6 174.7 2,104.5 377

2009 . . 724.9 592.2 20.5 112.2 541.8 535.2 2.9 3.7 183.1 2,287.6 388

2010 . . 772.1 624.9 22.4 124.9 583.0 576.2 3.0 3.8 189.1 2,476.8 392

2011 . . 855.1 678.6 26.6 149.9 636.0 629.3 3.1 3.6 219.1 2,695.8 389

2012 . . 923.3 719.4 30.6 173.3 695.4 687.9 3.2 4.2 227.9 2,923.7 388

2013 . . 981.9 757.4 34.6 190.0 757.6 749.8 3.3 4.5 224.3 3,148.0 386

2014 . . 1,035.2 795.0 37.9 202.4 820.9 812.7 3.4 4.8 214.3 3,362.4 383

2015 . . 1,088.3 832.8 41.1 214.4 886.8 878.3 3.4 5.1 201.5 3,563.9 379
147

Fiscal Year Operations and Projections

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

Table VI.C5.—Operations of the DI Trust Fund in Fiscal Years 2001-15

[Amounts in billions]

Fiscal 

year

Income Cost Assets

Total1

1 “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. In particular, a transfer is

expected to be made in December 2006 in the amount of $7.3 million from the General Fund of the Treasury

to the DI Trust Fund. Such transfers are estimated to be less than $500,000 in each year after fiscal year

2007.

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

ratio2

2 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:

2001 . . $82.1 $74.6 $0.7 $7.6 $59.9 $58.2 $1.8 3/

3 Between -$50 million and $50 million.

$22.1 $135.9 190

2002 . . 85.7 76.1 .9 8.7 66.4 64.2 2.0 $0.2 19.4 155.3 205

2003 . . 87.9 77.4 .9 9.6 71.9 69.8 2.0 .2 16.0 171.3 216

2004 . . 90.1 79.3 1.0 9.8 78.5 76.2 2.1 .2 11.6 182.9 218

2005 . . 96.8 85.4 1.2 10.2 86.4 83.7 2.3 .3 10.4 193.3 212

Intermediate:

2006 . . 101.2 89.7 1.2 10.3 94.0 91.4 2.3 .3 7.2 200.5 206

2007 . . 105.1 93.2 1.4 10.5 100.4 97.6 2.5 .3 4.7 205.2 200

2008 . . 111.4 99.0 1.7 10.7 105.9 103.1 2.4 .4 5.4 210.7 194

2009 . . 116.7 103.9 1.7 11.0 112.0 108.9 2.6 .4 4.7 215.4 188

2010 . . 123.0 109.8 1.9 11.3 119.2 116.0 2.8 .4 3.8 219.2 181

2011 . . 129.3 115.5 2.3 11.6 125.2 121.8 3.0 .5 4.1 223.3 175

2012 . . 134.9 120.5 2.6 11.8 133.1 129.4 3.1 .5 1.9 225.1 168

2013 . . 140.6 125.8 2.9 11.9 140.7 136.8 3.3 .5 3/1 225.1 160

2014 . . 146.1 131.0 3.2 11.9 148.4 144.4 3.5 .5 -2.2 222.9 152

2015 . . 151.8 136.6 3.4 11.8 156.7 152.5 3.7 .5 -4.9 217.9 142

Low Cost:

2006 . . 101.3 89.7 1.2 10.3 93.0 90.3 2.3 .3 8.3 201.6 208

2007 . . 105.6 93.7 1.3 10.6 97.5 94.7 2.5 .3 8.1 209.7 207

2008 . . 111.6 99.1 1.6 10.9 101.1 98.3 2.4 .4 10.5 220.2 207

2009 . . 117.0 103.9 1.6 11.4 104.6 101.6 2.6 .4 12.4 232.6 210

2010 . . 123.5 109.6 1.8 12.1 108.7 105.5 2.8 .4 14.8 247.3 214

2011 . . 130.1 115.2 2.0 13.0 111.6 108.3 2.9 .4 18.5 265.8 222

2012 . . 136.5 120.2 2.3 14.1 115.9 112.4 3.1 .5 20.6 286.4 229

2013 . . 143.1 125.4 2.5 15.2 119.9 116.2 3.2 .5 23.2 309.6 239

2014 . . 149.8 130.6 2.6 16.6 123.9 120.1 3.4 .5 25.9 335.5 250

2015 . . 156.5 135.8 2.8 18.0 128.4 124.4 3.6 .4 28.2 363.7 261

High Cost:

2006 . . 100.6 89.0 1.2 10.3 96.1 93.5 2.3 .3 4.5 197.8 201

2007 . . 101.2 89.7 1.5 10.0 105.7 102.9 2.5 .4 -4.4 193.3 187

2008 . . 107.7 96.2 1.8 9.8 113.9 111.0 2.4 .4 -6.2 187.1 170

2009 . . 111.9 100.6 1.9 9.4 122.6 119.5 2.6 .4 -10.7 176.5 153

2010 . . 117.0 106.1 2.2 8.7 134.1 130.8 2.8 .5 -17.1 159.4 132

2011 . . 125.7 115.2 2.6 7.9 146.3 142.7 3.1 .5 -20.5 138.8 109

2012 . . 132.0 122.2 3.2 6.7 160.9 157.0 3.3 .5 -28.8 110.0 86

2013 . . 137.3 128.6 3.7 5.0 174.4 170.3 3.5 .6 -37.1 72.9 63

2014 . . 142.4 135.0 4.0 3.4 187.3 183.0 3.7 .6 -44.9 28.0 39

2015 . . 4/

4 Under the high cost assumptions, the DI Trust Fund is projected to be exhausted in 2015. Therefore, certain

trust fund operation values for that year are not meaningful under present law and are not shown in this table.

141.4 4.4 4/1 201.0 196.5 4.0 .6 4/1 4/1 14
Appendices

148

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

Table VI.C6.—Operations of the Combined OASI and DI Trust Funds

in Fiscal Years 2001-15

[Amounts in billions]

Fiscal year

Income Cost Assets

Total1

1 “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

ratio2

2 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:

2001. . $595.9 $515.4 $12.5 $68.8 $432.9 $425.8 $3.8 $3.3 $163.0 $1,169.7 233

2002. . 615.0 524.2 13.5 76.8 455.9 448.1 4.1 3.6 159.1 1,328.8 257

2003. . 630.3 533.4 13.3 83.5 474.7 466.5 4.5 3.7 155.5 1,484.3 280

2004. . 646.6 546.1 14.3 86.2 495.5 487.3 4.3 3.8 151.1 1,635.4 300

2005. . 696.8 588.4 16.5 91.8 523.3 514.2 5.2 3.9 173.5 1,808.9 313

Intermediate:

2006. . 731.0 617.8 16.4 97.3 555.5 546.4 5.3 3.8 175.5 1,984.4 326

2007. . 765.5 642.5 18.2 104.8 584.3 574.9 5.5 3.9 181.3 2,165.7 340

2008. . 817.4 682.2 21.2 114.0 612.6 603.3 5.4 3.9 204.8 2,370.5 354

2009. . 864.4 715.9 22.0 126.6 646.7 637.1 5.6 4.0 217.8 2,588.3 367

2010. . 919.8 756.1 23.7 140.0 686.5 676.6 5.8 4.1 233.4 2,821.7 377

2011. . 977.4 795.5 27.4 154.5 727.6 717.8 6.0 3.9 249.7 3,071.4 388

2012. . 1,030.8 830.3 30.9 169.6 775.4 764.9 6.2 4.4 255.4 3,326.8 396

2013. . 1,085.2 866.4 34.3 184.5 828.0 817.1 6.4 4.5 257.2 3,584.0 402

2014. . 1,139.8 902.7 37.2 199.9 884.9 873.6 6.6 4.7 254.9 3,838.9 405

2015. . 1,195.9 940.7 40.0 215.3 945.7 934.0 6.9 4.8 250.2 4,089.1 406

Low Cost:

2006. . 731.3 618.2 16.4 97.2 554.3 545.2 5.3 3.8 177.0 1,985.9 326

2007. . 768.3 645.8 18.2 104.3 580.3 570.9 5.5 3.9 188.0 2,174.0 342

2008. . 816.5 683.0 21.0 112.5 605.0 595.6 5.4 3.9 211.6 2,385.5 359

2009. . 861.8 716.0 21.6 124.1 632.3 622.7 5.5 4.0 229.5 2,615.0 377

2010. . 915.1 754.9 23.0 137.1 662.7 653.0 5.7 4.0 252.4 2,867.4 395

2011. . 971.2 793.4 26.3 151.5 693.8 684.2 5.9 3.8 277.4 3,144.8 413

2012. . 1,024.8 827.7 29.3 167.7 730.1 719.9 6.0 4.1 294.7 3,439.5 431

2013. . 1,080.6 863.8 32.2 184.7 770.4 759.9 6.2 4.2 310.3 3,749.8 446

2014. . 1,136.4 899.9 34.5 202.0 813.9 803.2 6.4 4.3 322.5 4,072.3 461

2015. . 1,191.8 935.5 36.7 219.5 860.3 849.3 6.6 4.4 331.4 4,403.7 473

High Cost:

2006. . 726.2 613.2 16.4 96.9 557.7 548.6 5.3 3.8 168.5 1,977.4 324

2007. . 737.7 618.3 18.4 101.0 592.0 582.6 5.5 3.9 145.7 2,123.1 334

2008. . 794.1 662.4 21.5 110.2 625.5 616.1 5.4 4.0 168.6 2,291.7 339

2009. . 836.8 692.8 22.4 121.5 664.3 654.7 5.5 4.1 172.4 2,464.1 345

2010. . 889.2 731.0 24.6 133.6 717.1 707.0 5.8 4.2 172.0 2,636.1 344

2011. . 980.8 793.8 29.2 157.7 782.3 771.9 6.2 4.1 198.5 2,834.7 337

2012. . 1,055.3 841.5 33.8 180.0 856.2 844.9 6.6 4.7 199.1 3,033.7 331

2013. . 1,119.2 886.0 38.2 195.0 932.0 920.1 6.8 5.1 187.2 3,220.9 326

2014. . 1,177.6 930.0 41.9 205.7 1,008.2 995.7 7.1 5.4 169.4 3,390.3 319

2015. . 1,235.1 974.2 45.5 215.4 1,087.8 1,074.7 7.4 5.7 147.3 3,537.7 312
149

Long-Range Sensitivity Analysis

D. LONG-RANGE SENSITIVITY ANALYSIS

This appendix presents estimates which 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. Similar

variations in the selected assumptions within the other alternatives would

result in similar relative variations in the long-range estimates.

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. These assumptions are that the ultimate total

fertility rate will be 1.7, 2.0, and 2.3 children per woman as assumed for

alternatives III, II, and I, respectively. The rate is assumed to change gradually from its current level and to reach the various ultimate values in 2030.
Appendices

150

For the 25-year period, the cost rate for the three fertility assumptions varies

by only about 0.06 percent of taxable payroll. In contrast, the 75-year cost

rate varies over a wide range, decreasing from 16.31 to 15.51 percent, as the

assumed ultimate total fertility rate increases from 1.7 to 2.3. Similarly,

while the 25-year actuarial balance varies by only 0.05 percent of taxable

payroll, the 75-year actuarial balance varies over a much wider range, from

-2.38 to -1.67 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.

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

Table VI.D1.—Sensitivity to Varying Fertility Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate total fertility rate1,2

1The 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

2030.

2 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: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.61 14.62 14.62

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.06 14.05 14.04

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.92 13.88 13.84

Summarized cost rate:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.93 13.96 13.99

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.42 15.31 15.22

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.31 15.90 15.51

Actuarial balance:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.68 +.66 +.63

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.36 -1.26 -1.18

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.38 -2.02 -1.67

Annual balance for 2080 . . . . . . . . . . . . . . . . . . . . . . . . . . -7.88 -5.38 -3.37

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2040 2040 2040
151

Long-Range Sensitivity Analysis

future reductions in death rates for the period 2005-80. 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 0.30 percent, 0.72 percent, and 1.26 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 13.81 percent (for an

average annual death-rate reduction of 0.30 percent) to 14.12 percent (for an

average annual death-rate reduction of 1.26 percent). The 75-year cost rate

increases from 15.28 to 16.63 percent. The actuarial balance decreases from

+0.81 to +0.50 percent for the 25-year period, and from -1.42 to -2.72 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 than they would otherwise

be. The relative increase in cost, however, exceeds the relative increase in

taxable payroll. For any given year, reductions in the death rates for people

who are age 62 and over (ages where 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

Table VI.D2.—Sensitivity to Varying Death-Rate Assumptions

[As a percentage of taxable payroll]

Valuation period

Average annual death-rate reduction1, 2

1The average annual death-rate reduction is the average annual geometric rate of decline in the age-sexadjusted death rate between 2005 and 2080. The overall decreases from the age-sex-adjusted death rate in

2005 to the corresponding rate in 2080 are, in order, 20 percent, 42 percent, and 61 percent. 2 The average annual death-rate reductions used for this analysis are 0.30 percent from the alternative I

assumptions, 0.72 percent from the alternative II assumptions, and 1.26 percent from the alternative III

assumptions. All other assumptions used for this analysis are from alternative II.

0.30 percent 0.72 percent 1.26 percent

Summarized income rate:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.62 14.62 14.62

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.03 14.05 14.06

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.86 13.88 13.91

Summarized cost rate:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.81 13.96 14.12

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.89 15.31 15.78

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.28 15.90 16.63

Actuarial balance:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.81 +.66 +.50

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.86 -1.26 -1.72

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.42 -2.02 -2.72

Annual balance for 2080 . . . . . . . . . . . . . . . . . . . . . . . . . . -3.88 -5.38 -7.19

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2043 2040 2038
Appendices

152

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 reduction in the average annual death-rate reduction decreases the

long-range actuarial balance by about 0.14 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. These assumptions are that the annual net

immigration will be 672,500 persons, 900,000 persons, and 1,300,000 persons as assumed for alternatives III, II, and I, respectively.

Table VI.D3.—Sensitivity to Varying Net-Immigration Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate net immigration per year1, 2

1 Net immigration per year is the assumed annual net immigration to the Social Security area, including both

legal and other immigration.

2 The ultimate net immigration per year assumptions used for this analysis are 672,500 from the alternative

III assumptions, 900,000 from the alternative II assumptions, and 1,300,000 from the alternative I assumptions. All other assumptions used for this analysis are from alternative II.

672,500 900,000 1,300,000

Summarized income rate:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.64 14.62 14.58

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.08 14.05 14.00

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.91 13.88 13.84

Summarized cost rate:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.08 13.96 13.79

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.51 15.31 15.03

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.12 15.90 15.60

Actuarial balance:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.56 +.66 +.79

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.44 -1.26 -1.03

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.21 -2.02 -1.76

Annual balance for 2080 . . . . . . . . . . . . . . . . . . . . . . . . . . -5.75 -5.38 -4.88

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2039 2040 2042
153

Long-Range Sensitivity Analysis

For all three periods, the cost rate decreases with increasing rates of net

immigration. For the 25-year period, the cost rate decreases from

14.08 percent of taxable payroll (for annual net immigration of 672,500 persons) to 13.79 percent (for annual net immigration of 1,300,000 persons).

For the 50-year period, it decreases from 15.51 percent to 15.03 percent, and

for the 75-year period, it decreases from 16.12 percent to 15.60 percent. The

actuarial balance increases from +0.56 to +0.79 percent for the 25-year

period, from -1.44 to -1.03 for the 50-year period, and from -2.21 to

-1.76 percent for the 75-year period.

