110th Congress, 2d Session – – – – – – – – – – – – – – House Document 110-104

THE 2008 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 2008 ANNUAL REPORT OF THE BOARD OF TRUSTEES OF THE

FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND FEDERAL

DISABILITY INSURANCE TRUST FUNDS

April 10, 2008.—Referred to the Committee on Ways and Means

 and ordered to be printed

U.S. GOVERNMENT PRINTING OFFICE

41-188 WASHINGTON: 2008
.

.
CONTENTS

(V)

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

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

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

B. TRUST FUND FINANCIAL OPERATIONS IN 2007 . . . . . . . 4

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

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

E. CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND

LEGISLATIVE CHANGES IN THE LAST YEAR . . . . . . . . . . 20

A. OPERATIONS OF THE OLD-AGE AND SURVIVORS 

INSURANCE (OASI) AND DISABILITY INSURANCE (DI) 

TRUST FUNDS, IN CALENDAR YEAR 2007 . . . . . . . . . . . . 20

1. OASI Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

2. DI Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

3. OASI and DI Trust Funds, Combined . . . . . . . . . . . . . . . . . . 27

B. SOCIAL SECURITY AMENDMENTS SINCE THE

2007 REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

IV. ACTUARIAL ESTIMATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

A. SHORT-RANGE ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . 32

1. Operations of the OASI Trust Fund. . . . . . . . . . . . . . . . . . . . 33

2. Operations of the DI Trust Fund . . . . . . . . . . . . . . . . . . . . . . 36

3. Operations of the Combined OASI and DI Trust Funds . . . . . 40

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

Estimates From the 2007 Report . . . . . . . . . . . . . . . . . . . . . . 41

B. LONG-RANGE ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . . 43

1. Annual Income Rates, Cost Rates, and Balances . . . . . . . . . . 44

2. Comparison of Workers to Beneficiaries. . . . . . . . . . . . . . . . 49

3. Trust Fund Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

4. Summarized Income Rates, Cost Rates, and Balances . . . . . . 56

5. Additional Measures of OASDI Unfunded Obligations . . . . . 60

6. Test of Long-Range Close Actuarial Balance . . . . . . . . . . . . 63

7. Reasons for Change in Actuarial Balance From Last Report . . 67
(VI)

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

A. DEMOGRAPHIC ASSUMPTIONS AND METHODS . . . . . . . 73

1. Fertility Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

2. Mortality Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

3. Immigration Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 76

4. Total Population Estimates. . . . . . . . . . . . . . . . . . . . . . . . . . 81

5. Life Expectancy Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . 83

B. ECONOMIC ASSUMPTIONS AND METHODS . . . . . . . . . . . 87

1. Productivity Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 87

2. Price Inflation Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . 88

3. Average Earnings Assumptions . . . . . . . . . . . . . . . . . . . . . . 89

4. Assumed Real-Wage Differentials . . . . . . . . . . . . . . . . . . . . 91

5. Labor Force and Unemployment Projections . . . . . . . . . . . . . 93

6. Gross Domestic Product Projections . . . . . . . . . . . . . . . . . . . 95

7. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

C. PROGRAM-SPECIFIC ASSUMPTIONS AND METHODS . . . 100

1. Automatically Adjusted Program Parameters. . . . . . . . . . . . . 100

2. Covered Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

3. Taxable Payroll and Payroll Tax Revenue . . . . . . . . . . . . . . . 108

4. Insured Population. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

5. Old-Age and Survivors Insurance Beneficiaries. . . . . . . . . . . 111

6. Disability Insurance Beneficiaries. . . . . . . . . . . . . . . . . . . . . 117

7. Average Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

8. Benefit Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

9. Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

10. Railroad Retirement Financial Interchange . . . . . . . . . . . . . . 129

11. Benefits to Uninsured Persons . . . . . . . . . . . . . . . . . . . . . . . 129

12. Military-Service Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . 129

13. Income From Taxation of Benefits . . . . . . . . . . . . . . . . . . . . 130
(VII)

VI. APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS. . 131

B. HISTORY OF ACTUARIAL BALANCE ESTIMATES . . . . . . 144

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2017 . . . . . . . . . . . . . . . . . . . . . . 149

D. LONG-RANGE SENSITIVITY ANALYSIS . . . . . . . . . . . . . . 155

1. Total Fertility Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

2. Death Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

3. Net Immigration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

4. Real-Wage Differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159

5. Consumer Price Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

6. Real Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162

7. Disability Incidence Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 163

8. Disability Termination Rates . . . . . . . . . . . . . . . . . . . . . . . . 164

E. STOCHASTIC PROJECTIONS. . . . . . . . . . . . . . . . . . . . . . . . 166

1. Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

2. Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

3. Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168

F. ESTIMATES FOR OASDI AND HI, SEPARATE AND 

COMBINED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172

1. Estimates as a Percentage of Taxable Payroll. . . . . . . . . . . . . 172

2. Estimates as a Percentage of Gross Domestic Product . . . . . . 177

3. Estimates in Dollars. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

G. ANALYSIS OF BENEFIT DISBURSEMENTS FROM THE

OASI TRUST FUND WITH RESPECT TO DISABLED 

BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195

H. GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199

LIST OF TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216

LIST OF FIGURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222

STATEMENT OF ACTUARIAL OPINION. . . . . . . . . . . . . . . 227
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THE 2008 ANNUAL REPORT OF THE BOARD OF

TRUSTEES OF THE FEDERAL OLD-AGE AND

SURVIVORS INSURANCE AND FEDERAL DISABILITY

INSURANCE TRUST FUNDS

I. INTRODUCTION

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

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

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

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

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

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

monthly benefits are paid to disabled workers and their families.

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

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

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

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

the President, subject to confirmation by the Senate. The Deputy Commissioner of the Social Security Administration (SSA) is designated as Secretary

of the Board.

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

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

DI Trust Funds. This annual report, for 2008, is the 68th such report.
Overview

2

II. OVERVIEW

A. HIGHLIGHTS

The report’s major findings are summarized below.

In 2007

At the end of 2007, almost 50 million people were receiving benefits:

34 million retired workers and their dependents, 6 million survivors of

deceased workers, and 9 million disabled workers and their dependents. During the year an estimated 163 million people had earnings covered by Social

Security and paid payroll taxes. Total benefits paid in 2007 were $585 billion. Income was $785 billion, and assets held in special issue U.S. Treasury

securities grew to $2.2 trillion. 

Short-Range Results

The OASI Trust Fund and the combined OASI and DI Trust Funds are adequately financed over the next 10 years under the intermediate assumptions.

The DI Trust Fund is expected to remain solvent over the next 10 years, but

does not satisfy the short-range test of financial adequacy because assets are

estimated to fall below 100 percent of annual expenditures before the end of

2017. The combined assets of the OASI and DI Trust Funds are projected to

increase from $2,238 billion at the beginning of 2008, or 359 percent of

annual expenditures, to $4,273 billion at the beginning of 2017, or

385 percent of annual expenditures in that year. Combined assets were projected in last year’s report to rise to 362 percent of annual expenditures at the

beginning of 2008, and 403 percent at the beginning of 2017. 

Long-Range Results

Under the intermediate assumptions, OASDI cost will increase more rapidly

than tax income between about 2010 and 2030 due to the retirement of the

large baby-boom generation. After 2030, increases in life expectancy and the

relatively low fertility rates experienced since the baby boom will continue

to increase Social Security system costs relative to tax income, but more

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

the annual gap will be covered with cash from redemptions of special obligations of the Treasury that make up the trust fund assets until these assets are

exhausted in 2041. 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 1.70 percent of taxable payroll, 0.26 percentage point smaller

than in last year’s report. The open group unfunded obligation for OASDI

over the 75-year period is $4.3 trillion in present value, and is $0.4 trillion
3

Highlights

less than the measured level of a year ago. In the absence of any changes in

assumptions, methods, and starting values, the unfunded obligation would

have risen to almost $5.1 trillion due to the change in the valuation date.

The OASDI annual cost rate is projected to increase from 11.20 percent of

taxable payroll in 2008, to 16.41 percent in 2030, and to 17.50 percent in

2082, or to a level that is 4.20 percent of taxable payroll more than the projected income rate for 2082. In last year’s report the OASDI cost for 2081

was estimated at 18.55 percent, or 5.20 percent of payroll more than the

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

domestic product (GDP), OASDI cost is estimated to rise from the current

level of 4.3 percent of GDP, to 6.0 percent in 2030, and then to decline to

5.8 percent in 2082.

The improvement in the long-range actuarial status of the OASDI program

indicated in this report is principally the result of changes in immigration

methods and assumptions. These changes resulted in substantial reductions

in the projected cost of the program, particularly in the latter half of the longrange projection period.

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 2041 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 1.70 percentage points, benefits could be reduced during the period in a manner equivalent to an immediate and permanent reduction of 11.5 percent, general revenue transfers equivalent to $4.3 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. Making adjustments sooner will allow them to be

spread over more generations. Social Security plays a critical role in the lives

of 50 million beneficiaries and 164 million covered workers and their families in 2008. With informed discussion, creative thinking, and timely legislative action, present and future Congresses and Presidents can ensure that

Social Security continues to protect future generations.
Overview

4

B. TRUST FUND FINANCIAL OPERATIONS IN 2007

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

the DI and the combined OASDI Trust Funds in calendar year 2007.

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

In 2007, 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 $97,500 in 2007 and is increased each year automatically (to $102,000

in 2008) as the average wage increases. The tax rates scheduled under current law for 2007 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 specified levels to Federal personal income taxation, and 14 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 2007

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

Table II.B1.—Summary of 2007 Trust Fund Financial Operations

Amounts (in billions)

OASI DI OASDI

Assets at the end of 2006 . . . . . . . . . . . . . . . . . . . . . . $1,844.3 $203.8 $2,048.1

Total income in 2007 . . . . . . . . . . . . . . . . . . . . . . . . . 675.0 109.9 784.9

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . 560.9 95.2 656.1

Taxation of benefits . . . . . . . . . . . . . . . . . . . . . . . . 17.2 1.4 18.6

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97.0 13.2 110.2

Total expenditures in 2007. . . . . . . . . . . . . . . . . . . . . 495.7 98.8 594.5

Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . 489.1 95.9 584.9

Railroad Retirement financial interchange . . . . . . 3.6 .4 4.0

Administrative expenses . . . . . . . . . . . . . . . . . . . . 3.1 2.5 5.5

Net increase in assets in 2007 . . . . . . . . . . . . . . . . . . 179.3 11.1 190.4

Assets at the end of 2007 . . . . . . . . . . . . . . . . . . . . . . 2,023.6 214.9 2,238.5

Table II.B2.—Tax Rates for 2007 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 2007 Operations

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

OASDI Trust Funds in 2007 went to pay retirement, survivor, and disability

benefits totaling $584.9 billion. The financial interchange with the Railroad

Retirement program resulted in a payment of $4.0 billion from the combined

OASDI Trust Funds, or about 0.7 percent of total expenditures. The administrative expenses of the Social Security program were $5.5 billion, or about

0.9 percent of total expenditures.

Assets of the trust funds provide a reserve to pay benefits whenever total program cost exceeds income. Trust fund assets increased by $190.4 billion in

2007 because income to each fund exceeded expenditures. At the end of

2007, the combined assets of the OASI and the DI Trust Funds were

359 percent of estimated expenditures for 2008, up from an actual level of

345 percent at the end of 2006.
Overview

6

C. ASSUMPTIONS ABOUT THE FUTURE

Future income and expenditures of the OASI and DI Trust Funds will depend

on many factors, including the size and characteristics of the population

receiving benefits, the level of monthly benefit amounts, the size of the

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

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

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

employment rates, productivity gains, wage increases, inflation, and many

other demographic, economic, and program-specific factors.

The intermediate demographic and economic assumptions shown in table

II.C1, 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 annual review helps to ensure that the assumptions 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 25 years. See chapter V for details, including historical

values and projected values prior to reaching the ultimate.

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 2032 to 2082. . . . . . . . . . .73 .32 1.21

Average annual net immigration (in thousands) over 

the period 2008-82. . . . . . . . . . . . . . . . . . . . . . . . . . 1,070 1,375 790

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 (2008-2017), the Trustees measure financial adequacy by

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

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

each year at least equal to projected cost for the year—is considered a good

indication of a trust fund’s ability to cover most short-term contingencies.

The projected trust fund ratios for OASI alone, and for OASI and DI combined, under the intermediate assumptions exceed 100 percent throughout

the short-range period and therefore OASI and OASDI satisfy the Trustees’

short-term test of financial adequacy. Considering the DI program alone,

however, its trust fund ratio is projected to fall below the 100 percent level

before the end of 2017. Thus, DI fails to satisfy the Trustees’ short-term test

of financial adequacy. Figure II.D1 below shows that the trust fund ratios for

the combined OASI and DI Trust Funds reach a peak level in 2014 and begin

declining thereafter.

 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%

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Calendar year

Historical Estimated

"Minimum" level for short-term financial adequacy
Overview

8

Long-Range Actuarial Estimates

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

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

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

open group unfunded obligation (expressed in present-value dollars and as

percentages of taxable payroll and gross domestic product (GDP)). Considering Social Security’s annual cost and income as a percentage of the total U.S.

economic output or GDP provides an additional important perspective. 

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

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

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

cost rate is projected to increase rapidly and first exceed the income rate in

2017, producing cash-flow deficits thereafter. Redemption of trust fund

assets will allow continuation of full benefit payments on a timely basis until

2041, when the trust funds are projected to 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 2041.

Even if a trust fund’s assets are exhausted, however, tax income will continue to flow into the fund. Present tax rates are projected to be sufficient to

pay 78 percent of scheduled benefits after trust fund exhaustion in 2041 and

75 percent of scheduled benefits in 2082.

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

[As a percentage of taxable payroll]

0%

5%

10%

15%

20%

25%

2005 2015 2025 2035 2045 2055 2065 2075 2085

Calendar year

Cost: Scheduled and 

payable benefits

Income

Payable benefits as percent

of scheduled benefits:

2008-40: 100%

2041: 78%

2082: 75%

Cost: Scheduled but not 

fully payable benefits

Expenditures: Income = payable 

benefits starting in the year the trust 

funds are exhausted (2041)
9

Future Financial Status

Social Security’s cost rate is projected to rise rapidly from 2010 through

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

Thereafter, the cost rate is estimated to rise at a slower rate for about 5 years

and then to remain fairly stable for the next 35 years. Continued reductions

in death rates and maintaining birth rates at levels well below those from the

baby-boom era and before will cause a continued increase in the average age

of the population and will raise the cost rate from 17.0 percent of taxable

payroll in 2070 to 17.5 percent by 2082 under the intermediate assumptions.

In a pure pay-as-you-go system (with no trust fund assets or borrowing

authority), this 17.5-percent cost rate would require that the combination of

the payroll tax (scheduled to total 12.4 percent) and proceeds from income

taxes on benefits (expected to be 0.9 percent of taxable payroll in 2082) be

equal to 17.5 percent of taxable payroll to pay all currently scheduled benefits. After 2082, the increase in the average age of the population is likely to

continue and to increase the gap between OASDI cost and income rates.

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. There were about 3.3 workers for

every OASDI beneficiary in 2007. This ratio has been extremely stable,

remaining between 3.2 and 3.4 since 1974. However, the baby-boom generation will have largely retired by 2030, and the ratio of workers to beneficiaries is projected to 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.
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 could be added to

the current law income rate for each of the next 75 years, or subtracted from

the cost rate for each year, to bring the funds into actuarial balance. Because

the effects of future changes are unlikely to follow this pattern, this measure

should be viewed only as providing a rough indication of the amount of

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

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

Trust Fund Exhaustion Dates Under the Intermediate Assumptions

OASI DI OASDI

Maximum trust fund ratio (percent). . . . . . . . . . . . . . 445 199 395

Year attained. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 2008 2014

Year of trust fund exhaustion . . . . . . . . . . . . . . . . . . . 2042 2025 2041

0

1

2

3

4

1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Historical Estimated
11

Future Financial Status

change that is needed over the 75-year period as a whole. In this report, the

actuarial balance under the intermediate assumptions is a deficit of

1.70 percent of taxable payroll for the combined OASI and DI Trust Funds.

The actuarial deficit was 1.95 percent in the 2007 report and has been in the

range of 1.86 percent to 2.19 percent for the prior 10 reports. The main reason

for the decline in the actuarial deficit from the level in last year’s report is the

improved method used for projecting the other-immigrant population, which,

taken alone, reduces the actuarial deficit by about 0.3 percent of taxable payroll.

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

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

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

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

$2.7 trillion in 2017 (in present value) and then turns downward. This cumulative amount continues to be positive, indicating trust fund assets, or

reserves, through 2040. However, after 2040 this cumulative amount

becomes negative, indicating a net unfunded obligation. Through the end of

2082, the combined funds have a present-value unfunded obligation of

$4.3 trillion. This unfunded obligation represents 1.6 percent of future taxable payroll and 0.6 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, 2008, in trillions]

-$5

-$4

-$3

-$2

-$1

$0

$1

$2

$3

2007 2022 2037 2052 2067 2082

Ending year of valuation period

Unfunded obligation

(negative)

Trust fund assets

(positive)

2041
Overview

12

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

annual cost and tax income as a share of U.S. economic output. Figure II.D5

shows that Social Security’s cost as a percentage of GDP is projected to

grow from 4.3 percent in 2008 to 6.0 percent in 2030, and then to peak at

about 6.1 percent in 2035. Thereafter, OASDI cost as a percent of GDP is

projected to decrease to about 5.8 percent by 2050, and to remain at that

level through 2082. However, Social Security’s scheduled tax revenue is

projected to begin declining within the next 5 years from its current level of

about 4.9 percent of GDP reaching about 4.4 percent by 2082. Income from

payroll taxes declines generally in relation to GDP in the future because an

increasing share of employee compensation is assumed to be provided in

fringe benefits, making wages a shrinking share of GDP. 

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

worsening 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 addition, summary measures for a time period

that extends to the infinite horizon are included in this report. These measures provide an additional indication of Social Security’s very long-run

 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

financial condition, but are subject to much greater uncertainty. These calculations show that extending the horizon beyond 75 years increases the

unfunded obligation. Over the infinite horizon, the shortfall (unfunded obligation) is $13.6 trillion in present value, or 3.2 percent of future taxable payroll and 1.1 percent of future GDP. These calculations of the shortfall

indicate that much larger changes may be required to achieve solvency

beyond the 75-year period as compared to changes needed to balance 75-

year period summary measures. The measured unfunded obligation over the

infinite horizon is unchanged from $13.6 trillion in last year’s report. In the

absence of any changes in assumptions, methods, and starting values, the

unfunded obligation over the infinite horizon would have risen to

$14.3 trillion due to the change in the valuation date. This reduction in the

unfunded obligation over the infinite horizon is largely the result of the changes

in immigration assumptions and methods. Expressed as percentages of taxable

payroll and of GDP, however, the measured unfunded obligation over the

infinite horizon declined from 3.5 percent and 1.2 percent, respectively in

last year’s report.

Uncertainty of the Projections

Significant uncertainty surrounds the intermediate assumptions and the

Trustees utilize several methods to help illustrate that uncertainty. One

approach is the use of low cost (alternative I) and high cost (alternative III)

assumptions. Figure II.D6 shows the projected trust fund ratios for the combined OASI and DI Trust Funds under the intermediate, low cost, and high

cost assumptions. The low cost alternative reflects a set of assumptions that

improves the projected financial status of the trust funds, relative to the

financial status under the intermediate set of assumptions. The low cost alternative includes a higher ultimate total fertility rate, slower improvement in

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

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

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

unemployment. These alternatives are not intended to suggest that all parameters would be likely to differ from the intermediate values in the same direction, but are intended to illustrate the effect of scenarios that are, on balance,

very favorable or unfavorable for the program’s financial status. The actual

outcome for future costs is unlikely to be as extreme as either of the outcomes portrayed by the low and high cost projections. The method for constructing these high and low cost projections does not provide an estimate of

the probability that actual experience will lie within or outside the range they

define.
Overview

14

This report also provides long-range sensitivity analysis for the OASDI program, varying one parameter at a time, in Appendix D. These estimates provide further illustrations of the uncertainty surrounding projections into the

future, but do not provide any measure of the probability that future outcomes will fall within or outside the ranges shown.

An alternative approach uses stochastic simulations to develop a range of

projections and does provide estimates of the probability that future outcomes will fall within or outside a given range. The results of the stochastic

simulations, discussed in more detail in Appendix E, suggest that trust fund

exhaustion is highly probable sometime during the 75-year period (see figure

II.D7). Further, the stochastic results suggest that outcomes as good as the low

cost alternative or as bad as the high cost alternative are unlikely. However, the

relationship between the stochastic results and the high and low cost alternatives

may change as the methodology for the stochastic simulations is further developed. As noted in Appendix E, future improvements and refinements are

expected to be more likely to expand rather than reduce the indicated range of

uncertainty.

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

[Assets as a percentage of annual cost]

0%

100%

200%

300%

400%

500%

600%

700%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Historical Estimated

III II

I
15

Future Financial Status

Changes From Last Year’s Report

The long-range OASDI actuarial deficit of 1.70 percent of taxable payroll for

this year’s report is smaller than the deficit of 1.95 percent of taxable payroll

shown in last year’s report under intermediate assumptions. Changes in

methodology are the main reason for the decrease in the deficit. The most

significant methodological change for this report is the introduction of a new

approach for projecting other (undocumented and temporary legal) immigration. Changes in several assumptions and recent data had largely offsetting

effects. For example, an increase in the assumed level of legal immigration

improved the OASDI actuarial balance by 0.07 percent of payroll, but this

improvement was offset by other changes in demographic assumptions and

starting values. For a detailed description of the specific changes identified in

table II.D2 below, see section IV.B.7 on page 67.

 Figure II.D7.—Annual Trust Fund Ratios

0%

100%

200%

300%

400%

500%

600%

2008 2023 2038 2053 2068 2083

Projection year

50%

97.5%

2.5%

90%

10%
Overview

16

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

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

decreased from $4.7 trillion (present discounted value as of January 1, 2007)

to $4.3 trillion (present discounted value as of January 1, 2008). The measured unfunded obligation would be expected to increase by about

$0.3 trillion due to advancing the valuation date by 1 year and including the

additional year 2082. However, changes in methods and assumptions

reduced the measured unfunded obligation by about $0.7 trillion, more than

fully offsetting the increase that would be expected in the absence of such

changes.

Figure II.D8 shows that this year’s projections of annual balances (non-interest income minus cost) are slightly lower than those in last year’s report

through 2024 principally because of lower death rates and recent economic

trends. Thereafter, annual balances are somewhat higher for the rest of the

long-range projection period mostly due to changes in immigration assumptions and methods. Section IV.B.7 on page 67 provides a detailed presentation of these changes.

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.99 1.93 13.92

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.68 2.19 15.87

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.69 -.27 -1.95

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 2007-81, to the valuation period of

this report, 2008-82, the relatively large negative annual balance for 2082 is included. This change in the

valuation period results in a larger long-range actuarial deficit. The fund balance at the end of 2007, i.e., at

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

-.06 -.01 -.06

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

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

Disability assumptions . . . . . . . . . . . . . . . . . . . . . . . . .00 .00 .00

Methods and programmatic data . . . . . . . . . . . . . . . . +.31 +.01 +.32

Total change in actuarial balance . . . . . . . . . . . . . . . . . . +.23 +.03 +.26

Shown in this report:

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.46 -.24 -1.70

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01 1.93 13.94

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.46 2.17 15.63
17

Future Financial Status

 Figure II.D8.—OASDI Annual Balances: 2007 and 2008 Trustees Reports

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

-6%

-4%

-2%

0%

2%

4%

2005 2015 2025 2035 2045 2055 2065 2075 2085

Calendar year

2007 Report

2008 Report
Overview

18

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 (compared to the baby-boom

period), 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 scheduled benefits until they

become exhausted in 2041. At that time annual tax income to the trust funds

is projected to equal about 78 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 2082, annual tax income is projected to be about 75 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 1.70 percent of taxable payroll—0.26 percentage

point smaller than the 1.95 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 increases were made equivalent to immediately and permanently increasing the Social Security payroll tax from its current level of

12.4 percent (for employees and employers combined) to 14.10 percent.

Alternatively, changes could be made equivalent to reducing all current and

future benefits by about 11.5 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

2041, then the effects of changes would be more concentrated on fewer years

and fewer cohorts: 

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

fully in every year starting in 2041. In this case, the payroll tax would

be increased to 15.94 percent at the point of trust fund exhaustion in

2041 and continue rising to 16.60 percent in 2082.

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

scheduled tax rates in each year beginning in 2041. Under this scenario,

benefits would be reduced 22 percent at the point of trust fund exhaustion in 2041, with reductions reaching 25 percent in 2082.

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

as a whole by specifically eliminating annual deficits after trust fund exhaus-
19

Conclusion

tion. 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 2082. As a result, ensuring solvency of the system beyond 2082 would likely require further changes beyond those

expected to be needed for 2082.

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. Making adjustments sooner will allow them to be

spread over more generations. In 2008, Social Security plays a critical role in

the lives of 50 million beneficiaries and 164 million covered workers, and

their families. With informed discussion, creative thinking, and timely legislative action, present and future Congresses and Presidents can ensure that

Social Security continues to protect future generations.

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

 • www.socialsecurity.gov/OACT/TR/TR08/index.html

 • www.cms.hhs.gov/ReportsTrustFunds/

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

20

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 2007

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

during calendar year 2007 is presented in this section. Chapter IV provides

projections for calendar years 2008 through 2085.

1. OASI Trust Fund

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

Survivors Insurance Trust Fund in calendar year 2007, and of the assets of

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

III.A1. As shown in the table, total trust fund receipts in 2007 amounted to

$675.0 billion, while disbursements totaled $495.7 billion, resulting in an

increase in trust fund assets during 2007 of $179.3 billion.

The reported income and disbursements for 2007 were both affected by a

transfer made from the OASI Trust Fund to the DI Trust Fund to correct a

long-standing, but small, error in the allocation of benefit payments between

the trust funds. For beneficiaries entitled to benefits both as disabled workers

(payable from the DI Trust Fund) and as disabled adult children of retired or

deceased workers (payable from the OASI Trust Fund), their benefit payments have initially been made entirely from the DI Trust Fund. Periodic

transfers from the OASI Trust Fund to reimburse the DI Trust Fund for the

share of benefits paid due to the disabled adult child entitlement have not

been made for many years. To correct the allocation error, on an estimated

basis for months through September 2007, a transfer from the OASI Trust

Fund to the DI Trust Fund was made in September 2007. The transfer totaled

$5.6 billion, consisting of a principal amount of $3.3 billion, the balance

being interest. Further details of the various components of trust fund income

and disbursements are discussed in the following paragraphs.

Included in total receipts during calendar year 2007 were $562.8 billion in

employment tax contributions. These contributions were partially offset by

transfers totaling $1.9 billion to the general fund for the estimated amount of

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

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

benefit base. 

 1 Data on trust fund operations are available on the Social Security website at:

www.socialsecurity.gov/OACT/ProgData/fundsQuery.html.
21

Calendar Year 2007 Operations

Net contributions thus amounted to $560.9 billion in 2007, an increase of

4.9 percent over the corresponding amount in 2006. This increase in OASI

tax contributions 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.)

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

Table III.A1.—Operations of the OASI Trust Fund, Calendar Year 2007

[In millions]

Total assets, December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,844,304

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $562,775

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

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,897

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 560,877

Income based on taxation of benefit payments:

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

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,047

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,192

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

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

1 Between -$0.5 and $0.5 million.

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,320

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, and (3) interest on certain reimbursements to the trust fund.

-2,355

Net investment income and interest adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 96,965

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675,035

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485,881

Transfer to the DI Trust Fund to correct a trust fund allocation error made on payments to certain dually entitled disabled beneficiaries . . . . . . . . . . . . . . . . . . . . 3,253

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -62

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

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 489,074

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . 3,575

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,519

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 560

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.

-4

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,075

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495,723

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,312

Total assets, December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,023,616
Financial Operations & Legislative Changes

22

Income based on taxation of benefits amounted to $17.2 billion in 2007.

About 99 percent of this income represents amounts credited to the trust

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

taxes by the Treasury. The remaining 1 percent of the total income from taxation of benefits represents amounts withheld from the benefits paid to nonresident aliens.

Special payments are made to uninsured persons who meet certain requirements. The costs associated with providing such payments are largely reimbursed from the General Fund of the Treasury. Accordingly, a transfer of

$12 thousand was made in 2007, reflecting costs incurred in fiscal year 2006.

The OASI Trust Fund was credited with interest netting $97.0 billion, which

consisted of (1) interest earned on the investments of the trust fund, (2) interest on transfers between the trust fund and the general fund account for the

Supplemental Security Income program due to adjustments in the allocation

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

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

reimbursements to the trust fund, including interest on the transfer related to

the trust fund allocation error described earlier. The remaining $569 thousand of receipts consisted of gifts received under the provisions authorizing

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

Of the $495.7 billion in total OASI disbursements, $489.1 billion was for net

benefit payments, including the reimbursable costs of vocational rehabilitation services.1 Excluding the $3.3 billion interfund transfer due to the trust

fund allocation error described earlier, net benefit payments would have been

$485.8 billion. This lower amount of net benefit payments in calendar year

2007 represents an increase of 5.5 percent over the corresponding adjusted

amount2 in calendar year 2006. This increase is due primarily to (1) an

increase in the total number of beneficiaries and (2) an increase in the average benefit amount. The increase in the average benefit amount in 2007 was

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

3.3 percent which became effective for December 2006 under the automaticadjustment 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

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

of retired or deceased workers who were receiving benefits on the basis of disabilities that began before age

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

those cases where the services contributed to the successful rehabilitation of the beneficiary.

 2 In calendar year 2006, net OASI benefit payments were $454.5 billion, but after excluding reimbursements totaling $5.9 billion related to voluntary income tax withholding, adjusted net benefit payments were

$460.4 billion.
23

Calendar Year 2007 Operations

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 2007.

The remaining $3.1 billion of disbursements from the OASI Trust Fund represented net administrative expenses. The expenses of administering the

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

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

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

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

experience develops and is analyzed, adjustments to the allocations of

administrative expenses for prior periods are effected by interfund transfers

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

the Supplemental Security Income program, with appropriate interest adjustments. As described earlier, the interest adjustments arising from the reallocation of administrative expenses are recorded in the trust fund accounting

under investment income.

In 2007, 82 percent of OASI net administrative expenses represented the cost

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

Social Security Administration ($2.5 billion in 2007). In addition, the

Department of the Treasury charges directly to the trust fund certain

expenses ($0.6 billion in 2007) that it incurs in helping to administer the

OASI program. In addition a relatively small adjustment ($257,483 in 2007)

to administrative expenses is an offset representing income from the sale of

excess supplies and equipment.

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

Treasury for administrative costs incurred by the Social Security Administration in performing certain legislatively mandated activities that are not

directly related to the OASI program. These reimbursements include the

costs associated with union activities related to administering the OASI program and providing information to participants in certain pension plans.

Such reimbursements totaled $4 million in 2007.

The assets of the OASI Trust Fund at the end of calendar year 2007 totaled

$2,023.6 billion, consisting of $2,024.4 billion in U.S. Government obligations and, as an offset, an extension of credit amounting to $0.8 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 2007 was 5.2 percent, as compared to 5.3 percent earned
Financial Operations & Legislative Changes

24

during calendar year 2006. Table VI.A5, presented in Appendix A, shows a

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

and year of maturity at the end of each year 2006 and 2007.

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

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, 2007, with an interest rate of 5.000 percent, were selected so that

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

over the 15-year period 2008-22. The amount of bonds purchased on June

30, 2007 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 2007, 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 $95.2 billion, an increase of 4.9 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, which accounted for

the change in contributions to the OASI Trust Fund.
25

Calendar Year 2007 Operations

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

Of the $98.8 billion in total disbursements, $95.9 billion was for net benefit

payments. Excluding the $3.3 billion interfund transfer due to the trust fund

allocation error, net benefit payments would have been $99.1 billion. This

amount represents an increase of 7.3 percent over the corresponding adjusted

amount ($92.4 billion) of benefit payments in calendar year 2006. This

increase in DI benefit payments was due to the same factors that resulted in

the net increase in benefit payments from the OASI Trust Fund. However,

the number of persons receiving benefits from the DI Trust Fund increased

more rapidly in 2007 than the number receiving benefits from the OASI

Trust Fund largely due to a) the current ages of the baby-boom generation, b)

Table III.A2.—Operations of the DI Trust Fund, Calendar Year 2007

[In millions]

Total assets, December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $203,808

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $95,565

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

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -322

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,243

Income based on taxation of benefit payments:

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

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,389

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,393

Reimbursement from the General Fund of the Treasury for costs of 

noncontributory wage credits for military service before 1957 . . . . . . . . . . . . . 8

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,843

Interest adjustments1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,367

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 13,210

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,854

Disbursements:

Benefit payments:

Monthly benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,086

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

on payments to certain dually entitled disabled beneficiaries . . . . . . . . . . . . . . . -3,253

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

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 61

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,865

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . 445

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,350

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

Miscellaneous reimbursements from the general fund2. . . . . . . . . . . . . . . . . . . . . . 15

Total administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,468

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,778

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,076

Total assets, December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,884

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, and (3) interest on certain

reimbursements to the trust fund.

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

related to administering the DI program.
Financial Operations & Legislative Changes

26

the recent 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, which

started to exceed non-interest income in 2005, continue to exceed such

income in 2007. However, as in 2005 and 2006, total DI income (including

interest) in 2007 exceeds total disbursements.

The assets of the DI Trust Fund at the end of calendar year 2007 totaled

$214.9 billion, consisting of $215.0 billion in U.S. Government obligations

and, as an offset, an extension of credit amounting to $0.2 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 2007 was 5.3 percent, as compared to 5.4 percent earned during calendar year 2006. Table VI.A6, presented in Appendix A, shows a detailed

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

of maturity at the end of each year 2006 and 2007.
27

Calendar Year 2007 Operations

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 2007

[In millions]

Total assets, December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,048,112

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $658,340

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

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2,220

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656,121

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 149

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,436

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,585

Reimbursement from the General Fund of the Treasury for costs of

noncontributory wage credits for military service before 1957 . . . . . . . . . . . . . . . 8

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

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

1 Between -$0.5 and $0.5 million.

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,163

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.

12

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 110,175

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 784,889

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 584,966

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -90

Payment for costs of vocational rehabilitation services for disabled beneficiaries 63

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584,939

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . 4,020

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,869

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663

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.

11

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,542

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 594,501

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190,388

Total assets, December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,238,500
Financial Operations & Legislative Changes

28

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 2007, as shown in the

2003-07 Annual Reports, with the corresponding actual amounts in 2007.1

l

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

legislation or other administrative initiatives that were unanticipated at the

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

At the end of calendar year 2007, about 49.9 million persons were receiving

monthly benefits under the OASDI program. Of these persons, about 40.9

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

annual reports.

Table III.A4.—Comparison of Actual Calendar Year 2007 Trust Fund Operations

With Estimates Made in Prior Reports 1

[Amounts in billions]

1 The estimates shown are based on the intermediate assumptions.

Net contributions 2

2 “Actual” contributions for 2007 reflect adjustments for prior calendar years (see Appendix A on page 133

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

estimated basis.

Net benefit payments

Amount

Difference

from actual

(percent) Amount

Difference

from actual

(percent)

OASI Trust Fund:

Estimate in 2003 report . . . . . . . . . . . . . . $573.2 2.2 $474.2 -2.4

Estimate in 2004 report . . . . . . . . . . . . . . 554.8 -1.1 462.4 -4.8

Estimate in 2005 report . . . . . . . . . . . . . . 554.8 -1.1 469.9 -3.3

Estimate in 2006 report . . . . . . . . . . . . . . 557.7 -.6 482.7 -.6

Estimate in 2007 report . . . . . . . . . . . . . . 559.9 -.2 485.8 3/

3 Less than 0.05 percent.

Actual amount . . . . . . . . . . . . . . . . . . . . . 560.9 — 4 485.8

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

beneficiaries. The transfer amounted to $3.3 billion from OASI to DI.

—

DI Trust Fund:

Estimate in 2003 report . . . . . . . . . . . . . . 97.3 2.2 94.8 -4.3

Estimate in 2004 report . . . . . . . . . . . . . . 94.2 -1.1 92.2 -7.0

Estimate in 2005 report . . . . . . . . . . . . . . 94.2 -1.1 94.8 -4.4

Estimate in 2006 report . . . . . . . . . . . . . . 94.7 -.6 99.0 -.1

Estimate in 2007 report . . . . . . . . . . . . . . 95.1 -.2 99.3 .2

Actual amount . . . . . . . . . . . . . . . . . . . . . 95.2 — 4 99.1 —

OASI and DI Trust Funds, combined:

Estimate in 2003 report . . . . . . . . . . . . . . 670.6 2.2 569.1 -2.7

Estimate in 2004 report . . . . . . . . . . . . . . 649.1 -1.1 554.6 -5.2

Estimate in 2005 report . . . . . . . . . . . . . . 649.0 -1.1 564.7 -3.5

Estimate in 2006 report . . . . . . . . . . . . . . 652.4 -.6 581.7 -.6

Estimate in 2007 report . . . . . . . . . . . . . . 655.0 -.2 585.0 3/1

Actual amount . . . . . . . . . . . . . . . . . . . . . 656.1 — 584.9 —
29

Calendar Year 2007 Operations

million and 8.9 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 1.1 percent and 3.5 percent, respectively, during the calendar year. The estimated distributions of

benefit payments in calendar years 2006 and 2007, 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.

Net administrative expenses charged to the OASI and DI Trust Funds in calendar year 2007 totaled $5.5 billion. This amount represented 0.8 percent of

contribution income and 0.9 percent of expenditures. Corresponding percentages for each trust fund separately and for the OASDI program as a whole

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

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

Calendar Years 2006 and 2007

[Amounts in millions]

Calendar year 20061

1 Excludes reimbursements for excess amounts of voluntary income tax withholding in 1999-2005. Reimbursements are $5.9 billion and $0.7 billion for OASI and DI, respectively.

Calendar year 20072

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

beneficiaries. The transfer amounted to $3.3 billion from OASI to DI.

Amount

Percentage

of total Amount

Percentage

of total

Total OASDI benefit payments . . . . . . . . . . $552,841 100.0 $584,966 100.0

OASI benefit payments . . . . . . . . . . . . . . 460,457 83.3 485,881 83.1

DI benefit payments . . . . . . . . . . . . . . . . . 92,384 16.7 99,086 16.9

OASI benefit payments, total. . . . . . . . . . . . 460,457 100.0 485,881 100.0

Monthly benefits:

Retired workers and auxiliaries . . . . . . 366,952 79.7 389,124 80.1

Retired workers . . . . . . . . . . . . . . . . 342,865 74.5 364,278 75.0

Spouses . . . . . . . . . . . . . . . . . . . . . . . 21,005 4.6 21,571 4.4

Children . . . . . . . . . . . . . . . . . . . . . . 3,082 .7 3,274 .7

Survivors of deceased workers. . . . . . . 93,300 20.3 96,554 19.9

Aged widows and widowers. . . . . . . 74,142 16.1 76,619 15.8

Disabled widows and widowers . . . . 1,758 .4 1,853 .4

Parents . . . . . . . . . . . . . . . . . . . . . . . 24 3/

3 Less than 0.05 percent.

24 3/1

Children . . . . . . . . . . . . . . . . . . . . . . 15,814 3.4 16,486 3.4

Widowed mothers and fathers 

caring for child beneficiaries . . . . 1,562 .3 1,573 .3

Uninsured persons generally aged 72 

before 1968 . . . . . . . . . . . . . . . . . . . 4/

4 Less than $500,000.

3/1 4/1 3/1

Lump-sum death payments . . . . . . . . . . . 204 3/1 203 3/1

DI benefit payments, total . . . . . . . . . . . . . . 92,384 100.0 99,086 100.0

Disabled workers . . . . . . . . . . . . . . . . . 84,952 92.0 91,314 92.2

Spouses. . . . . . . . . . . . . . . . . . . . . . . . . 509 .6 520 .5

Children . . . . . . . . . . . . . . . . . . . . . . . . 6,923 7.5 7,251 7.3
Financial Operations & Legislative Changes

30

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

2006 and the end of 2007 are a result of the acquisition and disposition of

securities during calendar year 2007. Table III.A7 presents these investment

transactions for each trust fund separately and combined. 

Note: All investments are shown at par value.

Table III.A6.—Administrative Expenses as a Percentage of Contribution Income and of 

Total Expenditures, Calendar Years 2003-07

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

2003 . . . . . . . . . . . 0.6 0.6 2.6 2.7 0.9 1.0

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

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

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

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

Table III.A7.—Trust Fund Investment Transactions, Calendar Year 2007

[In millions]

OASI

Trust Fund

DI

Trust Fund

OASI and DI

Trust Funds,

combined

Invested assets, December 31, 2006 . . . . . . . . $1,845,339 $203,922 $2,049,260

Acquisitions:

Special issues:

Certificates of indebtedness . . . . . . . . . . . 634,596 108,709 743,304

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

1 Amounts shown were purchased on June 30, 2007. The interest rate on such purchases was 5 percent.

304,967 20,725 325,692

Total acquisitions . . . . . . . . . . . . . . . . . . . 939,563 129,434 1,068,996

Dispositions:

Special issues:

Certificates of indebtedness . . . . . . . . . . . 650,706 106,238 756,943

Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,804 12,072 121,876

Total dispositions . . . . . . . . . . . . . . . . . . . 760,510 118,309 878,819

Net increase in invested assets . . . . . . . . . . . . . 179,053 11,124 190,177

Invested assets, December 31, 2007 . . . . . . . . 2,024,392 215,046 2,239,438
31

Social Security Amendments in 2007

B. SOCIAL SECURITY AMENDMENTS SINCE THE 2007 REPORT

Since the 2007 Annual Report was transmitted to Congress on April 23,

2007, there has been no legislation enacted that would have a significant

effect on the financial status of the OASDI program.
Actuarial Estimates

32

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 (2008-17) are presented first, followed by estimates and measures of actuarial status for the long range (2008-82) 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

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

scheduled benefits in full on a timely basis and is generally assessed using

the “trust fund ratio,” which is defined as the assets at the beginning of a year

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. A trust fund ratio of 100 percent of annual program cost is generally assumed to provide a reasonable

“contingency reserve.” During periods when trust fund income exceeds disbursements, the excess is held in the trust funds. To the extent that trust fund

assets exceed 100 percent of annual cost, the excess is dedicated to advance

fund a portion of the Social Security program’s future financial obligations.

During periods when trust fund disbursements exceed income, as might happen during an economic recession, trust fund assets are used to meet the

shortfall. In the event of recurring shortfalls for an extended period, the trust
33

Short-Range Estimates

funds can allow time for the development, enactment, and implementation of

legislation to restore financial stability to the program.

The short-range test of financial adequacy 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 2008-17, 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 large amount through the end of

2017. 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 2017, except for two periods of economic recession in alternative

III. The number of persons with taxable earnings would increase on the basis

of alternatives I, II, and III from 163 million during calendar year 2007 to

 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.
Actuarial Estimates

34

about 178 million, 175 million, and 172 million, respectively, in 2017. The

total annual amount of taxable earnings is projected to increase from

$5,300 billion in 2007 to $8,329 billion, $8,422 billion, and $8,758 billion,

in 2017, on the basis of alternatives I, II, and III, respectively.1 These

increases in taxable earnings are due primarily to (1) projected increases in

employment levels as the working age population increases, (2) increases in

average earnings in covered employment (reflecting both real growth and

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

2008-17 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 2017, interest income to the

OASI Trust Fund is projected to be about 20 percent of total trust fund

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

14 percent in 2007.

