113th Congress, 2d Session – – –––––––––––– House Document 113-139

THE 2014 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 2014 ANNUAL REPORT OF THE BOARD OF TRUSTEES OF THE

FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND FEDERAL

DISABILITY INSURANCE TRUST FUNDS

July 28, 2014.—Referred to the Committee on Ways and Means

and ordered to be printed

U.S. GOVERNMENT PRINTING OFFICE

88-865 WASHINGTON: 2014
.
LETTER OF TRANSMITTAL

BOARD OF TRUSTEES OF THE

FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND

FEDERAL DISABILITY INSURANCE TRUST FUNDS,

Washington, D.C., July 28, 2014

HON. JOHN A. BOEHNER,

Speaker of the House of Representatives.

HON. JOSEPH R. BIDEN, JR.,

President of the Senate.

DEAR MR. SPEAKER AND MR. PRESIDENT:

We have the honor of transmitting to you the 2014 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance

Trust Funds, the 74th such report.

Respectfully,

JACOB J. LEW,

Secretary of the Treasury,

and Managing Trustee of the Trust Funds.

THOMAS E. PEREZ,

Secretary of Labor, and Trustee.

SYLVIA M. BURWELL,

Secretary of Health and Human Services,

and Trustee.

CAROLYN W. COLVIN,

Acting Commissioner

of Social Security, and Trustee.

CHARLES P. BLAHOUS III,

Trustee.

ROBERT D. REISCHAUER,

Trustee.

DAVID A. WEAVER,

Associate Commissioner, Office of Research,

Demonstration, and Employment Support,

Social Security Administration,

and Acting Secretary, Board of Trustees.

CONTENTS

(V)

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

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

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

B. TRUST FUND FINANCIAL OPERATIONS IN 2013 . . . . . . . 6

C. ASSUMPTIONS ABOUT THE FUTURE . . . . . . . . . . . . . . . . 8

D. PROJECTIONS OF FUTURE FINANCIAL STATUS . . . . . . . 9

E. CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND

LEGISLATIVE CHANGES IN THE LAST YEAR . . . . . . . . . . 26

A. OPERATIONS OF THE OLD-AGE AND SURVIVORS

INSURANCE (OASI) AND DISABILITY INSURANCE (DI)

TRUST FUNDS, IN CALENDAR YEAR 2013 . . . . . . . . . . . . 26

1. OASI Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

2. DI Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

3. OASI and DI Trust Funds, Combined . . . . . . . . . . . . . . . . . . 33

B. SOCIAL SECURITY AMENDMENTS SINCE THE

2013 REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

IV. ACTUARIAL ESTIMATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

A. SHORT-RANGE ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . 39

1. Operations of the OASI Trust Fund. . . . . . . . . . . . . . . . . . . . 40

2. Operations of the DI Trust Fund . . . . . . . . . . . . . . . . . . . . . . 43

3. Operations of the Combined OASI and DI Trust Funds . . . . . 45

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

Estimates From the 2013 Report . . . . . . . . . . . . . . . . . . . . . . 47

B. LONG-RANGE ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . . 49

1. Annual Income Rates, Cost Rates, and Balances . . . . . . . . . . 50

2. Comparison of Workers to Beneficiaries. . . . . . . . . . . . . . . . 56

3. Trust Fund Ratios and Test of Long-Range

Close Actuarial Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

4. Summarized Income Rates, Summarized Cost Rates,

and Actuarial Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

5. Additional Measures of OASDI Unfunded Obligations . . . . . 68

6. Reasons for Change in Actuarial Balance From Last Report . . 70
(VI)

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

A. DEMOGRAPHIC ASSUMPTIONS AND METHODS . . . . . . . 76

1. Fertility Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

2. Mortality Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

3. Immigration Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 79

4. Total Population Estimates. . . . . . . . . . . . . . . . . . . . . . . . . . 86

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

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

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

2. Price Inflation Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . 93

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

4. Assumed Real-Wage Differential . . . . . . . . . . . . . . . . . . . . . 98

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

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

7. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

C. PROGRAM-SPECIFIC ASSUMPTIONS AND METHODS . . . 108

1. Automatically Adjusted Program Parameters. . . . . . . . . . . . . 108

2. Covered Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

3. Insured Population. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

4. Old-Age and Survivors Insurance Beneficiaries. . . . . . . . . . . 119

5. Disability Insurance Beneficiaries. . . . . . . . . . . . . . . . . . . . . 125

6. Covered and Taxable Earnings, Taxable Payroll, and

Payroll Tax Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . 136

7. Income From Taxation of Benefits . . . . . . . . . . . . . . . . . . . . 141

8. Average Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

9. Scheduled Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

10. Illustrative Scheduled Benefit Amounts . . . . . . . . . . . . . . . . 143

11. Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

12. Railroad Retirement Financial Interchange . . . . . . . . . . . . . . 145

13. Military Service Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . 145
(VII)

VI. APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS. . 146

B. HISTORY OF ACTUARIAL STATUS ESTIMATES . . . . . . . . 157

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2023 . . . . . . . . . . . . . . . . . . . . . . 163

D. LONG-RANGE SENSITIVITY ANALYSIS . . . . . . . . . . . . . . 170

1. Total Fertility Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170

2. Death Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172

3. Net Immigration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

4. Real-Wage Differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

5. Consumer Price Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

6. Real Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177

7. Disability Incidence Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 178

8. Disability Termination Rates . . . . . . . . . . . . . . . . . . . . . . . . 178

E. STOCHASTIC PROJECTIONS AND UNCERTAINTY . . . . . . 181

1. Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181

2. Stochastic Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . 181

3. Stochastic Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

4. Comparison of Results: Stochastic to Low-Cost,

Intermediate, and High-Cost Alternatives . . . . . . . . . . . . . . . 184

F. INFINITE HORIZON PROJECTIONS . . . . . . . . . . . . . . . . . . 191

G. ESTIMATES FOR OASDI AND HI, SEPARATE AND

COMBINED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195

1. Estimates as a Percentage of Taxable Payroll. . . . . . . . . . . . . 195

2. Estimates as a Percentage of Gross Domestic Product . . . . . . 201

3. Estimates in Dollars. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206

H. ANALYSIS OF BENEFIT DISBURSEMENTS FROM THE

OASI TRUST FUND WITH RESPECT TO DISABLED

BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216

I. GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

LIST OF TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237

LIST OF FIGURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241

INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243

STATEMENT OF ACTUARIAL OPINION. . . . . . . . . . . . . . . 248

THE 2014 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 makes

monthly income available to insured workers and their families at retirement,

death, or disability. The OASDI program consists of two parts. Retired workers, their families, and survivors of deceased workers receive monthly benefits under the Old-Age and Survivors Insurance (OASI) program. Disabled

workers and their families receive monthly benefits under the Disability

Insurance (DI) program.

The Social Security Act established the Board of Trustees 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 President appoints and

the Senate confirms the other two members to serve as public representatives. The Deputy Commissioner of the Social Security Administration

serves as Secretary of the Board.

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

annually to the Congress on the actuarial status and financial operations of

the OASI and DI Trust Funds. The 2014 report is the 74th such report.
Overview

2

II. OVERVIEW

A. HIGHLIGHTS

This section summarizes the report’s major findings.

In 2013

At the end of 2013, the OASDI program was providing benefit payments

1 to

about 58 million people: 41 million retired workers and dependents of retired

workers, 6 million survivors of deceased workers, and 11 million disabled

workers and dependents of disabled workers. During the year, an estimated

163 million people had earnings covered by Social Security and paid payroll

taxes. Total expenditures in 2013 were $823 billion. Total income was $855

billion, which consisted of $752 billion in non-interest income and $103 billion in interest earnings. Asset reserves held in special issue U.S. Treasury

securities grew from $2,732 billion at the beginning of the year to $2,764 billion at the end of the year.

Short-Range Results

Social Security’s cost exceeded its tax income in 2013, and also exceeded its

non-interest income, as it has since 2010. This relationship is projected to

continue throughout the short-range period (2014 through 2023) and beyond.

The 2013 deficit of tax income relative to cost was $76 billion and the deficit

of non-interest income relative to cost was $71 billion. In recent years,

OASDI tax income and non-interest income have differed as a result of a

temporary reduction in the Social Security payroll tax for 2011 and 2012,

combined with reimbursements from the General Fund of the Treasury to the

Social Security trust funds that amounted to $103 billion in 2011, $114 billion in 2012, and $5 billion in 2013. Assuming there is no future legislation

to transfer General Funds to the trust funds, OASDI tax income should

approximately equal non-interest income this year and in future years. For

2014, the deficit of tax income (and non-interest income) is projected to be

approximately $80 billion.

The Trustees project that the asset reserves of the OASI Trust Fund and of

the theoretical combined OASI and DI Trust Funds2 will be adequate over

the next 10 years under the intermediate assumptions. However, the projected reserves of the DI Trust Fund decline steadily from 62 percent of

annual cost at the beginning of 2014 until the trust fund reserves are depleted

1 The definitions of “benefit payment” and other terms appear in the Glossary.

2 The OASI and DI Trust Funds are distinct legal entities which operate independently. To illustrate the

actuarial status of the program as a whole, the fund operations are often combined on a theoretical basis.
3

Highlights

in the fourth quarter of 2016. At the time reserves are depleted, continuing

income to the DI Trust Fund would be sufficient to pay 81 percent of scheduled DI benefits. The DI Trust Fund does not satisfy the short-range test of

financial adequacy. Figures II.D2 and II.D3 illustrate the implications of

reserve depletion for the combined trust funds and for the DI Trust Fund

alone.

The Trustees project that the reserves of the combined OASI and DI Trust

Funds will increase for the next several years, growing from $2,764 billion at

the beginning of 2014 to $2,878 billion at the beginning of 2020. Reserves

increase through 2019 because annual cost is less than total income for 2014

through 2019. At the same time, however, the ratio of reserves to cost

declines, from 320 percent of annual cost for 2014 to 233 percent of annual

cost for 2020.

Beginning in 2020, annual cost exceeds total income, and therefore the combined reserves begin to decline, reaching $2,698 billion at the end of 2023.

The ratio of reserves at the beginning of a year to cost for that year declines

to 187 percent as of the beginning of 2023. For last year’s report, the Trustees projected that combined reserves would be 315 percent of annual cost at

the beginning of 2014 and 189 percent at the beginning of 2023.

Long-Range Results

The Trustees project that annual OASDI cost will exceed non-interest

income throughout the long-range period (2014 through 2088) under the

intermediate assumptions. The dollar level of the theoretical combined trust

fund reserves declines beginning in 2020 until reserves become depleted in

2033. Considered separately, the DI Trust Fund reserves become depleted in

2016 and the OASI Trust Fund reserves become depleted in 2034. The projected reserve depletion years were 2033 for OASDI, 2016 for DI, and 2035

for OASI in last year’s report.

Projected OASDI cost generally increases more rapidly than projected noninterest income through about 2035 primarily because the retirement of the

baby-boom generation will increase the number of beneficiaries much faster

than the number of workers increases, as subsequent lower-birth-rate generations replace the baby-boom generation at working ages. From 2035 to 2050,

the cost rate (the ratio of program cost to taxable payroll) generally declines

because the aging baby-boom generation is gradually replaced at retirement

ages by historically low-birth-rate generations, causing the beneficiary-toworker ratio to decline. Thereafter, increases in life expectancy cause

OASDI cost to increase generally relative to non-interest income, but more

slowly than between 2010 and 2035.
Overview

4

The projected OASDI annual cost rate increases from 13.95 percent of taxable payroll for 2014 to 17.09 percent for 2035 and to 18.19 percent for

2088, a level that is 4.90 percent of taxable payroll more than the projected

income rate (the ratio of program income to taxable payroll) for 2088. For

last year’s report, the Trustees estimated the OASDI cost for 2088 at

18.07 percent, or 4.82 percent of payroll more than the annual income rate

for that year. Expressed in relation to the projected gross domestic product

(GDP), OASDI cost rises from 4.9 percent of GDP for 2014 to about

6.2 percent by 2035, then declines to 6.0 percent by 2050, and then remains

between 6.0 and 6.1 percent through 2088.

For the 75-year projection period, the actuarial deficit is 2.88 percent of taxable payroll, 0.16 percentage point larger than in last year’s report. The open

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

$10.6 trillion in present value and is $1.0 trillion more than the measured

level of $9.6 trillion a year ago. If the assumptions, methods, starting values,

and the law had all remained unchanged, the actuarial deficit would have

increased to 2.78 percent of taxable payroll and the unfunded obligation

would have risen to about $10.1 trillion due to the change in the valuation

date. The remaining increase in the actuarial deficit and the unfunded obligation is primarily due to changes in methods, assumptions, and starting values.

Conclusion

Under the intermediate assumptions, the Trustees project that annual cost for

the OASDI program will exceed non-interest income in 2014 and remain

higher throughout the remainder of the long-range period. The projected theoretical combined OASI and DI Trust Fund asset reserves increase through

2019, begin to decline in 2020, and become depleted and unable to pay

scheduled benefits in full on a timely basis in 2033. At the time of reserve

depletion, continuing income to the combined trust funds would be sufficient

to pay 77 percent of scheduled benefits. However, the DI Trust Fund reserves

become depleted in 2016, at which time continuing income to the DI Trust

Fund would be sufficient to pay 81 percent of DI benefits. Therefore, legislative action is needed as soon as possible to address the DI program’s financial imbalance. Lawmakers may consider responding to the impending DI

Trust Fund reserve depletion as they did in 1994, solely by reallocating the

payroll tax rate between OASI and DI. Such a response might serve to delay

DI reforms and much needed corrections for OASDI as a whole. However,

enactment of a more permanent solution could include a tax reallocation in

the short-run.

For the combined OASI and DI Trust Funds to remain solvent throughout the

75-year projection period: (1) revenues would have to increase by an amount
5

Highlights

equivalent to an immediate and permanent payroll tax rate increase of 2.83

percentage points1 (from its current level of 12.40 percent to 15.23 percent;

a relative increase of 22.8 percent); (2) scheduled benefits during the period

would have to be reduced by an amount equivalent to an immediate and permanent reduction of 17.4 percent applied to all current and future beneficiaries, or 20.8 percent if the reductions were applied only to those who become

initially eligible for benefits in 2014 or later; or (3) some combination of

these approaches would have to be adopted.

The Trustees recommend that lawmakers address the projected trust fund

shortfalls in a timely way in order to phase in necessary changes gradually

and give workers and beneficiaries time to adjust to them. Implementing

changes soon would allow more generations to share in the needed revenue

increases or reductions in scheduled benefits. Social Security will play a critical role in the lives of 59 million beneficiaries and 165 million covered

workers and their families in 2014. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect

future generations.

1 The necessary tax rate of 2.83 percent differs from the 2.88 percent actuarial deficit for two reasons. First,

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

any trust fund reserve at the end of the period, whereas the actuarial deficit incorporates an ending trust fund

reserve equal to 1 year’s cost. Second, the necessary tax rate reflects a behavioral response to tax rate

changes, whereas the actuarial deficit does not. In particular, the calculation of the necessary tax rate

assumes that an increase in payroll taxes results in a small shift of wages and salaries to forms of employee

compensation that are not subject to the payroll tax.
Overview

6

B. TRUST FUND FINANCIAL OPERATIONS IN 2013

Table II.B1 shows the income, expenditures, and asset reserves for the OASI,

the DI, and the theoretical combined OASI and DI Trust Funds in calendar

year 2013.

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

In 2013, net payroll tax contributions accounted for 85 percent of total trust

fund income. Net payroll tax contributions consist of taxes paid by employees, employers, and the self-employed on earnings covered by Social Security. These taxes are paid on covered earnings up to a specified maximum

annual amount, which was $113,700 in 2013. Table II.B2 shows the tax rates

for 2013.

In 2013, less than one percent of OASI and DI combined Trust Fund income

came from reimbursements from the General Fund of the Treasury. Public

Laws 111-312, 112-78, and 112-96 account for most of the reimbursement

for the year. These acts specified general fund reimbursement for temporary

reductions in revenue due to reduced payroll tax rates for employees and for

self-employed workers.

Two percent of OASI and DI combined Trust Fund income in 2013 came

from subjecting up to 50 percent of Social Security benefits to Federal personal income taxation for beneficiaries with income (including half of benefits and all non-taxable interest) exceeding specified levels. Interest earned

on investment of trust fund asset reserves accounted for 12 percent of

Table II.B1.—Summary of 2013 Trust Fund Financial Operations

[In billions]

OASI DI OASDI

Asset reserves at the end of 2012. . . . . . . . . . . . . . . . . . . . $2,609.7 $122.7 $2,732.3

Total income in 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743.8 111.2 855.0

Net payroll tax contributions . . . . . . . . . . . . . . . . . . . . . 620.8 105.4 726.2

Reimbursement from General Fund of the Treasury . . . 4.2 .7 4.9

Taxation of benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.7 .4 21.1

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98.1 4.7 102.8

Total expenditures in 2013. . . . . . . . . . . . . . . . . . . . . . . . . 679.5 143.4 822.9

Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672.1 140.1 812.3

Railroad Retirement financial interchange . . . . . . . . . . 3.9 .6 4.5

Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . 3.4 2.8 6.2

Net increase in asset reserves in 2013 . . . . . . . . . . . . . . . . 64.3 -32.2 32.1

Asset reserves at the end of 2013. . . . . . . . . . . . . . . . . . . . 2,674.0 90.4 2,764.4
7

Calendar Year 2013 Operations

OASDI income. The Department of the Treasury invests trust fund reserves

in interest-bearing securities issued by the U.S. Government. In 2013, the

combined trust fund reserves earned interest at an effective annual rate of

3.8 percent.

Almost 99 percent of expenditures from the combined OASI and DI Trust

Funds in 2013 were retirement, survivor, and disability benefits totaling

$812.3 billion. The financial interchange with the Railroad Retirement program was the source of a net payment of $4.5 billion from the combined

OASI and DI Trust Funds, which was about 0.5 percent of total expenditures.

The administrative expenses of the Social Security program were $6.2 billion, which was about 0.7 percent of total expenditures.

The trust fund investments provide a reserve to pay benefits whenever total

program cost exceeds income. Trust fund reserves increased by $32.1 billion

in 2013 because total income to the combined funds, including interest

earned on trust fund reserves, exceeded total expenditures. At the end of

2013, the combined reserves of the OASI and the DI Trust Funds were

320 percent of estimated expenditures1 for 2014. In comparison, the combined reserves at the end of 2012 were 332 percent of expenditures for 2013.

1 Estimated expenditures are based on the intermediate set of assumptions.

Table II.B2.—Payroll Tax Contribution Rates for 2013

[In percent]

OASI DI OASDI

Payroll tax contribution rate for employees. . . . . . . . . . . . . . . . . . . . . . . 5.30 0.90 6.20

Payroll tax contribution rate for employers . . . . . . . . . . . . . . . . . . . . . . . 5.30 .90 6.20

Payroll tax contribution rate for self-employed persons . . . . . . . . . . . . . 10.60 1.80 12.40
Overview

8

C. ASSUMPTIONS ABOUT THE FUTURE

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

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

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

depend in turn on future birth rates, death rates, immigration, marriage and

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

rates, employment rates, productivity gains, wage increases, inflation, interest rates, and many other demographic, economic, and program-specific factors.

Table II.C1 presents key demographic and economic assumptions for three

alternative scenarios. The intermediate assumptions reflect the Trustees’ best

estimates of future experience. Therefore, most of the figures in this overview present only the outcomes under the intermediate assumptions. Any

projection of the future is, of course, uncertain. For this reason, the Trustees

also present results under low-cost and high-cost alternatives to provide a

range of possible future experience. The actual future costs are unlikely to be

as extreme as those portrayed by the low-cost or high-cost projections. A

separate section on the uncertainty of the projections, beginning on page 18,

highlights the implications of these alternative scenarios.

The Trustees reexamine the assumptions each year in light of recent experience and new information. This annual review helps to ensure that the Trustees’ assumptions provide the best estimate of future possibilities.

Table II.C1.—Long-Range Valuesa of Key Assumptions for the 75-year Projection Period

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

Long-range assumptions Intermediate Low-cost High-cost

Demographic:

Total fertility rate (children per woman), for 2038 and later . . . . 2.0 2.3 1.7

Average annual percentage reduction in total age-sex-adjusted

death rates from 2013 to 2088. . . . . . . . . . . . . . . . . . . . . . . . . . .79 .41 1.20

Average annual net immigration (in thousands) for 2014

to 2088. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,125 1,430 830

Economic:

Average annual percentage change in:

Productivity (total U.S. economy), for 2026 and later . . . . . . . 1.68 1.98 1.38

Average wage in covered employment from 2025 to 2088 . . . 3.83 5.16 2.52

Consumer Price Index (CPI-W), for 2020 and later. . . . . . . . . 2.70 3.40 2.00

Average annual real-wage differential (percent) for 2025

to 2088. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.13 1.76 .52

Unemployment rate (percent, age-sex-adjusted), for 2023 and

later . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5 4.5 6.5

Annual trust fund real interest rate (percent), for 2025 and later. 2.9 3.4 2.4

Programmatic:

Disability incidence rate (per 1,000 exposed, age-sex-adjusted)

by 2040 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 4.3 6.5

Disability recovery rate (per 1,000 beneficiaries, age-sexadjusted) by 2045 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.4 12.6 8.3
9

Future Financial Status

D. PROJECTIONS OF FUTURE FINANCIAL STATUS

Short-Range Actuarial Estimates

For the short-range period (2014 through 2023), the Trustees measure financial adequacy by comparing projected asset reserves at the beginning of each

year to projected program cost for that year under the intermediate set of

assumptions. Maintaining a trust fund ratio of 100 percent or more—that is,

reserves at the beginning of each year at least equal to projected cost for the

year—is a good indication that the trust fund can cover most short-term contingencies. The projected trust fund ratios under the intermediate assumptions for OASI alone, and for OASI and DI combined, exceed 100 percent

throughout the short-range period. Therefore, OASI and OASDI satisfy the

Trustees’ short-term test of financial adequacy. However, the DI Trust Fund

fails the Trustees’ short-term test of financial adequacy. The Trustees estimate that the DI trust fund ratio was at 62 percent at the beginning of 2014.

The projected DI trust fund ratio then declines until the trust fund reserves

become depleted in 2016. Figure II.D1 shows that the trust fund ratios for the

theoretical combined OASI and DI Trust Funds decline consistently after

2010. Figure II.D3 illustrates the implications of reserve depletion for the DI

Trust Fund alone.

As it has since 2010, projected OASDI cost exceeds non-interest income

throughout the short-range period. Cost is less than total income until 2020,

when cost begins to exceed total income. While trust fund reserves continue

to grow through 2019, they grow more slowly than cost, causing the trust

fund ratio to decline, as shown in figure II.D1.
Overview

10

Long-Range Actuarial Estimates

The Trustees use three types of measures to assess the actuarial status of the

program over the next 75 years: (1) annual cash-flow measures, including

income rates, cost rates, and balances; (2) trust fund ratios; and (3) summary

measures such as actuarial balances and open group unfunded obligations.

The Trustees express these measures as percentages of taxable payroll, as

percentages of gross domestic product (GDP), or in dollars. The Trustees

also present summary measures over the infinite horizon in Appendix F. The

infinite horizon values provide an additional indication of Social Security’s

very-long-run financial condition, but are subject to much greater uncertainty.

The Trustees also apply the test of long-range close actuarial balance each

year. To satisfy the test, a trust fund must meet two conditions: (1) the trust

fund satisfies the short-range test of financial adequacy, and (2) the trust fund

ratio stays above zero throughout the 75-year projection period, such that

benefits would be payable in a timely manner throughout the period. The

OASI, DI, and theoretical combined OASI and DI Trust Funds all fail the

Figure II.D1.—Short-Range OASI and DI Combined Trust Fund Ratio

[Asset reserves as a percentage of annual cost]

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

Calendar year

Historical Estimated

"Minimum" level for short-term financial adequacy
11

Future Financial Status

test of long-range close actuarial balance under the intermediate assumptions.

Annual Income Rates, Cost Rates, and Balances

Figure II.D2 illustrates the year-by-year relationship among OASDI income

(excluding interest), cost (including scheduled benefits), and expenditures

(including payable benefits) for the full 75-year period (2014 through 2088).

The figure shows all values as percentages of taxable payroll. Under the

intermediate assumptions, demographic factors would by themselves cause

the projected cost rate to rise rapidly for the next two decades before leveling

off in about 2035. However, the recent recession led to lower taxable earnings than expected and more beneficiaries than expected, which in turn

sharply increased the cost rate. This recession effect obscures the underlying

rising trend in the cost rate for the next few years. The projected income rate

is stable at about 13 percent throughout the 75-year period.

Annual OASDI cost exceeded non-interest income in 2010 for the first time

since 1983. The Trustees project that cost will continue to exceed non-interest income throughout the 75-year valuation period. Nevertheless, total trust

fund income, including interest income, is more than is necessary to cover

costs through 2019, so trust fund asset reserves continue to grow. Beginning

in 2020, cost exceeds total income, and theoretical combined OASI and DI

Trust Fund reserves diminish until they become depleted in 2033. After trust

fund reserve depletion, continuing income is sufficient to support expenditures at a level of 77 percent of program cost for the rest of 2033, declining

to 72 percent for 2088. Figure II.D2 depicts OASDI operations as a theoretical combined whole. However, under current law, the differences between

scheduled and payable benefits would begin at different times for the program’s two trust funds: in 2016 for DI and in 2034 for OASI.
Overview

12

To illustrate the more immediate challenges specific to the DI program, figure II.D3 presents the year-by-year relationship among income, cost, and

expenditures for the 75-year projection period. The DI Trust Fund reserves

are expected to deplete in 2016 if no legislative action is taken before then.

After DI Trust Fund reserve depletion, continuing income is sufficient to

support expenditures at a level of 81 percent of program cost for the rest of

2016, rising to a somewhat higher level for 2020 through 2040, then declining to 80 percent by 2088.

Figure II.D2.—OASDI Income, Cost, and Expenditures as Percentages of Taxable Payroll

[Under Intermediate Assumptions]

0%

5%

10%

15%

20%

25%

2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Cost: Scheduled and

payable benefits

Income

Payable benefits as percent

of scheduled benefits:

2013-32: 100%

2033: 77%

2088: 72%

Cost: Scheduled but not

fully payable benefits

Expenditures: Payable benefits = income

after trust fund depletion in 2033
13

Future Financial Status

Figure II.D4 shows the estimated number of workers per beneficiary. Figures

II.D2 and II.D4 illustrate the inverse relationship between cost rates and the

number of workers per beneficiary. In particular, the projected future

increase in the cost rate reflects a projected decline in the number of covered

workers per beneficiary. There were about 2.8 workers for every OASDI

beneficiary in 2013. This ratio had been extremely stable, remaining between

3.2 and 3.4 from 1974 through 2008, and has declined since then due to the

economic recession and the beginning of the demographic shift that will

drive this ratio over the next 20 years. The Trustees project that the ratio of

workers to beneficiaries will continue to decline, even as the economy recovers, due to this demographic shift—as workers of lower-birth-rate generations replace workers of the baby-boom generation. The ratio of workers to

beneficiaries reaches 2.1 by 2035 when the baby-boom generation will have

largely retired, with a further gradual decline thereafter due to increasing longevity.

Figure II.D3.—DI Income, Cost, and Expenditures as Percentages of Taxable Payroll

[Under Intermediate Assumptions]

0%

1%

2%

3%

4%

5%

2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Cost: Scheduled and

payable benefits

Income

Payable benefits as percent

of scheduled benefits:

2013-15: 100%

2016: 81%

2088: 80%

Cost: Scheduled but not

fully payable benefits

Expenditures: Payable benefits = income

after trust fund depletion in 2016
Overview

14

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

annual cost and non-interest income as a share of U.S. economic output

(GDP). As shown in figure II.D5, the Trustees project that Social Security’s

cost as a percent of GDP will grow from 4.4 percent in 2008 to about

6.2 percent by 2035, then decline to 6.0 percent by 2050, and remain

between 6.0 and 6.1 percent through 2088. As the economy recovers, Social

Security’s non-interest income, which reflects scheduled tax rates, increases

from its current level of about 4.5 percent of GDP to about 4.8 percent of

GDP for 2024. Thereafter, non-interest income as a percent of GDP declines

gradually, to about 4.5 percent by 2088, because the Trustees expect the

share of employee compensation provided as noncovered fringe benefits to

increase gradually.

Figure II.D4.—Number of Covered Workers Per OASDI Beneficiary

0

1

2

3

4

1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Historical Estimated
15

Future Financial Status

Trust Fund Ratios

The trust fund ratio is defined as the asset reserves at the beginning of a year

expressed as a percentage of the cost during the year. The trust fund ratio

thus represents the proportion of a year’s cost which could be paid solely

with the reserves at the beginning of the year. Table II.D1 displays the projected maximum trust fund ratios during the long-range period for the OASI,

DI, and combined OASI and DI funds. The table also shows the year of maximum projected trust fund ratio during the long-range projection period

(2014-88) and the year of trust fund reserve depletion. Each trust fund ratio

has been generally declining in recent years. OASI reached a peak level of

402 in 2011, DI reached a peak level of 219 in 2003, and OASDI reached a

peak level of 358 in 2008.

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

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

and Trust Fund Reserve Depletion Dates

[Under the Intermediate Assumptions]

OASI DI OASDI

Maximum trust fund ratio (percent). . . . . . . . . . . . . . 373 62 320

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

Year of trust fund reserve depletion. . . . . . . . . . . . . . 2034 2016 2033

0%

2%

4%

6%

8%

10%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Non-interest Income

Historical Estimated

Cost
Overview

16

Summary Measures

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

through the end of the 75-year valuation period. The actuarial balance measure includes the trust fund asset reserves at the beginning of the period, all

cost and income during the valuation period, and the cost of reaching a target

trust fund reserve of one year’s cost by the end of the period. Therefore, the

actuarial balance is essentially the difference between the present values of

income and cost from 1937 through the end of the valuation period. The

Trustees express actuarial balance as a percentage of the taxable payroll for

the 75-year valuation period, and refer to a negative actuarial balance as an

actuarial deficit. The actuarial deficit represents the average amount of

change in income or cost that is needed throughout the valuation period in

order to achieve actuarial balance.

In this report, the actuarial deficit for the combined OASI and DI Trust

Funds under the intermediate assumptions is 2.88 percent of taxable payroll.

The actuarial deficit was 2.72 percent in the 2013 report. If the assumptions,

methods, starting values, and the law had all remained unchanged from last

year, the actuarial deficit would have increased to 2.78 percent of payroll

solely due to advancing the valuation period by 1 year. Changes in methods,

assumptions, and starting values combined to account for most of the

remaining change in the actuarial deficit.

Another way to illustrate the projected financial shortfall of the OASDI program is to examine the cumulative present value of scheduled income less

cost. Figure II.D6 shows the present value of cumulative OASDI income less

cost from the inception of the program through each of the years from 2013

to 2088. A positive value represents the present value of trust fund reserves

at the end of the selected year. A negative value is the unfunded obligation

through the selected year. The asset reserves of the combined trust funds

were $2.8 trillion at the end of 2013. The trust fund reserves decline on a

present value basis after 2013, but remain positive through 2032. However,

after 2032 this cumulative amount becomes negative, which means that the

combined OASI and DI Trust Funds have a net unfunded obligation through

each year after 2032. Through the end of 2088, the combined funds have a

present-value unfunded obligation of $10.6 trillion. If the assumptions, methods, starting values, and the law had all remained unchanged from last year,

the unfunded obligation would have risen to about $10.1 trillion due to the

change in the valuation date. The remaining increase in the unfunded obligation is primarily due to changes in methods, assumptions, and starting values.
17

Future Financial Status

This unfunded obligation represents 2.73 percent of taxable payroll and

1.0 percent of GDP for the 75-year valuation period. The unfunded obligation as a share of taxable payroll (2.73 percent) and the actuarial deficit

(2.88 percent) are similar measures, but differ because the actuarial deficit

includes the cost of having an ending trust fund reserve equal to 1 year’s

cost.

Figures II.D2, II.D5, and II.D6 show that the program’s financial condition is

worsening at the end of the projection period. Trends in annual balances and

cumulative values toward the end of the 75-year period provide an indication

of the program’s ability to maintain solvency beyond 75 years. Consideration

of summary measures alone for a 75-year period can lead to incorrect perceptions and to policy prescriptions that do not achieve sustainable solvency.

1

1 Sustainable solvency for the financing of the program under a specified set of assumptions has been

achieved when the projected trust fund ratio is positive throughout the 75-year projection period and is either

stable or rising at the end of the period.

Figure II.D6.—Cumulative Scheduled OASDI Income Less Cost,

From Program Inception Through Years 2013-88

[Present value as of January 1, 2014, in trillions]

-$11

-$10

-$9

-$8

-$7

-$6

-$5

-$4

-$3

-$2

-$1

$0

$1

$2

$3

2013 2028 2043 2058 2073 2088

Ending year of accumulation

Unfunded

obligation

(negative)

Trust fund

reserves

(positive)

2033
Overview

18

Appendix F presents summary measures over the infinite horizon. The

infinite horizon values provide an additional indication of Social Security’s

financial condition for the period beginning with the inception of the program and extending indefinitely into the future, but results are subject to

much greater uncertainty. Extending the horizon beyond 75 years increases

the measured unfunded obligation. Through the infinite horizon, the

unfunded obligation, or shortfall, is equivalent to 4.1 percent of future taxable payroll or 1.4 percent of future GDP.

Uncertainty of the Projections

Significant uncertainty surrounds the intermediate assumptions. The Trustees

use several methods to help illustrate that uncertainty.

A first approach uses alternative scenarios reflecting low-cost (alternative I)

and high-cost (alternative III) sets of assumptions. Figure II.D7 shows the

projected trust fund ratios for the combined OASI and DI Trust Funds under

the intermediate, low-cost, and high-cost assumptions. The low-cost alternative includes a higher ultimate total fertility rate, slower improvement in

mortality, a higher real-wage differential, a higher ultimate real interest rate,

a higher ultimate annual change in the CPI, and a lower unemployment rate.

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

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

lower ultimate real interest rate, a lower ultimate annual change in the CPI,

and a higher unemployment rate1. These alternatives are not intended to suggest that all parameters would be likely to differ from the intermediate values

in the specified directions, but are intended to illustrate the effect of clearly

defined scenarios that are, on balance, very favorable or unfavorable for the

program’s financial status. Actual future costs are unlikely to be as extreme

as those portrayed by the low-cost or high-cost projections. The method for

constructing the low-cost and high-cost projections does not lend itself to

estimating the probability that actual experience will lie within or outside the

range they define.

1

In prior reports, the low-cost alternative included a lower ultimate annual change in the CPI and the highcost alternative included a higher ultimate annual change in the CPI. This change contributes to the more

positive projection shown for the low-cost alternative compared to last year.
19

Future Financial Status

Appendix D of this report presents long-range sensitivity analysis for the

OASDI program. By varying one parameter at a time, sensitivity analysis

provides a second approach for illustrating the uncertainty surrounding projections into the future.