The cost rate decreases with increasing rates of net immigration because

immigration occurs at relatively young ages, thereby increasing the numbers

of covered workers earlier than the numbers of beneficiaries. Each additional

100,000 net immigrants increases 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. These assumptions are that the ultimate real-wage

differential will be 0.6 percentage point, 1.1 percentage points, and 1.6 percentage points as assumed for alternatives III, II, and I, respectively. In each

case, the ultimate annual increase in the CPI is assumed to be 2.8 percent (as

assumed for alternative II), yielding ultimate percentage increases in average

annual wages in covered employment of 3.4, 3.9, and 4.4 percent.

For the 25-year period, the cost rate decreases from 14.38 percent (for a realwage differential of 0.6 percentage point) to 13.54 percent (for a differential

of 1.6 percentage points). For the 50-year period, it decreases from 15.95 to

14.69 percent, and for the 75-year period it decreases from 16.59 to

15.22 percent. The actuarial balance increases from +0.34 to +0.98 percent

for the 25-year period, from -1.77 to -0.76 for the 50-year period, and from

-2.57 to -1.47 percent for the 75-year period.
Appendices

154

The cost rate decreases with increasing real-wage differentials because

higher wages affect the taxable payroll immediately, but increase benefit levels only gradually as new beneficiaries become entitled. In addition, cost-ofliving 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

0.55 percent of taxable payroll.

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). These assumptions

are that the ultimate annual increase in the CPI will be 1.8 percent,

2.8 percent, and 3.8 percent as assumed for alternatives I, II, and III, respectively. In each case, the ultimate real-wage differential is assumed to be

1.1 percentage points (as assumed for alternative II), yielding ultimate percentage increases in average annual wages in covered employment of 2.9,

3.9, and 4.9 percent.

Table VI.D4.—Sensitivity to Varying Real-Wage Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate percentage increase in wages-CPI1, 2

1The 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. 2 The ultimate real-wage differentials of 0.6, 1.1, and 1.6 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 3.9-2.8 4.4-2.8

Summarized income rate:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.72 14.62 14.52

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.17 14.05 13.93

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.02 13.88 13.75

Summarized cost rate:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.38 13.96 13.54

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.95 15.31 14.69

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.59 15.90 15.22

Actuarial balance:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.34 +.66 +.98

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.77 -1.26 -.76

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.57 -2.02 -1.47

Annual balance for 2080 . . . . . . . . . . . . . . . . . . . . . . . . . . -6.87 -5.38 -4.07

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2036 2040 2046
155

Long-Range Sensitivity Analysis

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

14.11 (for CPI increases of 1.8 percent) to 13.81 percent (for CPI increases

of 3.8 percent). For the 50-year period, it decreases from 15.53 to

15.10 percent, and for the 75-year period, it decreases from 16.15 to

15.66 percent. The actuarial balance increases from +0.54 to +0.77 percent

for the 25-year period, from -1.45 to -1.08 for the 50-year period, and from

-2.23 to -1.81 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

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.

Table VI.D5.—Sensitivity to Varying CPI-Increase Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate percentage increase in wages-CPI1, 2

1The 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. 2 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 1.1 percentage points is the same as in alternative II. All other

assumptions used for this analysis are also from alternative II.

2.9-1.8 3.9-2.8 4.9-3.8

Summarized income rate:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.66 14.62 14.58

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.08 14.05 14.02

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.91 13.88 13.85

Summarized cost rate:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.11 13.96 13.81

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.53 15.31 15.10

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.15 15.90 15.66

Actuarial balance: 

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.54 +.66 +.77

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.45 -1.26 -1.08

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.23 -2.02 -1.81

Annual balance for 2080 . . . . . . . . . . . . . . . . . . . . . . . . . . -5.72 -5.38 -5.06

Year of combined trust fund exhaustion . . . . . . . . . . . 2039 2040 2042
Appendices

156

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. These assumptions are that

the ultimate annual real interest rate will be 2.1 percent, 2.9 percent, and

3.6 percent as assumed for alternatives III, II, and I, respectively. In each

case, the ultimate annual increase in the CPI is assumed to be 2.8 percent (as

assumed for 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 slightly with increasing real

interest rates from 14.11 percent (for an ultimate real interest rate of 2.1 percent) to 13.83 percent (for an ultimate real interest rate of 3.6 percent). For

the 50-year period, it decreases from 15.61 to 15.06 percent, and for the

75-year period, it decreases from 16.31 to 15.55 percent. The actuarial balance increases from +0.42 to +0.87 percent for the 25-year period, from

-1.68 to -0.90 percent for the 50-year period, and from -2.55 to -1.55 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

0.33 percent of taxable payroll.

Table VI.D6.—Sensitivity to Varying Real-Interest Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate annual real interest rate1, 2

1The 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. 2 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: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.52 14.62 14.70

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.93 14.05 14.15

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.76 13.88 14.00

Summarized cost rate:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.11 13.96 13.83

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.61 15.31 15.06

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.31 15.90 15.55

Actuarial balance:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.42 +.66 +.87

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.68 -1.26 -.90

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.55 -2.02 -1.55

Annual balance for 2080 . . . . . . . . . . . . . . . . . . . . . . . . . . -5.38 -5.38 -5.38

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2038 2040 2043
157

Long-Range Sensitivity Analysis

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 2027. The ultimate levels

attained vary by sex. In comparison to the corresponding annual rates experienced during the base period 1994-96, the ultimate rates for men are about

15 percent lower for alternative I, about 7 percent higher for alternative II,

and about 28 percent higher for alternative III. For women they are about

19 percent lower for alternative I, 1 percent higher for alternative II, and

21 percent higher for alternative III. 

For the 25-year period, the cost rate increases with increasing disability incidence rates from 13.73 percent (for the relatively low rates assumed for

alternative I) to 14.21 percent (for the relatively high rates assumed for

alternative III). For the 50-year period, it increases from 15.03 to 15.60 percent, and for the 75-year period, it increases from 15.61 to 16.20 percent.

The actuarial balance decreases from +0.88 to +0.41 percent for the 25-year

period, from -0.99 to -1.55 percent for the 50-year period, and from -1.73 to

-2.31 percent for the 75-year period.

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: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.61 14.62 14.62

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.04 14.05 14.05

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.88 13.88 13.89

Summarized cost rate:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.73 13.96 14.21

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.03 15.31 15.60

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.61 15.90 16.20

Actuarial balance:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.88 +.66 +.41

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.99 -1.26 -1.55

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.73 -2.02 -2.31

Annual balance for 2080 . . . . . . . . . . . . . . . . . . . . . . . . . . -5.05 -5.38 -5.71

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2043 2040 2038
Appendices

158

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 alternative II, death-termination rates

by age and sex are assumed to decline until they reach levels by the end of

the 75-year period that, for men and women, respectively, are about

57 percent and 55 percent lower than those experienced during the base

period 1996-2000. For the other alternatives, the rates are assumed to spread

gradually from the rates for alternative II. By the end of the projection

period, for alternatives I and III, respectively, the rates for men are about

40 percent and 74 percent lower than those experienced during the base

period; for women the corresponding rates are about 38 percent and

74 percent lower than those experienced during the base period.

For all three alternatives, ultimate recovery-termination rates by age and sex

are assumed to be attained in the twentieth year of the projection period. For

alternative II, such rates are assumed to be 1 percent lower for men and

16 percent higher for women than those experienced in the base period,

1996-2000. The ultimate rates for alternative I are assumed to be 19 percent

higher for men and 40 percent higher for women than those experienced in

the base period. The ultimate rates for alternative III are assumed to be

21 percent lower for men and 7 percent lower for women than those experienced in the base 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: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.62 14.62 14.62

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.05 14.05 14.05

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.88 13.88 13.88

Summarized cost rate:

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.91 13.96 13.99

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.27 15.31 15.35

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.86 15.90 15.93

Actuarial balance: 

25-year: 2006-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.70 +.66 +.63

50-year: 2006-55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.22 -1.26 -1.30

75-year: 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.98 -2.02 -2.05

Annual balance for 2080 . . . . . . . . . . . . . . . . . . . . . . . . . . -5.36 -5.38 -5.38

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2041 2040 2040
159

Long-Range Sensitivity Analysis

For the 25-year period, the cost rate increases with decreasing disability termination rates from 13.91 percent (for the relatively high rates assumed for

alternative I) to 13.99 percent (for the relatively low rates assumed for

alternative III). For the 50-year period, it increases from 15.27 to

15.35 percent, and for the 75-year period, it increases from 15.86 to

15.93 percent. The actuarial balance decreases from +0.70 to +0.63 percent

for the 25-year period, from -1.22 to -1.30 percent for the 50-year period,

and from -1.98 to -2.05 percent for the 75-year period.
Appendices

160

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 new 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, immigration levels, emigration levels, net other

immigration levels, the Consumer Price Index, average real wages, unemployment rates, trust fund real yield rates, and disability incidence and recovery rates. Each of these variables will reach an assumed ultimate value at a

specific point during the long-range period and will 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.

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

year-by-year random variation, as reflected in the historical period. For some
161

Stochastic Projections 

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. More detail on this

model, and stochastic modeling in general, is available on the Social Security

website.1

For each simulation of the model, values of the variables listed above are

determined by using Monte Carlo techniques to randomly assign the year-byyear variations. Each simulation produces an estimate of the financial status

of the combined OASI and DI Trust Funds. Results shown in this section,

based on the 5,000 simulations of the model, reflect the distribution of

results.

The results from this model should be interpreted with caution and with a full

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, using the

variations exhibited in a relatively recent historical period 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 other than those mentioned above (such as labor force participation

rates, retirement rates, marriage rates, and divorce rates). Furthermore, additional variability could result from incorporating statistical approaches that

would more fully model change in the long-range central tendencies of the

variables. The historical period available for most variables is relatively

homogeneous and 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.

 1 The website address is: www.socialsecurity.gov/OACT/stochastic/index.html.
Appendices

162

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

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 which 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 2040 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 2030

ranges from 404 to 71 percent of annual cost. In comparison, the 2030 trust

fund ratios for the low cost and high cost alternatives are each outside this

range, at 469 and 9 percent, respectively. By 2080, 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 2080.
163

Stochastic Projections 

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 14.86 percent

of payroll and 20.14 percent of payroll, respectively. These are quite close to

the limits of the 95-percent confidence interval, as can be seen in figure

VI.E2. By 2080, the cost rates for these alternatives, 13.47 and 26.76 percent

of payroll, are still fairly close to the limits of the 95-percent confidence

interval (14.11 and 27.57 percent of payroll).

 Figure VI.E1.—Annual Trust Fund Ratios

0%

100%

200%

300%

400%

500%

600%

2006 2021 2036 2051 2066 2081

Projection year

50%

97.5%

2.5%

90%

10%
Appendices

164

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, 2006-80. 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, low cost,

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 the same or slightly more pessimistic for the combined OASI and

DI Trust Funds than those projected under the intermediate assumptions. The

median estimate of the long-range actuarial balance is -2.11 percent of taxable payroll, about 0.09 percentage point lower than projected under the

intermediate assumptions. The median estimate for the first year cost

exceeds tax income is 2017 and for the year assets first become exhausted is

2040. These are the same as those projected under the intermediate assumptions. The median estimate for the annual cost in the 75th year of the projection period is 19.27 as a percentage of taxable payroll and 6.50 as a

 Figure VI.E2.—Annual Cost Rates

5%

10%

15%

20%

25%

30%

2006 2021 2036 2051 2066 2081

Projection year

50%

97.5%

2.5%

90%

10%

Income Rate
165

Stochastic Projections 

percentage of GDP. The comparable estimates using the intermediate

assumptions are 18.74 and 6.32, respectively.

The 95-percent confidence interval determined by the stochastic modeling

projections can be compared to the range of variation defined by the traditional low cost and high cost alternatives. For three of the measures in table

VI.E1 (the actuarial balance, the open group unfunded obligation, and the

year assets become exhausted), the 95-percent stochastic projection range is

narrower than the range defined by the low cost and high cost alternatives.

That is, for these measures, the estimates under the low cost and high cost

alternatives fall outside the 95-percent confidence interval determined by the

stochastic modeling projections. In contrast, for two other measures in the

table (the first year cost exceeds tax income and the annual cost in the 75th

year of the projection period expressed as a percentage of GDP), the 95-percent stochastic projection range includes the estimates under the low cost and

high cost alternatives. For the remaining measure in the table (the annual

cost in the 75th year of the projection period expressed as a percentage of

taxable payroll), the 95-percent stochastic projection range includes the estimate under the high cost alternative, but does not include the low cost estimate.

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

IntermediateLow

Cost

High

Cost

Median

50th

percentile

80-Percent

confidence interval

95-Percent

confidence interval

10th

percentile

90th

percentile

2.5th

percentile

97.5th

percentile

Actuarial balance . . . . . . -2.02 0.35 -5.17 -2.11 -3.33 -1.05 -4.08 -0.52

Open group unfunded 

obligation (in trillions) $4.6 -$1.1 $12.3 $4.9 $8.0 $2.3 $10.2 $1.0

First year cost exceeds 

tax income . . . . . . . . . 2017 2022 2013 2017 2014 2020 2013 2022

Year assets become 

exhausted . . . . . . . . . . 2040 1/

1 The fund is not estimated to be exhausted within the projection period.

2030 2040 2034 2049 2032 2060

Annual cost in 75th year 

(percent of taxable 

payroll) . . . . . . . . . . . . 18.74 13.47 26.76 19.27 15.62 24.21 14.11 27.57

Annual cost in 75th year 

(percent of GDP) . . . . 6.32 4.90 8.31 6.50 5.27 8.17 4.76 9.30
Appendices

166

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.

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 25 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. The resulting combined rates may

be interpreted as those applicable to the taxable payroll in the amount of the

OASDI payroll, with the separate HI rates being additionally applicable to

the excess of the HI payroll over the OASDI payroll.

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 combined OASDI and HI contribution rate for

employees and their employers is often referred to as the FICA tax, because

it is authorized by the Federal Insurance Contributions Act. Contribution

rates for the OASDI and HI programs are shown in table VI.F1.
167

OASDI & HI: Percent of Payroll

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. These annual rates

are intended to indicate the cash-flow operation of the programs. Therefore,

income rates exclude interest earned on trust fund assets, and cost rates

exclude the cost of accumulating ending target trust fund balances. 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.

Under all three sets of assumptions, the combined OASDI and HI cost rate is

projected to rise above current levels, with the sharpest increase occurring

during the period 2010-30. Under the high cost set of assumptions, annual

deficits are projected to occur beginning in 2011, and to continue for the

remainder of the 75-year projection period. The cost rate is projected to rise

to about three and a half times its current level by the end of the projection

period. Under the intermediate assumptions, annual deficits begin in 2015,

with the cost rate more than doubling by the end of the projection period.

Under the low cost assumptions, the cost rate is projected to increase by

about 34 percent, by the end of the period, with annual deficits beginning in

2022.

Table VI.F1.—Contribution Rates for the OASDI and HI Programs

[In percent]

Calendar years

Employees and employers, each Self employed

OASDI HI Combined OASDI HI Combined

1966 . . . . . . . . . . . . . . 3.85 0.35 4.20 5.80 0.35 6.15

1967 . . . . . . . . . . . . . . 3.90 .50 4.40 5.90 .50 6.40

1968 . . . . . . . . . . . . . . 3.80 .60 4.40 5.80 .60 6.40

1969-70 . . . . . . . . . . . 4.20 .60 4.80 6.30 .60 6.90

1971-72 . . . . . . . . . . . 4.60 .60 5.20 6.90 .60 7.50

1973 . . . . . . . . . . . . . . 4.85 1.00 5.85 7.00 1.00 8.00

1974-77 . . . . . . . . . . . 4.95 .90 5.85 7.00 .90 7.90

1978 . . . . . . . . . . . . . . 5.05 1.00 6.05 7.10 1.00 8.10

1979-80 . . . . . . . . . . . 5.08 1.05 6.13 7.05 1.05 8.10

1981 . . . . . . . . . . . . . . 5.35 1.30 6.65 8.00 1.30 9.30

1982-83 . . . . . . . . . . . 5.40 1.30 6.70 8.05 1.30 9.35

19841 . . . . . . . . . . . . . 