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

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

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

[Assets as a percentage of annual cost]

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

550%

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Calendar year

OASI

DI

Historical Estimated

"Minimum" level for short-term financial adequacy

I

II

III

I

II

III
35

Short-Range Estimates

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

Table IV.A1.—Operations of the OASI Trust Fund, Calendar Years 2003-171

[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. In December 2005, $350 million was

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

service wage credits. After 2007 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:

2003 . . $543.8 $456.1 $12.5 $75.2 $406.0 $399.8 $2.6 $3.6 $137.8 $1,355.3 300

2004 . . 566.3 472.8 14.6 79.0 421.0 415.0 2.4 3.6 145.3 1,500.6 322

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

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

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

Intermediate:

2008 . . 708.0 583.1 18.9 106.1 515.6 508.8 3.3 3.6 192.4 2,216.0 392

2009 . . 754.9 618.3 22.0 114.7 545.2 538.3 3.3 3.6 209.7 2,425.7 406

2010 . . 801.2 650.7 23.9 126.5 577.9 570.9 3.3 3.6 223.3 2,648.9 420

2011 . . 848.1 682.1 26.0 139.9 615.0 608.0 3.3 3.7 233.1 2,882.0 431

2012 . . 896.8 713.8 28.9 154.0 656.7 649.5 3.3 3.9 240.1 3,122.1 439

2013 . . 946.9 746.1 32.3 168.5 704.0 696.6 3.4 4.0 242.9 3,365.0 443

2014 . . 997.6 779.6 34.8 183.2 755.4 747.8 3.4 4.2 242.1 3,607.1 445

2015 . . 1,049.6 814.1 37.9 197.6 810.2 802.3 3.5 4.4 239.4 3,846.5 445

2016 . . 1,103.5 850.1 41.3 212.2 868.7 860.7 3.6 4.5 234.7 4,081.3 443

2017 . . 1,159.4 887.3 44.8 227.3 931.4 923.0 3.6 4.9 227.9 4,309.2 438

Low Cost:

2008 . . 713.0 587.5 18.9 106.7 515.4 508.5 3.3 3.6 197.6 2,221.2 393

2009 . . 763.9 626.7 21.9 115.4 543.1 536.2 3.3 3.5 220.8 2,442.0 409

2010 . . 807.0 657.8 23.7 125.5 571.9 565.0 3.3 3.6 235.0 2,677.1 427

2011 . . 852.2 689.1 25.5 137.5 602.4 595.5 3.3 3.6 249.8 2,926.9 444

2012 . . 899.0 720.1 28.0 150.9 636.6 629.5 3.3 3.8 262.4 3,189.3 460

2013 . . 946.3 750.2 31.0 165.2 675.4 668.3 3.3 3.9 270.8 3,460.1 472

2014 . . 994.2 781.0 33.1 180.2 717.6 710.3 3.3 4.0 276.6 3,736.7 482

2015 . . 1,042.8 812.0 35.7 195.2 762.3 754.8 3.4 4.1 280.5 4,017.3 490

2016 . . 1,093.2 844.0 38.5 210.7 809.8 802.3 3.4 4.1 283.3 4,300.6 496

2017 . . 1,146.4 877.8 41.4 227.2 860.5 852.6 3.5 4.4 285.9 4,586.5 500

High Cost:

2008 . . 693.0 569.7 18.9 104.4 515.9 509.0 3.3 3.6 177.1 2,200.7 392

2009 . . 732.2 597.8 22.1 112.3 550.0 543.0 3.3 3.6 182.3 2,383.0 400

2010 . . 784.5 635.8 24.2 124.5 584.9 577.9 3.3 3.7 199.6 2,582.6 407

2011 . . 827.3 663.1 26.5 137.8 624.6 617.5 3.3 3.7 202.7 2,785.3 413

2012 . . 888.9 702.3 29.9 156.7 679.0 671.6 3.4 4.0 209.9 2,995.2 410

2013 . . 971.6 753.1 34.4 184.2 749.9 742.1 3.6 4.2 221.8 3,217.0 399

2014 . . 1,040.3 798.6 38.0 203.7 825.0 816.8 3.7 4.6 215.2 3,432.2 390

2015 . . 1,099.0 840.2 42.1 216.7 899.4 890.7 3.7 5.0 199.6 3,631.9 382

2016 . . 1,155.8 881.3 46.3 228.3 973.7 964.7 3.8 5.2 182.1 3,814.0 373

2017 . . 1,212.6 922.5 50.7 239.5 1,052.5 1,042.9 3.9 5.7 160.1 3,974.1 362
Actuarial Estimates

36

Rising expenditures during 2008-17 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 credited to the trust fund and, when the securities mature, they are reinvested in new securities if not immediately needed

to pay program costs. When securities are redeemed prior to maturity in

order to pay program costs, general fund revenues flow to the trust fund.

Thus, the investment operations of the trust fund result in various credits and

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

2. Operations of the DI Trust Fund

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

calendar years 2008-17 under the three sets of assumptions are shown in

table IV.A2, together with values for actual experience in 2003-07. 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 2011 and then begin to decline under the

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

decline steadily beginning in 2008 until exhaustion in 2017.

Cost is estimated to increase in part due to increases in average benefit levels

resulting from (1) automatic benefit increases and (2) projected increases in

the amounts of average monthly earnings on which benefits are based. In

addition, 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 2007-17, the projected annual

average growth rate in the number of DI worker beneficiaries is roughly 1.2,

2.5, and 3.6 percent under alternatives I, II, and III, respectively. Growth is

largely attributable to the gradual progression of the baby-boom generation
37

Short-Range Estimates

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 During 2004 and 2005 however, this growth in the incidence

rate subsided, and the incidence rate even declined in 2006 and 2007. Nevertheless, incidence rates are still 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 continues to be 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 schedule for processing these cases, remain roughly the same as assumed for the 2007 report.

After the last of these special workload cases is processed in about 2010, the

incidence of disability is projected in this report to drop back somewhat from

then current levels, and to remain roughly level on an age-sex-adjusted basis

over the remainder of the short-range period under the intermediate assumptions. Incidence rates gradually rise under alternative III, and decline under

alternative I, after 2010 to the end of the short-range period.

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

V.C.6.
Actuarial Estimates

38

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

Table IV.A2.—Operations of the DI Trust Fund, Calendar Years 2003-171

[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

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

Trust Fund. After 2007 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:

2003 . . $88.1 $77.4 $0.9 $9.7 $73.1 $70.9 $2.0 $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

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

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

Intermediate:

2008 . . 111.6 99.0 1.6 11.0 107.9 104.9 2.5 .4 3.8 218.7 199

2009 . . 117.9 105.0 1.9 11.0 114.8 111.7 2.7 .5 3.1 221.8 190

2010 . . 123.8 110.5 2.2 11.1 121.8 118.5 2.8 .5 2.0 223.9 182

2011 . . 129.4 115.8 2.4 11.2 128.7 125.2 3.0 .6 .8 224.6 174

2012 . . 135.2 121.2 2.7 11.2 136.7 133.0 3.1 .5 -1.5 223.1 164

2013 . . 140.9 126.7 3.1 11.1 144.7 140.8 3.3 .6 -3.8 219.3 154

2014 . . 146.6 132.4 3.3 10.9 152.8 148.8 3.5 .6 -6.2 213.0 143

2015 . . 152.4 138.2 3.6 10.5 161.4 157.1 3.7 .6 -9.0 204.0 132

2016 . . 158.3 144.3 3.9 10.0 170.2 165.8 3.9 .5 -11.9 192.1 120

2017 . . 164.5 150.7 4.3 9.5 179.4 174.8 4.1 .5 -14.9 177.2 107

Low Cost:

2008 . . 112.5 99.7 1.6 11.1 106.1 103.1 2.5 .4 6.4 221.3 203

2009 . . 119.6 106.4 1.9 11.3 111.0 107.9 2.7 .4 8.6 229.9 199

2010 . . 125.4 111.7 2.1 11.7 115.5 112.2 2.8 .5 9.9 239.8 199

2011 . . 131.4 117.0 2.2 12.2 119.4 115.9 2.9 .6 12.0 251.8 201

2012 . . 137.5 122.3 2.5 12.8 124.2 120.6 3.1 .5 13.3 265.1 203

2013 . . 143.6 127.4 2.8 13.5 128.8 125.0 3.3 .5 14.8 279.9 206

2014 . . 149.9 132.6 2.9 14.3 133.4 129.5 3.4 .5 16.4 296.4 210

2015 . . 156.2 137.9 3.1 15.2 138.3 134.2 3.6 .5 17.9 314.2 214

2016 . . 162.9 143.3 3.3 16.2 143.4 139.1 3.8 .5 19.5 333.7 219

2017 . . 170.1 149.1 3.6 17.5 148.6 144.2 3.9 .5 21.5 355.2 225

High Cost:

2008 . . 109.2 96.7 1.6 10.9 109.7 106.8 2.5 .4 -.5 214.4 196

2009 . . 114.0 101.5 2.0 10.5 119.2 116.1 2.7 .5 -5.2 209.2 180

2010 . . 120.4 108.0 2.3 10.1 128.4 125.1 2.8 .5 -8.0 201.2 163

2011 . . 124.8 112.6 2.6 9.6 137.4 133.9 3.0 .6 -12.7 188.5 146

2012 . . 131.1 119.3 3.0 8.8 149.8 146.0 3.2 .6 -18.7 169.8 126

2013 . . 139.1 127.9 3.5 7.7 164.4 160.3 3.5 .6 -25.3 144.4 103

2014 . . 145.6 135.6 3.9 6.1 178.9 174.6 3.7 .6 -33.3 111.1 81

2015 . . 151.5 142.7 4.4 4.4 193.0 188.4 3.9 .6 -41.5 69.6 58

2016 . . 156.8 149.6 4.8 2.4 206.7 201.8 4.2 .6 -49.8 19.7 34

2017 . . 4/

4 Under the high cost assumptions, the DI Trust Fund is projected to be exhausted in 2017. Therefore, certain

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

156.6 5.3 4/1 220.8 215.8 4.4 .6 4/1 4/1 9
39

Short-Range Estimates

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

experience among the DI disabled-worker beneficiaries. In addition, conversions to old-age benefits are at a temporarily reduced level for years 2003

through 2008 due to the gradual increase in the normal retirement age. The

termination rate due to recovery has been much more volatile. Currently, the

proportion of disabled beneficiaries whose benefits cease because of their

recovery from disability is very low in comparison to levels experienced

throughout the 1970s and early 1980s. Projected rates of recovery terminations in this year’s report are low initially due to resource constraints which

temporarily limit the number of continuing disability reviews conducted by

SSA. Following this temporary resource constraint, recovery termination

rates are projected to return to levels consistent with last year’s report. The

overall proportion of disabled workers leaving the DI rolls (reflecting all

causes) is projected in 2008 to remain near levels experienced since 2003,

before returning to higher levels in 2009 when the gradual increase in the

normal retirement age temporarily ceases.

At the beginning of calendar year 2007, the assets of the DI Trust Fund represented 206 percent of annual expenditures. During 2007, DI expenditures

continued to exceed non-interest income. While total DI income exceeded DI

expenditures by $11.1 billion, the trust fund ratio for the beginning of 2008

still decreased, to about 199 percent. Under the intermediate set of assumptions, total income is estimated to exceed expenditures through 2011. The

projected expenditures in excess of income beginning in 2012 result in a

decline in the projected trust fund ratio to 107 percent by the beginning of

2017.

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

225 percent at the beginning of 2017. 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 2013, and becoming completely depleted in 2017.

Assets of the DI Trust Fund were greater than 1 year’s expenditures at the

beginning of 2008 and would remain above that level through the beginning

of 2017. By the beginning of 2018, however, the trust fund ratio is projected

to decline to 95 percent, indicating that assets would fall below the 100-percent level sometime during 2017. Accordingly, the DI Trust Fund does not

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

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

assumptions the DI Trust Fund does meet the short-range test of financial
Actuarial Estimates

40

adequacy, because assets remain above 1 year’s expenditures through the

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

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 2008-17 on the basis of the three alternatives,

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

2003-07. 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 2017. The value of the combined OASI and DI Trust

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

made available to pay DI benefits through 2017, but only with legislation to

permit this action.

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

Calendar Years 2003-171

[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:

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

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

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

Intermediate:

2008 . . 819.7 682.1 20.5 117.1 623.5 613.7 5.8 4.0 196.2 2,434.7 359

2009 . . 872.8 723.3 23.9 125.7 660.0 650.0 6.0 4.0 212.8 2,647.5 369

2010 . . 925.0 761.2 26.1 137.6 699.6 689.4 6.1 4.1 225.3 2,872.8 378

2011 . . 977.5 798.0 28.4 151.1 743.7 733.2 6.3 4.2 233.8 3,106.6 386

2012 . . 1,031.9 835.0 31.6 165.3 793.4 782.5 6.5 4.4 238.6 3,345.2 392

2013 . . 1,087.8 872.8 35.4 179.7 848.8 837.5 6.7 4.6 239.1 3,584.2 394

2014 . . 1,144.2 912.0 38.2 194.0 908.3 896.6 6.9 4.8 235.9 3,820.2 395

2015 . . 1,201.9 952.3 41.5 208.1 971.6 959.4 7.2 5.0 230.4 4,050.5 393

2016 . . 1,261.8 994.4 45.2 222.2 1,039.0 1,026.5 7.5 5.0 222.8 4,273.4 390

2017 . . 1,323.9 1,037.9 49.1 236.8 1,110.8 1,097.7 7.7 5.4 213.0 4,486.4 385
41

Short-Range Estimates

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

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

From the 2007 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 2007 Annual Report, the trust fund

ratio for OASI was estimated to reach 462 percent at the beginning of

2016—the tenth projection year from that report. If there had been no

changes to the projections, the estimated ratio at the beginning of 2017

would be 4 percentage points lower than at the beginning of 2016, or

458 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 (2017) is 438 percent. The

net effect of changes in demographic assumptions over the short-range

period resulted in a reduction in the tenth-year trust fund ratio of 3 percentLow Cost:

2008 . . $825.5 $687.2 $20.4 $117.8 $621.5 $611.7 $5.8 $4.0 $204.0 $2,442.5 360

2009 . . 883.5 733.1 23.7 126.7 654.1 644.2 6.0 4.0 229.4 2,671.9 373

2010 . . 932.4 769.5 25.8 137.1 687.4 677.2 6.1 4.1 245.0 2,916.9 389

2011 . . 983.5 806.1 27.7 149.7 721.8 711.4 6.2 4.2 261.8 3,178.6 404

2012 . . 1,036.5 842.4 30.5 163.6 760.8 750.1 6.4 4.3 275.7 3,454.4 418

2013 . . 1,089.9 877.6 33.7 178.6 804.3 793.3 6.6 4.4 285.7 3,740.0 430

2014 . . 1,144.1 913.6 36.0 194.5 851.0 839.8 6.8 4.5 293.1 4,033.1 439

2015 . . 1,199.0 949.8 38.8 210.4 900.6 889.0 7.0 4.6 298.4 4,331.5 448

2016 . . 1,256.0 987.3 41.8 226.9 953.2 941.4 7.2 4.6 302.8 4,634.3 454

2017 . . 1,316.5 1,026.8 45.0 244.7 1,009.1 996.8 7.4 4.9 307.4 4,941.7 459

High Cost:

2008 . . 802.2 666.4 20.5 115.3 625.6 615.8 5.8 4.0 176.6 2,415.1 358

2009 . . 846.2 699.3 24.1 122.8 669.1 659.1 6.0 4.0 177.1 2,592.2 361

2010 . . 904.9 743.7 26.5 134.6 713.3 703.0 6.1 4.2 191.6 2,783.8 363

2011 . . 952.0 775.7 29.0 147.4 762.0 751.4 6.3 4.3 190.0 2,973.8 365

2012 . . 1,020.0 821.6 32.9 165.5 828.8 817.6 6.6 4.6 191.2 3,165.0 359

2013 . . 1,110.7 881.0 37.9 191.8 914.2 902.4 7.1 4.8 196.4 3,361.4 346

2014 . . 1,185.9 934.2 42.0 209.7 1,004.0 991.4 7.4 5.2 181.9 3,543.3 335

2015 . . 1,250.5 982.9 46.4 221.1 1,092.4 1,079.1 7.7 5.6 158.1 3,701.4 324

2016 . . 1,312.6 1,030.9 51.1 230.7 1,180.4 1,166.5 8.0 5.8 132.3 3,833.7 314

2017 . . 1,374.1 1,079.1 56.0 239.0 1,273.3 1,258.7 8.4 6.3 100.8 3,934.5 301

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 2003-171 (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
Actuarial Estimates

42

age points. The cumulative net effects of changes in economic data and

assumptions resulted in a reduction in the trust fund ratio of 15 percentage

points by the beginning of 2017. There were several relatively minor changes

in the short-range projection methodology since the 2007 report. The

changes included improvements in our methods for estimating the numbers

of retired workers and their retirement rates. In addition, the revision in the

methods used for projecting the other-immigrant (other than legal permanent

resident) population described in section IV.B.7 had an impact on estimated

revenue in the short-range period. The combined effect of these methodological improvements was to increase the ending trust fund ratio by about 2 percentage points. Finally, a decrease in the 2017 trust fund ratio of 3

percentage points resulted from the combined effects of incorporating recent

programmatic data including the correction of the trust fund allocation error

described in section III.A. As discussed in section III.B, no legislative

changes have been enacted since the 2007 report that directly affect the

financing of the OASDI program.

Corresponding estimates of the factors underlying the changes in the financial projections for the DI Trust Fund, and for the OASI and DI Trust Funds

combined, are also shown in table IV.A4. The largest effects on the DI trust

fund ratio at the beginning of 2017 were due to the change in the valuation

period and revised economic assumptions, which make up essentially all of

the net 23 percentage point reduction. Revised demographic assumptions,

updates for a variety of programmatic assumptions (including the correction

of the trust fund allocation error), and improvements to DI projection methodology contributed minor offsetting changes.

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 2016 462 130 407

Change in trust fund ratio due to changes in: 

Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1/

1 Change in trust fund ratio of less than 0.5 percentage point.

1/1 1/1

Valuation period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4 -11 -4

Demographic data and assumptions. . . . . . . . . . . . . . . . . . . . -3 -1 -3

Economic data and assumptions. . . . . . . . . . . . . . . . . . . . . . . -15 -11 -14

Programmatic data and assumptions . . . . . . . . . . . . . . . . . . . -3 4 -1

Projection methods and data. . . . . . . . . . . . . . . . . . . . . . . . . . 2 -5 1

Total change in trust fund ratio . . . . . . . . . . . . . . . . . . . . . . . . . -24 -23 -22

Trust fund ratio shown in this report for calendar year 2017. . . . . 438 107 385
43

Long-Range Estimates

B. LONG-RANGE ESTIMATES

Three types of financial measures are useful in assessing the actuarial status

of the Social Security trust funds under the financing approach specified in

current law: (1) annual cash-flow measures, including income and cost rates,

and balances; (2) trust fund ratios; and (3) summary measures like actuarial

balances and unfunded obligations. The first long-range estimates presented

are the series of projected annual balances (or net cash flow), which are the

differences between the projected annual income rates and annual cost rates

(expressed as percentages of the taxable payroll). In assessing the financial

condition of the program, particular attention should be paid to the level 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 could

be paid with the funds available at the beginning of the year. Particular attention should be paid to the level and year of maximum trust fund ratio, to the

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

cases where the ratio remains positive at the end of the long-range period.

When a program has positive trust fund ratios throughout the 75-year projection period and these ratios are stable or rising at the end of the period, the

program financing is said to achieve sustainable solvency.

The final measures discussed in this section summarize the total income and

cost over valuation periods that extend through 75 years, and to the infinite

horizon. These measures indicate whether projected income will be 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 asset level is positive throughout the year.) Whether or not financial adequacy is stable in the sense that it is likely to continue for subsequent

75-year periods 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
Actuarial Estimates

44

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 rising due to the gradually increasing effect of the taxation of

 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.
45

Long-Range Estimates

benefits. The pattern of the cost rate is much different. From about 2010 to

2030, the cost rate increases rapidly as the baby-boom generation reaches

retirement eligibility age. After 2030, the cost rate remains fairly stable for

about 40 years and thereafter rises slowly reflecting projected reductions in

death rates and continued relatively low birth rates. The cost rate reaches

15.20 percent of taxable payroll for 2082. By comparison, the income rate

reaches 11.43 percent of taxable payroll for 2082.

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. For the low cost assumptions, the

cost rate decreases through 2009, then rises, until it peaks in 2034 at a level

of 13.10 percent of payroll. The cost rate then declines gradually, reaching a

level of 11.06 percent of payroll for 2082 (at which point the income rate

reaches 11.20 percent). For the high cost assumptions, the cost rate rises

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 21.62 percent of payroll

for 2082 (at which point the income rate reaches 11.79 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 10 years (through 2017) and is negative thereafter. This annual deficit rises rapidly, reaching 2 percent of taxable

payroll by 2025, and continues rising generally thereafter, to a level of

3.76 percent of taxable payroll for 2082.

Under the low cost assumptions, the projected OASI annual balance is positive for 13 years (through 2020) and then becomes negative, with the annual

deficit peaking at 1.82 percent of taxable payroll for 2034. Thereafter, the

annual deficit declines. By 2072, the OASI annual balance becomes positive,

reaching a surplus of 0.15 percent of payroll in 2082. Under the high cost

assumptions, however, the OASI balance is projected to be positive for only

7 years (through 2014) and to be negative thereafter, with a deficit of

1.87 percent for 2020, 5.79 percent for 2050, and 9.84 percent of payroll for

2082.
Actuarial Estimates

46

Table IV.B1.—Estimated Annual Income Rates, Cost Rates, and Balances,

Calendar Years 1990-2085

[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 8.98 1.92 1.80 1.42 .37 12.69 10.40 2.29

2001. . . . . 10.89 9.08 1.81 1.82 1.48 .34 12.71 10.56 2.15

2002. . . . . 10.91 9.29 1.62 1.82 1.60 .22 12.74 10.90 1.84

2003. . . . . 10.89 9.35 1.54 1.82 1.68 .14 12.71 11.03 1.68

2004. . . . . 10.92 9.28 1.64 1.82 1.78 .05 12.75 11.05 1.69

2005. . . . . 10.88 9.31 1.58 1.82 1.85 -.03 12.71 11.16 1.55

2006. . . . . 10.91 9.17 1.74 1.82 1.88 -.05 12.74 11.04 1.69

2007. . . . . 10.93 9.39 1.54 1.83 1.87 -.04 12.75 11.26 1.49

Intermediate:

2008. . . . . 10.94 9.26 1.68 1.83 1.94 -.11 12.77 11.20 1.57

2009. . . . . 10.97 9.31 1.67 1.83 1.96 -.13 12.81 11.26 1.54

2010. . . . . 10.99 9.39 1.60 1.84 1.98 -.14 12.82 11.37 1.46

2011 . . . . . 11.00 9.54 1.47 1.84 2.00 -.16 12.84 11.53 1.31

2012. . . . . 11.03 9.73 1.29 1.84 2.03 -.19 12.87 11.76 1.11

2013. . . . . 11.06 9.98 1.08 1.84 2.05 -.21 12.90 12.03 .87

2014. . . . . 11.07 10.25 .83 1.85 2.07 -.23 12.92 12.32 .60

2015. . . . . 11.09 10.52 .57 1.85 2.10 -.25 12.94 12.62 .32

2016. . . . . 11.11 10.81 .31 1.85 2.12 -.27 12.96 12.92 .04

2017. . . . . 11.13 11.10 .03 1.85 2.14 -.29 12.99 13.24 -.25

2020. . . . . 11.19 12.02 -.82 1.85 2.12 -.27 13.04 14.14 -1.09

2025. . . . . 11.27 13.28 -2.00 1.85 2.16 -.30 13.13 15.43 -2.30

2030. . . . . 11.34 14.28 -2.94 1.85 2.13 -.27 13.19 16.41 -3.21

2035. . . . . 11.37 14.74 -3.36 1.85 2.10 -.25 13.23 16.84 -3.61

2040. . . . . 11.38 14.71 -3.33 1.86 2.11 -.25 13.23 16.81 -3.58

2045. . . . . 11.37 14.46 -3.09 1.86 2.16 -.30 13.23 16.62 -3.39

2050. . . . . 11.37 14.32 -2.95 1.86 2.20 -.34 13.23 16.52 -3.29

2055. . . . . 11.37 14.33 -2.96 1.86 2.23 -.37 13.23 16.57 -3.33

2060. . . . . 11.38 14.46 -3.07 1.86 2.23 -.37 13.24 16.69 -3.44

2065. . . . . 11.39 14.58 -3.19 1.86 2.24 -.38 13.25 16.82 -3.57

2070. . . . . 11.40 14.73 -3.33 1.86 2.26 -.40 13.26 16.99 -3.72

2075. . . . . 11.41 14.91 -3.49 1.86 2.28 -.42 13.28 17.18 -3.91

2080. . . . . 11.43 15.11 -3.68 1.86 2.30 -.43 13.29 17.41 -4.12

2085. . . . . 11.44 15.33 -3.89 1.86 2.30 -.44 13.30 17.63 -4.33

First year balance becomes

negative and remains negative

through 2085 . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . 2017

Low Cost:

2008. . . . . 10.94 9.19 1.75 1.83 1.89 -.06 12.76 11.08 1.69

2009. . . . . 10.97 9.17 1.80 1.83 1.88 -.04 12.80 11.05 1.75

2010. . . . . 10.98 9.19 1.79 1.83 1.86 -.02 12.81 11.05 1.77

2011 . . . . . 10.99 9.25 1.75 1.83 1.83 2/ 12.83 11.08 1.75

2012. . . . . 11.01 9.35 1.66 1.84 1.83 .01 12.85 11.18 1.67

2013. . . . . 11.04 9.52 1.51 1.84 1.82 .02 12.88 11.34 1.54

2014. . . . . 11.05 9.72 1.33 1.84 1.81 .03 12.89 11.52 1.36

2015. . . . . 11.06 9.93 1.14 1.84 1.80 .04 12.90 11.73 1.18

2016. . . . . 11.08 10.15 .93 1.84 1.80 .04 12.92 11.94 .98

2017. . . . . 11.10 10.37 .73 1.84 1.79 .05 12.94 12.16 .78
47

Long-Range Estimates

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.

Low Cost (cont.):

2020. . . . . 11.15 11.15 2/1 1.84 1.71 0.13 12.99 12.86 0.14

2025. . . . . 11.22 12.19 -0.97 1.84 1.67 .18 13.06 13.85 -.80

2030. . . . . 11.27 12.92 -1.65 1.84 1.61 .23 13.11 14.52 -1.42

2035. . . . . 11.28 13.09 -1.80 1.84 1.56 .28 13.12 14.65 -1.53

2040. . . . . 11.27 12.79 -1.52 1.84 1.55 .30 13.11 14.34 -1.22

2045. . . . . 11.25 12.31 -1.06 1.84 1.56 .28 13.10 13.88 -.78

2050. . . . . 11.24 11.95 -.71 1.84 1.56 .28 13.08 13.52 -.44

2055. . . . . 11.23 11.73 -.50 1.84 1.56 .28 13.07 13.29 -.22

2060. . . . . 11.23 11.59 -.36 1.84 1.54 .30 13.07 13.13 -.06

2065. . . . . 11.22 11.42 -.20 1.84 1.53 .31 13.06 12.95 .11

2070. . . . . 11.21 11.25 -.03 1.84 1.53 .31 13.05 12.78 .28

2075. . . . . 11.21 11.10 .11 1.84 1.54 .30 13.05 12.64 .40

2080. . . . . 11.20 11.05 .15 1.84 1.56 .28 13.05 12.61 .44

2085. . . . . 11.21 11.09 .12 1.84 1.57 .28 13.05 12.66 .39

First year balance becomes

negative and remains negative

through 2085 . . . . . . . . . . . . . . 3/1 . . . . . . . . . . . . . . . . 3/ . . . . . . . . . . . . . . . . 3/1

High Cost:

2008. . . . . 10.95 9.49 1.46 1.83 2.02 -.19 12.78 11.51 1.27

2009. . . . . 10.99 9.61 1.37 1.83 2.08 -.25 12.82 11.70 1.13

2010. . . . . 11.00 9.73 1.28 1.84 2.14 -.30 12.84 11.86 .98

2011 . . . . . 11.02 9.97 1.05 1.84 2.19 -.35 12.86 12.16 .70

2012. . . . . 11.05 10.22 .83 1.84 2.25 -.41 12.89 12.47 .42

2013. . . . . 11.08 10.52 .56 1.85 2.31 -.46 12.93 12.83 .10

2014. . . . . 11.10 10.92 .19 1.85 2.37 -.52 12.96 13.29 -.33

2015. . . . . 11.13 11.31 -.18 1.85 2.43 -.57 12.98 13.74 -.75

2016. . . . . 11.15 11.68 -.52 1.86 2.48 -.62 13.01 14.16 -1.14

2017. . . . . 11.18 12.06 -.88 1.86 2.53 -.67 13.04 14.59 -1.55

2020. . . . . 11.25 13.12 -1.87 1.86 2.57 -.70 13.11 15.68 -2.57

2025. . . . . 11.34 14.58 -3.23 1.87 2.68 -.81 13.21 17.26 -4.05

2030. . . . . 11.42 15.85 -4.42 1.87 2.69 -.82 13.29 18.53 -5.24

2035. . . . . 11.48 16.65 -5.17 1.87 2.69 -.82 13.35 19.34 -5.99

2040. . . . . 11.50 16.99 -5.48 1.87 2.72 -.85 13.38 19.71 -6.34

2045. . . . . 11.52 17.09 -5.58 1.88 2.83 -.96 13.39 19.93 -6.53

2050. . . . . 11.53 17.33 -5.79 1.88 2.93 -1.05 13.41 20.26 -6.84

2055. . . . . 11.56 17.74 -6.18 1.88 3.02 -1.14 13.44 20.76 -7.32

2060. . . . . 11.60 18.32 -6.72 1.88 3.06 -1.18 13.48 21.38 -7.90

2065. . . . . 11.63 18.97 -7.34 1.88 3.10 -1.22 13.52 22.07 -8.55

2070. . . . . 11.68 19.73 -8.05 1.89 3.15 -1.26 13.56 22.88 -9.31

2075. . . . . 11.72 20.54 -8.82 1.89 3.17 -1.29 13.61 23.71 -10.10

2080. . . . . 11.77 21.33 -9.56 1.89 3.18 -1.30 13.66 24.51 -10.86

2085. . . . . 11.81 22.01 -10.20 1.89 3.18 -1.29 13.69 25.19 -11.50

First year balance becomes

negative and remains negative

through 2085 . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . 2014

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 Between -0.005 and 0.005 percent of taxable payroll.

3 The annual balance is projected to be negative for a temporary period, returning to positive levels before

the end of the projection period.

Table IV.B1.—Estimated Annual Income Rates, Cost Rates, and Balances,

Calendar Years 1990-2085 (Cont.)

[As a percentage of taxable payroll]

Calendar 

year

OASI DI OASDI

Income

rate1 Cost

rate Balance

Income

rate1 Costrate Balance

Income

rate1 Costrate Balance
Actuarial Estimates

48

Under the intermediate assumptions, the cost rate for DI generally increases

over the long-range period from 1.94 percent of taxable payroll for 2008,

reaching 2.30 percent for 2082. The income rate increases only very slightly

from 1.83 percent of taxable payroll for 2008 to 1.86 percent for 2082. The

annual deficit is about 0.11 percent in 2008 and reaches 0.44 percent for

2082.

Under the low cost assumptions, the DI cost rate is fairly stable over the

long-range period, reaching 1.56 percent for 2082. The annual balance is

negative for the first 3 years and is positive throughout the remainder of the

long-range period. For the high cost assumptions, DI cost rises much more,

reaching 3.18 percent for 2082. The annual deficit is about 0.19 percent in

2008 and reaches 1.30 percent for 2082.

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.
49

Long-Range Estimates

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 5.8 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 177.

2. Comparison of Workers to Beneficiaries

The primary reason that the estimated OASDI cost rate increases rapidly

between 2010 and 2030 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 eligibility 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
Actuarial Estimates

50

Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2085

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 . . . . . . . . . 64,975 7,564 — 7,564 8.6 12

1960 . . . . . . . . . 72,293 13,740 522 14,262 5.1 20

1965 . . . . . . . . . 80,437 18,509 1,648 20,157 4.0 25

1970 . . . . . . . . . 92,788 22,618 2,568 25,186 3.7 27

1975 . . . . . . . . . 100,198 26,998 4,125 31,123 3.2 31

1980 . . . . . . . . . 112,659 30,384 4,734 35,117 3.2 31

1985 . . . . . . . . . 120,234 32,763 3,874 36,636 3.3 30

1990 . . . . . . . . . 133,247 35,255 4,204 39,459 3.4 30

1995 . . . . . . . . . 141,030 37,364 5,731 43,096 3.3 31

2000 . . . . . . . . . 154,624 38,556 6,606 45,162 3.4 29

2001 . . . . . . . . . 154,830 38,888 6,780 45,668 3.4 29

2002 . . . . . . . . . 154,310 39,117 7,060 46,176 3.3 30

2003 . . . . . . . . . 154,576 39,315 7,438 46,753 3.3 30

2004 . . . . . . . . . 156,250 39,558 7,810 47,368 3.3 30

2005 . . . . . . . . . 158,913 39,961 8,172 48,133 3.3 30

2006 . . . . . . . . . 161,209 40,435 8,428 48,863 3.3 30

2007 . . . . . . . . . 163,177 40,863 8,739 49,603 3.3 30

Intermediate:

2010 . . . . . . . . . 167,817 43,165 9,615 52,780 3.2 31

2015 . . . . . . . . . 173,056 49,804 10,688 60,492 2.9 35

2020 . . . . . . . . . 177,542 57,519 11,362 68,881 2.6 39

2025 . . . . . . . . . 181,299 64,947 12,191 77,138 2.4 43

2030 . . . . . . . . . 184,974 71,547 12,421 83,968 2.2 45

2035 . . . . . . . . . 189,166 76,084 12,628 88,712 2.1 47

2040 . . . . . . . . . 193,724 78,396 12,985 91,381 2.1 47

2045 . . . . . . . . . 198,583 79,801 13,601 93,402 2.1 47

2050 . . . . . . . . . 203,318 81,506 14,134 95,640 2.1 47

2055 . . . . . . . . . 208,081 83,857 14,643 98,500 2.1 47

2060 . . . . . . . . . 212,909 86,724 14,979 101,703 2.1 48

2065 . . . . . . . . . 217,825 89,602 15,394 104,996 2.1 48

2070 . . . . . . . . . 222,734 92,628 15,877 108,505 2.1 49

2075 . . . . . . . . . 227,634 95,810 16,364 112,174 2.0 49

2080 . . . . . . . . . 232,426 99,154 16,837 115,991 2.0 50

2085 . . . . . . . . . 237,182 102,672 17,256 119,928 2.0 51

Low Cost:

2010 . . . . . . . . . 169,371 43,150 9,298 52,449 3.2 31

2015 . . . . . . . . . 176,193 49,693 9,676 59,369 3.0 34

2020 . . . . . . . . . 181,320 57,140 9,848 66,988 2.7 37

2025 . . . . . . . . . 185,847 64,171 10,116 74,288 2.5 40

2030 . . . . . . . . . 190,581 70,137 10,065 80,203 2.4 42

2035 . . . . . . . . . 196,431 73,913 10,128 84,041 2.3 43

2040 . . . . . . . . . 203,488 75,468 10,382 85,850 2.4 42

2045 . . . . . . . . . 211,562 76,250 10,875 87,125 2.4 41

2050 . . . . . . . . . 220,158 77,498 11,327 88,826 2.5 40

2055 . . . . . . . . . 229,281 79,480 11,795 91,275 2.5 40

2060 . . . . . . . . . 238,906 81,991 12,191 94,182 2.5 39

2065 . . . . . . . . . 249,329 84,459 12,702 97,162 2.6 39

2070 . . . . . . . . . 260,491 87,015 13,323 100,339 2.6 39

2075 . . . . . . . . . 272,255 89,788 14,034 103,822 2.6 38

2080 . . . . . . . . . 284,348 93,262 14,777 108,039 2.6 38

2085 . . . . . . . . . 296,658 97,564 15,492 113,056 2.6 38
51

Long-Range Estimates

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 2007

level of 30 beneficiaries per 100 covered workers, this ratio is estimated to

rise significantly by 2085 to 38 under the low cost assumptions, 51 under the

intermediate assumptions, and 68 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 . . . . . . . . . 165,703 43,183 9,933 53,116 3.1 32

2015 . . . . . . . . . 170,017 49,926 11,700 61,626 2.8 36

2020 . . . . . . . . . 173,672 58,010 12,836 70,847 2.5 41

2025 . . . . . . . . . 176,930 65,906 14,181 80,086 2.2 45

2030 . . . . . . . . . 179,866 73,139 14,678 87,817 2.0 49

2035 . . . . . . . . . 182,565 78,492 14,994 93,487 2.0 51

2040 . . . . . . . . . 184,903 81,680 15,406 97,086 1.9 53

2045 . . . . . . . . . 186,828 83,827 16,090 99,917 1.9 53

2050 . . . . . . . . . 187,986 86,128 16,641 102,769 1.8 55

2055 . . . . . . . . . 188,862 88,938 17,118 106,056 1.8 56

2060 . . . . . . . . . 189,419 92,205 17,303 109,508 1.7 58

2065 . . . . . . . . . 189,617 95,565 17,499 113,064 1.7 60

2070 . . . . . . . . . 189,280 99,156 17,680 116,836 1.6 62

2075 . . . . . . . . . 188,684 102,797 17,736 120,533 1.6 64

2080 . . . . . . . . . 187,731 106,075 17,701 123,776 1.5 66

2085 . . . . . . . . . 186,740 108,867 17,612 126,479 1.5 68

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 1945-2085 (Cont.)

Calendar year

Covered

workers1

(in thousands)

Beneficiaries2 (in thousands) Covered

workers per

OASDI

beneficiary

OASDI

beneficiaries

per 100

covered

OASI DI OASDI workers
Actuarial Estimates

52

Table IV.B2 also shows that the number of covered workers per OASDI beneficiary, which was about 3.3 in 2007, is estimated to decline in the future.

Based on the intermediate assumptions, the ratio declines to 2.1 by 2034, and

thereafter declines very slowly reaching 2.0 workers per beneficiary by

2071. The slow decline after 2034 is due to the assumed gradual decline in

death rates. 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 2.6 by 2063. 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 2048, and 1.5

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 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.

 Figure IV.B2.—Number of OASDI Beneficiaries Per 100 Covered Workers

0

10

20

30

40

50

60

70

80

90

100

1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Historical Estimated

III

II

I
53

Long-Range Estimates

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

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. Under these conditions, the program financing is said to

achieve sustainable solvency.

Table IV.B3 shows, by alternative, the estimated trust fund ratios (without

regard to advance tax transfers that would be effected 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 392 percent at the beginning of 2008, reaching a peak of

445 percent at the beginning of 2014. This increase in the OASI trust fund

ratio results from the fact that the annual income rate exceeds the annual cost

rate 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 follows a pattern that is similar but unfolds more rapidly. The DI trust fund ratio is estimated to decline steadily from 199 percent

at the beginning of 2008 until becoming exhausted in 2025.

The trust fund ratio for the combined OASI and DI Trust Funds under the

intermediate assumptions rises from 359 percent for 2008 to a peak of

395 percent at the beginning of 2014. Thereafter, the ratio declines, with the

combined funds becoming exhausted in 2041. In last year’s report, the peak

trust fund ratio for the combined funds was estimated to be 409 percent for

2014 and the year of exhaustion was estimated to be 2041.

The trust fund ratio for the OASDI program under the intermediate assumptions first declines in 2015. This occurs because the increase in trust fund

assets during 2014, 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 2014 and 2015. After 2014, 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 under the intermediate assumptions

is projected to experience increasingly large cash-flow shortfalls that will
Actuarial Estimates

54

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 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 from 2011 through the end of the long-range projection period,

reaching the extremely high level of 2,111 percent for 2083. At the end of

the long-range period, the DI trust fund ratio is rising by 38 percentage

points per year. For the OASI program, the trust fund ratio rises to a peak of

500 percent for 2018, drops to a low of 323 percent for 2054, and rises thereafter to a level of 424 percent for 2083. At the end of the period, the OASI

trust fund ratio is rising by 5 percentage points per year. For the OASDI program, the trust fund ratio peaks at 464 percent for 2020, falls to 387 percent

for 2043, and increases thereafter, reaching 633 percent for 2083. Because

the trust fund ratios are large and increasing at the end of the long range

period, subsequent Trustees Reports are likely to contain projections of adequate long-range financing of the OASI, the DI, and the combined OASI and

DI programs under the low cost assumptions. Thus, under the low cost

assumptions, each program would achieve sustainable solvency.

In contrast, under the high cost assumptions, the OASI trust fund ratio is estimated to peak at 413 percent for 2011, thereafter declining to fund exhaustion by the end of 2033. The DI trust fund ratio is estimated to decline from

196 percent for 2008 to fund exhaustion by the end of 2017. The combined

OASDI trust fund ratio is estimated to rise to a peak of 365 percent for 2011,

declining thereafter to fund exhaustion by the end of 2031.

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 23 years into the future (until 2031). Under the intermediate assumptions the combined starting funds plus estimated future income

would be able to cover cost for about 33 years into the future (until 2041).

The program would be able to cover cost for the foreseeable future under the

more optimistic low cost assumptions. In the 2007 report, the combined trust

funds were projected to become exhausted in 2030 under the high cost

assumptions and in 2041 under the intermediate assumptions.
55

Long-Range Estimates

.

Note: See definition of trust fund ratio on page 214. 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.D6 on page 14.

Table IV.B3.—Estimated Trust Fund Ratios, Calendar Years 2008-85

[In percent]

Calendar

year

Intermediate Low Cost High Cost

OASI DI OASDI OASI DI OASDI OASI DI OASDI

2008 . . . . . . . . . . . . . 392 199 359 393 203 360 392 196 358

2009 . . . . . . . . . . . . . 406 190 369 409 199 373 400 180 361

2010 . . . . . . . . . . . . . 420 182 378 427 199 389 407 163 363

2011 . . . . . . . . . . . . . 431 174 386 444 201 404 413 146 365

2012 . . . . . . . . . . . . . 439 164 392 460 203 418 410 126 359

2013 . . . . . . . . . . . . . 443 154 394 472 206 430 399 103 346

2014 . . . . . . . . . . . . . 445 143 395 482 210 439 390 81 335

2015 . . . . . . . . . . . . . 445 132 393 490 214 448 382 58 324

2016 . . . . . . . . . . . . . 443 120 390 496 219 454 373 34 314

2017 . . . . . . . . . . . . . 438 107 385 500 225 459 362 9 301

2020 . . . . . . . . . . . . . 413 71 361 496 258 464 320 1/1 256

2025 . . . . . . . . . . . . . 350 9 302 471 332 455 221 1/1 153

2030 . . . . . . . . . . . . . 263 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.

221 429 432 429 97 1/1 28

2035 . . . . . . . . . . . . . 164 1/1 127 386 558 404 1/1 1/1 1/1

2040 . . . . . . . . . . . . . 59 1/1 26 352 695 389 1/1 1/1 1/1

2045 . . . . . . . . . . . . . 1/1 1/1 1/1 333 824 388 1/1 1/1 1/1

2050 . . . . . . . . . . . . . 1/1 1/1 1/1 325 960 398 1/1 1/1 1/1

2055 . . . . . . . . . . . . . 1/1 1/1 1/1 323 1,109 416 1/1 1/1 1/1

2060 . . . . . . . . . . . . . 1/1 1/1 1/1 327 1,284 439 1/1 1/1 1/1

2065 . . . . . . . . . . . . . 1/1 1/1 1/1 336 1,466 470 1/1 1/1 1/1

2070 . . . . . . . . . . . . . 1/1 1/1 1/1 354 1,646 509 1/1 1/1 1/1

2075 . . . . . . . . . . . . . 1/1 1/1 1/1 379 1,821 555 1/1 1/1 1/1

2080 . . . . . . . . . . . . . 1/1 1/1 1/1 408 1,998 604 1/1 1/1 1/1

2085 . . . . . . . . . . . . . 1/1 1/1 1/1 435 2,190 652 1/1 1/1 1/1

Trust fund is estimated to become

exhausted in. . . . . 2042 2025 2041 2/

2 The trust fund is not estimated to be exhausted within the projection period.

2/1 2/1 2033 2017 2031
Actuarial Estimates

56

4. Summarized Income Rates, Cost Rates, and Balances

Summarized income and cost rates, along with their components, are presented in table IV.B4 for 25-year, 50-year, and 75-year valuation periods.

Income rates reflect the scheduled payroll tax rates and the projected income

from the taxation of scheduled benefits expressed as a percentage of taxable

payroll. The current combined payroll tax rate of 12.4 percent is scheduled to

remain unchanged in the future. In contrast, the projected income from taxation of benefits, expressed as a percentage of taxable payroll, is expected to

generally increase throughout the long-range period. 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%

1,600%

1,800%

2,000%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

OASI

DI

Historical Estimated

III II

I

I

II III
57

Long-Range Estimates

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

1.57 percent of taxable payroll under the low cost assumptions, 0.38 percent

under the intermediate assumptions, and -1.07 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 0.64 percent under the low cost assumptions, but would have deficits of 1.14 percent under the intermediate assumptions and 3.35 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.
Actuarial Estimates

58

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 0.57 percent of taxable payroll under the low cost assumptions,

-1.70 percent under the intermediate assumptions, and -4.66 percent under

the high cost assumptions.

Assuming the Trustees’ intermediate assumptions are realized, the deficit of

1.70 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 14.1 percent. Alternatively, all current and

future benefits could be reduced by 11.5 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 4 percent of payroll under the intermediate

assumptions (see table IV.B1), indicate that the annual cost will very likely

continue to exceed tax revenues after 2082. 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 3.2 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 15.6 percent. This shortfall

could also be eliminated if all current and future benefits were immediately

reduced by 19.8 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 when measured relative to the level of program costs.
59

Long-Range Estimates

.