A third approach uses stochastic simulations that reflect randomly assigned

annual values for each parameter. These simulations produce a distribution

of projections and corresponding probabilities 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 reserve depletion

(i.e., the point at which the trust fund ratio reaches zero) is very likely by

mid-century. In particular, figure II.D8 suggests that based on these stochastic simulations, trust fund asset reserves will deplete between 2028 and 2044

with a 95-percent probability.

The stochastic results suggest that trust fund ratios as high as the low-cost

alternative are very unlikely. However, the relationship between the stochastic results and the low-cost and high-cost alternatives may change as the

methodology for the stochastic simulations is further developed. As noted in

Figure II.D7.—Long-Range OASI and DI Combined Trust Fund Ratios Under

Alternative Scenarios

[Asset reserves as a percentage of annual cost]

0%

100%

200%

300%

400%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Historical Estimated

III

II

I
Overview

20

appendix E, future improvements and refinements are expected to be more

likely to expand rather than reduce the indicated range of uncertainty.

Changes From Last Year’s Report

The projected long-range OASDI actuarial deficit increased from

2.72 percent of taxable payroll for last year’s report to 2.88 percent of taxable payroll for this year’s report. The change in the 75-year projection

period alone increased the actuarial deficit to 2.78 percent. Changes in methods, assumptions, and starting values combined to account for most of the

remaining change in the actuarial deficit. For a detailed description of the

specific changes identified in table II.D2, see section IV.B.6.

Figure II.D8.—Long-Range OASI and DI Combined Trust Fund Ratios

From Stochastic Modeling

0%

100%

200%

300%

400%

2014 2029 2044 2059 2074 2089

Projection year

50%

97.5%

2.5%

90%

10%
21

Future Financial Status

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

Figure II.D9 compares this year’s projections of annual balances (non-interest income minus cost) to those in last year’s report. The annual balances in

this year’s report are about 0.1 percentage point more negative throughout

the projection period. See page 74 for details.

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

Based on Intermediate Assumptions

[As a percentage of taxable payroll]

Item OASI DI OASDI

Shown in last year's report:

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.00 1.88 13.88

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.40 2.20 16.60

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.40 -.32 -2.72

Changes in actuarial balance due to changes in:

Legislation / Regulation . . . . . . . . . . . . . . . . . . . . . . . -.01 .00 -.01

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

a The change in the 75-year valuation period from last year’s report to this report means that the 75-year

actuarial balance now includes the relatively large negative annual balance for 2088. This change in the valuation period results in a larger long-range actuarial deficit. The actuarial deficit includes the trust fund

reserve at the beginning of the projection period.

-.05 -.01 -.06

Demographic data and assumptions. . . . . . . . . . . . . . .04 .00 .04

Economic data and assumptions. . . . . . . . . . . . . . . . . -.08 -.02 -.10

Disability data and assumptions. . . . . . . . . . . . . . . . . .00 .02 .02

Methods and programmatic data . . . . . . . . . . . . . . . . -.05 .00 -.05

Total change in actuarial balance . . . . . . . . . . . . . . . . . . -.15 -.01 -.16

Shown in this report:

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.55 -.33 -2.88

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.02 1.87 13.89

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.57 2.20 16.77
Overview

22

Figure II.D9.—OASDI Annual Balances: 2013 and 2014 Trustees Reports

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

-6%

-4%

-2%

0%

2%

2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

2013 Report

2014 Report
23

Conclusion

E. CONCLUSION

Under current law, the projected cost of Social Security increases faster than

projected income through about 2035 primarily because of the aging of the

baby-boom generation and relatively low fertility since the baby-boom

period. Cost will continue to grow faster than income, but to a lesser degree,

after 2035 due to increasing life expectancy. Based on the Trustees’ best estimate, program cost exceeds non-interest income for 2014, as it has since

2010, and remains higher than non-interest income throughout the remainder

of the 75-year projection period. Social Security’s theoretical combined trust

funds increase with the help of interest income through 2019 and allow full

payment of scheduled benefits on a timely basis until the trust fund asset

reserves become depleted in 2033. At that time, projected continuing income

to the combined trust funds equals about 77 percent of program cost. By

2088, continuing income equals about 72 percent of program cost.

The Trustees project that the OASI Trust Fund and the DI Trust Fund will

have sufficient reserves to pay full benefits on time until 2034 and 2016,

respectively. Legislative action is needed as soon as possible to prevent

depletion of the DI Trust Fund reserves in 2016, at which time continuing

income to the DI Trust Fund would be sufficient to pay 81 percent of DI benefits. Lawmakers may consider responding to the impending DI Trust Fund

reserve depletion as they did in 1994, solely by reallocating the payroll tax

rate between OASI and DI. Such a response might serve to delay DI reforms

and much needed corrections for OASDI as a whole. However, enactment of

a more permanent solution could include a tax reallocation in the short-run.

The Trustees estimate that the 75-year actuarial deficit for the combined trust

funds is 2.88 percent of taxable payroll—0.16 percentage point larger than

the 2.72 percent deficit in last year’s report. For the combined OASI and DI

Trust Funds to remain fully solvent throughout the 75-year projection period:

(1) revenues would have to increase by an amount equivalent to an immediate and permanent payroll tax rate increase of 2.83 percentage points (from

its current level of 12.40 percent to 15.23 percent; a relative increase of

22.8 percent); (2) scheduled benefits during the period would have to be

reduced by an amount equivalent to an immediate and permanent reduction

of 17.4 percent applied to all current and future beneficiaries, or 20.8 percent

if the reductions were applied only to those who become initially eligible for

benefits in 2014 or later; or (3) some combination of these approaches would

have to be adopted. Under these scenarios, non-interest income would initially be substantially greater than expenditures, and trust fund reserves

would accumulate rapidly. Subsequently, however, non-interest income alone
Overview

24

would be inadequate, and reserves would be drawn down to cover the differences. This illustrates that if lawmakers were to design legislative solutions

only to eliminate the overall actuarial deficit without consideration of yearby-year patterns, then a substantial financial imbalance could remain at the

end of the period, and the long-range sustainability of program financing

could still be in doubt.

If substantial actions are deferred for several years, the changes necessary to

maintain Social Security solvency would be concentrated on fewer years and

fewer generations. Much larger changes would be necessary if action is

deferred until the combined trust fund reserves become depleted in 2033. In

order to maintain solvency throughout the 75-year projection period and

finance scheduled benefits fully in every year starting in 2033, it would be

necessary to increase revenues by an amount equivalent to a payroll tax rate

increase of about 4.2 percentage points (yielding a total payroll tax rate of

about 16.6 percent) at the point of trust fund reserve depletion, with the total

rate reaching about 17.7 percent in 2088. Alternatively, solvency could be

maintained if benefits were reduced to the level that would be payable with

scheduled tax rates and earnings subject to tax in each year beginning in

2033. At the point of combined trust fund reserve depletion in 2033, this

would be equivalent to a reduction in all scheduled benefits of 23 percent,

with reductions reaching 28 percent in 2088. In addition, of course, there is a

continuum of policies combining tax increases with benefit reductions that

would maintain solvency at the point of trust fund depletion.

Some strategies for achieving solvency would not be feasible if delayed until

trust fund reserve depletion in 2033. For example, even a temporary 100-percent benefit reduction for those newly eligible for benefits in 2033 would not

by itself make it possible to pay all benefits scheduled for payment in that

year to those already receiving or eligible to receive benefits.

If the life expectancy of the population continues to improve after the end of

the 75-year period, Social Security’s annual cost will very likely continue to

grow faster than non-interest income after 2088. As a result, lawmakers

would have to make additional changes to ensure solvency of the system

beyond 2088. Making changes now that achieve sustainable solvency (that

is, result in a trust fund ratio that is positive throughout the long-range period

and is either level or increasing at the end of the period) could avoid the need

for later legislative changes.

The Trustees recommend that lawmakers address the projected trust fund

shortfalls in a timely way in order to phase in necessary changes gradually

and give workers and beneficiaries time to adjust to them. Implementing
25

Conclusion

changes soon would allow more generations to share in the needed revenue

increases or reductions in scheduled benefits. Social Security will play a critical role in the lives of 59 million beneficiaries and 165 million covered

workers and their families in 2014. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect

future generations.

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

• www.socialsecurity.gov/oact/tr/2014/index.html

• www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trendsand-Reports/ReportsTrustFunds/index.html

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

social_security.aspx
Financial Operations and Legislative Changes

26

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 2013

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

DI Trust Funds

1 during calendar year 2013. Chapter IV provides projections

for calendar years 2014 through 2090.

1. OASI Trust Fund

Table III.A1 presents a statement of the income and disbursements of the

Federal Old-Age and Survivors Insurance Trust Fund in calendar year 2013,

and of the asset reserves in the fund at the beginning and end of the calendar

year. As shown in this table, total trust fund receipts in 2013 amounted to

$743.8 billion, while disbursements totaled $679.5 billion, an increase in

trust fund reserves during 2013 of $64.3 billion.

Total receipts during calendar year 2013 included $622.2 billion in payroll

tax contributions. These contributions include initial appropriations of payroll taxes, made on an estimated basis, and adjustments to appropriations for

prior years to reflect actual tax receipts. The OASI fund paid the general

fund $1.4 billion for the estimated amount of employee payroll-tax refunds,

partially offsetting these gross contributions. Employees who work for more

than one employer during a year and pay contributions on total earnings in

excess of the contribution and benefit base are eligible for such refunds. Net

payroll tax contributions were therefore $620.8 billion in 2013.

Net reimbursements from the General Fund of the Treasury amounted to

$4.2 billion in 2013. As shown in the table, Public Law 111-312, the Tax

Relief, Unemployment Insurance Reauthorization, and Job Creation Act of

2010, Public Law 112-78, the Temporary Payroll Tax Cut Continuation Act

of 2011, and Public Law 112-96, the Middle Class Tax Relief and Job Creation Act of 2012, account for almost all of the reimbursement for the year,

or about $4.1 billion. These acts specified general fund reimbursement for

temporary reductions in employee and self-employment payroll taxes.2

1 See www.socialsecurity.gov/oact/ProgData/fundsQuery.html.

2 Amounts transferred include adjustments to estimated initial appropriations to reflect actual tax receipts in

prior periods.
27

Calendar Year 2013 Operations

The General Fund of the Treasury reimbursed the OASI Trust Fund approximately $98 million in 2013 under the provisions of Public Law 111-147, the

Hiring Incentives to Restore Employment (HIRE) Act. The General Fund

reimbursed the OASI Trust Fund about $7 million in 2013 under the provisions of Public Law 110-246, the Food, Conservation, and Energy Act of

2008.

The Social Security Administration makes special payments to uninsured

persons who meet certain requirements. The General Fund of the Treasury

largely reimburses costs associated with providing such payments. In 2013,

the general fund reimbursed the OASI Trust Fund approximately $1 thousand. This reimbursement reflects costs incurred for fiscal year 2011. This

should be the last such reimbursement because the last remaining beneficiary

of these special payments died in fiscal year 2011.

Income based on taxation of OASI benefits amounted to $20.7 billion in

2013. About 99 percent of this income represents amounts credited to the

trust funds, generally in advance of the actual receipt of taxes by the Treasury. These credited amounts represent the net amount of initial estimated

taxes transferred for tax liabilities in 2013 and adjustments to initial amounts

transferred for prior periods. The remaining one percent of the total income

from taxation of benefits represents amounts withheld from the benefits paid

to nonresident aliens.

In 2013, the OASI Trust Fund earned $98.1 billion in net interest, which consisted of: (1) interest earned on the investments held by the trust fund;

(2) interest on adjustments in the allocation of administrative expenses

between the trust fund and the general fund account for the Supplemental

Security Income program; (3) interest arising from the revised allocation of

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

reimbursements to the trust fund.

The Social Security Act authorizes the deposit of monetary gifts or bequests

in the trust funds. In 2013, there were no such receipts by the OASI Trust

Fund.
Financial Operations and Legislative Changes

28

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

Of the $679.5 billion in total OASI disbursements in 2013, $672.1 billion

was for net benefit payments, including recovered overpayments, reimburseTable III.A1.—Operations of the OASI Trust Fund, Calendar Year 2013

[In millions]

Total asset reserves, December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,609,668

Receipts:

Net payroll tax contributions:

Payroll tax contributionsa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

a

Includes adjustments for prior calendar years.

$622,211

Payments from the General Fund of the Treasury for payroll tax contributions subject to refunda

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,396

Net payroll tax contributionsa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 620,814

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L. 111-312, P.L. 112-78,

and P.L. 112-96a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,065

Reduction in payroll tax contributions due to P.L. 111-147a. . . . . . . . . . . . . . . . . . 98

Reimbursement directed by P.L. 110-246 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

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

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b

b Between -$0.5 and $0.5 million.

Reimbursement for the costs of payments to uninsured persons who attained

age 72 before 1968

b

Net general fund reimbursements

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,169

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 177

All other, not subject to withholding

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,517

Total income from taxation of benefits

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,694

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,113

Interest adjustmentsc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

c

Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust fund and

the general fund account for the Supplemental Security Income program; (2) interest arising from the revised

allocation of administrative expenses among the trust funds; and (3) interest on certain reimbursements to

the trust fund.

1

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 98,114

Gifts —

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743,793

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death payments

d . . . . . . . . . . . . . . . . . . . . . . . . . .

d

Includes net reductions for the recovery of overpayments.

672,175

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -49

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

Net benefit paymentsd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672,129

Financial interchange with the Railroad Retirement “Social Security Equivalent

Benefit Account”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,948

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,823

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583

Offsetting receipts from sales of supplies, materials, etc. . . . . . . . . . . . . . . . . . . . . -3

Miscellaneous reimbursements from the general fund e. . . . . . . . . . . . . . . . . . . . .

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

related to administering the OASI program.

-5

Net administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,397

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679,475

Net increase in asset reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,317

Total asset reserves, December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,673,985
29

Calendar Year 2013 Operations

ments from the general fund for unnegotiated checks, and the reimbursable

costs of vocational rehabilitation services1. Net benefit payments increased

by 5.4 percent from calendar year 2012 to calendar year 2013. 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 2013 was due in large part to the automatic cost-of-living benefit increase of 1.7 percent which became effective for December 2012 under

the automatic-adjustment provisions in section 215(i) of the Social Security

Act. In addition, new beneficiaries tend to have higher benefits than previous

cohorts.

The Railroad Retirement Act requires an annual financial interchange

between the Railroad Retirement program and the OASDI program. The purpose of the interchange is to put the OASI and DI Trust Funds in the same

financial position they would have been in had railroad employment always

been covered directly by Social Security. The Railroad Retirement Board and

the Social Security Administration calculated an interchange of $3.9 billion

from the OASI Trust Fund to the Social Security Equivalent Benefit Account

for June 2013.

The remaining $3.4 billion of disbursements from the OASI Trust Fund represents net administrative expenses. The Social Security Administration and

the Department of the Treasury initially charge administrative expenses

directly to the trust fund on an estimated basis. Periodically, as actual experience is recorded, they adjust the allocations of administrative expenses for

prior periods. These adjustments affect the OASI Trust Fund, the DI Trust

Fund, and the general fund account for the Supplemental Security Income

program, and include appropriate interest adjustments. As described earlier,

the trust fund accounting records such interest adjustments under investment

income.

In 2013, the cost incurred by the Social Security Administration to administer the OASI program was 83 percent of OASI net administrative expenses.

The Social Security Administration charges such costs to the trust fund

($2.8 billion in 2013). In addition, the Department of the Treasury charges to

the trust fund expenses ($0.6 billion in 2013) for services provided in administering the OASI program. A relatively small offset ($3 million in 2013) to

administrative expenses represents income from the sale of excess supplies

and equipment.

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

of retired or deceased workers who receive benefits based on disabilities that began before age 22. The trust

funds reimburse the providers of such services only in those cases where the services contributed to the successful rehabilitation of the beneficiary.
Financial Operations and Legislative Changes

30

Finally, the General Fund of the Treasury makes net reimbursements for

administrative costs incurred by the Social Security Administration in performing legislatively mandated activities that are not directly related to the

OASI program. These reimbursements include the costs associated with

union activities related to administering the OASI program ($4 million in

2013) and with the provision of information to participants in certain pension

plans ($1 million in 2013). These miscellaneous reimbursements totaled

$5 million in 2013.

The asset reserves in the OASI Trust Fund at the end of calendar year 2013

totaled $2,674.0 billion, consisting of $2,674.5 billion in U.S. Government

obligations and, as an offset, an extension of credit of $0.5 billion against

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

rate of interest earned by the reserves in the OASI Trust Fund during calendar year 2013 was 3.8 percent, slightly lower than the 4.1 percent earned

during calendar year 2012. Table VI.A4, 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 calendar years 2012 and 2013.

By law, the Department of the Treasury must invest trust fund reserves in

interest-bearing securities backed by the full faith and credit of the United

States Government. Those securities currently held by the OASI Trust Fund

are special issues, that is, securities sold only to the trust funds. These special

issues are of two types: short-term certificates of indebtedness and longerterm bonds. Daily receipts are invested in the short-term certificates of

indebtedness which mature on the next June 30 following the date of issue.

The trust fund normally acquires long-term special-issue bonds when special

issues of either type mature on June 30 and must be reinvested. The amount

of long-term bonds acquired on June 30 is equal to the amount of special

issues maturing (including accrued interest earnings), plus tax receipts for

that day, less amounts required to meet expenditures on that day.

Section 201(d) of the Social Security Act provides that the obligations issued

for purchase by the OASI and DI Trust Funds shall have maturities fixed

with due regard for the needs of the funds. The usual practice has been to

reinvest the maturing special issues, as of each June 30, so that the value of

the securities maturing in each of the next 15 years are approximately equal.

Accordingly, the Department of the Treasury, in consultation with the Chief

Actuary of the Social Security Administration, selected the amounts and

maturity dates of the special-issue bonds purchased on June 30, 2013, so that

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

over the 15-year period 2014-28. The bonds purchased on that date have an

interest rate of 1.750 percent, reflecting the average market yield, as of the
31

Calendar Year 2013 Operations

last business day of the prior month, on all of the outstanding marketable

U.S. obligations that are due or callable more than 4 years in the future.

Table III.A7 shows additional details on the investment transactions during

2013, including the amounts of bonds purchased on June 30, 2013.

2. DI Trust Fund

Table III.A2 presents a statement of the income and disbursements of the

Federal Disability Insurance Trust Fund in calendar year 2013, and of the

asset reserves in the fund at the beginning and end of the calendar year.

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

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

Of the $111.2 billion in total receipts, $105.4 billion was net payroll tax contributions.

Of the $143.4 billion of total disbursements, $140.1 billion was net benefit

payments. Net benefit payments increased by 2.4 percent from calendar year

2012 to calendar year 2013. This increase in DI benefit payments was due to

the same factors described earlier for OASI benefit payments. Total DI disbursements exceeded non-interest income in years 2005 through 2013 and

exceeded total income in years 2009 through 2013.

During 2013, the reserves in the DI Trust Fund decreased by $32.2 billion,

from $122.7 billion at the end of 2012 to $90.4 billion at the end of 2013.

The $90.4 billion reserves in the DI Trust Fund at the end of calendar year

2013 consisted of $90.7 billion in U.S. Government obligations and, as an

offset, an extension of credit of $0.3 billion against securities to be redeemed

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

the asset reserves in the DI Trust Fund during calendar year 2013 was 4.5

percent, slightly lower than the 4.7 percent earned during calendar year 2012.

Table VI.A5, 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 calendar years 2012 and 2013.
Financial Operations and Legislative Changes

32

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

Section 201(d) of the Social Security Act provides that the Treasury securities 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

Table III.A2.—Operations of the DI Trust Fund, Calendar Year 2013

[In millions]

Total asset reserves, December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $122,666

Receipts:

Net payroll tax contributions:

Payroll tax contributionsa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

a

Includes adjustments for prior calendar years.

$105,639

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

subject to refunda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -237

Net payroll tax contributionsa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,402

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L. 111-312, P.L. 112-78,

and P.L. 112-96a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 712

Reduction in payroll tax contributions due to P.L. 111-147a. . . . . . . . . . . . . . . . . . 17

Reimbursements directed by P.L. 110-246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

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

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b

b Between -$0.5 and $0.5 million.

Net general fund reimbursements

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 729

Income based on taxation of benefit payments:

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

All other, not subject to withholding

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387

Total income from taxation of benefits

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,704

Interest adjustmentsc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

c

Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust fund and

the general fund account for the Supplemental Security Income program; (2) interest arising from the revised

allocation of administrative expenses among the trust funds; and (3) interest on certain reimbursements to

the trust fund.

1

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 4,706

Gifts —

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,228

Disbursements:

Benefit payments:

Monthly benefitsd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

d

Includes net reductions for the recovery of overpayments.

140,071

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -25

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 84

Net benefit paymentsd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,130

Financial interchange with the Railroad Retirement “Social Security Equivalent

Benefit Account”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,644

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

Demonstration projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Miscellaneous reimbursements from the general funde. . . . . . . . . . . . . . . . . . . . . .

e Reimbursements for costs incurred in performing legislatively mandated activities not directly related to

administering the DI program.

-3

Net administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,769

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143,450

Net increase in asset reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32,221

Total asset reserves, December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,445
33

Calendar Year 2013 Operations

been to reinvest the maturing special issues, as of each June 30, so that the

value of the securities maturing in each of the next 15 years are approximately equal. However, as of June 2013, the Trustees projected that the

reserves in the DI Trust Fund would be depleted within 15 years. Therefore,

the Department of the Treasury, in consultation with the Chief Actuary of the

Social Security Administration, selected the amounts and maturity dates of

the DI special-issue bonds purchased on June 30, 2013, so that equal

amounts of special issues would mature over the three-year period 2014-16.

The bonds purchased have an interest rate of 1.750 percent, reflecting the

average market yield, as of the last business day of the prior month, on all of

the outstanding marketable U.S. obligations that are due or callable more

than 4 years in the future. As of June 30, 2013, the DI Trust Fund had already

redeemed all of the bonds coming due on June 30, 2014, June 30, 2015, and

on June 30, 2016, so this investment approach required that all bond purchases on June 30, 2013 be split evenly over maturity dates of June 30, 2014,

June 30, 2015, and June 30, 2016. Table III.A7 shows additional details on

the investment transactions during 2013.

3. OASI and DI Trust Funds, Combined

Table III.A3 presents a statement of the operations of the OASI and DI Trust

Funds on a theoretical combined basis1

. The entries in this table represent

the sums of the corresponding values from tables III.A1 and III.A2. The two

preceding subsections that cover OASI and DI provide a description of the

nature of these income and expenditure transactions.

1 The OASI and DI Trust Funds are distinct legal entities which operate independently. To illustrate the

actuarial status of the program as a whole, the fund operations are often combined on a theoretical basis.
Financial Operations and Legislative Changes

34

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 2013

[In millions]

Total asset reserves, December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,732,334

Receipts:

Net payroll tax contributions:

Payroll tax contributionsa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

a

Includes adjustments for prior calendar years.

$727,850

Payments from the General Fund of the Treasury for payroll tax contributions subject to refunda

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,633

Net payroll tax contributionsa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 726,217

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L. 111-312, P.L. 112-78,

and P.L. 112-96a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,776

Reduction in payroll tax contributions due to P.L. 111-147a. . . . . . . . . . . . . . . . . . 115

Reimbursements directed by P.L. 110-246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

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

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b

b Between -$0.5 and $0.5 million.

Reimbursement for the costs of payments to uninsured persons who attained

age 72 before 1968

b

Net general fund reimbursements

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,899

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 182

All other, not subject to withholding

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,904

Total income from taxation of benefits

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,086

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,817

Interest adjustmentsc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

c

Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust funds

and the general fund account for the Supplemental Security Income program; (2) interest arising from the

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

3

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 102,820

Gifts —

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 855,021

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death payments

d

. . . . . . . . . . . . . . . . . . . . . . . . . .

d Includes net reductions for the recovery of overpayments.

812,247

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -74

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 87

Net benefit paymentsd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 812,259

Financial interchange with the Railroad Retirement “Social Security Equivalent

Benefit Account”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,499

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,467

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692

Offsetting receipts from sales of supplies, materials, etc. . . . . . . . . . . . . . . . . . . . . -3

Demonstration projects 19

Miscellaneous reimbursements from the general funde. . . . . . . . . . . . . . . . . . . . . .

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

related to administering the OASI and DI programs.

-8

Net administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,166

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 822,925

Net increase in asset reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,096

Total asset reserves, December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,764,431
35

Calendar Year 2013 Operations

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

calendar year 2013 from the 2009-13 Trustees Reports, to the corresponding

actual amounts for 2013.

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

A number of factors contribute to differences between estimates and subsequent actual amounts, including: (1) actual values for key demographic, economic, and other variables that differ from earlier assumed levels; and (2)

legislation that was enacted or other administrative initiatives that were finalized after the Trustees completed their estimates.

At the end of calendar year 2013, the OASDI program was providing

monthly benefits to about 58.0 million people. The OASI Trust Fund was

providing benefits to about 47.0 million people and the DI Trust Fund was

providing benefits to about 11.0 million people. The number of people

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

Table III.A4.—Comparison of Actual Calendar Year 2013 Trust Fund Operations

With Estimates Made in Prior Reports, Based on Intermediate Assumptionsa

[Amounts in billions]

a Percentage differences are calculated prior to rounding.

Total income b

b “Actual” income for 2013 reflects adjustments to payroll tax contributions for prior calendar years (see

appendix A for description of these adjustments). “Estimated” income also includes such adjustments, but on

an estimated basis.

Total expenditures

Amount

Difference

from actual

(percent) Amount

Difference

from actual

(percent)

OASI Trust Fund:

Estimate in 2009 report . . . . . . . . . . . . . . $874.2 17.5 $678.8 -0.1

Estimate in 2010 report . . . . . . . . . . . . . . 845.1 13.6 680.4 .1

Estimate in 2011 report . . . . . . . . . . . . . . 796.4 7.1 670.0 -1.4

Estimate in 2012 report . . . . . . . . . . . . . . 759.7 2.1 684.9 .8

Estimate in 2013 report . . . . . . . . . . . . . . 743.4 -.1 682.0 .4

Actual amount . . . . . . . . . . . . . . . . . . . . . 743.8 — 679.5 —

DI Trust Fund:

Estimate in 2009 report . . . . . . . . . . . . . . 129.7 16.6 143.9 .3

Estimate in 2010 report . . . . . . . . . . . . . . 124.4 11.9 147.0 2.5

Estimate in 2011 report . . . . . . . . . . . . . . 118.7 6.7 143.8 .3

Estimate in 2012 report . . . . . . . . . . . . . . 113.7 2.2 147.4 2.7

Estimate in 2013 report . . . . . . . . . . . . . . 111.4 .1 144.8 1.0

Actual amount . . . . . . . . . . . . . . . . . . . . . 111.2 — 143.4 —

OASI and DI Trust Funds, combined:

Estimate in 2009 report . . . . . . . . . . . . . . 1,003.9 17.4 822.7 c

c Between -0.05 and 0.05 percent.

Estimate in 2010 report . . . . . . . . . . . . . . 969.5 13.4 827.4 .5

Estimate in 2011 report . . . . . . . . . . . . . . 915.1 7.0 813.8 -1.1

Estimate in 2012 report . . . . . . . . . . . . . . 873.4 2.1 832.3 1.1

Estimate in 2013 report . . . . . . . . . . . . . . 854.8 c 826.8 .5

Actual amount . . . . . . . . . . . . . . . . . . . . . 855.0 — 822.9 —
Financial Operations and Legislative Changes

36

and 0.9 percent, respectively, during the calendar year. This growth reflects

increases in the insured population and the gradual aging of the population.

Table III.A5 shows the estimated distributions of benefit payments in calendar years 2012 and 2013, by type of beneficiary, for each trust fund separately.

Note: Benefits are monthly benefits and lump-sum death payments. Totals do not necessarily equal the sums

of rounded components.

Net administrative expenses of the OASI and DI Trust Funds in calendar

year 2013 totaled $6.2 billion. This amount is equal to 0.8 percent of noninterest income and 0.7 percent of total expenditures. Table III.A6 shows

corresponding percentages for each trust fund separately and for the OASDI

program as a whole for each of the last 5 years.

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

Calendar Years 2012 and 2013

[Amounts in millions]

Calendar year 2012 Calendar year 2013

Amount

Percentage

of total Amount

Percentage

of total

Total OASDI benefit payments . . . . . . . . . . $774,825 100.0 $812,247 100.0

OASI benefit payments . . . . . . . . . . . . . . 637,948 82.3 672,175 82.8

DI benefit payments. . . . . . . . . . . . . . . . . 136,878 17.7 140,071 17.2

OASI benefit payments, total. . . . . . . . . . . . 637,948 100.0 672,175 100.0

Monthly benefits:

Retired workers and auxiliaries . . . . . . 527,403 82.7 559,942 83.3

Retired workers . . . . . . . . . . . . . . . . 497,471 78.0 528,862 78.7

Spouses . . . . . . . . . . . . . . . . . . . . . . . 25,348 4.0 26,300 3.9

Children . . . . . . . . . . . . . . . . . . . . . . 4,583 .7 4,780 .7

Survivors of deceased workers. . . . . . . 110,345 17.3 112,032 16.7

Aged widows and widowers. . . . . . . 87,603 13.7 89,126 13.3

Disabled widows and widowers. . . . 2,293 .4 2,301 .3

Parents . . . . . . . . . . . . . . . . . . . . . . . 22

a

a Less than 0.05 percent.

22 a

Children . . . . . . . . . . . . . . . . . . . . . . 18,752 2.9 18,923 2.8

Widowed mothers and fathers

caring for child beneficiaries . . . . 1,676 .3 1,660 .2

Lump-sum death payments . . . . . . . . . . . 200 a 201

a

DI benefit payments, total . . . . . . . . . . . . . . 136,878 100.0 140,071 100.0

Disabled workers . . . . . . . . . . . . . . . . . 127,155 92.9 130,427 93.1

Spouses. . . . . . . . . . . . . . . . . . . . . . . . . 631 .5 615 .4

Children . . . . . . . . . . . . . . . . . . . . . . . . 9,092 6.6 9,028 6.4
37

Calendar Year 2013 Operations

The acquisition and disposition of securities during calendar year 2013

changed the invested reserves of the OASI Trust Fund and the DI Trust

Fund. Table III.A7 presents these investment transactions for each trust fund

separately and for the trust funds combined.

Note: All investments are shown at par value. Totals do not necessarily equal the sums of rounded components.

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

Total Expenditures, Calendar Years 2009-13

Calendar year

OASI Trust Fund DI Trust Fund

OASI and DI

Trust Funds,

combined

Non-interest

income

Total

expenditures

Non-interest

income

Total

expenditures

Non-interest

income

Total

expenditures

2009 . . . . . . . . . . . 0.6 0.6 2.8 2.3 0.9 0.9

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

2011 . . . . . . . . . . . .6 .6 3.0 2.2 .9 .9

2012 . . . . . . . . . . . .5 .5 2.8 2.1 .9 .8

2013 . . . . . . . . . . . .5 .5 2.6 1.9 .8 .7

Table III.A7.—Trust Fund Investment Transactions, Calendar Year 2013

[In millions]

OASI

Trust Fund

DI

Trust Fund

OASI and DI

Trust Funds,

combined

Invested asset reserves, December 31, 2012a.

a

Invested asset reserves differ from total asset reserves by the amount of undisbursed balances. See tables

VI.A4 and VI.A5 for details.

$2,610,272 $122,802 $2,733,074

Acquisitions:

Special issues:

Certificates of indebtedness . . . . . . . . . . . 701,186 110,371 811,557

Bondsb . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Purchased on June 30, 2013. The interest rate on these purchases was 1.75 percent.

246,863 6,987 253,850

Total acquisitions . . . . . . . . . . . . . . . . . . . 948,049 117,358 1,065,407

Dispositions:

Special issues:

Certificates of indebtedness . . . . . . . . . . . 701,305 111,204 812,508

Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,527 38,233 220,760

Total dispositions . . . . . . . . . . . . . . . . . . . 883,831 149,437 1,033,268

Net increase in invested asset reserves . . . . . . 64,218 -32,079 32,139

Invested asset reserves, December 31, 2013a. 2,674,490 90,723 2,765,213
Financial Operations and Legislative Changes

38

B. SOCIAL SECURITY AMENDMENTS SINCE THE 2013 REPORT

Since the Trustees submitted the 2013 report to Congress, no laws have been

enacted that are expected to have notable financial effects on the OASDI

program.

However, the Supreme Court’s decision in the United States v. Windsor case,

issued in June 2013, is projected to have a small but significant effect on the

long-range cost of the OASDI program. The United States v. Windsor decision repealed parts of the Defense of Marriage Act, which affects the payment of federal benefits based on same-sex marriages. The extent to which

OASDI benefits based on marriage will be available to same-sex couples is

still not completely clear. SSA has issued guidelines, approved by the

Department of Justice, for certain benefits for same-sex couples who were

legally married when the insured account holder resided in a State or jurisdiction that recognized same-sex marriages at the time of application or

death. Expansion of this authority to other same-sex couples and to other

benefits is under review at the Department of Justice. For the estimates in

this report, the Trustees have assumed that Social Security will expand its

guidelines to recognize all auxiliary beneficiaries for such marriages and that

same-sex marriages will eventually be recognized in all States. This projected expansion of benefits has a small but significant financial impact over

the long-range period.

Sections IV.A.4 and IV.B.6 of this report provide further description of the

nature and magnitude of the effects of United States v. Windsor on the financial status of the OASDI program.
39

Short-Range Estimates

IV. ACTUARIAL ESTIMATES

This chapter presents actuarial estimates of the future financial condition of

the Social Security program. These estimates show the income, cost, and

asset reserves or unfunded obligation of the OASI and DI Trust Funds: (1) in

dollars over the 10-year short-range period; and (2) as a percentage of taxable payroll, as a percentage of gross domestic product, and in present-value

dollars over the 75-year long-range period. In addition, the chapter discusses

a variety of measures of the adequacy of current program financing. This

report distinguishes between: (1) the cost (obligations) of the program, which

includes all future benefits scheduled under current law; and (2) expenditures

(disbursements), which include actual payments for the past plus only the

portion of projected program cost that would be payable with the financing

provisions in current law.

This chapter presents the estimates and measures of trust fund financial adequacy for the short range period (2014-23) first, followed by estimates and

measures of actuarial status for the long range period (2014-88). Summary

measures are also provided for trust fund status over the infinite horizon. As

described in the Overview chapter of this report, these estimates depend

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

chapter presents estimates under three sets of assumptions to show a wide

range of possible outcomes, because assumptions related to these factors are

subject to uncertainty. The intermediate set of assumptions, designated as

alternative II, reflects the Trustees’ best estimate of future experience; the

low-cost alternative I is significantly more optimistic and the high-cost alternative III is significantly more pessimistic for the trust funds’ future financial

outlook. The tables of this report show the intermediate estimates first, followed by the low-cost and high-cost estimates. Chapter V describes these

three sets of assumptions, along with the actuarial methods used to produce

the estimates. Appendix D and appendix E present two additional methods to

illustrate the uncertainty of the projections. Appendix D presents sensitivity

analyses of the effects of variation in individual factors and appendix E presents probability distributions generated by a stochastic model.