1 See footnote 1 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 7.00 11.40 2.60 14.00

1985 . . . . . . . . . . . . . . 5.70 1.35 7.05 11.40 2.70 14.10

1986-87 . . . . . . . . . . . 5.70 1.45 7.15 11.40 2.90 14.30

1988-89 . . . . . . . . . . . 6.06 1.45 7.51 12.12 2.90 15.02

1990 and later. . . . . . . 6.20 1.45 7.65 12.40 2.90 15.30
Appendices

168

Table VI.F2.—Estimated OASDI and HI Annual Income Rates, Cost Rates, 

and Balances, Calendar Years 2006-80

[As a percentage of taxable payroll1]

Calendar year

OASDI HI Combined

Income

rate

Cost

rate Balance

Income

rate

Cost

rate Balance

Income

rate

Cost

rate Balance

Intermediate:

2006 . . . . . . 12.74 11.22 1.52 3.08 3.13 -0.05 15.82 14.35 1.46

2007 . . . . . . 12.75 11.15 1.61 3.09 3.18 -.09 15.84 14.32 1.52

2008 . . . . . . 12.80 11.10 1.69 3.12 3.22 -.10 15.91 14.32 1.59

2009 . . . . . . 12.77 11.16 1.61 3.10 3.27 -.17 15.88 14.43 1.44

2010 . . . . . . 12.79 11.29 1.50 3.12 3.32 -.20 15.91 14.61 1.30

2011 . . . . . . 12.84 11.40 1.44 3.14 3.38 -.24 15.98 14.78 1.20

2012 . . . . . . 12.87 11.63 1.23 3.16 3.45 -.30 16.02 15.09 .94

2013 . . . . . . 12.90 11.91 .99 3.17 3.55 -.37 16.07 15.45 .62

2014 . . . . . . 12.91 12.19 .72 3.18 3.63 -.45 16.10 15.82 .28

2015 . . . . . . 12.93 12.48 .45 3.19 3.72 -.53 16.12 16.20 -.08

2020 . . . . . . 13.02 13.99 -.97 3.25 4.28 -1.03 16.27 18.27 -2.00

2025 . . . . . . 13.11 15.50 -2.38 3.29 5.06 -1.77 16.41 20.56 -4.15

2030 . . . . . . 13.19 16.71 -3.52 3.33 5.99 -2.66 16.53 22.71 -6.18

2035 . . . . . . 13.24 17.36 -4.12 3.36 6.92 -3.56 16.60 24.29 -7.69

2040 . . . . . . 13.26 17.51 -4.25 3.37 7.71 -4.34 16.63 25.22 -8.59

2045 . . . . . . 13.26 17.51 -4.25 3.37 8.34 -4.97 16.63 25.85 -9.22

2050 . . . . . . 13.27 17.55 -4.28 3.37 8.88 -5.50 16.65 26.43 -9.78

2055 . . . . . . 13.28 17.68 -4.40 3.38 9.35 -5.97 16.66 27.03 -10.36

2060 . . . . . . 13.30 17.87 -4.57 3.39 9.83 -6.44 16.69 27.70 -11.01

2065 . . . . . . 13.31 18.09 -4.78 3.39 10.31 -6.92 16.71 28.40 -11.69

2070 . . . . . . 13.33 18.35 -5.01 3.40 10.80 -7.39 16.73 29.14 -12.41

2075 . . . . . . 13.34 18.54 -5.20 3.41 11.21 -7.80 16.75 29.76 -13.00

2080 . . . . . . 13.36 18.74 -5.38 3.42 11.59 -8.17 16.77 30.33 -13.56

Low Cost:

2006 . . . . . . 12.74 11.15 1.58 3.08 3.06 .02 15.81 14.21 1.61

2007 . . . . . . 12.75 11.03 1.72 3.09 3.04 .04 15.84 14.07 1.76

2008 . . . . . . 12.79 10.93 1.86 3.12 3.03 .09 15.91 13.96 1.95

2009 . . . . . . 12.77 10.89 1.88 3.10 3.02 .08 15.87 13.91 1.96

2010 . . . . . . 12.78 10.89 1.90 3.11 3.01 .10 15.89 13.89 2.00

2011 . . . . . . 12.82 10.87 1.95 3.13 3.00 .13 15.95 13.87 2.08

2012 . . . . . . 12.84 10.96 1.89 3.15 3.01 .14 15.99 13.97 2.02

2013 . . . . . . 12.87 11.08 1.79 3.16 3.03 .13 16.03 14.11 1.92

2014 . . . . . . 12.88 11.22 1.65 3.17 3.04 .12 16.04 14.27 1.78

2015 . . . . . . 12.89 11.39 1.50 3.17 3.06 .11 16.06 14.45 1.61

2020 . . . . . . 12.96 12.57 .39 3.22 3.20 .02 16.18 15.77 .41

2025 . . . . . . 13.04 13.76 -.72 3.26 3.44 -.19 16.29 17.20 -.90

2030 . . . . . . 13.09 14.58 -1.49 3.29 3.69 -.40 16.38 18.27 -1.89

2035 . . . . . . 13.12 14.86 -1.74 3.30 3.88 -.58 16.42 18.75 -2.33

2040 . . . . . . 13.12 14.67 -1.55 3.30 4.02 -.73 16.42 18.70 -2.28

2045 . . . . . . 13.11 14.37 -1.26 3.29 4.14 -.85 16.40 18.52 -2.11

2050 . . . . . . 13.10 14.13 -1.02 3.29 4.28 -.99 16.39 18.40 -2.01

2055 . . . . . . 13.10 13.97 -.86 3.28 4.46 -1.18 16.38 18.43 -2.04

2060 . . . . . . 13.10 13.84 -.74 3.28 4.69 -1.41 16.38 18.54 -2.16

2065 . . . . . . 13.09 13.72 -.62 3.28 4.92 -1.64 16.38 18.64 -2.26

2070 . . . . . . 13.09 13.60 -.51 3.28 5.16 -1.88 16.37 18.76 -2.39

2075 . . . . . . 13.09 13.49 -.41 3.28 5.36 -2.08 16.36 18.85 -2.49

2080 . . . . . . 13.09 13.47 -.38 3.27 5.53 -2.26 16.36 19.00 -2.64
169

OASDI & HI: Percent of Payroll

Notes:

1. The income rate excludes interest income and certain transfers from the General Fund of the Treasury.

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:

2006 . . . . . . 12.75 11.56 1.19 3.08 3.29 -0.20 15.83 14.84 0.99

2007 . . . . . . 12.77 11.64 1.13 3.10 3.39 -.29 15.86 15.02 .84

2008 . . . . . . 12.81 11.71 1.11 3.13 3.49 -.36 15.94 15.19 .75

2009 . . . . . . 12.80 11.92 .87 3.11 3.64 -.52 15.91 15.56 .35

2010 . . . . . . 12.82 12.15 .67 3.13 3.76 -.63 15.95 15.91 .04

2011 . . . . . . 12.87 12.34 .53 3.15 3.87 -.71 16.02 16.21 -.18

2012 . . . . . . 12.91 12.71 .20 3.17 4.04 -.86 16.08 16.75 -.67

2013 . . . . . . 12.94 13.11 -.17 3.19 4.23 -1.04 16.14 17.34 -1.20

2014 . . . . . . 12.96 13.48 -.52 3.21 4.42 -1.21 16.17 17.90 -1.73

2015 . . . . . . 12.98 13.87 -.89 3.22 4.62 -1.40 16.20 18.49 -2.29

2020 . . . . . . 13.09 15.64 -2.55 3.28 5.85 -2.57 16.37 21.49 -5.12

2025 . . . . . . 13.20 17.40 -4.20 3.33 7.63 -4.30 16.53 25.03 -8.50

2030 . . . . . . 13.30 19.02 -5.72 3.39 9.94 -6.55 16.69 28.96 -12.27

2035 . . . . . . 13.37 20.14 -6.77 3.43 12.57 -9.15 16.80 32.72 -15.92

2040 . . . . . . 13.42 20.80 -7.38 3.45 15.02 -11.57 16.87 35.82 -18.95

2045 . . . . . . 13.45 21.32 -7.87 3.47 17.09 -13.62 16.92 38.41 -21.49

2050 . . . . . . 13.49 21.89 -8.40 3.48 18.73 -15.25 16.97 40.63 -23.65

2055 . . . . . . 13.53 22.56 -9.03 3.50 19.90 -16.40 17.03 42.46 -25.43

2060 . . . . . . 13.57 23.33 -9.75 3.53 20.93 -17.40 17.10 44.26 -27.16

2065 . . . . . . 13.62 24.22 -10.59 3.55 21.95 -18.40 17.18 46.17 -28.99

2070 . . . . . . 13.68 25.16 -11.48 3.58 22.99 -19.41 17.26 48.15 -30.89

2075 . . . . . . 13.73 26.01 -12.28 3.61 23.88 -20.27 17.33 49.89 -32.55

2080 . . . . . . 13.77 26.76 -12.99 3.63 24.67 -21.04 17.40 51.43 -34.03

1 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.—Estimated OASDI and HI Annual Income Rates, Cost Rates, 

and Balances, Calendar Years 2006-80 (Cont.)

[As a percentage of taxable payroll1]

Calendar year

OASDI HI Combined

Income rate Cost

rate Balance

Income rate Cost

rate Balance

Income rate Cost

rate Balance
Appendices

170

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 (table VI.F3, including beginning trust fund balances and the cost of ending fund targets). 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 positive actuarial balances for the 25-year and the 50-year valuation periods, and a very small

negative actuarial balance for the 75-year valuation period.

Table VI.F3.—Summarized OASDI and HI Income Rates and Cost Rates for Valuation 

Periods,1 Calendar Years 2006-80

[As a percentage of taxable payroll2]

1 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. 2 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-years:

2006-30 . . . . . . 14.62 13.96 0.66 3.41 4.39 -0.98 18.03 18.35 -0.32

50-years:

2006-55 . . . . . . 14.05 15.31 -1.26 3.39 5.87 -2.48 17.44 21.18 -3.74

75-years:

2006-80 . . . . . . 13.88 15.90 -2.02 3.39 6.90 -3.51 17.27 22.80 -5.53

Low Cost:

25-years:

2006-30 . . . . . . 14.57 12.74 1.82 3.40 3.33 .07 17.96 16.08 1.89

50-years:

2006-55 . . . . . . 13.95 13.38 .58 3.35 3.63 -.28 17.31 17.01 .30

75-years:

2006-80 . . . . . . 13.75 13.40 .35 3.34 3.95 -.61 17.09 17.35 -.26

High Cost:

25-years:

2006-30 . . . . . . 14.68 15.50 -.82 3.43 6.08 -2.65 18.11 21.58 -3.47

50-years:

2006-55 . . . . . . 14.14 17.74 -3.60 3.44 10.25 -6.81 17.58 27.99 -10.41

75-years:

2006-80 . . . . . . 14.03 19.21 -5.17 3.47 12.93 -9.47 17.50 32.14 -14.64
171

OASDI & 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, proceeds from taxation of benefits, and various reimbursements from the General Fund of the Treasury. Total 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. Total cost consists of outlays (benefits and administrative expenses) for insured beneficiaries. Both the 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 positive on the basis of the low cost

assumptions until 2022. After 2021, deficits increase to a peak in about 2035,

and decrease thereafter. The OASDI balance is projected to be positive until

2017 on the basis of the intermediate assumptions and until 2013 on the basis

of the high cost assumptions, at which time balances become permanently

negative, with generally increasing deficits. The projected HI balance as a

percentage of GDP, is positive through 2020 on the basis of the low cost

assumptions. The HI balance is projected to be negative in the first projection year under the intermediate and high cost assumptions, with deficits

increasing steadily thereafter. The combined OASDI and HI balance as a percentage of GDP is projected to be positive through 2021 under the low cost

assumptions, through 2014 under the intermediate assumptions, and through

2009 under the high cost assumptions. Between 2010 and about 2035, under

all three sets of assumptions, both the OASDI and HI balances as percentages of GDP are projected to decline (or deficits increase) substantially
Appendices

172

because the baby-boom generation reaches retirement age during these years.

After balances cease to be positive under the intermediate and high cost

assumptions, the annual deficits increase fairly steadily for the combined

OASDI and HI programs.

By 2080, the combined OASDI and HI balances as percentages of GDP, are

projected to range from a deficit of 1.17 percent for the low cost assumptions

to a deficit of 12.33 percent for the high cost assumptions. Projected balances

differ by a much smaller amount for the tenth year, 2015, ranging from a

positive balance of 0.62 percent for the low cost assumptions to a deficit of

1.00 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 deficit of 0.15 percent, based on the low

cost assumptions, to a deficit of 5.99 percent, based on the high cost assumptions). The 25-year summarized balance varies by a smaller amount (from a

positive balance of 0.73 percent to a deficit of 1.55 percent). Summarized

rates are calculated on the present-value basis including the trust fund balances on January 1, 2006 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.)
173

OASDI & HI: Percent of GDP

Table VI.F4.—OASDI and HI Annual and Summarized Income, Cost, and Balance 

as a Percentage of GDP, Calendar Years 2006-80 

Calendar year

Percentage of GDP GDP in

dollars

(billions)

OASDI HI Combined

Income1 Cost Balance Income1 Cost Balance Income1 Cost Balance

Intermediate:

2006 . . . . . . 4.85 4.28 0.57 1.46 1.48 -0.02 6.31 5.76 0.55 $13,191

2007 . . . . . . 4.83 4.26 .58 1.47 1.51 -.04 6.30 5.76 .54 13,886

2008 . . . . . . 4.87 4.24 .63 1.48 1.53 -.05 6.36 5.77 .59 14,620

2009 . . . . . . 4.87 4.27 .60 1.48 1.56 -.08 6.35 5.82 .52 15,366

2010 . . . . . . 4.88 4.32 .56 1.48 1.58 -.10 6.36 5.90 .46 16,141

2011 . . . . . . 4.90 4.36 .54 1.50 1.61 -.11 6.39 5.97 .43 16,937

2012 . . . . . . 4.90 4.44 .46 1.50 1.64 -.14 6.41 6.09 .32 17,748

2013 . . . . . . 4.91 4.54 .37 1.51 1.69 -.18 6.42 6.23 .19 18,544

2014 . . . . . . 4.91 4.64 .26 1.51 1.72 -.21 6.42 6.37 .05 19,378

2015 . . . . . . 4.90 4.74 .16 1.51 1.77 -.25 6.42 6.51 -.09 20,274

2020 . . . . . . 4.89 5.27 -.38 1.53 2.01 -.49 6.42 7.28 -.86 25,369

2025 . . . . . . 4.88 5.78 -.90 1.53 2.36 -.82 6.42 8.14 -1.73 31,536

2030 . . . . . . 4.87 6.18 -1.31 1.54 2.77 -1.23 6.41 8.95 -2.54 39,112

2035 . . . . . . 4.84 6.36 -1.52 1.54 3.17 -1.63 6.38 9.53 -3.15 48,593

2040 . . . . . . 4.80 6.36 -1.56 1.53 3.50 -1.97 6.33 9.86 -3.53 60,423

2045 . . . . . . 4.76 6.30 -1.54 1.52 3.75 -2.24 6.28 10.06 -3.78 75,174

2050 . . . . . . 4.72 6.26 -1.54 1.50 3.96 -2.45 6.23 10.22 -3.99 93,329

2055 . . . . . . 4.69 6.25 -1.57 1.49 4.13 -2.64 6.18 10.38 -4.20 115,752

2060 . . . . . . 4.65 6.26 -1.61 1.48 4.31 -2.82 6.13 10.57 -4.43 143,534

2065 . . . . . . 4.61 6.28 -1.67 1.47 4.48 -3.00 6.08 10.76 -4.67 178,018

2070 . . . . . . 4.57 6.31 -1.74 1.46 4.65 -3.18 6.04 10.95 -4.92 220,656

2075 . . . . . . 4.54 6.32 -1.78 1.45 4.78 -3.33 5.99 11.10 -5.11 273,678

2080 . . . . . . 4.50 6.32 -1.83 1.44 4.90 -3.45 5.94 11.22 -5.28 339,249

Summarized rates:2

25-year:

 2006-30 . . . 5.52 5.27 .25 1.61 2.07 -.46 7.13 7.34 -.21

50-year:

 2006-55 . . . 5.21 5.68 -.47 1.57 2.72 -1.15 6.78 8.40 -1.62

75-year

 2006-80 . . . 5.07 5.81 -.74 1.55 3.14 -1.60 6.62 8.95 -2.33

Low Cost:

2006 . . . . . . 4.85 4.25 .59 1.45 1.44 .01 6.30 5.70 .60 13,226

2007 . . . . . . 4.85 4.22 .63 1.46 1.44 .02 6.31 5.66 .65 13,898

2008 . . . . . . 4.89 4.19 .70 1.48 1.44 .04 6.37 5.63 .74 14,584

2009 . . . . . . 4.89 4.19 .71 1.48 1.44 .04 6.37 5.62 .75 15,281

2010 . . . . . . 4.91 4.19 .72 1.48 1.43 .05 6.39 5.63 .77 15,995

2011 . . . . . . 4.93 4.19 .74 1.49 1.43 .06 6.43 5.62 .80 16,749

2012 . . . . . . 4.94 4.22 .72 1.50 1.44 .06 6.44 5.66 .78 17,523

2013 . . . . . . 4.95 4.27 .68 1.51 1.45 .06 6.46 5.72 .74 18,290

2014 . . . . . . 4.95 4.33 .63 1.51 1.45 .06 6.46 5.78 .68 19,075

2015 . . . . . . 4.95 4.39 .56 1.51 1.46 .05 6.47 5.85 .62 19,874

2020 . . . . . . 4.96 4.82 .14 1.53 1.52 .01 6.49 6.34 .15 24,310

2025 . . . . . . 4.96 5.25 -.29 1.54 1.62 -.09 6.50 6.87 -.37 29,555

2030 . . . . . . 4.96 5.54 -.58 1.54 1.73 -.19 6.50 7.27 -.77 35,906

2035 . . . . . . 4.95 5.62 -.67 1.54 1.82 -.27 6.49 7.43 -.94 43,802

2040 . . . . . . 4.93 5.52 -.60 1.54 1.87 -.34 6.46 7.40 -.93 53,656

2045 . . . . . . 4.90 5.39 -.48 1.53 1.92 -.40 6.43 7.31 -.88 65,897

2050 . . . . . . 4.88 5.27 -.39 1.52 1.98 -.46 6.40 7.25 -.85 80,951

2055 . . . . . . 4.86 5.19 -.33 1.51 2.05 -.54 6.37 7.24 -.88 99,512

2060 . . . . . . 4.84 5.12 -.29 1.50 2.15 -.65 6.34 7.27 -.93 122,427

2065 . . . . . . 4.82 5.06 -.24 1.50 2.25 -.75 6.31 7.30 -.99 150,864

2070 . . . . . . 4.79 4.99 -.20 1.49 2.34 -.85 6.28 7.33 -1.05 186,069

2075 . . . . . . 4.77 4.93 -.16 1.48 2.42 -.94 6.25 7.35 -1.10 229,632

2080 . . . . . . 4.75 4.90 -.15 1.48 2.49 -1.02 6.23 7.39 -1.17 283,241
Appendices

174

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 25 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: 2

25-year:

 2006-30 . . . 5.59 4.89 0.70 1.61 1.58 0.03 7.20 6.47 0.73

50-year:

 2006-55 . . . 5.31 5.09 .22 1.58 1.71 -.13 6.88 6.79 .09

75-year

 2006-80 . . . 5.19 5.06 .13 1.56 1.84 -.29 6.75 6.90 -.15

High Cost:

2006 . . . . . . 4.92 4.42 .49 1.46 1.55 -.10 6.37 5.98 .40 $12,828

2007 . . . . . . 4.80 4.45 .35 1.47 1.60 -.14 6.26 6.05 .21 13,501

2008 . . . . . . 4.86 4.45 .41 1.48 1.65 -.17 6.34 6.10 .24 14,252

2009 . . . . . . 4.86 4.54 .32 1.48 1.72 -.25 6.34 6.27 .07 14,855

2010 . . . . . . 4.84 4.60 .24 1.48 1.78 -.30 6.32 6.38 -.06 15,901

2011 . . . . . . 4.80 4.62 .19 1.49 1.83 -.34 6.29 6.45 -.15 17,315

2012 . . . . . . 4.81 4.75 .06 1.50 1.91 -.41 6.31 6.65 -.35 18,439

2013 . . . . . . 4.83 4.91 -.08 1.51 1.99 -.49 6.33 6.90 -.57 19,390

2014 . . . . . . 4.83 5.04 -.21 1.51 2.08 -.57 6.34 7.12 -.78 20,389

2015 . . . . . . 4.82 5.17 -.35 1.51 2.17 -.66 6.33 7.33 -1.00 21,456

2020 . . . . . . 4.80 5.75 -.95 1.52 2.71 -1.19 6.32 8.46 -2.14 27,536

2025 . . . . . . 4.77 6.31 -1.54 1.52 3.49 -1.96 6.30 9.80 -3.50 35,124

2030 . . . . . . 4.74 6.80 -2.06 1.53 4.48 -2.95 6.27 11.29 -5.01 44,645

2035 . . . . . . 4.71 7.11 -2.40 1.52 5.60 -4.07 6.23 12.71 -6.47 56,647

2040 . . . . . . 4.66 7.24 -2.58 1.52 6.60 -5.08 6.18 13.84 -7.67 71,695

2045 . . . . . . 4.61 7.32 -2.71 1.50 7.41 -5.91 6.11 14.74 -8.62 90,543

2050 . . . . . . 4.56 7.42 -2.86 1.49 8.02 -6.53 6.05 15.43 -9.38 113,732

2055 . . . . . . 4.51 7.53 -3.03 1.48 8.40 -6.92 5.99 15.93 -9.95 142,554

2060 . . . . . . 4.46 7.68 -3.22 1.47 8.71 -7.25 5.93 16.39 -10.47 178,219

2065 . . . . . . 4.41 7.86 -3.45 1.46 9.02 -7.56 5.87 16.87 -11.00 222,292

2070 . . . . . . 4.36 8.05 -3.68 1.45 9.31 -7.86 5.82 17.36 -11.54 276,940

2075 . . . . . . 4.32 8.20 -3.88 1.44 9.54 -8.10 5.76 17.74 -11.98 344,722

2080 . . . . . . 4.27 8.31 -4.05 1.43 9.72 -8.29 5.70 18.03 -12.33 428,728

Summarized rates: 2

25-year:

 2006-30 . . . 5.43 5.74 -.30 1.59 2.83 -1.23 7.02 8.57 -1.55

50-year:

 2006-55 . . . 5.09 6.38 -1.29 1.56 4.63 -3.08 6.65 11.01 -4.36

75-year

 2006-80 . . . 4.92 6.73 -1.81 1.53 5.71 -4.18 6.45 12.44 -5.99

1 Income for individual years excludes interest on the trust funds. Interest is implicitly reflected in all summarized values.

2 Summarized rates are calculated on the present-value basis including the value of the trust funds on

January 1, 2006 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 2006-80 (Cont.)

Calendar year

Percentage of GDP GDP in

dollars

(billions)

OASDI HI Combined

Income1 Cost Balance Income1 Cost Balance Income1 Cost Balance
175

OASDI & 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 0.27 percent for the 40 years from 1964 to 2004. For the 10-year periods 1964-74, 1974-84, and 1984-94 the average annual rates of decline were

0.45, 0.50, and 0.13 percent, respectively. For the 10-year period 1994-2004

the average annual rate of change was essentially zero. Ultimate future

annual rates of decline in the ratio of earnings to employee compensation are

assumed to be 0.1, 0.2, and 0.3 percent for the low cost, intermediate, and

high cost assumptions, respectively. An additional factor that has made the

overall ratio of taxable payroll to GDP decline in recent years is the decline

in the ratio of taxable wages to covered wages, as a result of the relatively

greater increases in wages for persons earning above the contribution and

benefit base. This decline in the taxable ratio is assumed to continue at a

slower pace through 2015, with no further decline thereafter.

Table VI.F5.—Ratio of OASDI Taxable Payroll to GDP, Calendar Years 2006-80 

Calendar year Intermediate Low Cost High Cost

2006 . . . . . . . . . . . . . . . . . . . . . . . . . 0.381 0.381 0.383

2007 . . . . . . . . . . . . . . . . . . . . . . . . . .382 .383 .382

2008 . . . . . . . . . . . . . . . . . . . . . . . . . .382 .383 .380

2009 . . . . . . . . . . . . . . . . . . . . . . . . . .382 .384 .381

2010 . . . . . . . . . . . . . . . . . . . . . . . . . .382 .385 .379

2011 . . . . . . . . . . . . . . . . . . . . . . . . . .382 .385 .374

2012 . . . . . . . . . . . . . . . . . . . . . . . . . .382 .385 .374

2013 . . . . . . . . . . . . . . . . . . . . . . . . . .381 .385 .374

2014 . . . . . . . . . . . . . . . . . . . . . . . . . .381 .385 .374

2015 . . . . . . . . . . . . . . . . . . . . . . . . . .380 .385 .372

2020 . . . . . . . . . . . . . . . . . . . . . . . . . .377 .384 .367

2025 . . . . . . . . . . . . . . . . . . . . . . . . . .373 .382 .363

2030 . . . . . . . . . . . . . . . . . . . . . . . . . .370 .380 .358

2035 . . . . . . . . . . . . . . . . . . . . . . . . . .366 .378 .353

2040 . . . . . . . . . . . . . . . . . . . . . . . . . .363 .376 .348

2045 . . . . . . . . . . . . . . . . . . . . . . . . . .360 .375 .343

2050 . . . . . . . . . . . . . . . . . . . . . . . . . .357 .373 .339

2055 . . . . . . . . . . . . . . . . . . . . . . . . . .354 .372 .334

2060 . . . . . . . . . . . . . . . . . . . . . . . . . .350 .370 .329

2065 . . . . . . . . . . . . . . . . . . . . . . . . . .347 .369 .324

2070 . . . . . . . . . . . . . . . . . . . . . . . . . .344 .367 .320

2075 . . . . . . . . . . . . . . . . . . . . . . . . . .341 .366 .315

2080 . . . . . . . . . . . . . . . . . . . . . . . . . .337 .364 .311
Appendices

176

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.

The selection of a particular index for adjustment of current dollars depends

upon the analyst’s decision as to which index provides the most useful standard for adjusting dollar amounts, over time, to create values that are appropriately comparable. 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. This adjustment

removes the inflation in the index from the series of values.

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 calculated by dividing by the

adjusted CPI 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

3.4, 3.9, 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
177

OASDI & HI: Estimates in Dollars

for the effects of price inflation and real-wage growth. The OASDI taxable

payroll consists of all earnings subject to OASDI taxation, adjusted for the

lower effective tax rate on multiple-employer excess wages. Values adjusted

by dividing by the taxable payroll indicate 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

178

Table VI.F6.—Selected Economic Variables, Calendar Years 2005-80

[GDP and taxable payroll in billions]

Calendar year

Adjusted

CPI1 Average

wage index2 Taxablepayroll3

Gross

domestic

product

Compound

interest-rate

factor4

Intermediate:

2005 . . . . . . . . . . . . . 97.19 $37,197.43 $4,754 $12,485 0.9527

2006 . . . . . . . . . . . . . 100.00 38,695.99 5,028 13,191 1.0000

2007 . . . . . . . . . . . . . 102.28 40,375.23 5,302 13,886 1.0528

2008 . . . . . . . . . . . . . 104.94 42,112.24 5,585 14,620 1.1132

2009 . . . . . . . . . . . . . 107.86 43,916.42 5,875 15,366 1.1795

2010 . . . . . . . . . . . . . 110.89 45,798.28 6,173 16,141 1.2498

2011 . . . . . . . . . . . . . 114.00 47,707.59 6,475 16,937 1.3242

2012 . . . . . . . . . . . . . 117.20 49,695.49 6,775 17,748 1.4014

2013 . . . . . . . . . . . . . 120.47 51,632.49 7,069 18,544 1.4832

2014 . . . . . . . . . . . . . 123.85 53,603.73 7,379 19,378 1.5690

2015 . . . . . . . . . . . . . 127.31 55,677.10 7,706 20,274 1.6599

2020 . . . . . . . . . . . . . 146.16 67,207.92 9,556 25,369 2.1985

2025 . . . . . . . . . . . . . 167.80 81,352.86 11,770 31,536 2.9118

2030 . . . . . . . . . . . . . 192.64 98,468.99 14,463 39,112 3.8566

2035 . . . . . . . . . . . . . 221.17 119,326.16 17,807 48,593 5.1080

2040 . . . . . . . . . . . . . 253.91 144,701.05 21,948 60,423 6.7654

2045 . . . . . . . . . . . . . 291.51 175,442.24 27,067 75,174 8.9605

2050 . . . . . . . . . . . . . 334.67 212,549.47 33,302 93,329 11.8679

2055 . . . . . . . . . . . . . 384.22 257,395.55 40,927 115,752 15.7188

2060 . . . . . . . . . . . . . 441.11 311,720.91 50,285 143,534 20.8190

2065 . . . . . . . . . . . . . 506.42 377,517.46 61,791 178,018 27.5742

2070 . . . . . . . . . . . . . 581.41 457,258.39 75,880 220,656 36.5212

2075 . . . . . . . . . . . . . 667.49 553,902.85 93,235 273,678 48.3713

2080 . . . . . . . . . . . . . 766.32 670,953.75 114,488 339,249 64.0664

Low Cost:

2005 . . . . . . . . . . . . . 97.35 37,207.16 4,756 12,492 .9539

2006 . . . . . . . . . . . . . 100.00 38,717.74 5,043 13,226 1.0000

2007 . . . . . . . . . . . . . 101.93 40,294.22 5,316 13,898 1.0487

2008 . . . . . . . . . . . . . 103.75 41,843.44 5,592 14,584 1.1037

2009 . . . . . . . . . . . . . 105.63 43,431.83 5,874 15,281 1.1649

2010 . . . . . . . . . . . . . 107.54 45,075.49 6,161 15,995 1.2298

2011 . . . . . . . . . . . . . 109.47 46,758.63 6,456 16,749 1.2997

2012 . . . . . . . . . . . . . 111.44 48,513.49 6,753 17,523 1.3737

2013 . . . . . . . . . . . . . 113.45 50,208.20 7,049 18,290 1.4494

2014 . . . . . . . . . . . . . 115.48 51,920.30 7,351 19,075 1.5284

2015 . . . . . . . . . . . . . 117.56 53,679.86 7,659 19,874 1.6116

2020 . . . . . . . . . . . . . 128.53 63,241.93 9,324 24,310 2.1028

2025 . . . . . . . . . . . . . 140.52 74,684.59 11,280 29,555 2.7437

2030 . . . . . . . . . . . . . 153.63 88,136.78 13,637 35,906 3.5800

2035 . . . . . . . . . . . . . 167.96 104,133.07 16,559 43,802 4.6711

2040 . . . . . . . . . . . . . 183.64 123,172.28 20,198 53,656 6.0947

2045 . . . . . . . . . . . . . 200.77 145,707.16 24,703 65,897 7.9523

2050 . . . . . . . . . . . . . 219.50 172,282.35 30,220 80,951 10.3760

2055 . . . . . . . . . . . . . 239.98 203,785.66 36,995 99,512 13.5384

2060 . . . . . . . . . . . . . 262.37 241,084.38 45,325 122,427 17.6647

2065 . . . . . . . . . . . . . 286.85 285,231.67 55,620 150,864 23.0486

2070 . . . . . . . . . . . . . 313.61 337,524.44 68,310 186,069 30.0733

2075 . . . . . . . . . . . . . 342.87 399,474.46 83,944 229,632 39.2391

2080 . . . . . . . . . . . . . 374.86 472,712.26 103,094 283,241 51.1985
179

OASDI & HI: Estimates in Dollars

Table VI.F7 shows estimated operations of the combined OASI and DI Trust

Funds in constant 2006 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, income from

taxation of benefits, and miscellaneous reimbursements from the General

Fund of the Treasury. 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:

2005 . . . . . . . . . . . . . 96.71 $37,138.78 $4,746 $12,458 0.9596

2006 . . . . . . . . . . . . . 100.00 37,968.14 4,911 12,828 1.0000

2007 . . . . . . . . . . . . . 102.72 39,792.92 5,158 13,501 1.0543

2008 . . . . . . . . . . . . . 105.61 41,576.39 5,418 14,252 1.1179

2009 . . . . . . . . . . . . . 110.25 43,136.48 5,660 14,855 1.1899

2010 . . . . . . . . . . . . . 116.55 46,029.79 6,022 15,901 1.2900

2011 . . . . . . . . . . . . . 123.02 49,405.86 6,480 17,315 1.4080

2012 . . . . . . . . . . . . . 128.79 52,179.65 6,888 18,439 1.5132

2013 . . . . . . . . . . . . . 133.85 54,531.83 7,255 19,390 1.6082

2014 . . . . . . . . . . . . . 138.93 56,892.43 7,619 20,389 1.7048

2015 . . . . . . . . . . . . . 144.21 59,333.06 7,989 21,456 1.8064

2020 . . . . . . . . . . . . . 173.78 73,390.05 10,119 27,536 2.4151

2025 . . . . . . . . . . . . . 209.40 91,089.22 12,735 35,124 3.2289

2030 . . . . . . . . . . . . . 252.33 113,110.09 15,969 44,645 4.3168

2035 . . . . . . . . . . . . . 304.06 140,585.94 19,989 56,647 5.7714

2040 . . . . . . . . . . . . . 366.39 174,789.75 24,962 71,695 7.7161

2045 . . . . . . . . . . . . . 441.50 217,185.28 31,099 90,543 10.3160

2050 . . . . . . . . . . . . . 532.00 269,556.63 38,523 113,732 13.7920

2055 . . . . . . . . . . . . . 641.06 334,166.86 47,605 142,554 18.4393

2060 . . . . . . . . . . . . . 772.48 414,095.73 58,668 178,219 24.6524

2065 . . . . . . . . . . . . . 930.84 513,006.08 72,131 222,292 32.9591

2070 . . . . . . . . . . . . . 1,121.66 635,745.68 88,572 276,940 44.0647

2075 . . . . . . . . . . . . . 1,351.60 787,844.86 108,662 344,722 58.9123

2080 . . . . . . . . . . . . . 1,628.68 976,583.40 133,194 428,728 78.7629

1The adjusted CPI is the CPI-W indexed to calendar year 2006. 2 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.) 3 Taxable payroll consists of total earnings subject to OASDI contribution rates, adjusted to include deemed

wages based on military service through calendar year 2001 and to reflect the lower effective contribution

rates (compared to the combined employee-employer rate) which apply to multiple-employer “excess

wages.”

4 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 2005-80 (Cont.)

[GDP and taxable payroll in billions]

Calendar year

Adjusted

CPI1 Average

wage index2 Taxablepayroll3

Gross

domestic

product

Compound

interest-rate

factor4
Appendices

180

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 2006 Dollars,1 Calendar Years 2006-80

[In billions]

1The 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:

2006 . . . . . . . . . . . . . $640.0 $100.9 $740.9 $564.2 $2,035.3

2007 . . . . . . . . . . . . . 656.1 106.6 762.7 577.8 2,174.8

2008 . . . . . . . . . . . . . 679.2 114.4 793.5 591.0 2,322.4

2009 . . . . . . . . . . . . . 693.8 123.5 817.2 608.1 2,468.6

2010 . . . . . . . . . . . . . 710.2 132.6 842.9 628.5 2,615.6

2011 . . . . . . . . . . . . . 727.6 142.1 869.7 647.6 2,766.3

2012 . . . . . . . . . . . . . 742.6 151.0 893.6 672.5 2,912.0

2013 . . . . . . . . . . . . . 755.1 159.5 914.7 698.6 3,048.9

2014 . . . . . . . . . . . . . 767.5 167.6 935.1 726.3 3,174.6

2015 . . . . . . . . . . . . . 780.6 174.6 955.1 755.1 3,288.3

2020 . . . . . . . . . . . . . 849.4 201.8 1,051.3 914.7 3,642.8

2025 . . . . . . . . . . . . . 917.7 198.3 1,116.0 1,087.0 3,523.1

2030 . . . . . . . . . . . . . 988.0 162.8 1,150.9 1,254.7 2,823.4

20352 . . . . . . . . . . . .

2 Estimates for later years are not shown because the combined OASI and DI Trust Funds are estimated to

become exhausted in 2040 under the intermediate assumptions and in 2030 under the high cost assumptions.

1,063.4 96.6 1,159.9 1,397.9 1,575.0

Low Cost: 

2006 . . . . . . . . . . . . . 641.0 100.7 741.7 562.4 2,038.0

2007 . . . . . . . . . . . . . 661.1 106.1 767.2 575.3 2,191.4

2008 . . . . . . . . . . . . . 687.6 113.7 801.3 589.3 2,364.8

2009 . . . . . . . . . . . . . 707.9 123.5 831.5 605.5 2,548.9

2010 . . . . . . . . . . . . . 730.4 134.0 864.4 623.7 2,744.3

2011 . . . . . . . . . . . . . 754.7 145.6 900.3 641.1 2,955.0

2012 . . . . . . . . . . . . . 777.1 158.0 935.1 663.9 3,174.0

2013 . . . . . . . . . . . . . 797.7 170.4 968.1 688.3 3,397.6

2014 . . . . . . . . . . . . . 817.8 182.4 1,000.3 714.5 3,623.4

2015 . . . . . . . . . . . . . 837.5 194.2 1,031.7 742.0 3,849.1

2020 . . . . . . . . . . . . . 938.3 254.5 1,192.8 912.0 4,905.2

2025 . . . . . . . . . . . . . 1,044.1 299.8 1,343.9 1,104.2 5,731.9

2030 . . . . . . . . . . . . . 1,159.5 329.4 1,488.9 1,293.9 6,263.1

2035 . . . . . . . . . . . . . 1,290.4 347.5 1,637.9 1,465.2 6,588.5

2040 . . . . . . . . . . . . . 1,439.6 363.5 1,803.0 1,613.7 6,893.4

2045 . . . . . . . . . . . . . 1,609.3 385.6 1,994.9 1,768.3 7,324.5

2050 . . . . . . . . . . . . . 1,799.8 416.4 2,216.2 1,944.8 7,921.0

2055 . . . . . . . . . . . . . 2,014.7 456.4 2,471.2 2,152.9 8,691.9

2060 . . . . . . . . . . . . . 2,257.4 505.5 2,762.9 2,391.3 9,635.7

2065 . . . . . . . . . . . . . 2,533.0 566.1 3,099.1 2,659.5 10,802.0

2070 . . . . . . . . . . . . . 2,844.6 640.8 3,485.4 2,962.2 12,239.8

2075 . . . . . . . . . . . . . 3,196.4 733.0 3,929.4 3,303.3 14,017.3

2080 . . . . . . . . . . . . . 3,590.5 844.3 4,434.9 3,703.3 16,153.2

High Cost:

2006 . . . . . . . . . . . . . 630.9 99.0 729.9 567.5 2,021.1

2007 . . . . . . . . . . . . . 630.6 102.4 732.9 584.3 2,116.2

2008 . . . . . . . . . . . . . 655.8 109.2 765.0 600.6 2,222.7

2009 . . . . . . . . . . . . . 655.3 115.7 771.0 612.0 2,288.2

2010 . . . . . . . . . . . . . 659.8 123.6 783.4 627.7 2,320.2

2011 . . . . . . . . . . . . . 676.2 137.8 813.9 649.9 2,362.2

2012 . . . . . . . . . . . . . 688.7 146.0 834.7 679.8 2,411.4

2013 . . . . . . . . . . . . . 699.4 149.9 849.3 710.6 2,458.8

2014 . . . . . . . . . . . . . 708.8 151.7 860.5 739.5 2,489.9

2015 . . . . . . . . . . . . . 717.1 152.2 869.3 768.5 2,499.6

2020 . . . . . . . . . . . . . 760.3 130.2 890.5 910.9 2,216.1

2025 2 . . . . . . . . . . . . 800.6 82.6 883.1 1,058.1 1,317.4
181

OASDI & 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 through 2016,

(2) current tax income plus amounts from the trust funds that are less than

annual interest income for years 2017 through 2026, and (3) current tax

income plus amounts from the trust funds that are greater than annual interest

income for years 2027 through 2039, i.e., through 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

2005 2010 2015 2020 2025 2030 2035 2040 2045

Calendar year

Cost

Total income

Income excluding interest
Appendices

182

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 2006-80

[In billions]

Calendar year

Income

excluding

interest

Interest

income

Total

income Cost

Assets at

end of year

Intermediate:

2006 . . . . . . . . . . . . . $640.0 $100.9 $740.9 $564.2 $2,035.3

2007 . . . . . . . . . . . . . 671.1 109.1 780.1 591.0 2,224.5

2008 . . . . . . . . . . . . . 712.7 120.0 832.7 620.1 2,437.1

2009 . . . . . . . . . . . . . 748.3 133.2 881.5 655.9 2,662.7

2010 . . . . . . . . . . . . . 787.6 147.1 934.7 696.9 2,900.4

2011 . . . . . . . . . . . . . 829.6 162.0 991.5 738.3 3,153.7

2012 . . . . . . . . . . . . . 870.3 177.0 1,047.3 788.2 3,412.8

2013 . . . . . . . . . . . . . 909.7 192.2 1,101.9 841.7 3,673.1

2014 . . . . . . . . . . . . . 950.6 207.6 1,158.2 899.5 3,931.7

2015 . . . . . . . . . . . . . 993.7 222.3 1,216.0 961.4 4,186.4

2020 . . . . . . . . . . . . . 1,241.5 295.0 1,536.5 1,336.9 5,324.2

2025 . . . . . . . . . . . . . 1,539.8 332.7 1,872.6 1,824.0 5,911.7

2030 . . . . . . . . . . . . . 1,903.4 313.7 2,217.1 2,417.1 5,439.0

20351 . . . . . . . . . . . .

1 Estimates for later years are not shown because the combined OASI and DI Trust Funds are estimated to

become exhausted in 2040 under the intermediate assumptions and in 2030 under the high cost assumptions.

2,351.8 213.6 2,565.4 3,091.7 3,483.3

Low Cost:

2006 . . . . . . . . . . . . . 641.0 100.7 741.7 562.4 2,038.0

2007 . . . . . . . . . . . . . 673.8 108.1 781.9 586.3 2,233.6

2008 . . . . . . . . . . . . . 713.4 118.0 831.4 611.4 2,453.6

2009 . . . . . . . . . . . . . 747.8 130.5 878.3 639.5 2,692.3

2010 . . . . . . . . . . . . . 785.4 144.1 929.5 670.7 2,951.1

2011 . . . . . . . . . . . . . 826.1 159.4 985.5 701.8 3,234.8

2012 . . . . . . . . . . . . . 866.0 176.1 1,042.1 739.9 3,537.0

2013 . . . . . . . . . . . . . 905.0 193.3 1,098.3 780.9 3,854.4

2014 . . . . . . . . . . . . . 944.5 210.7 1,155.1 825.1 4,184.4

2015 . . . . . . . . . . . . . 984.5 228.3 1,212.9 872.3 4,525.0

2020 . . . . . . . . . . . . . 1,206.0 327.1 1,533.2 1,172.2 6,304.6

2025 . . . . . . . . . . . . . 1,467.2 421.3 1,888.4 1,551.6 8,054.5

2030 . . . . . . . . . . . . . 1,781.3 506.1 2,287.4 1,987.9 9,622.0

2035 . . . . . . . . . . . . . 2,167.4 583.7 2,751.0 2,461.0 11,066.3

2040 . . . . . . . . . . . . . 2,643.6 667.4 3,311.0 2,963.3 12,658.7

2045 . . . . . . . . . . . . . 3,231.0 774.2 4,005.2 3,550.1 14,705.3

2050 . . . . . . . . . . . . . 3,950.5 914.0 4,864.5 4,268.8 17,386.5

2055 . . . . . . . . . . . . . 4,834.9 1,095.3 5,930.3 5,166.4 20,858.6

2060 . . . . . . . . . . . . . 5,922.7 1,326.3 7,249.1 6,274.0 25,281.1

2065 . . . . . . . . . . . . . 7,265.8 1,623.9 8,889.7 7,628.7 30,985.2

2070 . . . . . . . . . . . . . 8,921.0 2,009.5 10,930.5 9,289.7 38,385.3

2075 . . . . . . . . . . . . . 10,959.4 2,513.3 13,472.8 11,326.1 48,061.1

2080 . . . . . . . . . . . . . 13,459.5 3,165.1 16,624.6 13,882.2 60,551.7

High Cost:

2006 . . . . . . . . . . . . . $630.9 $99.0 $729.9 $567.5 $2,021.1

2007 . . . . . . . . . . . . . 647.7 105.2 752.9 600.2 2,173.8

2008 . . . . . . . . . . . . . 692.6 115.4 808.0 634.3 2,347.4

2009 . . . . . . . . . . . . . 722.4 127.6 850.0 674.8 2,522.7

2010 . . . . . . . . . . . . . 769.0 144.1 913.1 731.5 2,704.3

2011 . . . . . . . . . . . . . 831.8 169.5 1,001.3 799.5 2,906.0

2012 . . . . . . . . . . . . . 886.9 188.1 1,075.0 875.5 3,105.5

2013 . . . . . . . . . . . . . 936.2 200.7 1,136.9 951.2 3,291.2

2014 . . . . . . . . . . . . . 984.8 210.8 1,195.6 1,027.4 3,459.4

2015 . . . . . . . . . . . . . 1,034.1 219.5 1,253.7 1,108.2 3,604.8

2020 . . . . . . . . . . . . . 1,321.2 226.2 1,547.4 1,582.9 3,851.1

2025 1 . . . . . . . . . . . . 1,676.4 172.9 1,849.3 2,215.8 2,758.7
183

OASDI & HI: Estimates in Dollars

Table VI.F9 shows, in current dollars, estimated income (excluding interest)

and estimated total cost (excluding the cost of accumulating target trust fund

balances) of the combined OASI and DI Trust Funds, of the HI Trust Fund,

and of the combined OASI, DI, and HI Trust Funds, based on the low cost,

intermediate, and high cost sets of assumptions described earlier in this

report. For OASDI, income excluding interest consists of payroll-tax contributions, proceeds from taxation of OASDI benefits, and miscellaneous transfers from the General Fund of the Treasury. 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