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

Table IV.B5 presents the components and the calculation of the long-range

(75-year) actuarial balance under the intermediate assumptions. The present

value of future cost less future tax income over the long-range period, minus

the amount of trust fund assets at the beginning of the projection period,

amounts to $4.3 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 2008-82

[As a percentage of taxable payroll]

Valuation period

Summarized income rate Summarized cost rate

Actuarial

balance

Payroll

tax

Taxation

of

benefits

Beginning

fund

balance Total Cost

Ending

target

fund Total

OASI:

Intermediate:

2008-32. . . . . 10.58 0.57 1.64 12.79 11.76 0.51 12.26 0.53

2008-57. . . . . 10.59 .65 .95 12.19 12.92 .21 13.13 -.94

2008-82. . . . . 10.59 .69 .73 12.01 13.34 .12 13.46 -1.46

Low Cost:

2008-32. . . . . 10.59 .53 1.64 12.75 10.95 .45 11.40 1.35

2008-57. . . . . 10.59 .58 .95 12.12 11.57 .17 11.74 .38

2008-82. . . . . 10.59 .59 .72 11.90 11.50 .09 11.60 .31

High Cost:

2008-32. . . . . 10.58 .62 1.64 12.84 12.77 .58 13.35 -.51

2008-57. . . . . 10.58 .75 .94 12.27 14.63 .27 14.90 -2.63

2008-82. . . . . 10.58 .82 .72 12.13 15.79 .17 15.96 -3.83

DI:

Intermediate:

2008-32. . . . . 1.80 .05 .17 2.02 2.09 .07 2.17 -.15

2008-57. . . . . 1.80 .05 .10 1.95 2.12 .03 2.15 -.20

2008-82. . . . . 1.80 .05 .08 1.93 2.15 .02 2.17 -.24

Low Cost:

2008-32. . . . . 1.80 .04 .17 2.01 1.74 .05 1.79 .22

2008-57. . . . . 1.80 .04 .10 1.94 1.66 .02 1.69 .25

2008-82. . . . . 1.80 .04 .08 1.92 1.63 .01 1.65 .27

High Cost:

2008-32. . . . . 1.80 .06 .17 2.03 2.49 .10 2.58 -.55

2008-57. . . . . 1.80 .07 .10 1.96 2.63 .04 2.68 -.72

2008-82. . . . . 1.80 .07 .08 1.94 2.75 .02 2.77 -.83

OASDI:

Intermediate:

2008-32. . . . . 12.38 .61 1.82 14.81 13.85 .58 14.43 .38

2008-57. . . . . 12.38 .71 1.05 14.14 15.04 .24 15.28 -1.14

2008-82. . . . . 12.39 .74 .81 13.94 15.49 .14 15.63 -1.70

Low Cost:

2008-32. . . . . 12.38 .56 1.81 14.76 12.69 .50 13.19 1.57

2008-57. . . . . 12.39 .62 1.05 14.06 13.23 .19 13.42 .64

2008-82. . . . . 12.39 .63 .80 13.82 13.14 .11 13.24 .57

High Cost:

2008-32. . . . . 12.37 .68 1.82 14.87 15.25 .68 15.93 -1.07

2008-57. . . . . 12.38 .81 1.04 14.23 17.26 .31 17.58 -3.35

2008-82. . . . . 12.38 .89 .80 14.07 18.54 .19 18.73 -4.66
Actuarial Estimates

60

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

-$4.7 trillion for the OASDI program. Expressed as a percentage of taxable

payroll for the period, this is the actuarial balance of -1.70 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 2008 to 2082 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

2082). 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

$4.3 trillion. The open group measure indicates the adequacy of financing

over the period as a whole for a program financed on a pay-as-you-go basis.

On this basis, payroll taxes and scheduled benefits of all participants are

included through 2082.

Table IV.B6 also presents the 75-year unfunded obligation as percentages of

future OASDI taxable payroll and gross domestic product (GDP) through

Table IV.B5.—Components of 75-Year Actuarial Balance

Under Intermediate Assumptions (2008-82)

Item OASI DI OASDI

Present value as of January 1, 2008 (in billions):

a. Payroll tax revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,321 $4,979 $34,300

b. Taxation of benefits revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,907 149 2,056

c. Tax income (a + b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,228 5,128 36,357

d. Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,953 5,958 42,911

e. Cost minus tax income (d - c) . . . . . . . . . . . . . . . . . . . . . . . . . . 5,725 830 6,555

f. Trust fund assets at start of period. . . . . . . . . . . . . . . . . . . . . . . 2,024 215 2,238

g. Open group unfunded obligation (e - f). . . . . . . . . . . . . . . . . . . 3,701 615 4,316

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.

336 51 387

i. Income minus cost, plus assets at start of period, minus

ending target trust fund (c - d + f - h = - g - h) . . . . . . . . . . . . . -4,037 -666 -4,703

j. Taxable payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276,946 276,946 276,946

Percent of taxable payroll:

Actuarial balance (100 × i ÷ j) . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.46 -.24 -1.70
61

Long-Range Estimates

2082. The 75-year unfunded obligation as a percentage of taxable payroll is

less than the actuarial deficit, because it excludes the ending target trust fund

value (see table IV.B5).

However, there are limitations on what can be conveyed using summarized

measures alone. For example, overemphasis on summary measures (such as

the actuarial balance and open group unfunded obligation) for the 75-year

period can lead to incorrect perceptions and policies that fail to address

financial sustainability for the more distant future. 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 address this limitation, this section presents estimates of unfunded

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, phased in over the 10-year period

2083 to 2092. This change essentially maintains consistency with the

assumed reduction in the growth of health care expenditures after 2082. (See

the Medicare Trustees Report.) The values in table IV.B6 indicate that

extending the calculations beyond 2082 adds $9.3 ($13.6 - $4.3) trillion in

present value to the amount of the unfunded obligation estimated through

2082. That is, over the infinite horizon, the OASDI open group unfunded

obligation is projected to be $13.6 trillion. The $9.3 trillion increment

reflects a significant financing gap projected for OASDI over the infinite

future period after 2082. Of course, the degree of uncertainty associated with

estimates beyond 2082 is substantial.

In last year’s report the unfunded obligation over the infinite horizon was

reported as $13.6 trillion in present value as of January 1, 2007. The change

to the later valuation date (January 1, 2008), taken alone, would increase the

measured deficit by about $0.7 trillion. The net effects of changes in data,

methods, and other assumptions decreased the infinite horizon unfunded

obligation by approximately $0.7 trillion. The main changes affecting the

infinite horizon unfunded obligation for this report are changes in immigration methods and assumptions. The change in the method for projecting other

immigration results in persistent effects (beginning in the latter half of the

long-range 75-year period) from an increased overall working-age population relative to the increased overall retirement-age population. See section

IV.B.7 for details regarding changes in data, methods, and assumptions.
Actuarial Estimates

62

As noted in the previous section, the $13.6 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

3.2 percent of taxable payroll under the intermediate assumptions, about

0.3 percent lower than in last year’s report. This unfunded obligation can

also be expressed as a percentage of GDP over the infinite future and is

1.1 percent on that basis, about 0.1 percentage point lower than in last year’s

report. 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 2008-82 and for 2008 through the infinite horizon are

$276.9 trillion and $432.8 trillion, respectively.

2. The present values of GDP for 2008-82 and for 2008 through the infinite horizon are $768.4 trillion and

$1,274.3 trillion, respectively. Present values of GDP shown in the Medicare Trustees Report differ slightly

due to the use of interest discount rates that are specific to each program’s trust fund holdings.

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

$17.4 trillion. For this purpose, current participants are defined as individuals

who attain age 15 or older in 2008. 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

$15.2 trillion. This value represents the shortfall of lifetime contributions for

all past and current participants relative to the lifetime costs associated with

Table IV.B6.—Unfunded OASDI Obligations for 1935 (Program Inception)

Through the Infinite Horizon

[Present values as of January 1, 2008; 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

2008. Expressed as percentage of payroll and GDP for the period 2008 through the infinite horizon.

$13.6 3.2 1.1

Unfunded obligation for 1935 through 20822 . . . . . . . . . . . . . . . . 

2 Present value of future cost less future taxes through 2082, reduced by the amount of trust fund assets at the

beginning of 2008. Expressed as percentage of payroll and GDP for the period 2008 through 2082.

4.3 1.6 .6
63

Long-Range Estimates

their generations. For a fully-advance-funded program this value would be

equal to zero.

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 taxes that are

approximately $1.5 trillion more in present value than the cost of providing

benefits they are scheduled to receive over the infinite future. For the 2007

report, on a present-value basis, future participants were projected to pay

about $0.8 trillion more, in taxes, than the total cost of benefits they would

receive over the infinite future. This amount changed in part due to relatively

lower annual deficits late in the 75-year period that are projected to continue.

Thus, the remaining long run financing gap that program reforms must ultimately close for the infinite future is estimated to be $13.6 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 3.2 percent of taxable payroll or 1.1 percent of GDP.

Notes:

1. The present value of future taxable payroll for 2008 through the infinite horizon is $432.8 trillion.

2. The present value of GDP for 2008 through the infinite horizon is $1,274.3 trillion.

3. Totals do not necessarily equal the sums of rounded components.

6. Test of Long-Range Close Actuarial Balance

The test of long-range close actuarial balance applies to a set of 66 separate

valuation periods beginning with the first 10-year period, and including the

periods of the first 11 years, the first 12 years, etc., up through the full

75-year projection period. Under the long-range test, the summarized income

rate and cost rate are calculated for each of these valuation periods. The

Table IV.B7.—Present Values of OASDI Cost Less Tax Revenue and Unfunded 

Obligations for Program Participants

[Present values as of January 1, 2008; 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 . . . $17.4 4.0 1.4

Less current trust fund

(tax accumulations minus expenditures to date for past and current 

participants). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 .5 .2

Equals unfunded obligation for past and current participants 1 . . . . . . . .

1This concept is also referred to as the closed group unfunded obligation.

15.2 3.5 1.2

Plus present value of cost less taxes for future participants 

for the infinite future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.5 -.3 -.1

Equals unfunded obligation for all participants through the infinite

horizon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.6 3.2 1.1
Actuarial Estimates

64

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.

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 32 years under the intermediate estimates. For valuation

periods of length greater than 32 years, the estimated actuarial balance is less

than the minimum allowable. For the full 75-year long-range period the estimated actuarial balance reaches -10.83 percent of the summarized cost rate,

for a shortfall of 5.83 percent, from the minimum allowable balance of
65

Long-Range Estimates

-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 33), it is not in long-range close actuarial balance.

For the DI program, under the intermediate assumptions, the estimated actuarial balance as a percentage of the summarized cost rate is less than the minimum allowable balance for all 66 valuation periods. For the full 75-year

long-range period the estimated actuarial balance reaches -11.08 percent of

the summarized cost rate, for a shortfall of 6.08 percent from the minimum

allowable balance of -5.0 percent of the summarized cost rate. Thus, the DI

program fails to meet the short-range test of financial adequacy (as discussed

on page 39), and is also not in long-range close actuarial balance.

Financing for the DI program is much less adequate than for the OASI program in satisfying the test for long-range actuarial balance even though longrange actuarial deficits are more comparable over the entire 75-year period.

This difference 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 30 years under the intermediate estimates.

For valuation periods of length greater than 30 years, the estimated actuarial

balance is below the minimum allowable balance. The size of the shortfall

from the minimum allowable balance rises gradually, reaching 5.86 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

improved as compared to those shown in last year’s report for the longer valuation periods.
Actuarial Estimates

66

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 rate

Actuarial

balance

Actuarial

balance

Minimum

allowable

actuarial

balance

OASI:

10 years: 2008-2017. . . . . 14.80 11.10 3.70 33.36 0.00

15 years: 2008-2022. . . . . 13.65 11.42 2.23 19.51 -.38

20 years: 2008-2027. . . . . 13.11 11.85 1.25 10.58 -.77

25 years: 2008-2032. . . . . 12.79 12.26 .53 4.31 -1.15

30 years: 2008-2037. . . . . 12.59 12.59 .00 .02 -1.54

35 years: 2008-2042. . . . . 12.45 12.81 -.36 -2.81 -1.92

40 years: 2008-2047. . . . . 12.34 12.95 -.61 -4.70 -2.31

45 years: 2008-2052. . . . . 12.26 13.05 -.79 -6.06 -2.69

50 years: 2008-2057. . . . . 12.19 13.13 -.94 -7.15 -3.08

55 years: 2008-2062. . . . . 12.14 13.21 -1.07 -8.07 -3.46

60 years: 2008-2067. . . . . 12.10 13.27 -1.18 -8.87 -3.85

65 years: 2008-2072. . . . . 12.06 13.34 -1.28 -9.58 -4.23

70 years: 2008-2077. . . . . 12.03 13.40 -1.37 -10.23 -4.62

75 years: 2008-2082. . . . . 12.01 13.46 -1.46 -10.83 -5.00

DI:

10 years: 2008-2017. . . . . 2.24 2.25 -.01 -.32 .00

15 years: 2008-2022. . . . . 2.12 2.20 -.08 -3.81 -.38

20 years: 2008-2027. . . . . 2.06 2.18 -.13 -5.80 -.77

25 years: 2008-2032. . . . . 2.02 2.17 -.15 -6.75 -1.15

30 years: 2008-2037. . . . . 2.00 2.15 -.16 -7.28 -1.54

35 years: 2008-2042. . . . . 1.98 2.15 -.17 -7.73 -1.92

40 years: 2008-2047. . . . . 1.97 2.15 -.18 -8.29 -2.31

45 years: 2008-2052. . . . . 1.96 2.15 -.19 -8.85 -2.69

50 years: 2008-2057. . . . . 1.95 2.15 -.20 -9.36 -3.08

55 years: 2008-2062. . . . . 1.94 2.16 -.21 -9.77 -3.46

60 years: 2008-2067. . . . . 1.94 2.16 -.22 -10.12 -3.85

65 years: 2008-2072. . . . . 1.94 2.16 -.23 -10.46 -4.23

70 years: 2008-2077. . . . . 1.93 2.17 -.23 -10.78 -4.62

75 years: 2008-2082. . . . . 1.93 2.17 -.24 -11.08 -5.00

OASDI:

10 years: 2008-2017. . . . . 17.04 13.35 3.70 27.70 .00

15 years: 2008-2022. . . . . 15.77 13.62 2.14 15.74 -.38

20 years: 2008-2027. . . . . 15.16 14.03 1.13 8.03 -.77

25 years: 2008-2032. . . . . 14.81 14.43 .38 2.65 -1.15

30 years: 2008-2037. . . . . 14.59 14.74 -.15 -1.04 -1.54

35 years: 2008-2042. . . . . 14.43 14.95 -.53 -3.51 -1.92

40 years: 2008-2047. . . . . 14.31 15.09 -.79 -5.21 -2.31

45 years: 2008-2052. . . . . 14.22 15.20 -.98 -6.46 -2.69

50 years: 2008-2057. . . . . 14.14 15.28 -1.14 -7.46 -3.08

55 years: 2008-2062. . . . . 14.08 15.36 -1.28 -8.31 -3.46

60 years: 2008-2067. . . . . 14.04 15.43 -1.40 -9.05 -3.85

65 years: 2008-2072. . . . . 14.00 15.50 -1.50 -9.70 -4.23

70 years: 2008-2077. . . . . 13.96 15.57 -1.60 -10.31 -4.62

75 years: 2008-2082. . . . . 13.94 15.63 -1.70 -10.86 -5.00
67

Long-Range Estimates

7. Reasons for Change in Actuarial Balance From Last Report

The estimated effects of various changes from last year’s report to this report

on the long-range actuarial balance under the intermediate assumptions are

listed (by category) in table IV.B9.

 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%

2017 2022 2027 2032 2037 2042 2047 2052 2057 2062 2067 2072 2077 2082

Ending year of valuation period

 Actuarial balance as percentage

 of summarized cost rate

 Minimum allowable actuarial balance

OASI

OASDI

DI
Actuarial Estimates

68

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

There were no legislative changes since the last report that are projected to

have a significant effect on the long-range OASDI actuarial balance.

In changing from the valuation period of last year’s report, which was 2007-

81, to the valuation period of this report, 2008-82, the relatively large negative annual balance for 2082 is included. This results in a decrease (worsening) in the long-range OASDI actuarial balance of 0.06 percent of taxable

payroll. (Note that the fund balance at the end of 2007, i.e., at the beginning

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

Changes in the demographic starting values and the transition to ultimate

assumptions and changes in the ultimate mortality and legal immigration

assumptions have largely offsetting effects and combine to have little net

effect on the long-range OASDI actuarial balance. Final mortality data for

2004 result in slightly lower starting death rates and faster near-term declines

in death rates than in last year’s report. Also, slightly faster rates of decline

in death rates are assumed ultimately for ages 15-64 in this year’s report.

These changes in ultimate rates are based on the continuing strong declines

in mortality recently experienced by men at these ages and a belief that the

lower rates of decline experienced by women since 1982 will not continue in

the future. All of the mortality changes result in a decrease (worsening) in

the long-range actuarial balance of about 0.12 percent of taxable payroll.

Partially offsetting the effect of the mortality changes is an increase in the

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.99 1.93 13.92

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.68 2.19 15.87

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.69 -.27 -1.95

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 2007-81, to the valuation period of

this report, 2008-82, the relatively large negative annual balance for 2082 is included. This results in a larger

long-range actuarial deficit. The fund balance at the end of 2007, i.e., at the beginning of the projection

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

-.06 -.01 -.06

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

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

Disability assumptions . . . . . . . . . . . . . . . . . . . . . . . . .00 .00 .00

Methods and programmatic data . . . . . . . . . . . . . . . . +.31 +.01 +.32

Total change in actuarial balance . . . . . . . . . . . . . . . . . . +.23 +.03 +.26

Shown in this report:

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.46 -.24 -1.70

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01 1.93 13.94

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.46 2.17 15.63
69

Long-Range Estimates

assumed ultimate level of net legal immigration in this year’s report. Based

on data since 2000, the ultimate level of net legal immigration is assumed to

increase from 600,000 to 750,000 persons per year. This change results in an

increase (improvement) in the long-range actuarial balance of about 0.07

percent of taxable payroll. Other demographic changes are made to the starting values of birth rates and numbers of people in the Social Security area.

Birth rates for the first 25 years of the projection period are higher than in

last year’s report, based on preliminary birth data for 2005 and 2006 which

indicate higher than expected numbers of births. These changes in birth rates

and the starting population result in an increase (improvement) in the longrange actuarial balance of about 0.05 percent of taxable payroll.

Ultimate economic assumptions are unchanged from last year’s report.

Changes in starting values for the economic assumptions and in the nearterm transition to the ultimate economic assumptions have a negligible effect

on the OASDI long-range actuarial balance.

Several methodological improvements and updates of program-specific data

are included in the 2008 report. These changes to programmatic data and

methods result in a combined increase (improvement) in the long-range

OASDI actuarial balance of about 0.32 percent of taxable payroll. The most

significant of these changes is a major revision in the methods used for projecting the other-immigrant (other than legal permanent resident) population.

In previous reports, the other-immigrant population was projected using

assumed annual numbers of net other immigrants with a static age-sex distribution. For this year’s report, the annual numbers of net other immigrants are

projected by explicitly modeling other immigrants and other emigrants separately. Under this approach, a large number of other immigrants is assumed

to enter the Social Security area at relatively young working ages, with the

total annual number of other immigrants entering the area assumed to be

about 1.5 million. Most of these immigrants are assumed to either: (1) leave

the Social Security area (i.e., to depart from the area without having attained

the legal status or work credits needed to become eligible for retired-worker

benefits); or (2) attain legal permanent resident (LPR) status after several

years of being in the other-immigrant population. Thus, this year’s report

results in a much larger other-immigrant population projected at working

ages and a smaller number remaining in the Social Security area into old age.

This change, along with the additional births due to the larger other-immigrant population at younger ages, results in a substantial increase in the number of working-age individuals contributing payroll taxes, but a relatively

smaller increase in the number of retirement-age individuals receiving benefits in the latter half of the long-range period. This revision results in an

increase (improvement) in the long-range actuarial balance of about 0.30

percent of taxable payroll. Another area of methodological improvement is
Actuarial Estimates

70

related to the projection of average benefit levels for workers who will

become eligible in the future. The historical sample of new beneficiaries,

which serves as the basis for the projection of average benefit levels, was

updated from a 2003 sample to a 2004 sample. Also, additional records of

beneficiaries who began receiving benefits after the year for which they were

first found to be entitled are now included in the sample of newly entitled

retired-worker beneficiaries. These changes in projecting average benefits,

along with several other smaller changes, result in an increase (improvement) in the long-range actuarial balance of about 0.02 percent of taxable

payroll.

The combined effects of changes made in data, assumptions, and methods

for this report more than offset the decrease in the OASDI long-range actuarial balance due to the new valuation period. This effect is indicated by the

total 0.26 percent of payroll increase in the actuarial balance, which, after

rounding, changes the actuarial balance from a deficit of 1.95 percent in last

year’s report to a deficit of 1.70 percent of taxable payroll in this report.

The effects of changes made in this report can also be illustrated by comparing the annual (cash-flow) balances for this and the prior year’s report. Figure IV.B5 provides this comparison for the combined OASDI program over

the long-range (75-year) projection period.

 Figure IV.B5.—OASDI Annual Balances: 2007 and 2008 Trustees Reports

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

-6%

-4%

-2%

0%

2%

4%

2005 2015 2025 2035 2045 2055 2065 2075 2085

Calendar year

2007 Report

2008 Report
71

Long-Range Estimates

During the first 10 years of the projection period, the annual balances in this

report are lower than those in last year’s report by about 0.18 percent of taxable payroll, on average. These diminished annual balances early in the projection period reflect the fact that, the more unfavorable economic

experience during 2007 and assumed for the first few projection years in this

year’s report and the lower death rates for retirees projected for this year’s

report, have a larger effect in increasing cost than do the changes in immigration assumptions and methods in increasing workers and payroll. After 2017,

the difference in projected annual balances between the two reports declines,

as the impact of early economic experience diminishes and the number of

immigrant workers increases, with annual balances becoming similar around

2024. Thereafter, the projected annual balances in this year’s report are

higher than those in last year’s report, reaching over 1 percent of payroll

higher by the end of the 75-year projection period. The higher annual balances in this year’s report for years after 2035 reflect the combined effects

of: (1) the increased working-age population due to the cumulative effects of

higher legal and other immigration; and (2) reductions in the other-immigrant population at retirement ages due to the improved projection methods.

Also contributing to the improved annual balances in later years is the

assumption that new policies since 2001 for issuing Social Security numbers

will result in a reduced likelihood that the other-immigrant population

remaining in the Social Security area will collect benefits. The annual deficit

for 2081 is 4.16 percent of taxable payroll in this report compared to

5.20 percent for 2081 in last year’s report.
Assumptions & Methods

72

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 also have a 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,
73

Demographic Assumptions and Methods

but rather, they are intended to be indicators of the expected trend and a reasonable range of future income and cost, under a variety of plausible demographic and economic conditions.

The values for each of the demographic, economic, and program-specific

factors are assumed to move from recently experienced levels or trends,

toward long-range ultimate values, generally over the next 25 years. Ultimate values or trends reached by the end of the 75-year long-range period are

generally maintained at these levels or trends for extrapolations beyond 75

years. One exception is for real-wage growth, as described in section IV.B.5.

The assumed ultimate values, which are reached within the first 25 years

(and apply thereafter through the end of the 75-year long-range period) for

both the demographic and the economic factors, are intended to represent

average annual experience or growth rates. Actual future values will exhibit

fluctuations or cyclical patterns, as in the past.

The following sections discuss, in abbreviated form, the various assumptions

and methods required to make the estimates of trust fund financial status

which are the heart of this report.1 There are, of course, many interrelationships among these factors that make a sequential presentation potentially

misleading. Nevertheless, the following sections roughly follow the order

used in building the trust fund estimates presented in chapter IV.

A. DEMOGRAPHIC ASSUMPTIONS AND METHODS

The principal demographic assumptions relating to fertility, mortality, and

net immigration for the three alternatives are shown in table V.A1. The

rationales for selecting these assumptions are discussed in the following

three sections.

1. 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 at www.socialsecurity.gov/OACT/request.html; or write to:

Office of the Chief Actuary, 700 Altmeyer Building, 6401 Security Boulevard, Baltimore, MD 21235; or

call (410) 965-3006. This entire report, along with supplemental year-by-year tables, may also be found at

www.socialsecurity.gov/OACT/TR/TR08/index.html.
Assumptions & Methods

74

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. These assumptions are unchanged from those

used in last year’s report.

Based on preliminary data for 2005 and 2006, the total fertility rate is

assumed to reach a level of 2.06 children per woman for 2006 and 2007.

These levels are slightly higher than those estimated in last year’s report for

the intermediate assumptions. For all three alternatives, the total fertility rate

is then assumed to follow a gradual trend toward the selected ultimate level,

which is reached for 2032 and later.

2. Mortality Assumptions

For the projections in this year’s report, assumed average percentage reductions in future mortality rates were developed by age group, sex, and cause of

death. These assumptions were then used to estimate future central death

rates by age group, sex, and cause of death. From these estimated central

death rates, resulting probabilities of death by single year of age and sex

were calculated. 

Historical death rates (for years 1900-2004) used in developing estimates for

this report were calculated for ages below 65 (and for all ages for years prior

to 1968) using data from the National Center for Health Statistics (NCHS).2

 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.

 2 These rates reflect NCHS data on deaths and Census estimates of population.
75

Demographic Assumptions and Methods

For ages 65 and over, final Medicare data on deaths and enrollments were

used for years 1968 through 2004. Death rates by cause of death at all ages,

for years 1979-2004, were produced by the NCHS. 

The total age-sex-adjusted death rate1 declined at an average rate2 of

1.08 percent per year between 1900 and 2004. Between 1979 and 2004, the

period for which death rates were analyzed by cause, the total age-sexadjusted death rate (for all causes combined) declined at an average rate of

0.86 percent per year.

Death rates have declined substantially in the U.S. since 1990, with rapid

declines over some periods and slow or no improvement over the other periods. Historical death rates have generally declined more slowly for older

ages than for the rest of the population. The age-sex-adjusted death rate for

ages 65 and over declined at an average rate of 0.76 percent per year between

1900 and 2004. Between 1979 and 2004 the age-sex-adjusted death rate for

these ages declined at an average annual rate of 0.66 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

group, sex, and cause of death were selected for 2032 and later. The intermediate set, which was 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 differ only slightly from those used in last

year’s report.

After 2004, the reductions in central death rates for alternative II are

assumed to change rapidly from the average annual reductions by age group,

sex, and cause of death observed between 1984 and 2004, to the ultimate

annual percentage reductions by age group, sex, and cause of death assumed

for 2032 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 lev-

 1 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.

 2 Average rate of decline is calculated as the annual geometric rate of reduction between the first and last

years of the period.
Assumptions & Methods

76

els which are, respectively, 50 or 150 percent of the average annual reductions observed between 1984 and 2004.

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

lower than the death rates in last year’s report. New final death data for 2004

indicate a substantial decrease in the total age-sex-adjusted death rate of

about 4 percent for the year. However, preliminary death data for 2005 and

2006 indicate little, if any, further decline from the 2004 death rates. This

suggests that the large decline for 2004 may have resulted in part from an

acceleration of declines that would have been expected to occur in later

years.

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 0.32 percent, 0.73 percent, and 1.21 percent between

2032 and 2082 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

0.28 percent, 0.65 percent, and 1.13 percent between 2032 and 2082 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.

3. Immigration Assumptions

In order to develop projections of the total Social Security area population,

assumptions are made for annual legal immigration, legal emigration, other

immigration, and other emigration. Legal immigration consists of persons

who are granted legal permanent resident (LPR) status. Legal emigration

consists of those legal immigrants and native-born citizens who leave the
77

Demographic Assumptions and Methods

Social Security area population. Net legal immigration is then calculated as

the difference between legal immigration and legal emigration. Other immigration consists of immigrants who enter the Social Security area and stay 6

months or more but without LPR status, such as undocumented immigrants

and temporary foreign workers and students. Other emigration consists of

other immigrants who leave the Social Security area population or who

adjust their status to LPR. Net other immigration is then calculated as the difference between other immigration and other emigration. For previous Trustees Reports, annual net other immigration was assumed without making

explicit assumptions for other immigrants or other emigrants. 

Separate assumptions are developed for the low cost, intermediate, and high

cost scenarios. The low cost scenario includes higher annual net immigration

and the high cost scenario includes lower annual net immigration.

Legal immigration increased after World War II to around 300,000 persons

per year and remained around that level until shortly after 1960. With the

Immigration Act of 1965 and other related changes, annual legal immigration increased to about 400,000 and remained fairly stable until 1977.

Between 1977 and 1990, legal immigration once again increased, averaging

about 580,0001 per year. The Immigration Act of 1990, which took effect in

fiscal year 1992, restructured the immigration categories and increased significantly the number of immigrants who may legally enter the United States.

Legal immigration averaged about 790,0001 persons per year during the

period 1992 through 2000. Legal immigration increased to about 900,000 in

2000 and about 1,000,000 in 2001 reflecting primarily an increase in the

number of persons granted LPR status as immediate relatives of U.S. citizens, the only category of legal immigration that is not numerically limited.

However, legal immigration declined to less than 800,000 by 2003 as the

number of pending applications increased. Since 2003, legal immigration has

increased, rising above 1,100,000 in 2005 and reaching a level over

1,200,000 in 2006. Legal immigration in excess of 1,000,000 reflects the

concerted effort in recent years to reduce the backlog of pending applications

for LPR status.

For the intermediate alternative, it is assumed that the backlog of pending

applications will be reduced by the end of 2009, and thereafter legal immigration will average approximately 1,000,000 persons per year. For alternatives I and III, annual legal immigration is ultimately assumed to be

 1 Excludes those persons who attained legal permanent resident status under the special, one-time provisions of the Immigration Reform and Control Act of 1986.
Assumptions & Methods

78

1,200,000 persons and 800,000 persons, respectively. These are higher than

the ultimate legal immigration assumptions used in the 2007 report, which

were 1,062,500, 800,000, and 675,000 for alternatives I, II, and III, respectively.

The ratios of annual legal emigration to legal immigration are assumed to be

20, 25, and 30 percent for alternatives I, II, and III, respectively. This range

is consistent with the limited historical data for legal emigration from the

Social Security area. These are the same ratios used in the 2007 Trustees

Report. Combining the annual legal immigration and emigration assumptions, results in ultimate net legal immigration of 750,000 persons per year

under the intermediate alternative. For the low cost and high cost scenarios,

ultimate annual net legal immigration is 960,000 persons and 560,000 persons, respectively.

Significant changes for projecting other immigration are implemented in this

year’s report. In previous reports, annual other immigration was estimated by

assuming a fixed number of net other immigrants with a static age-sex distribution. For this year’s report, the annual numbers of other immigrants and

other emigrants are modeled separately. In addition, the new model reflects

the fact that many new legal immigrants are persons who adjust to LPR status from the other-immigrant population.

The number of other immigrants residing in the Social Security area population is estimated to have been about 9.7 million persons as of April 1, 2000,

increasing to about 13.0 million persons as of January 1, 2006. This otherimmigrant population is highly mobile and far more likely to leave the Social

Security area than is the native-born or legal-immigrant population. The

average number of persons entering the other-immigrant population in the

period 2000 through 2006 is estimated to have been about 1.5 million persons per year. During the same period, the number of other immigrants who

left the Social Security area or adjusted status to become an LPR averaged

about 950,000 per year. Thus, annual net other immigration during this time

period is estimated to have averaged approximately 550,000 persons.

For the intermediate assumptions, annual other immigration is assumed to

continue at the level of 1.5 million persons throughout the projection period.

For the low and high cost scenarios, future annual other immigration is

assumed to average 1.8 million persons and 1.2 million persons, respectively.

Emigration from the other-immigrant population includes those who leave

the Social Security area and those who adjust status to become LPRs. The

annual number of other immigrants who leave the Social Security area is
79

Demographic Assumptions and Methods

estimated based on modeled departures for the period 2000-06, disaggregated into two groups. The first departing group is calculated by applying a

set of annual departure rates, by age and sex, to the other-immigrant population in the Social Security area. The second departing group is set at fixed

annual numbers of departures, by age and sex, which remain constant

throughout the projection period. For the intermediate assumptions, the ultimate annual number of other immigrants who adjust status to become an

LPR is assumed to be 500,000, or one third of the annual number of other

immigrants entering the Social Security area. For the low and high cost scenarios, ultimate annual numbers adjusting status to LPR are assumed to average 600,000 persons and 400,000 persons, respectively.

Under the assumptions and methods described above, the size of the otherimmigrant population is projected to grow substantially. This growth reflects

the excess of annual other immigration over the combined annual numbers of

emigrants and deaths that occur within the other-immigrant population.

Net other immigration decreased from a level averaging well over 550,000

per year in the period 2000 through 2003, to about 380,000 in 2006, reflecting an increase in the number of other immigrants adjusting to LPR status as

a result of the effort to reduce the backlog of applications for LPR status. By

2010, when the backlog of applications is expected to be eliminated, net

other immigration is projected to rise to a level of about 445,000 persons per

year. After 2010, net other immigration is projected to decline steadily to

about 275,000 in 2061 and to remain fairly stable thereafter. The decline in

net other immigration is attributable to the increasing number of other immigrants residing in the Social Security area, which results in an increase in the

numbers who emigrate out of the area based on the rates of departure

described above. All other components of other immigration and emigration

are set at fixed levels after 2009, and thus do not contribute toward any

change in net other immigration. While annual net other immigration is projected to fall below the ultimate assumption of 300,000 used in last year’s

report, average annual net other immigration over the 75-year projection

period in this year’s report is higher, at 315,000 persons. Net other immigration is estimated to average about 415,000 persons per year under the low

cost assumptions and 225,000 persons per year under the high cost assumptions.

The total level of net immigration (legal and other combined) is estimated to

average 1,070,000 persons per year during the 75-year projection period

under the intermediate assumptions. For the low cost assumptions, total net

immigration is estimated to average 1,375,000 persons per year. Under the
Assumptions & Methods

80

high cost assumptions, total net immigration is estimated to average 790,000

persons per year.

Demographers express a wide range of views 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.

Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2085

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 45,000

1945 . . . . . . . . . 2.42 1,586.6 601.8 8,522.4 55,000

1950 . . . . . . . . . 3.03 1,435.6 499.4 8,028.3 170,000

1955 . . . . . . . . . 3.50 1,334.2 442.8 7,612.2 210,000

1960 . . . . . . . . . 3.61 1,330.9 436.9 7,626.7 200,000

1965 . . . . . . . . . 2.88 1,304.6 430.0 7,464.0 230,000

1970 . . . . . . . . . 2.43 1,224.3 422.6 6,870.7 280,000

1975 . . . . . . . . . 1.77 1,099.0 369.5 6,236.4 295,000

1980 . . . . . . . . . 1.82 1,035.9 331.9 5,993.6 410,000 375,000

1985 . . . . . . . . . 1.84 984.2 303.6 5,777.6 435,000 375,000

1990 . . . . . . . . . 2.07 931.2 289.4 5,451.1 500,000 550,000

1995 . . . . . . . . . 1.98 913.9 277.3 5,397.5 575,000 550,000

1996 . . . . . . . . . 1.98 900.4 266.1 5,367.2 665,000 550,000

1997 . . . . . . . . . 1.97 885.1 253.6 5,332.5 570,000 550,000

1998 . . . . . . . . . 2.00 878.3 246.9 5,325.2 490,000 550,000

1999 . . . . . . . . . 2.01 884.3 245.0 5,386.6 520,000 550,000

2000 . . . . . . . . . 2.06 875.7 243.4 5,328.3 670,000 630,000

2001 . . . . . . . . . 2.03 867.3 243.5 5,260.7 795,000 500,000

2002 . . . . . . . . . 2.02 863.6 242.6 5,236.6 730,000 555,000

2003 . . . . . . . . . 2.05 851.4 241.2 5,148.2 575,000 685,000

2004 . . . . . . . . . 2.05 819.9 234.8 4,940.6 750,000 505,000

20055 . . . . . . . . 2.05 835.8 230.6 5,098.4 870,000 445,000

20065 . . . . . . . . 2.06 831.0 227.7 5,079.9 950,000 380,000

20075 . . . . . . . . 2.06 826.5 224.9 5,062.9 900,000 375,000

Intermediate: 

2010 . . . . . . . . . 2.06 812.2 217.1 5,003.5 750,000 445,000

2015 . . . . . . . . . 2.04 782.4 205.0 4,848.9 750,000 410,000

2020 . . . . . . . . . 2.03 750.5 193.7 4,671.8 750,000 380,000

2025 . . . . . . . . . 2.02 719.3 183.2 4,495.4 750,000 360,000

2030 . . . . . . . . . 2.01 689.8 173.3 4,327.1 750,000 335,000

2035 . . . . . . . . . 2.00 662.0 164.1 4,168.1 750,000 315,000

2040 . . . . . . . . . 2.00 635.9 155.5 4,019.1 750,000 300,000

2045 . . . . . . . . . 2.00 611.5 147.4 3,879.5 750,000 290,000

2050 . . . . . . . . . 2.00 588.6 139.9 3,748.4 750,000 285,000

2055 . . . . . . . . . 2.00 567.0 132.8 3,625.3 750,000 280,000

2060 . . . . . . . . . 2.00 546.8 126.1 3,509.5 750,000 280,000

2065 . . . . . . . . . 2.00 527.8 119.9 3,400.3 750,000 275,000

2070 . . . . . . . . . 2.00 509.8 114.0 3,297.3 750,000 275,000

2075 . . . . . . . . . 2.00 492.9 108.5 3,200.0 750,000 275,000

2080 . . . . . . . . . 2.00 476.8 103.2 3,107.9 750,000 275,000

2085 . . . . . . . . . 2.00 461.7 98.3 3,020.7 750,000 275,000
81

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 2007 through

Low Cost: 

2010 . . . . . . . . . 2.09 827.7 221.9 5,094.6 960,000 640,000

2015 . . . . . . . . . 2.14 820.2 216.4 5,072.6 960,000 560,000

2020 . . . . . . . . . 2.19 807.8 210.9 5,011.2 960,000 510,000

2025 . . . . . . . . . 2.23 793.9 205.5 4,938.4 960,000 475,000

2030 . . . . . . . . . 2.28 780.1 200.2 4,863.5 960,000 440,000

2035 . . . . . . . . . 2.30 766.4 195.2 4,789.3 960,000 415,000

2040 . . . . . . . . . 2.30 753.2 190.3 4,717.5 960,000 390,000

2045 . . . . . . . . . 2.30 740.5 185.6 4,648.2 960,000 375,000

2050 . . . . . . . . . 2.30 728.3 181.1 4,581.4 960,000 360,000

2055 . . . . . . . . . 2.30 716.5 176.8 4,516.9 960,000 355,000

2060 . . . . . . . . . 2.30 705.1 172.7 4,454.6 960,000 350,000

2065 . . . . . . . . . 2.30 694.1 168.7 4,394.5 960,000 345,000

2070 . . . . . . . . . 2.30 683.5 164.8 4,336.4 960,000 345,000

2075 . . . . . . . . . 2.30 673.2 161.1 4,280.3 960,000 345,000

2080 . . . . . . . . . 2.30 663.4 157.5 4,226.1 960,000 345,000

2085 . . . . . . . . . 2.30 653.8 154.0 4,173.6 960,000 345,000

High Cost:

2010 . . . . . . . . . 2.02 796.8 212.5 4,912.4 630,000 205,000

2015 . . . . . . . . . 1.95 745.4 194.6 4,624.4 560,000 255,000

2020 . . . . . . . . . 1.87 695.2 178.9 4,331.3 560,000 250,000

2025 . . . . . . . . . 1.80 648.3 164.8 4,053.5 560,000 245,000

2030 . . . . . . . . . 1.73 605.1 151.9 3,796.5 560,000 230,000

2035 . . . . . . . . . 1.70 565.4 140.2 3,560.0 560,000 220,000

2040 . . . . . . . . . 1.70 529.2 129.6 3,343.4 560,000 215,000

2045 . . . . . . . . . 1.70 496.0 119.8 3,144.9 560,000 210,000

2050 . . . . . . . . . 1.70 465.5 110.9 2,962.6 560,000 205,000

2055 . . . . . . . . . 1.70 437.6 102.8 2,795.1 560,000 205,000

2060 . . . . . . . . . 1.70 411.9 95.4 2,640.8 560,000 210,000

2065 . . . . . . . . . 1.70 388.2 88.5 2,498.6 560,000 210,000

2070 . . . . . . . . . 1.70 366.4 82.3 2,367.3 560,000 210,000

2075 . . . . . . . . . 1.70 346.2 76.5 2,245.9 560,000 210,000

2080 . . . . . . . . . 1.70 327.6 71.2 2,133.4 560,000 210,000

2085 . . . . . . . . . 1.70 310.4 66.3 2,029.1 560,000 210,000

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

2032.

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 persons over the period 1990-99.

5 Estimated.

Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2085 (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

82

2085. The starting Social Security area population for January 1, 2006, is

based on the Census Bureau’s estimate of the residents of the 50 States and

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 1950-2085

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 . . . . . . . . . . . . . . 80,052 104,805 19,070 203,927 .182 .946

1970 . . . . . . . . . . . . . . 80,864 112,996 20,899 214,759 .185 .901

1975 . . . . . . . . . . . . . . 78,776 122,579 23,254 224,609 .190 .832

1980 . . . . . . . . . . . . . . 74,929 134,110 26,196 235,236 .195 .754

1985 . . . . . . . . . . . . . . 73,401 144,851 29,122 247,374 .201 .708

1990 . . . . . . . . . . . . . . 75,154 153,316 31,981 260,452 .209 .699

1995 . . . . . . . . . . . . . . 79,541 160,872 34,336 274,748 .213 .708

2000 . . . . . . . . . . . . . . 82,684 170,127 35,474 288,284 .209 .695

2005 . . . . . . . . . . . . . . 84,512 181,058 37,293 302,863 .206 .673

20073 . . . . . . . . . . . . . 85,276 185,135 38,264 308,675 .207 .667

Intermediate:

2010 . . . . . . . . . . . . . . 86,121 190,674 40,303 317,097 .211 .663

2015 . . . . . . . . . . . . . . 87,644 197,105 46,393 331,142 .235 .680

2020 . . . . . . . . . . . . . . 90,224 200,843 54,082 345,149 .269 .719

2025 . . . . . . . . . . . . . . 92,839 202,943 62,837 358,619 .310 .767

2030 . . . . . . . . . . . . . . 95,176 205,359 70,437 370,973 .343 .806

2035 . . . . . . . . . . . . . . 96,988 210,038 74,972 381,998 .357 .819

2040 . . . . . . . . . . . . . . 98,646 216,003 77,353 392,002 .358 .815

2045 . . . . . . . . . . . . . . 100,446 222,192 78,777 401,416 .355 .807

2050 . . . . . . . . . . . . . . 102,547 227,282 80,845 410,674 .356 .807

2055 . . . . . . . . . . . . . . 104,806 231,736 83,602 420,145 .361 .813

2060 . . . . . . . . . . . . . . 106,919 235,906 87,202 430,027 .370 .823

2065 . . . . . . . . . . . . . . 108,839 240,958 90,513 440,309 .376 .827

2070 . . . . . . . . . . . . . . 110,688 246,105 93,991 450,784 .382 .832

2075 . . . . . . . . . . . . . . 112,609 251,165 97,471 461,245 .388 .836

2080 . . . . . . . . . . . . . . 114,636 255,823 101,120 471,580 .395 .843

2085 . . . . . . . . . . . . . . 116,702 260,221 104,906 481,829 .403 .852
83

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

Low Cost:

2010 . . . . . . . . . . . . . . 86,439 191,101 40,272 317,812 0.211 0.663

2015 . . . . . . . . . . . . . . 89,306 198,830 46,162 334,299 .232 .681

2020 . . . . . . . . . . . . . . 93,981 203,802 53,474 351,256 .262 .724

2025 . . . . . . . . . . . . . . 99,481 207,101 61,659 368,242 .298 .778

2030 . . . . . . . . . . . . . . 105,425 210,789 68,498 384,712 .325 .825

2035 . . . . . . . . . . . . . . 110,984 217,387 72,155 400,526 .332 .842

2040 . . . . . . . . . . . . . . 116,111 226,023 73,660 415,794 .326 .840

2045 . . . . . . . . . . . . . . 121,316 235,571 74,354 431,240 .316 .831

2050 . . . . . . . . . . . . . . 126,927 244,714 75,896 447,537 .310 .829

2055 . . . . . . . . . . . . . . 132,834 253,971 78,277 465,082 .308 .831

2060 . . . . . . . . . . . . . . 138,974 263,468 81,498 483,940 .309 .837

2065 . . . . . . . . . . . . . . 145,081 274,555 84,321 503,956 .307 .836

2070 . . . . . . . . . . . . . . 151,118 286,643 87,137 524,898 .304 .831

2075 . . . . . . . . . . . . . . 157,239 299,490 89,920 546,649 .300 .825

2080 . . . . . . . . . . . . . . 163,603 312,184 93,444 569,231 .299 .823

2085 . . . . . . . . . . . . . . 170,211 324,723 97,782 592,717 .301 .825

High Cost:

2010 . . . . . . . . . . . . . . 85,815 190,269 40,336 316,419 .212 .663

2015 . . . . . . . . . . . . . . 86,045 195,472 46,637 328,154 .239 .679

2020 . . . . . . . . . . . . . . 86,618 198,032 54,725 339,375 .276 .714

2025 . . . . . . . . . . . . . . 86,491 198,986 64,079 349,556 .322 .757

2030 . . . . . . . . . . . . . . 85,439 200,186 72,481 358,106 .362 .789

2035 . . . . . . . . . . . . . . 83,818 203,008 77,955 364,781 .384 .797

2040 . . . . . . . . . . . . . . 82,427 206,392 81,294 370,114 .394 .793

2045 . . . . . . . . . . . . . . 81,407 209,348 83,543 374,298 .399 .788

2050 . . . . . . . . . . . . . . 80,787 210,570 86,221 377,578 .409 .793

2055 . . . . . . . . . . . . . . 80,392 210,505 89,409 380,306 .425 .807

2060 . . . . . . . . . . . . . . 79,649 209,765 93,400 382,814 .445 .825

2065 . . . . . . . . . . . . . . 78,685 209,385 97,177 385,247 .464 .840

2070 . . . . . . . . . . . . . . 77,764 208,436 101,284 387,483 .486 .859

2075 . . . . . . . . . . . . . . 77,039 206,820 105,439 389,298 .510 .882

2080 . . . . . . . . . . . . . . 76,468 204,849 109,180 390,497 .533 .906

2085 . . . . . . . . . . . . . . 75,930 202,813 112,337 391,080 .554 .928

1 Ratio of the population at ages 65 and over to the population at ages 20-64.

2 Ratio of the population at ages 65 and over and the population under age 20 to the population at ages

20-64.