A. SHORT-RANGE ESTIMATES

The Trustees consider the trust funds to be fully solvent if the funds can pay

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

solvency is the “trust fund ratio,” which is the reserves in a fund at the beginning of a year (which do not include advance tax transfers) expressed as a

percentage of the cost during the year. The trust fund ratio represents the proportion of a year’s cost which the reserves available at the beginning of that

year can cover. The Trustees assume that a trust fund ratio of 100 percent of
Actuarial Estimates

40

annual program cost provides a reasonable “contingency reserve.” Maintaining a reasonable contingency reserve is important because the trust funds do

not have borrowing authority. After reserves are depleted, the trust funds

would be unable to pay benefits in full on a timely basis if annual revenue

were less than annual cost. Unexpected events, such as severe economic

recessions or large changes in other trends, can quickly deplete reserves. In

such cases, a reasonable contingency reserve can maintain the ability to pay

scheduled benefits while giving lawmakers time to address possible changes

to the program.

The short-range test of financial adequacy applies to the OASI and DI Trust

Funds individually and combined on a theoretical basis. If the estimated trust

fund ratio is at least 100 percent at the beginning of the projection period, the

test requires that it remain at or above 100 percent throughout the 10-year

period. If the ratio is initially less than 100 percent, then it must reach at least

100 percent within 5 years (without reserve depletion at any time during this

period) and then remain at or above 100 percent throughout the remainder of

the 10-year period. This test is applied using the estimates based on the intermediate assumptions. If either trust fund fails this test, then program solvency in the next 10 years is in question, and lawmakers should take prompt

action to improve short-range financial adequacy.

1. Operations of the OASI Trust Fund

This subsection presents estimates, based on the assumptions described in

chapter V, of the operations and financial status of the OASI Trust Fund for

the period 2014-23. These estimates assume that there are no changes in the

statutory provisions and regulations under which the OASDI program currently operates.

1

Table IV.A1 shows these estimates, which indicate that the asset reserves of

the OASI Trust Fund continue to increase through 2021 under the intermediate assumptions, throughout the next 10 years under the low-cost assumptions, and through 2016 under the high-cost assumptions. However, trust

fund ratios decline throughout the 10-year period under all three sets of

assumptions. Based on the intermediate assumptions, the reserves of the

OASI Trust Fund continue to exceed 100 percent of annual cost by a large

amount through the end of 2023. Consequently, the OASI Trust Fund satisfies the test of short-range financial adequacy by a wide margin. Table IV.A1

also indicates that the OASI Trust Fund would satisfy the short-range test

even under the high-cost assumptions. See figure IV.A1 for an illustration of

these results.

1 The estimates shown in this subsection reflect 12 months of scheduled benefits in each year of the shortrange projection period. In practice, the actual payment dates have at times shifted over calendar year

boundaries as a result of the statutory requirement for early delivery of benefit checks when the normal

check delivery date is a Saturday, Sunday, or legal public holiday.
41

Short-Range Estimates

Table IV.A1.—Operations of the OASI Trust Fund, Calendar Years 2009-23a

[Dollar amounts in billions]

a Appendix A presents a detailed description of the components of income and cost, along with complete historical values.

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsb

b

Includes reimbursements from the General Fund of the Treasury to the OASI Trust Fund for: (1) the cost of

noncontributory wage credits for military service before 1957; (2) the cost of benefits to certain uninsured persons who attained age 72 before 1968; (3) the cost of payroll tax credits provided to employees in 1984 and

self-employed persons in 1984-89 by Public Law 98-21; (4) the cost in 2009-17 of excluding certain selfemployment earnings from SECA taxes under Public Law 110-246; and (5) payroll tax revenue forgone under

the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.

Taxation of

benefits

Net

interest Total

Benefit

paymentsc

c Projected benefits are estimated as scheduled under current law.

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratio

d

d The “Trust fund ratio” column represents reserves at the beginning of a year (which are identical to reserves

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:

2009 . . . $698.2 $570.4

e

e Between -$50 million and $50 million.

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

$19.9 $107.9 $564.3 $557.2 $3.4 $3.7 $133.9 $2,336.8 390

2010 . . . 677.1 544.8 $2.0 22.1 108.2 584.9 577.4 3.5 3.9 92.2 2,429.0 400

2011 . . . 698.8 482.4 87.8 22.2 106.5 603.8 596.2 3.5 4.1 95.0 2,524.1 402

2012 . . . 731.1 503.9 97.7 26.7 102.8 645.5 637.9 3.4 4.1 85.6 2,609.7 391

2013 . . . 743.8 620.8 4.2 20.7 98.1 679.5 672.1 3.4 3.9 64.3 2,674.0 384

Intermediate:

2014 . . . 768.0 643.9 .5 28.0 95.6 716.4 709.5 2.8 4.1 51.5 2,725.5 373

2015 . . . 816.8 691.1 .3 30.7 94.7 758.7 751.2 3.2 4.2 58.1 2,783.7 359

2016 . . . 858.8 729.2 .1 33.8 95.7 807.5 799.9 3.3 4.3 51.3 2,835.0 345

2017 . . . 909.7 773.5 .1 37.4 98.8 861.1 853.5 3.4 4.1 48.6 2,883.6 329

2018 . . . 965.3 820.7

e 40.9 103.6 920.5 912.4 3.6 4.6 44.7 2,928.3 313

2019 . . . 1,019.0 865.8

e 44.7 108.4 985.1 976.7 3.7 4.7 33.9 2,962.2 297

2020 . . . 1,072.0 910.9

e 48.6 112.5 1,054.6 1,045.9 3.8 4.9 17.4 2,979.5 281

2021 . . . 1,124.3 956.5

e 52.6 115.2 1,122.9 1,114.1 3.9 4.9 1.4 2,980.9 265

2022 . . . 1,176.3 1,001.8

e 56.9 117.6 1,197.3 1,188.1 4.0 5.2 -21.0 2,959.9 249

2023 . . . 1,228.2 1,046.7

e 61.6 119.9 1,277.1 1,267.7 4.1 5.3 -48.9 2,911.0 232

Low-cost:

2014 . . . 774.2 649.4 .5 28.0 96.4 716.3 709.4 2.8 4.1 57.9 2,731.9 373

2015 . . . 848.0 717.7 .3 30.8 99.2 759.9 752.4 3.2 4.2 88.1 2,820.0 360

2016 . . . 912.7 771.8 .1 34.2 106.7 816.2 808.7 3.3 4.3 96.5 2,916.5 345

2017 . . . 991.3 836.0 .1 38.2 117.1 880.2 872.6 3.5 4.1 111.1 3,027.6 331

2018 . . . 1,071.3 900.5

e 42.2 128.6 949.7 941.4 3.7 4.6 121.6 3,149.2 319

2019 . . . 1,151.1 964.1

e 46.5 140.5 1,023.9 1,015.3 3.9 4.8 127.1 3,276.3 308

2020 . . . 1,232.8 1,028.9

e 50.9 153.0 1,103.3 1,094.3 4.1 5.0 129.5 3,405.8 297

2021 . . . 1,316.0 1,094.7

e 55.4 166.0 1,182.7 1,173.4 4.2 5.0 133.4 3,539.1 288

2022 . . . 1,405.2 1,164.5

e 60.4 180.3 1,269.6 1,259.9 4.4 5.3 135.5 3,674.7 279

2023 . . . 1,497.4 1,235.9

e 65.8 195.8 1,363.9 1,353.8 4.6 5.4 133.6 3,808.3 269

High-cost:

2014 . . . 759.7 636.7 .5 28.0 94.6 716.5 709.6 2.8 4.1 43.2 2,717.2 373

2015 . . . 782.0 660.4 .3 30.7 90.6 758.3 750.8 3.2 4.3 23.7 2,740.9 358

2016 . . . 807.3 686.0 .1 33.6 87.6 802.6 794.9 3.3 4.4 4.6 2,745.5 341

2017 . . . 836.8 714.3 .1 36.9 85.6 850.2 842.6 3.4 4.2 -13.3 2,732.2 323

2018 . . . 869.7 744.8

e 40.1 84.7 902.7 894.6 3.4 4.7 -33.0 2,699.2 303

2019 . . . 900.6 773.7

e 43.5 83.4 959.5 951.2 3.5 4.8 -58.9 2,640.3 281

2020 . . . 931.0 803.0

e 47.0 80.9 1,020.1 1,011.6 3.6 4.9 -89.1 2,551.1 259

2021 . . . 960.5 833.3

e 50.5 76.6 1,078.4 1,069.8 3.7 4.9 -117.9 2,433.2 237

2022 . . . 989.4 863.9

e 54.3 71.3 1,141.5 1,132.6 3.7 5.2 -152.1 2,281.1 213

2023 . . . 1,015.5 891.5

e 58.3 65.7 1,208.5 1,199.5 3.8 5.2 -193.1 2,088.1 189
Actuarial Estimates

42

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

set of assumptions throughout the short-range projection period. The estimated increases in income reflect increases in estimated OASDI taxable

earnings and growth in interest earnings on the invested reserves in the trust

fund. Employment increases in every year through 2023 for all three alternatives. The number of persons with taxable earnings increases on the basis of

alternatives I, II, and III from 163 million during calendar year 2013 to about

185 million, 181 million, and 176 million, respectively, in 2023. The total

annual amount of taxable earnings increases in every year through 2023 for

each alternative. Total earnings increase from $5,913 billion in 2013 to

$11,737 billion, $9,937 billion, and $8,459 billion in 2023, on the basis of

alternatives I, II, and III, respectively. These increases in taxable earnings are

due primarily to: (1) projected increases in employment levels as the working age population increases; (2) trend increases in average earnings in covered employment (reflecting both real growth and price inflation);

(3) increases in the contribution and benefit base under the automatic-adjustment provisions; and (4) growth in employment and average earnings, temporarily higher than trend, as the economy recovers from the economic

recession.

Interest earnings generally contribute to the overall projected increase in

trust fund income during this period. Despite the projected growth in OASI

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

[Asset reserves as a percentage of annual cost]

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

Calendar year

DI

OASI

Historical Estimated

"Minimum"levelfor short-term financial adequacy

I

II III

I

II

III
43

Short-Range Estimates

Trust Fund reserves, annual interest earnings decline slightly in the early projection years under all three sets of assumptions due to historically low interest rates assumed for newly-issued bonds. Thereafter, interest income

increases under the intermediate and low-cost assumptions due to the net

effects of higher reserve levels and the patterns of projected interest rates.

Under the high-cost assumptions, declining reserves cause interest income to

continue to decrease throughout the short-range period. Although interest

earnings generally increase over the short-range period, interest declines as a

share of total OASI Trust Fund income. By 2023, OASI interest income is

about 10 percent of total trust fund income under the intermediate assumptions, as compared to 13 percent in 2013.

Rising OASI cost during 2014-23 reflects automatic benefit increases as well

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

monthly earnings underlying benefits. The growth in the number of beneficiaries since 2009 and the expected future growth result both from the

increase in the aged population and from the increase in the proportion of the

population that is eligible for benefits.

The Treasury invests OASI income in financial securities, generally special

public-debt obligations of the U.S. Government. The revenue used to make

these purchases flows to the General Fund of the Treasury. The trust fund

earns interest on these securities, and the Treasury invests maturing securities

in new securities if not immediately needed to pay program costs. Program

expenditures require the redemption of trust fund securities, generally prior

to maturity, to cover the payments made by the General Fund of the Treasury

on behalf of the trust fund.

2. Operations of the DI Trust Fund

Table IV.A2 shows the estimated operations and financial status of the DI

Trust Fund during calendar years 2014-23 under the three sets of assumptions, together with values for actual experience during 2009-13. Non-interest income increases steadily after 2013 under each alternative, due to most

of the same factors described previously for the OASI Trust Fund. DI cost

grows at a slower rate than DI income or OASI cost, but remains greater than

DI income. As a result, after having reached a maximum in 2008, DI Trust

Fund reserves continue to decrease after 2013 under each alternative. Under

the intermediate assumptions, reserves continue to decline until their projected depletion in the fourth quarter of 2016. Under the low-cost assumptions, reserves begin to increase again after reaching a low point in 2019;

reserves are at such low levels in 2019 and 2020 that the DI trust fund

requires advance tax transfers1

to pay scheduled benefits in a timely fashion.

1 Advance tax transfers are a change in the timing of the crediting of payroll tax income to a trust fund in

which all payroll taxes for a month are credited to the trust fund on the first of the month rather than throughout the month. This timing change allows the trust fund to pay benefits due early in the month on time.

Advance tax transfers are permitted under current law only when necessary to pay scheduled benefits.
Actuarial Estimates

44

Under the high-cost assumptions, DI reserves decline steadily until depletion

in the second quarter of 2016.

Table IV.A2.—Operations of the DI Trust Fund, Calendar Years 2009-23a

[Dollar amounts in billions]

a Appendix A presents a detailed description of the components of income and cost, along with complete historical values.

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsb

b Includes reimbursements from the General Fund of the Treasury to the DI Trust Fund for: (1) the cost of noncontributory wage credits for military service before 1957; (2) the cost of payroll tax credits provided to

employees in 1984 and self-employed persons in 1984-89 by Public Law 98-21; (3) the cost in 2009-17 of

excluding certain self-employment earnings from SECA taxes under Public Law 110-246; and (4) payroll tax

revenue forgone under the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.

Taxation of

benefits

Net

interest Total

Benefit

paymentsc

c Projected benefits are estimated as scheduled under current law.

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratio

d

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

2009 . . . $109.3 $96.9

e

e Between -$50 million and $50 million.

$2.0 $10.5 $121.5 $118.3 $2.7 $0.4 -$12.2 $203.5 178

2010 . . . 104.0 92.5 $0.4 1.9 9.3 127.7 124.2 3.0 .5 -23.6 179.9 159

2011 . . . 106.3 81.9 14.9 1.6 7.9 132.3 128.9 2.9 .5 -26.1 153.9 136

2012 . . . 109.1 85.6 16.5 .6 6.4 140.3 136.9 2.9 .5 -31.2 122.7 110

2013 . . . 111.2 105.4 .7 .4 4.7 143.4 140.1 2.8 .6 -32.2 90.4 86

Intermediate:

2014 . . . 114.4 109.3 .1 1.7 3.3 146.7 143.3 2.9 .4 -32.2 58.2 62

2015 . . . 121.2 117.3 .1 1.8 2.0 151.0 147.3 3.3 .4 -29.8 28.4 39

2016 . . .

f 123.8e 2.0 f

f The DI Trust Fund becomes depleted in 2016 under the intermediate and the high-cost assumptions. Accordingly, certain trust fund operation values from the year of the trust fund depletion through 2023 are not meaningful under the present law.

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

155.8 152.1 3.2 .4

f f 18

2017 . . .

f 131.4e 2.2 f 161.2 157.3 3.6 .3f f f

2018 . . .

f 139.4e 2.5 f 167.1 162.9 3.9 .3f f f

2019 . . .

f 147.0e 2.7 f 173.6 169.2 4.2 .3f f f

2020 . . .

f 154.7e 2.9 f 180.6 175.9 4.4 .2f f f

2021 . . .

f 162.4e 3.1 f 189.4 184.5 4.7 .2f f f

2022 . . .

f 170.1e 3.4 f 198.5 193.4 5.0 .2f f f

2023 . . .

f 177.7e 3.7 f 207.8 202.5 5.2 .1f f f

Low-cost:

2014 . . . 115.4 110.3 .1 1.7 3.4 144.7 141.4 2.9 .4 -29.3 61.1 62

2015 . . . 126.0 121.9 .1 1.8 2.3 147.5 143.8 3.3 .4 -21.5 39.7 41

2016 . . . 134.5 131.1

e 2.0 1.4 151.6 147.9 3.3 .4 -17.1 22.6 26

2017 . . . 144.9 142.0

e 2.2 .7 156.8 152.7 3.7 .3 -11.9 10.7 14

2018 . . . 155.7 152.9

e 2.4 .4 162.2 157.8 4.1 .3 -6.5 4.2 7

2019 . . . 166.6 163.7

e 2.6 .3 168.0 163.3 4.5 .3 -1.5 2.7 2

2020 . . . 177.8 174.7

e 2.8 .3 174.3 169.3 4.8 .2 3.5 6.3 2

2021 . . . 189.6 185.9

e 3.0 .7 182.4 177.1 5.1 .2 7.1 13.4 3

2022 . . . 202.3 197.7

e 3.3 1.3 191.0 185.3 5.5 .1 11.4 24.8 7

2023 . . . 215.7 209.9

e 3.5 2.3 199.8 193.8 5.9 .1 15.8 40.6 12

High-cost:

2014 . . . 113.2 108.1 .1 1.7 3.3 148.7 145.3 2.9 .4 -35.5 54.9 61

2015 . . . 115.7 112.1 .1 1.9 1.6 154.9 151.1 3.3 .4 -39.2 15.7 35

2016 . . .

f 116.5e 2.1 f 161.0 157.4 3.2 .4f f 10

2017 . . .

f 121.3e 2.3 f 167.3 163.5 3.5 .4f f f

2018 . . .

f 126.5e 2.6 f 173.9 169.8 3.7 .3f f f

2019 . . .

f 131.4e 2.8 f 180.9 176.7 3.9 .3f f f

2020 . . .

f 136.4e 3.0 f 188.2 183.9 4.1 .2f f f

2021 . . .

f 141.5e 3.3 f 197.2 192.7 4.3 .2f f f

2022 . . .

f 146.7e 3.5 f 206.3 201.6 4.5 .2f f f

2023 . . .

f 151.4e 3.8 f 215.4 210.5 4.7 .2f f f
45

Short-Range Estimates

In the future, DI cost increases 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. The number of DI beneficiaries in current-payment status increases

but at a slower rate than in the past 20 years during the short-range projection

period.

At the beginning of calendar year 2013, the reserves of the DI Trust Fund

represented 86 percent of annual cost. During 2013, DI cost exceeded

income, and the trust fund ratio for the beginning of 2014 decreased to about

62 percent. Under the intermediate assumptions, cost exceeds total income

throughout the short-range projection period. The projected cost in excess of

income results in the estimated depletion of the DI Trust Fund reserves in the

fourth quarter of 2016.

Under the low-cost assumptions, the trust fund ratio decreases to a low of

2 percent at the beginning of 2020 before increasing to 12 percent at the

beginning of 2023. Under the high-cost assumptions, the reserves of the DI

Trust Fund decline steadily until depletion in the second quarter of 2016.

Since the reserves of the DI Trust Fund were lower than estimated annual

cost at the beginning of 2014, and they remain below that level throughout

the short-range period, the DI Trust Fund fails the Trustees’ short-range test

of financial adequacy under all three alternatives. Furthermore, the DI Trust

Fund becomes depleted by the end of the fourth and second quarters of 2016

under alternatives II and III, respectively, and is able to pay scheduled benefits on time in 2019 and 2020 under alternative I only by using advance tax

transfers.

3. Operations of the Combined OASI and DI Trust Funds

Table IV.A3 shows the estimated operations and status of the combined

OASI and DI Trust Funds for calendar years 2014-23 under the three alternatives, together with actual experience in 2009-13. Income and cost for the

OASI Trust Fund represent over 80 percent of the corresponding amounts for

the combined OASI and DI Trust Funds. Therefore, based on the relative

strength of the OASI Trust Fund over the next 10 years, the combined OASI

and DI Trust Funds would have sufficient financial resources to pay all

scheduled benefits through the end of the short-range period and would satisfy the short-range test of financial adequacy under all three alternative sets

of assumptions. Under current law, one trust fund cannot share financial

resources with another trust fund.
Actuarial Estimates

46

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

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

Calendar Years 2009-23a

[Dollar amounts in billions]

a Appendix A presents a detailed description of the components of income and cost, along with complete historical values.

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursements

b

b

Includes reimbursements from the General Fund of the Treasury to the OASI and DI Trust Funds for: (1) the

cost of noncontributory wage credits for military service before 1957; (2) the cost of benefits to certain uninsured persons who attained age 72 before 1968; (3) the cost of payroll tax credits provided to employees in

1984 and self-employed persons in 1984-89 by Public Law 98-21; (4) the cost in 2009-17 of excluding certain

self-employment earnings from SECA taxes under Public Law 110-246; and (5) payroll tax revenue forgone

under the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.

Taxation of

benefits

Net

interest Total

Benefit

paymentsc

c Projected benefits are estimated as scheduled under current law.

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiod

d The “Trust fund ratio” column represents reserves at the beginning of a year (which are identical to reserves

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:

2009 . . . $807.5 $667.3 e

e Between -$50 million and $50 million.

$21.9 $118.3 $685.8 $675.5 $6.2 $4.1 $121.7 $2,540.3 353

2010 . . . 781.1 637.3 $2.4 23.9 117.5 712.5 701.6 6.5 4.4 68.6 2,609.0 357

2011 . . . 805.1 564.2 102.7 23.8 114.4 736.1 725.1 6.4 4.6 69.0 2,677.9 354

2012 . . . 840.2 589.5 114.3 27.3 109.1 785.8 774.8 6.3 4.7 54.4 2,732.3 341

2013 . . . 855.0 726.2 4.9 21.1 102.8 822.9 812.3 6.2 4.5 32.1 2,764.4 332

Intermediate:

2014 . . . 882.4 753.2 .5 29.7 99.0 863.1 852.8 5.7 4.6 19.3 2,783.7 320

2015 . . . 938.0 808.4 .4 32.6 96.7 909.7 898.5 6.6 4.7 28.3 2,812.1 306

2016 . . . 985.3 853.0 .1 35.8 96.3 963.3 952.0 6.5 4.7 22.0 2,834.1 292

2017 . . . 1,042.7 904.9 .1 39.6 98.1 1,022.3 1,010.8 7.0 4.5 20.4 2,854.4 277

2018 . . . 1,105.0 960.0 e 43.4 101.6 1,087.6 1,075.2 7.5 4.9 17.4 2,871.8 262

2019 . . . 1,165.1 1,012.9 e 47.4 104.9 1,158.7 1,145.8 7.9 5.0 6.4 2,878.3 248

2020 . . . 1,224.5 1,065.5 e 51.5 107.4 1,235.2 1,221.8 8.2 5.1 -10.7 2,867.6 233

2021 . . . 1,283.2 1,118.9 e 55.8 108.5 1,312.3 1,298.6 8.6 5.1 -29.1 2,838.4 219

2022 . . . 1,341.4 1,172.0 e 60.3 109.2 1,395.8 1,381.5 9.0 5.4 -54.4 2,784.1 203

2023 . . . 1,399.3 1,224.5 e 65.2 109.5 1,484.9 1,470.2 9.4 5.4 -85.7 2,698.4 187

Low-cost:

2014 . . . 889.6 759.7 .5 29.7 99.8 861.1 850.8 5.7 4.6 28.5 2,793.0 321

2015 . . . 974.0 839.6 .4 32.6 101.5 907.4 896.2 6.6 4.6 66.7 2,859.6 308

2016 . . . 1,047.2 902.8 .1 36.1 108.1 967.8 956.6 6.6 4.7 79.4 2,939.0 295

2017 . . . 1,136.2 978.0 .1 40.4 117.8 1,037.0 1,025.3 7.2 4.4 99.2 3,038.3 283

2018 . . . 1,227.0 1,053.4 e 44.6 129.0 1,111.9 1,099.2 7.8 4.9 115.1 3,153.4 273

2019 . . . 1,317.6 1,127.8 e 49.0 140.7 1,191.9 1,178.6 8.3 5.0 125.7 3,279.0 265

2020 . . . 1,410.6 1,203.6 e 53.7 153.3 1,277.6 1,263.6 8.9 5.2 133.0 3,412.0 257

2021 . . . 1,505.6 1,280.5 e 58.4 166.6 1,365.1 1,350.6 9.4 5.2 140.5 3,552.5 250

2022 . . . 1,607.5 1,362.2 e 63.6 181.7 1,460.6 1,445.2 9.9 5.5 146.9 3,699.4 243

2023 . . . 1,713.1 1,445.7 e 69.3 198.1 1,563.7 1,547.7 10.5 5.6 149.4 3,848.9 237

High-cost:

2014 . . . 872.9 744.8 .5 29.7 97.8 865.2 854.9 5.7 4.6 7.7 2,772.1 320

2015 . . . 897.6 772.5 .4 32.6 92.1 913.2 901.9 6.6 4.7 -15.5 2,756.6 304

2016 . . . 925.7 802.5 .1 35.7 87.4 963.6 952.3 6.5 4.8 -37.8 2,718.8 286

2017 . . . 958.8 835.6 .1 39.2 84.0 1,017.5 1,006.1 6.8 4.6 -58.7 2,660.1 267

2018 . . . 995.2 871.3 e 42.7 81.2 1,076.6 1,064.4 7.2 5.0 -81.4 2,578.7 247

2019 . . . 1,029.0 905.0 e 46.3 77.6 1,140.4 1,127.9 7.4 5.1 -111.4 2,467.3 226

2020 . . . 1,062.1 939.4 e 50.1 72.6 1,208.3 1,195.5 7.7 5.2 -146.2 2,321.0 204

2021 . . . 1,094.2 974.8 e 53.8 65.6 1,275.6 1,262.5 8.0 5.1 -181.3 2,139.7 182

2022 . . . 1,125.6 1,010.5 e 57.8 57.2 1,347.7 1,334.2 8.2 5.3 -222.2 1,917.5 159

2023 . . . 1,153.3 1,042.9 e 62.1 48.3 1,423.9 1,410.1 8.5 5.4 -270.6 1,646.9 135
47

Short-Range Estimates

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

From the 2013 Report

Table IV.A4 presents an analysis of the factors underlying the changes in the

intermediate estimates over the short-range projection period for the OASI,

DI, and the combined funds from last year’s report to this report.

In the 2013 report, the trust fund ratio for OASI reached 250 percent at the

beginning of 2022—the tenth projection year for that report. The change in

the short-range valuation period alone, from 2013-22 to 2014-23, lowered

the estimated trust fund ratio for the tenth year by 15 percentage points, to

235 percent. Changes to reflect changes in law and regulations since last

year’s report, the most recent data, adjustments to the assumptions for future

years, and changes in projection methods further reduced the ratio for the

tenth projection year to 232 percent.

Changes in demographic assumptions over the short-range period did not

significantly affect the projected tenth-year trust fund ratio for OASI.

Changes in economic data and assumptions, primarily the effect of lower

cost-of-living adjustments, lower interest rates, and lower payroll tax revenues over the ten year period, generated partially offsetting effects on OASI

trust fund ratios resulting in a net reduction in the OASI trust fund ratio of 2

percentage points by the beginning of 2023. Incorporating recent programmatic data, including the numbers of beneficiaries and amount of benefit

payments, resulted in no significant net effect on the tenth year OASI trust

fund ratio. In addition, there are two changes in the short-range projection

methodology worth noting as compared to the methodology used for the

2013 report. The first of these is an improvement in the process used to project the average benefit for new awards, and the second is a refinement of the

method for projecting the number of retired workers. In combination, these

methodology changes decreased the ending trust fund ratio by a net of 1 percentage point, primarily due to the second change. Finally, the totality of legislative and regulatory changes since the 2013 report was published,

including the United States v. Windsor decision, did not have a significant

effect on the tenth year trust fund ratio. See section III.B for details.

Table IV.A4 also shows corresponding estimates of the factors underlying

the changes in the financial projections for the DI Trust Fund, and for the

combined OASI and DI Trust Funds. The ratios at the beginning of 2022 for

the DI Trust Fund and the combined OASI and DI Trust Funds in last year’s

report, as well as the corresponding ratios for the beginning of 2023 in this

year’s report, are theoretical because the Trustees project that the DI Trust

Fund reserves will be depleted prior to the end of the short range projection

period. The DI trust fund ratio increased by 9 percentage points due to lowerthan-expected disability incidence rates experienced since last year. The
Actuarial Estimates

48

overall 9-percentage-point decrease in the DI trust fund ratio is the net effect

of this change in disability incidence and the other factors described above

for the OASI Trust Fund.

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

Table IV.A4.—Reasons for Change in Trust Fund (Unfunded Obligation) Ratios

at the Beginning of the Tenth Year of Projection Under Intermediate Assumptions

[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 2022a.

a Figures for DI, and OASI and DI combined, are theoretical because the DI Trust Fund reserves are depleted

before the beginning of the tenth year under the assumptions of each report. The figures for DI are the ratios

of the unfunded obligation at the beginning of the tenth year to cost for that year.

250 -76 204

Change in trust fund ratio due to changes in:

Legislation and regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b b b

Valuation period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15 -14 -15

Demographic data and assumptions. . . . . . . . . . . . . . . . . . . . . . .

b b

b Between -0.5 and 0.5 percent.

b

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

Programmatic data and assumptions . . . . . . . . . . . . . . . . . . . . . .

b 9 2

Projection methods and data . . . . . . . . . . . . . . . . . . . . . . . . . . . -1 b-1

Total change in trust fund ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18 -9 -17

Trust fund ratio shown in this report for calendar year 2023a. . . . . . 232 -85 187
49

Long-Range Estimates

B. LONG-RANGE ESTIMATES

The Trustees use three types of financial measures to assess the actuarial status of the Social Security trust funds under the financing approach specified

in current law: (1) annual cash-flow measures, including income rates, cost

rates, and balances; (2) trust fund ratios; and (3) summary measures such as

actuarial balances and unfunded obligations.

The difference between the annual income rate and annual cost rate, both

expressed as percentages of taxable payroll, is the annual balance. The level

and trend of the annual balances at the end of the 75-year projection period

are factors that the Trustees use to assess the financial condition of the program.

The trust fund ratio for a year is the proportion of the year’s projected cost

that could be paid with funds available at the beginning of the year. Critical

factors considered by the Trustees in assessing actuarial status include:

(1) the level and year of maximum trust fund ratio; (2) the year of depletion

of the fund reserves and the percent of scheduled benefits that is still payable

after reserves are depleted; and (3) the stability of the trust fund ratio at the

end of the long-range period.

Solvency at any point in time requires that sufficient financial resources are

available to pay all scheduled benefits at that time. Solvency is generally

indicated by a positive trust fund ratio. “Sustainable solvency” for the financing of the program under a specified set of assumptions has been achieved

when the projected trust fund ratio is positive throughout the 75-year projection period and is either stable or rising at the end of the period.

Summarized measures for any period indicate whether projected income is

sufficient, on average, for the whole period. Summarized measures can only

indicate the solvency status of a fund for the end of the period. The Trustees

summarize the total income and cost over valuation periods that extend

through 75 years and over the infinite horizon

1. This section presents two

summarized measures: (1) the actuarial balance; and (2) the open group

unfunded obligation. The actuarial balance indicates the size of any surplus

or shortfall as a percentage of the taxable payroll over the period. The open

group unfunded obligation indicates the size of any shortfall in present-value

dollars.

This section also includes additional information that the Trustees use to

assess the financial status of the Social Security program, including: (1) a

comparison of the number of beneficiaries to the number of covered work1 See Appendix F.
Actuarial Estimates

50

ers; (2) the test of long-range close actuarial balance; and (3) the reasons for

the change in the actuarial balance from the last report.

1. Annual Income Rates, Cost Rates, and Balances

The concepts of income rate and cost rate, expressed as percentages of taxable payroll, are important in the consideration of the long-range actuarial

status of the trust funds. The annual income rate is the ratio of all non-interest income to the OASDI taxable payroll for the year. Non-interest income

includes payroll taxes, taxes on scheduled benefits, and any general fund

transfers or reimbursements. The OASDI taxable payroll consists of the total

earnings subject to OASDI taxes with some relatively small adjustments.

1

The annual cost rate is the ratio of the cost of the program to the taxable payroll for the year. The cost includes scheduled benefits, administrative

expenses, net interchange with the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries. For

any year, the income rate minus the cost rate is the “balance” for the year.

Table IV.B1 presents a comparison of the estimated annual income rates and

cost rates by trust fund and alternative. Table VI.G8 shows detailed longrange projections of trust fund operations in current dollar amounts.

Under the intermediate assumptions, the Trustees project that the OASI

income rate will rise at a very gradual rate from 10.87 percent of taxable payroll for 2014 to 11.43 percent for 2088. Income from taxation of benefits

causes this increase for two main reasons: (1) total benefits are rising faster

than payroll; and (2) the benefit-taxation threshold amounts are fixed (not

indexed), and therefore an increasing share of total benefits will be subject to

tax as incomes and benefits rise. The pattern of the cost rate is much different. The OASI cost rate is projected to increase relatively slowly from 11.58

percent of payroll for 2014 to 11.86 percent of payroll for 2018, as the economic recovery through this period largely offsets the effects of the aging

population. From 2018 to 2035, the cost rate rises rapidly because the retirement of the baby-boom generation will increase the number of beneficiaries

much faster than the number of workers increases, as subsequent lowerbirth-rate generations replace the baby-boom generation at working ages.

From 2037 to 2051, the cost rate declines because the aging baby-boom generation is gradually replaced at retirement ages by historically low-birth-rate

generations born between 1966 and 1989, causing the beneficiary-to-worker

ratio to decline. After 2051, the projected OASI cost rate generally rises

1 Adjustments include adding deemed wage credits based on military service for 1983-2001 and reflecting

the lower effective tax rates (as compared to the combined employee-employer rate) that apply to multipleemployer “excess wages.” Lower rates also applied to net earnings from self-employment before 1984 and

to income from tips before 1988.
51

Long-Range Estimates

slowly, reaching 15.88 percent of taxable payroll for 2088, primarily because

of projected reductions in death rates.

The Trustees’ projections of income rates under the low-cost and high-cost

sets of assumptions are similar to those projected for the intermediate

assumptions, because income rates are largely a reflection of the payroll tax

rates specified in the law, with the gradual change from taxation of benefits

noted above. In contrast, OASI cost rates for the low-cost and high-cost

assumptions are significantly different from those projected for the intermediate assumptions. For the low-cost assumptions, the OASI cost rate

decreases through 2017, and then rises until it peaks in 2034 at 12.77 percent

of payroll. Thereafter, the cost rate generally declines until it reaches

11.29 percent of payroll for 2088, at which point the income rate reaches

11.18 percent. For the high-cost assumptions, the OASI cost rate rises

throughout the 75-year period. It rises relatively rapidly through about 2035

because of the aging of the baby-boom generation. Thereafter, the cost rate

continues to rise and reaches 23.24 percent of payroll for 2088, at which

point the income rate reaches 11.83 percent.

The pattern of the projected OASI annual balance is important in the analysis

of the financial condition of the program. Under the intermediate assumptions, the annual balance is negative throughout the projection period. This

annual deficit rises slowly from 0.71 percent of payroll for 2014 to

0.76 percent for 2018, and then rapidly to 3.71 percent for 2037. The annual

deficit then declines to 3.33 percent of payroll for 2051, and generally rises

thereafter, reaching 4.45 percent of taxable payroll for 2088.