184

Table VI.F9.—OASDI and HI Annual Income Excluding Interest, Cost, and

Balance in Current Dollars, Calendar Years 2006-80

[In billions]

Calendar

year

OASDI HI Combined

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance

Intermediate:

2006 . . . . . . $640 $564 $76 $192 $195 -$3 $832 $759 $73

2007 . . . . . . 671 591 80 203 209 -6 875 800 74

2008 . . . . . . 713 620 93 217 224 -7 929 844 86

2009 . . . . . . 748 656 92 227 239 -12 975 895 80

2010 . . . . . . 788 697 91 240 255 -16 1,027 952 75

2011 . . . . . . 830 738 91 253 273 -19 1,083 1,011 72

2012 . . . . . . 870 788 82 267 292 -25 1,137 1,080 57

2013 . . . . . . 910 842 68 280 313 -33 1,190 1,154 35

2014 . . . . . . 951 900 51 293 334 -41 1,244 1,234 10

2015 . . . . . . 994 961 32 307 358 -51 1,301 1,319 -18

2020 . . . . . . 1,242 1,337 -95 387 510 -123 1,629 1,847 -219

2025 . . . . . . 1,540 1,824 -284 484 744 -260 2,024 2,568 -544

2030 . . . . . . 1,903 2,417 -514 602 1,082 -480 2,505 3,500 -994

2035 . . . . . . 2,352 3,092 -740 747 1,540 -793 3,099 4,631 -1,533

2040 . . . . . . 2,903 3,844 -941 923 2,113 -1,190 3,826 5,956 -2,130

2045 . . . . . . 3,582 4,739 -1,158 1,140 2,822 -1,682 4,721 7,561 -2,840

2050 . . . . . . 4,410 5,844 -1,435 1,404 3,695 -2,290 5,814 9,539 -3,725

2055 . . . . . . 5,424 7,237 -1,813 1,729 4,782 -3,053 7,153 12,019 -4,866

2060 . . . . . . 6,672 8,984 -2,312 2,130 6,181 -4,051 8,801 15,165 -6,364

2065 . . . . . . 8,208 11,178 -2,971 2,624 7,969 -5,346 10,831 19,148 -8,316

2070 . . . . . . 10,092 13,921 -3,829 3,231 10,251 -7,020 13,323 24,172 -10,849

2075 . . . . . . 12,412 17,290 -4,878 3,979 13,087 -9,108 16,391 30,377 -13,986

2080 . . . . . . 15,256 21,456 -6,200 4,896 16,610 -11,714 20,152 38,066 -17,914

Low Cost:

2006 . . . . . . 641 562 79 192 191 1 833 753 80

2007 . . . . . . 674 586 87 203 201 3 877 787 90

2008 . . . . . . 713 611 102 216 210 6 929 821 108

2009 . . . . . . 748 640 108 225 219 6 973 859 114

2010 . . . . . . 785 671 115 237 229 8 1,023 900 123

2011 . . . . . . 826 702 124 250 240 10 1,076 942 135

2012 . . . . . . 866 740 126 263 252 11 1,129 992 137

2013 . . . . . . 905 781 124 276 265 11 1,181 1,045 135

2014 . . . . . . 944 825 119 288 277 11 1,232 1,102 130

2015 . . . . . . 985 872 112 301 290 11 1,285 1,162 123

2020 . . . . . . 1,206 1,172 34 371 368 2 1,577 1,541 36

2025 . . . . . . 1,467 1,552 -84 454 480 -26 1,921 2,031 -110

2030 . . . . . . 1,781 1,988 -207 554 622 -68 2,335 2,610 -275

2035 . . . . . . 2,167 2,461 -294 675 795 -120 2,843 3,256 -413

2040 . . . . . . 2,644 2,963 -320 824 1,005 -182 3,467 3,968 -501

2045 . . . . . . 3,231 3,550 -319 1,006 1,266 -260 4,237 4,816 -579

2050 . . . . . . 3,951 4,269 -318 1,229 1,599 -370 5,179 5,868 -689

2055 . . . . . . 4,835 5,166 -331 1,503 2,043 -540 6,338 7,209 -871

2060 . . . . . . 5,923 6,274 -351 1,841 2,632 -791 7,763 8,906 -1,143

2065 . . . . . . 7,266 7,629 -363 2,257 3,388 -1,131 9,523 11,017 -1,494

2070 . . . . . . 8,921 9,290 -369 2,771 4,358 -1,587 11,692 13,648 -1,956

2075 . . . . . . 10,959 11,326 -367 3,402 5,563 -2,161 14,362 16,889 -2,528

2080 . . . . . . 13,459 13,882 -423 4,178 7,060 -2,882 17,638 20,942 -3,304
185

OASDI & 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 2006 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 2006 dollars (adjusted to 2006 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 normal retirement age is 65 for individuals who reached age 62 before

2000, was 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 illustrative cases attaining age 65 after 2002, benefit

levels shown for retirement at 65 are lower than the levels shown for retireHigh Cost:

2006 . . . . . . $631 $567 $63 $187 $199 -$12 $818 $767 $51

2007 . . . . . . 648 600 48 198 216 -19 846 817 29

2008 . . . . . . 693 634 58 211 236 -24 904 870 34

2009 . . . . . . 722 675 48 219 256 -37 942 931 11

2010 . . . . . . 769 732 37 235 283 -48 1,004 1,015 -10

2011 . . . . . . 832 800 32 258 317 -59 1,090 1,116 -26

2012 . . . . . . 887 875 11 276 351 -75 1,163 1,227 -64

2013 . . . . . . 936 951 -15 292 387 -95 1,228 1,338 -110

2014 . . . . . . 985 1,027 -43 307 424 -116 1,292 1,451 -159

2015 . . . . . . 1,034 1,108 -74 324 465 -141 1,358 1,573 -215

2020 . . . . . . 1,321 1,583 -262 418 746 -328 1,739 2,329 -589

2025 . . . . . . 1,676 2,216 -539 535 1,225 -690 2,212 3,441 -1,230

2030 . . . . . . 2,118 3,038 -919 682 2,001 -1,319 2,800 5,039 -2,239

2035 . . . . . . 2,666 4,027 -1,360 864 3,171 -2,307 3,530 7,197 -3,668

2040 . . . . . . 3,341 5,193 -1,852 1,087 4,732 -3,645 4,428 9,925 -5,497

2045 . . . . . . 4,173 6,630 -2,457 1,361 6,711 -5,350 5,534 13,342 -7,808

2050 . . . . . . 5,183 8,434 -3,250 1,695 9,118 -7,422 6,879 17,551 -10,672

2055 . . . . . . 6,425 10,739 -4,315 2,108 11,976 -9,868 8,533 22,716 -14,183

2060 . . . . . . 7,945 13,687 -5,742 2,617 15,531 -12,914 10,562 29,217 -18,655

2065 . . . . . . 9,805 17,469 -7,664 3,244 20,040 -16,797 13,048 37,509 -24,460

2070 . . . . . . 12,088 22,284 -10,197 4,017 25,784 -21,767 16,105 48,068 -31,963

2075 . . . . . . 14,883 28,263 -13,380 4,966 32,876 -27,909 19,849 61,139 -41,290

2080 . . . . . . 18,300 35,648 -17,348 6,128 41,663 -35,535 24,428 77,311 -52,883

Table VI.F9.—OASDI and HI Annual Income Excluding Interest, Cost, and

Balance in Current Dollars, Calendar Years 2006-80 (Cont.)

[In billions]

Calendar

year

OASDI HI Combined

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance
Appendices

186

ment at NRA, primarily because of the actuarial reduction for “early” (preNRA) retirement.

Four different pre-retirement earnings patterns are represented in table

VI.F10. Three of these patterns 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 1991-2002. The general,

career-average 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 OASDI 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 2005.3, located at the following internet address: www.socialsecurity.gov/OACT/NOTES/ran3/

an2005-3.html.
187

OASDI & HI: Estimates in Dollars

Table VI.F10.—Estimated Annual Scheduled Benefit Amounts1 for Retired Workers

With Various Pre-Retirement Earnings Patterns Based on

Intermediate Assumptions, Calendar Years 2006-80 

Year attain age 652

Retirement at normal retirement age Retirement at age 65

Age at

retirement

Constant

2006

dollars 3 Percent of

earnings

Age at

retirement

Constant

2006

dollars3 Percent of

earnings

 Scaled low earnings:4

2006 . . . . . . . . . . . 65:8 $9,791 57.8 65:0 $9,354 55.9

2010 . . . . . . . . . . . 66:0 9,865 54.6 65:0 9,209 51.7

2015 . . . . . . . . . . . 66:0 10,661 55.7 65:0 9,958 52.6

2020 . . . . . . . . . . . 66:2 11,289 56.0 65:0 10,411 52.2

2025 . . . . . . . . . . . 67:0 11,877 55.4 65:0 10,293 49.0

2030 . . . . . . . . . . . 67:0 12,519 55.4 65:0 10,851 49.0

2035 . . . . . . . . . . . 67:0 13,200 55.3 65:0 11,437 48.9

2040 . . . . . . . . . . . 67:0 13,932 55.3 65:0 12,075 48.9

2045 . . . . . . . . . . . 67:0 14,716 55.3 65:0 12,754 48.9

2050 . . . . . . . . . . . 67:0 15,545 55.3 65:0 13,470 49.0

2055 . . . . . . . . . . . 67:0 16,405 55.4 65:0 14,215 49.0

2060 . . . . . . . . . . . 67:0 17,305 55.4 65:0 14,997 49.0

2065 . . . . . . . . . . . 67:0 18,254 55.3 65:0 15,821 49.0

2070 . . . . . . . . . . . 67:0 19,257 55.3 65:0 16,689 49.0

2075 . . . . . . . . . . . 67:0 20,315 55.3 65:0 17,607 49.0

2080 . . . . . . . . . . . 67:0 21,436 55.3 65:0 18,578 49.0

Scaled medium earnings:5

2006 . . . . . . . . . . . 65:8 16,127 42.9 65:0 15,413 41.4

2010 . . . . . . . . . . . 66:0 16,258 40.5 65:0 15,174 38.3

2015 . . . . . . . . . . . 66:0 17,572 41.3 65:0 16,401 39.0

2020 . . . . . . . . . . . 66:2 18,605 41.5 65:0 17,158 38.7

2025 . . . . . . . . . . . 67:0 19,562 41.1 65:0 16,953 36.3

2030 . . . . . . . . . . . 67:0 20,625 41.1 65:0 17,875 36.3

2035 . . . . . . . . . . . 67:0 21,748 41.0 65:0 18,850 36.3

2040 . . . . . . . . . . . 67:0 22,959 41.0 65:0 19,896 36.3

2045 . . . . . . . . . . . 67:0 24,250 41.0 65:0 21,014 36.3

2050 . . . . . . . . . . . 67:0 25,609 41.0 65:0 22,196 36.3

2055 . . . . . . . . . . . 67:0 27,025 41.0 65:0 23,422 36.3

2060 . . . . . . . . . . . 67:0 28,509 41.0 65:0 24,707 36.3

2065 . . . . . . . . . . . 67:0 30,073 41.0 65:0 26,064 36.3

2070 . . . . . . . . . . . 67:0 31,725 41.0 65:0 27,494 36.3

2075 . . . . . . . . . . . 67:0 33,470 41.0 65:0 29,006 36.3

2080 . . . . . . . . . . . 67:0 35,316 41.0 65:0 30,607 36.3

Scaled high earnings:6

2006 . . . . . . . . . . . 65:8 21,313 35.8 65:0 20,367 34.6

2010 . . . . . . . . . . . 66:0 21,555 33.5 65:0 20,121 31.8

2015 . . . . . . . . . . . 66:0 23,298 34.2 65:0 21,740 32.3

2020 . . . . . . . . . . . 66:2 24,673 34.4 65:0 22,754 32.1

2025 . . . . . . . . . . . 67:0 25,938 34.0 65:0 22,479 30.1

2030 . . . . . . . . . . . 67:0 27,349 34.0 65:0 23,701 30.1

2035 . . . . . . . . . . . 67:0 28,834 34.0 65:0 24,990 30.1

2040 . . . . . . . . . . . 67:0 30,441 34.0 65:0 26,381 30.1

2045 . . . . . . . . . . . 67:0 32,149 34.0 65:0 27,864 30.1

2050 . . . . . . . . . . . 67:0 33,954 34.0 65:0 29,427 30.1

2055 . . . . . . . . . . . 67:0 35,832 34.0 65:0 31,054 30.1

2060 . . . . . . . . . . . 67:0 37,798 34.0 65:0 32,757 30.1

2065 . . . . . . . . . . . 67:0 39,872 34.0 65:0 34,555 30.1

2070 . . . . . . . . . . . 67:0 42,061 34.0 65:0 36,452 30.1

2075 . . . . . . . . . . . 67:0 44,375 34.0 65:0 38,458 30.1

2080 . . . . . . . . . . . 67:0 46,821 34.0 65:0 40,578 30.1
Appendices

188

Steady maximum earnings:7

2006 . . . . . . . . . . . 65:8 $24,685 29.7 65:0 $23,578 28.9

2010 . . . . . . . . . . . 66:0 25,732 27.5 65:0 23,820 26.1

2015 . . . . . . . . . . . 66:0 28,325 27.6 65:0 26,294 26.0

2020 . . . . . . . . . . . 66:2 30,134 27.6 65:0 27,692 25.7

2025 . . . . . . . . . . . 67:0 31,887 27.3 65:0 27,432 24.0

2030 . . . . . . . . . . . 67:0 33,653 27.3 65:0 28,964 24.0

2035 . . . . . . . . . . . 67:0 35,498 27.2 65:0 30,553 23.9

2040 . . . . . . . . . . . 67:0 37,438 27.2 65:0 32,221 24.0

2045 . . . . . . . . . . . 67:0 39,552 27.2 65:0 34,045 24.0

2050 . . . . . . . . . . . 67:0 41,715 27.3 65:0 35,908 24.0

2055 . . . . . . . . . . . 67:0 44,022 27.3 65:0 37,894 24.0

2060 . . . . . . . . . . . 67:0 46,434 27.3 65:0 39,971 24.0

2065 . . . . . . . . . . . 67:0 48,979 27.3 65:0 42,162 24.0

2070 . . . . . . . . . . . 67:0 51,667 27.3 65:0 44,475 24.0

2075 . . . . . . . . . . . 67:0 54,508 27.3 65:0 46,920 24.0

2080 . . . . . . . . . . . 67:0 57,513 27.3 65:0 49,507 24.0

1 Annual scheduled benefit amounts are the total for the 12-month period starting with the month of

retirement.

2 Assumed to attain age 65 in January of the year.

3 The adjustment for constant dollars is made using the adjusted CPI indexing series shown in table VI.F6. 4 Career-average earnings at about 45 percent of the national average wage index (AWI). 5 Career-average earnings at about 100 percent of the AWI.

6 Career-average earnings at about 160 percent of the AWI.

7 Earnings for each year equal to the OASDI contribution and benefit base.

Table VI.F10.—Estimated Annual Scheduled Benefit Amounts1 for Retired Workers

With Various Pre-Retirement Earnings Patterns Based on

Intermediate Assumptions, Calendar Years 2006-80 (Cont.) 