3 Estimated.

Table V.A2.—Social Security Area Population as of July 1 and Dependency Ratios,

Calendar Years 1950-2085 (Cont.)

Calendar year

Population (in thousands) Dependency ratio

Under 20 20-64

65 and

over Total Aged1 Total2
Assumptions & Methods

84

for illustrating the overall level of the death rates experienced in a single

year. It is thus closely related to the age-sex-adjusted death rate that is discussed in section V.A.2. Period life expectancy for a particular year may be

viewed as the expected remaining life at a selected age only if it is assumed

that there is no change in death rates after that year.

Cohort life expectancy truly answers the question “What is the expected

average remaining lifetime for an individual at a selected age in a given

year?” Cohort life expectancy is calculated using death rates not from a single year, but from the series of years in which the individual will actually

reach each succeeding age if he or she survives. Cohort life expectancy is

shown in table V.A4 for those born on January 1 of each calendar year, and

for those attaining age 65 on January 1 of each calendar year.

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.
85

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 . . . . 67.2 74.9 13.1 17.1

1975 . . . . 68.7 76.6 13.7 18.0

1980 . . . . 69.9 77.5 14.0 18.4

1985 . . . . 71.1 78.2 14.4 18.6

1990 . . . . 71.8 78.9 15.1 19.1

1995 . . . . 72.5 79.1 15.4 19.1

1996 . . . . 73.0 79.2 15.5 19.1

1997 . . . . 73.4 79.4 15.6 19.1

1998 . . . . 73.7 79.4 15.7 19.1

1999 . . . . 73.8 79.3 15.7 19.0

2000 . . . . 74.0 79.4 15.9 19.0

2001 . . . . 74.1 79.5 16.1 19.1

2002 . . . . 74.2 79.5 16.2 19.1

2003 . . . . 74.4 79.6 16.3 19.2

2004 . . . . 74.8 80.0 16.7 19.5

20052 . . . 74.9 79.8 16.5 19.2

20062 . . . 75.1 79.8 16.6 19.2

20072 . . .

2 Estimated.

75.2 79.9 16.7 19.2

Projected:

2010 . . . . 75.4 79.8 16.8 19.2 75.7 80.0 16.9 19.3 75.9 80.2 17.1 19.4

2015 . . . . 75.7 79.9 16.9 19.2 76.3 80.4 17.3 19.5 76.9 80.9 17.6 19.9

2020 . . . . 76.0 80.1 17.0 19.3 76.9 80.9 17.6 19.8 77.9 81.7 18.2 20.3

2025 . . . . 76.2 80.3 17.1 19.4 77.5 81.3 17.9 20.0 78.7 82.4 18.7 20.9

2030 . . . . 76.5 80.5 17.3 19.5 78.0 81.8 18.2 20.3 79.5 83.1 19.2 21.3

2035 . . . . 76.8 80.7 17.4 19.6 78.5 82.2 18.5 20.6 80.3 83.8 19.7 21.8

2040 . . . . 77.0 80.9 17.5 19.7 79.0 82.6 18.8 20.9 81.1 84.5 20.2 22.3

2045 . . . . 77.2 81.1 17.6 19.8 79.5 83.1 19.0 21.2 81.8 85.1 20.7 22.8

2050 . . . . 77.5 81.3 17.7 19.9 80.0 83.4 19.3 21.4 82.6 85.7 21.2 23.3

2055 . . . . 77.7 81.5 17.8 20.0 80.4 83.8 19.6 21.7 83.2 86.3 21.7 23.7

2060 . . . . 77.9 81.6 17.9 20.1 80.8 84.2 19.8 21.9 83.9 86.9 22.1 24.1

2065 . . . . 78.1 81.8 18.0 20.2 81.3 84.6 20.1 22.2 84.5 87.5 22.6 24.6

2070 . . . . 78.3 82.0 18.1 20.3 81.7 84.9 20.3 22.4 85.2 88.0 23.0 25.0

2075 . . . . 78.5 82.1 18.2 20.4 82.0 85.2 20.6 22.6 85.8 88.5 23.4 25.4

2080 . . . . 78.7 82.3 18.3 20.5 82.4 85.6 20.8 22.8 86.3 89.0 23.8 25.8

2085 . . . . 78.9 82.4 18.4 20.6 82.8 85.9 21.0 23.1 86.9 89.5 24.3 26.2
Assumptions & Methods

86

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 1940 through 2004. For birth years after 2004, 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 2004, these values are based on a combination of actual and estimated death rates. After 2004, 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 . . . . 69.5 75.4 12.7 14.7 69.8 75.8 12.7 14.7 70.2 76.3 12.7 14.7

1945 . . . . 71.1 76.8 13.0 15.4 71.6 77.3 13.0 15.4 72.1 78.0 13.0 15.4

1950 . . . . 72.1 77.8 13.1 16.2 72.8 78.5 13.1 16.2 73.6 79.4 13.1 16.2

1955 . . . . 72.6 78.2 13.1 16.7 73.5 79.2 13.1 16.7 74.6 80.3 13.1 16.7

1960 . . . . 73.1 78.5 13.2 17.4 74.2 79.6 13.2 17.4 75.5 81.0 13.2 17.4

1965 . . . . 73.7 78.8 13.5 18.0 75.1 80.2 13.5 18.0 76.7 81.8 13.5 18.0

1970 . . . . 74.6 79.4 13.8 18.5 76.2 81.0 13.8 18.5 78.1 82.9 13.8 18.5

1975 . . . . 75.2 79.9 14.2 18.7 77.2 81.7 14.2 18.7 79.3 83.9 14.2 18.7

1980 . . . . 75.9 80.3 14.7 18.7 78.1 82.4 14.7 18.7 80.6 84.8 14.7 18.7

1985 . . . . 76.4 80.6 15.3 18.8 78.8 83.0 15.3 18.9 81.6 85.7 15.3 18.9

1990 . . . . 76.8 80.9 15.8 18.9 79.5 83.5 15.8 19.0 82.6 86.4 15.9 19.1

1995 . . . . 77.2 81.2 16.2 19.0 80.1 84.0 16.3 19.2 83.5 87.2 16.5 19.4

1996 . . . . 77.3 81.3 16.3 19.0 80.3 84.1 16.5 19.3 83.7 87.3 16.6 19.5

1997 . . . . 77.3 81.3 16.4 19.1 80.3 84.2 16.6 19.3 83.8 87.5 16.7 19.6

1998 . . . . 77.4 81.4 16.5 19.1 80.4 84.2 16.7 19.3 84.0 87.6 16.9 19.6

1999 . . . . 77.4 81.4 16.6 19.1 80.6 84.3 16.8 19.4 84.1 87.7 17.0 19.7

2000 . . . . 77.5 81.5 16.6 19.1 80.6 84.4 16.9 19.5 84.3 87.9 17.2 19.8

2001 . . . . 77.5 81.5 16.7 19.2 80.7 84.5 17.0 19.5 84.5 88.0 17.3 19.9

2002 . . . . 77.5 81.5 16.8 19.2 80.8 84.5 17.1 19.6 84.6 88.1 17.4 20.0

2003 . . . . 77.6 81.6 16.8 19.2 80.9 84.6 17.2 19.6 84.7 88.2 17.5 20.1

2004 . . . . 77.6 81.6 16.9 19.2 81.0 84.7 17.2 19.7 84.9 88.4 17.7 20.2

2005 . . . . 77.7 81.7 16.9 19.2 81.1 84.8 17.3 19.7 85.0 88.5 17.8 20.3

2006 . . . . 77.8 81.7 16.9 19.3 81.2 84.9 17.4 19.8 85.2 88.6 17.9 20.4

2007 . . . . 77.8 81.7 17.0 19.3 81.3 85.0 17.5 19.8 85.4 88.8 18.0 20.5

2010 . . . . 78.0 81.8 17.1 19.3 81.6 85.2 17.7 20.0 85.8 89.1 18.4 20.8

2015 . . . . 78.2 82.0 17.2 19.5 82.1 85.6 18.0 20.3 86.5 89.8 19.0 21.3

2020 . . . . 78.4 82.2 17.3 19.6 82.5 85.9 18.3 20.6 87.2 90.3 19.6 21.9

2025 . . . . 78.6 82.4 17.4 19.7 82.9 86.3 18.6 20.9 87.8 90.9 20.1 22.4

2030 . . . . 78.8 82.5 17.5 19.8 83.3 86.6 18.9 21.2 88.5 91.4 20.6 22.9

2035 . . . . 79.0 82.7 17.6 19.9 83.7 86.9 19.2 21.4 89.1 91.9 21.2 23.4

2040 . . . . 79.2 82.8 17.8 20.0 84.0 87.2 19.5 21.7 89.6 92.4 21.7 23.9

2045 . . . . 79.4 83.0 17.9 20.1 84.4 87.5 19.8 22.0 90.2 92.9 22.2 24.3

2050 . . . . 79.6 83.1 18.0 20.2 84.8 87.8 20.0 22.2 90.7 93.4 22.6 24.8

2055 . . . . 79.8 83.3 18.1 20.3 85.1 88.1 20.3 22.5 91.2 93.8 23.1 25.3

2060 . . . . 80.0 83.4 18.2 20.4 85.4 88.4 20.6 22.7 91.8 94.3 23.6 25.7

2065 . . . . 80.2 83.5 18.3 20.5 85.7 88.7 20.8 22.9 92.2 94.7 24.0 26.1

2070 . . . . 80.3 83.7 18.4 20.6 86.0 88.9 21.0 23.2 92.7 95.2 24.5 26.6

2075 . . . . 80.5 83.8 18.5 20.7 86.3 89.2 21.3 23.4 93.2 95.6 24.9 27.0

2080 . . . . 80.6 83.9 18.6 20.8 86.6 89.4 21.5 23.6 93.6 96.0 25.3 27.4

2085 . . . . 80.8 84.0 18.7 20.9 86.9 89.7 21.7 23.8 94.1 96.4 25.8 27.8
87

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 2007. 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

total- economy productivity is a major determinant in the growth of average

earnings. For the 40 years from 1966 to 2006, annual increases in total productivity averaged 1.7 percent, the result of average annual increases of 2.0,

1.3, 1.2, and 2.1 percent for the 10-year periods 1966-76, 1976-86, 1986-96,

and 1996-2006, respectively. However, it should be noted that this growth

 1 Historical levels of real GDP are from the Bureau of Economic Analysis’ (BEA) National Income and

Product Accounts (NIPA). Historical total hours worked is an unpublished series provided by the Bureau of

Labor Statistics (BLS), and is for all U.S. Armed Forces and civilian employment.
Assumptions & Methods

88

rate of 1.7 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, 1.2, 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 the same as those used in the 2007 report,

and reflect the belief that recent strong growth in nonfarm business productivity, after the relatively poor performance from 1973 to 1995, is consistent

with future long-term growth that mirrors the long-term trends of the past.

For the intermediate assumptions, the annual change in productivity is

assumed to be about 1.4 percent for 2007, average about 1.9 percent for 2008

and 2009, then gradually decline to the ultimate assumed level of 1.7 percent

by 2014. For the low cost assumptions, the annual change in productivity

averages about 2.1 percent over the 2007 to 2012 period, and reaches the

ultimate assumed level of 2.0 percent by 2017. For the high cost assumptions, the annual change in productivity decreases from 1.4 percent for 2007

to 0.1 percent for 2008. Thereafter, the annual change in productivity varies

with economic cycles until reaching its ultimate growth rate of 1.4 percent

for 2017.

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 at an average annual rate of 4.6 percent for

the 40 years from 1966 to 2006, the result of average annual increases of 5.8,

6.6, 3.6, and 2.5 percent for the 10-year periods 1966-76, 1976-86, 1986-96,

and 1996-2006, respectively. The GDP deflator increased at an average

annual rate of 4.1 percent from 1966 to 2006, the result of average annual

increases of 5.7, 5.9, 2.8, and 2.2 percent for the same respective 10-year

periods.
89

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 2007 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 the

same as the one used in the 2007 report. 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 2.8 percent for 2007 to 2.5 percent for 2009, then rise gradually to the assumed ultimate rate of 2.8 percent for 2010 and later. For the

low cost assumptions, the annual change in the CPI is assumed to decrease

from 2.8 percent for 2007, to the assumed ultimate rate of 1.8 percent by

2010. For the high cost assumptions, the annual change in the CPI mostly

increases from 2.8 percent for 2007 to 5.7 percent by 2012, then decreases to

its assumed ultimate rate of 3.8 percent as of 2016. The price differential,

defined as the percent change in the CPI less the GDP deflator percent

change, is estimated to be 0.1 percentage point for 2007. For 2008, the price

differential is assumed to be 0.8 percentage point, reflecting the relative

effects on the two price measures of the rise in oil prices in the second half of

2007. For all three alternatives, the price differential is projected to be

approximately 0.4 percentage point for 2009 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

contribution and benefit base, the exempt amounts under the retirement earn-
Assumptions & Methods

90

ings 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 -0.3 percent over

the last 40 years, and -0.9, -0.1, 0.3, and -0.3 percent for the 10-year periods

1966-76, 1976-86, 1986-96 and 1996-2006, respectively. The average annual

change in average hours worked was -0.2 percent over the last four complete

economic cycles covering the period from 1966 to 2000. The annual change

in average hours worked averaged -0.7, -0.6, 0.0, and 0.1 percent over the

economic cycles 1966-73, 1973-78, 1978-89, 1989-2000, respectively. 

For the 2008 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 2007

report.

The average annual change in the ratio of earnings to compensation was

-0.2 percent from 1966 to 2006. For wage workers, the assumed ultimate

annual rates of change in the ratio of earnings to compensation are -0.1, -0.2,

and -0.3 percent for the low cost, intermediate, and high cost assumptions,

respectively. Under the intermediate assumptions, the ratio of wages to

employee compensation is projected to decline from 0.809 for 2007 to 0.698

for 2082. 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 growth rate 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

to be very close to the average annual growth rates in the average wage in
91

Economic Assumptions and Methods

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

2007, then generally declining until reaching its assumed ultimate annual

growth rate of 3.9 percent after 2017.

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, 1967-2006, the real-wage differential averaged 0.9 percentage point, the result of averages of 0.7, 0.7, 0.5, and

1.6 percentage points for the 10-year periods 1967-76, 1977-86, 1987-96,

and 1997-2006, 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

1.6 percentage points for 2007. For the intermediate assumptions, the realwage differential is projected to fall to 1.3 percentage points in 2008, then

rise to 1.7 percentage points in 2009, reflecting an assumed economic slowdown and recovery over the period. The real-wage differential is projected to

average about 1.2 percentage points for the 2010 to 2013 period, then average the ultimate assumed differential of 1.1 percentage points (3.9 percent

nominal wage growth less 2.8 percent CPI inflation) thereafter.

For the low cost assumptions, the real-wage differential is assumed to rise to

2.1 percentage points by 2009, then generally decline to an average of about

1.5 percentage points over the 2012 to 2017 period, then averaging the ultimate assumed real-wage differential of 1.6 percentage points for 2018 and

later. For the high cost assumptions, the real-wage differential for the shortrange period is projected to fluctuate between -1.3 and 2.0 percentage points,

eventually stabilizing at about 0.6 percentage point for 2018 and later.
Assumptions & Methods

92

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. . . . .9 -.6 -.2 7.3 8.9 8.9 -.1

1980 to 1985. . . . 1.7 -.2 .0 5.2 6.5 5.2 1.3

1985 to 1990. . . . 1.3 .1 -.1 3.2 4.7 3.8 .9

1990 to 1995. . . . 1.1 -.2 .4 2.5 3.6 3.0 .6

1995 to 2000. . . . 2.1 .4 .1 1.7 5.4 2.4 2.9

2000 to 2005. . . . 2.4 -.6 -.8 2.5 2.7 2.5 .2

1997 . . . . . . . . . . 1.5 .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 .5 1.4 4.9 2.2 2.7

2000 . . . . . . . . . . 2.3 .1 -1.1 2.2 6.2 3.5 2.7

2001 . . . . . . . . . . 2.1 -.3 -1.3 2.4 2.1 2.7 -.7

2002 . . . . . . . . . . 2.9 -1.5 -1.0 1.7 .7 1.4 -.7

2003 . . . . . . . . . . 3.0 -1.0 -1.5 2.1 2.6 2.2 .4

2004 . . . . . . . . . . 2.4 .4 .1 2.9 4.5 2.6 1.8

2005 . . . . . . . . . . 1.5 -.4 -.2 3.2 3.7 3.5 .1

2006 . . . . . . . . . . 1.0 .1 .0 3.2 5.0 3.2 1.8

20073 . . . . . . . . . 1.4 .0 -.3 2.7 4.4 2.8 1.6

Intermediate: 

2008 . . . . . . . . . . 1.9 .0 -.1 2.0 4.1 2.8 1.3

2009 . . . . . . . . . . 1.9 -.1 .0 2.1 4.2 2.5 1.7

2010 . . . . . . . . . . 1.8 -.1 .0 2.4 4.0 2.8 1.3

2011 . . . . . . . . . . 1.8 -.2 .0 2.4 3.9 2.8 1.1

2012 . . . . . . . . . . 1.8 -.2 .0 2.4 4.0 2.8 1.2

2013 . . . . . . . . . . 1.8 -.2 .0 2.4 4.0 2.8 1.2

2014 . . . . . . . . . . 1.7 -.2 .0 2.4 3.9 2.8 1.1

2015 . . . . . . . . . . 1.7 -.2 .0 2.4 3.9 2.8 1.1

2016 . . . . . . . . . . 1.7 -.2 .0 2.4 3.8 2.8 1.0

2017 . . . . . . . . . . 1.7 -.2 .0 2.4 3.8 2.8 1.0

2015 to 2020. . . . 1.7 -.2 .0 2.4 3.9 2.8 1.1

2020 to 2082. . . . 1.7 -.2 .0 2.4 3.9 2.8 1.1

Low Cost: 

2008 . . . . . . . . . . 2.7 .0 .0 1.8 4.6 2.6 2.0

2009 . . . . . . . . . . 2.3 -.1 .1 1.5 4.0 1.9 2.1

2010 . . . . . . . . . . 2.1 -.1 .1 1.4 3.6 1.8 1.8

2011 . . . . . . . . . . 2.1 -.1 .1 1.4 3.5 1.8 1.7

2012 . . . . . . . . . . 2.0 -.1 .1 1.4 3.4 1.8 1.6

2013 . . . . . . . . . . 1.9 -.1 .1 1.4 3.4 1.8 1.6

2014 . . . . . . . . . . 1.8 -.1 .1 1.4 3.3 1.8 1.5

2015 . . . . . . . . . . 1.8 -.1 .1 1.4 3.2 1.8 1.4

2016 . . . . . . . . . . 1.8 -.1 .1 1.4 3.2 1.8 1.4

2017 . . . . . . . . . . 2.0 -.1 .1 1.4 3.3 1.8 1.5

2015 to 2020. . . . 2.0 -.1 .1 1.4 3.3 1.8 1.5

2020 to 2082. . . . 2.0 -.1 .1 1.4 3.4 1.8 1.6
93

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 1.2 percent

from 1990 to 2007. 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

0.8 percent per year, on average, through 2017. Thereafter, the labor force is

projected to increase much more slowly, averaging 0.5 percent over the 2017

to 2022 period, and 0.4 percent over the remainder of the 75-year projection

period. The 0.4 percent ultimate average annual growth rate in the labor

High Cost: 

2008 . . . . . . . . . . 0.1 -0.2 -0.2 2.7 2.1 3.5 -1.3

2009 . . . . . . . . . . 2.6 -.1 -.1 2.6 5.0 3.0 2.0

2010 . . . . . . . . . . 1.8 -.1 -.1 2.6 4.4 3.0 1.4

2011 . . . . . . . . . . .1 -.3 -.1 4.0 3.5 4.4 -.9

2012 . . . . . . . . . . 2.0 -.3 -.1 5.3 6.6 5.7 .9

2013 . . . . . . . . . . 2.1 -.3 -.1 5.2 7.2 5.6 1.6

2014 . . . . . . . . . . 1.3 -.4 -.1 4.3 5.3 4.7 .6

2015 . . . . . . . . . . 1.3 -.3 -.1 3.5 4.3 3.9 .4

2016 . . . . . . . . . . 1.3 -.3 -.1 3.4 4.2 3.8 .4

2017 . . . . . . . . . . 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 2082. . . . 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

94

force is higher than the 0.3 percent growth rate in the 2007 Trustees Report

because of changes in the demographic assumptions (see section V.A).

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. However, the participation rates are not highly sensitive to most of the demographic and economic assumptions. Thus, the 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 for both sexes 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,

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) 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 1.3 percent to

the total labor force by 2082.

For men age 16 and over, the projected age-adjusted labor force participation

rates for 2082 are 72.6, 73.0, and 73.5 percent for the low cost, intermediate,
95

Economic Assumptions and Methods

and high cost assumptions, respectively, compared to the 2006 level of

73.5 percent. (Age-adjusted labor force participation rates are adjusted to the

2006 age distribution of the civilian noninstitutional U.S. population.) These

rates reflect the net effect of increases due to assumed improvements in life

expectancy, and decreases due to higher assumed disability prevalence rates

and an increasing proportion of males who are never married. For women

age 16 and over, the projected age-adjusted labor force participation rates for

2082 are 60.6, 60.7, and 60.6 percent, for the low cost, intermediate, and

high cost assumptions, respectively, compared to the 2006 level of

59.4 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 separated, widowed, divorced, or never married.

The unemployment rate presented in table V.B2 is in the most commonly

cited form, the civilian rate. For years through 2017, total rates are presented

without adjustment for the changing age-sex distribution of the population.

For years after 2017, unemployment rates are presented as total age-sexadjusted rates (using the age-sex distribution of the 2006 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 2017. 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 2007

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

96

unemployment rates. For the 40-year period from 1966 to 2006, the average

growth rate in real GDP was 3.1 percent, combining the approximate growth

rates of 1.6, 1.7, and -0.3 percent for its components—total employment,

productivity, and average hours worked, respectively.

For the intermediate assumptions, the average annual growth in real GDP is

projected to be 2.4 percent from 2007 to 2017, a slower rate than the

3.1 percent average observed over the historical 40-year period from 1966 to

2006. 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 3.1 percent over the decade ending in 2017. 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 fourth quarter of 2007 and in the first three quarters of 2008,

resulting in a total decline in real GDP for these four quarters of 2.6 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 2011 and

last three quarters. After the second recession, a moderate economic recovery is assumed through 2013, with continued modest economic growth thereafter. For the high cost assumptions, annual growth in real GDP is projected

to average 1.7 percent for the decade ending in 2017.

After 2017, 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. At the end of the

75-year projection period, the annual growth in real GDP is 2.1 percent, due

to the assumed ultimate percent changes of about 0.4, 1.7, and 0.0 for total

employment, productivity, and average hours worked, respectively.

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

each year reflects the actual realized (historical) or expected (future) annual

real yield on securities issuable in the prior year.
97

Economic Assumptions and Methods

In developing a reasonable range of assumed ultimate future real interest

rates for the three alternatives, historical experience was examined for the 40

years, 1967-2006, and for each of the 10-year subperiods, 1967-76, 1977-86,

1987-96, and 1997-2006. For the 40-year period, the real interest rate averaged 2.8 percent per year. For the four 10-year subperiods, the real interest

rates averaged 0.6, 3.7, 4.2, and 2.9 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 the same as those assumed in the 2007 report. These ultimate real

interest rates, when combined with the ultimate CPI assumptions of 1.8, 2.8,

and 3.8 percent, yield ultimate nominal interest rates of about 5.4 percent for

the low cost assumptions, about 5.7 percent for the intermediate assumptions, and about 5.9 percent for the high cost assumptions.

The actual average annual nominal interest rate is 4.8 and 4.7 percent for

2006 and 2007, respectively. The annual rate of change in the CPI is

assumed to be 2.8 percent for 2007. Hence, the annual real interest rate is

2.0 percent for 2007. For the next 10-year short-range projection period,

nominal interest rates are projected based on changes in the business cycle

and in the CPI. Under the intermediate assumptions, the nominal interest rate

is projected to rise from 4.7 percent for 2007 to 5.8 percent for 2012 through

2016, reflecting a continued growing economy along with a stable rate of

inflation. The nominal interest rate falls to the ultimate assumed level of

5.7 percent for 2017. 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 8.8 percent for

2013, and then decline to an ultimate rate of about 5.9 percent by 2016.
Assumptions & Methods

98

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 2.3 4.6 2.4

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 . . . . . . . . . . . . 4.7 .8 .0 .8 5.2 3.5

2002 . . . . . . . . . . . . 5.8 .8 -.3 1.6 4.9 3.9

2003 . . . . . . . . . . . . 6.0 1.1 1.0 2.5 4.1 2.6

2004 . . . . . . . . . . . . 5.5 .6 1.1 3.6 4.3 1.5

2005 . . . . . . . . . . . . 5.1 1.3 1.7 3.1 4.3 .8

2006 . . . . . . . . . . . . 4.6 1.4 1.8 2.9 4.8 1.1

20078 . . . . . . . . . . . 4.6 1.1 1.1 2.2 4.7 2.0

Intermediate: 

2008 . . . . . . . . . . . . 4.8 .7 .4 2.3 4.4 1.9

2009 . . . . . . . . . . . . 5.0 1.1 .9 2.8 5.1 1.9

2010 . . . . . . . . . . . . 5.2 1.1 .9 2.7 5.6 2.3

2011 . . . . . . . . . . . . 5.3 .9 .7 2.5 5.7 2.8

2012 . . . . . . . . . . . . 5.4 .8 .7 2.5 5.8 2.9

2013 . . . . . . . . . . . . 5.5 .7 .6 2.5 5.8 3.0

2014 . . . . . . . . . . . . 5.5 .7 .7 2.4 5.8 3.0

2015 . . . . . . . . . . . . 5.5 .6 .6 2.3 5.8 3.0

2016 . . . . . . . . . . . . 5.5 .6 .6 2.3 5.8 2.9

2017 . . . . . . . . . . . . 5.5 .6 .6 2.3 5.7 3.0

2020 . . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2025 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2030 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2035 . . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2040 . . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2045 . . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2050 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2055 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2060 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2065 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2070 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2075 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2080 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2085 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

Low Cost: 

2008 . . . . . . . . . . . . 4.5 .9 .9 3.4 4.6 2.1

2009 . . . . . . . . . . . . 4.5 1.2 1.2 3.5 4.8 2.6

2010 . . . . . . . . . . . . 4.5 1.2 1.2 3.5 4.9 3.0

2011 . . . . . . . . . . . . 4.5 1.1 1.1 3.3 5.2 3.1

2012 . . . . . . . . . . . . 4.5 1.0 1.0 3.1 5.3 3.4

2013 . . . . . . . . . . . . 4.4 .8 .9 3.0 5.4 3.5

2014 . . . . . . . . . . . . 4.4 .8 .8 2.9 5.4 3.6

2015 . . . . . . . . . . . . 4.4 .7 .7 2.7 5.4 3.6

2016 . . . . . . . . . . . . 4.5 .7 .6 2.7 5.4 3.6

2017 . . . . . . . . . . . . 4.5 .7 .7 2.8 5.4 3.6
99

Economic Assumptions and Methods

Low Cost: (Cont.)

2020 . . . . . . . . . . . . 4.5 0.6 0.6 2.7 5.4 3.6

2025 . . . . . . . . . . . . 4.5 .5 .5 2.6 5.4 3.6

2030 . . . . . . . . . . . . 4.5 .6 .6 2.7 5.4 3.6

2035 . . . . . . . . . . . . 4.5 .7 .7 2.8 5.4 3.6

2040 . . . . . . . . . . . . 4.5 .7 .7 2.8 5.4 3.6

2045 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2050 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2055 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2060 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2065 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2070 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2075 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2080 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2085 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

High Cost: 

2008 . . . . . . . . . . . . 5.9 .4 -1.0 -1.0 3.7 1.2

2009 . . . . . . . . . . . . 6.3 .7 .2 2.7 5.5 .7

2010 . . . . . . . . . . . . 6.0 1.1 1.4 3.1 5.9 2.5

2011 . . . . . . . . . . . . 6.5 .7 .2 .2 6.1 1.5

2012 . . . . . . . . . . . . 7.2 .4 -.4 1.5 8.0 .4

2013 . . . . . . . . . . . . 6.6 .7 1.4 3.4 8.8 2.5

2014 . . . . . . . . . . . . 6.4 .7 .9 2.1 7.2 4.1

2015 . . . . . . . . . . . . 6.5 .5 .4 1.6 6.2 3.3

2016 . . . . . . . . . . . . 6.5 .5 .5 1.7 5.9 2.4

2017 . . . . . . . . . . . . 6.5 .4 .4 1.7 5.9 2.2

2020 . . . . . . . . . . . . 6.5 .4 .4 1.7 5.9 2.1

2025 . . . . . . . . . . . . 6.5 .4 .4 1.6 5.9 2.1

2030 . . . . . . . . . . . . 6.5 .3 .4 1.6 5.9 2.1

2035 . . . . . . . . . . . . 6.5 .3 .3 1.6 5.9 2.1

2040 . . . . . . . . . . . . 6.5 .3 .3 1.6 5.9 2.1

2045 . . . . . . . . . . . . 6.5 .2 .2 1.5 5.9 2.1

2050 . . . . . . . . . . . . 6.5 .1 .1 1.4 5.9 2.1

2055 . . . . . . . . . . . . 6.5 .1 .1 1.3 5.9 2.1

2060 . . . . . . . . . . . . 6.5 .0 .0 1.3 5.9 2.1

2065 . . . . . . . . . . . . 6.5 .0 .0 1.3 5.9 2.1

2070 . . . . . . . . . . . . 6.5 -.1 -.1 1.2 5.9 2.1

2075 . . . . . . . . . . . . 6.5 -.1 -.1 1.2 5.9 2.1

2080 . . . . . . . . . . . . 6.5 -.1 -.1 1.1 5.9 2.1

2085 . . . . . . . . . . . . 6.5 -.1 -.1 1.2 5.9 2.1

1The unemployment rates for 2018 and later are adjusted to the age-sex distribution of the civilian labor

force in 2006. 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

100

\

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 Parameters

The Social Security Act specifies that certain program parameters affecting

the determination of OASDI benefits and taxes are to be adjusted annually,

reflecting changes in particular economic measures. The law prescribes specific formulas that, when applied to reported statistics, produce automatic

revisions in these program parameters and hence in the benefit and tax computations. These automatic adjustments are based on measured changes in

the national average wage index (AWI) and the CPI.1 In this section, values

are shown for program parameters that are subject to automatic adjustment,

from the time that such adjustments became effective through 2017. 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 parameters. In each table, the projections

are shown under the three alternative sets of economic assumptions

described in the previous section. Table V.C1 includes:

 • The annual percentage increases 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.
101

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 benefit equivalent values near

the time of the worker’s benefit eligibility, and these indexed values are

used to calculate the worker’s benefit amount. The AWI is also used to

adjust most of the other program parameters that are subject to the automatic-adjustment provisions.

 • The wage-indexed OASDI contribution and benefit base—the maximum amount of earnings for the specified year that are subject to the

OASDI payroll tax and creditable toward benefit computation.

 • The wage-indexed retirement earnings test exempt amounts—the

annual amount of earnings below which beneficiaries are not subject to

benefit withholding. A lower exempt amount applies in years before a

beneficiary attains normal retirement age (NRA). A higher amount

applies for the year in which the beneficiary attains normal retirement

age. The retirement test does not apply beginning with the attainment of

normal retirement age.
Assumptions & Methods

102

Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and 

Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2017

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

2005 . . . . . . . . . . . 4.1 36,952.94 3.7 90,000 12,000 31,800

2006 . . . . . . . . . . . 3.3 38,651.41 4.6 94,200 12,480 33,240

Intermediate:

2007 . . . . . . . . . . . 7 2.3 40,307.02 4.3 797,500 712,960 734,440

2008 . . . . . . . . . . . 2.7 41,953.05 4.1 7102,000 713,560 736,120

2009 . . . . . . . . . . . 2.5 43,679.27 4.1 106,500 14,160 37,560

2010 . . . . . . . . . . . 2.8 45,434.85 4.0 110,700 14,760 39,120

2011 . . . . . . . . . . . 2.8 47,226.12 3.9 115,500 15,360 40,800

2012 . . . . . . . . . . . 2.8 49,089.78 3.9 120,000 15,960 42,360

2013 . . . . . . . . . . . 2.8 51,050.68 4.0 124,800 16,560 44,040

2014 . . . . . . . . . . . 2.8 53,053.07 3.9 129,600 17,160 45,840

2015 . . . . . . . . . . . 2.8 55,091.11 3.8 135,000 17,880 47,640

2016 . . . . . . . . . . . 2.8 57,198.35 3.8 140,100 18,600 49,440

2017 . . . . . . . . . . . 2.8 59,376.44 3.8 145,500 19,320 51,360

Low Cost:

2007 . . . . . . . . . . . 72.3 40,296.93 4.3 797,500 712,960 734,440

2008 . . . . . . . . . . . 2.4 42,140.73 4.6 7102,000 713,560 736,120

2009 . . . . . . . . . . . 1.9 43,833.37 4.0 106,500 14,160 37,560

2010 . . . . . . . . . . . 1.8 45,416.45 3.6 111,300 14,760 39,360

2011 . . . . . . . . . . . 1.8 46,995.78 3.5 115,800 15,360 40,920

2012 . . . . . . . . . . . 1.8 48,607.27 3.4 120,000 15,960 42,360

2013 . . . . . . . . . . . 1.8 50,237.06 3.4 124,200 16,440 43,800

2014 . . . . . . . . . . . 1.8 51,888.66 3.3 128,400 17,040 45,360

2015 . . . . . . . . . . . 1.8 53,561.45 3.2 132,600 17,640 46,920

2016 . . . . . . . . . . . 1.8 55,284.42 3.2 137,100 18,240 48,360

2017 . . . . . . . . . . . 1.8 57,114.87 3.3 141,600 18,720 49,920
103

Program Assumptions and Methods

Values for other wage-indexed parameters are shown in table V.C2. The

table provides historical values from 1978, when the amount of earnings

required for a quarter of coverage was first indexed, through 2008, and also

shows projected amounts through 2017. These other wage-indexed program

parameters are:

 • The bend points in the formula for computing the primary insurance

amount (PIA) for workers who reach age 62, become disabled, or die in

a given year. As illustrated in figure V.C1, these bend points indicate

three ranges in a worker’s average indexed monthly earnings (AIME)

over which a certain percent factor, 90, 32, or 15 percent respectively, is

applied to determine the worker’s PIA.

High Cost:

2007 . . . . . . . . . . . 72.3 $40,262.64 4.2 7$97,500 7$12,960 7$34,440

2008 . . . . . . . . . . . 3.5 41,159.10 2.2 7102,000 713,560 736,120

2009 . . . . . . . . . . . 2.8 43,165.02 4.9 106,500 14,160 37,560

2010 . . . . . . . . . . . 3.1 45,054.20 4.4 108,900 14,400 38,400

2011 . . . . . . . . . . . 4.6 46,635.97 3.5 114,000 15,120 40,320

2012 . . . . . . . . . . . 5.9 49,647.24 6.5 119,100 15,840 42,000

2013 . . . . . . . . . . . 5.5 53,160.38 7.1 123,300 16,320 43,560

2014 . . . . . . . . . . . 4.6 55,984.77 5.3 131,100 17,400 46,320

2015 . . . . . . . . . . . 3.9 58,436.60 4.4 140,400 18,600 49,560

2016 . . . . . . . . . . . 3.8 60,908.74 4.2 147,900 19,680 52,200

2017 . . . . . . . . . . . 3.8 63,499.11 4.3 154,500 20,520 54,480

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 2017.

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, 1975-2017 (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

104

 • Bend points in the formula used to compute the maximum total amount

of monthly benefits payable on the basis of the earnings of a retired or

deceased worker. This formula is a function of the worker’s PIA, and, as

shown in figure V.C2, relies on four intervals and percentages.

 Figure V.C1.—Primary-Insurance-Amount Formula for Those Newly Eligible in 2008

 Figure V.C2.—Maximum-Family-Benefit Formula for Those Newly Eligible in 2008

32% 

15% 

90% 

$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

($711)

Second

bend point

($4,288)

134% 

175% 

150% 

272% 

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$0 $500 $1,000 $1,500 $2,000 $2,500

Primary Insurance Amount

Maximum family benefit .

Third

bend point

($1,711)

Second

bend point

($1,312)

First

bend point

($909)
105

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 1977

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.—Values for Selected Wage-Indexed Program Parameters, 

Calendar Years 1978-2017

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 5 $17,700

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

2007 . . . . . . . . . 680 4,100 869 1,255 1,636 1,000 72,600

2008 . . . . . . . . . 711 4,288 909 1,312 1,711 1,050 75,900
Assumptions & Methods

106

In addition to the program parameters affecting the determination of OASDI

benefits that reflect changes in the economy, there are certain legislated

changes that have affected, and will affect, benefits. Two such changes are

the scheduled increases in the normal retirement age and in the delayed

retirement credits. Table V.C3 shows the scheduled changes in these parameters and the resulting effects on benefit levels expressed as a percentage of

PIA.

Intermediate:

2009 . . . . . . . . . $742 $4,472 $948 $1,368 $1,785 $1,090 $79,200

2010 . . . . . . . . . 772 4,655 987 1,424 1,858 1,140 82,200

2011 . . . . . . . . . 804 4,846 1,027 1,483 1,934 1,180 85,800

2012 . . . . . . . . . 836 5,041 1,069 1,542 2,012 1,230 89,100

2013 . . . . . . . . . 869 5,240 1,111 1,603 2,091 1,280 92,700

2014 . . . . . . . . . 904 5,446 1,155 1,667 2,174 1,330 96,300

2015 . . . . . . . . . 940 5,664 1,201 1,733 2,260 1,380 100,200

2016 . . . . . . . . . 976 5,886 1,248 1,801 2,349 1,440 104,100

2017 . . . . . . . . . 1,014 6,112 1,296 1,870 2,439 1,490 108,000

Low Cost:

2009 . . . . . . . . . 742 4,471 948 1,368 1,784 1,090 79,200

2010 . . . . . . . . . 776 4,675 991 1,431 1,866 1,140 82,800

2011 . . . . . . . . . 807 4,863 1,031 1,488 1,941 1,190 86,100

2012 . . . . . . . . . 836 5,039 1,068 1,542 2,011 1,230 89,100

2013 . . . . . . . . . 865 5,214 1,105 1,595 2,081 1,270 92,100

2014 . . . . . . . . . 895 5,393 1,143 1,650 2,152 1,320 95,400

2015 . . . . . . . . . 925 5,574 1,182 1,705 2,224 1,360 98,700

2016 . . . . . . . . . 955 5,757 1,220 1,762 2,297 1,410 101,700

2017 . . . . . . . . . 986 5,942 1,260 1,818 2,372 1,450 105,000

High Cost:

2009 . . . . . . . . . 741 4,467 947 1,367 1,783 1,090 78,900

2010 . . . . . . . . . 758 4,566 968 1,397 1,822 1,120 80,700

2011 . . . . . . . . . 794 4,789 1,015 1,465 1,911 1,170 84,600

2012 . . . . . . . . . 829 4,999 1,060 1,530 1,995 1,220 88,500

2013 . . . . . . . . . 858 5,174 1,097 1,583 2,065 1,260 91,500

2014 . . . . . . . . . 914 5,508 1,168 1,685 2,198 1,350 97,500

2015 . . . . . . . . . 978 5,898 1,250 1,805 2,354 1,440 104,400

2016 . . . . . . . . . 1,030 6,211 1,317 1,901 2,479 1,520 109,800

2017 . . . . . . . . . 1,076 6,483 1,374 1,984 2,587 1,580 114,600

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.—Values for Selected Wage-Indexed Program Parameters, 

Calendar Years 1978-2017 (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
107

Program Assumptions and Methods

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 (earnings subject to the OASDI payroll tax) at any time

during the year. For those aged 16 and over, projected covered employment

is the sum of age-sex components, each of which is projected as a ratio to the

CPS concept of employment. For those under age 16, projected covered

employment is the sum of age-sex components, each of which is projected as

a ratio to the Social Security area population. The projection methodology

accounts for changes in the business cycle, the quarterly pattern of growth in

employment within each year, changes in non-OASDI covered employment,

the increase in coverage of Federal civilian employment as a result of the

1983 Social Security Amendments, and changes in the number and employTable 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

108

ment-status of other immigrants estimated to be residing within the Social

Security coverage area.

Covered-worker rates are defined as the ratio of OASDI covered workers to

the Social Security area population. The age-adjusted coverage rate for males

age 16 and over is projected to be 71.2, 70.6, and 70.2 percent for 2082 for

the low cost, intermediate, and high cost assumptions, respectively, compared to the 2006 level of about 71.7 percent. (Age-adjusted covered worker

rates are adjusted to the 2006 age distribution of the Social Security area

population.) For females, the projected age-adjusted coverage rate changes

from its 2006 level of 63.1 percent to 64.4, 63.8, and 63.1 percent for 2082

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 of the economy, including private,

State and local, Federal civilian, and military. Covered earnings for each sector are based on the projected growth of U.S. earnings and a factor that

reflects any projected change in coverage (e.g., the increase in coverage in

the Federal civilian sector due to mandatory coverage of newly hired

employees). The level of taxable earnings reflects only the portion of covered earnings that is at or below the contribution and benefit base. The portion of covered earnings that is taxable (i.e., at or below the base) was about
109

Program Assumptions and Methods

89.5, 86.9, and 82.8 percent for 1983, 1994, and 2000, respectively. This

ratio of taxable earnings to covered earnings rose to about 85.8 in 2002, then

fell to 83.3 by 2006. The average annual rate of change in the ratio was about

-0.3 percent between 1983 and 2006.

Most of this decline was due to a relative increase in wages for high earners.

This decline is assumed to continue at a slower rate through 2017 for the

intermediate and high cost assumptions. The projected taxable earnings

ratios in 2017 are 83.7, 82.9, and 82.1 percent for the low cost, intermediate,

and high cost assumptions, respectively. After 2017, the taxable-to-covered

earnings ratio is approximately constant.

Payroll tax revenue is computed by applying the scheduled tax rates to taxable wages and self-employment income, taking into account the lag

between the time the tax liability is incurred and 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 for

employers with few employees to the next banking day after wages are paid

for companies with very large payrolls.) Self-employed workers are required

to make estimated tax payments on their earnings four times during the year,

as well as making up any under-estimate on their individual income tax

return. The pattern of actual receipts by the Treasury is taken into account

when estimating self-employed tax collections.

4. Insured Population

Eligibility for benefits under the OASDI program requires some minimal

level of work in covered employment. This requirement is established by a

worker’s accumulation of quarters of coverage (QCs). Prior to 1978, one QC

was credited for each calendar quarter in which at least $50 was earned. In

1978, when quarterly reporting of earnings was replaced by annual reporting,

the amount required to earn a QC (up to a maximum of four per year) was set

at $250. Since then, this amount has been adjusted each year according to

changes in the AWI. Its value in 2008 is $1,050.

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 (but not less than six).

Once a worker has accumulated 40 QCs, he or she remains permanently fully
Assumptions & Methods

110

insured. Disability insured status is acquired by any fully insured worker

over age 30 who has accumulated 20 QCs during the 40-quarter period ending with the current quarter; any fully insured worker aged 24-30 who has

accumulated QCs during one-half of the quarters elapsed after the quarter of

attainment of age 21 and up to and including the current quarter; and any

fully insured worker under age 24 who has accumulated six QCs during the

12-quarter period ending with the current quarter. Currently insured status is

acquired by any worker who has accumulated six QCs during the 13-quarter

period ending with the current quarter. Periods of disability are excluded

from the above described QC requirements for insured status (but do not

reduce the minimum of six QCs).