Under the low-cost assumptions, the Trustees project smaller negative OASI

annual deficits throughout the projection period. The annual deficit declines

to 0.08 percent of payroll for 2017, rises to 1.54 percent for 2034, and then

declines for most years thereafter, reaching a deficit of 0.12 percent of payroll for 2088. Under the high-cost assumptions, the OASI balance worsens

throughout the projection period. Annual deficits rise to 2.24 percent for

2020, 6.85 percent for 2050, and 11.41 percent of payroll for 2088.
Actuarial Estimates

52

Table IV.B1.—Annual Income Rates, Cost Rates, and Balances,

Calendar Years 1990-2090

[As a percentage of taxable payroll]

Calendar

year

OASI DI OASDI

Income

ratea

Cost

rate Balance

Income

ratea

Cost

rate Balance

Income

ratea

Cost

rate Balance

Historical data:

1990. . . . . 11.47 9.66 1.82 1.18 1.09 0.10 12.66 10.74 1.91

1995. . . . . 10.64 10.22 .42 1.87 1.44 .43 12.51 11.67 .85

2000. . . . . 10.84 8.98 1.87 1.78 1.42 .36 12.62 10.40 2.23

2001. . . . . 10.90 9.08 1.82 1.82 1.48 .35 12.72 10.55 2.17

2002. . . . . 11.06 9.29 1.76 1.85 1.60 .24 12.90 10.89 2.01

2003. . . . . 10.79 9.35 1.44 1.80 1.68 .12 12.59 11.03 1.56

2004. . . . . 10.73 9.27 1.46 1.79 1.78 .02 12.53 11.05 1.48

2005. . . . . 10.96 9.31 1.65 1.84 1.85 -.02 12.80 11.16 1.63

2006. . . . . 10.96 9.18 1.78 1.83 1.88 -.05 12.79 11.06 1.73

2007. . . . . 11.01 9.44 1.57 1.84 1.88 -.04 12.85 11.32 1.53

2008. . . . . 10.90 9.54 1.37 1.83 2.01 -.19 12.73 11.55 1.18

2009. . . . . 11.23 10.74 .50 1.88 2.31 -.43 13.11 13.05 .06

2010. . . . . 10.75 11.06 -.30 1.79 2.41 -.62 12.54 13.47 -.92

2011 . . . . . 10.84 11.04 -.21 1.80 2.42 -.62 12.64 13.47 -.83

2012. . . . . 11.04 11.34 -.30 1.81 2.46 -.66 12.84 13.80 -.96

2013. . . . . 10.96 11.53 -.57 1.81 2.43 -.63 12.77 13.97 -1.20

Intermediate:

2014. . . . . 10.87 11.58 -.71 1.80 2.37 -.58 12.67 13.95 -1.29

2015. . . . . 11.09 11.65 -.56 1.83 2.32 -.49 12.92 13.97 -1.05

2016. . . . . 11.07 11.71 -.64 1.83 2.26 -.43 12.89 13.97 -1.08

2017. . . . . 11.08 11.77 -.69 1.83 2.20 -.38 12.91 13.97 -1.06

2018. . . . . 11.10 11.86 -.76 1.83 2.15 -.33 12.93 14.02 -1.08

2019. . . . . 11.12 12.03 -.91 1.83 2.12 -.29 12.95 14.15 -1.20

2020. . . . . 11.13 12.23 -1.10 1.83 2.10 -.27 12.96 14.33 -1.37

2021. . . . . 11.15 12.41 -1.26 1.83 2.09 -.26 12.98 14.50 -1.52

2022. . . . . 11.18 12.64 -1.46 1.83 2.10 -.26 13.01 14.74 -1.73

2023. . . . . 11.20 12.90 -1.71 1.83 2.10 -.27 13.03 15.00 -1.97

2025. . . . . 11.23 13.42 -2.19 1.84 2.12 -.28 13.07 15.54 -2.47

2030. . . . . 11.31 14.52 -3.21 1.84 2.09 -.25 13.15 16.60 -3.46

2035. . . . . 11.34 15.01 -3.66 1.84 2.08 -.24 13.19 17.09 -3.90

2040. . . . . 11.35 15.00 -3.64 1.84 2.09 -.24 13.20 17.09 -3.89

2045. . . . . 11.35 14.78 -3.43 1.85 2.16 -.31 13.20 16.94 -3.74

2050. . . . . 11.35 14.69 -3.34 1.85 2.20 -.35 13.20 16.89 -3.69

2055. . . . . 11.36 14.78 -3.42 1.85 2.24 -.38 13.21 17.01 -3.80

2060. . . . . 11.38 15.03 -3.65 1.85 2.23 -.37 13.23 17.26 -4.03

2065. . . . . 11.39 15.26 -3.86 1.85 2.24 -.39 13.25 17.50 -4.25

2070. . . . . 11.41 15.49 -4.09 1.85 2.25 -.39 13.26 17.74 -4.48

2075. . . . . 11.42 15.65 -4.23 1.85 2.24 -.38 13.27 17.88 -4.61

2080. . . . . 11.42 15.63 -4.21 1.86 2.27 -.42 13.27 17.90 -4.63

2085. . . . . 11.42 15.73 -4.31 1.86 2.31 -.45 13.28 18.04 -4.76

2090. . . . . 11.44 15.99 -4.55 1.86 2.30 -.45 13.30 18.29 -5.00

First year balance becomes

negative and remains negative

throughout the projection

period. . . . . . . . . . . . . . . . . . . . 2010 . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . 2010

Low-cost:

2014. . . . . 10.81 11.43 -.61 1.79 2.31 -.52 12.60 13.74 -1.14

2015. . . . . 11.11 11.28 -.16 1.84 2.19 -.35 12.95 13.46 -.52

2016. . . . . 11.03 11.17 -.14 1.82 2.08 -.25 12.86 13.25 -.39

2017. . . . . 11.05 11.12 -.08 1.82 1.98 -.16 12.87 13.10 -.23

2018. . . . . 11.06 11.15 -.08 1.82 1.90 -.08 12.89 13.05 -.16

2019. . . . . 11.07 11.22 -.15 1.82 1.84 -.02 12.89 13.06 -.16

2020. . . . . 11.08 11.32 -.24 1.82 1.79 .03 12.90 13.11 -.21

2021. . . . . 11.10 11.41 -.31 1.82 1.76 .06 12.92 13.17 -.25

2022. . . . . 11.12 11.52 -.41 1.82 1.73 .09 12.94 13.26 -.32

2023. . . . . 11.13 11.66 -.53 1.82 1.71 .12 12.96 13.37 -.42
53

Long-Range Estimates

Notes:

1. The income rate excludes interest income.

2. Revisions of taxable payroll may change some historical values.

3. Totals do not necessarily equal the sums of rounded components.

The DI cost rate rose substantially from 1.09 percent of taxable payroll for

1990 to 1.88 percent of taxable payroll for 2007 as the baby boom generation

Low-cost (Cont.):

2025. . . . . 11.16 11.99 -0.83 1.83 1.68 0.14 12.99 13.67 -0.69

2030. . . . . 11.21 12.62 -1.41 1.83 1.58 .25 13.04 14.20 -1.16

2035. . . . . 11.23 12.76 -1.53 1.83 1.52 .31 13.06 14.28 -1.22

2040. . . . . 11.22 12.50 -1.28 1.83 1.49 .34 13.06 13.99 -.94

2045. . . . . 11.21 12.13 -.92 1.83 1.51 .32 13.04 13.65 -.60

2050. . . . . 11.20 11.91 -.70 1.83 1.52 .31 13.04 13.43 -.39

2055. . . . . 11.20 11.84 -.64 1.83 1.52 .31 13.04 13.37 -.33

2060. . . . . 11.21 11.89 -.68 1.83 1.50 .34 13.04 13.38 -.34

2065. . . . . 11.21 11.86 -.66 1.83 1.49 .35 13.04 13.35 -.31

2070. . . . . 11.20 11.81 -.60 1.83 1.48 .36 13.04 13.29 -.25

2075. . . . . 11.20 11.65 -.46 1.83 1.47 .37 13.03 13.12 -.09

2080. . . . . 11.18 11.37 -.19 1.83 1.49 .34 13.02 12.86 .15

2085. . . . . 11.18 11.26 -.08 1.84 1.52 .31 13.01 12.78 .23

2090. . . . . 11.18 11.34 -.16 1.84 1.52 .31 13.02 12.86 .15

First year balance becomes

negative and remains negative

throughout the projection

period. . . . . . . . . . . . . . . . . . . . 2010 . . . . . . . . . . . . . . . .

b . . . . . . . . . . . . . . . .b

High-cost:

2014. . . . . 10.94 11.79 -.84 1.81 2.45 -.64 12.75 14.24 -1.48

2015. . . . . 11.05 12.12 -1.07 1.82 2.48 -.65 12.88 14.60 -1.72

2016. . . . . 11.10 12.38 -1.28 1.83 2.48 -.65 12.93 14.87 -1.93

2017. . . . . 11.13 12.59 -1.47 1.83 2.48 -.65 12.96 15.07 -2.11

2018. . . . . 11.16 12.83 -1.67 1.83 2.47 -.64 12.99 15.30 -2.31

2019. . . . . 11.17 13.12 -1.95 1.83 2.47 -.64 13.01 15.59 -2.58

2020. . . . . 11.19 13.43 -2.24 1.84 2.48 -.64 13.03 15.91 -2.88

2021. . . . . 11.22 13.69 -2.47 1.84 2.50 -.67 13.06 16.19 -3.13

2022. . . . . 11.25 13.98 -2.74 1.84 2.53 -.69 13.09 16.51 -3.42

2023. . . . . 11.27 14.35 -3.07 1.84 2.56 -.71 13.12 16.90 -3.79

2025. . . . . 11.32 15.07 -3.75 1.85 2.63 -.78 13.17 17.70 -4.54

2030. . . . . 11.42 16.72 -5.30 1.85 2.69 -.84 13.27 19.41 -6.15

2035. . . . . 11.48 17.70 -6.22 1.86 2.76 -.91 13.33 20.46 -7.13

2040. . . . . 11.51 18.09 -6.58 1.86 2.82 -.96 13.37 20.91 -7.54

2045. . . . . 11.52 18.19 -6.67 1.86 2.96 -1.10 13.39 21.15 -7.76

2050. . . . . 11.54 18.39 -6.85 1.87 3.06 -1.19 13.41 21.45 -8.04

2055. . . . . 11.57 18.79 -7.22 1.87 3.16 -1.29 13.44 21.95 -8.50

2060. . . . . 11.61 19.42 -7.81 1.88 3.19 -1.32 13.48 22.61 -9.13

2065. . . . . 11.65 20.09 -8.45 1.88 3.25 -1.38 13.53 23.35 -9.82

2070. . . . . 11.69 20.87 -9.18 1.88 3.29 -1.41 13.57 24.16 -10.59

2075. . . . . 11.74 21.63 -9.89 1.88 3.29 -1.41 13.62 24.92 -11.30

2080. . . . . 11.77 22.20 -10.43 1.88 3.34 -1.45 13.65 25.54 -11.88

2085. . . . . 11.81 22.83 -11.02 1.88 3.36 -1.48 13.69 26.19 -12.50

2090. . . . . 11.85 23.50 -11.65 1.88 3.33 -1.45 13.73 26.83 -13.10

First year balance becomes

negative and remains negative

throughout the projection

period. . . . . . . . . . . . . . . . . . . . 2010 . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . 2010

a

Income rates include certain reimbursements from the General Fund of the Treasury.

b The Trustees project the annual balance to be negative for a temporary period and return to positive levels

before the end of the projection period.

Table IV.B1.—Annual Income Rates, Cost Rates, and Balances,

Calendar Years 1990-2090 (Cont.)

[As a percentage of taxable payroll]

Calendar

year

OASI DI OASDI

Income

ratea

Cost

rate Balance

Income

ratea

Cost

rate Balance

Income

ratea

Cost

rate Balance
Actuarial Estimates

54

moved into prime disability ages, and further to a peak of 2.46 percent for

2012 due to the recent economic recession. Under the intermediate assumptions, the projected DI cost rate declines from 2.46 percent for 2012 to

2.09 percent for 2021. From 2021 to 2040, the DI cost rate stays relatively

stable and then generally increases to 2.31 percent for 2088. The income rate

increases only very slightly from 1.80 percent of taxable payroll for 2014 to

1.86 percent for 2088. The projected annual deficit declines from

0.58 percent for 2014 to a low of 0.23 percent for 2038, and then increases to

0.45 percent for 2088.

Under the low-cost assumptions, the DI cost rate declines from 2.46 percent

of payroll for 2012 to 1.49 percent for 2039, and remains relatively stable

thereafter, reaching 1.52 percent for 2088. The annual balance is negative for

the first 6 years and is positive throughout the remainder of the long-range

period. Under the high-cost assumptions, the DI cost rate generally rises

from 2018 through the end of the projection period, reaching 3.35 percent for

2088. The annual deficit is 0.64 percent for 2014, 1.19 percent for 2050, and

1.46 percent for 2088.

Figure IV.B1 shows the patterns of the OASI and DI annual cost rates.

Annual DI cost rates rose substantially between 1990 and 2010 in large part

due to: (1) aging of the working population as the baby-boom generation

moved from ages 25-44 in 1990, where disability prevalence is low, to ages

45-64 in 2010, where disability prevalence is much higher; (2) a substantial

increase in the percentage of women insured for DI benefits as a result of

increased and more consistent rates of employment; and (3) increased disability incidence rates for women to a level similar to those for men by 2010.

After 2010, all of these factors stabilize, and therefore the DI cost rate stabilizes also. Annual OASI cost rates follow a similar pattern to that for DI, but

displaced 20 to 25 years later, because the baby-boom generation enters

retirement ages 20 to 25 years after entering prime disability ages. Figure

IV.B1 shows only the income rates for alternative II because the variation in

income rates by alternative is very small. Income rates generally increase

slowly for each of the alternatives over the long-range period. Taxation of

benefits, which is a relatively small portion of income, is the main source of

both the increases in the income rate and the variation among the alternatives. Increases in income from taxation of benefits reflect: (1) increases in

the total amount of benefits paid; and (2) the increasing share of individual

benefits that will be subject to taxation because benefit taxation threshold

amounts are not indexed.

Figure IV.B1 shows the patterns of the annual balances for OASI and DI. For

each alternative and for historical data, the magnitude of each of the positive

balances, as a percentage of taxable payroll, is the distance between the
55

Long-Range Estimates

appropriate cost-rate curve and the income-rate curve above it. The magnitude of each of the deficits is the distance between the appropriate cost-rate

curve and the income-rate curve below it. Annual balances follow closely the

pattern of annual cost rates after 1990 because the payroll tax rate does not

change for the OASDI program, with only small variations in the allocation

between DI and OASI. The pattern of the projected OASDI annual balances

is important to the analysis of the financial condition of the Social Security

program as a whole.

In the future, the costs of OASI, DI, and the theoretical combined OASDI

programs as a percentage of taxable payroll are unlikely to fall outside the

range encompassed by alternatives I and III because alternatives I and III

define a wide range of demographic and economic conditions.

Long-range OASDI cost and income are most often expressed as percentages

of taxable payroll. However, the Trustees also present cost and income as

shares of gross domestic product (GDP), the value of goods and services produced during the year in the United States. Under alternative II, the Trustees

project the OASDI cost to rise from 4.92 percent of GDP for 2014 to a peak

of 6.16 percent for 2037. After 2037, OASDI cost as a percentage of GDP

declines to a low of 5.96 percent for 2052 and thereafter generally increases

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 2090

Calendar year

Alternative II Income rates

OASI cost rates

DI cost rates

Historical Estimated

OASI

DI III

II

I

III

II

I
Actuarial Estimates

56

slowly, reaching 6.12 percent by 2088. Appendix G presents full estimates of

income and cost relative to GDP.

2. Comparison of Workers to Beneficiaries

Under the intermediate assumptions, the Trustees project the OASDI cost

rate will remain relatively stable through 2018 as the economy recovers. The

cost rate then rises rapidly between 2018 and 2035, primarily because the

number of beneficiaries rises much more rapidly than the number of covered

workers as the baby-boom generation retires. The ratio of OASDI beneficiaries to workers is dominated by the OASI program because all workers eventually die or retire, but only a small minority become disabled. The trends

described below are primarily due to demographic changes and thus affect

the DI program roughly 20 years earlier than the OASI and OASDI programs. The baby-boom generation had lower fertility rates than their parents,

and the Trustees expect those lower fertility rates to persist; therefore, the

ratio of OASDI beneficiaries to workers will rise rapidly and reach a permanently higher level after the baby-boom generation retires. Due to increasing

longevity, the ratio of beneficiaries to workers will generally rise slowly

thereafter. Table IV.B2 provides a comparison of the numbers of covered

workers and beneficiaries.
57

Long-Range Estimates

Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2090

Calendar year

Covered

workersa

(in thousands)

Beneficiaries

b (in thousands) Covered

workers per

OASDI

beneficiary

OASDI

beneficiaries

per 100

covered

OASI DI OASDI workers

Historical data:

1945 . . . . . . . . . 46,390 1,106 - 1,106 41.9 2

1950 . . . . . . . . . 48,280 2,930 - 2,930 16.5 6

1955 . . . . . . . . . 65,066 7,564 - 7,564 8.6 12

1960 . . . . . . . . . 72,371 13,740 522 14,262 5.1 20

1965 . . . . . . . . . 80,539 18,509 1,648 20,157 4.0 25

1970 . . . . . . . . . 92,963 22,618 2,568 25,186 3.7 27

1975 . . . . . . . . . 100,193 26,998 4,125 31,123 3.2 31

1980 . . . . . . . . . 112,651 30,384 4,734 35,117 3.2 31

1985 . . . . . . . . . 120,312 32,763 3,874 36,636 3.3 30

1990 . . . . . . . . . 133,123 35,255 4,204 39,459 3.4 30

1995 . . . . . . . . . 140,976 37,364 5,731 43,096 3.3 31

2000 . . . . . . . . . 154,916 38,556 6,606 45,162 3.4 29

2001 . . . . . . . . . 155,320 38,888 6,780 45,668 3.4 29

2002 . . . . . . . . . 154,754 39,117 7,060 46,176 3.4 30

2003 . . . . . . . . . 154,976 39,315 7,438 46,753 3.3 30

2004 . . . . . . . . . 156,766 39,558 7,810 47,368 3.3 30

2005 . . . . . . . . . 159,212 39,961 8,172 48,133 3.3 30

2006 . . . . . . . . . 161,748 40,435 8,428 48,863 3.3 30

2007 . . . . . . . . . 163,521 40,863 8,739 49,603 3.3 30

2008 . . . . . . . . . 162,902 41,355 9,065 50,420 3.2 31

2009 . . . . . . . . . 157,940 42,385 9,475 51,860 3.0 33

2010 . . . . . . . . . 157,328 43,440 9,958 53,398 2.9 34

2011 . . . . . . . . . 158,988 44,388 10,428 54,816 2.9 34

2012 . . . . . . . . . 161,672 45,377 10,799 56,176 2.9 35

2013 . . . . . . . . . 163,221 46,517 10,954 57,471 2.8 35

Intermediate:

2014 . . . . . . . . . 165,446 47,866 11,031 58,896 2.8 36

2015 . . . . . . . . . 167,493 49,377 11,108 60,485 2.8 36

2020 . . . . . . . . . 177,705 57,923 11,489 69,412 2.6 39

2025 . . . . . . . . . 182,644 65,509 12,058 77,567 2.4 42

2030 . . . . . . . . . 186,049 72,809 12,213 85,022 2.2 46

2035 . . . . . . . . . 189,841 77,752 12,545 90,297 2.1 48

2040 . . . . . . . . . 195,100 80,187 12,963 93,149 2.1 48

2045 . . . . . . . . . 200,717 81,430 13,694 95,124 2.1 47

2050 . . . . . . . . . 205,991 83,072 14,223 97,295 2.1 47

2055 . . . . . . . . . 210,763 85,475 14,723 100,198 2.1 48

2060 . . . . . . . . . 215,272 88,588 15,016 103,605 2.1 48

2065 . . . . . . . . . 220,022 91,742 15,470 107,212 2.1 49

2070 . . . . . . . . . 225,171 95,245 15,903 111,148 2.0 49

2075 . . . . . . . . . 230,524 98,430 16,252 114,681 2.0 50

2080 . . . . . . . . . 235,909 100,766 16,899 117,665 2.0 50

2085 . . . . . . . . . 241,094 103,890 17,509 121,399 2.0 50

2090 . . . . . . . . . 246,038 107,850 17,860 125,710 2.0 51
Actuarial Estimates

58

Notes:

1. The number of beneficiaries does not include uninsured individuals who receive benefits under Section

228 of the Social Security Act. The General Fund of the Treasury reimburses the trust funds for the costs of

most of these individuals.

2. Historical covered worker and beneficiary data are subject to revision.

3. Totals do not necessarily equal the sums of rounded components.

The effect of the demographic shift under the three alternatives on the

OASDI cost rates is clear when one considers the projected number of

OASDI beneficiaries per 100 covered workers. Compared to the 2013 level

of 35 beneficiaries per 100 covered workers, the Trustees project that this

ratio rises to 48 by 2035 under the intermediate assumptions because the

growth in beneficiaries greatly exceeds the growth in workers. By 2090, this

projected ratio rises further under the intermediate and high-cost assumptions, reaching 51 under the intermediate assumptions and 66 under the highLow-cost:

2014 . . . . . . . . . 165,996 47,861 10,977 58,838 2.8 35

2015 . . . . . . . . . 168,951 49,360 10,937 60,296 2.8 36

2020 . . . . . . . . . 181,302 57,729 10,667 68,396 2.7 38

2025 . . . . . . . . . 186,743 65,012 10,679 75,690 2.5 41

2030 . . . . . . . . . 190,730 71,805 10,385 82,190 2.3 43

2035 . . . . . . . . . 195,416 76,153 10,339 86,492 2.3 44

2040 . . . . . . . . . 202,184 77,996 10,483 88,480 2.3 44

2045 . . . . . . . . . 210,045 78,779 10,976 89,754 2.3 43

2050 . . . . . . . . . 218,205 80,087 11,367 91,454 2.4 42

2055 . . . . . . . . . 226,529 82,319 11,776 94,095 2.4 42

2060 . . . . . . . . . 235,171 85,302 12,074 97,376 2.4 41

2065 . . . . . . . . . 244,535 88,323 12,553 100,877 2.4 41

2070 . . . . . . . . . 254,931 91,572 13,082 104,655 2.4 41

2075 . . . . . . . . . 266,242 94,386 13,624 108,011 2.5 41

2080 . . . . . . . . . 278,237 96,455 14,485 110,940 2.5 40

2085 . . . . . . . . . 290,461 99,793 15,383 115,176 2.5 40

2090 . . . . . . . . . 302,748 104,648 16,098 120,746 2.5 40

High-cost:

2014 . . . . . . . . . 164,648 47,871 11,085 58,956 2.8 36

2015 . . . . . . . . . 165,331 49,395 11,284 60,679 2.7 37

2020 . . . . . . . . . 172,359 58,101 12,332 70,433 2.4 41

2025 . . . . . . . . . 178,063 66,046 13,425 79,470 2.2 45

2030 . . . . . . . . . 181,104 73,860 14,027 87,886 2.1 49

2035 . . . . . . . . . 184,214 79,439 14,724 94,162 2.0 51

2040 . . . . . . . . . 188,064 82,557 15,386 97,943 1.9 52

2045 . . . . . . . . . 191,522 84,360 16,330 100,690 1.9 53

2050 . . . . . . . . . 193,992 86,420 16,964 103,384 1.9 53

2055 . . . . . . . . . 195,378 89,056 17,513 106,570 1.8 55

2060 . . . . . . . . . 196,044 92,349 17,744 110,093 1.8 56

2065 . . . . . . . . . 196,561 95,652 18,090 113,742 1.7 58

2070 . . . . . . . . . 197,016 99,410 18,312 117,722 1.7 60

2075 . . . . . . . . . 197,253 102,978 18,302 121,280 1.6 61

2080 . . . . . . . . . 197,068 105,598 18,506 124,103 1.6 63

2085 . . . . . . . . . 196,467 108,419 18,577 126,997 1.5 65

2090 . . . . . . . . . 195,580 111,272 18,368 129,640 1.5 66

a Workers who are paid at some time during the year for employment on which OASDI taxes are due.

b Beneficiaries with monthly benefits in current-payment status as of June 30.

Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2090 (Cont.)

Calendar year

Covered

workersa

(in thousands)

Beneficiaries

b (in thousands) Covered

workers per

OASDI

beneficiary

OASDI

beneficiaries

per 100

covered

OASI DI OASDI workers
59

Long-Range Estimates

cost assumptions. Under the low-cost assumptions, this ratio rises to 44 by

2035 and then declines, reaching a stable level of about 40 after 2076. Figure

IV.B2 shows beneficiaries per 100 covered workers.

For each alternative, the curve in figure IV.B2 is strikingly similar to the corresponding cost-rate curve in figure IV.B1. This similarity emphasizes the

extent to which the cost rate is determined by the age distribution of the population. The cost rate is essentially 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. For this reason, the pattern of the

annual cost rates is similar to that of the annual ratios of beneficiaries to

workers.

Table IV.B2 also shows the number of covered workers per OASDI beneficiary, which was about 2.8 for 2013. Under the low-cost assumptions, this

ratio declines to 2.3 by 2035, and then generally rises throughout the remainder of the period, reaching 2.5 by 2090. Under the intermediate assumptions,

this ratio declines generally throughout the long-range period, reaching 2.1

for 2035 and 2.0 by 2090. Under the high-cost assumptions, this ratio

decreases steadily to 1.5 by 2090.

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 2090

Calendar year

Historical Estimated

III

II

I
Actuarial Estimates

60

3. Trust Fund Ratios and Test of Long-Range Close Actuarial Balance

Trust fund ratios are critical indicators of the adequacy of the financial

resources of the Social Security program. The trust fund ratio for a year is the

amount of asset reserves in a fund at the beginning of a year expressed as a

percentage of the cost for the year. Under present law, the OASI and DI Trust

Funds do not have the authority to borrow other than in the form of advance

tax transfers, which are limited to expected taxes for the current calendar

month. If reserves held in either trust fund become depleted during a year,

and continuing tax revenues fall short of the cost of scheduled benefits, then

full scheduled benefits would not be payable on a timely basis. For this reason, the trust fund ratio is the most critical financial measure.

The trust fund ratio serves an additional important purpose in assessing the

actuarial status of the program. If the projected trust fund ratio is positive

throughout the period and is either level or increasing at the end of the

period, then projected adequacy for the long-range period is likely to continue for subsequent reports. Under these conditions, the program has

achieved sustainable solvency.1

Table IV.B3 shows the Trustees’ projections of trust fund ratios by alternative, without regard to advance tax transfers that would be effected, for the

separate and theoretical combined OASI and DI Trust Funds. The table also

shows the years of trust fund reserve depletion and the percentage of scheduled benefits that would be payable thereafter, by alternative.

Under the intermediate assumptions, the OASI Trust Fund ratio has declined

since 2011 and continues to decline from 373 percent at the beginning of

2014 until the trust fund reserves become depleted in 2034 (one year earlier

than projected in last year’s report), at which time 75 percent of scheduled

benefits would be payable. The DI trust fund ratio has been declining

steadily since 2003 (at first slowly and then more rapidly due to the recent

recession), and continues to decline from 62 percent at the beginning of 2014

until the trust fund reserves become depleted in the fourth quarter of 2016, at

which time 81 percent of scheduled benefits would be payable.

Under the intermediate assumptions, the trust fund ratio for the combined

OASI and DI Trust Funds declines from 320 percent at the beginning of

2014 until the combined fund reserves become depleted in 2033, at which

time 77 percent of scheduled benefits would be payable. This is the same

depletion year that was shown in last year’s report.

1 As noted in greater detail in the 2014 Medicare Trustees Report, “The trust fund perspective does not

encompass the interrelationship between the Medicare and Social Security trust funds and the overall Federal budget.” For an explanation of that relationship, see appendix F of the 2014 Medicare Trustees Report.
61

Long-Range Estimates

Under the low-cost assumptions, the trust fund ratio for the DI program

declines to 2 percent in 2020, requiring advance tax transfers to pay full

scheduled benefits in 2019 and 2020. After 2020, the trust fund ratio

increases through the end of the long-range projection period, reaching the

extremely high level of 1,761 percent for 2089. For the OASI program, the

trust fund ratio declines steadily until the trust fund reserves become

depleted in 2059, at which time 94 percent of scheduled benefits would still

be payable. For the combined OASDI program, the trust fund ratio declines

from 321 percent for 2014 to a low of 74 percent in 2074, then rises thereafter reaching 102 percent by 2089. Because the trust fund ratio is positive

throughout the projection period and increasing at the end of the period,

under the low-cost assumptions, the combined OASDI program and the DI

program achieve sustainable solvency. However, the DI trust fund ratio falls

very close to zero percent for some early years of the projection period.

Under the high-cost assumptions, the OASI trust fund ratio declines continually until reserves become depleted in 2029, at which time 68 percent of

scheduled benefits would still be payable. The DI trust fund ratio declines

from 61 percent for 2014 until reserves become depleted in 2016, at which

time 73 percent of scheduled benefits would still be payable. The combined

OASI and DI trust fund ratio declines from 320 percent for 2014 until

reserves become depleted in 2028, at which time 69 percent of scheduled

benefits would still be payable.

The Trustees project trust fund reserve depletion within the 75-year projection period with the exceptions of the combined OASDI Trust Fund and the

DI Trust Fund under the low-cost assumptions. It is therefore very likely that

lawmakers will need to increase income, reduce program costs, or both, in

order to maintain solvency for the trust funds. The stochastic projections discussed in appendix E suggest that trust fund reserve depletion is highly probable by mid-century.

Even under the high-cost assumptions, however, the combined OASI and DI

Trust Fund reserves on hand plus their estimated future income are sufficient

to fully cover their combined cost until 2028. Under the intermediate

assumptions, the combined starting fund reserves plus estimated future

income are sufficient to fully cover cost until 2033. In the 2013 report, the

Trustees projected that the combined trust fund reserves would become

depleted in 2027, 2033, and 2068 under the high-cost, intermediate, and lowcost assumptions, respectively.
Actuarial Estimates

62

Note: The definition of trust fund ratio appears in the Glossary. The ratios shown for the combined trust

funds for years after reserve depletion of either the DI or OASI Trust Fund are theoretical.

The test of long-range close actuarial balance for each trust fund requires

meeting two conditions: (1) the short-range test of financial adequacy is satisfied; and (2) the trust fund ratios stay above zero throughout the 75-year

projection period, allowing scheduled benefits to be paid in a timely manner

throughout the period. As discussed in section IV.A, the DI Trust Fund fails

the short-range test of financial adequacy under the intermediate assumptions

because trust fund reserves become depleted in the fourth quarter of 2016.

Under the intermediate assumptions, the OASI trust fund reserves become

depleted in 2034, and the combined OASI and DI trust fund reserves become

depleted in 2033. Therefore, the OASI, DI, and combined OASI and DI

Trust Funds all fail the long-range test of close actuarial balance.

Table IV.B3.—Trust Fund Ratios, Calendar Years 2014-90

[In percent]

Calendar

year

Intermediate Low-cost High-cost

OASI DI OASDI OASI DI OASDI OASI DI OASDI

2014 . . . . . . . . . . . . . 373 62 320 373 62 321 373 61 320

2015 . . . . . . . . . . . . . 359 39 306 360 41 308 358 35 304

2016 . . . . . . . . . . . . . 345 18 292 345 26 295 341 10 286

2017 . . . . . . . . . . . . . 329 a 277 331 14 283 323 a 267

2018 . . . . . . . . . . . . . 313 a 262 319 7 273 303

a 247

2019 . . . . . . . . . . . . . 297 a 248 308 2 265 281

a 226

2020 . . . . . . . . . . . . . 281 a 233 297 2 257 259

a 204

2021 . . . . . . . . . . . . . 265 a

a The Trustees estimate that the trust fund reserves will be depleted by the beginning of this year.

219 288 3 250 237

a 182

2022 . . . . . . . . . . . . . 249 a 203 279 7 243 213

a 159

2023 . . . . . . . . . . . . . 232 a 187 269 12 237 189 a 135

2025 . . . . . . . . . . . . . 196 a 154 251 27 224 138 a 84

2030 . . . . . . . . . . . . . 100 a 64 206 89 193

aaa

2035 . . . . . . . . . . . . .

aaa 158 189 161aaa

2040 . . . . . . . . . . . . .

aaa 111 313 133aaa

2045 . . . . . . . . . . . . .

aaa 75 432 114aaa

2050 . . . . . . . . . . . . .

aaa 46 554 104aaa

2055 . . . . . . . . . . . . .

aaa 21 682 97 aaa

2060 . . . . . . . . . . . . .

aaa a 834 89 aaa

2065 . . . . . . . . . . . . .

aaa a 993 82 aaa

2070 . . . . . . . . . . . . .

aaa a 1,162 76 aaa

2075 . . . . . . . . . . . . .

aaa a 1,343 74 aaa

2080 . . . . . . . . . . . . .

aaa a 1,492 79 aaa

2085 . . . . . . . . . . . . .

aaa a 1,630 92 aaa

2090 . . . . . . . . . . . . .

aaa a 1,795 104aaa

Trust fund reserves

deplete in . . . . . . . 2034 2016 2033 2059 b

b The Trustees estimate that the trust fund reserves will not be depleted within the projection period.

b 2029 2016 2028

Payable benefits as

percent of scheduled benefits:

At the time of

reserve

depletion . . . . . 75 81 77 94

b b 68 73 69

For 2088 . . . . . 70 80 72 99 100 100 48 55 49
63

Long-Range Estimates

Beginning with the 2013 report, the Trustees modified the test of long-range

close actuarial balance to require solvency throughout the 75-year projection

period. The old test allowed for a negative actuarial balance of up to 5 percent of the summarized cost rate for the full 75-year period. The Trustees

modified the test to make it simpler and to be more consistent with the actuarial measures presented in this report.

Figure IV.B3 illustrates the trust fund ratios for the separate OASI and DI

Trust Funds for each of the alternative sets of assumptions. DI Trust Fund

status is more uncertain than OASI Trust Fund status because there is a high

degree of uncertainty associated with future disability prevalence. A graph of

the trust fund ratios for the combined trust funds appears in figure II.D7.

4. Summarized Income Rates, Summarized Cost Rates, and Actuarial

Balances

Summarized values for the full 75-year period are useful in analyzing the

program’s long-range financial adequacy over the period as a whole, both

under present law and under proposed modifications to the law. All annual

amounts included in a summarized value are present-value discounted to the

valuation date. It is important to note that the actuarial balance indicates the

solvency status of the fund only for the very end of the period.