Year attain age 652

Retirement at normal retirement age Retirement at age 65

Age at

retirement

Constant

2006

dollars 3 Percent of

earnings

Age at

retirement

Constant

2006

dollars3 Percent of

earnings
189

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, 2005, about 835,000 persons were receiving monthly benefits from the OASI Trust Fund because of their disabilities or the disabilities

of children. This total includes 28,000 mothers and fathers (wives or husbands under age 65 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 $6,288 million in

calendar year 2005. Table VI.G1 shows these and similar figures for selected

calendar years during 1960-2005, and estimated experience for 2006-15

based on the intermediate set of assumptions.
Appendices

190

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

Total benefit payments from the OASI Trust Fund with respect to disabled

beneficiaries are estimated to increase from $6,572 million in calendar year

2006 to $10,155 million in calendar year 2015, based on the intermediate

assumptions.

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 payments1

1 Beginning in 1966, includes payments for vocational rehabilitation services.

Total Children 2

2 Also includes certain mothers and fathers (see text).

Widowswidowers 3

3 In 1984 and later years, only disabled widows and widowers aged 50-59 are included because disabled

widows and widowers aged 60-64 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 Children2 Widowswidowers 4

4 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 3).

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 . . . . . . . . . 826 721 105 5,746 4,979 764

2004 . . . . . . . . . 828 723 105 5,945 5,162 781

2005 . . . . . . . . . 835 727 108 6,288 5,386 843

Estimates:

2006 . . . . . . . . . 846 739 108 6,572 5,701 863

2007 . . . . . . . . . 857 751 106 6,847 5,966 874

2008 . . . . . . . . . 870 765 105 7,151 6,251 892

2009 . . . . . . . . . 884 780 104 7,511 6,585 918

2010 . . . . . . . . . 900 796 104 7,905 6,946 949

2011 . . . . . . . . . 915 811 104 8,327 7,326 989

2012 . . . . . . . . . 929 825 104 8,768 7,721 1,034

2013 . . . . . . . . . 944 839 105 9,226 8,128 1,084

2014 . . . . . . . . . 957 852 105 9,684 8,547 1,121

2015 . . . . . . . . . 968 865 104 10,155 8,982 1,156
191

OASI Expenditures for Disabled

In calendar year 2005, 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

$91,674 million. Of this amount, $6,288 million or 6.9 percent represented

payments from the OASI Trust Fund. These and similar figures for selected

calendar years during 1960-2005 and estimates for calendar years 2006-15

are presented in table VI.G2.

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

Table VI.G2.—Benefit Disbursements Under the OASDI Program 

With Respect to Disabled Beneficiaries

[Amounts in millions]

Calendar year Total1

1 Beginning in 1966, includes payments for vocational rehabilitation services.

DI Trust Fund 2

2 Benefit payments to disabled workers and their children and spouses.

OASI Trust Fund

Amount 3

3 Benefit payments to disabled children aged 18 and over, to certain mothers and fathers (see text), and to

disabled widows and widowers (see footnote 4, table VI.G1).

Percentage of total

Historical data:

1960 . . . . . . . . . $627 $568 $59 9.4

1965 . . . . . . . . . 1,707 1,573 134 7.9

1970 . . . . . . . . . 3,386 3,085 301 8.9

1975 . . . . . . . . . 9,169 8,505 664 7.2

1980 . . . . . . . . . 16,738 15,515 1,223 7.3

1985 . . . . . . . . . 20,908 18,836 2,072 9.9

1986 . . . . . . . . . 22,075 19,856 2,219 10.1

1987 . . . . . . . . . 22,858 20,527 2,331 10.2

1988 . . . . . . . . . 24,226 21,708 2,518 10.4

1989 . . . . . . . . . 25,591 22,911 2,680 10.5

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 . . . . . . . . . 76,698 70,952 5,746 7.5

2004 . . . . . . . . . 84,197 78,251 5,945 7.1

2005 . . . . . . . . . 91,674 85,386 6,288 6.9

Estimates:

2006 . . . . . . . . . 100,107 93,535 6,572 6.6

2007 . . . . . . . . . 105,888 99,042 6,847 6.5

2008 . . . . . . . . . 111,661 104,509 7,151 6.4

2009 . . . . . . . . . 117,894 110,382 7,511 6.4

2010 . . . . . . . . . 125,832 117,927 7,905 6.3

2011 . . . . . . . . . 131,480 123,153 8,327 6.3

2012 . . . . . . . . . 140,268 131,500 8,768 6.3

2013 . . . . . . . . . 147,855 138,629 9,226 6.2

2014 . . . . . . . . . 156,069 146,384 9,684 6.2

2015 . . . . . . . . . 164,807 154,651 10,155 6.2
Appendices

192

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 which

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 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 conditions.

See tables V.A1, V.B1, and V.B2.
193

Glossary

Automatic cost-of-living benefit increase. The annual increase in benefits,

effective for December, reflecting the increase in the cost of living. The benefit increase equals the percentage increase in the Consumer Price Index for

Urban Wage Earners and Clerical Workers (CPI-W) measured from the average over July, August, and September of the preceding year to the average

for the same 3 months in the current year. If the increase is less than onetenth of 1 percent, when rounded, there is no automatic increase for the current year; the increase for the next year would reflect the net increase in the

CPI over a 2-year period. 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. 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 wageindexed 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 through the mid1960s 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.”
Appendices

194

Benefit payments. The amounts disbursed for OASI and DI benefits by the

Department of the Treasury in specified periods.

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. 

Book value. A bond’s value between its price at purchase and its value at

maturity. Book value is calculated as par value plus unamortized premium, if

purchased at a price above its par value, or less unamortized discount, if purchased below par.

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 are 15 years

or older as of the valuation date 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
195

Glossary

 • 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.

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-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. In this context, the cost is defined to include

scheduled benefit payments, special monthly payments to certain uninsured

persons who have 3 or more quarters of coverage (and whose payments are

therefore not reimbursable from the General Fund of the Treasury), 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 special

monthly payments to certain uninsured persons whose payments are reimbursable from the General Fund of the Treasury (as described above), and

transfers under the interfund borrowing provisions.

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.
Appendices

196

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 Credit. Increases the benefit amount for certain individuals who did not receive benefits for months after attainment of the normal retirement age but before age 70. Delayed retirement credits are

applicable for January benefits of the year following the year they are earned

or for the month of attainment of age 70, whichever comes first. See table

V.C3.

Demographic assumptions. See “Assumptions.”

Deterministic model. A model with specified assumptions for and relationships among variables. Under such a model, any specified set of assumptions

determines a single outcome directly reflecting the specifications.

Disability. For Social Security purposes, the inability to engage in substantial gainful activity (see “Substantial gainful activity—SGA”) by reason of

any medically determinable physical or mental impairment that can be

expected to result in death or to last for a continuous period of not less than

12 months. Special rules apply for workers at ages 55 and over whose disability is based on blindness.

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 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 termination rate. The proportion of disabled-worker beneficiaries in a given year whose disability benefits terminate as a result of the individual’s recovery, death, or attainment of normal retirement age.

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, special monthly payments to certain uninsured persons who have 3 or more quarters of coverage

(and whose payments are therefore not reimbursable from the General Fund

of the Treasury), 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 special monthly payments to certain uninsured persons
197

Glossary

whose payments are reimbursable from the General Fund of the Treasury (as

described above), and transfers under the interfund borrowing provisions.

Earnings. Unless otherwise qualified, all wages from employment and net

earnings from self-employment, whether or not taxable or covered.

Earnings test. The provision requiring the withholding of benefits if beneficiaries under normal retirement age have earnings in excess of certain

exempt amounts. See table V.C1.

Economic assumptions. See “Assumptions.”

Effective interest rate. See “Interest rate.”

Excess wages. Wages in excess of the contribution and benefit base on

which a worker initially 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 2006 began October 1, 2005 and will end September 30,

2006.

Full advance funding. A financing scheme where 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:
Appendices

198

 • The costs associated with providing special payments made to uninsured persons who attained age 72 before 1968, and who had fewer than

3 quarters of coverage.

 • Payments corresponding to the employee-employer taxes on deemed

wage credits for military personnel.

 • 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 rate. Ratio of income from tax revenues on a liability basis (payrolltax contributions and income from the taxation of scheduled benefits) to the

OASDI taxable payroll for the year.

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
199

Glossary

interest rates on new special-issue securities. The effective interest rate for a

trust fund is the ratio of the interest earned by the fund over a given period of

time to the average level of assets held by the fund during the period. The

effective rate of interest thus represents a measure of the overall average

interest earnings on the fund’s portfolio of assets.

Interfund borrowing. The borrowing of assets by a trust fund (OASI, DI, or

HI) from another of the trust funds when the first fund is in danger of

exhaustion. Interfund borrowing was permitted by the Social Security Act

only during 1982 through 1987; all amounts borrowed were to be repaid

prior to the end of 1989. The only exercise of this authority occurred in 1982,

when the OASI Trust Fund borrowed assets from the DI and HI Trust Funds.

The final repayment of borrowed amounts occurred in 1986.

Intermediate assumptions. See “Assumptions.”

Legal immigration. Consistent with the U.S. Citizenship and Immigration

Services, legal immigrants are individuals who are admitted to the United

States for legal permanent residence.

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

he or she survives.

Long range. The next 75 years. Long-range actuarial estimates are made for

this period because it is approximately the maximum remaining lifetime of

current Social Security participants.

Low cost assumptions

See “Assumptions.”

Lump-sum death benefit. A lump sum, generally $255, payable on the

death of a fully or currently insured worker. The lump sum is payable to the

surviving spouse of the worker, under most circumstances, or to the worker’s

children.

Maximum family benefit. The maximum monthly amount that can be paid

on a worker’s earnings record. Whenever the total of the individual monthly

benefits payable to all the beneficiaries entitled on one earnings record

exceeds the maximum, each dependent’s or survivor’s benefit is proportionately reduced to bring the total within the maximum. Benefits payable to

divorced spouses or surviving divorced spouses are not reduced under the

family maximum provision.

Medicare. A nationwide, Federally administered health insurance program

authorized in 1965 to cover the cost of hospitalization, medical care, and
Appendices

200

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. The age at which a person may first become entitled to unreduced retirement benefits. For persons reaching age 62 before

2000, the normal retirement age is 65. It will increase gradually to 67 for persons reaching that age in 2027 or later, beginning with an increase to 65

years and 2 months for persons reaching age 65 in 2003. See table V.C3.

Old-Age and Survivors Insurance (OASI) Trust Fund. See “Trust fund.”

Old-law base. Amount the contribution and benefit base would have been if

the discretionary increases in the base under the 1977 amendments had not

been enacted. The Social Security Amendments of 1972 provided for automatic annual indexing of the contribution and benefit base. The Social Security Amendments of 1977 provided ad hoc increases to the bases for

1979-81, with subsequent bases updated in accordance with the normal

indexing procedure. See table V.C2.

Open group unfunded obligation. This measure is computed as the excess

of the present value of the projected cost of the program over a specified

time period (for example the next 75 years or the infinite future) over the

sum of (1) the value of trust fund assets at the beginning of the period and (2)
201

Glossary

the present value of the projected tax income of the program, assuming

scheduled tax rates and benefit levels.

Other immigration. Individuals who enter the United States and are not

admitted for legal permanent residence. This includes individuals who are

legally admitted, but not seeking permanent residence as well as those who

are unauthorized.

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 where 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 where 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 on the rolls 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 wage 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. The population comprised of (i)

residents of the 50 States and the District of Columbia (adjusted for net census undercount); (ii) civilian residents of Puerto Rico, the Virgin Islands,

Guam, American Samoa and the Northern Mariana Islands; (iii) Federal

civilian employees and persons in the U.S. Armed Forces abroad and their

dependents; (iv) crew members of merchant vessels; and (v) all other U.S.

citizens abroad.
Appendices

202

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 2006, a worker receives one quarter of coverage (up to a total of

four) for each $970 of annual covered earnings. The amount of earnings

required for a quarter of coverage is subject to annual automatic increases in

proportion to increases in average wages. For amounts applicable for years

after 1978, 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.
203

Glossary

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. Retired-worker benefit data do not

include special age-72 benefits.

Retirement age. The age at which an individual establishes entitlement to

retirement benefits. See “Normal retirement age.”

Retirement earnings test. See “Earnings test.”

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. 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 Old-Age,

Survivors, and Disability Insurance program is authorized by title II of the

Social Security Act. 

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

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.
Appendices

204

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. This percentage can be used as a measure of the relative level of

cost during the period in question. 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 (a) the sum of the

present value of the cost during the period plus the present value of the targeted ending trust fund level, to (b) 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. This percentage can be used as a measure of the

relative level of income during the period in question. 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 (a) the sum of

the trust fund balance at the beginning of the period plus the present value of

the total income from taxes during the period, to (b) the present value of the

taxable payroll for the years in the period.
205

Glossary

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 average of taxable wages and taxable selfemployment 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).

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-
Appendices

206

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 as follows:

 • If the trust fund ratio for a fund exceeds 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 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, 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.

 • 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.
207

Glossary

 • 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 the adequacy of the trust fund level. Defined

as the assets at the beginning of the year, including advance tax transfers (if

any), 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 with the

funds available at the beginning of the year.

Unfunded obligation. See “Open group unfunded obligation” and “Closed

group unfunded obligation”.

Unnegotiated check. A check which has not been cashed 6 months after the

end of the month in which the check was issued. When a check has been outstanding for a year (i) the check is administratively cancelled by the Department of the Treasury and (ii) 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 where the services contributed to the successful rehabilitation of the beneficiaries.

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 exhausted.
List of Tables

208

II. OVERVIEW

II.B1 Summary of 2005 Trust Fund Financial Operations . . . . . . . . 4

II.B2 Tax Rates for 2005 and Later . . . . . . . . . . . . . . . . . . . . . . . . 4

II.C1 Ultimate Values of Key Demographic and Economic

Assumptions for the Long-Range (75-year) Projection Period . 6

II.D1 Projected Maximum Trust Fund Ratios Attained and Trust Fund

Exhaustion Dates Under the Intermediate Assumptions . . . . . 10

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

Under Intermediate Assumptions. . . . . . . . . . . . . . . . . . . . . . 13

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND

LEGISLATIVE CHANGES IN THE LAST YEAR

III.A1 Operations of the OASI Trust Fund, Calendar Year 2005 . . . . 19

III.A2 Operations of the DI Trust Fund, Calendar Year 2005 . . . . . . . 23

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

Calendar Year 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

III.A4 Comparison of Actual Calendar Year 2005 Trust Fund

Operations With Estimates Made in Prior Reports . . . . . . . . . 25

III.A5 Distribution of Benefit Payments by Type of Beneficiary or 

Payment, Calendar Years 2004 and 2005 . . . . . . . . . . . . . . . . 26

III.A6 Administrative Expenses as a Percentage of Contribution Income 

and of Total Expenditures, Calendar Years 2001-05 . . . . . . . . 27

III.A7 Trust Fund Investment Transactions, Calendar Year 2005 . . . . 27

IV. ACTUARIAL ESTIMATES

IV.A1 Operations of the OASI Trust Fund, Calendar Years 2001-15 . 32

IV.A2 Operations of the DI Trust Fund, Calendar Years 2001-15 . . . 35

IV.A3 Operations of the Combined OASI and DI Trust Funds,

Calendar Years 2001-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

IV.A4 Reasons for Change in Trust Fund Ratios at the Beginning 

of the Tenth Year of Projection . . . . . . . . . . . . . . . . . . . . . . . 39

IV.B1 Estimated Annual Income Rates, Cost Rates, and Balances

Calendar Years 1990-2080 . . . . . . . . . . . . . . . . . . . . . . . . . . 43

IV.B2 Covered Workers and Beneficiaries, Calendar Years 1945-2080 47

IV.B3 Estimated Trust Fund Ratios, Calendar Years 2006-80 . . . . . . 52

IV.B4 Components of Summarized Income Rates and Cost Rates, 

Calendar Years 2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

IV.B5 Components of 75-Year Actuarial Balance

Under Intermediate Assumptions (2006-80). . . . . . . . . . . . . . 57
List of Tables