There are many types of benefits payable to workers and their family members under the OASDI program. A worker must be fully insured to be eligible for a primary retirement benefit, and for his or her spouse or children to

be eligible for auxiliary benefits. A deceased worker must have been either

currently insured or fully insured at the time of death for his or her children

(and their mother or father) to be eligible for benefits. If there are no eligible

surviving children, the deceased worker must have been fully insured at the

time of death for his or her surviving spouse to be eligible. A worker must be

disability insured to be eligible for a primary disability benefit, and for his or

her spouse or children to be eligible for auxiliary benefits.

Historical estimates of the fully insured population, as a percentage of the

Social Security area population, are made by age and sex for each birth

cohort beginning with 1900. These percentages are based on 30,000 simulated work histories for each sex and birth cohort, which are constructed

from past coverage rates, median earnings, and amounts required for crediting QCs. These work histories are developed 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 simulated fully insured percentages reproduce fairly closely the fully insured

percentages estimated from the Continuous Work History Sample from 1970

to date. The fully insured population for future years is projected using this

model, reflecting estimated future coverage rates, median earnings, and

amounts required for crediting QCs.

Historical estimates of the disability insured population, as a percentage of

the fully insured population, are made by age and sex for each birth cohort

beginning with 1900. These percentages are based on the same simulated

work histories used to project the fully insured percentages. Additional

adjustments are made to bring the simulated disability insured percentages

into close agreement with those estimated from the Continuous Work His-
111

Program Assumptions and Methods

tory Sample. The principal adjustment is for periods of disability (which are

not explicitly taken into account in the model). These periods (which reduce

the normally applicable QC requirements) have a negligible effect on fully

insured status at retirement age, but a substantial effect on disability insured

status. The disability insured population for future years is projected using

this model, reflecting projections of the fully insured population.

Projections of the currently insured population are not made. This is because

the number of beneficiaries who are entitled to benefits based solely on currently insured status has been very small, and is expected to remain small in

the future.

Under this procedure, the percentage of the Social Security area population

aged 62 and over that is fully insured is projected to increase from its estimated level of 81.0 for December 31, 2005, to 90.5, 90.6, and 91.0 for

December 31, 2085, under alternatives I, II, and III, respectively. The percentage for females is projected to increase significantly, while that for males

is projected to decline somewhat. Under alternative II, for example, the percentage for males is projected to decrease slightly during this period from

92.6 to 91.3, while that for females is projected to increase from 72.1 to 90.0.

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, agedwidow(er)’s, or aged-spouse’s benefits, and by applying termination rates to

the number of persons already receiving retired-worker benefits.

For the long-range period, the number of retired-worker beneficiaries not

previously converted from disabled-worker beneficiary status is projected as

a percentage of the exposed population, i.e., the aged fully insured population less persons entitled to or converted from disabled-worker benefits and

fully insured persons entitled only to widow(er)’s benefits. For age 62, a linear regression is developed based on the historical relationship between this

percentage and the labor force participation rate. The regression coefficients

are then used to project this percentage based on the projected labor force

participation rate for age 62. The percentage for ages 70 and over is assumed

to be nearly 100, because delayed retirement credit can no longer be earned
Assumptions & Methods

112

after age 70. The percentage for each age 63 through 69 is projected based on

historical experience with an adjustment for changes in the portion of the primary insurance amount that is payable at each age of entitlement. As the normal retirement age increases, the number of retired-worker beneficiaries not

automatically converted from disabled-worker beneficiary status as a percentage of the exposed population, is gradually adjusted downward.

For the long-range period 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 “earners.”

In the short-range period, insured aged-spouse beneficiaries are projected in

conjunction with the retired-worker beneficiaries. Uninsured aged-spouse

beneficiaries are projected by applying award rates to the aged uninsured

male or female population, and by applying termination rates to the population already receiving such benefits.

In the long-range period, aged-spouse beneficiaries are estimated separately

for those married and divorced. The number of married aged-spouse beneficiaries is projected by applying a series of factors to the number of spouses

aged 62 and over in the population. These factors represent the probabilities

that the spouse and the earner meet all of the conditions of eligibility—i.e.,

the probabilities that: (1) the earner is 62 or over; (2) the earner is insured;

(3) the earner is receiving benefits; (4) the spouse is not receiving a benefit

for the care of an entitled child; (5) the spouse is not insured; and (6) the

spouse is not eligible to receive a significant government pension based on

earnings in noncovered employment. To the resulting number of spouses a

projected prevalence rate is applied to calculate the estimated number of

aged-spouse beneficiaries.

The number of divorced aged-spouse beneficiaries is estimated by applying

the same factors to the number of divorced persons aged 62 and over in the

population, with three differences. First, an additional factor is required to

reflect the probability that the person’s former earner spouse is still alive

(otherwise, the person may be entitled to a divorced widow(er)’s benefit).

Second, a factor is required to reflect the probability that the marriage to the

earner spouse was at least 10 years in duration. Third, factor (3) above is not

applied because, effective as of January 1985, a divorced person generally
113

Program Assumptions and Methods

need not wait to receive benefits until the former earner spouse is receiving

benefits.

The projected numbers of children under age 18, and students aged 18 and

19, who are eligible for benefits as children of retired-worker beneficiaries,

are based on the projected number of children in the population. In the shortrange period, the number of entitled children is developed by applying award

rates to the number of children in the population 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 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 aged 62 to 71 to the population aged 20 to 71.

For student beneficiaries, factors are applied to the number of children aged

18 and 19 in the population, representing the probabilities that the parent is

alive, aged 62 or over, insured, and receiving a retired-worker benefit.

Another factor is applied representing the probability that the child is attending a secondary school.

The number of disabled children, aged 18 and over, of retired-worker beneficiaries is projected from the adult population. In the short-range period,

award rates are applied to the population, and termination rates are applied to

the number of disabled children already receiving benefits. In the long-range

period, disabled children are projected in a manner similar to that for student

children with the inclusion of a factor reflecting the probability of being disabled before age 22.

In the short-range period, the number of 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

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, fully insured aged-widow(er) beneficiaries are projected in conjunction with the retired-worker beneficiaries. Uninsured aged-widow(er) beneficiaries are projected, by applying award rates to
Assumptions & Methods

114

the aged uninsured male or female population, and by applying termination

rates to the population already receiving such benefits. In the long-range

period, aged-widow(er) beneficiaries are projected by marital status. Four

factors are applied to the number of widow(er)s in the population aged 60

and over. These factors represent the probabilities that (1) the deceased

earner is fully insured at death, (2) the widow(er) is not receiving a benefit

for the care of an entitled child, (3) the widow(er) is not fully insured, and (4)

the widow(er)’s benefits are not withheld because of receipt of a significant

government pension based on earnings in noncovered employment. In addition, some insured widow(er)s who had not applied for their 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 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 entitled 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.

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

father-survivor 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
115

Program Assumptions and Methods

number of mother-survivors and father-survivors already receiving benefits.

In the long-range period, mother-survivor and father-survivor beneficiaries,

assuming they are not remarried, are estimated from the number of child-survivor beneficiaries, taking into account projected changes in average family

size.

The number of parent-survivor beneficiaries is projected based on the historical pattern of the number of such beneficiaries.

Table V.C4 shows the projected number of beneficiaries under the OASI

program by type of benefit. Included among the beneficiaries who receive

retired-worker benefits are persons who also receive a residual benefit consisting of the excess of an auxiliary benefit over their retired-worker benefit.

Estimates of the number and amount of such residual payments are made

separately for spouses and widow(er)s.
Assumptions & Methods

116

Table V.C4.—OASI Beneficiaries With Benefits in Current-Payment Status 

at the End of Calendar Years 1945-2085

[In thousands]

Calendar year

Retired workers and auxiliaries Survivors

Worker Total 1 Spouse Child

WidowwidowerMotherfather Child Parent

Historical data:

1945 . . . . . . . . . . 518 159 13 94 121 377 6 1,288

1950 . . . . . . . . . . 1,771 508 46 314 169 653 15 3,477

1955 . . . . . . . . . . 4,474 1,192 122 701 292 1,154 25 7,961

1960 . . . . . . . . . . 8,061 2,269 268 1,544 401 1,577 36 14,157

1965 . . . . . . . . . . 11,101 2,614 461 2,371 472 2,074 35 19,128

1970 . . . . . . . . . . 13,349 2,668 546 3,227 523 2,688 29 23,030

1975 . . . . . . . . . . 16,589 2,867 643 3,888 582 2,919 21 27,509

1980 . . . . . . . . . . 19,564 3,018 639 4,415 563 2,610 15 30,823

1985 . . . . . . . . . . 22,435 3,069 456 4,862 372 1,918 10 33,122

1986 . . . . . . . . . . 22,985 3,086 450 4,927 350 1,878 9 33,685

1987 . . . . . . . . . . 23,444 3,090 439 4,983 329 1,837 8 34,129

1988 . . . . . . . . . . 23,862 3,088 432 5,013 318 1,809 7 34,529

1989 . . . . . . . . . . 24,331 3,095 422 5,057 312 1,782 6 35,004

1990 . . . . . . . . . . 24,841 3,104 421 5,098 304 1,777 6 35,551

1991 . . . . . . . . . . 25,293 3,106 425 5,142 301 1,792 5 36,064

1992 . . . . . . . . . . 25,762 3,115 431 5,187 294 1,808 5 36,603

1993 . . . . . . . . . . 26,109 3,098 436 5,207 289 1,837 5 36,981

1994 . . . . . . . . . . 26,412 3,069 440 5,218 283 1,865 4 37,292

1995 . . . . . . . . . . 26,679 3,027 441 5,213 275 1,884 4 37,522

1996 . . . . . . . . . . 26,905 2,971 442 5,199 242 1,898 4 37,661

1997 . . . . . . . . . . 27,282 2,926 441 5,043 230 1,893 3 37,817

1998 . . . . . . . . . . 27,518 2,866 439 4,981 221 1,884 3 37,911

1999 . . . . . . . . . . 27,784 2,811 442 4,936 212 1,885 3 38,073

2000 . . . . . . . . . . 28,505 2,798 459 4,901 203 1,878 3 38,747

2001 . . . . . . . . . . 28,843 2,742 467 4,828 197 1,890 3 38,969

2002 . . . . . . . . . . 29,195 2,681 477 4,771 194 1,908 2 39,227

2003 . . . . . . . . . . 29,537 2,622 480 4,707 190 1,910 2 39,448

2004 . . . . . . . . . . 29,952 2,569 482 4,643 184 1,901 2 39,733

2005 . . . . . . . . . . 30,461 2,524 488 4,569 178 1,903 2 40,126

2006 . . . . . . . . . . 30,976 2,476 490 4,494 171 1,899 2 40,508

2007 . . . . . . . . . . 31,528 2,431 494 4,436 165 1,892 2 40,947

Intermediate:

2010 . . . . . . . . . . 34,209 2,394 533 4,364 153 1,873 2 43,527

2015 . . . . . . . . . . 41,056 2,345 623 4,282 143 1,887 1 50,337

2020 . . . . . . . . . . 49,138 2,254 689 4,229 137 1,901 2 58,349

2025 . . . . . . . . . . 56,369 2,268 741 4,233 133 1,895 2 65,640

2030 . . . . . . . . . . 62,728 2,293 779 4,293 129 1,902 2 72,126

2035 . . . . . . . . . . 67,011 2,205 788 4,375 125 1,898 2 76,405

2040 . . . . . . . . . . 69,285 2,089 792 4,368 121 1,883 2 78,539

2045 . . . . . . . . . . 70,865 2,013 800 4,295 118 1,856 2 79,948

2050 . . . . . . . . . . 72,732 1,996 827 4,195 115 1,832 2 81,698

2055 . . . . . . . . . . 75,151 2,100 849 4,103 112 1,812 2 84,129

2060 . . . . . . . . . . 77,993 2,195 871 4,044 110 1,795 2 87,009

2065 . . . . . . . . . . 80,782 2,310 881 4,044 107 1,773 2 89,899

2070 . . . . . . . . . . 83,677 2,412 898 4,098 105 1,750 2 92,942

2075 . . . . . . . . . . 86,730 2,485 918 4,171 102 1,726 2 96,134

2080 . . . . . . . . . . 89,937 2,570 943 4,239 99 1,708 2 99,497

2085 . . . . . . . . . . 93,313 2,658 968 4,299 97 1,692 2 103,029
117

Program Assumptions and Methods

Notes: 

1. The number of beneficiaries does not include uninsured individuals who receive benefits under Section

228 of the Social Security Act. Costs are reimbursed from the General Fund of the Treasury for most of

these individuals.

2. Totals do not necessarily equal the sums of rounded components.

6. Disability Insurance Beneficiaries

Benefits are paid from the DI Trust Fund to disabled workers who satisfy the

disability insured requirements, 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 have not yet attained

normal retirement age. Spouses and children of such disabled workers may

Low Cost:

2010 . . . . . . . . . . 34,191 2,394 533 4,361 154 1,876 2 43,511

2015 . . . . . . . . . . 40,905 2,349 629 4,268 146 1,916 1 50,215

2020 . . . . . . . . . . 48,620 2,227 700 4,250 135 2,001 2 57,935

2025 . . . . . . . . . . 55,330 2,231 764 4,291 130 2,069 2 64,816

2030 . . . . . . . . . . 60,910 2,227 817 4,391 125 2,170 2 70,642

2035 . . . . . . . . . . 64,325 2,111 838 4,502 120 2,259 2 74,157

2040 . . . . . . . . . . 65,767 1,968 852 4,503 117 2,332 2 75,541

2045 . . . . . . . . . . 66,674 1,873 872 4,423 117 2,386 2 76,347

2050 . . . . . . . . . . 68,038 1,838 914 4,311 117 2,430 2 77,650

2055 . . . . . . . . . . 70,054 1,913 949 4,204 119 2,479 2 79,718

2060 . . . . . . . . . . 72,484 1,974 988 4,129 122 2,542 2 82,240

2065 . . . . . . . . . . 74,826 2,032 1,013 4,111 125 2,606 2 84,714

2070 . . . . . . . . . . 77,226 2,066 1,046 4,143 128 2,668 2 87,278

2075 . . . . . . . . . . 79,875 2,079 1,086 4,194 130 2,725 2 90,092

2080 . . . . . . . . . . 83,214 2,119 1,140 4,257 133 2,789 2 93,654

2085 . . . . . . . . . . 87,299 2,195 1,202 4,338 135 2,856 2 98,028

High Cost:

2010 . . . . . . . . . . 34,233 2,393 532 4,368 153 1,869 2 43,549

2015 . . . . . . . . . . 41,214 2,341 618 4,298 140 1,858 1 50,470

2020 . . . . . . . . . . 49,763 2,289 681 4,206 140 1,807 2 58,888

2025 . . . . . . . . . . 57,569 2,315 722 4,175 135 1,732 2 66,648

2030 . . . . . . . . . . 64,697 2,371 744 4,192 128 1,662 2 73,795

2035 . . . . . . . . . . 69,896 2,312 740 4,243 121 1,589 2 78,901

2040 . . . . . . . . . . 73,101 2,218 732 4,227 112 1,513 2 81,905

2045 . . . . . . . . . . 75,443 2,163 726 4,167 104 1,438 2 84,042

2050 . . . . . . . . . . 77,906 2,166 738 4,089 97 1,377 2 86,374

2055 . . . . . . . . . . 80,766 2,300 746 4,018 90 1,326 2 89,247

2060 . . . . . . . . . . 84,021 2,430 752 3,973 83 1,275 2 92,536

2065 . . . . . . . . . . 87,289 2,597 747 3,983 77 1,220 2 95,914

2070 . . . . . . . . . . 90,742 2,756 747 4,042 71 1,168 2 99,528

2075 . . . . . . . . . . 94,224 2,874 749 4,115 65 1,117 2 103,146

2080 . . . . . . . . . . 97,346 2,974 748 4,175 60 1,075 2 106,380

2085 . . . . . . . . . . 100,009 3,063 746 4,207 56 1,035 2 109,117

1 Included among the beneficiaries who receive retired-worker benefits are persons who also receive a residual benefit consisting of the excess of an auxiliary benefit over their retired-worker benefit.

Table V.C4.—OASI Beneficiaries With Benefits in Current-Payment Status 

at the End of Calendar Years 1945-2085 (Cont.)

[In thousands]

Calendar year

Retired workers and auxiliaries Survivors

Worker Total 1 Spouse Child

WidowwidowerMotherfather Child Parent
Assumptions & Methods

118

also receive DI benefits provided they satisfy certain criteria, principally

meeting age requirements.

The number of disabled workers receiving benefits in a given year (i.e., in

current-payment status) is projected using standard actuarial methods that

reflect future new benefit awards, terminations due to death and recovery,

and conversions from disability to retired-worker beneficiary status after

which benefits are paid from the OASI Trust Fund.

The prevalence of disability (arising from the likelihood of becoming disabled—

incidence—as well as the likelihood that disability ceases—termination) is captured by the ratio of the number of disabled-worker beneficiaries in current-payment status to the disability insured population (this ratio is referred to as the

disabled-worker prevalence rate). The balance of this section describes the

methods and assumptions used for projecting the number of disability beneficiaries. Incidence rates and termination rates are the key factors in these

projections. This section illustrates these rates as well as the projected beneficiary population and prevalence rates.

a. Disability Incidence

The number of new benefit awards each year divided by the number of individuals who meet insured requirements but are not yet receiving benefits (the

disability exposed population) is referred to as the disability incidence rate.

New awards are projected for each year by applying assumed age-sex-specific disability incidence rates to the projected disability exposed population

by age and sex. Projections of the disability insured population are described

in section V.C.4 of this report.

For the first 10 years of the projection period (through 2017) incidence rates

reflect several factors including: (1) aspects of program administration (processing of the special disability workload described in section IV.A.2, efforts

to reduce the disability backlog, and recent changes to how claims are adjudicated); (2) assumed future unemployment rates; and (3) underlying trends

in incidence. After 2017, age-sex-specific incidence rates are assumed to

trend toward the ultimate rates assumed for the long-range projections,

reaching these ultimate rates in 2027. The ultimate age-sex-specific disability incidence rates are selected based on careful analysis of historical levels

and patterns and expected future conditions, including the impact of sched-
119

Program Assumptions and Methods

uled increases in the normal retirement age.1 The ultimate incidence rates

are assumed to represent the likely average rates of incidence for the future.

For the intermediate alternative, the ultimate age-sex-adjusted incidence rate

(adjusted to the disability exposed population for the year 2000) for ages

through 64 is assumed to be 5.2 awards per thousand exposed population.2

This level is about 1 percent higher than the average rate for the historical

period 1970 through 2007. The ultimate age-sex-adjusted incidence rates for

the low cost and high cost alternatives are assumed to be 4.2 and 6.2 awards

per thousand exposed, or about 19 percent lower and 20 percent higher than

the average for the historical period, respectively. For the 2008 report, the

ultimate assumed age-sex-adjusted incidence rates are essentially the same as

in last year’s report.

Historical incidence rates and assumed incidence rates under the three alternatives are illustrated in figure V.C3. Incidence rates have varied within a

wide range over the past 35 years. This variation is attributed 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 incidence rate, age-sex adjusted to the distribution of the

disability exposed population for 2000. Such adjustment facilitates meaningful comparisons over long periods of time by focusing on the likelihood of

becoming disabled, and excluding the effects of a changing distribution of

the population toward ages where disability is inherently more or less likely.

Gross (unadjusted) incidence rates are also shown in figure V.C3 in dashed

lines. Unadjusted rates are influenced by the changing age-sex distribution of

the exposed population over time. The gross incidence rate fell substantially

below the age-sex-adjusted rate between 1975 and 1995 as the baby-boom

generation swelled the size of the younger working-age population, where

disability incidence is low. After 1995, the gross rate rose relative to the

age-sex-adjusted rate, reflecting the aging of the baby-boom generation into

higher ages, where disability incidence increases substantially. After about

 1 Incidence rates are adjusted upward to account for additional workers who are expected to file for disability benefits (rather than retirement benefits) in response to greater reductions in retirement benefits as the

NRA rises.

 2 The ultimate age-sex-adjusted disability incidence rate is reported as new awards per thousand exposed in

this year’s report. For last year’s report, the rate was reported on an entitlement basis rather than a new

award basis. The incidence rates in this year’s report are essentially equivalent to those reported for last

year’s report and have the same ultimate effect on benefit payments and beneficiaries in current-payment

status.

 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 at

www.socialsecurity.gov/OACT/NOTES/s2000s.html.
Assumptions & Methods

120

2023, the gross incidence rate declines relative to the age-sex-adjusted rate as the

baby-boom generation moves above the normal retirement age (NRA), and is

replaced at prime disability ages (50 to NRA) by the smaller cohorts born in the

1970s. As these smaller cohorts age past NRA, by about 2050, the gross incidence rate returns to a higher relative level under the intermediate assumptions.

Thereafter, the gross rate remains higher, reflecting the persistently higher

average age of the working-age population, which is largely due to lower

birth rates since 1965.

b. Disability Termination

Disability benefits may be terminated if a beneficiary dies or recovers from

the disabling condition (as indicated by either medical improvement or

return to work). The termination rate is the ratio of the number of terminations to the average number of disabled-worker beneficiaries during the year.

Termination rates are projected by age, sex, and reason for termination. In

addition, in the long-range period (post-2017) termination rates are also

assumed to vary by duration of entitlement to disabled-worker benefits.

In the short-range period (through 2017), the age-sex-adjusted death rate

(adjusted to the 2000 disabled-worker population) under the intermediate

assumptions is projected to gradually decline from 27.9 deaths per thousand

 Figure V.C3.—DI Disabled-Worker Incidence Rates, 1970-2085

[Awards per thousand disability exposed]

0

1

2

3

4

5

6

7

8

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Gross incidence rates

Age-sex-adjusted

incidence rates

I

I

II II

III

III

Historical Estimated
121

Program Assumptions and Methods

beneficiaries in 2007 to about 23.9 per thousand by 2017.1 The age-sexadjusted recovery rate under the intermediate assumptions is assumed to rise

from a relatively low level of 10 per thousand beneficiaries in 2007 (reflecting temporarily lower levels of continuing disability reviews) to 12 per thousand beneficiaries by 2017. Under low cost (high cost) assumptions, total

age-sex-adjusted termination rates due to death and recovery are assumed to

increase (decrease) to levels roughly 10-15 percent higher (lower) than those

under the intermediate assumptions. 

For the long-range period (post-2017), death and recovery rates are projected

relative to rates by age, sex, and duration of entitlement over the base period

1996-2000.2 The ultimate age-sex-adjusted recovery rate for disabled workers is assumed to be about 10.8 per thousand beneficiaries. Ultimate age-sexadjusted recovery rates for low cost and high cost alternatives are assumed to

reach about 13.1 and 8.6 recoveries per thousand beneficiaries, respectively.

For all three sets of assumptions, the ultimate recovery rates are reached in

the twentieth year of the projection period (2027). In contrast, death rates by

age and sex are assumed to change throughout the long-range period at the

same rate as for death rates in the general population. From the age-sexadjusted death rate of 27.9 per thousand beneficiaries in 2007, rates of 21.4,

12.2, and 7.7 per thousand disabled-worker beneficiaries are projected for

2085 under the low cost, intermediate, and high cost assumptions, respectively.

Figure V.C4 illustrates gross and age-sex-adjusted total termination rates for

disabled-worker beneficiaries for the historical period since 1970, and for the

projection period through 2085. As with incidence rates, the age-sexadjusted termination rate provides an illustration of the real change in the

tendency to terminate benefits. The gross rate is influenced by changes in the

age-sex distribution of the beneficiary population. A shift in the beneficiary

population to older ages, as when the baby-boom generation moves into preretirement ages, results in an increase in the gross death termination rate as

long as death rates by age and sex are constant or declining.

 1 Projections are distinguished between the short range (through 2017) and the long range (after 2017).

While short-range assumptions vary within the 10-year short-range period, the full phase in to the ultimate

assumptions is not achieved until 2027. Death rates differ in this regard as explained in the text.

 2 The termination rate analysis was based on work presented in Actuarial Study 118, “Social Security Disability Insurance Program Worker Experience,” June 2005. This study can be found on the Social Security

website at www.socialsecurity.gov/OACT/NOTES/s2000s.html.
Assumptions & Methods

122

c. Comparison of Incidence, Termination, and Conversion

Incidence and termination rates are the foundation for development of the

projected levels of disabled-worker beneficiaries in current-payment status

up to the normal retirement age (NRA) at which time beneficiaries are converted to retired-worker status and thereby leave the DI rolls. For all disabled-worker beneficiaries reaching the NRA in a given year, the disability

“conversion” rate is, by definition 100 percent. For beneficiaries at all other

ages this rate is zero. Conversions are simply a transfer of beneficiaries at

NRA from the DI Trust Fund account to the OASI Trust Fund account. After

conversion, recovery from the disabling condition is no longer considered.

Conversions do represent a form of exit from the DI rolls and therefore must

be accounted for in disabled-worker beneficiary totals.

Figure V.C5 compares the historical and projected (intermediate) levels of

incidence, termination, and conversion on both gross and age-sex adjusted

bases. The rates for incidence and termination (death and recovery) are

described above. The conversion ratio is the number of conversions in a

given year (i.e., beneficiaries who reach the NRA) divided by the average

number of disabled-worker beneficiaries at all ages in that year. The ratio is a

constant on an age-sex-adjusted basis, except for the two periods during

 Figure V.C4.—DI Disabled-Worker Termination Rates, 1970-2085

[Terminations per thousand disabled-worker beneficiaries]

0

20

40

60

80

100

120

140

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Gross termination rates

Age-sex-adjusted

termination rates

II

III

I

Historical Estimated
123

Program Assumptions and Methods

which the NRA increases under current law. But on a gross basis, the conversion ratio rises and falls with the change in the age distribution of disabled

workers reflecting the changing proportion of all disabled-worker beneficiaries who attain the NRA in a given year.

Termination rates have declined and are expected to continue to fall, largely

because of declines in death rates. Incidence rates have varied widely and are

assumed for the intermediate projection (on an age-sex-adjusted basis) to

remain near the middle of the high and low extremes experienced since

1970. The gross conversion ratio increases in the future due to aging of the

beneficiary population.

d. DI Beneficiaries and Disabled-Worker Prevalence Rates

The detailed projections of disabled-worker awards, terminations, and conversions are combined using standard actuarial methods to project the number of disabled workers receiving benefits (i.e., in current-payment status)

over the next 75 years. The projected numbers of disabled workers in current-payment status are presented in table V.C5. The number of disabled

workers in current-payment status is projected to grow from 7.1 million at

the end of 2007, to 12.2 million, 14.1 million, and 14.8 million at the end of

 Figure V.C5.—Comparison of DI Disabled-Worker Incidence Rates, Termination Rates 

and Conversion Ratios Under Intermediate Assumptions, 1970-2085

[Awards per thousand disability exposed;

terminations and conversions per thousand disabled-worker beneficiaries]

0

1

2

3

4

5

6

7

8

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Incidence rates

0

20

40

60

80

100

120

140

160

Termination rates &

Conversion ratios

Gross incidence rates

Age-sex-adjusted incidence rates

Gross conversion ratios

Age-sex-adjusted conversion ratios

Age-sex-adjusted and 

gross termination rates

Historical Estimated
Assumptions & Methods

124

2085, under the low cost, intermediate, and 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. Also shown in table

V.C5 are disabled-worker prevalence rates on both gross (unadjusted) and

age-sex-adjusted bases. Discussion of auxiliary beneficiary projections

appears below.

Table V.C5.—DI Beneficiaries With Benefits in Current-Payment Status at the End of 

Calendar Years 1960-2085

[Beneficiaries in thousands; prevalence rates per thousand disability insured]

Calendar year

Disabledworker

beneficiaries

Auxiliary beneficiaries

Total

beneficiaries

Disabled-worker 

prevalence rates

Spouse Child Gross

Age-sex

adjusted

Historical data:

1960. . . . . . . . . . . . 455 77 155 687

1965. . . . . . . . . . . . 988 193 558 1,739

1970. . . . . . . . . . . . 1,493 283 889 2,665 20 19

1975. . . . . . . . . . . . 2,488 453 1,411 4,351 29 29

1980. . . . . . . . . . . . 2,856 462 1,359 4,677 28 31

1985. . . . . . . . . . . . 2,653 306 945 3,904 24 26

1986. . . . . . . . . . . . 2,725 301 965 3,991 24 27

1987. . . . . . . . . . . . 2,782 291 968 4,041 25 27

1988. . . . . . . . . . . . 2,826 281 963 4,070 24 27

1989. . . . . . . . . . . . 2,891 271 962 4,124 24 27

1990. . . . . . . . . . . . 3,007 266 989 4,261 25 28

1991. . . . . . . . . . . . 3,191 266 1,052 4,509 26 29

1992. . . . . . . . . . . . 3,464 271 1,151 4,886 28 31

1993. . . . . . . . . . . . 3,721 273 1,255 5,249 30 32

1994. . . . . . . . . . . . 3,958 271 1,350 5,579 31 33

1995. . . . . . . . . . . . 4,179 264 1,409 5,852 33 35

1996. . . . . . . . . . . . 4,378 224 1,463 6,065 34 35

1997. . . . . . . . . . . . 4,501 207 1,438 6,146 34 35

1998. . . . . . . . . . . . 4,691 190 1,446 6,327 35 36

1999. . . . . . . . . . . . 4,870 176 1,468 6,514 36 36

2000. . . . . . . . . . . . 5,036 165 1,466 6,667 36 36

2001. . . . . . . . . . . . 5,268 157 1,482 6,907 37 37

2002. . . . . . . . . . . . 5,539 152 1,526 7,217 39 37

2003. . . . . . . . . . . . 5,869 151 1,571 7,590 41 38

2004. . . . . . . . . . . . 6,198 153 1,599 7,950 42 39

2005. . . . . . . . . . . . 6,519 157 1,633 8,309 44 39

2006. . . . . . . . . . . . 6,807 156 1,652 8,615 45 40

2007. . . . . . . . . . . . 7,099 154 1,665 8,918 47 40
125

Program Assumptions and Methods

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

Intermediate:

2010. . . . . . . . . . . . 7,841 162 1,733 9,736 50 41

2015. . . . . . . . . . . . 8,764 159 1,844 10,766 53 43

2020. . . . . . . . . . . . 9,328 154 1,935 11,416 55 43

2025. . . . . . . . . . . . 10,029 178 2,061 12,269 54 44

2030. . . . . . . . . . . . 10,060 178 2,184 12,422 52 44

2035. . . . . . . . . . . . 10,195 174 2,287 12,656 52 45

2040. . . . . . . . . . . . 10,505 171 2,366 13,041 53 45

2045. . . . . . . . . . . . 11,057 177 2,429 13,663 54 45

2050. . . . . . . . . . . . 11,503 188 2,495 14,187 55 46

2055. . . . . . . . . . . . 11,906 207 2,573 14,685 55 46

2060. . . . . . . . . . . . 12,156 207 2,651 15,014 55 46

2065. . . . . . . . . . . . 12,502 214 2,725 15,440 56 47

2070. . . . . . . . . . . . 12,910 221 2,792 15,924 56 47

2075. . . . . . . . . . . . 13,329 227 2,856 16,413 57 47

2080. . . . . . . . . . . . 13,724 236 2,922 16,882 57 47

2085. . . . . . . . . . . . 14,062 241 2,992 17,295 58 47

Low Cost:

2010. . . . . . . . . . . . 7,547 151 1,652 9,350 48 39

2015. . . . . . . . . . . . 7,900 140 1,653 9,693 48 38

2020. . . . . . . . . . . . 8,029 126 1,689 9,843 46 37

2025. . . . . . . . . . . . 8,255 137 1,755 10,147 43 35

2030. . . . . . . . . . . . 8,059 130 1,862 10,051 41 35

2035. . . . . . . . . . . . 8,050 121 1,974 10,144 40 34

2040. . . . . . . . . . . . 8,233 114 2,078 10,425 40 34

2045. . . . . . . . . . . . 8,635 115 2,174 10,925 40 34

2050. . . . . . . . . . . . 8,981 122 2,271 11,373 40 34

2055. . . . . . . . . . . . 9,322 133 2,383 11,838 40 35

2060. . . . . . . . . . . . 9,589 132 2,513 12,234 39 35

2065. . . . . . . . . . . . 9,976 135 2,649 12,760 39 35

2070. . . . . . . . . . . . 10,467 138 2,783 13,388 39 35

2075. . . . . . . . . . . . 11,049 144 2,915 14,108 40 35

2080. . . . . . . . . . . . 11,650 151 3,050 14,850 40 35

2085. . . . . . . . . . . . 12,215 158 3,189 15,563 40 36

High Cost:

2010. . . . . . . . . . . . 8,137 172 1,814 10,123 52 43

2015. . . . . . . . . . . . 9,631 177 2,031 11,839 59 47

2020. . . . . . . . . . . . 10,594 177 2,172 12,943 64 50

2025. . . . . . . . . . . . 11,750 215 2,338 14,303 64 52

2030. . . . . . . . . . . . 12,023 225 2,445 14,693 64 54

2035. . . . . . . . . . . . 12,303 227 2,501 15,030 65 55

2040. . . . . . . . . . . . 12,725 226 2,518 15,469 67 56

2045. . . . . . . . . . . . 13,400 238 2,519 16,157 70 57

2050. . . . . . . . . . . . 13,908 252 2,534 16,694 72 58

2055. . . . . . . . . . . . 14,316 276 2,560 17,152 73 58

2060. . . . . . . . . . . . 14,477 274 2,568 17,319 74 59

2065. . . . . . . . . . . . 14,677 284 2,560 17,520 75 59

2070. . . . . . . . . . . . 14,857 291 2,543 17,691 76 59

2075. . . . . . . . . . . . 14,919 294 2,524 17,737 77 59

2080. . . . . . . . . . . . 14,886 297 2,512 17,694 77 59

2085. . . . . . . . . . . . 14,797 297 2,507 17,601 77 60

Table V.C5.—DI Beneficiaries With Benefits in Current-Payment Status at the End of 

Calendar Years 1960-2085 (Cont.)

[Beneficiaries in thousands; prevalence rates per thousand disability insured]

Calendar year

Disabledworker

beneficiaries

Auxiliary beneficiaries

Total

beneficiaries

Disabled-worker 

prevalence rates

Spouse Child Gross

Age-sex

adjusted
Assumptions & Methods

126

Figure V.C6 illustrates the historical and projected disabled-worker prevalence rates on both a gross (unadjusted) basis and on an age-sex-adjusted

basis (adjusted to the age-sex distribution of the insured population for the

year 2000).

Changes in prevalence rates are a direct result of changes in incidence rates

and termination rates. The patterns depicted for these rates in figure V.C5 are

helpful for understanding the trend in prevalence rates (annual rates are not

directly comparable and cannot be simply combined, as their denominators

differ).

Prevalence rates have increased primarily because: (1) termination rates have

declined; and (2) incidence rates at younger ages have increased relative to

rates at higher ages. Gross prevalence rates have increased more than agesex-adjusted prevalence rates since the baby-boom generation began to move

into the ages 50 through NRA, where incidence rates are relatively high.

With this upward shift in the age distribution of the disabled population,

gross conversions to retired worker status at NRA have naturally increased

as well. In the future, prevalence rates are projected to grow at a slower pace

reflecting assumed stabilization in three factors: the age distribution of the

general population, the age distribution of the disability insured population,

 Figure V.C6.—DI Disabled-Worker Prevalence Rates, 1970-2085

[Rate per thousand disability insured]

0

10

20

30

40

50

60

70

80

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Gross prevalence rates

Age-sex-adjusted

prevalence rates

III

III

II

II

I

I

Historical Estimated
127

Program Assumptions and Methods

and relative rates of incidence by age. With these factors gradually stabilizing, the remaining force influencing prevalence rates is the declining death

termination rate, which is projected to continue to have a small influence

toward higher disabled worker prevalence rates in the future.

As mentioned above in the discussion of incidence and termination rates, the

age-sex-adjusted prevalence rate isolates the changing trend in the true likelihood of receiving benefits for the insured population, free from the effects of

an aging population. For disability prevalence rates, like incidence rates, the

entrance of the baby-boom generation into working ages caused the gross

rate of disability to decline relative to the age-sex-adjusted rate between

1975 and 1995, due to lower disability prevalence rates at younger ages.

Conversely, the gross rate of disability prevalence increases relative to the

age-sex-adjusted rate after 1995 due to the aging of the baby-boom generation into ages with higher disability prevalence rates.

The age-sex-adjusted disabled-worker prevalence rate for ages through 64 is

projected to grow from 40.0 per thousand disability insured at the end of

2007, to 47.4 per thousand at the end of 2085 under the intermediate assumptions. As mentioned above, the growth in prevalence is expected to slow relative to the historical period.

Under the low cost and high cost assumptions, the age-sex-adjusted disability prevalence rate is projected to decrease to 35.6 per thousand and increase

to 59.6 per thousand insured workers at the end of 2085, respectively.

Table V.C5 presents projections of the numbers of auxiliary beneficiaries

paid from the DI Trust Fund. As indicated at the beginning of this subsection, such auxiliary beneficiaries consist of qualifying spouses and children

of disabled workers. In the case of 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, in his or her care, an eligible child beneficiary who is either under age 16 or disabled prior to age 22.

In general, the number of such auxiliary beneficiaries is projected in a manner that is related to the projected number of disabled-worker beneficiaries.

In the short-range period (2008-17), this is accomplished for family members

of disabled-worker beneficiaries by projecting incidence and termination

rates for each category of auxiliary beneficiary. After 2017, the child beneficiaries at ages 18 and under are projected in relation to the projected number

of children in the population, by applying factors representing the probability

that either of their parents is a disabled-worker beneficiary. The remaining

categories of children and spouses are projected in a similar manner.
Assumptions & Methods

128

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 in PIAs since the year of award,

reflecting automatic benefit increases, recomputations to reflect additional

covered earnings, and other factors. Future 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

based on 2004 entitlements, and more recent actual earnings levels by age

and sex for covered workers.

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 2017 is based on historical experience and the expected growth in average wages. Additionally, estimates for the first several years of the projection are provided by the Office

of Budget of the Social Security Administration. For years after 2017,

administrative expenses are assumed to increase because of increases in the
129

Program Assumptions and Methods

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.

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.
Assumptions & Methods

130

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

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.
131

History of Trust Fund Operations

VI. APPENDICES

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS

The Federal Old-Age and Survivors Insurance (OASI) Trust Fund was established on January 1, 1940 as a separate account in the United States Treasury. The Federal Disability Insurance (DI) Trust Fund, another separate

account in the United States Treasury, was established on August 1, 1956.

All the financial operations of the OASI and DI programs are handled

through these respective funds. The Board of Trustees is responsible for

overseeing the financial operations of these funds. The following paragraphs

describe the various components of trust fund income and outgo. 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-
Appendices

132

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 2007 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
133

History of Trust Fund Operations

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.

19861. . . . . . . . . . . $42,000 5.700 5.200 0.500 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

19891. . . . . . . . . . . 48,000 6.060 5.530 .530 12.1200 11.0600 1.0600

1990 . . . . . . . . . . . 51,300 6.200 5.600 .600 12.4000 11.2000 1.2000

1991. . . . . . . . . . . . 53,400 6.200 5.600 .600 12.4000 11.2000 1.2000

1992. . . . . . . . . . . . 55,500 6.200 5.600 .600 12.4000 11.2000 1.2000

1993. . . . . . . . . . . . 57,600 6.200 5.600 .600 12.4000 11.2000 1.2000

1994. . . . . . . . . . . . 60,600 6.200 5.260 .940 12.4000 10.5200 1.8800

1995. . . . . . . . . . . . 61,200 6.200 5.260 .940 12.4000 10.5200 1.8800

1996. . . . . . . . . . . . 62,700 6.200 5.260 .940 12.4000 10.5200 1.8800

1997. . . . . . . . . . . . 65,400 6.200 5.350 .850 12.4000 10.7000 1.7000

1998. . . . . . . . . . . . 68,400 6.200 5.350 .850 12.4000 10.7000 1.7000

1999. . . . . . . . . . . . 72,600 6.200 5.350 .850 12.4000 10.7000 1.7000

2000. . . . . . . . . . . . 76,200 6.200 5.300 .900 12.4000 10.6000 1.8000

2001. . . . . . . . . . . . 80,400 6.200 5.300 .900 12.4000 10.6000 1.8000

2002. . . . . . . . . . . . 84,900 6.200 5.300 .900 12.4000 10.6000 1.8000

2003. . . . . . . . . . . . 87,000 6.200 5.300 .900 12.4000 10.6000 1.8000

2004. . . . . . . . . . . . 87,900 6.200 5.300 .900 12.4000 10.6000 1.8000

2005. . . . . . . . . . . . 90,000 6.200 5.300 .900 12.4000 10.6000 1.8000

2006. . . . . . . . . . . . 94,200 6.200 5.300 .900 12.4000 10.6000 1.8000

2007. . . . . . . . . . . . 97,500 6.200 5.300 .900 12.4000 10.6000 1.8000

2008. . . . . . . . . . . . 102,000 6.200 5.300 .900 12.4000 10.6000 1.8000

2009 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
Appendices

134

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

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.

 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.
135

History of Trust Fund Operations

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.

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.
Appendices

136

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.

Table VI.A2.—Historical Operations of the OASI Trust Fund, 

Calendar Years 1937-2007

[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

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
137

History of Trust Fund Operations

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

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

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

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/table4a1.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 1937-2007 (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
Appendices

138

Table VI.A3.—Historical Operations of the DI Trust Fund, 

Calendar Years 1957-2007

[Amounts in billions]

Calendar

year

Income Expenditures Assets

Total 1

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

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

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

2007 . . 109.9 95.2 1.4 13.2 98.8 95.9 2.5 .4 11.1 214.9 206
139

History of Trust Fund Operations

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/table4a2.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.
Appendices

140

Table VI.A4.—Historical Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1957-2007

[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

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

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

2007 . . 784.9 656.1 18.6 110.2 594.5 584.9 5.5 4.0 190.4 2,238.5 345
141

History of Trust Fund Operations

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

Tables VI.A5 and VI.A6 show the total assets of the OASI Trust Fund and

the DI Trust Fund, respectively, at the end of each calendar year 2006 and

2007. 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 2007 had an interest rate of 5 percent, compared with an interest rate of 5.125 percent for bonds issued in

2006.

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/table4a3.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.
Appendices

142

Note: Amounts of special issues are shown at par value. Special issues are always purchased and redeemed

at par value. Where equal amounts mature in two or more years at a given interest rate, they are grouped.

Table VI.A5.—Assets of the OASI Trust Fund, End of Calendar Years 2006 and 2007

[In thousands]

December 31, 2006 December 31, 2007

Obligations sold only to the trust funds (special issues): 

Certificates of indebtedness:

4.000 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . — $73,768,095

4.500 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . $69,954,173 —

4.500 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . — 11,114,654

4.750 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,593,669 —

5.000 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . — 22,046,087

5.250 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,491,126 —

Bonds:

3.500 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,513,751 —

3.500 percent, 2009-15. . . . . . . . . . . . . . . . . . . . . . . . . 66,596,257 66,596,257

3.500 percent, 2016-17. . . . . . . . . . . . . . . . . . . . . . . . . 19,027,504 19,027,504

3.500 percent, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,900,994 86,900,994

4.125 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,516,946 —

4.125 percent, 2009-19. . . . . . . . . . . . . . . . . . . . . . . . . 115,686,406 115,686,406

4.125 percent, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,585,700 106,585,700

4.625 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,167,664 —

4.625 percent, 2009-15. . . . . . . . . . . . . . . . . . . . . . . . . 64,173,648 64,173,648

4.625 percent, 2016-18. . . . . . . . . . . . . . . . . . . . . . . . . 27,502,989 27,502,989

4.625 percent, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,068,657 96,068,657

5.000 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . — 12,454,234

5.000 percent, 2010-11 . . . . . . . . . . . . . . . . . . . . . . . . . — 24,908,466

5.000 percent, 2012-21. . . . . . . . . . . . . . . . . . . . . . . . . — 124,542,320

5.000 percent, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . — 130,607,701

5.125 percent, 2008-09. . . . . . . . . . . . . . . . . . . . . . . . . 23,135,730 23,135,730

5.125 percent, 2010-19. . . . . . . . . . . . . . . . . . . . . . . . . 115,678,660 115,678,660

5.125 percent, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,567,769 11,567,769

5.125 percent, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,153,469 118,153,469

5.250 percent, 2008-15. . . . . . . . . . . . . . . . . . . . . . . . . 73,887,296 73,887,296

5.250 percent, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,235,911 9,235,911

5.250 percent, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,387,242 77,387,242

5.625 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,621,438 —

5.625 percent, 2008-11 . . . . . . . . . . . . . . . . . . . . . . . . . 38,485,752 38,485,752

5.625 percent, 2012-15. . . . . . . . . . . . . . . . . . . . . . . . . 38,485,748 38,485,748

5.625 percent, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,151,331 68,151,331

5.875 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,169,273 —

5.875 percent, 2008-12. . . . . . . . . . . . . . . . . . . . . . . . . 30,846,365 30,846,365

5.875 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,258,869 43,258,869

6.000 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,693,627 —

6.000 percent, 2008-11 . . . . . . . . . . . . . . . . . . . . . . . . . 26,774,508 26,774,508

6.000 percent, 2012-13. . . . . . . . . . . . . . . . . . . . . . . . . 13,387,256 13,387,256

6.000 percent, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,952,497 49,952,497

6.250 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,150,974 —

6.250 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,350,034 23,350,034

6.500 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,008,650 —

6.500 percent, 2008-09. . . . . . . . . . . . . . . . . . . . . . . . . 22,017,300 22,017,300

6.500 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,320,240 38,320,240

6.500 percent, 2011-14 . . . . . . . . . . . . . . . . . . . . . . . . . 34,309,584 34,309,584

6.500 percent, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,529,893 58,529,893

6.875 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,975,271 —

6.875 percent, 2008-09. . . . . . . . . . . . . . . . . . . . . . . . . 7,950,542 7,950,542

6.875 percent, 2010-11 . . . . . . . . . . . . . . . . . . . . . . . . . 7,950,544 7,950,544

6.875 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,089,596 37,089,596

7.000 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,371,480 —

7.000 percent, 2008-10. . . . . . . . . . . . . . . . . . . . . . . . . 10,114,440 10,114,440

7.000 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,114,324 33,114,324

7.250 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,961,557 —

7.250 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,961,557 3,961,557

7.250 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,311,591 27,311,591

7.375 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,199,060 —

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,845,338,862 2,024,391,760

Undisbursed balances1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

1 Negative figures represent an extension of credit against securities to be redeemed within the following

few days.