Figure IV.B3.—Long-Range OASI and DI Trust Fund Ratios

[Asset reserves as a percentage of annual cost]

0%

200%

400%

600%

800%

1,000%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

OASI

DI

Historical Estimated

III

II

I

I

II III
Actuarial Estimates

64

Table IV.B4 presents summarized income rates, summarized cost rates, and

actuarial balances for 25-year, 50-year, and 75-year valuation periods. Summarized income rates are the sum of the present value of non-interest income

for a period (which includes scheduled payroll taxes, the projected income

from the taxation of scheduled benefits, and reimbursements from the General Fund of the Treasury) and the starting trust fund asset reserves,

expressed as a percentage of the present value of taxable payroll over the

period. Under current law, the total OASDI payroll tax rate will remain at

12.4 percent in the future. In contrast, the Trustees expect income from taxation of benefits, expressed as a percentage of taxable payroll, to increase in

most years of the long-range period for the two reasons discussed earlier on

page 54. Summarized cost rates are the sum of the present value of cost for a

period (which includes scheduled benefits, administrative expenses, net

interchange with the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries) and the present value

of the cost of reaching a target trust fund of 100 percent of annual cost at the

end of the period, expressed as a percentage of the present value of taxable

payroll over the period.

The actuarial balance for a valuation period is equal to the difference

between the summarized income rate and the summarized cost rate for the

period. An actuarial balance of zero for any period indicates that cost for the

period could be met for the period as a whole (but not necessarily at all

points within the period), with a remaining trust fund reserve at the end of

the period equal to 100 percent of the following year’s cost. A negative actuarial balance for a period indicates that the present value of income to the

program plus the existing trust fund is less than the present value of the cost

of the program plus the cost of reaching a target trust fund reserve of 1 year’s

cost by the end of the period. Generally, a trust fund is deemed to be adequately financed for a period if the actuarial balance is zero or positive,

meaning that the reserves at the end of the period are at least equal to annual

cost. Solvency is still possible with a small negative actuarial balance where

reserves are still positive.

Table IV.B4 contains summarized rates for the intermediate, low-cost, and

high-cost assumptions. The low-cost and high-cost assumptions define a

wide range of possibilities. Financial outcomes as good as the low-cost scenario or as bad as the high-cost scenario are unlikely to occur.

For the 25-year valuation period, the OASDI program has an actuarial balance of 0.21 percent of taxable payroll under the low-cost assumptions,

-1.50 percent under the intermediate assumptions, and -3.55 percent under

the high-cost assumptions. These balances indicate that the program is ade-
65

Long-Range Estimates

quately financed for the 25-year valuation period under only the low-cost

projections.

For the 50-year valuation period, the OASDI program has actuarial balances

of -0.04 percent under the low-cost assumptions, -2.42 percent under the

intermediate assumptions, and -5.40 percent under the high-cost assumptions. These actuarial deficits mean that the program is not adequately

financed for the 50-year valuation period under the intermediate and highcost sets of assumptions. Under the low-cost assumptions, trust fund reserves

are not expected to deplete within the 50-year period but do fall below the

target level of 100 percent of annual cost by the end of this period.

For the entire 75-year valuation period, the combined OASDI program has

actuarial balances between 0.000 and 0.005 percent of taxable payroll under

the low-cost assumptions, -2.88 percent under the intermediate assumptions,

and -6.56 percent under the high-cost assumptions. These balances indicate

that the combined OASDI program is adequately financed for the 75-year

valuation period under only the low-cost assumptions.

Assuming the intermediate assumptions accurately capture future demographic and economic trends, solvency for the program over the next 75

years could be restored using a variety of approaches. For example, revenues

could be increased in a manner equivalent to an immediate and permanent

increase in the combined Social Security payroll tax rate from 12.40 percent

to 15.23 percent (a relative increase of 22.8 percent), cost could be reduced

in a manner equivalent to an immediate and permanent reduction in scheduled benefits of 17.4 percent, or some combination of approaches could be

used.

However, eliminating the actuarial deficit for the next 75-year valuation

period requires raising payroll taxes or lowering benefits by more than is

required just to achieve solvency, because the actuarial deficit includes the

cost of attaining a target trust fund ratio equal to 100 percent of annual program cost by the end of the period. The actuarial deficit could be eliminated

for the 75-year period by increasing revenues in a manner equivalent to an

immediate and permanent increase in the combined payroll tax from

12.40 percent to 15.39 percent (a relative increase of 24.1 percent),1

reducing cost in a manner equivalent to an immediate reduction in scheduled benefits of 18.2 percent, or some combination of approaches could be used.

1 The indicated increase in the payroll tax rate of 2.99 percent is somewhat larger than the 2.88 percent

75-year actuarial deficit because the indicated increase reflects a behavioral response to tax rate changes. In

particular, the calculation assumes that an increase in payroll taxes results in a small shift of wages and salaries to forms of employee compensation that are not subject to the payroll tax.
Actuarial Estimates

66

Under the intermediate assumptions, the OASDI program has large annual

deficits toward the end of the long-range period that are increasing and reach

4.90 percent of payroll for 2088 (see table IV.B1). These large deficits indicate that annual cost continues to exceed non-interest income after 2088, so

continued adequate financing would require larger changes than those

needed to maintain solvency for the 75-year period. Over the period extending through the infinite horizon, the actuarial deficit is 4.1 percent of payroll

under the intermediate assumptions.

The financial shortfall of the DI program is worse than that of the OASI program for the first 25 years when measured relative to the level of program

cost. Summarized over the full 75-year period, however, long-range deficits

for the OASI and DI programs under intermediate assumptions are more

similar measured relative to the level of program cost. Increases in longevity

after 2027, when the disability conversion age remains fixed, have a greater

effect on OASI cost than on DI cost. As a result of this greater effect on

OASI cost, the financial status of the OASI program in the later portion of

the 75-year projection period is worse than the financial status of the DI program.

Table IV.B4.—Components of Summarized Income Rates and Cost Rates,

Calendar Years 2014-88

[As a percentage of taxable payroll]

Valuation period

Summarized income rate Summarized cost rate

Actuarial

balance

Non-interest

income

Beginning

asset

reserves Total Cost

Ending

target

fund Total

OASI:

Intermediate:

2014-38. . . . . 11.23 1.62 12.85 13.48 0.56 14.04 -1.19

2014-63. . . . . 11.30 .91 12.21 14.08 .23 14.31 -2.11

2014-88. . . . . 11.33 .69 12.02 14.44 .13 14.57 -2.55

Low-cost:

2014-38. . . . . 11.16 1.46 12.63 12.04 .49 12.53 .10

2014-63. . . . . 11.19 .80 11.99 12.04 .20 12.24 -.25

2014-88. . . . . 11.20 .58 11.78 11.92 .11 12.03 -.25

High-cost:

2014-38. . . . . 11.32 1.79 13.11 15.19 .65 15.84 -2.73

2014-63. . . . . 11.42 1.03 12.45 16.63 .27 16.90 -4.45

2014-88. . . . . 11.49 .81 12.30 17.67 .16 17.83 -5.52

DI:

Intermediate:

2014-38. . . . . 1.84 .05 1.89 2.13 .08 2.21 -.32

2014-63. . . . . 1.84 .03 1.87 2.15 .03 2.19 -.31

2014-88. . . . . 1.85 .02 1.87 2.18 .02 2.20 -.33

Low-cost:

2014-38. . . . . 1.83 .05 1.88 1.71 .06 1.77 .11

2014-63. . . . . 1.83 .03 1.86 1.62 .02 1.65 .21

2014-88. . . . . 1.83 .02 1.85 1.59 .02 1.60 .25

High-cost:

2014-38. . . . . 1.84 .06 1.91 2.62 .10 2.72 -.81

2014-63. . . . . 1.86 .03 1.89 2.80 .04 2.84 -.95

2014-88. . . . . 1.86 .03 1.89 2.91 .02 2.93 -1.04
67

Long-Range Estimates

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

Table IV.B5 presents the components and the calculation of the long-range

(75-year) actuarial balance under the intermediate assumptions. The present

value of future cost less future non-interest income over the long-range

period, minus the amount of trust fund asset reserves at the beginning of the

projection period, amounts to $10.6 trillion for the OASDI program. This

amount is the 75-year “open group unfunded obligation” (see row H). The

actuarial deficit (which is the negative of the actuarial balance) combines this

unfunded obligation with the present value of the ending target trust fund and

expresses the total as a percentage of the present value of the taxable payroll

for the period. The present value of future non-interest income minus cost,

plus starting trust fund reserves, minus the present value of the ending target

trust fund, is -$11.1 trillion for the OASDI program. The actuarial balance,

expressed as a percentage of taxable payroll for the period, is -2.88 percent.

OASDI:

Intermediate:

2014-38. . . . . 13.07 1.67 14.75 15.61 .64 16.25 -1.50

2014-63. . . . . 13.14 .94 14.08 16.24 .26 16.50 -2.42

2014-88. . . . . 13.17 .71 13.89 16.62 .15 16.77 -2.88

Low-cost:

2014-38. . . . . 12.99 1.51 14.50 13.75 .54 14.30 .21

2014-63. . . . . 13.02 .82 13.85 13.66 .22 13.88 -.04

2014-88. . . . . 13.03 .60 13.63 13.50 .13 13.63

a

High-cost:

2014-38. . . . . 13.16 1.85 15.01 17.81 .75 18.56 -3.55

2014-63. . . . . 13.28 1.07 14.34 19.43 .32 19.74 -5.40

2014-88. . . . . 13.35 .84 14.19 20.58 .18 20.75 -6.56

a Between 0 and 0.005 percent of taxable payroll.

Table IV.B4.—Components of Summarized Income Rates and Cost Rates,

Calendar Years 2014-88 (Cont.)

[As a percentage of taxable payroll]

Valuation period

Summarized income rate Summarized cost rate

Actuarial

balance

Non-interest

income

Beginning

asset

reserves Total Cost

Ending

target

fund Total
Actuarial Estimates

68

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

The open group unfunded obligation (row H in the table above) increased

from $9.6 trillion shown in last year's report to $10.6 trillion in this report. If

there had been no changes in starting values, assumptions, laws, or methods

for this report, then the open group unfunded obligation would have

increased to $10.1 trillion solely due to the change in the valuation period.

This expected increase in the unfunded obligation occurs because: (1) the

unfunded obligation is now discounted to January 1, 2014, rather than to January 1, 2013, which tends to increase the unfunded obligation by the annual

nominal interest rate; and (2) the unfunded obligation now includes an additional year (2088). However, changes in assumptions, methods, and starting

values resulted in a net additional $0.5 trillion increase in the unfunded obligation.

The change in the actuarial deficit can be explained in a similar way. The

actuarial deficit was 2.72 percent of payroll in last year’s report, and was

expected to increase to a deficit of 2.78 percent of payroll solely due to the

change in the valuation period. Changes in assumptions, methods, and starting values combined to account for the rest of the change in the actuarial

deficit, up to 2.88 percent of payroll. For additional details on these changes,

see section IV.B.6.

5. Additional Measures of OASDI Unfunded Obligations

A negative actuarial balance (i.e., an actuarial deficit) is one measure of the

unfunded obligation of the program. This subsection presents additional

measures of OASDI unfunded obligations under the intermediate assumptions.

Table IV.B5.—Components of 75-Year Actuarial Balance

Under Intermediate Assumptions

Item OASI DI OASDI

Present value as of January 1, 2014 (in billions):

A. Payroll tax revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40,948 $6,953 $47,901

B. Reimbursements from general revenue. . . . . . . . . . . . . . . . . . . 1 0 1

C. Taxation of benefits revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,878 189 3,067

D. Non-interest income (A + B + C) . . . . . . . . . . . . . . . . . . . . . . . 43,826 7,143 50,969

E. Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,863 8,436 64,299

F. Cost minus non-interest income (E - D) . . . . . . . . . . . . . . . . . . 12,037 1,293 13,330

G. Trust fund asset reserves at start of period . . . . . . . . . . . . . . . . 2,674 90 2,764

H. Open group unfunded obligation (F - G). . . . . . . . . . . . . . . . . . 9,363 1,202 10,565

I. Ending target trust funda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

a The calculation of the actuarial balance includes the cost of accumulating a target trust fund reserve equal

to 100 percent of annual cost at the end of the period.

509 74 582

J. Income minus cost, plus reserves at start of period, minus

ending target trust fund (D - E + G - I = - H - I) . . . . . . . . . . . . -9,872 -1,276 -11,148

K. Taxable payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386,884 386,884 386,884

Percent of taxable payroll:

Actuarial balance (100 × J ÷ K). . . . . . . . . . . . . . . . . . . . . . . . . . . -2.55 -.33 -2.88
69

Long-Range Estimates

a. Open Group Unfunded Obligations

Consistent with practice since 1965, this report focuses on a 75-year open

group valuation to evaluate the long-run financial status of the OASDI program. The open group valuation includes non-interest income and cost for

past, current, and future participants through the year 2088. The present

value of the open group unfunded obligation for the program is $10.6 trillion

over 2014-88. The open group unfunded obligation measures the adequacy

of financing over the period as a whole for a program financed on a pay-asyou-go basis. On this basis, payroll taxes and scheduled benefits for all participants are included through 2088.

The 75-year unfunded obligation is equivalent to 2.7 percent of future

OASDI taxable payroll and 1.0 percent of GDP through 2088. The 75-year

unfunded obligation as a percentage of taxable payroll is less than the actuarial deficit, because the unfunded obligation excludes the ending target trust

fund value (see table IV.B5).

Consideration of summary measures alone (such as the actuarial balance and

open group unfunded obligation) for a 75-year period can lead to incorrect

perceptions and to policy prescriptions that do not achieve sustainable solvency. These concerns can be addressed by considering the trend in trust

fund ratios toward the end of the period. See the discussion of “sustainable

solvency” beginning on page 49.

Another measure of trust fund finances, discussed in Appendix F, is the

infinite horizon unfunded obligation, which takes account of all annual balances, even those after 75 years. The extension of the time period past 75

years assumes that the current-law OASDI program and the demographic

and economic trends used for the 75-year projection continue indefinitely.

This infinite horizon unfunded obligation is estimated to be 4.1 percent of

taxable payroll or 1.4 percent of GDP. Of course, the degree of uncertainty

associated with estimates increases substantially for years further in the

future.
Actuarial Estimates

70

6. Reasons for Change in Actuarial Balance From Last Report

Table IV.B6 shows the effects of changes on the long-range actuarial balance, by category, between last year’s report and this report.

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

If the assumptions, methods, starting values, and the law had all remained

unchanged from last year’s Trustees Report, the long-range OASDI actuarial

balance would have decreased (become more negative) by 0.06 percent of

taxable payroll solely due to the change in the valuation period. However, as

described below, this report includes changes in law, data, assumptions, and

methods. These changes combine to decrease the long-range OASDI actuarial balance, from -2.72 percent of taxable payroll in last year's report to -2.88

percent in this report.

Since the last report, no laws have been enacted that are expected to have

significant effects on the long-range cost of the OASDI program. However,

the Supreme Court’s decision in the United States v. Windsor case, in June

2013, is projected to have a small but significant effect on the long-range

cost of the OASDI program. This decision repealed parts of the Defense of

Marriage Act, which affects the payment of federal benefits based on samesex marriages. The extent to which OASDI benefits based on marriage will

be available to same-sex couples is still not completely clear. SSA has issued

guidelines, approved by the Department of Justice, for certain benefits for

Table IV.B6.—Reasons for Change in the 75-Year Actuarial Balance,

Based on Intermediate Assumptions

[As a percentage of taxable payroll]

Item OASI DI OASDI

Shown in last year's report:

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.00 1.88 13.88

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.40 2.20 16.60

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.40 -.32 -2.72

Changes in actuarial balance due to changes in:

Legislation / Regulation . . . . . . . . . . . . . . . . . . . . . . . -.01 .00 -.01

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

a The change in the 75-year valuation period from last year’s report to this report means that the 75-year

actuarial balance now includes the relatively large negative annual balance for 2088. This change in the valuation period results in a larger long-range actuarial deficit. The actuarial deficit includes the trust fund

reserve at the beginning of the projection period.

-.05 -.01 -.06

Demographic data and assumptions. . . . . . . . . . . . . . .04 .00 .04

Economic data and assumptions. . . . . . . . . . . . . . . . . -.08 -.02 -.10

Disability data and assumptions. . . . . . . . . . . . . . . . . .00 .02 .02

Methods and programmatic data . . . . . . . . . . . . . . . . -.05 .00 -.05

Total change in actuarial balance . . . . . . . . . . . . . . . . . . -.15 -.01 -.16

Shown in this report:

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.55 -.33 -2.88

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.02 1.87 13.89

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.57 2.20 16.77
71

Long-Range Estimates

same-sex couples who were legally married when the insured account holder

resided in a State or jurisdiction that recognized same-sex marriages at the

time of application or death. Expansion of this authority to other same-sex

couples and to other benefits is under review at the Department of Justice.

For the estimates in this report, the Trustees have assumed that Social Security will expand its guidelines to recognize all auxiliary beneficiaries for such

marriages and that same-sex marriages will eventually be recognized in all

States. This projected expansion of benefits decreases the long-range OASDI

actuarial balance by 0.01 percent of taxable payroll.

Changing the 75-year valuation period from 2013-87 to 2014-88 decreased

the projected long-range OASDI actuarial balance by 0.06 percent of taxable

payroll. This decrease is the result of including the relatively large negative

annual balance for 2088 in this year’s 75-year projection period. Note that

the annual balance for 2013 is not excluded from this year’s 75-year projection period because the actuarial balance includes trust fund asset reserves at

the beginning of the projection period. These reserves at the start of the

period reflect the program’s net financial flows for all past years up to the

start of the projection period.

The Trustees did not change any of the ultimate demographic assumptions

for this year’s report. However, updating the starting and historical values,

and the way these values transition to ultimate assumed levels, combined to

increase the long-range OASDI actuarial balance by 0.04 percent of taxable

payroll. The following paragraph describes three demographic changes that

had significant effects on the long-range OASDI actuarial balance.

First, preliminary fertility (birth) data for 2012 indicated lower birth rates

than were assumed for last year’s report. The Trustees recognize the effect of

the recent economic recession on the total fertility rate for 2012 and assume

the path of the total fertility rate over the first several years of the projection

period will reflect the economic recovery. The additional fertility data and

the altered path of fertility over the first 25 years of the projection period

combined to decrease the long-range actuarial balance by 0.01 percent of

taxable payroll. Second, because the National Center for Health Statistics

(NCHS) no longer collects detailed divorce data (by age of husband crossed

with age of wife), these data are now obtained from certain States. These

new detailed historical divorce data, two years of additional total divorce

data from the NCHS, and revisions in the assumed path of the age-sexadjusted divorce rate over the first 25 years of the projection period combined to increase the long-range OASDI actuarial balance by 0.02 percent of

taxable payroll. Third, revising historical data since 2001 (to be more consistent with the most recent estimates from the Bureau of the Census) and

smoothing the historical distribution of the married population by age of hus-
Actuarial Estimates

72

band and age of wife (to provide a more reasonable distribution for the projections) combined to increase the long-range OASDI actuarial balance by

0.03 percent of taxable payroll.

The Trustees changed one of the ultimate economic assumptions this year:

the annual rate of change in the Consumer Price Index (CPI-W). The Trustees now assume an ultimate average increase of 2.7 percent per year, rather

than 2.8 percent in last year’s report. This change decreased the long-range

OASDI actuarial balance by 0.02 percent of taxable payroll. Lowering the

ultimate average annual increase in the CPI-W makes it more comparable to

recent historical annual increases. The CPI-W grew at an average annual rate

of 2.8 percent over the last thirty years (1982 to 2012) and 2.4 percent over

the last twenty years (1992 to 2012).

Additionally, updated starting values and changes in near-term economic

assumptions combined for a net decrease in the long-range OASDI actuarial

balance of 0.08 percent of payroll. One major factor contributing to this

change is the projected relationship between average taxable earnings and

the average wage index. Compared to last year’s report, the ratio of average

taxable earnings to the average wage index is lower by 1.9 percent in 2012

and 1.5 percent in 2013. This ratio remains about 1 percent lower throughout

the long-range period, resulting in lower payroll taxes (directly related to

average taxable earnings) relative to benefit levels (directly related to the

average wage index). Additionally, the estimated level of full-employment

GDP relative to actual GDP in recent years is assumed to be about 1 percent

lower in this year’s report. This change reflects the fact that GDP growth,

relative to the decline in the unemployment rate, has not been as strong so far

in this economic recovery as had been experienced in prior recoveries. As a

result, full-employment GDP is projected to be permanently lower by about

1 percent.

The Trustees did not change ultimate disability incidence or termination rates

from those in the prior report. However, slightly lower near-term incidence

rates reflecting recent experience and updated starting levels of beneficiaries

and benefit levels combined to increase the long-range OASDI actuarial balance by 0.02 percent of taxable payroll.

The projections in this report also reflect several methodological improvements and updates of program-specific data. These methodological changes,

updates, and interactions combined to decrease the long-range OASDI actuarial balance by 0.05 percent of taxable payroll. Descriptions of four significant methodological changes and updates follow.

The first methodological improvement alters the projected labor force participation rates to better reflect future trends in marital status and longevity on
73

Long-Range Estimates

these rates. Projected labor force participation rates for the population age 55

and older are slightly lower in this year’s report in order to better reflect the

difference in participation rates between never-married and married populations. This first methodological improvement also alters the projection of

increases in the labor force participation rates for older workers due to projected improvement in life expectancy. The calibration year for the age-specific relationship between the labor force participation rate and life

expectancy is changed from 2008 to 2050. Changing the calibration year

replaces the dated historical relationships with relationships that are projected to evolve over the course of the projection period. These changes in

labor force participation rates decreased the long-range OASDI actuarial balance by 0.05 percent of taxable payroll.

The second methodological improvement revises the treatment of the “other

immigrant” population in three ways. First, the other immigrant population is

divided into three distinct groups with differing employment and average

earnings levels: (1) those with temporary legal status, (2) those never authorized to be in the country, and (3) those who had temporary legal status previously but are no longer authorized to be in the country. Second, the

assumed age-sex distribution of other immigrants entering the country was

revised, resulting in a slightly lower average age at entry. Third, the projections of other immigrants leaving the country were modified to reflect only

rates of exit from the other-immigrant resident population, rather than a combination of exit rates from current residents and recent arrivals. The combined effect of these three components on the long-range OASDI actuarial

balance is negligible (between -0.005 and 0.005 percent of taxable payroll).

The third significant change increases the income from taxation of benefits.

Based on estimates provided by the Office of Tax Analysis at the Department

of Treasury, the ultimate projected ratio of income from taxation of benefits

to total benefits was increased. This change increased the long-range OASDI

actuarial balance by about 0.02 percent of taxable payroll.

Finally, changes in projected OASI beneficiaries and benefit levels over the

first 10 years of the projection period, updating programmatic data, other

small methodological improvements, and interactions decreased the longrange OASDI actuarial balance by about 0.02 percent of taxable payroll.

Figure IV.B4 compares the annual cash-flow balances for this report and the

prior year’s report for the combined OASDI program over the long-range

(75-year) projection period. The figure illustrates the annual effects of the

changes described earlier in this section.
Actuarial Estimates

74

Compared to last year’s report, the annual balance (income rate minus cost

rate) in this year’s report is about 0.1 percentage point more negative

throughout the projection period, primarily reflecting revised economic and

programmatic starting levels. In particular, the level of average taxable earnings is significantly lower in the initial years of the projection period. Compared to last year’s report, real growth in average taxable earnings for 2013

is 0.4 percent lower and real earnings growth over the period from 2013

through 2023 is 1 percent lower. By 2087, the annual deficit is 4.85 percent

of taxable payroll in this report, compared to 4.77 percent in last year's

report.

Figure IV.B4.—OASDI Annual Balances: 2013 and 2014 Trustees Reports

[As a percentage of taxable payroll, based on intermediate assumptions]

-6%

-4%

-2%

0%

2%

2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

2013 Report

2014 Report
75

Demographic Assumptions and Methods

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

The future income and cost of the OASDI program will depend on many

demographic, economic, and program-specific factors. Trust fund income

will depend on how these factors affect the size and composition of the

working population as well as the level and distribution of earnings. Similarly, program cost will depend on how these factors affect the size and composition of the beneficiary population as well as the general level of benefits.

The Trustees make basic assumptions for several of these factors based on

analysis of historical trends, historical conditions, and expected future conditions. These factors include fertility, mortality, immigration, marriage,

divorce, productivity, inflation, average earnings, unemployment, real interest rate, and disability incidence and termination. Other factors depend on

these basic assumptions. These other, often interdependent, factors include

total population, life expectancy, labor force participation, gross domestic

product, and program-specific factors. Each year the Trustees reexamine

these assumptions and methods in light of new information and make appropriate revisions. The Trustees selected the assumptions for this report by the

end of January 2014.

Future levels of these factors and their interrelationships are inherently

uncertain. To address these uncertainties, this report uses three sets of

assumptions, designated as intermediate (alternative II), low-cost (alternative

I), and high-cost (alternative III). The intermediate set represents the Trustees’ best estimate of the future course of the population and the economy.

With regard to the net effect on the actuarial status of the OASDI program,

the low-cost set is more optimistic and the high-cost set is more pessimistic.

The low-cost and high-cost sets of assumptions reflect significant potential

changes in the interrelationships among factors, as well as changes in the

values for individual factors.

While it is unlikely that all of the factors and interactions will differ in the

specified directions from the intermediate values, many combinations of

individual differences in the factors could have a similar overall effect. Outcomes with overall long-range cost as low as the low-cost scenario or as high

as the high-cost scenario are very unlikely. This report also includes sensitivity analysis, where factors are changed one at a time (see appendix D), and a

stochastic projection, which provides a probability distribution of possible

future outcomes that is centered around the intermediate assumptions (see

appendix E).
Assumptions and Methods

76

Readers should interpret with care the estimates based on the three sets of

alternative assumptions. These estimates are not specific predictions of the

future financial status of the OASDI program, but rather a reasonable range

of future income and cost under a variety of plausible demographic and economic conditions.

The Trustees assume that values for each of the demographic, economic, and

program-specific factors change toward long-range ultimate values from

recent levels or trends within the next 25 years. For extrapolations beyond

the 75-year long-range period, the ultimate levels or trends reached by the

end of the 75-year period remain unchanged. The assumed ultimate values

represent average annual experience or growth rates. Actual future values

will exhibit fluctuations or cyclical patterns, as in the past.

The following sections briefly discuss 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.

A. DEMOGRAPHIC ASSUMPTIONS AND METHODS

Table V.A1 displays the principal demographic assumptions relating to fertility, mortality, and net immigration for the three alternatives.

1. Fertility Assumptions

Birth rates by single year of age, for women aged 14 to 49, are the basis for

the fertility assumptions. These rates apply to the total number of women,

across all marital statuses, in the midyear population at each age.

Historically, birth rates in the United States have fluctuated widely. The total

fertility rate2 decreased from 3.31 children per woman at the end of World

War I (1918) to 2.15 during the Great Depression (1936). After 1936, the

total fertility rate rose to 3.68 in 1957 and then fell to 1.74 by 1976. After

1976, the total fertility rate began to rise again until it reached a level of 2.07

1 Actuarial Studies published by the Office of the Chief Actuary, Social Security Administration, contain

further details about the assumptions, methods, and actuarial estimates. A complete list of available studies

may be found at www.socialsecurity.gov/OACT/NOTES/actstud.html. To obtain copies of such studies or of

this report, please submit a request at www.socialsecurity.gov/OACT/request.html or write to: Office of the

Chief Actuary, 700 Altmeyer Building, 6401 Security Boulevard, Baltimore, MD 21235. This entire report,

along with supplemental year-by-year tables, may also be found at

www.socialsecurity.gov/OACT/TR/2014/index.html.

2 Defined to be the average number of children that would be born to a woman in her lifetime if she were to

experience, at each age of her life, the birth rate observed in, or assumed for, the selected year, and if she

were to survive the entire childbearing period. A rate of about 2.1 would ultimately result in a nearly constant population if immigration and emigration were both zero, and if death rates were to remain at current

levels.
77

Demographic Assumptions and Methods

for 1990. From 1991 to 2006, the total fertility rate averaged 2.03 children

per woman. Then, the total fertility rate dropped from 2.12 in 2007 to 1.89 in

2011 and, based on preliminary data, to 1.88 in 2012. The recession and high

unemployment are likely reasons for this drop. The estimated total fertility

rate for 2013 is 1.89.

These variations in the total fertility rate resulted from changes in many factors, including social attitudes, economic conditions, birth-control practices,

and the racial/ethnic composition of the population. The Trustees expect

future total fertility rates to remain close to recent levels. Certain population

characteristics, such as the higher percentages of women who have never

married, of women who are divorced, and of young women who are in the

labor force, are consistent with continued lower total fertility rates than experienced during the baby-boom era (1946-65). Based on consideration of

these factors, the Trustees assume ultimate total fertility rates of 2.30, 2.00,

and 1.70 children per woman for the low-cost, intermediate, and high-cost

assumptions, respectively. These ultimate rates are unchanged from last

year’s report.

For the intermediate alternative, the projected total fertility rate rises until

2021 when it reaches 2.07. This reflects the assumption that fertility rates

will have a recovery from their current recession-depleted levels. The Trustees then assume the total fertility rate follows a gradual trend toward the ultimate level in 2038. The Trustees assume the low-cost and high-cost total

fertility rates gradually trend away from the intermediate path to reach the

ultimate values in 2038.

2. Mortality Assumptions

The Office of the Chief Actuary at the Social Security Administration develops average percentage reductions in future mortality rates by age group,

sex, and cause of death. The office uses these percentages to estimate future

central death rates by age group, sex, and cause of death. From these estimated central death rates, the office calculates probabilities of death by single year of age and sex.

The Office of the Chief Actuary calculated historical death rates for years

1900-2010 for ages below 65 (and for all ages for years prior to 1968) using

data from the National Center for Health Statistics (NCHS).1 For ages 65

and over, the office used final Medicare data on deaths and enrollments for

years 1968 through 2010 and preliminary data for 2011. The office produced

1 These rates reflect NCHS data on deaths and Census estimates of population.
Assumptions and Methods

78

death rates by cause of death at all ages for years 1979-2010 using data from

the NCHS.

The total age-sex-adjusted death rate1 declined at an average annual rate of

1.07 percent between 1900 and 2010. Between 1979 and 2010, the period for

which death rates were analyzed by cause, the total age-sex-adjusted death

rate, for all causes combined, declined at an average rate of 0.99 percent per

year.

Death rates have declined substantially in the U.S. since 1900, with rapid

declines over some periods and slow or no improvement over the other periods. Historical death rates generally declined more slowly for older ages and

more rapidly for children than for the rest of the population. Between 1900

and 2010, the age-sex-adjusted death rate for 65 and over declined at an

average rate of 0.79 percent per year, while declining at an average rate of

3.13 percent per year for ages under 15.

Many factors are responsible for historical reductions in death rates, including increased medical knowledge, increased availability of health-care services, and improvements in sanitation and nutrition. Considering the

expected rate of future progress in these and other areas, the Trustees assume

three alternative sets of ultimate annual percentage reductions in central

death rates by age group and cause of death, for 2038 and later. The intermediate set, alternative II, represents the Trustees’ best estimate. The average

annual percentage reductions for alternative I (low-cost) are smaller than

those for alternative II, while those for alternative III (high-cost) are larger.

These ultimate annual percentage reductions are the same as those in last

year’s report.

For the years 2011 through 2013, the assumed annual reductions in central

death rates are the same as the average annual reductions by age group, sex,

and cause of death experienced between 2000 and 2010. After 2013, annual

reductions in central death rates for alternative II are assumed to transition

rapidly from the trend experienced between 2000 and 2010, until they reach

the ultimate annual percentage reductions for 2038 and later. The assumed

reductions in death rates under alternatives I and III also rapidly approach

their ultimate levels, but start from levels which are, respectively, 50 and

150 percent of the corresponding alternative II level.

Table V.A1 contains historical and projected age-sex-adjusted death rates for

the total population (all ages), for ages under 65, and for ages 65 and over.

1 Based on the enumerated total population as of April 1, 2010, if that population were to experience the

death rates by age and sex for the selected year.
79

Demographic Assumptions and Methods

Age-sex adjustment eliminates the effect of a changing distribution of population by age and sex, allowing the pure effects of changes in death rates to

be observed. The level of these age-sex-adjusted death rates is substantially

higher than the level shown for the age-sex-adjusted death rates in last year’s

report due to the change in the “standard” population used for age-sex adjusting. For last year’s report, this standard population was the enumerated resident population as of April 1, 2000. For this year’s report, the standard

population is the enumerated resident population as of April 1, 2010. This

change in the standard population for age-sex adjusting has very little effect

on the rates of improvement. If there had been no change in the standard

population used for age-sex adjusting, then the level of projected age-sexadjusted death rates would be similar to the level shown in last year’s report.

The projected average annual rate of decline for the total age-sex-adjusted

death rate is about 0.41 percent, 0.79 percent, and 1.20 percent between 2013

and 2088 for alternatives I, II, and III, respectively. In keeping with the patterns observed in the historical data, the assumed future rates of decline are

greater for younger ages than for older ages, but to a substantially lesser

degree than in the past. Accordingly, the projected age-sex-adjusted death

rates for ages 65 and over decline at average annual rates of about

0.37 percent, 0.71 percent, and 1.07 percent between 2013 and 2088 for

alternatives I, II, and III, respectively. The projected age-sex-adjusted death

rates for ages under 15 decline at average annual rates of about 0.78 percent,

1.56 percent, and 2.57 percent between 2013 and 2088 for alternatives I, II,

and III, respectively.

Demographers express a wide range of views on the likely rate of future

decline in death rates. For example, some believe that the long-standing historical tendency for mortality to decline more slowly at the highest ages will

cease in the future. Others believe that biological factors, social factors, and

limitations on health care spending may slow future rates of decline in mortality. The 2011 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 experienced for sustained

periods of time in the past or assumed for the intermediate projections in this

report. Evolving trends in health care and lifestyle will determine what further modifications to the assumed ultimate rates of decline in mortality will

be warranted for future reports.

3. Immigration Assumptions

In order to develop projections of the total Social Security area population,

the Trustees make assumptions for annual legal immigration, legal emigra-
Assumptions and Methods

80

tion, “other immigration,” and “other emigration.” Legal immigration consists of persons who are granted legal permanent resident status. Legal

emigration consists of legal permanent residents and citizens who leave the

Social Security area population. Net legal immigration is the difference

between legal immigration and legal emigration. “Other immigration” consists of immigrants who enter the Social Security area in a given year and

stay to the end of that year without having legal permanent resident 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 become legal permanent residents. Net other immigration is the difference between other immigration and other emigration. Net immigration refers to the sum of net legal

immigration and net other immigration.