209

IV.B6 Unfunded OASDI Obligations for 1935 (Program Inception)

Through the Infinite Horizon. . . . . . . . . . . . . . . . . . . . . . . . . 59

IV.B7 Present Values of OASDI Cost Less Tax Revenue and

Unfunded Obligations for Program Participants . . . . . . . . . . . 60

IV.B8 Comparison of Estimated Long-Range Actuarial Balances With

the Minimum Allowable in the Test for Close Actuarial Balance,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 63

IV.B9 Reasons for Change in the 75-Year Actuarial Balance

Under Intermediate Assumptions. . . . . . . . . . . . . . . . . . . . . . 65

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

V.A1 Principal Demographic Assumptions, Calendar Years 1940-2080 76

V.A2 Social Security Area Population as of July 1 and

Dependency Ratios, Calendar Years 1950-2080 . . . . . . . . . . . 78

V.A3 Period Life Expectancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

V.A4 Cohort Life Expectancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

V.B1 Principal Economic Assumptions . . . . . . . . . . . . . . . . . . . . . 88

V.B2 Additional Economic Factors . . . . . . . . . . . . . . . . . . . . . . . . 94

V.C1 Cost-of-Living Benefit Increases, Average Wage Index, 

Contribution and Benefit Bases, and Retirement Earnings

Test Exempt Amounts, 1975-2015 . . . . . . . . . . . . . . . . . . . . . . . 98

V.C2 Selected Wage-Indexed Program Amounts, 

Calendar Years 1978-2015 . . . . . . . . . . . . . . . . . . . . . . . . . . 101

V.C3 Legislated Changes in Normal Retirement Age and Delayed 

Retirement Credits, for Persons Reaching Age 62 in Each

Year 1986 and Later . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

V.C4 OASI Beneficiaries With Benefits in Current-Payment Status 

at the End of Calendar Years 1945-2080 . . . . . . . . . . . . . . . . 112

V.C5 Long-Range Ultimate Disabled Worker Age-Sex-Adjusted 

Incidence Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

V.C6 DI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1960-2080 . . . . . . . . . . . . . . . . 119
List of Tables

210

VI. APPENDICES

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS

VI.A1 Contribution and Benefit Base and Contribution Rates . . . . . . 125

VI.A2 Historical Operations of the OASI Trust Fund, 

Calendar Years 1937-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . 129

VI.A3 Historical Operations of the DI Trust Fund, 

Calendar Years 1957-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . 131

VI.A4 Historical Operations of the Combined OASI and DI Trust

Funds, Calendar Years 1957-2005 . . . . . . . . . . . . . . . . . . . . . 133

VI.A5 Assets of the OASI Trust Fund, End of Calendar Years

2004 and 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

VI.A6 Assets of the DI Trust Fund, End of Calendar Years

2004 and 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

B. HISTORY OF ACTUARIAL BALANCE ESTIMATES

VI.B1 Long-Range OASDI Actuarial Balances as Shown 

in the Trustees Reports for 1982-2006 . . . . . . . . . . . . . . . . . . 140

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2015

VI.C1 Operations of the OASI Trust Fund, Fiscal Year 2005. . . . . . . 143

VI.C2 Operations of the DI Trust Fund, Fiscal Year 2005 . . . . . . . . . 144

VI.C3 Operations of the Combined OASI and DI Trust Funds,

Fiscal Year 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

VI.C4 Operations of the OASI Trust Fund in Fiscal Years 2001-15 . . 146

VI.C5 Operations of the DI Trust Fund in Fiscal Years 2001-15 . . . . 147

VI.C6 Operations of the Combined OASI and DI Trust Funds in

Fiscal Years 2001-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

D. LONG-RANGE SENSITIVITY ANALYSIS

VI.D1 Sensitivity to Varying Fertility Assumptions . . . . . . . . . . . . . 150

VI.D2 Sensitivity to Varying Death-Rate Assumptions . . . . . . . . . . . 151

VI.D3 Sensitivity to Varying Net-Immigration Assumptions . . . . . . . 152

VI.D4 Sensitivity to Varying Real-Wage Assumptions . . . . . . . . . . . 154

VI.D5 Sensitivity to Varying CPI-Increase Assumptions. . . . . . . . . . 155

VI.D6 Sensitivity to Varying Real-Interest Assumptions . . . . . . . . . . 156

VI.D7 Sensitivity to Varying Disability Incidence Assumptions. . . . . 157

VI.D8 Sensitivity to Varying Disability Termination Assumptions. . . 158
List of Tables

211

E. STOCHASTIC PROJECTIONS

VI.E1 Long-Range Estimates Relating to the Actuarial Status of the 

Combined OASDI Program . . . . . . . . . . . . . . . . . . . . . . . . . 165

F. ESTIMATES FOR OASDI AND HI, SEPARATE AND COMBINED

VI.F1 Contribution Rates for the OASDI and HI Programs. . . . . . . . 167

VI.F2 Estimated OASDI and HI Annual Income Rates, Cost Rates, 

and Balances, Calendar Years 2006-80 . . . . . . . . . . . . . . . . . 168

VI.F3 Summarized OASDI and HI Income Rates and Cost Rates for 

Valuation Periods, Calendar Years 2006-80 . . . . . . . . . . . . . . 170

VI.F4 OASDI and HI Annual and Summarized Income, Cost, and

Balance as a Percentage of GDP, Calendar Years 2006-80. . . . 173

VI.F5 Ratio of OASDI Taxable Payroll to GDP, Calendar Years

2006-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

VI.F6 Selected Economic Variables, Calendar Years 2005-80 . . . . . . 178

VI.F7 Operations of the Combined OASI and DI Trust Funds,

in Constant 2006 Dollars, Calendar Years 2006-80 . . . . . . . . . 180

VI.F8 Operations of the Combined OASI and DI Trust Funds,

in Current Dollars, Calendar Years 2006-80 . . . . . . . . . . . . . . 182

VI.F9 OASDI and HI Annual Income Excluding Interest, Cost, and

Balance in Current Dollars, Calendar Years 2006-80 . . . . . . . 184

VI.F10 Estimated Annual Scheduled Benefit Amounts for Retired

Workers With Various Pre-Retirement Earnings Patterns Based

on Intermediate Assumptions, Calendar Years 2006-80. . . . . . 187

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 . . . . . . . . . . . . . . . . . 190

VI.G2 Benefit Disbursements Under the OASDI Program

With Respect to Disabled Beneficiaries . . . . . . . . . . . . . . . . . 191
List of Figures

212

II. OVERVIEW

II.D1 Short-Range OASDI Trust Fund Ratios . . . . . . . . . . . . . . . . . 7

II.D2 OASDI Income and Cost Rates Under Intermediate

Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

II.D3 Number of Covered Workers Per OASDI Beneficiary. . . . . . . 9

II.D4 Cumulative OASDI Income Less Cost, Based on

Present Law Tax Rates and Scheduled Benefits . . . . . . . . . . . 11

II.D5 OASDI Cost and Scheduled Tax Revenue as a Percentage

of GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

II.D6 OASDI Annual Balances: 2005 and 2006 Trustees Reports. . . 14

II.D7 Long-Range OASDI Trust Fund Ratios Under Alternative 

Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

IV. ACTUARIAL ESTIMATES

IV.A1 Short-Range OASI and DI Trust Fund Ratios. . . . . . . . . . . . . 31

IV.B1 Long-Range OASI and DI Annual Income Rates and

Cost Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

IV.B2 Number of OASDI Beneficiaries Per 100 Covered Workers . . 49

IV.B3 Long-Range OASI and DI Trust Fund Ratios. . . . . . . . . . . . . 53

IV.B4 Test of Long-Range Close Actuarial Balance . . . . . . . . . . . . . 64

IV.B5 OASDI Annual Balances: 2005 and 2006 Reports . . . . . . . . . 67

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

V.C1 Primary-Insurance-Amount Formula for the 2006 Cohort . . . . 100

V.C2 Maximum-Family-Benefit Formula for the 2006 Cohort . . . . . 100

V.C3 DI Disabled Worker Incidence Rates, 1970-2015 . . . . . . . . . . 115

VI. APPENDICES

VI.E1 Annual Trust Fund Ratios. . . . . . . . . . . . . . . . . . . . . . . . . . . 163

VI.E2 Annual Cost Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

VI.F1 Estimated OASDI Income and Cost in Constant Dollars,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 181
213

Index

A

Actuarial balance 7, 10, 40, 104, 138, 149

Actuarial balance, long-range test 63

Actuarial deficit 2, 10, 16, 55, 170

Actuarial estimates, LR 40

Actuarial estimates, SR 29

Adjusted program amounts 96

Administrative expenses 4, 27, 41, 121, 128, 143, 171, 179

Advance tax transfers 50, 130

Amendments 28

Annual balance 13, 40, 65

Assets 2, 4, 7, 21, 29, 41, 128, 143, 156, 166, 177

Assumptions 2, 7, 41, 69, 83, 96, 138, 149, 167, 171, 176, 189

Automatic cost-of-living benefit increase 4, 33, 84, 96

Auxiliary benefits 106

Average benefits 120

Average earnings assumptions 85

Average indexed monthly earnings (AIME) 99

Average wage index 96, 176

Award 107

B

Baby-boom generation 2, 8, 16, 34, 42, 89, 115, 172

Bend points 99

Beneficiaries, DI 113

Beneficiary 9, 33, 46, 69, 97, 141, 150, 171, 179, 189

Beneficiary, OASI 107

Benefit payments 4, 8, 30, 33, 41, 121, 128, 143, 155, 171, 179, 190

Benefit termination 6, 36

Best estimate 6, 16, 29, 69

Board of Trustees 29, 83, 124

Book value 135

C

Close actuarial balance 40, 61

Closed group unfunded obligation 59, 60, 194

Constant dollars 181

Consumer Price Index 84, 154, 176, 193

Contribution and benefit base 31, 86, 97, 125, 176, 193

Contributions 4, 124, 143, 166, 171, 179, 192

Cost rate 3, 8, 41, 104, 166

Cost-of-living adjustment 96

Covered earnings 4, 96, 175

Covered employment 6, 31, 85, 103, 124, 153

Covered worker 46, 103, 151

Creditable earnings 195
Index

214

Current dollars 176

Current-payment status 34, 117, 193

D

Deemed wage credit 41, 104, 124

Delayed retirement credit 103

Demographic assumptions 6, 13, 29, 41, 70, 90, 96, 138, 177, 192

Deterministic model 160, 165, 196

DI beneficiaries 113

Disability 124, 152, 189

Disability incidence rate 51, 69, 114, 152, 157, 192

Disability Insurance Trust Fund 194

Disability termination rate 158

Disabled-worker benefit 114, 196

Disbursements 18, 19, 20, 22, 23, 24, 29, 143, 144, 145, 190, 191

E

Earnings 2, 4, 30, 41, 85, 97, 124, 139, 166, 175, 176, 192

Earnings test 86, 97, 193

Economic assumptions 6, 13, 29, 39, 41, 83, 90, 96, 138, 177, 192

Excess wages 41, 104, 177

Expenditures 2, 4, 6, 22, 25, 27, 29, 33, 36, 50, 128, 129, 131, 133, 196

F

Federal Insurance Contributions Act 166, 194

Fertility assumptions 70

Financial interchange 4, 121, 128

Fiscal year 74, 130, 143

Full advance funding 197

G

General Fund of the Treasury 32, 33, 122, 126, 171, 179, 192, 195

General fund reimbursement 197

Gross domestic product 3, 46, 69, 83, 171

Gross domestic product projections 91

H

High cost assumptions 6, 15, 30, 42, 69, 83, 116, 149, 167, 171, 176, 192

Hospital Insurance program 125, 166, 200

Hospital Insurance Trust Fund 171

I

Immigration 6, 69, 70, 74, 76, 152, 160, 192, 198

Immigration assumptions 74

Income rate 3, 8, 41, 166

Inflation 6, 69, 84, 176, 192

Inflation assumptions 84

Insured population 6, 105
215

Index

Insured status 34, 101

Interest 30, 92, 127, 138, 143, 167, 171, 177, 192

Interest rate 31, 69, 127, 138, 156, 177, 192

Interest rate projections 92

Interfund borrowing 130, 195

Intermediate assumptions 29, 31, 33, 42, 69, 116, 149, 167, 171, 176, 180,

181, 189, 192

L

Labor force projections 89

Legal immigration 74, 77, 199

Life expectancy 2, 16, 69, 80, 89, 199

Life expectancy estimates 79

Long range 7, 40, 70, 83, 108, 138, 166, 171, 176

Low cost assumptions 6, 15, 33, 42, 69, 116, 149, 167, 176, 192

Lump-sum death payment 121

M

Maximum family benefit 100

Medicare 72, 200

Military service 32, 41, 86, 104, 122, 124, 198

N

National average wage index 96, 176

Normal retirement age 97, 185, 196

O

OASI beneficiaries 107

Old-Age and Survivors Insurance Trust Fund 124, 194

Old-law base 101

Open group unfunded obligation 2, 7, 13, 40, 56, 57, 165, 194, 200

Other immigration 74, 152, 160, 200

P

Par value 127, 194

Partial advance funding 201

Pay-as-you-go financing 138

Payroll taxes 2, 16, 54, 55, 96, 104, 141, 149, 166, 179

Population estimates 77

Population in the Social Security area 31, 48, 77, 89, 104, 152

Present value 138

Primary insurance amount (PIA) 99

Productivity assumptions 83

Q

Quarters of coverage 41, 195
Index

216

R

Railroad Retirement 41, 101, 121, 128, 143, 166, 171, 179, 195

Reallocation of tax rates 202

Real-wage differential 87, 153

Recession 29, 83

Retired-worker benefit 107, 151, 189

Retirement age 8, 36, 42, 97, 172, 185, 196

Retirement earnings test 86, 97

S

Self-employment 41, 84, 104, 124, 167, 194

Self-Employment Contributions Act 194

Sensitivity analysis 149

Short range 7, 29, 50, 83, 107, 116

Social Security Act 96, 127, 176, 189, 194

Social Security amendments 28

Solvency 13, 30, 40, 203

Special public-debt obligation 33, 95, 127, 156, 177

Stochastic projections 83, 160

Substantial gainful activity 113, 196

Summarized balance 172

Summarized income and cost rates 54, 138, 149, 169, 192

Supplemental Security Income 34, 143

Supplementary Medical Insurance program 166, 200

Survivor benefit 2, 5, 111, 193

T

Taxable earnings 30, 48, 97, 124, 139, 175, 193

Taxable payroll 2, 7, 16, 41, 84, 104, 138, 150, 166, 171, 176, 195

Taxable self-employment income 124, 205

Taxable wages 105, 126, 205

Taxation of benefits 4, 41, 122, 171, 179, 198

Taxes 4, 96, 124, 167, 195

Termination 36, 69

Termination rate 6, 36, 107, 158, 192

Test of short-range financial adequacy 30, 62, 203

Total fertility rate 70, 149

Trust fund financial operations 4, 18, 30, 124

Trust fund ratio 7, 29, 40, 49, 130, 146, 207
217

Index

U

Unemployment projections 89

Unfunded obligation 2, 7, 11, 13, 40, 56, 57, 60, 165, 194, 200, 207

Uninsured persons 122

Unnegotiated check 130, 143

V

Valuation period 10, 40, 138, 149, 169, 192

Vocational rehabilitation 41, 128, 144, 171, 179, 191, 195

Y

Year of exhaustion 8, 10, 16, 40, 52
218

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