-1,035,134 -776,165

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,844,303,728 2,023,615,595
143

History of Trust Fund Operations

Note: Amounts of special issues are shown at par value. Special issues are always purchased and redeemed

at par value. Where equal amounts mature in two or more years at a given interest rate, they are grouped.

Table VI.A6.—Assets of the DI Trust Fund, End of Calendar Years 2006 and 2007

[In thousands]

December 31, 2006 December 31, 2007

Obligations sold only to the trust funds (special issues):

Certificates of indebtedness: 

4.000 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . — $8,467,836

4.500 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . $8,252,811 —

4.500 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,256,068

Bonds:

3.500 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,115,128 —

3.500 percent, 2009-11. . . . . . . . . . . . . . . . . . . . . . . . 3,345,384 3,345,384

3.500 percent, 2012-15. . . . . . . . . . . . . . . . . . . . . . . . 4,460,508 4,460,508

3.500 percent, 2016-17. . . . . . . . . . . . . . . . . . . . . . . . 2,230,256 2,230,256

3.500 percent, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . 11,378,384 11,378,384

4.125 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . 677,386 —

4.125 percent, 2009-11. . . . . . . . . . . . . . . . . . . . . . . . 2,032,158 2,032,158

4.125 percent, 2012-17. . . . . . . . . . . . . . . . . . . . . . . . 4,064,310 4,064,310

4.125 percent, 2018-19. . . . . . . . . . . . . . . . . . . . . . . . 1,354,772 1,354,772

4.125 percent, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . 12,911,283 12,911,283

4.625 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . 855,496 —

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

5.000 percent, 2009-19. . . . . . . . . . . . . . . . . . . . . . . . — 5,242,446

5.000 percent, 2020-21. . . . . . . . . . . . . . . . . . . . . . . . — 953,168

5.000 percent, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . — 14,052,982

5.125 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . 665,132 —

5.125 percent, 2009-17. . . . . . . . . . . . . . . . . . . . . . . . 5,986,179 5,986,179

5.125 percent, 2018-19. . . . . . . . . . . . . . . . . . . . . . . . 1,330,260 1,330,260

5.125 percent, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . 665,115 665,115

5.125 percent, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . 13,576,398 13,576,398

5.250 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,363,407 —

5.250 percent, 2009-11. . . . . . . . . . . . . . . . . . . . . . . . 4,090,221 4,090,221

5.250 percent, 2012-16. . . . . . . . . . . . . . . . . . . . . . . . 6,817,040 6,817,040

5.250 percent, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . 10,263,256 10,263,256

5.625 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,524,968 205,332

5.625 percent, 2009-13. . . . . . . . . . . . . . . . . . . . . . . . 7,624,840 7,624,840

5.625 percent, 2014-15. . . . . . . . . . . . . . . . . . . . . . . . 3,049,934 3,049,934

5.625 percent, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . 8,899,848 8,899,848

5.875 percent, 2008-12. . . . . . . . . . . . . . . . . . . . . . . . 4,581,430 4,581,430

5.875 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . 5,361,805 5,361,805

6.000 percent, 2008-12. . . . . . . . . . . . . . . . . . . . . . . . 3,479,830 3,479,830

6.000 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . 695,967 695,967

6.000 percent, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . 6,057,772 6,057,772

6.500 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . 3,301,315 —

6.500 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . 4,381,228 4,381,228

6.500 percent, 2009-13. . . . . . . . . . . . . . . . . . . . . . . . 6,585,540 6,585,540

6.500 percent, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,317,109 1,317,109

6.500 percent, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . 7,374,881 7,374,881

6.875 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . 265,250 —

6.875 percent, 2008-09. . . . . . . . . . . . . . . . . . . . . . . . 530,498 530,498

6.875 percent, 2010-12. . . . . . . . . . . . . . . . . . . . . . . . 13,336,560 13,336,560

7.000 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,116,151 —

7.000 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,116,151 1,116,151

7.000 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . 4,180,271 4,180,271

7.375 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . 916,460 —

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,921,547 215,045,875

Undisbursed balances1 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 Negative figures represent an extension of credit against securities to be redeemed within the following few

days.

-113,509 -161,723

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,808,038 214,884,152
Appendices

144

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.
145

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 1982-2007, 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

146

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

Table VI.B1.—Long-Range OASDI Actuarial Balances 1 as Shown 

in the Trustees Reports for 1982-2008

[As a percentage of taxable payroll]

1 Values shown are based on the alternative II assumptions for 1991-2008, 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

2007 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.92 15.87 -1.95 +.06

2008 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.94 15.63 -1.70 +.26
147

History of Actuarial Balances

1990, changes in economic assumptions accounted for most of the changes

in the estimated actuarial balance. 

In 1991, the effect of legislation, changes in economic assumptions, and the

introduction of the cost of reaching and maintaining an ending trust fund target combined to produce the change in the actuarial balance. In 1992,

changes in disability assumptions and the method for projecting average benefit levels accounted for most of the change in the actuarial balance. In 1993,

numerous small changes in assumptions and methods had offsetting effects

on the actuarial balance. In 1994, changes in the real-wage assumptions, disability rates, and the earnings sample used for projecting average benefit levels accounted for most of the change in the actuarial balance. In 1995,

numerous small changes had largely offsetting effects on the actuarial balance, including a substantial reallocation of the payroll tax rate, which

reduced the OASI actuarial balance, but increased the DI actuarial balance.

In 1996, a change in the method of projecting dually-entitled beneficiaries

produced a large increase in the actuarial balance, which almost totally offset

decreases produced by changes in the valuation period and in the demographic and economic assumptions. Various changes in assumptions and

methods for the 1997 report had roughly offsetting effects on the actuarial

balance. In 1998, increases caused by changes in the economic assumptions,

although partially offset by decreases produced by changes in the valuation

period and in the demographic assumptions, accounted for most of the

changes in the estimated actuarial balance. In 1999, increases caused by

changes in the economic assumptions (related to improvements in the CPI by

the Bureau of Labor Statistics) accounted for most of the changes in the estimated actuarial balance. For the 2000 report, changes in the actuarial balance

resulted from changes in economic assumptions and methodology; however,

these increases in the balance were partially offset by reductions caused by

the change in valuation period and changes in demographic assumptions.

For the 2001 report, increases caused by changes in the demographic starting

values, although partially offset by a decrease produced by the change in the

valuation period, accounted for most of the changes in the estimated actuarial

balance. For the 2002 report, the changes in the valuation period and the

demographic assumptions—both decreases in the actuarial balance—were

offset by changes in the economic assumptions, while the increase due to disability assumptions was slightly more than offset by the decrease due to

changes in the projection methods and data. For the 2003 report, the increase

due to the change in program assumptions was more than offset by decreases

due to the change in valuation period and changes in demographic assumptions. For the 2004 report, increases due to changing the method of project-
Appendices

148

ing benefit levels for higher earners more than offset decreases in the

actuarial balance arising from the change in the valuation period and the net

effect of other changes in programmatic data and methods. For the 2005

report, the increase due to changing the method of projecting future average

benefit levels was more than offset by decreases due to changes in the valuation period, updated starting values for the economic assumptions, and other

methodological changes.

In 2006, decreases in the actuarial balance due to the change in the valuation

period, a reduction in the ultimate annual real interest rate, and improvements in calculating mortality for disabled workers, were greater in aggregate than increases in the actuarial balance due to changes in demographic

starting values and the ultimate total fertility rate, as well as other programmatic data and method changes. For the 2007 report, increases in the actuarial balance arising from revised disability incidence rate assumptions,

improvements in average benefit level projections, and changes in near-term

economic projections, more than offset decreases in the balance due to the

valuation period change and updated historical mortality data.

Changes affecting the actuarial balance shown for the 2008 report are

described in section IV.B.7 Reasons for Change in Actuarial Balance From

Last Report.
149

Fiscal Year Operations and Projections

0

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2017

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 2007, 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 2007

[In millions]

Total assets, September 30, 2006 $1,792,220

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $555,311

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

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,897

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553,414

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 143

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,518

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,661

Reimbursement from the general fund for costs of payments to uninsured persons who attained age 72 before 1968 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1/

1 Between -$0.5 and $0.5 million.

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,330

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, and (3) interest on certain reimbursements to the trust fund.

-2,030

Net investment income and interest adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 93,300

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663,376

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479,482

Reimbursement from the general fund for excess amounts of voluntary 

income tax withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -849

Transfer to the DI Trust Fund to correct a trust fund allocation error made on payments to certain dually entitled disabled beneficiaries . . . . . . . . . . . . . . . . . . . . 3,253

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -60

Payment for costs of vocational rehabilitation services for disabled beneficiaries 3

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 481,828

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . . 3,575

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,569

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 586

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.

-4

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,151

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 488,553

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174,822

Total assets, September 30, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,967,042
Appendices

150

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

Table VI.C2.—Operations of the DI Trust Fund, Fiscal Year 2007

[In millions]

Total assets, September 30, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $201,938

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $94,295

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

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -322

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,973

Income based on taxation of benefit payments:

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

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,347

Total income from taxation of benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,351

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,673

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, and (3) interest on certain

reimbursements to the trust fund.

2,399

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 13,072

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,396

Disbursements:

Benefit payments:

Monthly benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,271

Reimbursement from the general fund for excess amounts of voluntary

income tax withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -90

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

payments to certain dually entitled disabled beneficiaries . . . . . . . . . . . . . . . . . -3,253

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

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

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,955

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . . 445

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,238

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

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.

14

Total administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,357

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,758

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,638

Total assets, September 30, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213,577
151

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) 2003-17 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 2007

[In millions]

Total assets, September 30, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,994,158

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $649,607

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

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2,220

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647,387

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 147

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,865

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,012

Reimbursement from the general fund for costs of payments to uninsured persons who attained age 72 before 1968 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1/

1 Between -$0.5 and $0.5 million.

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,003

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 fund.

370

Net investment income and interest adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 106,372

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 771,772

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 576,752

Reimbursement from the general fund for excess amounts of voluntary

income tax withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -939

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

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

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575,783

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . . 4,020

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,806

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,508

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585,311

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186,461

Total assets, September 30, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,180,619
Appendices

152

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

Table VI.C4.—Operations of the OASI Trust Fund in Fiscal Years 2003-17

[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. These transfers consist of payments for (1) the cost of noncontributory wage credits for military service before 1957, and (2) the cost of

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

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

service wage credits. After 2007 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

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:

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

2006 . . 632.2 530.0 15.2 87.3 455.6 449.2 2.9 3.5 176.6 1,792.2 355

2007 . . 663.4 553.4 16.7 93.3 488.6 481.8 3.2 3.6 174.8 1,967.0 367

Intermediate:

2008 . . 698.9 577.3 18.5 103.0 509.5 502.7 3.2 3.6 189.4 2,156.4 386

2009 . . 738.5 607.1 21.2 110.2 537.4 530.5 3.4 3.6 201.1 2,357.5 401

2010 . . 788.7 644.8 23.4 120.4 569.6 562.7 3.3 3.6 219.1 2,576.7 414

2011 . . 835.9 677.4 25.5 133.0 605.6 598.6 3.3 3.7 230.4 2,807.0 425

2012 . . 882.0 706.7 28.2 147.1 645.9 638.7 3.3 3.9 236.1 3,043.1 435

2013 . . 931.6 738.8 31.4 161.3 691.9 684.5 3.4 4.0 239.7 3,282.8 440

2014 . . 981.2 771.1 34.2 176.0 742.5 734.9 3.4 4.2 238.8 3,521.6 442

2015 . . 1,031.2 803.5 37.1 190.5 796.3 788.4 3.5 4.4 234.8 3,756.4 442

2016 . . 1,091.4 846.1 40.4 204.8 853.9 845.8 3.5 4.5 237.5 3,993.9 440

2017 . . 1,142.1 879.1 43.9 219.1 915.7 907.2 3.6 4.9 226.4 4,220.3 436

Low Cost:

2008 . . 702.3 580.6 18.5 103.2 509.3 502.5 3.2 3.6 193.0 2,160.0 386

2009 . . 747.5 615.4 21.1 111.0 535.8 528.9 3.4 3.5 211.7 2,371.7 403

2010 . . 795.0 651.4 23.2 120.4 564.6 557.7 3.3 3.6 230.4 2,602.1 420

2011 . . 840.8 684.4 25.1 131.3 594.6 587.8 3.3 3.6 246.1 2,848.3 438

2012 . . 884.8 713.2 27.4 144.3 627.7 620.6 3.3 3.8 257.2 3,105.5 454

2013 . . 931.5 743.5 30.2 157.8 665.4 658.2 3.3 3.9 266.1 3,371.6 467

2014 . . 978.3 773.0 32.5 172.8 707.0 699.7 3.3 4.0 271.4 3,642.9 477

2015 . . 1,025.1 802.3 35.0 187.8 750.9 743.5 3.4 4.1 274.2 3,917.1 485

2016 . . 1,081.4 840.8 37.8 202.8 797.7 790.2 3.4 4.1 283.7 4,200.8 491

2017 . . 1,129.6 870.4 40.7 218.6 847.7 839.8 3.5 4.4 281.9 4,482.7 496

High Cost:

2008 . . 688.3 567.1 18.5 102.7 509.6 502.8 3.2 3.6 178.7 2,145.7 386

2009 . . 714.9 586.5 21.3 107.1 541.0 534.0 3.4 3.6 173.9 2,319.7 397

2010 . . 772.7 630.1 23.7 118.9 576.0 569.1 3.3 3.7 196.6 2,516.3 403

2011 . . 817.8 661.0 25.9 130.9 614.5 607.5 3.3 3.7 203.3 2,719.6 409

2012 . . 863.9 689.8 29.0 145.1 665.0 657.6 3.4 4.0 198.9 2,918.5 409

2013 . . 949.1 744.3 33.2 171.6 731.8 724.0 3.5 4.2 217.3 3,135.8 399

2014 . . 1,020.5 788.0 37.1 195.3 806.1 797.9 3.6 4.6 214.3 3,350.1 389

2015 . . 1,079.2 827.3 41.1 210.8 880.6 871.9 3.7 5.0 198.6 3,548.7 380

2016 . . 1,143.2 876.0 45.2 221.9 954.9 945.9 3.8 5.2 188.2 3,737.0 372

2017 . . 1,197.2 913.3 49.5 234.3 1,032.8 1,023.2 3.9 5.7 164.4 3,901.4 362
153

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 2003-17

[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. These transfers consist of payments for the cost of noncontributory wage credits for military service before 1957. In particular, a transfer

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

Trust Fund. After 2007 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

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:

2003 . . $87.9 $77.4 $0.9 $9.6 $71.9 $69.8 $2.0 $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

2006 . . 101.6 90.0 1.2 10.4 92.9 90.1 2.4 .4 8.6 201.9 208

2007 . . 108.4 94.0 1.4 13.1 96.8 94.0 2.4 .4 11.6 213.6 209

Intermediate:

2008 . . 110.6 98.0 1.6 11.0 106.4 103.5 2.5 .4 4.2 217.8 201

2009 . . 115.9 103.1 1.8 11.0 113.1 110.0 2.6 .5 2.8 220.6 193

2010 . . 122.7 109.5 2.1 11.1 120.0 116.7 2.7 .5 2.7 223.3 184

2011 . . 128.5 115.0 2.3 11.2 126.9 123.4 2.9 .6 1.6 224.9 176

2012 . . 133.9 120.0 2.6 11.2 134.7 131.1 3.1 .5 -.9 224.1 167

2013 . . 139.7 125.5 3.0 11.2 142.8 138.9 3.3 .6 -3.1 221.0 157

2014 . . 145.2 130.9 3.3 11.0 150.8 146.8 3.5 .6 -5.5 215.5 147

2015 . . 150.7 136.4 3.6 10.8 159.2 155.0 3.7 .6 -8.5 207.0 135

2016 . . 157.8 143.7 3.9 10.2 168.0 163.6 3.9 .5 -10.2 196.7 123

2017 . . 163.3 149.3 4.2 9.8 177.1 172.5 4.1 .5 -13.8 182.9 111

Low Cost:

2008 . . 111.1 98.6 1.5 11.0 105.2 102.3 2.5 .4 5.9 219.5 203

2009 . . 117.5 104.5 1.8 11.2 109.8 106.7 2.6 .4 7.7 227.2 200

2010 . . 124.1 110.6 2.0 11.5 114.3 111.1 2.7 .5 9.8 237.0 199

2011 . . 130.3 116.2 2.2 11.9 118.4 115.0 2.9 .6 11.9 248.9 200

2012 . . 136.0 121.1 2.4 12.5 123.0 119.5 3.1 .5 12.9 261.8 202

2013 . . 142.0 126.3 2.7 13.1 127.7 123.9 3.2 .5 14.4 276.1 205

2014 . . 148.0 131.3 2.9 13.9 132.2 128.3 3.4 .5 15.8 292.0 209

2015 . . 154.1 136.2 3.0 14.8 137.1 133.0 3.6 .5 17.0 309.0 213

2016 . . 161.8 142.8 3.3 15.8 142.1 137.9 3.7 .5 19.7 328.6 217

2017 . . 168.1 147.8 3.5 16.8 147.3 142.9 3.9 .5 20.8 349.4 223

High Cost:

2008 . . 108.9 96.3 1.6 11.0 107.6 104.7 2.5 .4 1.2 214.8 198

2009 . . 112.1 99.6 1.9 10.6 116.9 113.8 2.6 .5 -4.8 210.0 184

2010 . . 119.5 107.0 2.2 10.3 126.0 122.8 2.7 .5 -6.5 203.5 167

2011 . . 124.6 112.2 2.5 9.9 135.1 131.7 2.9 .6 -10.5 193.0 151

2012 . . 129.3 117.1 2.9 9.3 146.7 143.0 3.2 .6 -17.4 175.6 132

2013 . . 138.1 126.4 3.4 8.3 160.8 156.8 3.4 .6 -22.7 152.9 109

2014 . . 144.5 133.8 3.8 6.9 175.3 171.0 3.7 .6 -30.8 122.1 87

2015 . . 150.0 140.5 4.2 5.3 189.5 185.0 3.9 .6 -39.5 82.6 64

2016 . . 156.9 148.8 4.7 3.4 203.2 198.5 4.1 .6 -46.3 36.3 41

2017 . . 3/

3 Under the high cost assumptions, the DI Trust Fund is projected to be exhausted in 2017. Therefore, certain

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

155.1 5.2 3/1 217.3 212.3 4.4 .6 3/1 3/1 17
Appendices

154

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 2003-17

[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:

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

2006 . . 733.7 620.0 16.4 97.7 548.5 539.3 5.3 3.8 185.2 1,994.2 330

2007 . . 771.8 647.4 18.0 106.4 585.3 575.8 5.5 4.0 186.5 2,180.6 341

Intermediate:

2008 . . 809.4 675.4 20.1 114.0 615.9 606.1 5.7 4.0 193.6 2,374.2 354

2009 . . 854.4 710.2 23.0 121.2 650.5 640.5 6.0 4.0 203.9 2,578.1 365

2010 . . 911.4 754.3 25.5 131.5 689.6 679.4 6.0 4.1 221.9 2,800.0 374

2011 . . 964.5 792.4 27.8 144.2 732.5 722.0 6.2 4.2 232.0 3,032.0 382

2012 . . 1,015.9 826.8 30.8 158.3 780.6 769.8 6.4 4.4 235.2 3,267.2 388

2013 . . 1,071.2 864.3 34.4 172.5 834.6 823.4 6.6 4.6 236.6 3,503.8 391

2014 . . 1,126.5 902.0 37.5 187.0 893.3 881.6 6.9 4.8 233.2 3,737.0 392

2015 . . 1,181.9 939.9 40.7 201.3 955.6 943.5 7.1 5.0 226.3 3,963.4 391

2016 . . 1,249.2 989.8 44.3 215.0 1,021.9 1,009.5 7.4 5.0 227.3 4,190.6 388

2017 . . 1,305.4 1,028.4 48.1 228.8 1,092.8 1,079.7 7.7 5.4 212.6 4,403.2 383

Low Cost:

2008 . . 813.4 679.1 20.0 114.2 614.5 604.8 5.7 4.0 198.9 2,379.5 355

2009 . . 865.0 719.9 22.9 122.2 645.6 635.6 6.0 4.0 219.4 2,598.9 369

2010 . . 919.1 762.0 25.2 131.9 679.0 668.8 6.0 4.1 240.2 2,839.1 383

2011 . . 971.1 800.7 27.2 143.2 713.1 702.7 6.2 4.2 258.0 3,097.1 398

2012 . . 1,020.8 834.3 29.8 156.7 750.7 740.1 6.3 4.3 270.1 3,367.2 413

2013 . . 1,073.5 869.7 32.9 170.9 793.1 782.2 6.5 4.4 280.5 3,647.7 425

2014 . . 1,126.4 904.2 35.4 186.7 839.2 828.0 6.7 4.5 287.2 3,934.9 435

2015 . . 1,179.2 938.6 38.1 202.6 888.0 876.5 6.9 4.6 291.2 4,226.0 443

2016 . . 1,243.2 983.6 41.0 218.6 939.8 928.1 7.1 4.6 303.4 4,529.4 450

2017 . . 1,297.7 1,018.2 44.2 235.4 995.0 982.8 7.4 4.9 302.7 4,832.1 455

High Cost:

2008 . . 797.2 663.4 20.1 113.7 617.3 607.5 5.7 4.0 179.9 2,360.5 353

2009 . . 827.0 686.0 23.2 117.8 657.8 647.8 6.0 4.0 169.2 2,529.7 359

2010 . . 892.2 737.1 25.9 129.2 702.1 691.9 6.0 4.2 190.1 2,719.8 360

2011 . . 942.4 773.3 28.4 140.8 749.6 739.1 6.2 4.3 192.8 2,912.6 363

2012 . . 993.2 806.9 31.9 154.4 811.7 800.6 6.5 4.6 181.5 3,094.1 359

2013 . . 1,087.2 870.7 36.6 179.9 892.6 880.8 7.0 4.8 194.6 3,288.6 347

2014 . . 1,165.0 921.8 40.9 202.2 981.5 969.0 7.3 5.2 183.5 3,472.2 335

2015 . . 1,229.2 967.8 45.3 216.1 1,070.1 1,056.8 7.6 5.6 159.2 3,631.4 324

2016 . . 1,300.0 1,024.8 49.9 225.3 1,158.1 1,144.4 7.9 5.8 141.9 3,773.3 314

2017 . . 1,358.5 1,068.4 54.7 235.4 1,250.0 1,235.5 8.3 6.3 108.5 3,881.7 302
155

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.

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 2032.
Appendices

156

For the 25-year period, the cost rate for the three fertility assumptions varies

by only about 0.05 percent of taxable payroll. In contrast, the 75-year cost

rate varies over a wide range, decreasing from 16.04 to 15.25 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

-2.06 to -1.36 percent.

During the 25-year period, the very slight increases in the working population resulting from increases in fertility are more than offset by decreases in

the female labor force and increases in the number of child beneficiaries.

Hence, the program cost slightly increases with higher fertility. For the

75-year long-range period, however, changes in fertility have a relatively

greater impact on the labor force than on the beneficiary population. As a

result, an increase in fertility significantly reduces the cost rate. Each

increase of 0.1 in the ultimate total fertility rate increases the long-range

actuarial balance by about 0.12 percent of taxable payroll.

Table VI.D1.—Sensitivity to Varying Fertility Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate total fertility 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

2032.

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: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.81 14.81 14.82

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.15 14.14 14.13

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.98 13.94 13.89

Summarized cost rate:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.41 14.43 14.46

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.38 15.28 15.20

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.04 15.63 15.25

Actuarial balance:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.40 +.38 +.36

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.23 -1.14 -1.07

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.06 -1.70 -1.36

Annual balance for 2082 . . . . . . . . . . . . . . . . . . . . . . . . . . -6.56 -4.20 -2.33

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2041 2041 2041
157

Long-Range Sensitivity Analysis

2. Death Rates

Table VI.D2 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

future reductions in death rates for the period 2007-82. 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, 0.75 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 14.27 percent (for an

average annual death-rate reduction of 0.30 percent) to 14.59 percent (for an

average annual death-rate reduction of 1.26 percent). The 75-year cost rate

increases from 15.00 to 16.28 percent. The actuarial balance decreases from

+0.55 to +0.22 percent for the 25-year period, and from -1.09 to -2.32 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

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 2007 and 2082. The overall decreases from the age-sex-adjusted death rate in

2007 to the corresponding rate in 2082 are 20 percent, 43 percent, and 61 percent for alternatives I, II, and

III, respectively.

2 The average annual death-rate reductions used for this analysis are 0.30 percent from the alternative I

assumptions, 0.75 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 0.75 percent 1.26 percent

Summarized income rate:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.81 14.81 14.81

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.13 14.14 14.16

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.91 13.94 13.96

Summarized cost rate:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.27 14.43 14.59

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.85 15.28 15.72

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.00 15.63 16.28

Actuarial balance:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.55 +.38 +.22

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.72 -1.14 -1.56

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.09 -1.70 -2.32

Annual balance for 2082 . . . . . . . . . . . . . . . . . . . . . . . . . . -2.75 -4.20 -5.70

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2044 2041 2039
Appendices

158

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 at which death rates are the highest) increase

the number of retired-worker beneficiaries (and, therefore, the amount of

retirement benefits paid) without adding significantly to the number of covered workers (and, therefore, to the taxable payroll). Although reductions for

people at ages 50 to retirement eligibility age do result in significant

increases to the taxable payroll, those increases are not large enough to offset

the sum of the additional retirement benefits mentioned above and the disability benefits paid to additional beneficiaries at these pre-retirement ages,

which are ages of high disability incidence. At ages under 50, death rates are

so low that even substantial reductions would not result in significant

increases in the numbers of covered workers or beneficiaries. Consequently,

if death rates for all ages are lowered by about the same relative amount, cost

increases at a rate greater than the rate of growth in payroll, thereby resulting

in higher cost rates and, therefore, lower actuarial balances. Each additional

0.1-percentage-point increase in the average annual rate of decline in the

death rate decreases the long-range actuarial balance by about 0.13 percent

of taxable payroll.

3. Net Immigration

Table VI.D3 shows the estimated OASDI income rates, cost rates, and actuarial balances, under alternative II with various assumptions about the magnitude of net immigration. These assumptions are that the annual net

immigration will average, over the long-range period, 790,000 persons,

1,070,000 persons, and 1,375,000 persons as assumed for alternatives III, II,

and I, respectively.
159

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

14.54 percent of taxable payroll (for average annual net immigration of

790,000 persons) to 14.32 percent (for average annual net immigration of

1,375,000 persons). For the 50-year period, it decreases from 15.47 percent

to 15.09 percent, and for the 75-year period, it decreases from 15.85 percent

to 15.41 percent. The actuarial balance increases from +0.30 to +0.47 percent

for the 25-year period, from -1.29 to -0.98 percent for the 50-year period,

and from -1.88 to -1.51 percent for the 75-year period.

The cost rate decreases with an increase in net immigration because immigration occurs at relatively young ages, thereby increasing the numbers of

covered workers earlier than the numbers of beneficiaries. Increasing average annual net immigration by 100,000 persons improves the long-range

actuarial balance by about 0.06 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

Table VI.D3.—Sensitivity to Varying Net-Immigration Assumptions

[As a percentage of taxable payroll]

Valuation period

Average annual net immigration1 2

1 Net immigration per year is the assumed annual net immigration to the Social Security area, including both

legal and other immigration, averaged over the 75-year projection period.

2 The average annual net immigration assumptions used for this analysis are 790,000 from the alternative III

assumptions, 1,070,000 from the alternative II assumptions, and 1,375,000 from the alternative I assumptions. All other assumptions used for this analysis are from alternative II.

790,000 1,070,000 1,375,000

Summarized income rate:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.83 14.81 14.79

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.17 14.14 14.11

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.97 13.94 13.90

Summarized cost rate:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.54 14.43 14.32

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.47 15.28 15.09

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.85 15.63 15.41

Actuarial balance:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.30 +.38 +.47

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.29 -1.14 -.98

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.88 -1.70 -1.51

Annual balance for 2082 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.61 -4.20 -3.82

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2040 2041 2042
Appendices

160

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 14.87 percent (for a realwage differential of 0.6 percentage point) to 14.00 percent (for a differential

of 1.6 percentage points). For the 50-year period, it decreases from 15.95 to

14.64 percent, and for the 75-year period it decreases from 16.37 to

14.92 percent. The actuarial balance increases from +0.05 to +0.71 percent

for the 25-year period, from -1.67 to -0.62 percent for the 50-year period,

and from -2.28 to -1.12 percent for the 75-year period.

The cost rate decreases with increasing real-wage differentials. This is

because higher wages increase taxable payroll immediately, but increase

benefit levels only gradually as new beneficiaries become entitled. In addition, cost-of-living adjustments (COLAs) to benefits are not affected by

changes in wages, but only in prices. Each 0.5-percentage-point increase in

the assumed real-wage differential increases the long-range actuarial balance

by about 0.58 percent of taxable payroll.

Table VI.D4.—Sensitivity to Varying Real-Wage Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate percentage increase in wages-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: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.92 14.81 14.71

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.28 14.14 14.01

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.09 13.94 13.79

Summarized cost rate:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.87 14.43 14.00

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.95 15.28 14.64

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.37 15.63 14.92

Actuarial balance:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.05 +.38 +.71

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.67 -1.14 -.62

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.28 -1.70 -1.12

Annual balance for 2082 . . . . . . . . . . . . . . . . . . . . . . . . . . -5.56 -4.20 -3.00

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2037 2041 2048
161

Long-Range Sensitivity Analysis

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.

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

14.59 (for CPI increases of 1.8 percent) to 14.28 percent (for CPI increases

of 3.8 percent). For the 50-year period, it decreases from 15.50 to

15.08 percent, and for the 75-year period, it decreases from 15.88 to

15.40 percent. The actuarial balance increases from +0.27 to +0.49 percent

for the 25-year period, from -1.32 to -0.96 percent for the 50-year period,

and from -1.91 to -1.50 percent for the 75-year period.

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: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.86 14.81 14.77

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.18 14.14 14.11

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.97 13.94 13.91

Summarized cost rate:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.59 14.43 14.28

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.50 15.28 15.08

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.88 15.63 15.40

Actuarial balance: 

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.27 +.38 +.49

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.32 -1.14 -.96

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.91 -1.70 -1.50

Annual balance for 2082 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.52 -4.20 -3.89

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2039 2041 2043
Appendices

162

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.

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.

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: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.71 14.81 14.90

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.01 14.14 14.26

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.79 13.94 14.07

Summarized cost rate:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.58 14.43 14.31

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.51 15.28 15.09

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.93 15.63 15.38

Actuarial balance:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.13 +.38 +.60

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.50 -1.14 -.82

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.14 -1.70 -1.31

Annual balance for 2082 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.20 -4.20 -4.20

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2038 2041 2044
163

Long-Range Sensitivity Analysis

For the 25-year period, the cost rate decreases with increasing real interest

rates, from 14.58 percent (for an ultimate real interest rate of 2.1 percent) to

14.31 percent (for an ultimate real interest rate of 3.6 percent). For the 50-

year period, it decreases from 15.51 to 15.09 percent, and for the 75-year

period, it decreases from 15.93 to 15.38 percent. The actuarial balance

increases from +0.13 to +0.60 percent for the 25-year period, from -1.50 to

-0.82 percent for the 50-year period, and from -2.14 to -1.31 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 0.28 percent of

taxable payroll.

7. Disability Incidence Rates

Table VI.D7 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions concerning future disability incidence rates. For all three alternatives, incidence

rates by age and sex are assumed to vary during the early years of the projection period before attaining ultimate levels in 2027. In comparison to the historical period 1970 through 2007, the ultimate age-sex-adjusted incidence

rate is 1 percent higher for alternative II, 19 percent lower for alternative I,

and 20 percent higher for alternative III.

For the 25-year period, the cost rate increases with increasing disability incidence rates, from 14.23 percent (for the relatively low rates assumed for

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: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.81 14.81 14.82

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.14 14.14 14.15

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.93 13.94 13.94

Summarized cost rate:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.23 14.43 14.64

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.03 15.28 15.54

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.36 15.63 15.90

Actuarial balance:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.58 +.38 +.18

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.89 -1.14 -1.39

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.43 -1.70 -1.96

Annual balance for 2082 . . . . . . . . . . . . . . . . . . . . . . . . . . -3.88 -4.20 -4.52

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2044 2041 2039
Appendices

164

alternative I) to 14.64 percent (for the relatively high rates assumed for

alternative III). For the 50-year period, it increases from 15.03 to 15.54 percent, and for the 75-year period, it increases from 15.36 to 15.90 percent.

The actuarial balance decreases from +0.58 to +0.18 percent for the 25-year

period, from -0.89 to -1.39 percent for the 50-year period, and from -1.43 to

-1.96 percent for the 75-year period.

8. Disability Termination Rates

Table VI.D8 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

future disability termination rates. For all three alternatives, death rates are

assumed to decline throughout the long-range period. For alternative II, the

age-sex-adjusted1 death rate is assumed to decline to a level at the end of the

75-year period that is about 56 percent lower than the level in 2007. For

alternative I, the age-sex-adjusted death rate is assumed to decline to a level

in 2085 that is about 23 percent lower than the level in 2007. For alternative

III, the age-sex-adjusted death rate is assumed to decline to a level at the end

of the 75-year period that is about 72 percent lower than the level in 2007.

For all three alternatives, ultimate recovery-termination rates by age, sex,

and duration are assumed to be attained in the twentieth year of the projection period. For alternative II, the age-sex-adjusted1 recovery rate in 2027 is

about 11 recoveries per thousand disabled-worker beneficiaries. For

alternative I, the age-sex-adjusted recovery rate in 2027 is about 13 recoveries per thousand disabled-worker beneficiaries. For alternative III, the agesex-adjusted recovery rate in 2027 is about 9 recoveries per thousand disabled-worker beneficiaries.

 1 Age adjusted to the total disabled workers in current-payment status as of the year 2000.
165

Long-Range Sensitivity Analysis

For the 25-year period, the cost rate increases with decreasing disability termination rates, from 14.39 percent (for the relatively high rates assumed for

alternative I) to 14.46 percent (for the relatively low rates assumed for

alternative III). For the 50-year period, it increases from 15.23 to

15.32 percent, and for the 75-year period, it increases from 15.58 to

15.67 percent. The actuarial balance decreases from +0.43 to +0.35 percent

for the 25-year period, from -1.09 to -1.18 percent for the 50-year period,

and from -1.65 to -1.73 percent for the 75-year period.

Table VI.D8.—Sensitivity to Varying Disability Termination Assumptions

[As a percentage of taxable payroll]

Valuation period

Disability termination rates

based on alternative—

I II III

Summarized income rate:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.81 14.81 14.81

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.14 14.14 14.14

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.94 13.94 13.94

Summarized cost rate:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.39 14.43 14.46

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.23 15.28 15.32

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.58 15.63 15.67

Actuarial balance:

25-year: 2008-32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.43 +.38 +.35

50-year: 2008-57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.09 -1.14 -1.18

75-year: 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.65 -1.70 -1.73

Annual balance for 2082 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.14 -4.20 -4.21

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2041 2041 2040
Appendices

166

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, legal and other immigration levels, legal and other

emigration 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
167

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 for most of the variables listed

above are determined by using Monte Carlo techniques to randomly assign

the year-by-year variations. The one exception is that net other immigration

is modeled rather than individually modeling other immigration and other

emigration. Each simulation produces an estimate of the financial status of

the combined OASI and DI Trust Funds. Results shown in this section, based

on 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 www.socialsecurity.gov/OACT/stochastic/index.html
Appendices

168

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 2041 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 379 to 87 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 429 and 28 percent, respectively. By 2082, 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 2082.
169

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 14.65 percent

of payroll and 19.34 percent of payroll, respectively. These are close to the

limits of the 95-percent confidence interval (14.58 and 19.46 percent of payroll), as can be seen in figure VI.E2. By 2082, the cost rates for these alternatives, 12.62 and 24.81 percent of payroll, are still close to the limits of the

95-percent confidence interval (13.13 and 24.84 percent of payroll).

 Figure VI.E1.—Annual Trust Fund Ratios

0%

100%

200%

300%

400%

500%

600%

2008 2023 2038 2053 2068 2083

Projection year

50%

97.5%

2.5%

90%

10%
Appendices

170

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

long-range period, 2008-82. 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 -1.79 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 2016. This is 1 year earlier than projected under the

intermediate assumptions. The median estimate for the year assets first

become exhausted is 2041. This is the same as the year projected under the

intermediate assumptions. The median estimate for the annual cost in the

75th year of the projection period is 17.85 as a percentage of taxable payroll

 Figure VI.E2.—Annual Cost Rates

5%

10%

15%

20%

25%

30%

2008 2023 2038 2053 2068 2083

Projection year

50%

97.5%

2.5%

90%

10%

Income Rate
171

Stochastic Projections 

and 5.92 as a percentage of GDP. The comparable estimates using the intermediate assumptions are 17.50 and 5.82, 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

first 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 . . . . . . -1.70 0.57 -4.66 -1.79 -2.90 -0.78 -3.52 -0.28

Open group unfunded 

obligation (in trillions) $4.3 -$1.9 $12.5 $4.6 $7.9 $1.8 $10.0 $0.4

First year cost exceeds tax 

income. . . . . . . . . . . . . 2017 2021 2014 2016 2014 2019 2013 2021

First year assets become 

exhausted1. . . . . . . . . .

1 For some stochastic simulations, the first year in which trust fund assets become exhausted does not indicate a permanent exhaustion of assets.

2041 2/

2 The fund is not estimated to be exhausted within the projection period.

2031 2041 2035 2052 2033 2070

Annual cost in 75th year 

(percent of taxable payroll) . . . . . . . . . . . . . . . 17.50 12.62 24.81 17.85 14.60 22.11 13.13 24.84

Annual cost in 75th year 

(percent of GDP). . . . . 5.82 4.55 7.60 5.92 4.77 7.41 4.27 8.37
Appendices

172

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.
173

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. 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 2012, and to continue for the

remainder of the 75-year projection period. The cost rate is projected to rise

to over three times its current level by the end of the projection period. Under

the intermediate assumptions, annual deficits begin in 2015, with the cost

rate doubling by the end of the projection period. Under the low cost

assumptions, the cost rate is projected to increase by about 27 percent by the

end of the period, with annual deficits beginning in 2021.

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

174

Table VI.F2.—Estimated OASDI and HI Annual Income Rates, Cost Rates,

and Balances, Calendar Years 2008-85

[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:

2008 . . . . . . 12.77 11.20 1.57 3.10 3.24 -0.14 15.86 14.44 1.43

2009 . . . . . . 12.81 11.26 1.54 3.12 3.30 -.18 15.93 14.56 1.37

2010 . . . . . . 12.82 11.37 1.46 3.13 3.34 -.21 15.96 14.71 1.25

2011 . . . . . . 12.84 11.53 1.31 3.13 3.38 -.25 15.97 14.91 1.06

2012 . . . . . . 12.87 11.76 1.11 3.15 3.45 -.30 16.02 15.21 .81

2013 . . . . . . 12.90 12.03 .87 3.17 3.53 -.36 16.07 15.56 .51

2014 . . . . . . 12.92 12.32 .60 3.18 3.61 -.44 16.09 15.93 .16

2015 . . . . . . 12.94 12.62 .32 3.19 3.70 -.51 16.13 16.32 -.19

2016 . . . . . . 12.96 12.92 .04 3.20 3.79 -.59 16.17 16.72 -.55

2017 . . . . . . 12.99 13.24 -.25 3.22 3.90 -.68 16.20 17.14 -.93

2020 . . . . . . 13.04 14.14 -1.09 3.25 4.24 -1.00 16.29 18.38 -2.09

2025 . . . . . . 13.13 15.43 -2.30 3.29 4.97 -1.68 16.41 20.40 -3.99

2030 . . . . . . 13.19 16.41 -3.21 3.32 5.81 -2.49 16.51 22.22 -5.70

2035 . . . . . . 13.23 16.84 -3.61 3.34 6.64 -3.30 16.57 23.48 -6.92

2040 . . . . . . 13.23 16.81 -3.58 3.34 7.35 -4.01 16.58 24.16 -7.59

2045 . . . . . . 13.23 16.62 -3.39 3.34 7.90 -4.56 16.57 24.52 -7.95

2050 . . . . . . 13.23 16.52 -3.29 3.34 8.36 -5.02 16.57 24.88 -8.31

2055 . . . . . . 13.23 16.57 -3.33 3.34 8.79 -5.45 16.58 25.36 -8.78

2060 . . . . . . 13.24 16.69 -3.44 3.35 9.28 -5.93 16.59 25.97 -9.37

2065 . . . . . . 13.25 16.82 -3.57 3.35 9.79 -6.44 16.61 26.61 -10.00

2070 . . . . . . 13.26 16.99 -3.72 3.36 10.32 -6.95 16.63 27.30 -10.68

2075 . . . . . . 13.28 17.18 -3.91 3.37 10.80 -7.43 16.64 27.98 -11.34

2080 . . . . . . 13.29 17.41 -4.12 3.37 11.24 -7.87 16.66 28.64 -11.98

2085 . . . . . . 13.30 17.63 -4.33 3.38 11.56 -8.18 16.68 29.20 -12.51

Low Cost:

2008 . . . . . . 12.76 11.08 1.69 3.09 3.11 -.02 15.86 14.19 1.67

2009 . . . . . . 12.80 11.05 1.75 3.12 3.11 2/ 15.92 14.16 1.76

2010 . . . . . . 12.81 11.05 1.77 3.13 3.10 .03 15.94 14.14 1.80

2011 . . . . . . 12.83 11.08 1.75 3.13 3.07 .05 15.95 14.15 1.80

2012 . . . . . . 12.85 11.18 1.67 3.14 3.08 .06 15.99 14.26 1.73

2013 . . . . . . 12.88 11.34 1.54 3.16 3.09 .07 16.03 14.43 1.61

2014 . . . . . . 12.89 11.52 1.36 3.16 3.10 .07 16.05 14.62 1.43

2015 . . . . . . 12.90 11.73 1.18 3.18 3.11 .06 16.08 14.84 1.24

2016 . . . . . . 12.92 11.94 .98 3.19 3.13 .06 16.11 15.07 1.04

2017 . . . . . . 12.94 12.16 .78 3.20 3.15 .05 16.14 15.31 .83

2020 . . . . . . 12.99 12.86 .14 3.22 3.23 -.01 16.21 16.09 .12

2025 . . . . . . 13.06 13.85 -.80 3.25 3.44 -.19 16.31 17.29 -.98

2030 . . . . . . 13.11 14.52 -1.42 3.28 3.65 -.37 16.38 18.17 -1.79

2035 . . . . . . 13.12 14.65 -1.53 3.29 3.79 -.50 16.41 18.44 -2.03

2040 . . . . . . 13.11 14.34 -1.22 3.28 3.87 -.58 16.40 18.20 -1.80

2045 . . . . . . 13.10 13.88 -.78 3.27 3.92 -.64 16.37 17.79 -1.42

2050 . . . . . . 13.08 13.52 -.44 3.27 3.99 -.72 16.35 17.51 -1.16

2055 . . . . . . 13.07 13.29 -.22 3.26 4.13 -.86 16.33 17.42 -1.08

2060 . . . . . . 13.07 13.13 -.06 3.26 4.35 -1.09 16.33 17.48 -1.15

2065 . . . . . . 13.06 12.95 .11 3.26 4.59 -1.33 16.32 17.54 -1.22

2070 . . . . . . 13.05 12.78 .28 3.25 4.83 -1.58 16.31 17.61 -1.31

2075 . . . . . . 13.05 12.64 .40 3.25 5.06 -1.81 16.30 17.71 -1.41

2080 . . . . . . 13.05 12.61 .44 3.25 5.27 -2.02 16.29 17.88 -1.58

2085 . . . . . . 13.05 12.66 .39 3.25 5.42 -2.17 16.30 18.08 -1.78
175

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:

2008 . . . . . . 12.78 11.51 1.27 3.10 3.41 -0.31 15.88 14.92 0.96

2009 . . . . . . 12.82 11.70 1.13 3.13 3.53 -.40 15.95 15.22 .73

2010 . . . . . . 12.84 11.86 .98 3.14 3.63 -.49 15.98 15.49 .49

2011 . . . . . . 12.86 12.16 .70 3.14 3.77 -.63 16.01 15.93 .07

2012 . . . . . . 12.89 12.47 .42 3.16 3.92 -.76 16.06 16.39 -.33

2013 . . . . . . 12.93 12.83 .10 3.18 4.05 -.88 16.11 16.89 -.78

2014 . . . . . . 12.96 13.29 -.33 3.19 4.24 -1.04 16.15 17.52 -1.38

2015 . . . . . . 12.98 13.74 -.75 3.21 4.43 -1.22 16.19 18.17 -1.97

2016 . . . . . . 13.01 14.16 -1.14 3.23 4.63 -1.41 16.24 18.79 -2.55

2017 . . . . . . 13.04 14.59 -1.55 3.24 4.85 -1.61 16.28 19.44 -3.16

2020 . . . . . . 13.11 15.68 -2.57 3.28 5.59 -2.32 16.39 21.27 -4.89

2025 . . . . . . 13.21 17.26 -4.05 3.32 7.21 -3.89 16.54 24.47 -7.94

2030 . . . . . . 13.29 18.53 -5.24 3.37 9.29 -5.92 16.66 27.82 -11.16

2035 . . . . . . 13.35 19.34 -5.99 3.40 11.69 -8.29 16.74 31.03 -14.28

2040 . . . . . . 13.38 19.71 -6.34 3.41 14.00 -10.59 16.79 33.71 -16.92

2045 . . . . . . 13.39 19.93 -6.53 3.42 15.96 -12.54 16.81 35.88 -19.07

2050 . . . . . . 13.41 20.26 -6.84 3.43 17.54 -14.11 16.85 37.80 -20.95

2055 . . . . . . 13.44 20.76 -7.32 3.45 18.77 -15.32 16.89 39.52 -22.63

2060 . . . . . . 13.48 21.38 -7.90 3.47 19.82 -16.35 16.95 41.19 -24.25

2065 . . . . . . 13.52 22.07 -8.55 3.49 20.91 -17.42 17.01 42.98 -25.98

2070 . . . . . . 13.56 22.88 -9.31 3.51 22.03 -18.52 17.08 44.91 -27.83

2075 . . . . . . 13.61 23.71 -10.10 3.54 23.07 -19.53 17.15 46.78 -29.64

2080 . . . . . . 13.66 24.51 -10.86 3.56 24.01 -20.45 17.22 48.52 -31.30

2085 . . . . . . 13.69 25.19 -11.50 3.58 24.70 -21.12 17.27 49.89 -32.62

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.