The Trustees make separate assumptions 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 780,000

1 persons per year during the period 1992 through

1999. Legal immigration increased to about 895,000 in 2000 and about

1,060,000 in 2001, primarily due to an increase in the number of persons

granted legal permanent resident 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 770,000 by 2003 as processing slowed and the number of pending applications increased. From

2003 to 2006, processing accelerated and legal immigration increased until it

reached about 1,215,000 in 2006. For 2007 through 2009, legal immigration

decreased to about 1,110,000 and declined further to about 1,045,000 in

2010, 1,055,000 in 2011, and 1,030,000 in 2012. The estimated level of legal

immigration in 2013 is 1,050,000.

1 This average excludes those persons who attained legal permanent resident status under the special, onetime provisions of the Immigration Reform and Control Act of 1986.
81

Demographic Assumptions and Methods

The intermediate alternative assumes that annual legal immigration will be

1,050,000 persons for 2014 and later. Alternatives I and III assume that ultimate annual legal immigration will be 1,250,000 persons and 850,000 persons, respectively, for 2016 and later. The ultimate assumption for each

alternative remains unchanged from the level assumed in last year’s report.

The assumed ratios of annual legal emigration to legal immigration are 20,

25, and 30 percent for alternatives I, II, and III, respectively. This range is

consistent with the limited historical data for legal emigration from the

Social Security area. These ratios are unchanged from last year’s report.

Under the intermediate alternative, by combining the ultimate annual legal

immigration and emigration assumptions, ultimate annual net legal immigration is about 790,000 persons. For the low-cost and high-cost scenarios, ultimate annual net legal immigration is 1,000,000 persons and 595,000 persons,

respectively.

Significant changes in the method for projecting other immigration were

implemented for this year’s report. In previous reports, the entire other immigrant population was modeled in aggregate. For this year’s report, three categories of other immigrants are modeled separately. These categories are: (1)

those that were never authorized to enter the Social Security area; (2) those

legally admitted for a limited period of time such as students, temporary

workers, and exchange visitors (“nonimmigrants”); and (3) those that were

nonimmigrants, but have overstayed their visas. Also, in previous reports,

annual other emigration was modeled in two groups: a fixed portion and a

varying portion estimated by applying departure rates to the other-immigrant

population. For this year’s report, other emigration is estimated by applying

distinct departure rates to each of the three separate other-immigrant categories, by age and sex.

The estimated number of other immigrants residing in the Social Security

area increased from 9.3 million persons for January 1, 2000, to 14.1 million

persons for January 1, 2008. The estimated other-immigrant population is

13.3 million persons for January 1, 2009, and 13.4 million persons for January 1, 2010 and January 1, 2011. The estimates for these 3 years are significantly lower than estimates for prior years’ levels, and this is likely due to

the recession.

During the period from 2000 to 2006, the level of annual other immigration

averaged about 1.4 million persons. However, during 2007 to 2010 (the

recession and its surrounding years), annual levels dropped significantly,

averaging only about 0.7 million persons. Estimated levels for 2011, 2012,

and 2013 are 1.0, 1.2, and 1.3 million persons, respectively. Under the inter-
Assumptions and Methods

82

mediate assumptions, annual other immigration is 1.4 million for 2014, and

increases to 1.6 million for 2018 and 2019, reflecting a recovery from recession-depleted levels of the other-immigrant population. Subsequently, it

decreases to the ultimate level of 1.4 million persons for 2022. For the lowcost and high-cost scenarios, the future ultimate annual other immigration is

1.7 million persons and 1.1 million persons, respectively, for 2022 and later.

Although significant methodological changes were made to the modeling of

other immigration, the ultimate assumption for each alternative is unchanged

from last year’s report.

Emigration from the other-immigrant population includes those who leave

the Social Security area and those who adjust their status to become legal

permanent residents. This other-immigrant population is highly mobile and

far more likely to leave the Social Security area than is the citizen or legal

permanent resident population.

Under the intermediate assumptions, the total annual number of other emigrants who leave the Social Security area averages 625,000 through the

75-year projection period. In addition, the ultimate annual number of other

immigrants who adjust status to become legal permanent residents is

assumed to be 450,000 for the intermediate assumptions. This ultimate

annual number who adjust status is about one-third of the ultimate annual

number of other immigrants entering the Social Security area. For the lowcost and high-cost scenarios, the total annual number of other emigrants

averages 725,000 and 500,000, respectively, through the 75-year projection

period. The ultimate annual number of people adjusting status to legal permanent resident status is assumed to be 550,000 persons and 350,000 persons, for the low-cost and high-cost scenarios, respectively. While the

ultimate annual number of people adjusting status to become legal permanent residents is unchanged from last year’s report, the annual number of

other emigrants who leave the Social Security area is about 25,000 to 30,000

lower than in last year’s report for each alternative. This lower level of other

emigration reflects improved historical data from the Department of Homeland Security.

Under the assumptions and methods described above, the projected size of

the other-immigrant population grows 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.

Estimated annual net other immigration averaged about 615,000 persons for

2000 through 2004. Estimates of net other immigration for 2005 through

2010 are based on data from the Department of Homeland Security. The esti-
83

Demographic Assumptions and Methods

mated level is 1,140,000 for 2005, decreasing to 800,000 for 2006 and

70,000 for 2007. For 2008, estimated net other immigration is negative, at

-760,000, but returns to a positive level of 105,000 for 2009 and 50,000 for

2010. The estimated net other immigration for 2011, 2012, and 2013 is

80,000, 390,000, and 490,000, respectively.

Under the intermediate assumptions, projected net other immigration is

about 555,000 persons for 2014, and about 690,000 persons for 2018. Net

other immigration then sharply decreases to about 435,000 for 2022, primarily due to the decline in the number of other immigrants entering the country.

This is followed by a more gradual decrease after 2022 to about 315,000 for

2040 and 270,000 for 2090. The decline in net other immigration after 2022

is due to the increasing number of other immigrants residing in the Social

Security area. Because the number of other immigrants leaving the Social

Security area is based on rates of departure, an increase in the number of

other immigrants residing in the Social Security area results in an increase in

the number who emigrate out of the area. All other components of other

immigration and emigration are assumed to be stable after 2022, and thus do

not contribute toward any change in net other immigration. Under the intermediate assumptions, the projected average annual level of net other immigration over the 75-year projection period is about 335,000 persons. For the

low-cost and high-cost assumptions, projected average annual net other

immigration is about 430,000 persons and 235,000 persons, respectively.

The projected average total level of net immigration (legal and other, combined) is about 1,125,000 persons per year during the 75-year projection

period under the intermediate assumptions. For the low-cost and high-cost

assumptions, projected average annual total net immigration is about

1,430,000 persons and 830,000 persons, respectively.

Demographers express a wide range of views about the future course of

immigration for the United States. Some, like the 2011 Technical Panel mentioned in the previous section, believe that net immigration will increase substantially in the future. Others believe that potential immigrants may be

increasingly attracted to other countries, that potential immigrants may be

fewer due to lower birth rates in many countries, or that changes in the law or

enforcement of the law could reduce immigration.
Assumptions and Methods

84

Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2090

Calendar year

Total

fertility

ratea

Age-sex-adjusted death rateb

per 100,000, by age Net immigration

c d

Total Under 65 65 and over Legal

e Otherf

Historical data:

1940 . . . . . . . . . 2.23 1,919.8 750.1 9,718.8 45,000 —

1945 . . . . . . . . . 2.42 1,716.6 674.8 8,662.9 55,000 —

1950 . . . . . . . . . 3.03 1,561.9 570.2 8,173.7 170,000 —

1955 . . . . . . . . . 3.50 1,453.8 508.2 7,758.4 210,000 —

1960 . . . . . . . . . 3.61 1,454.3 503.2 7,795.4 200,000 —

1965 . . . . . . . . . 2.88 1,428.8 495.2 7,653.3 230,000 —

1970 . . . . . . . . . 2.43 1,340.0 485.7 7,036.3 280,000 —

1975 . . . . . . . . . 1.77 1,204.8 426.6 6,393.6 295,000 —

1980 . . . . . . . . . 1.82 1,136.9 384.3 6,154.3 410,000 200,000

1985 . . . . . . . . . 1.83 1,081.0 353.3 5,932.9 435,000 255,000

1990 . . . . . . . . . 2.07 1,021.3 333.6 5,606.3 500,000 645,000

1995 . . . . . . . . . 1.98 1,001.5 317.9 5,559.5 575,000 585,000

1996 . . . . . . . . . 1.98 987.8 306.6 5,529.1 665,000 500,000

1997 . . . . . . . . . 1.97 971.9 293.3 5,496.4 570,000 570,000

1998 . . . . . . . . . 2.00 963.8 285.4 5,487.1 490,000 615,000

1999 . . . . . . . . . 2.01 970.6 283.2 5,553.6 520,000 615,000

2000 . . . . . . . . . 2.05 960.7 281.0 5,492.3 670,000 610,000

2001 . . . . . . . . . 2.03 951.1 280.4 5,422.8 795,000 610,000

2002 . . . . . . . . . 2.03 947.0 279.0 5,400.6 730,000 615,000

2003 . . . . . . . . . 2.05 933.4 277.2 5,308.6 575,000 615,000

2004 . . . . . . . . . 2.06 898.9 269.7 5,093.9 750,000 620,000

2005 . . . . . . . . . 2.06 901.3 270.7 5,105.4 870,000 1,140,000

2006 . . . . . . . . . 2.11 876.1 267.6 4,933.5 910,000 800,000

2007 . . . . . . . . . 2.12 856.8 261.6 4,825.2 800,000 70,000

2008 . . . . . . . . . 2.07 857.0 258.8 4,845.5 835,000 -760,000

2009 . . . . . . . . . 2.00 827.1 255.3 4,639.7 830,000 105,000

2010 . . . . . . . . . 1.93 821.3 248.5 4,640.1 785,000 50,000

2011g . . . . . . . . 1.89 820.1 249.7 4,622.8 790,000 80,000

2012g. . . . . . . . 1.88 801.9 247.0 4,501.5 775,000 390,000

2013g . . . . . . . . 1.89 790.6 244.4 4,432.2 790,000 490,000

Intermediate:

2015 . . . . . . . . . 1.94 770.0 239.3 4,308.1 790,000 535,000

2020 . . . . . . . . . 2.06 730.2 226.7 4,087.1 790,000 560,000

2025 . . . . . . . . . 2.05 697.3 214.4 3,917.1 790,000 405,000

2030 . . . . . . . . . 2.03 667.6 202.7 3,767.8 790,000 370,000

2035 . . . . . . . . . 2.01 640.2 191.6 3,630.7 790,000 335,000

2040 . . . . . . . . . 2.00 614.6 181.3 3,503.0 790,000 315,000

2045 . . . . . . . . . 2.00 590.6 171.7 3,383.3 790,000 300,000

2050 . . . . . . . . . 2.00 568.1 162.7 3,270.7 790,000 295,000

2055 . . . . . . . . . 2.00 547.0 154.3 3,164.6 790,000 285,000

2060 . . . . . . . . . 2.00 527.1 146.5 3,064.6 790,000 280,000

2065 . . . . . . . . . 2.00 508.4 139.1 2,970.2 790,000 280,000

2070 . . . . . . . . . 2.00 490.8 132.3 2,880.9 790,000 275,000

2075 . . . . . . . . . 2.00 474.1 125.8 2,796.4 790,000 275,000

2080 . . . . . . . . . 2.00 458.4 119.8 2,716.3 790,000 270,000

2085 . . . . . . . . . 2.00 443.5 114.1 2,640.3 790,000 270,000

2090 . . . . . . . . . 2.00 429.5 108.7 2,568.0 790,000 270,000
85

Demographic Assumptions and Methods

Low-cost:

2015 . . . . . . . . . 1.96 784.2 243.0 4,392.0 960,000 660,000

2020 . . . . . . . . . 2.14 768.1 238.0 4,302.8 1,000,000 735,000

2025 . . . . . . . . . 2.19 751.7 231.8 4,218.0 1,000,000 555,000

2030 . . . . . . . . . 2.23 735.4 225.4 4,135.5 1,000,000 495,000

2035 . . . . . . . . . 2.28 719.4 219.1 4,055.5 1,000,000 445,000

2040 . . . . . . . . . 2.30 703.9 212.9 3,977.9 1,000,000 410,000

2045 . . . . . . . . . 2.30 689.0 206.9 3,902.7 1,000,000 390,000

2050 . . . . . . . . . 2.30 674.5 201.2 3,830.1 1,000,000 370,000

2055 . . . . . . . . . 2.30 660.5 195.6 3,759.7 1,000,000 360,000

2060 . . . . . . . . . 2.30 646.9 190.3 3,691.7 1,000,000 350,000

2065 . . . . . . . . . 2.30 633.8 185.1 3,625.7 1,000,000 345,000

2070 . . . . . . . . . 2.30 621.2 180.1 3,561.8 1,000,000 340,000

2075 . . . . . . . . . 2.30 608.9 175.3 3,499.9 1,000,000 340,000

2080 . . . . . . . . . 2.30 597.0 170.6 3,439.9 1,000,000 335,000

2085 . . . . . . . . . 2.30 585.5 166.1 3,381.7 1,000,000 335,000

2090 . . . . . . . . . 2.30 574.3 161.7 3,325.2 1,000,000 335,000

High-cost:

2015 . . . . . . . . . 1.91 755.8 235.6 4,224.3 630,000 315,000

2020 . . . . . . . . . 1.97 691.6 214.8 3,870.1 595,000 135,000

2025 . . . . . . . . . 1.91 641.5 195.7 3,613.5 595,000 320,000

2030 . . . . . . . . . 1.83 598.5 178.5 3,398.8 595,000 295,000

2035 . . . . . . . . . 1.75 560.5 163.1 3,209.5 595,000 270,000

2040 . . . . . . . . . 1.70 526.3 149.3 3,039.7 595,000 250,000

2045 . . . . . . . . . 1.70 495.5 137.0 2,885.7 595,000 240,000

2050 . . . . . . . . . 1.70 467.6 125.9 2,745.4 595,000 230,000

2055 . . . . . . . . . 1.70 442.2 116.0 2,617.0 595,000 225,000

2060 . . . . . . . . . 1.70 419.0 107.0 2,499.1 595,000 220,000

2065 . . . . . . . . . 1.70 397.8 98.9 2,390.6 595,000 220,000

2070 . . . . . . . . . 1.70 378.4 91.6 2,290.4 595,000 215,000

2075 . . . . . . . . . 1.70 360.5 85.0 2,197.5 595,000 215,000

2080 . . . . . . . . . 1.70 344.0 78.9 2,111.1 595,000 210,000

2085 . . . . . . . . . 1.70 328.7 73.4 2,030.7 595,000 210,000

2090 . . . . . . . . . 1.70 314.5 68.4 1,955.5 595,000 210,000

a The total fertility rate for any year is the average number of children that would be born to a woman in her

lifetime if she were to experience, at each age of her life, the birth rate observed in, or assumed for, the

selected year, and if she were to survive the entire childbearing period.

b Based on the enumerated total population as of April 1, 2010, if that population were to experience the

death rates by age and sex observed in, or assumed for, the selected year.

c Net immigration values are rounded to the nearest 5,000.

d Estimates do not include persons who attained legal permanent resident status under the special one-time

provisions of the Immigration Reform and Control Act of 1986.

e Historical estimates of net legal immigration assume a 25 percent reduction in legal immigration due to

legal emigration.

f Historical net other immigration estimates depend on a residual method, using Department of Homeland

Security January 1 stock estimates for 2005 through 2011.

g Fertility is estimated starting in 2012, mortality starting in 2011, and immigration starting in 2012.

Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2090 (Cont.)

Calendar year

Total

fertility

ratea

Age-sex-adjusted death rateb

per 100,000, by age Net immigration

c d

Total Under 65 65 and over Legal

e Otherf
Assumptions and Methods

86

4. Total Population Estimates

The starting Social Security area population for January 1, 2012, is derived

from the Census Bureau’s estimate of the residents of the 50 States and D.C.

and U.S. Armed Forces overseas. Adjustments are made to reflect mortality

assumptions for the aged population since 2010 that are consistent with

Medicare and Social Security data, net immigration assumptions for the aged

population since 2010, estimates of the net undercount in the 2010 census,

inclusion of U.S. citizens living abroad (including residents of U.S. territories), and inclusion of non-citizens living abroad who are insured for Social

Security benefits. The Office of the Chief Actuary projects the population in

the Social Security area by age, sex, and marital status for January 1 of each

year 2013 through 2090 by combining the assumptions for future fertility,

mortality, and immigration with assumptions for marriage and divorce. Previous sections of this chapter present the assumptions for future fertility,

mortality, and immigration. Assumptions for future rates of marriage and

divorce reflect historical data from the National Center for Health Statistics,

the Census Bureau, and selected individual States.

For the estimates in this report, the Trustees have assumed that Social Security will expand its guidelines to recognize all auxiliary beneficiaries for

valid same-sex marriages and same-sex marriages will eventually be recognized in all States. The effect on marriage rates is assumed to be fully realized within 25 years, reflecting both the gradual acceptance of same-sex

marriage in all States and behavioral changes in the population consistent

with the acceptance.

This report presents a July 1 (i.e., midyear) population for each year, which

is derived from surrounding January populations. Table V.A2 shows the historical and projected population for July 1 by broad age group, for the three

alternatives. It also shows the aged and total dependency ratios (see table

footnotes for definitions).
87

Demographic Assumptions and Methods

Table V.A2.—Social Security Area Population on July 1 and Dependency Ratios,

Calendar Years 1945-2090

Calendar year

Population (in thousands) Dependency ratio

Under 20 20-64

65 and

over Total Aged

a Totalb

Historical data:

1945 . . . . . . . . . . . . . . 49,121 88,109 10,896 148,126 0.124 0.681

1950 . . . . . . . . . . . . . . 53,902 92,382 12,769 159,052 .138 .722

1955 . . . . . . . . . . . . . . 63,291 96,207 15,075 174,574 .157 .815

1960 . . . . . . . . . . . . . . 73,074 99,802 17,277 190,153 .173 .905

1965 . . . . . . . . . . . . . . 80,032 104,879 19,070 203,982 .182 .945

1970 . . . . . . . . . . . . . . 81,047 113,000 20,901 214,948 .185 .902

1975 . . . . . . . . . . . . . . 78,718 122,654 23,316 224,687 .190 .832

1980 . . . . . . . . . . . . . . 74,851 134,104 26,308 235,263 .196 .754

1985 . . . . . . . . . . . . . . 73,077 144,567 29,145 246,788 .202 .707

1990 . . . . . . . . . . . . . . 74,823 152,753 31,935 259,510 .209 .699

1995 . . . . . . . . . . . . . . 79,570 160,552 34,434 274,557 .214 .710

2000 . . . . . . . . . . . . . . 82,384 169,995 35,687 288,067 .210 .695

2005 . . . . . . . . . . . . . . 84,184 180,245 37,184 301,614 .206 .673

2010 . . . . . . . . . . . . . . 85,393 188,379 41,047 314,819 .218 .671

2013 c. . . . . . . . . . . . . 84,925 192,012 45,176 322,113 .235 .678

Intermediate:

2015 . . . . . . . . . . . . . . 85,414 194,094 48,170 327,678 .248 .688

2020 . . . . . . . . . . . . . . 88,211 198,246 56,643 343,101 .286 .731

2025 . . . . . . . . . . . . . . 91,406 200,512 66,114 358,032 .330 .786

2030 . . . . . . . . . . . . . . 94,060 203,105 74,364 371,528 .366 .829

2035 . . . . . . . . . . . . . . 97,539 206,276 79,462 383,276 .385 .858

2040 . . . . . . . . . . . . . . 99,185 212,109 82,114 393,407 .387 .855

2045 . . . . . . . . . . . . . . 100,060 218,788 83,783 402,631 .383 .840

2050 . . . . . . . . . . . . . . 101,486 224,196 86,030 411,711 .384 .836

2055 . . . . . . . . . . . . . . 103,714 228,560 88,960 421,234 .389 .843

2060 . . . . . . . . . . . . . . 106,315 232,274 92,678 431,267 .399 .857

2065 . . . . . . . . . . . . . . 108,680 236,738 96,196 441,614 .406 .865

2070 . . . . . . . . . . . . . . 110,587 241,457 99,962 452,006 .414 .872

2075 . . . . . . . . . . . . . . 112,178 246,406 103,722 462,306 .421 .876

2080 . . . . . . . . . . . . . . 113,874 252,688 105,962 472,525 .419 .870

2085 . . . . . . . . . . . . . . 115,905 257,378 109,493 482,776 .425 .876

2090 . . . . . . . . . . . . . . 118,130 261,141 113,830 493,101 .436 .888

Low-cost:

2015 . . . . . . . . . . . . . . 85,581 194,297 48,143 328,021 .248 .688

2020 . . . . . . . . . . . . . . 89,609 199,626 56,360 345,595 .282 .731

2025 . . . . . . . . . . . . . . 94,798 203,160 65,387 363,345 .322 .788

2030 . . . . . . . . . . . . . . 100,202 206,983 73,042 380,228 .353 .837

2035 . . . . . . . . . . . . . . 107,148 211,369 77,443 395,960 .366 .873

2040 . . . . . . . . . . . . . . 112,480 218,942 79,382 410,804 .363 .876

2045 . . . . . . . . . . . . . . 116,745 228,088 80,432 425,266 .353 .864

2050 . . . . . . . . . . . . . . 121,433 236,676 82,227 440,336 .347 .860

2055 . . . . . . . . . . . . . . 127,032 244,903 84,882 456,818 .347 .865

2060 . . . . . . . . . . . . . . 133,122 253,238 88,419 474,780 .349 .875

2065 . . . . . . . . . . . . . . 139,348 262,784 91,742 493,874 .349 .879

2070 . . . . . . . . . . . . . . 145,298 273,239 95,208 513,744 .348 .880

2075 . . . . . . . . . . . . . . 150,909 284,808 98,555 534,273 .346 .876

2080 . . . . . . . . . . . . . . 156,612 298,554 100,422 555,588 .336 .861

2085 . . . . . . . . . . . . . . 162,773 311,045 104,092 577,911 .335 .858

2090 . . . . . . . . . . . . . . 169,341 322,696 109,265 601,302 .339 .863
Assumptions and Methods

88

Notes:

1. Historical data are subject to revision.

2. Totals do not necessarily equal the sums of rounded components.

5. Life Expectancy Estimates

Life expectancy, or average remaining number of years expected prior to

death, is an additional way to summarize the Trustees’ mortality assumptions. This report includes life expectancy in two different forms (period and

cohort) for two separate purposes.

• Period life expectancy for a given year uses the actual or expected death

rates at each age for that year. It is a useful summary statistic for illustrating the overall level of the death rates experienced in a single year.

Period life expectancy for a particular year provides an individual’s

expected average remaining lifetime at a selected age, assuming no

change in death rates after that year. Table V.A3 presents historical and

projected life expectancy calculated on a period basis.

• Cohort life expectancy does not use death rates for a single year, but for

the series of years in which the individual will actually reach each succeeding age if he or she survives. Cohort life expectancy provides an

individual’s expected average remaining lifetime at a selected age in a

given year, using actual or expected future changes in death rates. Table

V.A4 presents historical and projected life expectancy calculated on a

High-cost:

2015 . . . . . . . . . . . . . . 85,205 193,822 48,197 327,224 0.249 0.688

2020 . . . . . . . . . . . . . . 86,191 195,722 56,912 338,826 .291 .731

2025 . . . . . . . . . . . . . . 87,394 196,635 66,843 350,871 .340 .784

2030 . . . . . . . . . . . . . . 87,438 198,210 75,728 361,376 .382 .823

2035 . . . . . . . . . . . . . . 87,659 200,384 81,581 369,624 .407 .845

2040 . . . . . . . . . . . . . . 85,980 204,625 85,014 375,620 .415 .836

2045 . . . . . . . . . . . . . . 83,966 208,921 87,366 380,253 .418 .820

2050 . . . . . . . . . . . . . . 82,691 211,298 90,105 384,095 .426 .818

2055 . . . . . . . . . . . . . . 82,225 212,039 93,308 387,572 .440 .828

2060 . . . . . . . . . . . . . . 82,187 211,456 97,158 390,801 .459 .848

2065 . . . . . . . . . . . . . . 81,750 211,215 100,796 393,761 .477 .864

2070 . . . . . . . . . . . . . . 80,844 210,676 104,784 396,304 .497 .881

2075 . . . . . . . . . . . . . . 79,761 209,664 108,884 398,309 .519 .900

2080 . . . . . . . . . . . . . . 78,895 209,385 111,437 399,717 .532 .909

2085 . . . . . . . . . . . . . . 78,372 207,555 114,644 400,572 .552 .930

2090 . . . . . . . . . . . . . . 78,012 205,112 117,797 400,921 .574 .955

a Ratio of the population at ages 65 and over to the population at ages 20-64.

b Ratio of the population at ages 65 and over and the population under age 20 to the population at ages

20-64.

c Estimated.

Table V.A2.—Social Security Area Population on July 1 and Dependency Ratios,

Calendar Years 1945-2090 (Cont.)

Calendar year

Population (in thousands) Dependency ratio

Under 20 20-64

65 and

over Total Aged

a Totalb
89

Demographic Assumptions and Methods

cohort basis. Cohort life expectancy is somewhat greater than period

life expectancy for a given year because: (a) death rates at any age tend

to decline over time; and (b) cohort life expectancy uses death rates

from future years, while period life expectancy uses death rates only

from the given year.

Life expectancy at a given age reflects death rates at that and all older ages.

Period life expectancy is somewhat related to the age-sex-adjusted death rate

discussed in section V.A.2. However, life expectancy places far greater

weight on death rates at lower ages than at higher ages. Therefore, changes in

death rates at lower ages have far greater effects in changing life expectancy

over time. It is important to keep this concept in mind when considering

trends in life expectancy.
Assumptions and Methods

90

Table V.A3.—Period Life Expectancya

a The period life expectancy at a given age for a given year is the average remaining number of years

expected prior to death for a person at that exact age, born on January 1, using the mortality rates for that

year over the course of his or her remaining life.

Historical data

Calendar

year

At birth At age 65

Male Female Male Female

1940 . . . . 61.4 65.7 11.9 13.4

1945 . . . . 62.9 68.4 12.6 14.4

1950 . . . . 65.6 71.1 12.8 15.1

1955 . . . . 66.7 72.8 13.1 15.6

1960 . . . . 66.7 73.2 12.9 15.9

1965 . . . . 66.8 73.8 12.9 16.3

1970 . . . . 67.2 74.9 13.1 17.1

1975 . . . . 68.7 76.6 13.7 18.0

1980 . . . . 69.9 77.5 14.0 18.4

1985 . . . . 71.1 78.2 14.4 18.6

1990 . . . . 71.8 78.9 15.1 19.1

1995 . . . . 72.5 79.1 15.4 19.1

2000 . . . . 74.0 79.4 15.9 19.0

2001 . . . . 74.1 79.5 16.1 19.1

2002 . . . . 74.2 79.5 16.2 19.1

2003 . . . . 74.4 79.6 16.3 19.2

2004 . . . . 74.8 80.0 16.7 19.5

2005 . . . . 74.8 80.0 16.7 19.5

2006 . . . . 75.1 80.2 17.0 19.7

2007 . . . . 75.4 80.5 17.2 19.9

2008 . . . . 75.5 80.5 17.2 19.9

2009 . . . . 75.9 80.8 17.5 20.2

2010 . . . . 76.1 80.9 17.6 20.2

2011 b. . . 76.1 80.9 17.7 20.2

2012 b . . . 76.4 81.1 17.9 20.4

2013 b . . .

b Estimated.

76.5 81.3 18.0 20.5

Intermediate Low-cost High-cost

Calendar

year

At birth At age 65 At birth At age 65 At birth At age 65

Male Female Male Female Male Female Male Female Male Female Male Female

2015 . . . . 76.9 81.5 18.3 20.7 76.7 81.3 18.2 20.6 77.1 81.7 18.5 20.8

2020 . . . . 77.6 82.1 18.8 21.1 77.0 81.6 18.4 20.7 78.3 82.6 19.3 21.5

2025 . . . . 78.2 82.6 19.2 21.4 77.3 81.8 18.6 20.9 79.3 83.4 19.9 22.0

2030 . . . . 78.8 83.1 19.6 21.7 77.6 82.1 18.8 21.0 80.2 84.2 20.4 22.5

2035 . . . . 79.4 83.5 19.9 22.0 77.9 82.3 18.9 21.2 81.0 84.9 20.9 22.9

2040 . . . . 79.9 84.0 20.2 22.3 78.2 82.5 19.1 21.3 81.8 85.5 21.4 23.3

2045 . . . . 80.4 84.4 20.5 22.5 78.5 82.8 19.3 21.5 82.6 86.1 21.8 23.7

2050 . . . . 80.9 84.8 20.7 22.8 78.8 83.0 19.4 21.6 83.3 86.7 22.2 24.1

2055 . . . . 81.4 85.2 21.0 23.0 79.0 83.2 19.6 21.8 83.9 87.2 22.6 24.5

2060 . . . . 81.8 85.5 21.3 23.3 79.3 83.5 19.7 21.9 84.5 87.7 23.0 24.8

2065 . . . . 82.3 85.9 21.5 23.5 79.6 83.7 19.9 22.0 85.1 88.2 23.3 25.2

2070 . . . . 82.7 86.2 21.8 23.8 79.8 83.9 20.0 22.2 85.7 88.7 23.7 25.5

2075 . . . . 83.1 86.6 22.0 24.0 80.1 84.1 20.2 22.3 86.2 89.1 24.0 25.8

2080 . . . . 83.5 86.9 22.3 24.2 80.3 84.3 20.3 22.4 86.7 89.5 24.4 26.1

2085 . . . . 83.9 87.2 22.5 24.4 80.6 84.5 20.5 22.6 87.2 89.9 24.7 26.4

2090 . . . . 84.3 87.5 22.8 24.6 80.8 84.7 20.6 22.7 87.7 90.3 25.0 26.7
91

Demographic Assumptions and Methods

Table V.A4.—Cohort Life Expectancya

a The cohort life expectancy at a given age for a given year is the average remaining number of years

expected prior to death for a person at that exact age, born on January 1, using the mortality rates for the

series of years in which the individual will actually reach each succeeding age if he or she survives.

Calendar

year

Intermediate Low-cost High-cost

At birth

b At age 65 c At birth b

b Cohort life expectancy at birth for those born in the calendar year is based on a combination of actual and

estimated death rates for birth years 1940 through 2010. For birth years after 2010, these values depend on

estimated death rates.

At age 65 c

c Age 65 cohort life expectancy for those attaining age 65 in calendar years 1940 though 2010 depends on

actual death rates or on a combination of actual and estimated death rates. After 2010, these values depend

on estimated death rates.

At birth b At age 65 c

Male Female Male Female Male Female Male Female Male Female Male Female

1940 . . . . 70.6 76.7 12.7 14.7 70.3 76.5 12.7 14.7 70.8 77.1 12.7 14.7

1945 . . . . 72.5 78.5 13.0 15.4 72.1 78.0 13.0 15.4 72.9 78.9 13.0 15.4

1950 . . . . 73.8 79.8 13.1 16.2 73.2 79.2 13.1 16.2 74.4 80.5 13.1 16.2

1955 . . . . 74.5 80.5 13.1 16.7 73.8 79.7 13.1 16.7 75.3 81.3 13.1 16.7

1960 . . . . 75.2 80.9 13.2 17.4 74.3 80.0 13.2 17.4 76.2 82.0 13.2 17.4

1965 . . . . 76.1 81.5 13.5 18.0 75.0 80.4 13.5 18.0 77.4 82.7 13.5 18.0

1970 . . . . 77.3 82.3 13.8 18.5 76.0 81.1 13.8 18.5 78.8 83.8 13.8 18.5

1975 . . . . 78.2 83.0 14.2 18.7 76.7 81.6 14.2 18.7 80.0 84.7 14.2 18.7

1980 . . . . 79.1 83.7 14.7 18.8 77.4 82.1 14.7 18.8 81.1 85.5 14.7 18.8

1985 . . . . 79.8 84.3 15.4 19.1 77.9 82.5 15.4 19.1 82.0 86.3 15.4 19.1

1990 . . . . 80.5 84.8 16.1 19.5 78.3 82.9 16.1 19.4 82.9 87.0 16.1 19.5

1995 . . . . 81.2 85.3 16.8 19.8 78.8 83.2 16.7 19.7 83.8 87.6 16.9 20.0

2000 . . . . 81.7 85.7 17.6 20.3 79.2 83.5 17.5 20.1 84.5 88.2 17.8 20.6

2001 . . . . 81.8 85.8 17.8 20.4 79.2 83.6 17.6 20.2 84.7 88.3 18.0 20.7

2002 . . . . 81.9 85.9 17.9 20.5 79.3 83.6 17.7 20.3 84.8 88.4 18.2 20.8

2003 . . . . 82.0 86.0 18.1 20.6 79.3 83.7 17.8 20.4 84.9 88.5 18.4 21.0

2004 . . . . 82.1 86.1 18.2 20.7 79.4 83.7 17.9 20.4 85.0 88.6 18.5 21.1

2005 . . . . 82.2 86.1 18.3 20.8 79.4 83.7 18.0 20.5 85.2 88.7 18.7 21.2

2006 . . . . 82.3 86.2 18.5 20.9 79.5 83.8 18.1 20.6 85.3 88.8 18.9 21.4

2007 . . . . 82.4 86.3 18.6 21.0 79.6 83.8 18.2 20.6 85.4 88.9 19.0 21.5

2008 . . . . 82.5 86.3 18.7 21.1 79.6 83.9 18.3 20.7 85.5 89.0 19.2 21.6

2009 . . . . 82.6 86.4 18.8 21.2 79.7 83.9 18.3 20.7 85.7 89.1 19.3 21.7

2010 . . . . 82.7 86.5 18.9 21.3 79.8 84.0 18.4 20.8 85.8 89.2 19.5 21.8

2011 . . . . 82.7 86.6 19.0 21.4 79.8 84.0 18.5 20.8 85.9 89.3 19.6 22.0

2012 . . . . 82.8 86.6 19.1 21.4 79.8 84.1 18.5 20.9 86.0 89.4 19.8 22.1

2013 . . . . 82.9 86.7 19.2 21.5 79.9 84.1 18.6 20.9 86.1 89.5 19.9 22.2

2015 . . . . 83.1 86.8 19.3 21.6 80.0 84.2 18.7 21.0 86.4 89.7 20.2 22.4

2020 . . . . 83.5 87.2 19.7 22.0 80.3 84.4 18.8 21.1 87.0 90.2 20.7 22.9

2025 . . . . 83.9 87.5 20.0 22.3 80.5 84.6 19.0 21.3 87.5 90.6 21.2 23.4

2030 . . . . 84.3 87.9 20.4 22.5 80.8 84.8 19.2 21.4 88.1 91.1 21.7 23.8

2035 . . . . 84.7 88.2 20.7 22.8 81.0 85.0 19.3 21.6 88.6 91.5 22.2 24.2

2040 . . . . 85.1 88.5 21.0 23.1 81.3 85.2 19.5 21.7 89.1 91.9 22.6 24.6

2045 . . . . 85.5 88.8 21.2 23.3 81.5 85.4 19.7 21.9 89.6 92.2 23.0 25.0

2050 . . . . 85.8 89.1 21.5 23.6 81.7 85.6 19.8 22.0 90.0 92.6 23.4 25.3

2055 . . . . 86.2 89.3 21.8 23.8 82.0 85.8 20.0 22.2 90.4 93.0 23.8 25.7

2060 . . . . 86.5 89.6 22.0 24.0 82.2 86.0 20.1 22.3 90.8 93.3 24.2 26.0

2065 . . . . 86.8 89.9 22.3 24.3 82.4 86.2 20.3 22.4 91.2 93.6 24.5 26.3

2070 . . . . 87.2 90.1 22.5 24.5 82.6 86.3 20.4 22.6 91.6 93.9 24.9 26.6

2075 . . . . 87.5 90.4 22.8 24.7 82.9 86.5 20.6 22.7 92.0 94.2 25.2 26.9

2080 . . . . 87.8 90.6 23.0 24.9 83.1 86.7 20.7 22.8 92.3 94.5 25.5 27.2

2085 . . . . 88.0 90.9 23.2 25.1 83.3 86.8 20.9 23.0 92.7 94.8 25.8 27.5

2090 . . . . 88.3 91.1 23.5 25.3 83.5 87.0 21.0 23.1 93.0 95.1 26.1 27.8
Assumptions and Methods

92

B. ECONOMIC ASSUMPTIONS AND METHODS

The three alternative sets of economic assumptions reflect a continuation of

the gradual recovery from the recession that started in December 2007. The

intermediate assumptions reflect the Trustees’ consensus expectation of sustained moderate economic growth and their best estimate for various other

economic parameters. The low-cost assumptions represent a more optimistic

outlook: a faster recovery, stronger long-term economic growth, and relatively optimistic levels for other parameters. The high-cost assumptions represent a more pessimistic scenario: a slower recovery, weaker long-term

economic growth, and relatively pessimistic levels for other parameters.

Actual economic data were available through the third quarter of 2013 at the

time the Trustees set the assumptions for this report. The data indicated that

economic activity peaked in December 20071 with the level of gross domestic product (GDP) about 1 percent above the estimated long-term sustainable

trend level. A severe recession followed, with a low point in the economic

cycle reached in the second quarter of 2009 with GDP about 7 percent below

the estimated sustainable trend level. The annual growth rate in real GDP has

been positive in all years since then, but not as strong as in most past recoveries. The Trustees project that the economy will return to its sustainable

trend level of output within the first 10 years of the projection period and

remain on that trend thereafter. However, the speed of the return varies by

alternative. The economy is projected to return to its sustainable trend level

of output by 2021 for the intermediate assumptions, 2019 for the low-cost

assumptions, and 2023 for the high-cost assumptions, about 1 year later than

in last year’s report for each alternative. Complete cycles have little effect on

the long-range estimates of financial status, so the assumptions do not

include economic cycles beyond 10 years.

The key economic assumptions underlying the three sets of projections of the

future financial status of the OASI and DI Trust Funds are discussed in the

remainder of this section.

1 See www.nber.org/cycles/cyclesmain.html.
93

Economic Assumptions and Methods

1. Productivity Assumptions

Total U.S. economy productivity is defined as the ratio of real GDP to hours

worked by all workers.

1 The rate of change in total-economy productivity is

a major determinant in the growth of average earnings. Over the last five

complete economic cycles (1966-73, 1973-79, 1979-89, 1989-2000, and

2000-07, measured peak to peak), the annual increases in total productivity

averaged 2.27, 1.10, 1.39, 1.79 and 2.15 percent, respectively. For the 41-

year period from 1966 to 2007, covering those last five complete economic

cycles, the annual increase in total-economy productivity averaged 1.73 percent.

The Trustees set the ultimate annual increases in total-economy productivity

to 1.98, 1.68, and 1.38 percent for the low-cost, intermediate, and high-cost

assumptions, respectively.

2 These rates of increase are unchanged from the

2013 report.

The average annual rate of change in total economy productivity from 2007

(the end of the last complete economic cycle) to 2013 is estimated to be

1.36 percent. For the intermediate assumptions, the annual change in productivity is assumed to be 1.57 percent for 2014, then increase to 1.92 percent

for 2015, gradually decline to 1.55 percent for 2020, and then rise to its ultimate value of 1.68 percent for 2023 and later. For the low-cost assumptions,

the assumed annual change in productivity is 1.88 percent for 2014, then

increases to 2.21 percent for 2015, averages 1.92 percent for 2016 through

2021, and reaches its ultimate value of 1.98 percent for 2022. For the highcost assumptions, the assumed annual change in productivity is 1.00 percent

for 2014, then averages 1.69 percent for 2015 through 2017, 1.34 percent for

2018 through 2023, and reaches its ultimate value of 1.38 percent for 2026

and later.

2. Price Inflation Assumptions

Future changes in the Consumer Price Index for Urban Wage Earners and

Clerical Workers (CPI) will directly affect the OASDI program through the

automatic cost-of-living benefit increases. Future changes in the GDP price

1 Historical levels of real GDP are from the Bureau of Economic Analysis’ National Income and Product

Accounts. Historical total hours worked is an unpublished series provided by the Bureau of Labor Statistics

that includes all U.S. Armed Forces and civilian employment.

2 These assumptions are consistent with ultimate annual increases in private non-farm business productivity

of 2.42, 2.06, and 1.69 percent. Compared to total-economy productivity, private non-farm business productivity is a more widely known concept that excludes the farm, government, non-profit institution, and private

household sectors.
Assumptions and Methods

94

index (GDP deflator) affect the nominal levels of GDP, wages, self-employment income, average earnings, and taxable payroll.

The annual increases in the CPI averaged 4.6, 8.5, 5.3, 3.0, and 2.6 percent

over the economic cycles 1966-73, 1973-79, 1979-89, 1989-2000, and 2000-

07, respectively. The annual increases in the GDP deflator averaged 4.6, 7.5,

4.7, 2.2, and 2.5 percent for the same respective economic cycles. For the 41

years from 1966 to 2007, covering the last five complete economic cycles,

the annual increases in the CPI and GDP deflator averaged 4.6 and

4.0 percent, respectively. The estimated average annual change from 2007

(the end of the last complete economic cycle) to 2013 is 2.1 percent for the

CPI and 1.5 percent for the GDP deflator.

The Trustees set the ultimate annual increases in the CPI to 3.4, 2.7, and

2.0 percent for the low-cost, intermediate, and high-cost assumptions,

respectively. The CPI assumptions differ in three ways from those in the

2013 report. First, the ultimate annual change in the CPI in the intermediate

assumptions is 0.1 percentage point lower. Second, the low-cost assumptions

now include a higher (rather than lower), and the high-cost assumptions a

lower (rather than higher), rate of increase in the CPI than the intermediate

assumptions. Third, the spread in the assumed rates of increase in the CPI

across the alternatives is now narrower. Note that a higher price inflation rate

results in faster earnings and revenue growth immediately, while the resulting added growth in benefit levels occurs with a delay, causing an overall

improvement in the actuarial balance. Similarly, a lower price inflation rate

causes an overall decline in the actuarial balance.

The Federal Reserve Board’s monetary policy changed in the 1980s toward

more vigilance in preventing high inflation. Recognizing this, the Trustees

lowered the assumed ultimate annual rate of increase in the CPI for the intermediate case from 4.0 percent for the 1996 report to 2.8 percent for the 2004

through 2013 reports. Consistent with the Board’s continued emphasis on

preventing inflation, as indicated by their current target for the GDP deflator,1 the Trustees have decided to decrease the ultimate annual change in the

CPI by 0.1 percentage point for the intermediate assumptions.

For the intermediate assumptions, the Trustees assume the annual change in

the CPI will be 1.61 percent for 2014, 1.95 percent for 2015, and then, as the

economy moves toward full employment, increase gradually to the ultimate

growth rate of 2.70 percent for 2020 and later. For the low-cost assumptions,

1 The Federal Open Market Committee (FOMC) targets a rate of 2 percent for the price index for Personal

Consumption Expenditures, which is substantially the same as the GDP deflator. See

www.federalreserve.gov/newsevents/press/monetary/20120125c.htm.
95

Economic Assumptions and Methods

the Trustees assume the annual change in the CPI will be 1.79 percent for

2014, increase to 2.82 percent for 2015, and reach its ultimate annual growth

rate of 3.40 percent for 2019 and later. For the high-cost assumptions, the

Trustees assume the annual rate of change in the CPI will increase from

1.48 percent for 2014 to the ultimate annual change of 2.00 percent for 2020

and later.

The annual increase in the GDP deflator differs from the annual increase in

the CPI because the two indices are constructed using different computational methods and coverage. The difference between the rate of change in

the CPI and the rate of change in the GDP deflator is called the price differential in this report. For the 41 years from 1966 to 2007, covering the last

five complete economic cycles, the average annual price differential was

0.5 percent. From 2007 (the end of the last complete economic cycle) to

2013, the average annual price differential is estimated to be 0.6 percent.

The Trustees assume the ultimate price differentials will be 0.3, 0.4, and 0.5

percentage point for the low-cost, intermediate, and high-cost alternatives,

respectively. Varying the ultimate projected price differential across alternatives recognizes the historical variation in this measure. Accordingly, the

assumed ultimate annual increase in the GDP deflator is 3.1 (3.4 less 0.3),

2.3 (2.7 less 0.4), and 1.5 (2.0 less 0.5) percent for the low-cost, intermediate, and high-cost alternatives, respectively. The ultimate price differentials

for the three alternatives are unchanged from the 2013 report.

The price differential was 1.6 percentage points for 2011, 0.4 percentage

point for 2012, and is estimated to be 0.0 percentage point for 2013. The

large change in the price differential between 2011 and 2012 primarily

reflects fluctuations in oil prices in recent years. Changes in oil prices affect

the CPI much more than the GDP deflator because oil represents a much

larger share of U.S. consumption than of U.S. production. The Trustees do

not assume any future fluctuations in oil prices because such fluctuations are

inherently unpredictable. For the intermediate assumptions, the Trustees

assume the price differential will be 0.2 percentage point for 2014 and 0.4

percentage point for 2015 and later.

3. Average Earnings Assumptions

The average level of nominal earnings in OASDI covered employment for

each year has a direct effect on the size of the taxable payroll and on the

future level of average benefits. In addition, under the automatic adjustment

provisions in the law, growth in the average wage in the U.S. economy

directly affects certain parameters used in the OASDI benefit formulas as
Assumptions and Methods

96

well as the contribution and benefit base, the exempt amounts under the

retirement earnings test, the amount of earnings required for a quarter of coverage, and in certain circumstances, the automatic cost-of-living benefit

increases.

Average U.S. earnings is defined as the ratio of the sum of total U.S. wage

and salary disbursements and net proprietors’ income to the sum of total U.S.

civilian employment and armed forces. 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 total

compensation (which includes fringe benefits), the ratio of total compensation to GDP, and the GDP deflator.

The average annual change in average hours worked was -0.27 percent over

the last five complete economic cycles covering the period from 1966 to

2007. The annual change in average hours worked averaged -0.71, -0.56,

0.00, 0.15, and -0.64 percent over the economic cycles 1966-73, 1973-79,

1979-89, 1989-2000, and 2000-07, respectively. From 2007 (the end of the

last complete economic cycle) to 2013, the average annual change in average

hours worked is estimated to be -0.15 percent.

The Trustees set the ultimate annual rates of change for average hours

worked at 0.05, -0.05, and -0.15 percent for the low-cost, intermediate, and

high-cost assumptions, respectively. These ultimate annual rates of change

for average hours worked are unchanged from the 2013 report.

The average annual change in the ratio of earnings to total compensation was

-0.20 percent from 1966 to 2007. Most of this decrease was due to the relative increase in the cost of employer-sponsored group health insurance for

wage workers. Assuming that the level of total employee compensation is

not affected by the amount of employer-sponsored group health insurance,

any increase or decrease in employer-sponsored group health insurance leads

to a commensurate decrease or increase in other components of employee

compensation, including wages. Projections of future ratios of earnings to

total compensation follow this principle. The Trustees assume that the total

amount of future employer-sponsored group health insurance will increase

more slowly than in the past due to provisions of the Affordable Care Act of

2010, as described in the 2010 report. Data from the Bureau of Economic

Analysis (BEA) indicate that the other significant component of non-wage

employee compensation is employer contributions to retirement plans. The

other component is assumed to grow faster than employee compensation in

the future as life expectancy and potential time in retirement increase.

The Trustees set the average annual rate of change in the ratio of wages to

employee compensation from 2025 to 2088 to about -0.03, -0.13, and -0.23
97

Economic Assumptions and Methods

percent for the low-cost, intermediate, and high-cost assumptions, respectively. Under the intermediate assumptions, the ratio of wages to employee

compensation is assumed to decline from 0.806 for 2013 to 0.737 for 2088.

The rate of this decline is about half the rate assumed prior to enactment of

the Affordable Care Act of 2010, as described in the 2010 report. The ratio of

earnings to compensation includes self-employment income both in the

numerator and in the denominator. As a result, the rate of decline in earnings

to compensation (which over the same period averages 0.11 percent under

the intermediate assumptions) is less than the rate of decline in wages to

employee compensation.

The ratio of total compensation (i.e., employee compensation and net proprietors’ income) to GDP varies over the economic cycle and with changes in

the relative sizes of different sectors of the economy. Over the last five economic cycles from 1966 to 2007, this ratio has averaged 0.627. The ratio

declined from 0.648 for 2001 to 0.606 for 2012. The Trustees assume that

this ratio will rise as the economy recovers, reaching a level of 0.631 for

2022. For years after 2022, relative sizes of different sectors of the economy

are assumed to remain constant, and therefore project the ratio of total compensation to GDP to remain unchanged at the 2022 level. The historical and

projected ratios of total compensation to GDP are lower than in the 2013

report because BEA changed the methodology of GDP measurement in July

2013.

1 The new method results in a higher level of GDP, but without a corresponding change in compensation.

The projected average annual growth rate in average nominal U.S. earnings

from 2025 to 2088 is about 3.85 percent for the intermediate alternative. This

growth rate reflects the average annual growth rate of approximately -0.11

percent for the ratio of earnings to total compensation, and also reflects the

assumed ultimate annual growth rates of 1.68, -0.05, and 2.30 percent for

productivity, average hours worked, and the GDP deflator, respectively. Similarly, the projected average annual growth rate in average nominal U.S.

earnings is 5.17 percent for the low-cost assumptions and 2.55 percent for

the high-cost assumptions.

Over long periods, the Trustees expect the average annual growth rate in the

average wage in OASDI covered employment (henceforth the “average covered wage”) to be very close to the average annual growth rate in average

U.S. earnings. Specifically, the assumed average annual growth rates in the

average covered wage from 2025 to 2088 are 5.16, 3.83, and 2.52 percent for

1 “2013 Comprehensive Revision of the National Income and Product Accounts.”

See www.bea.gov/national/an1.htm#2013comprehensive.
Assumptions and Methods

98

the low-cost, intermediate, and high-cost assumptions, respectively. The

Trustees estimate that the annual rate of change in the average covered wage

is 1.92 percent for 2013. For the intermediate assumptions, as the economy

recovers, the Trustees assume the annual rate of change in the average covered wage will average 4.37 percent from 2013 to 2023. Thereafter, the

assumed average annual rate of change in the average covered wage is

3.83 percent.

4. Assumed Real-Wage Differential

The Trustees have traditionally expressed the real increase in the average

OASDI covered wage in the form of a real-wage differential—the annual

percentage change in the average covered wage minus the annual percentage

change in the CPI. For the 41-year period including 1967 through 2007, covering the last five complete economic cycles, the real-wage differential averaged 0.89 percentage point, the result of averages of 1.48, 0.01, 0.45, 1.57,

and 0.60 percentage points over the economic cycles 1966-73, 1973-79,

1979-89, 1989-2000, and 2000-07, respectively.

For the years 2025-88, the Trustees assume that the annual real-wage differentials for OASDI covered employment will average 1.76, 1.13, and 0.52

percentage points for the low-cost, intermediate, and high-cost assumptions,

respectively.

The estimated real-wage differential averaged -0.19 percentage point for

2008 through 2013 (the years since the last complete economic cycle). For

the intermediate assumptions, the Trustees assume that the real-wage differential will increase from 2.18 percentage points for 2014 to 2.97 percentage

points for 2015, an improvement that reflects the economic recovery. Thereafter, the real-wage differential gradually declines to an average of 1.13 percentage points for 2025-88. For the low-cost assumptions, the real-wage

differential increases from 3.00 percentage points for 2014 to 3.88 percentage points for 2015, and gradually declines to its long-run average of 1.76

percentage points for 2025-88. For the high-cost assumptions, the real-wage

differential increases from 0.81 percentage point for 2014 to 2.10 percentage

points for 2016, and gradually declines to an average of 0.52 percentage

point for 2025-88.
99

Economic Assumptions and Methods

Table V.B1.—Principal Economic Assumptions

Calendar year

Annual percentage changeain—

Realwage

differential

b

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:

5-year periods:

1960 to 1965 . . . 3.27 -0.18 0.16 1.36 3.22 1.24 1.98

1965 to 1970 . . . 2.06 -0.31 -0.68 4.03 5.84 4.23 1.61

1970 to 1975 . . . 2.07 -0.50 -0.87 6.60 6.62 6.76 -0.18

1975 to 1980 . . . 0.95 -0.32 -0.17 7.19 8.87 8.91 -0.06

1980 to 1985 . . . 1.74 -0.33 0.02 5.21 6.53 5.22 1.29

1985 to 1990 . . . 1.37 -0.19 -0.08 3.11 4.75 3.83 0.92

1990 to 1995 . . . 1.26 -0.11 0.41 2.44 3.57 3.03 0.54

1995 to 2000 . . . 2.34 0.28 0.14 1.67 5.31 2.43 2.88

2000 to 2005 . . . 2.64 -0.41 -0.82 2.35 2.69 2.49 0.21

2005 to 2010 . . . 1.61 -0.09 -0.48 1.93 2.55 2.30 0.26

Economic cycles:

c

1966 to 1973 . . . 2.27 -0.29 -0.71 4.60 6.10 4.61 1.48

1973 to 1979 . . . 1.10 -0.43 -0.56 7.52 8.55 8.54 0.01

1979 to 1989 . . . 1.39 -0.28 0.00 4.68 5.80 5.31 0.45

1989 to 2000 . . . 1.79 0.05 0.15 2.20 4.52 2.96 1.57

2000 to 2007 . . . 2.15 -0.23 -0.64 2.50 3.23 2.65 0.60

2007 to 2013 . . . 1.36 0.01 -0.15 1.51 1.89 2.08 -0.19

Single years:

2003 . . . . . . . . . . 3.31 -0.66 -1.49 2.00 2.51 2.22 0.30

2004 . . . . . . . . . . 2.66 -0.27 0.02 2.74 4.67 2.61 2.06

2005 . . . . . . . . . . 1.84 -0.22 -0.23 3.21 3.70 3.52 0.18

2006 . . . . . . . . . . 0.84 0.49 -0.04 3.07 4.72 3.19 1.53

2007 . . . . . . . . . . 1.06 -0.05 -0.38 2.66 4.50 2.88 1.62

2008 . . . . . . . . . . 0.77 -0.06 -0.62 1.92 2.47 4.09 -1.62

2009 . . . . . . . . . . 2.88 -0.66 -1.89 0.80 -1.52 -0.67 -0.85

2010 . . . . . . . . . . 2.52 -0.17 0.57 1.22 2.69 2.07 0.62

2011 . . . . . . . . . . 0.28 0.34 0.99 1.96 3.16 3.56 -0.39

2012 . . . . . . . . . . 1.04 0.31 -0.07 1.75 2.69 2.10 0.59

2013d . . . . . . . . . 0.73 0.30 0.11 1.39 1.92 1.43 0.49

Intermediate:

2014 . . . . . . . . . . 1.57 -0.14 0.17 1.44 3.78 1.61 2.18

2015 . . . . . . . . . . 1.92 -0.17 0.08 1.55 4.92 1.95 2.97

2016 . . . . . . . . . . 1.87 0.09 0.08 1.78 5.01 2.18 2.84

2017 . . . . . . . . . . 1.82 0.15 0.07 1.98 4.95 2.38 2.57

2018 . . . . . . . . . . 1.61 0.06 0.05 2.18 4.70 2.58 2.12

2019 . . . . . . . . . . 1.58 -0.18 0.02 2.29 4.28 2.69 1.58

2020 . . . . . . . . . . 1.55 -0.19 e 2.30 4.12 2.70 1.42

2021 . . . . . . . . . . 1.63 -0.17 -0.03 2.30 4.11 2.70 1.41

2022 . . . . . . . . . . 1.66 -0.13 -0.05 2.30 4.02 2.70 1.32

2023 . . . . . . . . . . 1.68 -0.12 -0.05 2.30 3.85 2.70 1.15

2020 to 2025 . . . 1.67 -0.13 -0.05 2.30 3.92 2.70 1.22

2025 to 2088 . . . 1.68 -0.11 -0.05 2.30 3.83 2.70 1.13
Assumptions and Methods

100

5. Labor Force and Unemployment Projections

The Office of the Chief Actuary at the Social Security Administration projects the civilian labor force by age, sex, marital status, and presence of children. Projections of the labor force participation rates for each group reflect

disability prevalence, educational attainment, the average level of Social

Security retirement benefits, the state of the economy, and the change in life

expectancy. The projections also include a “cohort effect,” which reflects a

shift upward in female participation rates across cohorts born through 1948.

The annual rate of growth in the size of the labor force decreased from an

average of about 2.4 percent during the 1966-73 economic cycle and

Low-cost:

2014 . . . . . . . . . . 1.88 -0.14 0.31 1.71 4.79 1.79 3.00

2015 . . . . . . . . . . 2.21 -0.15 0.24 2.52 6.70 2.82 3.88

2016 . . . . . . . . . . 2.12 0.12 0.22 3.05 7.01 3.35 3.66

2017 . . . . . . . . . . 1.92 0.18 0.17 3.09 6.43 3.39 3.04

2018 . . . . . . . . . . 1.64 0.11 0.09 3.08 5.58 3.38 2.20

2019 . . . . . . . . . . 1.92 -0.12 0.07 3.10 5.34 3.40 1.94

2020 . . . . . . . . . . 2.00 -0.12 0.06 3.10 5.38 3.40 1.98

2021 . . . . . . . . . . 1.93 -0.10 0.05 3.10 5.31 3.40 1.91

2022 . . . . . . . . . . 1.98 -0.06 0.05 3.10 5.38 3.40 1.98

2023 . . . . . . . . . . 1.98 -0.03 0.05 3.10 5.20 3.40 1.80

2020 to 2025 . . . 1.96 -0.04 0.05 3.10 5.23 3.40 1.83

2025 to 2088 . . . 1.98 -0.02 0.05 3.10 5.16 3.40 1.76

High-cost:

2014 . . . . . . . . . . 1.00 -0.14 -0.05 1.23 2.29 1.48 0.81

2015 . . . . . . . . . . 1.63 -0.18 -0.13 0.96 3.16 1.46 1.71

2016 . . . . . . . . . . 1.75 0.07 -0.06 0.98 3.58 1.48 2.10

2017 . . . . . . . . . . 1.69 0.11 -0.03 1.18 3.75 1.68 2.07

2018 . . . . . . . . . . 1.43 0.02 -0.03 1.38 3.55 1.88 1.68

2019 . . . . . . . . . . 1.39 -0.23 -0.04 1.49 3.24 1.99 1.25

2020 . . . . . . . . . . 1.38 -0.25 -0.05 1.50 3.22 2.00 1.22

2021 . . . . . . . . . . 1.30 -0.24 -0.06 1.50 3.10 2.00 1.10

2022 . . . . . . . . . . 1.24 -0.22 -0.08 1.50 2.96 2.00 0.96

2023 . . . . . . . . . . 1.31 -0.21 -0.11 1.50 2.70 2.00 0.70

2020 to 2025 . . . 1.32 -0.21 -0.11 1.50 2.75 2.00 0.75

2025 to 2088 . . . 1.38 -0.19 -0.15 1.50 2.52 2.00 0.52

a For rows with a single year listed, the value is the annual percentage change from the prior year. For rows

with a range of years listed, the value is the compound average annual percentage change.

b For rows with a single year listed, the value is the annual percentage change in the average annual wage in

covered employment less the annual percentage change in the Consumer Price Index. For rows with a range

of years listed, the value is the average of annual values of the differential. Values are rounded after all computations.

c Economic cycles are shown from peak to peak, except for the last cycle, which is not yet complete.

d Historical data are not available for the full year. Estimated values vary slightly by alternative and are

shown for the intermediate assumptions.

e Greater than -0.005 and less than 0.005 percent.

Table V.B1.—Principal Economic Assumptions (Cont.)

Calendar year

Annual percentage changeain—

Realwage

differential

b

Productivity

(Total U.S.

economy)

Earnings as

a percent of

compensation

Average

hours

worked

GDP

price

index

Average

annual wage

in covered

employment

Consumer

Price

Index
101

Economic Assumptions and Methods

2.7 percent during the 1973-79 cycle to 1.7 percent during the 1979-89 cycle,

1.3 percent during the 1989-2000 cycle, and 1.0 percent during the 2000-07

cycle. The Trustees expect further slowing of labor force growth due to a

substantial slowing of growth in the working age population in the future—a

consequence of the baby-boom generation approaching retirement and succeeding lower-birth-rate cohorts reaching working age. Under the intermediate assumptions, the Office of the Chief Actuary projects that the labor force

will increase by an average of 0.9 percent per year from 2013 to 2023 and

0.5 percent per year over the remainder of the 75-year projection period.

The projected labor force participation rates are derived from a historically

based structural relationship that uses demographic and economic assumptions specific to each alternative. More optimistic economic assumptions in

the low-cost alternative are consistent with higher labor force participation

rates, but demographic assumptions in the low-cost alternative (such as

slower improvement in longevity) are consistent with lower labor force participation rates. These relationships with various basic assumptions move the

labor force participation rates in opposite directions. Therefore, the projected

labor force participation rates do not vary substantially across alternatives.

Historically, labor force participation rates reflect trends in demographics

and pensions. Between the mid-1960s and the mid-1980s, labor force participation rates at ages 50 and over declined for males but were fairly stable for

females. During this period, the baby-boom generation reached working age

and more women entered the labor force. This increasing supply of labor

allowed employers to offer attractive early retirement options. Between the

mid-1980s and the mid-1990s, participation rates roughly stabilized for

males and increased for females. Since the mid-1990s, however, participation rates for both sexes at ages 50 and over have generally risen significantly.

Many economic and demographic factors, including longevity, health, disability prevalence, the business cycle, incentives for retirement in Social

Security and private pensions, education, and marriage patterns, will influence future labor force participation rates. The Office of the Chief Actuary

models some of these factors directly. To model the effects of other factors

related to increases in life expectancy, the office adjusts projected participation rates upward for mid-career and older ages to reflect projected increases

in life expectancy. For the intermediate projections, this adjustment increases

the total labor force by 2.9 percent for 2088.
Assumptions and Methods

102

For men age 16 and over, the projected age-adjusted labor force participation

rate1 for 2088 is 73.1 percent for each of the low-cost, intermediate, and

high-cost assumptions. For women age 16 and over, the projected ageadjusted labor force participation rates for 2088 are 60.9, 60.8, and 60.6 percent for the low-cost, intermediate, and high-cost assumptions, respectively.

These rates are higher than the actual 2012 levels published by the Bureau of

Labor Statistics of 70.6 percent for men and 58.0 percent for women, primarily due to the assumed increase in life expectancy. In the first ten years, the

assumed labor force participation rates also increase as the economic recovery draws more people into the labor force. Increasing disability prevalence

rates offset these increases somewhat in the intermediate and high-cost

assumptions, but a decrease in disability prevalence further contributes to

increases in labor force participation in the low-cost assumptions.

The unemployment rates presented in table V.B2 are in the most commonly

cited form, the civilian rate. For years through 2023, the table presents total

civilian rates without adjustment for the changing age-sex distribution of the

population. For years after 2023, the table presents unemployment rates as

age-sex-adjusted rates, using the age-sex distribution of the 2011 civilian

labor force. Age-sex-adjusted rates allow for more meaningful comparisons

across longer time periods. The age-sex adjusted unemployment rate is about

0.1 percentage point lower than the unadjusted rate for 2024.

The total civilian unemployment rate reflects the projected levels of unemployment for various age-sex groups of the population. The Office of the

Chief Actuary projects each group’s unemployment rate by relating changes

in the unemployment rate to the changes in the economic cycle, as measured

by the ratio of actual to potential GDP.

2 For each alternative, the total civilian unemployment rate moves toward the ultimate assumed rate as the economy moves toward the long-range sustainable growth path.

The ultimate assumed unemployment rates are 4.5, 5.5, and 6.5 percent for

the low-cost, intermediate, and high-cost assumptions, respectively. These

values are unchanged from the 2013 report. The ultimate rates are reached in

2020 for the low-cost, 2021 for the intermediate, and 2023 for the high-cost

assumptions.

1 The Office of the Chief Actuary adjusts the labor force participation rates to the 2011 age distribution of

the civilian noninstitutional U.S. population.

2 Potential GDP is the level of GDP assuming the economy is operating at the underlying sustainable trend

rate of growth.
103

Economic Assumptions and Methods

6. Gross Domestic Product Projections

The value of real GDP equals the product of three components: (1) average

weekly total employment;1

(2) productivity; and (3) average hours worked

per week. Consequently, the growth rate in real GDP is approximately equal

to the sum of the growth rates for total employment, productivity, and average hours worked. For the period from 1966 to 2007, which covers the last

five complete economic cycles, the average growth rate in real GDP was

3.1 percent. This average growth rate approximately equals the sum of the

average growth rates of 1.6, 1.7, and -0.3 percent for total employment, productivity, and average hours worked, respectively. As a result of the 2007-09

recession, the real GDP in 2012 was only 4.0 percent above the 2007 level.

The estimated real GDP growth from 2012 to 2013 is 1.8 percent.

For the intermediate assumptions, the average annual growth in real GDP is

2.8 percent from 2013 to 2023, the approximate sum of component growth

rates of 1.1 percent for total employment, 1.7 percent for productivity, and

0.0 percent for average hours worked. The projected average annual growth

in real GDP of 2.8 percent for this period is 0.6 percentage point higher than

the underlying sustainable trend rate of 2.2 percent. This 0.6 percentage

point above-trend component reflects a relatively rapid increase in employment as the economy recovers and the age-sex adjusted unemployment rate

falls from 7.4 percent in 2013 to its assumed ultimate level of 5.5 percent in

2021. After 2023, the assumptions do not explicitly reflect economic cycles.

The projected annual growth rate in real GDP combines the projected growth

rates for total employment, total U.S. economy productivity, and average

hours worked. After 2023, the annual growth in real GDP averages

2.1 percent, based on the projected average annual growth rate of 0.5 percent

for total employment and the assumed ultimate growth rates of 1.7 percent

for productivity and -0.05 percent for average hours worked. The assumed

growth rate of real GDP is slower than the past average growth rate mainly

because the working-age population is expected to grow slower than in the

past.

For the low-cost assumptions, the annual growth in real GDP averages

3.4 percent over the decade ending in 2023. The relatively faster growth is

due mostly to higher assumed rates of growth for employment and worker

productivity. For the high-cost assumptions, the annual growth in real GDP

averages 2.1 percent for the decade ending in 2023.

1 Total employment is the sum of the U.S. Armed Forces and total civilian employment, which depends on

the projected total civilian labor force and unemployment rates.
Assumptions and Methods

104

7. Interest Rates

Table V.B2 presents average annual nominal and real interest rates for newly

issued trust fund securities. 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 is defined as the

annual 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) real

yield on securities issuable in the prior year.

To develop a reasonable range of assumed ultimate future real interest rates

for the three alternatives, the Office of the Chief Actuary examined historical

experience for the last five complete economic cycles. For the 41-year period

from 1966 to 2007, the real interest rate averaged 2.8 percent per year. The

real interest rates averaged 1.3, -1.0, 5.2, 4.0, and 2.2 percent per year over

the economic cycles 1966-73, 1973-79, 1979-89, 1989-2000, and 2000-07,

respectively. The assumed ultimate real interest rates are 3.4 percent, 2.9 percent, and 2.4 percent for the low-cost, intermediate, and high-cost assumptions, respectively. These rates are unchanged from the 2013 report.