2 Between -0.005 and 0.005 percent of taxable payroll.

Table VI.F2.—Estimated OASDI and HI Annual Income Rates, Cost Rates,

and Balances, Calendar Years 2008-85 (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

176

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

Under the high cost assumptions, the combined OASDI and HI system is

projected to experience large actuarial deficits for the 25-year, 50-year, and

75-year valuation periods. Under the intermediate assumptions, actuarial deficits smaller than those for the high cost assumptions are projected for all

three valuation periods. Under the low cost assumptions, the combined

OASDI and HI system is projected to have positive actuarial balances for the

25-year and the 50-year valuation periods, and a very small positive 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 2008-82

[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:

2008-32 . . . . . . 14.81 14.43 0.38 3.43 4.57 -1.15 18.24 19.00 -0.77

50-years:

2008-57 . . . . . . 14.14 15.28 -1.14 3.39 5.92 -2.53 17.53 21.20 -3.67

75-years:

2008-82 . . . . . . 13.94 15.63 -1.70 3.38 6.92 -3.54 17.32 22.55 -5.24

Low Cost:

25-years:

2008-32 . . . . . . 14.76 13.19 1.57 3.41 3.41 -.01 18.17 16.60 1.56

50-years:

2008-57 . . . . . . 14.06 13.42 .64 3.35 3.62 -.27 17.41 17.04 .37

75-years:

2008-82 . . . . . . 13.82 13.24 .57 3.33 3.90 -.57 17.15 17.14 3/

3 Between -0.005 and 0.005 percent of taxable payroll.

High Cost:

25-years:

2008-32 . . . . . . 14.87 15.93 -1.07 3.45 6.32 -2.87 18.32 22.25 -3.94

50-years:

2008-57 . . . . . . 14.23 17.58 -3.35 3.44 10.30 -6.86 17.67 27.88 -10.21

75-years:

2008-82 . . . . . . 14.07 18.73 -4.66 3.45 12.96 -9.50 17.52 31.69 -14.16
177

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 2021. After 2020, deficits increase to a peak in 2033 and

decrease thereafter. By 2063, the OASDI balance becomes positive, reaching

0.14 percent of GDP in 2082. The OASDI balance is projected to be positive

through 2016 on the basis of the intermediate assumptions and through 2013

on the basis of the high cost assumptions, at which time balances become

permanently negative, with increasing deficits thereafter. The HI balance is

projected to be negative in the first projection year under all three sets of

assumptions, with deficits increasing steadily thereafter under the intermediate and high cost assumptions. The projected HI balance as a percentage of

GDP is positive from 2009 through 2019 on the basis of the low cost

assumptions. The combined OASDI and HI balance as a percentage of GDP

is projected to be positive through 2020 under the low cost assumptions,

through 2014 under the intermediate assumptions, and through 2010 under

the high cost assumptions. Between 2010 and about 2035, under all three sets
Appendices

178

of assumptions, both the OASDI and HI balances as percentages of GDP are

projected to decline (or deficits increase) substantially because the babyboom generation reaches retirement eligibility 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 0.76 percent for the low cost assumptions

to a deficit of 11.39 percent for the high cost assumptions. Projected balances

differ by a much smaller amount for the tenth year, 2017, ranging from a

positive balance of 0.31 percent for the low cost assumptions to a deficit of

1.34 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 0.05 percent, based on the low

cost assumptions, to a deficit of 5.80 percent, based on the high cost assumptions). The 25-year summarized balance varies by a smaller amount (from a

positive balance of 0.60 percent to a deficit of 1.73 percent). Summarized

rates are calculated on the present-value basis including the trust fund balances on January 1, 2008, 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.)
179

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 2008-85

Calendar year

Percentage of GDP GDP in

dollars

(billions)

OASDI HI Combined

Income1 Cost Balance Income1 Cost Balance Income1 Cost Balance

Intermediate:

2008 . . . . . . 4.86 4.32 0.55 1.49 1.56 -0.07 6.35 5.87 0.48 $14,445

2009 . . . . . . 4.93 4.35 .57 1.51 1.59 -.08 6.43 5.94 .49 15,163

2010 . . . . . . 4.94 4.39 .55 1.51 1.61 -.10 6.45 6.00 .45 15,944

2011 . . . . . . 4.94 4.44 .49 1.51 1.63 -.12 6.45 6.07 .38 16,733

2012 . . . . . . 4.94 4.52 .42 1.51 1.66 -.15 6.45 6.18 .27 17,554

2013 . . . . . . 4.93 4.61 .32 1.52 1.69 -.17 6.45 6.30 .15 18,418

2014 . . . . . . 4.92 4.70 .22 1.52 1.73 -.21 6.44 6.43 .01 19,313

2015 . . . . . . 4.91 4.80 .11 1.52 1.77 -.24 6.44 6.57 -.13 20,227

2016 . . . . . . 4.91 4.90 2/ 1.52 1.80 -.28 6.43 6.71 -.28 21,189

2017 . . . . . . 4.90 5.01 -.11 1.53 1.85 -.32 6.42 6.85 -.43 22,192

2020 . . . . . . 4.88 5.30 -.42 1.53 2.00 -.47 6.41 7.30 -.89 25,440

2025 . . . . . . 4.85 5.71 -.86 1.53 2.31 -.78 6.37 8.02 -1.65 31,826

2030 . . . . . . 4.81 6.00 -1.19 1.52 2.67 -1.14 6.34 8.66 -2.33 39,773

2035 . . . . . . 4.77 6.09 -1.32 1.52 3.02 -1.50 6.29 9.10 -2.82 49,839

2040 . . . . . . 4.73 6.02 -1.29 1.50 3.30 -1.80 6.23 9.32 -3.09 62,511

2045 . . . . . . 4.68 5.89 -1.21 1.49 3.52 -2.03 6.17 9.42 -3.25 78,425

2050 . . . . . . 4.64 5.81 -1.17 1.48 3.69 -2.22 6.12 9.50 -3.39 98,187

2055 . . . . . . 4.60 5.77 -1.17 1.47 3.85 -2.39 6.07 9.63 -3.56 122,786

2060 . . . . . . 4.57 5.77 -1.20 1.46 4.03 -2.58 6.02 9.80 -3.78 153,485

2065 . . . . . . 4.53 5.76 -1.23 1.45 4.22 -2.78 5.98 9.99 -4.01 191,872

2070 . . . . . . 4.50 5.77 -1.27 1.44 4.41 -2.97 5.93 10.18 -4.25 239,750

2075 . . . . . . 4.46 5.79 -1.33 1.43 4.58 -3.15 5.89 10.37 -4.48 299,416

2080 . . . . . . 4.43 5.81 -1.38 1.42 4.73 -3.31 5.85 10.54 -4.69 373,590

2085 . . . . . . 4.40 5.84 -1.44 1.35 4.62 -3.27 5.75 10.47 -4.72 465,848

Summarized rates: 3

25-year:

 2008-32 . . . 5.57 5.43 .14 1.62 2.15 -.54 7.19 7.58 -.40

50-year:

 2008-57 . . . 5.19 5.61 -.42 1.56 2.73 -1.16 6.75 8.34 -1.58

75-year

 2008-82 . . . 5.02 5.63 -.61 1.53 3.13 -1.60 6.55 8.76 -2.21

Low Cost:

2008 . . . . . . 4.86 4.26 .59 1.49 1.50 -.01 6.35 5.76 .58 14,572

2009 . . . . . . 4.94 4.27 .67 1.50 1.50 2/1 6.45 5.77 .67 15,317

2010 . . . . . . 4.95 4.28 .67 1.51 1.49 .02 6.46 5.77 .69 16,071

2011 . . . . . . 4.95 4.29 .67 1.51 1.48 .03 6.46 5.77 .69 16,829

2012 . . . . . . 4.96 4.32 .64 1.51 1.48 .03 6.47 5.80 .67 17,599

2013 . . . . . . 4.96 4.38 .58 1.52 1.48 .03 6.48 5.86 .62 18,373

2014 . . . . . . 4.96 4.44 .51 1.52 1.48 .03 6.47 5.92 .55 19,163

2015 . . . . . . 4.95 4.51 .44 1.52 1.49 .03 6.47 6.00 .47 19,963

2016 . . . . . . 4.95 4.59 .37 1.52 1.49 .03 6.47 6.08 .39 20,785

2017 . . . . . . 4.95 4.66 .29 1.52 1.50 .02 6.47 6.16 .31 21,667

2020 . . . . . . 4.93 4.89 .04 1.52 1.53 -.01 6.46 6.42 .04 24,493

2025 . . . . . . 4.91 5.22 -.31 1.52 1.61 -.09 6.43 6.83 -.40 29,914

2030 . . . . . . 4.89 5.43 -.54 1.52 1.69 -.17 6.41 7.12 -.71 36,505

2035 . . . . . . 4.86 5.43 -.58 1.52 1.75 -.23 6.37 7.18 -.81 44,741

2040 . . . . . . 4.83 5.29 -.46 1.51 1.77 -.27 6.33 7.06 -.73 55,078

2045 . . . . . . 4.80 5.10 -.30 1.50 1.79 -.29 6.30 6.89 -.59 67,997

2050 . . . . . . 4.78 4.95 -.17 1.49 1.82 -.33 6.27 6.77 -.50 83,954

2055 . . . . . . 4.76 4.85 -.09 1.48 1.87 -.39 6.25 6.73 -.48 103,714

2060 . . . . . . 4.75 4.78 -.03 1.48 1.97 -.49 6.23 6.75 -.53 128,194

2065 . . . . . . 4.74 4.71 .03 1.47 2.07 -.60 6.21 6.78 -.57 158,705

2070 . . . . . . 4.72 4.63 .09 1.47 2.18 -.71 6.19 6.81 -.62 196,692

2075 . . . . . . 4.71 4.57 .14 1.46 2.28 -.82 6.17 6.85 -.68 243,869

2080 . . . . . . 4.70 4.55 .15 1.46 2.36 -.91 6.16 6.91 -.76 302,126

2085 . . . . . . 4.69 4.56 .13 1.40 2.33 -.93 6.08 6.88 -.80 373,893
Appendices

180

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

Low Cost (cont.):

Summarized rates: 3

25-year:

 2008-32 . . . 5.62 5.03 0.60 1.62 1.62 2/1 7.24 6.65 0.60

50-year:

 2008-57 . . . 5.28 5.04 .24 1.57 1.69 -0.12 6.85 6.73 .12

75-year

 2008-82 . . . 5.14 4.93 .21 1.54 1.80 -.26 6.68 6.73 -.05

High Cost:

2008 . . . . . . 4.89 4.45 .44 1.49 1.64 -.15 6.38 6.09 .29 $14,045

2009 . . . . . . 4.89 4.52 .37 1.51 1.70 -.19 6.39 6.22 .18 14,798

2010 . . . . . . 4.92 4.56 .36 1.51 1.75 -.24 6.43 6.30 .13 15,653

2011 . . . . . . 4.93 4.67 .26 1.51 1.81 -.30 6.44 6.48 -.04 16,316

2012 . . . . . . 4.90 4.75 .15 1.51 1.87 -.36 6.41 6.62 -.22 17,450

2013 . . . . . . 4.84 4.82 .02 1.52 1.93 -.42 6.36 6.75 -.39 18,976

2014 . . . . . . 4.83 4.97 -.14 1.52 2.01 -.50 6.35 6.98 -.63 20,196

2015 . . . . . . 4.84 5.14 -.30 1.52 2.10 -.58 6.36 7.24 -.88 21,251

2016 . . . . . . 4.84 5.28 -.44 1.52 2.19 -.66 6.36 7.47 -1.10 22,345

2017 . . . . . . 4.83 5.42 -.59 1.52 2.28 -.76 6.36 7.70 -1.34 23,498

2020 . . . . . . 4.81 5.76 -.96 1.53 2.60 -1.08 6.33 8.37 -2.04 27,318

2025 . . . . . . 4.77 6.24 -1.48 1.52 3.31 -1.78 6.29 9.55 -3.26 35,047

2030 . . . . . . 4.72 6.60 -1.88 1.52 4.19 -2.67 6.24 10.79 -4.55 44,915

2035 . . . . . . 4.67 6.78 -2.11 1.51 5.20 -3.69 6.18 11.98 -5.80 57,546

2040 . . . . . . 4.61 6.81 -2.20 1.50 6.14 -4.65 6.11 12.96 -6.85 73,555

2045 . . . . . . 4.55 6.79 -2.24 1.48 6.91 -5.43 6.04 13.70 -7.66 93,725

2050 . . . . . . 4.50 6.81 -2.31 1.47 7.49 -6.02 5.96 14.30 -8.34 118,830

2055 . . . . . . 4.44 6.88 -2.43 1.45 7.91 -6.45 5.90 14.79 -8.89 150,199

2060 . . . . . . 4.39 6.98 -2.59 1.44 8.23 -6.79 5.83 15.22 -9.38 189,431

2065 . . . . . . 4.34 7.11 -2.76 1.43 8.57 -7.14 5.77 15.68 -9.90 238,530

2070 . . . . . . 4.29 7.26 -2.97 1.42 8.90 -7.48 5.71 16.16 -10.45 299,564

2075 . . . . . . 4.25 7.42 -3.17 1.41 9.19 -7.78 5.66 16.61 -10.95 375,759

2080 . . . . . . 4.20 7.55 -3.35 1.40 9.43 -8.03 5.60 16.98 -11.39 470,518

2085 . . . . . . 4.15 7.65 -3.50 1.33 9.17 -7.85 5.48 16.83 -11.35 589,051

Summarized rates: 3

25-year:

 2008-32 . . . 5.49 5.88 -.39 1.61 2.95 -1.34 7.10 8.83 -1.73

50-year:

 2008-57 . . . 5.08 6.27 -1.19 1.55 4.65 -3.10 6.63 10.92 -4.29

75-year

 2008-82 . . . 4.88 6.50 -1.62 1.52 5.70 -4.18 6.40 12.20 -5.80

1 Income for individual years excludes interest on the trust funds. Interest is implicitly reflected in all summarized values.

2 Between -0.005 and 0.005 percent of GDP.

3 Summarized rates are calculated on the present-value basis including the value of the trust funds on

January 1, 2008, 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 2008-85 (Cont.)

Calendar year

Percentage of GDP GDP in

dollars

(billions)

OASDI HI Combined

Income1 Cost Balance Income1 Cost Balance Income1 Cost Balance
181

OASDI & HI: Percent of GDP

Appendix VI.F.1 for a detailed description of the difference). The cost as a

percentage of GDP is equal to the cost as a percentage of taxable payroll

multiplied by the ratio of taxable payroll to GDP.

Projections of GDP 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 0.25 percent for the 40 years from 1966 to 2006. For the 10-year periods 1966-76, 1976-86, 1986-96, and 1996-2006, the average annual rates of

change were -0.57, -0.30, 0.04 and -0.15 percent, respectively. Ultimate

future annual rates of decline in the ratio of wages 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 2017, with no further decline thereafter.

Table VI.F5.—Ratio of OASDI Taxable Payroll to GDP, Calendar Years 2008-85 

Calendar year Intermediate Low Cost High Cost

2008 . . . . . . . . . . . . . . . . . . . . . . . . . 0.385 0.385 0.387

2009 . . . . . . . . . . . . . . . . . . . . . . . . . .386 .387 .387

2010 . . . . . . . . . . . . . . . . . . . . . . . . . .386 .387 .384

2011 . . . . . . . . . . . . . . . . . . . . . . . . . .385 .387 .384

2012 . . . . . . . . . . . . . . . . . . . . . . . . . .384 .387 .381

2013 . . . . . . . . . . . . . . . . . . . . . . . . . .383 .386 .375

2014 . . . . . . . . . . . . . . . . . . . . . . . . . .382 .385 .374

2015 . . . . . . . . . . . . . . . . . . . . . . . . . .381 .385 .374

2016 . . . . . . . . . . . . . . . . . . . . . . . . . .379 .384 .373

2017 . . . . . . . . . . . . . . . . . . . . . . . . . .378 .383 .371

2020 . . . . . . . . . . . . . . . . . . . . . . . . . .375 .381 .368

2025 . . . . . . . . . . . . . . . . . . . . . . . . . .370 .377 .362

2030 . . . . . . . . . . . . . . . . . . . . . . . . . .366 .374 .356

2035 . . . . . . . . . . . . . . . . . . . . . . . . . .362 .371 .351

2040 . . . . . . . . . . . . . . . . . . . . . . . . . .358 .369 .346

2045 . . . . . . . . . . . . . . . . . . . . . . . . . .355 .367 .341

2050 . . . . . . . . . . . . . . . . . . . . . . . . . .352 .366 .336

2055 . . . . . . . . . . . . . . . . . . . . . . . . . .349 .365 .331

2060 . . . . . . . . . . . . . . . . . . . . . . . . . .346 .364 .327

2065 . . . . . . . . . . . . . . . . . . . . . . . . . .343 .363 .322

2070 . . . . . . . . . . . . . . . . . . . . . . . . . .340 .363 .317

2075 . . . . . . . . . . . . . . . . . . . . . . . . . .337 .362 .313

2080 . . . . . . . . . . . . . . . . . . . . . . . . . .334 .361 .308

2085 . . . . . . . . . . . . . . . . . . . . . . . . . .331 .360 .304
Appendices

182

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
183

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

184

Table VI.F6.—Selected Economic Variables, Calendar Years 2007-85

[GDP and taxable payroll in billions]

Calendar year

Adjusted

CPI1 Average

wage index2 Taxablepayroll3

Gross

domestic

product

Compound

interest-rate

factor4

Intermediate:

2007 . . . . . . . . . . . . . 97.27 $40,307.02 $5,280 $13,841 0.9578

2008 . . . . . . . . . . . . . 100.00 41,953.05 5,567 14,445 1.0000

2009 . . . . . . . . . . . . . 102.50 43,679.27 5,859 15,163 1.0514

2010 . . . . . . . . . . . . . 105.35 45,434.85 6,155 15,944 1.1107

2011 . . . . . . . . . . . . . 108.30 47,226.12 6,449 16,733 1.1751

2012 . . . . . . . . . . . . . 111.33 49,089.78 6,746 17,554 1.2436

2013 . . . . . . . . . . . . . 114.45 51,050.68 7,055 18,418 1.3162

2014 . . . . . . . . . . . . . 117.65 53,053.07 7,373 19,313 1.3929

2015 . . . . . . . . . . . . . 120.95 55,091.11 7,701 20,227 1.4742

2016 . . . . . . . . . . . . . 124.33 57,198.35 8,039 21,189 1.5602

2017 . . . . . . . . . . . . . 127.81 59,376.44 8,390 22,192 1.6505

2020 . . . . . . . . . . . . . 138.85 66,519.41 9,539 25,440 1.9536

2025 . . . . . . . . . . . . . 159.41 80,374.08 11,777 31,826 2.5875

2030 . . . . . . . . . . . . . 183.02 97,201.39 14,539 39,773 3.4271

2035 . . . . . . . . . . . . . 210.11 117,744.99 18,017 49,839 4.5391

2040 . . . . . . . . . . . . . 241.22 142,731.42 22,373 62,511 6.0119

2045 . . . . . . . . . . . . . 276.94 173,040.96 27,812 78,425 7.9625

2050 . . . . . . . . . . . . . 317.94 209,684.21 34,514 98,187 10.5462

2055 . . . . . . . . . . . . . 365.02 253,940.95 42,793 122,786 13.9681

2060 . . . . . . . . . . . . . 419.06 307,496.83 53,039 153,485 18.5003

2065 . . . . . . . . . . . . . 481.11 372,437.07 65,746 191,872 24.5032

2070 . . . . . . . . . . . . . 552.35 451,130.41 81,460 239,750 32.4537

2075 . . . . . . . . . . . . . 634.13 546,425.73 100,875 299,416 42.9840

2080 . . . . . . . . . . . . . 728.02 661,813.96 124,794 373,590 56.9311

2085 . . . . . . . . . . . . . 835.81 801,870.10 154,350 465,848 75.4035

Low Cost:

2007 . . . . . . . . . . . . . 97.46 40,296.93 5,280 13,844 .9560

2008 . . . . . . . . . . . . . 100.00 42,140.73 5,610 14,572 1.0000

2009 . . . . . . . . . . . . . 101.94 43,833.37 5,920 15,317 1.0481

2010 . . . . . . . . . . . . . 103.77 45,416.45 6,223 16,071 1.1003

2011 . . . . . . . . . . . . . 105.64 46,995.78 6,515 16,829 1.1583

2012 . . . . . . . . . . . . . 107.54 48,607.27 6,805 17,599 1.2199

2013 . . . . . . . . . . . . . 109.48 50,237.06 7,092 18,373 1.2861

2014 . . . . . . . . . . . . . 111.45 51,888.66 7,384 19,163 1.3561

2015 . . . . . . . . . . . . . 113.45 53,561.45 7,679 19,963 1.4300

2016 . . . . . . . . . . . . . 115.50 55,284.42 7,980 20,785 1.5079

2017 . . . . . . . . . . . . . 117.57 57,114.87 8,298 21,667 1.5900

2020 . . . . . . . . . . . . . 124.04 63,063.16 9,321 24,493 1.8652

2025 . . . . . . . . . . . . . 135.61 74,370.57 11,272 29,914 2.4337

2030 . . . . . . . . . . . . . 148.26 87,706.73 13,637 36,505 3.1754

2035 . . . . . . . . . . . . . 162.10 103,538.47 16,596 44,741 4.1433

2040 . . . . . . . . . . . . . 177.22 122,362.74 20,320 55,078 5.4060

2045 . . . . . . . . . . . . . 193.75 144,699.76 24,985 67,997 7.0537

2050 . . . . . . . . . . . . . 211.83 171,105.66 30,746 83,954 9.2035

2055 . . . . . . . . . . . . . 231.59 202,390.60 37,877 103,714 12.0086

2060 . . . . . . . . . . . . . 253.20 239,459.36 46,699 128,194 15.6686

2065 . . . . . . . . . . . . . 276.83 283,374.40 57,677 158,705 20.4441

2070 . . . . . . . . . . . . . 302.65 335,360.13 71,319 196,692 26.6751

2075 . . . . . . . . . . . . . 330.89 396,877.24 88,220 243,869 34.8051

2080 . . . . . . . . . . . . . 361.76 469,579.70 109,027 302,126 45.4131

2085 . . . . . . . . . . . . . 395.51 555,779.76 134,637 373,893 59.2541
185

OASDI & HI: Estimates in Dollars

Table VI.F7 shows estimated operations of the combined OASI and DI Trust

Funds in constant 2008 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:

2007 . . . . . . . . . . . . . 96.64 $40,262.64 $5,280 $13,818 0.9642

2008 . . . . . . . . . . . . . 100.00 41,159.10 5,436 14,045 1.0000

2009 . . . . . . . . . . . . . 102.97 43,165.02 5,721 14,798 1.0553

2010 . . . . . . . . . . . . . 106.06 45,054.20 6,012 15,653 1.1184

2011 . . . . . . . . . . . . . 110.72 46,635.97 6,266 16,316 1.1873

2012 . . . . . . . . . . . . . 117.03 49,647.24 6,645 17,450 1.2843

2013 . . . . . . . . . . . . . 123.53 53,160.38 7,125 18,976 1.3996

2014 . . . . . . . . . . . . . 129.32 55,984.77 7,557 20,196 1.5024

2015 . . . . . . . . . . . . . 134.41 58,436.60 7,953 21,251 1.5970

2016 . . . . . . . . . . . . . 139.52 60,908.74 8,338 22,345 1.6934

2017 . . . . . . . . . . . . . 144.82 63,499.11 8,725 23,498 1.7943

2020 . . . . . . . . . . . . . 161.97 72,170.68 10,042 27,318 2.1359

2025 . . . . . . . . . . . . . 195.17 89,345.44 12,675 35,047 2.8555

2030 . . . . . . . . . . . . . 235.18 110,813.91 15,991 44,915 3.8177

2035 . . . . . . . . . . . . . 283.39 137,730.54 20,184 57,546 5.1041

2040 . . . . . . . . . . . . . 341.49 171,257.01 25,429 73,555 6.8239

2045 . . . . . . . . . . . . . 411.49 212,850.37 31,949 93,725 9.1232

2050 . . . . . . . . . . . . . 495.85 264,313.27 39,941 118,830 12.1973

2055 . . . . . . . . . . . . . 597.50 327,657.55 49,775 150,199 16.3072

2060 . . . . . . . . . . . . . 719.99 405,911.67 61,884 189,431 21.8020

2065 . . . . . . . . . . . . . 867.58 502,931.56 76,805 238,530 29.1482

2070 . . . . . . . . . . . . . 1,045.44 623,153.76 95,060 299,564 38.9697

2075 . . . . . . . . . . . . . 1,259.75 772,164.34 117,501 375,759 52.1005

2080 . . . . . . . . . . . . . 1,518.00 956,879.67 144,973 470,518 69.6558

2085 . . . . . . . . . . . . . 1,829.19 1,186,350.40 178,908 589,051 93.1264

1The adjusted CPI is the CPI-W indexed to calendar year 2008.

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 reflect the lower

effective contribution rates (compared to the combined employee-employer rate) which apply to multipleemployer “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 2007-85 (Cont.)

[GDP and taxable payroll in billions]

Calendar year

Adjusted

CPI1 Averagewage index2 Taxablepayroll3

Gross

domestic

product

Compound

interest-rate

factor4
Appendices

186

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 2008 Dollars,1 Calendar Years 2008-85

[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:

2008 . . . . . . . . . . . . . $702.5 $117.1 $819.7 $623.5 $2,434.7

2009 . . . . . . . . . . . . . 728.9 122.6 851.5 643.9 2,582.8

2010 . . . . . . . . . . . . . 747.3 130.7 878.0 664.1 2,727.0

2011 . . . . . . . . . . . . . 763.1 139.5 902.6 686.7 2,868.6

2012 . . . . . . . . . . . . . 778.5 148.5 926.9 712.7 3,004.8

2013 . . . . . . . . . . . . . 793.5 157.0 950.5 741.6 3,131.8

2014 . . . . . . . . . . . . . 807.6 164.9 972.5 772.0 3,247.0

2015 . . . . . . . . . . . . . 821.8 172.0 993.8 803.3 3,349.1

2016 . . . . . . . . . . . . . 836.2 178.7 1,014.9 835.6 3,437.1

2017 . . . . . . . . . . . . . 850.5 185.3 1,035.8 869.1 3,510.1

2020 . . . . . . . . . . . . . 894.2 198.3 1,092.6 971.1 3,631.8

2025 . . . . . . . . . . . . . 967.9 195.3 1,163.2 1,140.2 3,466.1

2030 . . . . . . . . . . . . . 1,045.9 160.6 1,206.5 1,303.4 2,785.9

2035 . . . . . . . . . . . . . 1,131.8 98.7 1,230.5 1,444.1 1,624.3

20402 . . . . . . . . . . . .

2 Estimates for later years are not shown because the combined OASI and DI Trust Funds are estimated to

become exhausted in 2041 under the intermediate assumptions and in 2031 under the high cost assumptions.

1,224.8 15.9 1,240.7 1,559.6 94.3

Low Cost: 

2008 . . . . . . . . . . . . . 707.7 117.8 825.5 621.5 2,442.5

2009 . . . . . . . . . . . . . 742.4 124.3 866.7 641.7 2,621.1

2010 . . . . . . . . . . . . . 766.3 132.2 898.5 662.4 2,810.9

2011 . . . . . . . . . . . . . 789.4 141.7 931.0 683.3 3,008.9

2012 . . . . . . . . . . . . . 811.7 152.2 963.8 707.4 3,212.1

2013 . . . . . . . . . . . . . 832.4 163.2 995.6 734.6 3,416.3

2014 . . . . . . . . . . . . . 852.0 174.5 1,026.6 763.6 3,618.8

2015 . . . . . . . . . . . . . 871.4 185.5 1,056.8 793.8 3,817.9

2016 . . . . . . . . . . . . . 891.0 196.5 1,087.5 825.3 4,012.5

2017 . . . . . . . . . . . . . 911.6 208.1 1,119.7 858.2 4,203.0

2020 . . . . . . . . . . . . . 974.2 242.0 1,216.2 966.0 4,734.3

2025 . . . . . . . . . . . . . 1,083.2 285.5 1,368.7 1,151.6 5,451.2

2030 . . . . . . . . . . . . . 1,203.1 311.4 1,514.5 1,335.8 5,915.5

2035 . . . . . . . . . . . . . 1,340.9 328.5 1,669.4 1,500.0 6,228.5

2040 . . . . . . . . . . . . . 1,500.6 347.4 1,848.0 1,643.7 6,597.3

2045 . . . . . . . . . . . . . 1,685.1 378.8 2,064.0 1,789.2 7,219.3

2050 . . . . . . . . . . . . . 1,894.6 427.6 2,322.2 1,962.2 8,173.4

2055 . . . . . . . . . . . . . 2,133.5 495.3 2,628.8 2,173.7 9,488.5

2060 . . . . . . . . . . . . . 2,404.9 583.3 2,988.2 2,421.4 11,191.1

2065 . . . . . . . . . . . . . 2,715.3 696.7 3,412.0 2,697.8 13,389.2

2070 . . . . . . . . . . . . . 3,069.3 843.0 3,912.3 3,011.2 16,224.6

2075 . . . . . . . . . . . . . 3,471.0 1,030.0 4,501.0 3,371.1 19,845.3

2080 . . . . . . . . . . . . . 3,923.3 1,263.4 5,186.6 3,799.8 24,349.6

2085 . . . . . . . . . . . . . 4,432.6 1,545.3 5,977.9 4,309.0 29,779.5

High Cost:

2008 . . . . . . . . . . . . . 686.9 115.3 802.2 625.6 2,415.1

2009 . . . . . . . . . . . . . 702.6 119.2 821.8 649.8 2,517.4

2010 . . . . . . . . . . . . . 726.2 126.9 853.1 672.5 2,624.7

2011 . . . . . . . . . . . . . 726.7 133.1 859.9 688.2 2,685.8

2012 . . . . . . . . . . . . . 730.1 141.4 871.5 708.2 2,704.4

2013 . . . . . . . . . . . . . 743.8 155.3 899.1 740.1 2,721.0

2014 . . . . . . . . . . . . . 754.8 162.2 917.0 776.3 2,739.9

2015 . . . . . . . . . . . . . 765.8 164.5 930.3 812.7 2,753.8

2016 . . . . . . . . . . . . . 775.5 165.3 940.8 846.0 2,747.7

2017 . . . . . . . . . . . . . 783.8 165.0 948.8 879.2 2,716.7

2020 . . . . . . . . . . . . . 810.9 148.7 959.6 972.3 2,474.0

2025 . . . . . . . . . . . . . 855.8 96.1 951.9 1,120.8 1,551.3

2030 2 . . . . . . . . . . . . 901.7 11.6 913.3 1,260.3 5.0
187

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 2040, 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

188

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 2008-85

[In billions]

Calendar year

Income

excluding

interest

Interest

income

Total

income Cost

Assets at

end of year

Intermediate:

2008 . . . . . . . . . . . . . $702.5 $117.1 $819.7 $623.5 $2,434.7

2009 . . . . . . . . . . . . . 747.1 125.7 872.8 660.0 2,647.5

2010 . . . . . . . . . . . . . 787.3 137.6 925.0 699.6 2,872.8

2011 . . . . . . . . . . . . . 826.4 151.1 977.5 743.7 3,106.6

2012 . . . . . . . . . . . . . 866.7 165.3 1,031.9 793.4 3,345.2

2013 . . . . . . . . . . . . . 908.2 179.7 1,087.8 848.8 3,584.2

2014 . . . . . . . . . . . . . 950.1 194.0 1,144.2 908.3 3,820.2

2015 . . . . . . . . . . . . . 993.9 208.1 1,201.9 971.6 4,050.5

2016 . . . . . . . . . . . . . 1,039.6 222.2 1,261.8 1,039.0 4,273.4

2017 . . . . . . . . . . . . . 1,087.1 236.8 1,323.9 1,110.8 4,486.4

2020 . . . . . . . . . . . . . 1,241.6 275.4 1,517.0 1,348.4 5,042.8

2025 . . . . . . . . . . . . . 1,542.9 311.4 1,854.2 1,817.6 5,525.5

2030 . . . . . . . . . . . . . 1,914.1 294.0 2,208.1 2,385.5 5,098.7

2035 . . . . . . . . . . . . . 2,378.1 207.5 2,585.5 3,034.2 3,412.8

20401 . . . . . . . . . . . .

1 Estimates for later years are not shown because the combined OASI and DI Trust Funds are estimated to

become exhausted in 2041 under the intermediate assumptions and in 2031 under the high cost assumptions.

2,954.5 38.3 2,992.8 3,762.1 227.4

Low Cost:

2008 . . . . . . . . . . . . . 707.7 117.8 825.5 621.5 2,442.5

2009 . . . . . . . . . . . . . 756.8 126.7 883.5 654.1 2,671.9

2010 . . . . . . . . . . . . . 795.2 137.1 932.4 687.4 2,916.9

2011 . . . . . . . . . . . . . 833.9 149.7 983.5 721.8 3,178.6

2012 . . . . . . . . . . . . . 872.9 163.6 1,036.5 760.8 3,454.4

2013 . . . . . . . . . . . . . 911.3 178.6 1,089.9 804.3 3,740.0

2014 . . . . . . . . . . . . . 949.6 194.5 1,144.1 851.0 4,033.1

2015 . . . . . . . . . . . . . 988.6 210.4 1,199.0 900.6 4,331.5

2016 . . . . . . . . . . . . . 1,029.1 226.9 1,256.0 953.2 4,634.3

2017 . . . . . . . . . . . . . 1,071.8 244.7 1,316.5 1,009.1 4,941.7

2020 . . . . . . . . . . . . . 1,208.4 300.2 1,508.5 1,198.2 5,872.4

2025 . . . . . . . . . . . . . 1,469.0 387.2 1,856.2 1,561.7 7,392.4

2030 . . . . . . . . . . . . . 1,783.7 461.7 2,245.5 1,980.6 8,770.5

2035 . . . . . . . . . . . . . 2,173.5 532.5 2,706.0 2,431.5 10,096.1

2040 . . . . . . . . . . . . . 2,659.4 615.6 3,275.0 2,913.0 11,691.7

2045 . . . . . . . . . . . . . 3,265.0 734.0 3,999.0 3,466.7 13,987.7

2050 . . . . . . . . . . . . . 4,013.4 905.8 4,919.2 4,156.5 17,313.8

2055 . . . . . . . . . . . . . 4,941.1 1,147.1 6,088.2 5,034.2 21,974.9

2060 . . . . . . . . . . . . . 6,089.4 1,476.9 7,566.2 6,131.1 28,336.2

2065 . . . . . . . . . . . . . 7,516.8 1,928.6 9,445.3 7,468.3 37,064.7

2070 . . . . . . . . . . . . . 9,289.3 2,551.3 11,840.6 9,113.4 49,104.2

2075 . . . . . . . . . . . . . 11,485.2 3,408.2 14,893.4 11,154.6 65,666.3

2080 . . . . . . . . . . . . . 14,192.9 4,570.4 18,763.3 13,746.3 88,087.5

2085 . . . . . . . . . . . . . 17,531.5 6,112.0 23,643.5 17,042.7 117,782.1

High Cost:

2008 . . . . . . . . . . . . . 686.9 115.3 802.2 625.6 2,415.1

2009 . . . . . . . . . . . . . 723.4 122.8 846.2 669.1 2,592.2

2010 . . . . . . . . . . . . . 770.2 134.6 904.9 713.3 2,783.8

2011 . . . . . . . . . . . . . 804.7 147.4 952.0 762.0 2,973.8

2012 . . . . . . . . . . . . . 854.5 165.5 1,020.0 828.8 3,165.0

2013 . . . . . . . . . . . . . 918.9 191.8 1,110.7 914.2 3,361.4

2014 . . . . . . . . . . . . . 976.2 209.7 1,185.9 1,004.0 3,543.3

2015 . . . . . . . . . . . . . 1,029.3 221.1 1,250.5 1,092.4 3,701.4

2016 . . . . . . . . . . . . . 1,082.0 230.7 1,312.6 1,180.4 3,833.7

2017 . . . . . . . . . . . . . 1,135.1 239.0 1,374.1 1,273.3 3,934.5

2020 . . . . . . . . . . . . . 1,313.4 240.9 1,554.2 1,574.7 4,007.0

2025 . . . . . . . . . . . . . 1,670.3 187.5 1,857.8 2,187.4 3,027.8

2030 1 . . . . . . . . . . . . 2,120.6 27.2 2,147.8 2,964.0 11.7
189

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

190

Table VI.F9.—OASDI and HI Annual Income Excluding Interest, Cost, and

Balance in Current Dollars, Calendar Years 2008-85

[In billions]

Calendar

year

OASDI HI Combined

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance

Intermediate:

2008 . . . . . . $703 $623 $79 $215 $225 -$10 $918 $849 $69

2009 . . . . . . 747 660 87 228 241 -13 976 901 74

2010 . . . . . . 787 700 88 241 257 -16 1,028 957 72

2011 . . . . . . 826 744 83 253 272 -20 1,079 1,016 63

2012 . . . . . . 867 793 73 266 291 -26 1,132 1,085 48

2013 . . . . . . 908 849 59 280 312 -32 1,188 1,161 27

2014 . . . . . . 950 908 42 293 334 -40 1,244 1,242 1

2015 . . . . . . 994 972 22 308 357 -49 1,302 1,329 -27

2016 . . . . . . 1,040 1,039 1 323 382 -60 1,362 1,421 -59

2017 . . . . . . 1,087 1,111 -24 339 410 -72 1,426 1,521 -95

2020 . . . . . . 1,242 1,348 -107 389 508 -119 1,630 1,856 -226

2025 . . . . . . 1,543 1,818 -275 486 735 -249 2,029 2,552 -524

2030 . . . . . . 1,914 2,385 -471 606 1,060 -454 2,520 3,446 -926

2035 . . . . . . 2,378 3,034 -656 755 1,503 -748 3,134 4,538 -1,404

2040 . . . . . . 2,955 3,762 -808 940 2,066 -1,126 3,894 5,828 -1,934

2045 . . . . . . 3,671 4,623 -952 1,168 2,761 -1,594 4,839 7,384 -2,545

2050 . . . . . . 4,556 5,702 -1,147 1,449 3,628 -2,178 6,005 9,330 -3,325

2055 . . . . . . 5,651 7,089 -1,438 1,799 4,733 -2,934 7,450 11,822 -4,372

2060 . . . . . . 7,009 8,852 -1,842 2,235 6,190 -3,955 9,244 15,042 -5,798

2065 . . . . . . 8,695 11,059 -2,364 2,775 8,100 -5,325 11,470 19,159 -7,689

2070 . . . . . . 10,782 13,837 -3,055 3,446 10,576 -7,131 14,227 24,414 -10,186

2075 . . . . . . 13,364 17,333 -3,970 4,276 13,718 -9,442 17,640 31,051 -13,411

2080 . . . . . . 16,549 21,721 -5,172 5,303 17,665 -12,362 21,851 39,386 -17,534

2085 . . . . . . 20,488 27,216 -6,728 6,297 21,545 -15,248 26,786 48,762 -21,976

Low Cost:

2008 . . . . . . 708 621 86 217 218 -1 925 840 85

2009 . . . . . . 757 654 103 230 230 1/ 987 884 103

2010 . . . . . . 795 687 108 243 240 2 1,038 927 110

2011 . . . . . . 834 722 112 254 249 4 1,088 971 117

2012 . . . . . . 873 761 112 266 260 5 1,139 1,021 118

2013 . . . . . . 911 804 107 278 272 6 1,190 1,077 113

2014 . . . . . . 950 851 99 290 284 6 1,240 1,135 105

2015 . . . . . . 989 901 88 303 297 6 1,292 1,197 94

2016 . . . . . . 1,029 953 76 316 310 6 1,345 1,263 82

2017 . . . . . . 1,072 1,009 63 330 325 5 1,401 1,334 68

2020 . . . . . . 1,208 1,198 10 373 374 -1 1,581 1,573 9

2025 . . . . . . 1,469 1,562 -93 456 482 -26 1,925 2,043 -119

2030 . . . . . . 1,784 1,981 -197 555 618 -62 2,339 2,598 -259

2035 . . . . . . 2,174 2,432 -258 678 781 -103 2,852 3,213 -361

2040 . . . . . . 2,659 2,913 -254 830 977 -147 3,489 3,890 -401

2045 . . . . . . 3,265 3,467 -202 1,017 1,217 -200 4,282 4,683 -401

2050 . . . . . . 4,013 4,157 -143 1,249 1,525 -276 5,262 5,682 -420

2055 . . . . . . 4,941 5,034 -93 1,536 1,943 -407 6,478 6,977 -500

2060 . . . . . . 6,089 6,131 -42 1,893 2,525 -632 7,982 8,656 -674

2065 . . . . . . 7,517 7,468 48 2,335 3,291 -956 9,852 10,760 -907

2070 . . . . . . 9,289 9,113 176 2,884 4,288 -1,403 12,174 13,401 -1,227

2075 . . . . . . 11,485 11,155 331 3,565 5,553 -1,989 15,050 16,708 -1,658

2080 . . . . . . 14,193 13,746 447 4,405 7,142 -2,737 18,598 20,888 -2,291

2085 . . . . . . 17,531 17,043 489 5,217 8,698 -3,482 22,748 25,741 -2,993
191

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 2008 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 2008 dollars (adjusted to 2008 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

High Cost:

2008 . . . . . . $687 $626 $61 $209 $230 -$21 $896 $856 $40

2009 . . . . . . 723 669 54 223 251 -28 946 920 26

2010 . . . . . . 770 713 57 237 273 -37 1,007 987 20

2011 . . . . . . 805 762 43 246 296 -49 1,051 1,058 -7

2012 . . . . . . 854 829 26 264 327 -63 1,118 1,156 -38

2013 . . . . . . 919 914 5 288 367 -79 1,206 1,281 -75

2014 . . . . . . 976 1,004 -28 306 407 -100 1,282 1,410 -128

2015 . . . . . . 1,029 1,092 -63 323 446 -123 1,352 1,538 -186

2016 . . . . . . 1,082 1,180 -98 340 488 -148 1,422 1,669 -247

2017 . . . . . . 1,135 1,273 -138 358 536 -178 1,493 1,809 -316

2020 . . . . . . 1,313 1,575 -261 417 712 -295 1,730 2,286 -556

2025 . . . . . . 1,670 2,187 -517 534 1,159 -625 2,204 3,346 -1,142

2030 . . . . . . 2,121 2,964 -843 683 1,883 -1,200 2,803 4,847 -2,044

2035 . . . . . . 2,688 3,904 -1,216 870 2,993 -2,123 3,557 6,896 -3,339

2040 . . . . . . 3,393 5,013 -1,619 1,101 4,518 -3,417 4,495 9,531 -5,036

2045 . . . . . . 4,269 6,366 -2,098 1,388 6,474 -5,086 5,657 12,841 -7,184

2050 . . . . . . 5,345 8,091 -2,746 1,742 8,901 -7,159 7,087 16,992 -9,905

2055 . . . . . . 6,676 10,333 -3,657 2,182 11,874 -9,692 8,858 22,207 -13,349

2060 . . . . . . 8,323 13,230 -4,908 2,730 15,598 -12,868 11,052 28,828 -17,776

2065 . . . . . . 10,360 16,953 -6,593 3,410 20,443 -17,032 13,770 37,396 -23,625

2070 . . . . . . 12,865 21,748 -8,883 4,253 26,673 -22,420 17,118 48,421 -31,303

2075 . . . . . . 15,957 27,864 -11,906 5,297 34,544 -29,247 21,254 62,408 -41,153

2080 . . . . . . 19,754 35,533 -15,780 6,583 44,381 -37,798 26,337 79,914 -53,578

2085 . . . . . . 24,446 45,067 -20,621 7,828 54,044 -46,216 32,274 99,111 -66,837

1 Between -$500 million and $500 million.

Table VI.F9.—OASDI and HI Annual Income Excluding Interest, Cost, and

Balance in Current Dollars, Calendar Years 2008-85 (Cont.)

[In billions]

Calendar

year

OASDI HI Combined

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance
Appendices

192

attain age 62). Thus, for the illustrative cases shown in table VI.F10, benefit

levels shown for retirement at 65 are lower than the levels shown for retirement 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 cases are for workers with scaled-earnings patterns,1

reflecting low, medium, and high career-average levels of pre-retirement

earnings starting at age 21. The fourth case is the steady maximum earner.

The three scaled-earnings cases have earnings patterns that reflect differences by age in the probability of work and in average earnings levels experienced by insured workers during the period 1991-2004. The general, careeraverage level of earnings for the scaled cases is set relative to the national

average wage index (AWI) so that benefit levels are consistent with levels

for “steady-earnings” cases that were shown in the 2000 and earlier Trustees

Reports. For the scaled medium earner, the general, career-average earnings

level is about equal to the AWI. For the scaled low and high earners, the general, career-average earnings level is set at about 45 percent and 160 percent

of the AWI, respectively. The steady maximum earner is assumed to have

earnings at (or above) the 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 2007.3, located at the following internet address: www.socialsecurity.gov/OACT/NOTES/ran3/

an2007-3.html.
193

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 2008-85 

Year attain age 652

Retirement at normal retirement age Retirement at age 65

Age at

retirement

Constant

2008

dollars 3 Percent of

earnings

Age at

retirement

Constant

2008

dollars3 Percent ofearnings

 Scaled low earnings:4

2008 . . . . . . . . . . . 66:0 $10,252 55.7 65:0 $9,549 52.6

2010 . . . . . . . . . . . 66:0 10,307 54.6 65:0 9,624 51.6

2015 . . . . . . . . . . . 66:0 11,135 55.8 65:0 10,392 52.6

2020 . . . . . . . . . . . 66:2 11,764 56.0 65:0 10,854 52.3

2025 . . . . . . . . . . . 67:0 12,373 55.5 65:0 10,722 49.1

2030 . . . . . . . . . . . 67:0 13,022 55.4 65:0 11,284 49.1

2035 . . . . . . . . . . . 67:0 13,721 55.3 65:0 11,890 49.0

2040 . . . . . . . . . . . 67:0 14,481 55.3 65:0 12,550 49.0

2045 . . . . . . . . . . . 67:0 15,289 55.3 65:0 13,251 49.0

2050 . . . . . . . . . . . 67:0 16,145 55.3 65:0 13,993 49.0

2055 . . . . . . . . . . . 67:0 17,041 55.4 65:0 14,769 49.0

2060 . . . . . . . . . . . 67:0 17,977 55.4 65:0 15,579 49.0

2065 . . . . . . . . . . . 67:0 18,961 55.4 65:0 16,433 49.0

2070 . . . . . . . . . . . 67:0 20,004 55.4 65:0 17,336 49.0

2075 . . . . . . . . . . . 67:0 21,106 55.4 65:0 18,293 49.0

2080 . . . . . . . . . . . 67:0 22,267 55.4 65:0 19,299 49.0

2085 . . . . . . . . . . . 67:0 23,493 55.3 65:0 20,360 49.0

Scaled medium earnings:5

2008 . . . . . . . . . . . 66:0 16,893 41.3 65:0 15,732 39.0

2010 . . . . . . . . . . . 66:0 17,004 40.5 65:0 15,870 38.3

2015 . . . . . . . . . . . 66:0 18,352 41.4 65:0 17,135 39.1

2020 . . . . . . . . . . . 66:2 19,389 41.5 65:0 17,879 38.8

2025 . . . . . . . . . . . 67:0 20,391 41.1 65:0 17,671 36.4

2030 . . . . . . . . . . . 67:0 21,461 41.1 65:0 18,599 36.4

2035 . . . . . . . . . . . 67:0 22,610 41.0 65:0 19,595 36.3

2040 . . . . . . . . . . . 67:0 23,856 41.0 65:0 20,673 36.3

2045 . . . . . . . . . . . 67:0 25,193 41.0 65:0 21,833 36.3

2050 . . . . . . . . . . . 67:0 26,605 41.0 65:0 23,054 36.3

2055 . . . . . . . . . . . 67:0 28,079 41.1 65:0 24,335 36.3

2060 . . . . . . . . . . . 67:0 29,620 41.1 65:0 25,671 36.4

2065 . . . . . . . . . . . 67:0 31,244 41.0 65:0 27,078 36.3

2070 . . . . . . . . . . . 67:0 32,961 41.0 65:0 28,566 36.3

2075 . . . . . . . . . . . 67:0 34,775 41.0 65:0 30,138 36.3

2080 . . . . . . . . . . . 67:0 36,689 41.0 65:0 31,797 36.3

2085 . . . . . . . . . . . 67:0 38,708 41.0 65:0 33,546 36.3

Scaled high earnings:6

2008 . . . . . . . . . . . 66:0 22,383 34.3 65:0 20,854 32.4

2010 . . . . . . . . . . . 66:0 22,534 33.6 65:0 21,030 31.7

2015 . . . . . . . . . . . 66:0 24,331 34.3 65:0 22,714 32.4

2020 . . . . . . . . . . . 66:2 25,701 34.4 65:0 23,701 32.1

2025 . . . . . . . . . . . 67:0 27,031 34.1 65:0 23,428 30.2

2030 . . . . . . . . . . . 67:0 28,452 34.1 65:0 24,653 30.1

2035 . . . . . . . . . . . 67:0 29,972 34.0 65:0 25,972 30.1

2040 . . . . . . . . . . . 67:0 31,622 34.0 65:0 27,405 30.1

2045 . . . . . . . . . . . 67:0 33,393 34.0 65:0 28,939 30.1

2050 . . . . . . . . . . . 67:0 35,265 34.0 65:0 30,560 30.1

2055 . . . . . . . . . . . 67:0 37,218 34.0 65:0 32,256 30.1

2060 . . . . . . . . . . . 67:0 39,262 34.0 65:0 34,026 30.1

2065 . . . . . . . . . . . 67:0 41,412 34.0 65:0 35,891 30.1

2070 . . . . . . . . . . . 67:0 43,689 34.0 65:0 37,864 30.1

2075 . . . . . . . . . . . 67:0 46,096 34.0 65:0 39,950 30.1

2080 . . . . . . . . . . . 67:0 48,632 34.0 65:0 42,148 30.1

2085 . . . . . . . . . . . 67:0 51,307 34.0 65:0 44,465 30.1
Appendices

194

Steady maximum earnings:7

2008 . . . . . . . . . . . 66:0 $26,455 28.4 65:0 $24,415 26.9

2010 . . . . . . . . . . . 66:0 26,889 27.6 65:0 24,890 26.1

2015 . . . . . . . . . . . 66:0 29,574 27.6 65:0 27,458 26.0

2020 . . . . . . . . . . . 66:2 31,391 27.6 65:0 28,846 25.7

2025 . . . . . . . . . . . 67:0 33,228 27.3 65:0 28,581 24.0

2030 . . . . . . . . . . . 67:0 35,007 27.3 65:0 30,126 24.0

2035 . . . . . . . . . . . 67:0 36,895 27.2 65:0 31,754 24.0

2040 . . . . . . . . . . . 67:0 38,893 27.2 65:0 33,473 24.0

2045 . . . . . . . . . . . 67:0 41,070 27.2 65:0 35,354 24.0

2050 . . . . . . . . . . . 67:0 43,308 27.3 65:0 37,282 24.0

2055 . . . . . . . . . . . 67:0 45,715 27.3 65:0 39,351 24.0

2060 . . . . . . . . . . . 67:0 48,222 27.3 65:0 41,512 24.0

2065 . . . . . . . . . . . 67:0 50,858 27.3 65:0 43,781 24.0

2070 . . . . . . . . . . . 67:0 53,652 27.3 65:0 46,183 24.0

2075 . . . . . . . . . . . 67:0 56,604 27.3 65:0 48,726 24.0

2080 . . . . . . . . . . . 67:0 59,720 27.3 65:0 51,408 24.0

2085 . . . . . . . . . . . 67:0 63,004 27.3 65:0 54,235 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 2008-85 (Cont.) 

Year attain age 652

Retirement at normal retirement age Retirement at age 65

Age at

retirement

Constant

2008

dollars 3 Percent of

earnings

Age at

retirement

Constant

2008

dollars3 Percent ofearnings
195

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, 2007, about 850,000 persons were receiving monthly benefits from the OASI Trust Fund because of their disabilities or the disabilities

of children. This total includes 25,000 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 $7,293 million in

calendar year 2007. Table VI.G1 shows these and similar figures for selected

calendar years during 1960-2007, and estimated experience for 2008-17

based on the intermediate set of assumptions.
Appendices

196

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

Table VI.G1.—Benefit Disbursements From the OASI Trust Fund 

With Respect to Disabled Beneficiaries

[Beneficiaries in thousands; benefit payments in millions]

Calendar year

Disabled beneficiaries, end of year Amount of benefit 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 . . . . . . . . . 835 728 108 6,288 5,386 843

2006 . . . . . . . . . 839 732 108 6,737 5,848 885

2007 . . . . . . . . . 850 743 107 7,293 6,412 878

Estimates:

2008 . . . . . . . . . 863 756 106 7,602 6,690 907

2009 . . . . . . . . . 876 770 106 7,988 7,051 934

2010 . . . . . . . . . 889 783 106 8,384 7,422 959

2011 . . . . . . . . . 902 797 105 8,836 7,847 985

2012 . . . . . . . . . 914 810 103 9,297 8,282 1,010

2013 . . . . . . . . . 925 823 102 9,772 8,733 1,033

2014 . . . . . . . . . 934 835 99 10,242 9,192 1,044

2015 . . . . . . . . . 943 846 97 10,720 9,660 1,054

2016 . . . . . . . . . 950 857 93 11,206 10,144 1,057

2017 . . . . . . . . . 958 868 90 11,711 10,642 1,062
197

OASI Expenditures for Disabled

Total benefit payments from the OASI Trust Fund with respect to disabled

beneficiaries are estimated to increase from $7,602 million in calendar year

2008 to $11,711 million in calendar year 2017, based on the intermediate

assumptions.

In calendar year 2007, 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

$106,439 million. Of this amount, $7,293 million or 6.9 percent represented

payments from the OASI Trust Fund. These and similar figures for selected

calendar years during 1960-2007 and estimates for calendar years 2008-17

are presented in table VI.G2.

Table VI.G2.—Benefit Disbursements Under the OASDI Program 

With Respect to Disabled Beneficiaries

[Amounts in millions]

Calendar year Total1 DI Trust Fund 2

OASI Trust Fund

Amount 3 Percentage of total

Historical data:

1960 . . . . . . . . . $627 $568 $59 9.4

1965 . . . . . . . . . 1,707 1,573 134 7.9

1970 . . . . . . . . . 3,386 3,085 301 8.9

1975 . . . . . . . . . 9,169 8,505 664 7.2

1980 . . . . . . . . . 16,738 15,515 1,223 7.3

1985 . . . . . . . . . 20,908 18,836 2,072 9.9

1990 . . . . . . . . . 27,717 24,835 2,882 10.4

1991 . . . . . . . . . 30,877 27,698 3,179 10.3

1992 . . . . . . . . . 34,583 31,124 3,459 10.0

1993 . . . . . . . . . 38,378 34,626 3,752 9.8

1994 . . . . . . . . . 41,730 37,757 3,973 9.5

1995 . . . . . . . . . 45,140 40,937 4,202 9.3

1996 . . . . . . . . . 48,615 44,205 4,410 9.1

1997 . . . . . . . . . 50,358 45,712 4,646 9.2

1998 . . . . . . . . . 53,062 48,224 4,838 9.1

1999 . . . . . . . . . 56,390 51,399 4,991 8.9

2000 . . . . . . . . . 60,204 55,001 5,203 8.6

2001 . . . . . . . . . 65,157 59,637 5,520 8.5

2002 . . . . . . . . . 71,493 65,721 5,773 8.1

2003 . . . . . . . . . 76,698 70,952 5,746 7.5

2004 . . . . . . . . . 84,197 78,251 5,945 7.1

2005 . . . . . . . . . 91,674 85,386 6,288 6.9

2006 . . . . . . . . . 99,182 4 92,446 6,737 6.8

2007 . . . . . . . . . 106,439 5 99,147 7,293 6.9
Appendices

198

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

Estimates:

2008 . . . . . . . . . $112,547 $104,945 $7,602 6.8

2009 . . . . . . . . . 119,713 111,725 7,988 6.7

2010 . . . . . . . . . 126,908 118,524 8,384 6.6

2011 . . . . . . . . . 134,021 125,186 8,836 6.6

2012 . . . . . . . . . 142,351 133,053 9,297 6.5

2013 . . . . . . . . . 150,644 140,873 9,772 6.5

2014 . . . . . . . . . 159,033 148,791 10,242 6.4

2015 . . . . . . . . . 167,875 157,155 10,720 6.4

2016 . . . . . . . . . 177,044 165,838 11,206 6.3

2017 . . . . . . . . . 186,496 174,785 11,711 6.3

1 Beginning in 1966, includes payments for vocational rehabilitation services.

2 Benefit payments to disabled workers and their children and spouses.

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).

4 Excludes reimbursement of $0.7 billion for excess amounts of voluntary income tax withholding in 1999-

2005.

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

beneficiaries. The transfer amounted to $3.3 billion from OASI to DI.

Table VI.G2.—Benefit Disbursements Under the OASDI Program 

With Respect to Disabled Beneficiaries (Cont.)

[Amounts in millions]

Calendar year Total1 DI Trust Fund 2

OASI Trust Fund

Amount 3 Percentage of total
199

Glossary

H. GLOSSARY

Actuarial balance. The difference between the summarized income rate and

the summarized cost rate over a given valuation period.

Actuarial deficit. A negative actuarial balance.

Administrative expenses. Expenses incurred by the Social Security Administration and the Department of the Treasury in administering the OASDI

program and the provisions of the Internal Revenue Code relating to the collection of contributions. Such administrative expenses are paid from the

OASI and DI Trust Funds.

Advance tax transfers. Amounts representing the estimated total OASDI

tax contributions for a given month. From May 1983 through November

1990, such amounts were credited to the OASI and DI Trust Funds at the

beginning of each month. Reimbursements were made from the trust funds to

the General Fund of the Treasury for the associated loss of interest. Advance

tax transfers are no longer made unless needed in order to pay benefits.

Alternatives I, II, or III. See “Assumptions.”

Annual balance. The difference between the income rate and the cost rate in

a given year.

Assets. Treasury notes and bonds, other securities guaranteed by the Federal

Government, certain Federally sponsored agency obligations, and cash, held

by the trust funds for investment purposes.

Assumptions. Values relating to future trends in certain key factors 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 and program-specific conditions.

 • Alternative III is characterized as a high cost set—it assumes relatively

slow economic growth, high inflation, and unfavorable (from the standpoint of program financing) demographic and program-specific conditions.

See tables V.A1, V.B1, and V.B2.
Appendices

200

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.”
201

Glossary

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.

Cash flow. The cash flow for the OASI and DI Trust Funds is defined generally as actual or projected revenue and costs reflecting the levels of tax rates

and benefits scheduled in the law. Net cash flow is the difference between

tax revenue and cost on this basis.

Closed group unfunded obligation. This measure is computed like the

open group unfunded obligation except that individuals under the age of 15

(or not yet born) are excluded. In other words, only persons who attain age

15 or older during the first year of the projection period are included in the

calculations.

Constant dollars. Amounts adjusted by the CPI to the value of the dollar in

a particular year.

Consumer Price Index—CPI. An official measure of inflation in consumer

prices. In this report, all references to the CPI relate to the Consumer Price

Index for Urban Wage Earners and Clerical Workers (CPI-W). Historical

values for the CPI-W are published by the Bureau of Labor Statistics,

Department of Labor.

Contribution and benefit base. Annual dollar amount above which earnings in employment covered under the OASDI program are neither taxable

nor creditable for benefit-computation purposes. (Also referred to as maximum contribution and benefit base, annual creditable maximum, taxable

maximum, and maximum taxable.) See tables V.C1 and VI.A1. See “HI contribution base.”

Contributions. The amount based on a percent of earnings, up to an annual

maximum, that must be paid by—

 • employers and employees on wages from employment under the Federal Insurance Contributions Act,

 • the self-employed on net earnings from self-employment under the

Self-Employment Contributions Act, and
Appendices

202

 • 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. The cost for a year 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.

Cost-of-living adjustment. See “Automatic cost-of-living benefit increase.”

Cost rate. The cost rate for a year is the ratio of the cost of the program to

the taxable payroll for the year.

Covered earnings. Earnings in employment covered by the OASDI program.

Covered employment. All employment for which earnings are creditable

for Social Security purposes. Almost all employment is covered under the

program. Some exceptions are:

 • State and local government employees whose employer has not elected

to be covered under Social Security and who are participating in an

employer-provided pension plan.

 • Current Federal civilian workers hired before 1984 who have not

elected to be covered.

 • Self-employed workers earning less than $400 in a calendar year.

Covered worker. A person who has earnings creditable for Social Security

purposes on the basis of services for wages in covered employment and/or on

the basis of income from covered self-employment.

Creditable earnings. Wage or self-employment earnings posted to a

worker’s earnings record, upon which eligibility for and amount of benefits

on that worker’s record is based. The maximum amount of creditable earnings for each worker in a calendar year is determined by the contribution and

benefit base.

Current-cost financing. See “Pay-as-you-go financing.”
203

Glossary

Current dollars. Amounts expressed in nominal dollars with no adjustment

for inflationary changes in the value of the dollar over time.

Current-payment status. Status of a beneficiary to whom a benefit is being

paid for a given month (with or without deductions, provided the deductions

add to less than a full month’s benefit).

Deemed wage credit. See “Military service wage credits.”

Delayed retirement credits. Increases 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 conversion ratio. For a given year, the ratio of the number of disability conversions to the average number of disabled-worker beneficiaries

during the year.

Disability conversion. Upon attainment of normal retirement age, a disabled-worker beneficiary is automatically converted to retired-worker status.

Disability incidence rate. The proportion of workers in a given year,

insured for but not receiving disability benefits, who apply for and are

awarded disability benefits.

Disability Insurance (DI) Trust Fund. See “Trust fund.”

Disability prevalence rate. The proportion of persons insured for disability

benefits who are disabled-worker beneficiaries in current-payment status.

Disability termination rate. The proportion of disabled-worker beneficiaries in a given year whose disability benefits terminate as a result of the individual’s recovery or death.
Appendices

204

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

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 2008 began October 1, 2007, and will end September 30,

2008.

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
205

Glossary

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:

 • 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. Income for a given year is the sum of tax revenues on a liability

basis (payroll-tax contributions and income from the taxation of scheduled

benefits) and interest credited to the trust funds.

Income rate. Ratio of income from tax revenues on a liability basis (payrolltax contributions and income from the taxation of scheduled benefits) to the

OASDI taxable payroll for the year.
Appendices

206

Inflation. An increase in the volume of money and credit relative to available goods, resulting in an increase in the general price level.

Insured status. The state or condition of having sufficient quarters of coverage to meet the eligibility requirements for retired-worker or disabled-worker

benefits, or to permit the worker’s spouse and children or survivors to establish eligibility for benefits in the event of his or her disability, retirement, or

death. See “Quarters of coverage.”

Interest. A payment in exchange for the use of money during a specified

period.

Interest rate. Interest rates on new public-debt obligations issuable to Federal trust funds (see “Special public-debt obligation”) are determined

monthly. Such rates are set equal to the average market yield on all outstanding marketable U.S. securities not due or callable until after 4 years from the

date the rate is determined. See table V.B2 for historical and assumed future

interest rates on new special-issue securities. The effective interest rate for a

trust fund is the ratio of the interest earned by the fund over a given period of

time to the average level of assets held by the fund during the period. The

effective rate of interest thus represents a measure of the overall average

interest earnings on the fund’s portfolio of assets.

Interfund borrowing. The borrowing of assets by a trust fund (OASI, DI, or

HI) from another of the trust funds when the first fund is in danger of

exhaustion. Interfund borrowing was permitted by the Social Security Act

only during 1982 through 1987; all amounts borrowed were to be repaid

prior to the end of 1989. The only exercise of this authority occurred in 1982,

when the OASI Trust Fund borrowed assets from the DI and HI Trust Funds.

The final repayment of borrowed amounts occurred in 1986.

Intermediate assumptions. See “Assumptions.”

Legal emigration. Legal emigration for a given year consists of those legal

permanent residents and native-born citizens who leave the Social Security

area during the year.

Legal immigration. Consistent with the definition used by the Department

of Homeland Security, legal immigration for a given year consists of foreignborn individuals who are granted legal permanent residence status during the

year.

Life expectancy. Average remaining number of years expected prior to

death. Period life expectancy is calculated for a given year using the actual or

expected death rates at each age for that year. Cohort life expectancy, sometimes referred to as generational life expectancy, is calculated for individuals

at a specific age in a given year using actual or expected death rates from the

years in which the individuals would actually reach each succeeding age if

he or she survives.
207

Glossary

Long range. The next 75 years. Long-range actuarial estimates are made for

this period because it is approximately the maximum remaining lifetime of

current Social Security participants.

Low cost assumptions. See “Assumptions.”

Lump-sum death benefit. A lump sum, generally $255, payable on the

death of a fully or currently insured worker. The lump sum is payable to the

surviving spouse of the worker, under most circumstances, or to the worker’s

children.

Maximum family benefit. The maximum monthly amount that can be paid

on a worker’s earnings record. Whenever the total of the individual monthly

benefits payable to all the beneficiaries entitled on one earnings record

exceeds the maximum, each dependent’s or survivor’s benefit is proportionately reduced to bring the total within the maximum. Benefits payable to

divorced spouses or surviving divorced spouses are not reduced under the

family maximum provision.

Medicare. A nationwide, Federally administered health insurance program

authorized in 1965 to cover the cost of hospitalization, medical care, and

some related services for most people age 65 and over. In 1972, coverage

was extended to people receiving Social Security Disability Insurance payments for 2 years, and people with End-Stage Renal Disease. In 2006, prescription drug coverage was also added. Medicare consists of two separate

but coordinated programs—Hospital Insurance (HI, Part A) and Supplementary Medical Insurance (SMI). The SMI program is composed of three separate accounts—the Part B Account, the Part D Account, and the Transitional

Assistance Account. Almost all persons who are aged 65 and over or disabled and who are entitled to HI are eligible to enroll in Part B and Part D on

a voluntary basis by paying monthly premiums. Health insurance protection

is available to Medicare beneficiaries without regard to income.

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.”
Appendices

208

Normal retirement age. The age at which a person may first become entitled to retirement benefits without reduction based on age. For persons reaching age 62 before 2000, the normal retirement age is 65. It will increase

gradually to 67 for persons reaching that age in 2027 or later, beginning with

an increase to 65 years and 2 months for persons reaching age 65 in 2003.

See table V.C3.

Old-Age and Survivors Insurance (OASI) Trust Fund. See “Trust fund.”

Old-law base. Amount the contribution and benefit base would have been if

the discretionary increases in the base under the 1977 amendments had not

been enacted. The Social Security Amendments of 1972 provided for automatic annual indexing of the contribution and benefit base. The Social Security Amendments of 1977 provided ad hoc increases to the bases for

1979-81, with subsequent bases updated in accordance with the normal

indexing procedure. See table V.C2.

Open group unfunded obligation. This measure is computed as the excess

of the present value of the projected cost of the program over a specified

time period (for example the next 75 years or the infinite future) over the

sum of (1) the value of trust fund assets at the beginning of the period and (2)

the present value of the projected tax income of the program, assuming

scheduled tax rates and benefit levels.

Other emigration. Other emigration for a given year consists of individuals

from the other-immigrant population who leave the Social Security area during the year or who adjust status to become legal permanent residents during

the year.

Other immigration. Other immigration for a given year consists of individuals who enter the Social Security area and stay 6 months or more but without legal permanent residence status, such as undocumented immigrants and

temporary workers and students.

Outgo. See “Disbursements.”

Par value. The value printed on the face of a bond. For both public and special issues held by the trust funds, par value is also the redemption value at

maturity.

Partial advance funding. A financing scheme 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
209

Glossary

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 earner’s date of birth. For those

born on the first through tenth, the benefit payment day is the second

Wednesday of the month; for those born on the eleventh through the twentieth, the benefit payment day is the third Wednesday of the month; and for

those born after the twentieth of the month, the payment day is the fourth

Wednesday of the month.

Payroll taxes. A tax levied on the gross wages of workers. See tables VI.A1

and VI.F1.

Population in the Social Security area. See “Social Security area population.”

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 2008, a worker receives one quarter of coverage (up to a total of

four) for each $1,050 of annual covered earnings. The amount of earnings

required for a quarter of coverage is subject to annual automatic increases in
Appendices

210

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.

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 earnings test. See “Earnings test.”

Retirement eligibility age. The age (62) at which a fully insured individual

first becomes eligible to receive retired-worker benefits.

Retirement test. See “Earnings test.”

Self-employment. Operation of a trade or business by an individual or by a

partnership in which an individual is a member.

Self-Employment Contributions Act–SECA. Provision authorizing Social

Security taxes on the net earnings of most self-employed persons.

Short range. The next 10 years. Short-range actuarial estimates are prepared

for this period because of the short-range test of financial adequacy. The

Social Security Act requires estimates for 5 years; estimates are prepared for

an additional 5 years to help clarify trends which are only starting to develop

in the mandated first 5-year period. 

Social Security Act. Provisions of the law governing most operations of the

Social Security program. 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.

Social Security area population. The population comprised of (i) residents

of the 50 States and the District of Columbia (adjusted for net census under-
211

Glossary

count); (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.

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.

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
Appendices

212

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.

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
213

Glossary

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-

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
Appendices

214

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.

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.

 • 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 a year, including advance tax transfers (if
215

Glossary

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 a year.

Unfunded obligation. See “Open group unfunded obligation” and “Closed

group unfunded obligation”.

Unnegotiated check. A check which has not been cashed 6 months after the

end of the month in which the check was issued. When a check has been outstanding for a year (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

216

II. OVERVIEW

II.B1 Summary of 2007 Trust Fund Financial Operations . . . . . . . . 4

II.B2 Tax Rates for 2007 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 . . . . . . . . . . . . . . . . . . . . . 16

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND

LEGISLATIVE CHANGES IN THE LAST YEAR

III.A1 Operations of the OASI Trust Fund, Calendar Year 2007 . . . . 21

III.A2 Operations of the DI Trust Fund, Calendar Year 2007 . . . . . . . 25

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

Calendar Year 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

III.A4 Comparison of Actual Calendar Year 2007 Trust Fund

Operations With Estimates Made in Prior Reports . . . . . . . . . 28

III.A5 Distribution of Benefit Payments by Type of Beneficiary

or Payment, Calendar Years 2006 and 2007 . . . . . . . . . . . . . . 29

III.A6 Administrative Expenses as a Percentage of Contribution

Income and of Total Expenditures,

Calendar Years 2003-07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

III.A7 Trust Fund Investment Transactions, Calendar Year 2007 . . . . 30

IV. ACTUARIAL ESTIMATES

IV.A1 Operations of the OASI Trust Fund,

Calendar Years 2003-17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

IV.A2 Operations of the DI Trust Fund, Calendar Years 2003-17. . . . 38

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

Calendar Years 2003-17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

IV.A4 Reasons for Change in Trust Fund Ratios at the Beginning 

of the Tenth Year of Projection . . . . . . . . . . . . . . . . . . . . . . . 42

IV.B1 Estimated Annual Income Rates, Cost Rates, and Balances,

Calendar Years 1990-2085 . . . . . . . . . . . . . . . . . . . . . . . . . . 46

IV.B2 Covered Workers and Beneficiaries,

Calendar Years 1945-2085 . . . . . . . . . . . . . . . . . . . . . . . . . . 50

IV.B3 Estimated Trust Fund Ratios, Calendar Years 2008-85 . . . . . . 55
List of Tables

217

IV.B4 Components of Summarized Income Rates and Cost Rates, 

Calendar Years 2008-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

IV.B5 Components of 75-Year Actuarial Balance

Under Intermediate Assumptions (2008-82). . . . . . . . . . . . . . 60

IV.B6 Unfunded OASDI Obligations for 1935 (Program Inception)

Through the Infinite Horizon . . . . . . . . . . . . . . . . . . . . . . . . 62

IV.B7 Present Values of OASDI Cost Less Tax Revenue and

Unfunded Obligations for Program Participants . . . . . . . . . . . 63

IV.B8 Comparison of Estimated Long-Range Actuarial Balances

With the Minimum Allowable in the Test for Close Actuarial 

Balance, Based on Intermediate Assumptions . . . . . . . . . . . . 66

IV.B9 Reasons for Change in the 75-Year Actuarial Balance

Under Intermediate Assumptions . . . . . . . . . . . . . . . . . . . . . 68

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

V.A1 Principal Demographic Assumptions,

Calendar Years 1940-2085 . . . . . . . . . . . . . . . . . . . . . . . . . . 80

V.A2 Social Security Area Population as of July 1 and Dependency 

Ratios, Calendar Years 1950-2085 . . . . . . . . . . . . . . . . . . . . 82

V.A3 Period Life Expectancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

V.A4 Cohort Life Expectancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

V.B1 Principal Economic Assumptions . . . . . . . . . . . . . . . . . . . . . 92

V.B2 Additional Economic Factors . . . . . . . . . . . . . . . . . . . . . . . . 98

V.C1 Cost-of-Living Benefit Increases, Average Wage Index, 

Contribution and Benefit Bases, and Retirement Earnings

Test Exempt Amounts, 1975-2017 . . . . . . . . . . . . . . . . . . . . 102

V.C2 Values for Selected Wage-Indexed Program Parameters, 

Calendar Years 1978-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . 105

V.C3 Legislated Changes in Normal Retirement Age and Delayed 

Retirement Credits, for Persons Reaching Age 62 in

Each Year 1986 and Later. . . . . . . . . . . . . . . . . . . . . . . . . . . 107

V.C4 OASI Beneficiaries With Benefits in Current-Payment Status 

at the End of Calendar Years 1945-2085 . . . . . . . . . . . . . . . . 116

V.C5 DI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1960-2085 . . . . . . . . . . . . . . . . 124
List of Tables

218

VI. APPENDICES

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS

VI.A1 Contribution and Benefit Base and Contribution Rates . . . . . . 132

VI.A2 Historical Operations of the OASI Trust Fund, 

Calendar Years 1937-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . 136

VI.A3 Historical Operations of the DI Trust Fund, 

Calendar Years 1957-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . 138

VI.A4 Historical Operations of the Combined OASI and DI

Trust Funds, Calendar Years 1957-2007 . . . . . . . . . . . . . . . . 140

VI.A5 Assets of the OASI Trust Fund, End of Calendar Years

2006 and 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

VI.A6 Assets of the DI Trust Fund, End of Calendar Years

2006 and 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143

B. HISTORY OF ACTUARIAL BALANCE ESTIMATES

VI.B1 Long-Range OASDI Actuarial Balances as Shown 

in the Trustees Reports for 1982-2008 . . . . . . . . . . . . . . . . . . 146

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2017

VI.C1 Operations of the OASI Trust Fund, Fiscal Year 2007. . . . . . . 149

VI.C2 Operations of the DI Trust Fund, Fiscal Year 2007 . . . . . . . . . 150

VI.C3 Operations of the Combined OASI and DI Trust Funds,

Fiscal Year 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

VI.C4 Operations of the OASI Trust Fund in Fiscal Years 2003-17 . . 152

VI.C5 Operations of the DI Trust Fund in Fiscal Years 2003-17 . . . . 153

VI.C6 Operations of the Combined OASI and DI Trust Funds in

Fiscal Years 2003-17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154

D. LONG-RANGE SENSITIVITY ANALYSIS

VI.D1 Sensitivity to Varying Fertility Assumptions . . . . . . . . . . . . . 156

VI.D2 Sensitivity to Varying Death-Rate Assumptions . . . . . . . . . . . 157

VI.D3 Sensitivity to Varying Net-Immigration Assumptions . . . . . . . 159

VI.D4 Sensitivity to Varying Real-Wage Assumptions . . . . . . . . . . . 160

VI.D5 Sensitivity to Varying CPI-Increase Assumptions. . . . . . . . . . 161

VI.D6 Sensitivity to Varying Real-Interest Assumptions . . . . . . . . . . 162

VI.D7 Sensitivity to Varying Disability Incidence Assumptions. . . . . 163

VI.D8 Sensitivity to Varying Disability Termination Assumptions. . . 165
List of Tables

219

E. STOCHASTIC PROJECTIONS

VI.E1 Long-Range Estimates Relating to the Actuarial Status of the 

Combined OASDI Program . . . . . . . . . . . . . . . . . . . . . . . . . 171

F. ESTIMATES FOR OASDI AND HI, SEPARATE AND COMBINED

VI.F1 Contribution Rates for the OASDI and HI Programs. . . . . . . . 173

VI.F2 Estimated OASDI and HI Annual Income Rates, Cost Rates,

and Balances, Calendar Years 2008-85 . . . . . . . . . . . . . . . . . 174

VI.F3 Summarized OASDI and HI Income Rates and Cost Rates for 

Valuation Periods, Calendar Years 2008-82 . . . . . . . . . . . . . . 176

VI.F4 OASDI and HI Annual and Summarized Income, Cost, and

Balance as a Percentage of GDP, Calendar Years 2008-85 . . . 179

VI.F5 Ratio of OASDI Taxable Payroll to GDP,

Calendar Years 2008-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181

VI.F6 Selected Economic Variables, Calendar Years 2007-85 . . . . . . 184

VI.F7 Operations of the Combined OASI and DI Trust Funds, 

in Constant 2008 Dollars, Calendar Years 2008-85 . . . . . . . . . 186

VI.F8 Operations of the Combined OASI and DI Trust Funds, 

in Current Dollars, Calendar Years 2008-85 . . . . . . . . . . . . . . 188

VI.F9 OASDI and HI Annual Income Excluding Interest, Cost, and

Balance in Current Dollars, Calendar Years 2008-85 . . . . . . . 190

VI.F10 Estimated Annual Scheduled Benefit Amounts for Retired

Workers With Various Pre-Retirement Earnings Patterns Based

on Intermediate Assumptions, Calendar Years 2008-85 . . . . . 193

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 . . . . . . . . . . . . . . . . . 196

VI.G2 Benefit Disbursements Under the OASDI Program 

With Respect to Disabled Beneficiaries . . . . . . . . . . . . . . . . . 197
List of Figures

220

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. . . . . . . 10

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 Long-Range OASDI Trust Fund Ratios Under

Alternative Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

II.D7 Annual Trust Fund Ratios. . . . . . . . . . . . . . . . . . . . . . . . . . . 15

II.D8 OASDI Annual Balances: 2007 and 2008 Trustees Reports. . . 17

IV. ACTUARIAL ESTIMATES

IV.A1 Short-Range OASI and DI Trust Fund Ratios. . . . . . . . . . . . . 34

IV.B1 Long-Range OASI and DI Annual Income Rates

and Cost Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

IV.B2 Number of OASDI Beneficiaries Per 100 Covered Workers . . 52

IV.B3 Long-Range OASI and DI Trust Fund Ratios. . . . . . . . . . . . . 56

IV.B4 Test of Long-Range Close Actuarial Balance . . . . . . . . . . . . . 67

IV.B5 OASDI Annual Balances: 2007 and 2008 Trustees Reports. . . 70

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

V.C1 Primary-Insurance-Amount Formula for Those

Newly Eligible in 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

V.C2 Maximum-Family-Benefit Formula for Those

Newly Eligible in 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

V.C3 DI Disabled-Worker Incidence Rates, 1970-2085 . . . . . . . . . . 120

V.C4 DI Disabled-Worker Termination Rates, 1970-2085 . . . . . . . . 122

V.C5 Comparison of DI Disabled-Worker Incidence Rates,

Termination Rates and Conversion Ratios Under Intermediate 

Assumptions, 1970-2085 . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

V.C6 DI Disabled-Worker Prevalence Rates, 1970-2085 . . . . . . . . . 126
List of Figures

221

VI. APPENDICES

VI.E1 Annual Trust Fund Ratios. . . . . . . . . . . . . . . . . . . . . . . . . . . 169

VI.E2 Annual Cost Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170

VI.F1 Estimated OASDI Income and Cost in Constant Dollars,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 187
Index

222

A

Actuarial balance 8, 10, 43, 108, 144, 155

Actuarial balance, long-range test 66

Actuarial deficit 2, 10, 18, 58, 176

Actuarial estimates, LR 43

Actuarial estimates, SR 32

Adjusted program amounts 100

Administrative expenses 4, 29, 44, 128, 135, 149, 177, 185

Advance tax transfers 53, 137

Amendments 31

Annual balance 16, 43, 68

Assets 2, 4, 7, 23, 32, 44, 136, 149, 162, 172, 183

Assumptions 2, 7, 44, 72, 87, 100, 144, 155, 173, 177, 182, 195

Automatic cost-of-living benefit increase 4, 36, 88, 100

Auxiliary benefits 110

Average benefits 128

Average earnings assumptions 89

Average indexed monthly earnings (AIME) 103

Average wage index 100, 182

Award 111

B

Baby-boom generation 2, 9, 18, 36, 45, 93, 119, 127, 178

Bend points 103

Beneficiaries, DI 117

Beneficiary 9, 36, 49, 72, 101, 147, 156, 177, 185, 195

Beneficiary, OASI 111

Benefit payments 4, 8, 33, 44, 128, 135, 149, 162, 177, 185, 197

Benefit termination 6, 39

Best estimate 6, 18, 32, 72

Board of Trustees 32, 87, 131

C

Close actuarial balance 43, 63

Closed group unfunded obligation 62, 63, 201

Constant dollars 187

Consumer Price Index 88, 161, 182, 200

Contribution and benefit base 34, 89, 101, 132, 182, 200

Contributions 4, 131, 149, 172, 177, 185, 199

Cost rate 3, 8, 44, 108, 172

Cost-of-living adjustment 100

Covered earnings 4, 100, 181

Covered employment 6, 34, 89, 107, 131, 160

Covered worker 49, 107, 158
223

Index

Creditable earnings 202

Current dollars 182

Current-payment status 36, 118, 122, 123, 124, 200

D

Deemed wage credit 44, 108, 131

Delayed retirement credit 106

Demographic assumptions 6, 16, 32, 44, 73, 94, 100, 144, 183, 199

Deterministic model 166, 171, 203

DI beneficiaries 117

Disability 131, 158, 195

Disability conversion ratio 122

Disability incidence rate 72, 118, 120, 158, 163, 199

Disability Insurance Trust Fund 201

Disability prevalence rate 118

Disability termination rate 164

Disabled-worker benefit 120, 203

Disbursements 20, 21, 22, 25, 27, 32, 149, 150, 151, 196, 197

E

Earnings 2, 4, 33, 44, 89, 101, 131, 145, 172, 181, 182, 199

Earnings test 89, 101, 200

Economic assumptions 6, 16, 32, 42, 44, 87, 94, 100, 144, 183, 199

Excess wages 44, 108, 183

Expenditures 2, 4, 6, 24, 30, 32, 36, 39, 135, 136, 138, 140, 204

F

Federal Insurance Contributions Act 172, 201

Fertility assumptions 73

Financial interchange 4, 129, 135

Fiscal year 77, 137, 149

Full advance funding 204

G

General Fund of the Treasury 35, 36, 129, 133, 177, 185, 199, 202

General fund reimbursement 205

Gross domestic product 3, 49, 72, 87, 177

Gross domestic product projections 95

H

High cost assumptions 6, 13, 33, 45, 72, 87, 121, 155, 173, 177, 182, 199

Hospital Insurance program 132, 172, 207

Hospital Insurance Trust Fund 177
Index

224

I

Immigration 6, 72, 73, 76, 80, 158, 166, 199, 205

Immigration assumptions 76

Income rate 3, 8, 44, 172

Inflation 6, 72, 88, 182, 199

Inflation assumptions 88

Insured population 6, 109

Insured status 37, 105

Interest 33, 96, 134, 144, 149, 173, 177, 183, 199

Interest rate 34, 72, 134, 144, 162, 183, 199

Interest rate projections 96

Interfund borrowing 137, 202

Intermediate assumptions 32, 34, 36, 45, 72, 120, 155, 173, 177, 182, 186,

187, 195, 199

L

Labor force projections 93

Legal immigration 77, 81, 206

Life expectancy 2, 18, 72, 84, 93, 206

Life expectancy estimates 83

Long range 8, 43, 73, 87, 111, 144, 172, 177, 182

Low cost assumptions 6, 13, 36, 45, 72, 121, 155, 173, 182, 199

Lump-sum death payment 128

M

Medicare 75, 207

Military service 35, 44, 90, 108, 129, 131, 205

N

National average wage index 100, 182

Normal retirement age 101, 117, 191, 203

O

OASI beneficiaries 111

Old-Age and Survivors Insurance Trust Fund 131, 201

Old-law base 105

Open group unfunded obligation 2, 8, 16, 43, 59, 60, 171, 201, 208

Other immigration 77, 159, 208

P

Par value 135

Partial advance funding 208

Pay-as-you-go financing 144

Payroll taxes 2, 18, 57, 58, 100, 108, 147, 155, 172, 185

Population estimates 81

Population in the Social Security area 34, 51, 81, 93, 107, 159
225

Index

Present value 144

Primary insurance amount (PIA) 103

Productivity assumptions 87

Q

Quarters of coverage 44, 109, 202

R

Railroad Retirement 44, 105, 129, 135, 149, 172, 177, 185, 202

Reallocation of tax rates 210

Real-wage differential 91, 159

Recession 32, 87

Retired-worker benefit 111, 158, 195

Retirement age 39, 101, 191, 203

Retirement earnings test 89, 101

Retirement eligibility age 1, 9, 45, 49, 158, 178

S

Self-employment 44, 88, 108, 131, 173, 201

Self-Employment Contributions Act 201

Sensitivity analysis 155

Short range 7, 32, 53, 87, 111

Social Security Act 100, 134, 182, 195, 201

Social Security amendments 31

Solvency 13, 33, 43, 211

Special public-debt obligation 36, 99, 134, 162, 183

Stochastic projections 87, 166

Substantial gainful activity 117, 203

Summarized balance 178

Summarized income and cost rates 57, 144, 155, 175, 199

Supplemental Security Income 37, 149

Supplementary Medical Insurance program 172, 207

Survivor benefit 2, 5, 114, 200

T

Taxable earnings 33, 51, 101, 131, 145, 181, 200

Taxable payroll 2, 8, 18, 44, 88, 108, 144, 156, 172, 177, 182, 202

Taxable self-employment income 131, 212

Taxable wages 109, 133, 212

Taxation of benefits 4, 44, 130, 177, 185, 205

Taxes 4, 100, 131, 173, 202

Termination 39, 72

Termination rate 6, 39, 111, 164, 199

Test of short-range financial adequacy 33, 65, 210

Total fertility rate 74, 155
Index

226

Trust fund financial operations 4, 20, 33, 131

Trust fund ratio 7, 32, 43, 52, 137, 152, 214

U

Unemployment projections 93

Unfunded obligation 2, 8, 11, 13, 16, 43, 59, 60, 63, 171, 201, 208, 215

Uninsured persons 129

Unnegotiated check 137, 149

V

Valuation period 10, 43, 144, 155, 175, 199

Vocational rehabilitation 44, 135, 150, 177, 185, 197, 202

Y

Year of exhaustion 8, 10, 18, 43, 55
227

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