The actual average annual nominal interest rate was approximately

1.5 percent for 2012, which means that securities newly issued in 2012

would yield 1.5 percent if held one year. Estimated average prices rose from

2012 to 2013 by approximately 1.4 percent. The annual real interest rate for

2013 is 0.0 percent, the approximate difference between the nominal interest

rate and the rate of price increase. For the 10-year short-range projection

period, projected nominal interest rates depend on changes in the economic

cycle and in the CPI. When combined with the ultimate CPI assumptions of

3.4, 2.7, and 2.0 percent, the assumed ultimate real interest rates yield ultimate nominal interest rates of 6.8 percent for the low-cost assumptions,

5.6 percent for the intermediate assumptions, and 4.4 percent for the highcost assumptions. These nominal rates for newly issued trust fund securities

reach their ultimate levels by the end of the short-range period.
105

Economic Assumptions and Methods

Table V.B2.—Additional Economic Factors

Calendar year

Average annual

unemployment

ratea

Annual percentage changebin— Average annual interest rate

Labor

force

c

Total

employment

d

Real

GDP

e Nominalf Realg

Historical data:

5-year periods:

1960 to 1965. . . . . 5.5 1.3 1.6 5.0 4.0 2.5

1965 to 1970. . . . . 3.9 2.2 2.1 3.5 5.9 1.0

1970 to 1975. . . . . 6.1 2.5 1.5 2.7 6.7 0.0

1975 to 1980. . . . . 6.8 2.7 2.9 3.7 8.5 -0.9

1980 to 1985. . . . . 8.3 1.5 1.5 3.3 12.1 6.9

1985 to 1990. . . . . 5.9 1.7 2.0 3.4 8.5 5.1

1990 to 1995. . . . . 6.6 1.0 0.9 2.6 7.0 4.3

1995 to 2000. . . . . 4.6 1.5 1.8 4.3 6.2 3.9

2000 to 2005. . . . . 5.4 0.9 0.7 2.5 4.6 2.4

2005 to 2010. . . . . 6.8 0.6 -0.4 0.8 3.8 1.8

Economic cycles:

h

1966 to 1973. . . . . 4.6 2.4 2.0 3.6 6.1 1.3

1973 to 1979. . . . . 6.8 2.7 2.4 3.0 7.7 -1.0

1979 to 1989. . . . . 7.3 1.7 1.7 3.1 10.5 5.2

1989 to 2000. . . . . 5.6 1.3 1.3 3.3 6.8 4.0

2000 to 2007. . . . . 5.2 1.0 0.9 2.4 4.6 2.2

2007 to 2013. . . . . 8.2 0.3 -0.2 1.0 2.5 0.9

Single years:

2003 . . . . . . . . . . . 6.0 1.1 1.0 2.8 4.1 2.6

2004 . . . . . . . . . . . 5.5 0.6 1.1 3.8 4.3 1.5

2005 . . . . . . . . . . . 5.1 1.3 1.7 3.4 4.3 0.8

2006 . . . . . . . . . . . 4.6 1.4 1.8 2.7 4.8 1.1

2007 . . . . . . . . . . . 4.6 1.1 1.1 1.8 4.7 1.9

2008 . . . . . . . . . . . 5.8 0.8 -0.4 -0.3 3.6 0.6

2009 . . . . . . . . . . . 9.3 -0.1 -3.7 -2.8 2.9 4.4

2010 . . . . . . . . . . . 9.6 -0.2 -0.6 2.5 2.8 0.9

2011 . . . . . . . . . . . 8.9 -0.2 0.6 1.8 2.4 -0.7

2012 . . . . . . . . . . . 8.1 0.9 1.8 2.8 1.5 0.3

2013i. . . . . . . . . . . 7.4 0.3 1.0 1.8 1.9 0.0
Assumptions and Methods

106

Intermediate:

2014 . . . . . . . . . . . 6.9 0.8 1.3 3.1 2.9 0.3

2015 . . . . . . . . . . . 6.7 1.1 1.3 3.3 3.6 0.9

2016 . . . . . . . . . . . 6.5 1.1 1.3 3.3 4.2 1.4

2017 . . . . . . . . . . . 6.2 1.0 1.3 3.2 4.7 1.8

2018 . . . . . . . . . . . 5.9 1.1 1.3 3.0 5.1 2.1

2019 . . . . . . . . . . . 5.8 1.0 1.2 2.8 5.4 2.4

2020 . . . . . . . . . . . 5.6 0.9 1.0 2.6 5.5 2.7

2021 . . . . . . . . . . . 5.6 0.7 0.8 2.4 5.5 2.8

2022 . . . . . . . . . . . 5.6 0.5 0.5 2.2 5.5 2.8

2023 . . . . . . . . . . . 5.6 0.5 0.5 2.1 5.6 2.8

2025 . . . . . . . . . . . 5.5 0.5 0.5 2.1 5.6 2.9

2030 . . . . . . . . . . . 5.5 0.4 0.4 2.1 5.6 2.9

2035 . . . . . . . . . . . 5.5 0.5 0.5 2.1 5.6 2.9

2040 . . . . . . . . . . . 5.5 0.6 0.6 2.2 5.6 2.9

2045 . . . . . . . . . . . 5.5 0.6 0.6 2.2 5.6 2.9

2050 . . . . . . . . . . . 5.5 0.5 0.5 2.1 5.6 2.9

2055 . . . . . . . . . . . 5.5 0.4 0.4 2.1 5.6 2.9

2060 . . . . . . . . . . . 5.5 0.4 0.4 2.1 5.6 2.9

2065 . . . . . . . . . . . 5.5 0.4 0.4 2.1 5.6 2.9

2070 . . . . . . . . . . . 5.5 0.5 0.5 2.1 5.6 2.9

2075 . . . . . . . . . . . 5.5 0.5 0.5 2.1 5.6 2.9

2080 . . . . . . . . . . . 5.5 0.4 0.4 2.1 5.6 2.9

2085 . . . . . . . . . . . 5.5 0.4 0.4 2.0 5.6 2.9

2090 . . . . . . . . . . . 5.5 0.4 0.4 2.0 5.6 2.9

Low-cost:

2014 . . . . . . . . . . . 6.7 0.9 1.7 4.0 3.3 0.1

2015 . . . . . . . . . . . 6.1 1.4 2.0 4.5 4.9 0.5

2016 . . . . . . . . . . . 5.5 1.4 2.0 4.3 5.8 1.6

2017 . . . . . . . . . . . 5.1 1.3 1.8 3.9 6.1 2.4

2018 . . . . . . . . . . . 4.8 1.3 1.5 3.3 6.1 2.7

2019 . . . . . . . . . . . 4.7 1.2 1.2 3.3 6.3 2.7

2020 . . . . . . . . . . . 4.6 0.9 1.0 3.1 6.5 2.9

2021 . . . . . . . . . . . 4.6 0.7 0.8 2.8 6.6 3.1

2022 . . . . . . . . . . . 4.6 0.7 0.6 2.7 6.8 3.2

2023 . . . . . . . . . . . 4.6 0.6 0.6 2.6 6.8 3.3

2025 . . . . . . . . . . . 4.5 0.6 0.6 2.6 6.8 3.4

2030 . . . . . . . . . . . 4.5 0.5 0.5 2.6 6.8 3.4

2035 . . . . . . . . . . . 4.5 0.6 0.6 2.6 6.8 3.4

2040 . . . . . . . . . . . 4.5 0.7 0.7 2.8 6.8 3.4

2045 . . . . . . . . . . . 4.5 0.8 0.8 2.8 6.8 3.4

2050 . . . . . . . . . . . 4.5 0.7 0.7 2.8 6.8 3.4

2055 . . . . . . . . . . . 4.5 0.7 0.7 2.8 6.8 3.4

2060 . . . . . . . . . . . 4.5 0.7 0.7 2.8 6.8 3.4

2065 . . . . . . . . . . . 4.5 0.8 0.8 2.8 6.8 3.4

2070 . . . . . . . . . . . 4.5 0.8 0.8 2.9 6.8 3.4

2075 . . . . . . . . . . . 4.5 0.9 0.9 2.9 6.8 3.4

2080 . . . . . . . . . . . 4.5 0.8 0.8 2.9 6.8 3.4

2085 . . . . . . . . . . . 4.5 0.8 0.8 2.9 6.8 3.4

2090 . . . . . . . . . . . 4.5 0.8 0.8 2.8 6.8 3.4

Table V.B2.—Additional Economic Factors (Cont.)

Calendar year

Average annual

unemployment

ratea

Annual percentage changebin— Average annual interest rate

Labor

force

c

Total

employment

d

Real

GDP

e Nominalf Realg
107

Economic Assumptions and Methods

High-cost:

2014 . . . . . . . . . . . 7.4 0.7 0.7 1.7 2.1 0.4

2015 . . . . . . . . . . . 7.8 0.7 0.3 1.8 2.3 0.6

2016 . . . . . . . . . . . 7.9 0.7 0.6 2.3 2.9 0.9

2017 . . . . . . . . . . . 7.7 0.7 0.8 2.5 3.6 1.3

2018 . . . . . . . . . . . 7.6 0.7 0.9 2.3 4.0 1.7

2019 . . . . . . . . . . . 7.4 0.7 0.8 2.2 4.3 2.0

2020 . . . . . . . . . . . 7.2 0.6 0.8 2.2 4.5 2.3

2021 . . . . . . . . . . . 7.0 0.6 0.9 2.2 4.5 2.5

2022 . . . . . . . . . . . 6.7 0.6 0.8 2.0 4.5 2.5

2023 . . . . . . . . . . . 6.6 0.5 0.6 1.8 4.5 2.5

2025 . . . . . . . . . . . 6.5 0.4 0.4 1.7 4.4 2.4

2030 . . . . . . . . . . . 6.5 0.4 0.4 1.6 4.4 2.4

2035 . . . . . . . . . . . 6.5 0.4 0.4 1.6 4.4 2.4

2040 . . . . . . . . . . . 6.5 0.4 0.4 1.7 4.4 2.4

2045 . . . . . . . . . . . 6.5 0.3 0.3 1.6 4.4 2.4

2050 . . . . . . . . . . . 6.5 0.2 0.2 1.5 4.4 2.4

2055 . . . . . . . . . . . 6.5 0.1 0.1 1.3 4.4 2.4

2060 . . . . . . . . . . . 6.5 0.1 0.1 1.3 4.4 2.4

2065 . . . . . . . . . . . 6.5 j j 1.3 4.4 2.4

2070 . . . . . . . . . . . 6.5 j j 1.3 4.4 2.4

2075 . . . . . . . . . . . 6.5 j j 1.2 4.4 2.4

2080 . . . . . . . . . . . 6.5 j j 1.2 4.4 2.4

2085 . . . . . . . . . . . 6.5 -0.1 -0.1 1.1 4.4 2.4

2090 . . . . . . . . . . . 6.5 -0.1 -0.1 1.1 4.4 2.4

a The Office of the Chief Actuary adjusts the civilian unemployment rates for 2024 and later to the age-sex

distribution of the civilian labor force in 2011. For years through 2023, the values are the total rates without

adjustment for the changing age-sex distribution.

b For rows with a single year listed, the value is the annual percentage change from the prior year. For rows

with a range of years listed, the value is the compounded average annual percentage change.

c The U.S. civilian labor force.

d Total U.S. military and civilian employment.

e The value of the total output of goods and services in 2009 dollars.

f The average of the nominal interest rates, which compound semiannually, for special public-debt obligations

issuable to the trust funds in each of the 12 months of the year.

g The realized or expected annual real yield for each year on securities issuable in the prior year.

h Economic cycles are shown from peak to peak, except for the last cycle, which is not yet complete.

i Historical data are not available for the full year. Estimated values vary slightly by alternative and are shown

for the intermediate assumptions.

j Greater than -0.005 and less than 0.005 percent.

Table V.B2.—Additional Economic Factors (Cont.)

Calendar year

Average annual

unemployment

ratea

Annual percentage changebin— Average annual interest rate

Labor

force

c

Total

employment

d

Real

GDP

e Nominalf Realg
Assumptions and Methods

108

C. PROGRAM-SPECIFIC ASSUMPTIONS AND METHODS

The Office of the Chief Actuary at the Social Security Administration uses a

set of models to project future income and cost under the OASDI program.

These models rely not only on the demographic and economic assumptions

described in the previous sections, but also on a number of program-specific

assumptions and methods. Values of many program parameters change from

year to year as prescribed by formulas set out in the Social Security Act.

These program parameters affect the level of payroll taxes collected and the

level of benefits paid. The office uses more complex models to project the

numbers of future workers covered under OASDI and the levels of their covered earnings, as well as the numbers of future beneficiaries and the expected

levels of their benefits. The following subsections provide descriptions of

these program-specific assumptions and methods.

1. Automatically Adjusted Program Parameters

The Social Security Act requires that certain parameters affecting the determination of OASDI benefits and taxes be adjusted annually to reflect

changes in particular economic measures. Formulas prescribed in the law,

applied to reported statistics, change these program parameters annually. The

law bases these automatic adjustments on measured changes in the national

average wage index (AWI) and the Consumer Price Index for Urban Wage

Earners and Clerical Workers (CPI).1 This section shows values for program

parameters adjusted using these indices from the time that these adjustments

became effective through 2023. Projected values for future years depend on

the economic assumptions described in the preceding section of this report.

Tables V.C1 and V.C2 present the historical and projected values of the CPIbased benefit increases, the AWI series, and the values of many of the wageindexed program parameters. Each table shows projections under the three

alternative sets of economic assumptions. Table V.C1 includes:

• The annual cost-of-living benefit increase percentages. The automatic

cost-of-living adjustment provisions in the Social Security Act specify

increases in OASDI benefits based on increases in the CPI. In December 2009 and December 2010, there were no cost-of-living adjustments.

Cost-of-living adjustments resumed in December 2011. Under all three

sets of economic assumptions, the Trustees assume a smooth trend in

future price increases, without regard to annual fluctuations that will

1 The Federal Register publishes details of these indexation procedures annually. Also see

www.socialsecurity.gov/OACT/COLA/index.html.
109

Program Assumptions and Methods

occur. Therefore, the projections include annual cost-of-living adjustments in all future years.

• The annual levels of and percentage increases in the AWI. Under section 215(b)(3) of the Social Security Act, Social Security benefit computations index taxable earnings (for most workers first becoming

eligible for benefits in 1979 or later) using the AWI for each year after

1950. This procedure converts a worker’s past earnings to approximately average-wage-indexed equivalent values near the time of his or

her benefit eligibility. Other program parameters presented in this section that are subject to the automatic-adjustment provisions also rely on

the AWI.

• The wage-indexed contribution and benefit base. For any year, the contribution and benefit base is the maximum amount of earnings subject to

the OASDI payroll tax and creditable toward benefit computation. The

Social Security Act defers any increase in the contribution and benefit

base if there is no cost-of-living adjustment effective for December of

the preceding year. There was no increase in the contribution and benefit base in 2010 and 2011. Increases resumed in 2012.

• The wage-indexed retirement earnings test exempt amounts. The

exempt amounts are the annual amount of earnings below which beneficiaries do not have benefits withheld. A lower exempt amount applies in

years before normal retirement age. A higher amount applies for the

year in which a beneficiary attains normal retirement age. Starting in

2000, the retirement earnings test no longer applies beginning with the

month of normal retirement age attainment. The Social Security Act

defers any increase in these exempt amounts if there is no cost-of-living

adjustment effective for December of the preceding year. There was no

increase in these exempt amounts in 2010 and 2011. Increases resumed

in 2012.
Assumptions and Methods

110

Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and

Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2023

Calendar year

Cost-of-living

benefit

increasea

(percent)

Average

wage index (AWI)

b

Contribution

and benefit

base c

Retirement earnings

test exempt amount

Amount

Increase

(percent)

Under

NRAd At NRAe

Historical data:

1975 . . . . . . . . . . . 8.0 $8,630.92 7.5 $14,100 $2,520 $2,520

1976 . . . . . . . . . . . 6.4 9,226.48 6.9 15,300 2,760 2,760

1977 . . . . . . . . . . . 5.9 9,779.44 6.0 16,500 3,000 3,000

1978 . . . . . . . . . . . 6.5 10,556.03 7.9 17,700 3,240 4,000

1979 . . . . . . . . . . . 9.9 11,479.46 8.7 22,900 3,480 4,500

1980 . . . . . . . . . . . 14.3 12,513.46 9.0 25,900 3,720 5,000

1981 . . . . . . . . . . . 11.2 13,773.10 10.1 29,700 4,080 5,500

1982 . . . . . . . . . . . 7.4 14,531.34 5.5 32,400 4,440 6,000

1983 . . . . . . . . . . . 3.5 15,239.24 4.9 35,700 4,920 6,600

1984 . . . . . . . . . . . 3.5 16,135.07 5.9 37,800 5,160 6,960

1985 . . . . . . . . . . . 3.1 16,822.51 4.3 39,600 5,400 7,320

1986 . . . . . . . . . . . 1.3 17,321.82 3.0 42,000 5,760 7,800

1987 . . . . . . . . . . . 4.2 18,426.51 6.4 43,800 6,000 8,160

1988 . . . . . . . . . . . 4.0 19,334.04 4.9 45,000 6,120 8,400

1989 . . . . . . . . . . . 4.7 20,099.55 4.0 48,000 6,480 8,880

1990 . . . . . . . . . . . 5.4 21,027.98 4.6 51,300 6,840 9,360

1991 . . . . . . . . . . . 3.7 21,811.60 3.7 53,400 7,080 9,720

1992 . . . . . . . . . . . 3.0 22,935.42 5.2 55,500 7,440 10,200

1993 . . . . . . . . . . . 2.6 23,132.67 .9 57,600 7,680 10,560

1994 . . . . . . . . . . . 2.8 23,753.53 2.7 60,600 8,040 11,160

1995 . . . . . . . . . . . 2.6 24,705.66 4.0 61,200 8,160 11,280

1996 . . . . . . . . . . . 2.9 25,913.90 4.9 62,700 8,280 12,500

1997 . . . . . . . . . . . 2.1 27,426.00 5.8 65,400 8,640 13,500

1998 . . . . . . . . . . . 1.3 28,861.44 5.2 68,400 9,120 14,500

1999 . . . . . . . . . . .

f2.5 30,469.84 5.6 72,600 9,600 15,500

2000 . . . . . . . . . . . 3.5 32,154.82 5.5 76,200 10,080 17,000

2001 . . . . . . . . . . . 2.6 32,921.92 2.4 80,400 10,680 25,000

2002 . . . . . . . . . . . 1.4 33,252.09 1.0 84,900 11,280 30,000

2003 . . . . . . . . . . . 2.1 34,064.95 2.4 87,000 11,520 30,720

2004 . . . . . . . . . . . 2.7 35,648.55 4.6 87,900 11,640 31,080

2005 . . . . . . . . . . . 4.1 36,952.94 3.7 90,000 12,000 31,800

2006 . . . . . . . . . . . 3.3 38,651.41 4.6 94,200 12,480 33,240

2007 . . . . . . . . . . . 2.3 40,405.48 4.5 97,500 12,960 34,440

2008 . . . . . . . . . . . 5.8 41,334.97 2.3 102,000 13,560 36,120

2009 . . . . . . . . . . . .0 40,711.61 -1.5 106,800 14,160 37,680

2010 . . . . . . . . . . . .0 41,673.83 2.4 106,800 14,160 37,680

2011 . . . . . . . . . . . 3.6 42,979.61 3.1 106,800 14,160 37,680

2012 . . . . . . . . . . . 1.7 44,321.67 3.1 110,100 14,640 38,880

Intermediate:

2013 . . . . . . . . . . .

g1.5 45,128.76 1.8 g113,700g 15,120 g40,080

2014 . . . . . . . . . . . 1.5 46,786.77 3.7

g117,000g15,480 g41,400

2015 . . . . . . . . . . . 2.0 49,058.50 4.9 119,100 15,840 42,120

2016 . . . . . . . . . . . 2.2 51,505.89 5.0 123,600 16,440 43,680

2017 . . . . . . . . . . . 2.4 54,052.13 4.9 129,600 17,160 45,720

2018 . . . . . . . . . . . 2.6 56,590.98 4.7 136,200 18,000 48,000

2019 . . . . . . . . . . . 2.7 59,018.85 4.3 142,800 18,960 50,400

2020 . . . . . . . . . . . 2.7 61,453.22 4.1 149,400 19,800 52,800

2021 . . . . . . . . . . . 2.7 63,979.68 4.1 156,000 20,640 55,080

2022 . . . . . . . . . . . 2.7 66,556.71 4.0 162,300 21,600 57,360

2023 . . . . . . . . . . . 2.7 69,129.06 3.9 168,900 22,440 59,640
111

Program Assumptions and Methods

Table V.C2 shows values for other wage-indexed parameters. The table provides historical values from 1978, when indexing of the amount of earnings

required for a quarter of coverage first began, through 2014, and also shows

projected values through 2023. 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 figure V.C1 illustrates, these two bend points define

three ranges in a worker’s average indexed monthly earnings (AIME).

The formula for the worker’s PIA multiplies a 90, 32, or 15 percent facLow-cost:

2013 . . . . . . . . . . .

g1.5 $45,167.40 1.9 g$113,700 g $15,120 g$40,080

2014 . . . . . . . . . . . 1.7 47,267.39 4.6

g117,000g15,480 g41,400

2015 . . . . . . . . . . . 3.0 50,382.48 6.6 119,400 15,840 42,120

2016 . . . . . . . . . . . 3.4 53,894.61 7.0 124,800 16,560 44,040

2017 . . . . . . . . . . . 3.4 57,365.57 6.4 133,200 17,640 47,040

2018 . . . . . . . . . . . 3.4 60,578.54 5.6 142,500 18,840 50,280

2019 . . . . . . . . . . . 3.4 63,823.32 5.4 151,500 20,160 53,520

2020 . . . . . . . . . . . 3.4 67,253.43 5.4 160,200 21,240 56,520

2021 . . . . . . . . . . . 3.4 70,825.38 5.3 168,600 22,320 59,520

2022 . . . . . . . . . . . 3.4 74,636.44 5.4 177,600 23,520 62,760

2023 . . . . . . . . . . . 3.4 78,527.51 5.2 187,200 24,840 66,120

High-cost:

2013 . . . . . . . . . . .

g1.5 45,105.29 1.8 g113,700g 15,120 g40,080

2014 . . . . . . . . . . . 1.4 46,114.81 2.2 g117,000

g15,480 g41,400

2015 . . . . . . . . . . . 1.4 47,560.56 3.1 119,100 15,840 42,120

2016 . . . . . . . . . . . 1.5 49,256.28 3.6 121,800 16,200 43,080

2017 . . . . . . . . . . . 1.7 51,103.87 3.8 125,700 16,680 44,400

2018 . . . . . . . . . . . 1.9 52,927.59 3.6 130,200 17,280 45,960

2019 . . . . . . . . . . . 2.0 54,656.72 3.3 135,000 17,880 47,640

2020 . . . . . . . . . . . 2.0 56,418.17 3.2 139,800 18,600 49,440

2021 . . . . . . . . . . . 2.0 58,168.47 3.1 144,300 19,200 51,000

2022 . . . . . . . . . . . 2.0 59,886.69 3.0 149,100 19,800 52,680

2023 . . . . . . . . . . . 2.0 61,502.02 2.7 153,600 20,400 54,240

a Effective with benefits payable for June in each year 1975-82, and for December in each year after 1982.

b See table VI.G6 for projected dollar amounts of the AWI beyond 2023.

c Public Law 95-216 specified amounts for 1978-81. Public Law 101-239 changed the indexing procedure

and caused slightly higher bases after 1989.

d Normal retirement age. See table V.C3 for specific values.

e

In 1955-82, the retirement earnings test did not apply at ages 72 and over. In 1983-99, the test did not apply

at ages 70 and over. Beginning in 2000, the test does not apply beginning with the month of normal retirement

age attainment. In the year of normal retirement age attainment, the higher exempt amount applies to earnings

prior to the month of normal retirement age attainment. Public Law 95-216 specified amounts for 1978-82.

Public Law 104-121 specified amounts for 1996-2002.

f Originally determined as 2.4 percent. Pursuant to Public Law 106-554, effectively 2.5 percent.

g Actual amount, as determined under automatic-adjustment provisions.

Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and

Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2023 (Cont.)

Calendar year

Cost-of-living

benefit

increasea

(percent)

Average

wage index (AWI)

b

Contribution

and benefit

base c

Retirement earnings

test exempt amount

Amount

Increase

(percent)

Under

NRAd At NRAe
Assumptions and Methods

112

tor by the portion of the worker’s AIME that falls within the three

respective ranges, and then adds the resulting products together.

• The bend points in the formula for computing the maximum total

amount of monthly benefits payable based on the earnings record of a

retired or deceased worker (maximum family benefit). As figure V.C2

illustrates, these three bend points define four ranges in a worker’s PIA.

The formula for the maximum family benefit multiplies a 150, 272, 134,

or 175 percent factor by the portion of the worker’s PIA that falls within

the four respective ranges, and then adds the resulting products together.

Figure V.C1.—Primary-Insurance-Amount Formula for Those Newly Eligible in 2014

90%

32%

15%

$0

$500

$1,000

$1,500

$2,000

$2,500

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000

Primary Insurance Amount

Average Indexed Monthly Earnings

First

bend point

($816)

Second

bend point

($4,917)
113

Program Assumptions and Methods

• The amount of earnings required in a year to earn a quarter of coverage

(QC). The number and timing of QCs earned determines an individual’s

insured status—the basic requirement for benefit eligibility under

OASDI.

• The old-law contribution and benefit base—the contribution and benefit

base that would have been in effect without 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. Since 1986, the calculation of OASDI benefits

for certain workers who are eligible to receive pensions based on noncovered employment uses the old-law base. In addition, the Railroad

Retirement program and the Employee Retirement Income Security Act

of 1974 use the old-law base for certain purposes.

Figure V.C2.—OASI Maximum-Family-Benefit Formula

for Those Newly Eligible in 2014

150%

272%

134%

175%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$0 $500 $1,000 $1,500 $2,000 $2,500

Maximum family benefit

Primary Insurance Amount

Third

bend point

($1,962)

Second

bend point

($1,505)

First

bend point

($1,042)
Assumptions and Methods

114

Table V.C2.—Values for Selected Wage-Indexed Program Parameters,

Calendar Years 1978-2023

Calendar year

AIME bend

points in PIA

formula

a

PIA bend points

in OASI maximumfamily-benefit formula

b

Earnings

required for

a quarter of

coverage

Old-law

contribution

and benefit

basec First Second First Second Third

Historical data:

1978 . . . . . . . . .

d d ddd e $250 e $17,700

1979 . . . . . . . . .

e $180 e $1,085 e $230 e $332 e $433 260 18,900

1980 . . . . . . . . . 194 1,171 248 358 467 290 20,400

1981 . . . . . . . . . 211 1,274 270 390 508 310 22,200

1982 . . . . . . . . . 230 1,388 294 425 554 340 24,300

1983 . . . . . . . . . 254 1,528 324 468 610 370 26,700

1984 . . . . . . . . . 267 1,612 342 493 643 390 28,200

1985 . . . . . . . . . 280 1,691 358 517 675 410 29,700

1986 . . . . . . . . . 297 1,790 379 548 714 440 31,500

1987 . . . . . . . . . 310 1,866 396 571 745 460 32,700

1988 . . . . . . . . . 319 1,922 407 588 767 470 33,600

1989 . . . . . . . . . 339 2,044 433 626 816 500 35,700

1990 . . . . . . . . . 356 2,145 455 656 856 520 38,100

1991 . . . . . . . . . 370 2,230 473 682 890 540 39,600

1992 . . . . . . . . . 387 2,333 495 714 931 570 41,400

1993 . . . . . . . . . 401 2,420 513 740 966 590 42,900

1994 . . . . . . . . . 422 2,545 539 779 1,016 620 45,000

1995 . . . . . . . . . 426 2,567 544 785 1,024 630 45,300

1996 . . . . . . . . . 437 2,635 559 806 1,052 640 46,500

1997 . . . . . . . . . 455 2,741 581 839 1,094 670 48,600

1998 . . . . . . . . . 477 2,875 609 880 1,147 700 50,700

1999 . . . . . . . . . 505 3,043 645 931 1,214 740 53,700

2000 . . . . . . . . . 531 3,202 679 980 1,278 780 56,700

2001 . . . . . . . . . 561 3,381 717 1,034 1,349 830 59,700

2002 . . . . . . . . . 592 3,567 756 1,092 1,424 870 63,000

2003 . . . . . . . . . 606 3,653 774 1,118 1,458 890 64,500

2004 . . . . . . . . . 612 3,689 782 1,129 1,472 900 65,100

2005 . . . . . . . . . 627 3,779 801 1,156 1,508 920 66,900

2006 . . . . . . . . . 656 3,955 838 1,210 1,578 970 69,900

2007 . . . . . . . . . 680 4,100 869 1,255 1,636 1,000 72,600

2008 . . . . . . . . . 711 4,288 909 1,312 1,711 1,050 75,900

2009 . . . . . . . . . 744 4,483 950 1,372 1,789 1,090 79,200

2010 . . . . . . . . . 761 4,586 972 1,403 1,830 1,120 79,200

2011 . . . . . . . . . 749 4,517 957 1,382 1,803 1,120 79,200

2012 . . . . . . . . . 767 4,624 980 1,415 1,845 1,130 81,900

2013 . . . . . . . . . 791 4,768 1,011 1,459 1,903 1,160 84,300

2014 . . . . . . . . . 816 4,917 1,042 1,505 1,962 1,200 87,000

Intermediate:

2015 . . . . . . . . . 831 5,007 1,061 1,532 1,998 1,220 88,500

2016 . . . . . . . . . 861 5,191 1,100 1,588 2,072 1,270 91,800

2017 . . . . . . . . . 903 5,443 1,154 1,665 2,172 1,330 96,300

2018 . . . . . . . . . 948 5,714 1,211 1,749 2,281 1,400 101,100

2019 . . . . . . . . . 995 5,997 1,271 1,835 2,393 1,460 106,200

2020 . . . . . . . . . 1,042 6,279 1,331 1,921 2,506 1,530 111,000

2021 . . . . . . . . . 1,086 6,548 1,388 2,004 2,613 1,600 115,800

2022 . . . . . . . . . 1,131 6,818 1,445 2,086 2,721 1,670 120,600

2023 . . . . . . . . . 1,178 7,098 1,505 2,172 2,833 1,730 125,400
115

Program Assumptions and Methods

In addition to the economic factors that affect the determination of OASDI

benefits, there are certain legislated changes that affect current and future

benefit amounts. 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.

Low-cost:

2015 . . . . . . . . . $831 $5,011 $1,062 $1,533 $2,000 $1,220 $88,500

2016 . . . . . . . . . 870 5,244 1,112 1,605 2,093 1,280 92,700

2017 . . . . . . . . . 927 5,590 1,185 1,710 2,231 1,370 99,000

2018 . . . . . . . . . 992 5,979 1,268 1,830 2,386 1,460 105,600

2019 . . . . . . . . . 1,056 6,365 1,349 1,947 2,540 1,550 112,500

2020 . . . . . . . . . 1,115 6,721 1,425 2,057 2,682 1,640 118,800

2021 . . . . . . . . . 1,175 7,081 1,501 2,167 2,826 1,730 125,100

2022 . . . . . . . . . 1,238 7,462 1,582 2,283 2,978 1,820 132,000

2023 . . . . . . . . . 1,304 7,858 1,666 2,404 3,136 1,920 138,900

High-cost:

2015 . . . . . . . . . 830 5,004 1,061 1,531 1,997 1,220 88,500

2016 . . . . . . . . . 849 5,116 1,085 1,566 2,042 1,250 90,600

2017 . . . . . . . . . 875 5,277 1,119 1,615 2,106 1,290 93,300

2018 . . . . . . . . . 907 5,465 1,158 1,672 2,181 1,330 96,600

2019 . . . . . . . . . 941 5,670 1,202 1,735 2,263 1,380 100,200

2020 . . . . . . . . . 974 5,872 1,245 1,797 2,343 1,430 103,800

2021 . . . . . . . . . 1,006 6,064 1,285 1,856 2,420 1,480 107,100

2022 . . . . . . . . . 1,038 6,259 1,327 1,915 2,498 1,530 110,700

2023 . . . . . . . . . 1,071 6,454 1,368 1,975 2,575 1,580 114,000

a The formula to compute a PIA is: (1) 90% of AIME below the first bend point; plus (2) 32% of AIME in

excess of the first bend point but not in excess of the second; plus (3) 15% of AIME in excess of the second

bend point. The bend points are determined based on the first year a beneficiary becomes eligible for benefits.

b The formula to compute an OASI 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. This formula also determines family maximums for disabled workers first eligible after 1978 and entitled before July 1980.

c Contribution and benefit base that would have been in effect without enactment of the Social Security

Amendments of 1977. Public Law 101-239 changed the indexing procedure and caused slightly higher bases

after 1989.

d No provision in law for this amount in this year.

e Amount specified by Social Security Amendments of 1977.

Table V.C2.—Values for Selected Wage-Indexed Program Parameters,

Calendar Years 1978-2023 (Cont.)

Calendar year

AIME bend

points in PIA

formula

a

PIA bend points

in OASI maximumfamily-benefit formula

b

Earnings

required for

a quarter of

coverage

Old-law

contribution

and benefit

basec First Second First Second Third
Assumptions and Methods

116

2. Covered Employment

Projections of the total U.S. labor force and unemployment rate (see table

V.B2) are based on Bureau of Labor Statistics definitions from the Current

Population Survey (CPS). These projections represent the average weekly

number of employed and unemployed persons, age 16 and over, in the U.S.

in a calendar year. The Office of the Chief Actuary defines the total covered

workers in a year as the persons who have any OASDI covered earnings (that

is, earnings subject to the OASDI payroll tax) at any time during the year.

For those age 16 and over, projected covered employment is the sum of agesex components, each reflecting the growth projected for the component’s

total U.S employment and average weeks worked per year.

1For the shortrange period, the average weeks worked for each component is assumed to

increase during the economic recovery. After 2023, the average weeks

worked for each component is assumed to remain constant. The projection

method also accounts for changes in non-OASDI-covered employment, the

Table V.C3.—Legislated Changes in Normal Retirement Age and Delayed Retirement

Credits for Persons Reaching Age 62 in Each Year 1986 and Later

Year of birth

Year of

attainment of

age 62

Normal

retirement

age (NRA)

Credit for each

year of delayed

retirement after

NRA (percent)

Benefit, as a percentage of PIA,

beginning at age —

62 65 66 67 70

1924 . . . . . . . . 1986. . . . . . . . 65 . . . . . . . . 3 80 100 103 106 115

1925 . . . . . . . . 1987. . . . . . . . 65 . . . . . . . . 3 1/2 80 100 103 1/2 107 117 1/2

1926 . . . . . . . . 1988. . . . . . . . 65 . . . . . . . . 3 1/2 80 100 103 1/2 107 117 1/2

1927 . . . . . . . . 1989. . . . . . . . 65 . . . . . . . . 4 80 100 104 108 120

1928 . . . . . . . . 1990. . . . . . . . 65 . . . . . . . . 4 80 100 104 108 120

1929 . . . . . . . . 1991. . . . . . . . 65 . . . . . . . . 4 1/2 80 100 104 1/2 109 122 1/2

1930 . . . . . . . . 1992. . . . . . . . 65 . . . . . . . . 4 1/280 100 104 1/2109 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 1/280 100 105 1/2111 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 1/280 100 106 1/2113 132 1/2

1938 . . . . . . . . 2000. . . . . . . . 65, 2 mo . . . 6 1/2 79 1/6 98 8/9 105 5/12 111

11/12 1315/12

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 1/296 2/3103 1/2110

1/2

131

1/2

1941 . . . . . . . . 2003. . . . . . . . 65, 8 mo . . . 7 1/276 2/395 5/9102 1/2110 132 1/2

1942 . . . . . . . . 2004. . . . . . . . 65, 10 mo . . 7 1/2 75 5/6 94 4/9 101 1/4 108

3/4 1311/4

1943-54 . . . . . 2005-16 . . . . . 66 . . . . . . . . 8 75 93 1/3 100 108 132

1955 . . . . . . . . 2017. . . . . . . . 66, 2 mo . . . 8 74 1/692 2/998 8/9106

2/3

130

2/3

1956 . . . . . . . . 2018. . . . . . . . 66, 4 mo . . . 8 73 1/3 91 1/9 97 7/9 105

1/3 1291/3

1957 . . . . . . . . 2019. . . . . . . . 66, 6 mo . . . 8 72 1/2 90 96 2/3 104 128

1958 . . . . . . . . 2020. . . . . . . . 66, 8 mo . . . 8 71 2/388 8/995 5/9102

2/3

126

2/3

1959 . . . . . . . . 2021. . . . . . . . 66, 10 mo . . 8 70 5/6 87 7/9 94 4/9 101

1/3 1251/3

1960 & later . . 2022 & later . 67 . . . . . . . . 8 70 86 2/3 93 1/3 100 124

1 For those under age 16, projected covered employment is the sum of age-sex components, each of which

the office projects as a ratio to the Social Security area population.
117

Program Assumptions and Methods

increase in coverage of Federal civilian employment as a result of the 1983

Social Security Amendments, and changes in the number and employment

status of other immigrants residing within the Social Security coverage area.

The covered-worker rate is the ratio of OASDI covered workers to the Social

Security area population. For men age 16 and over, the projected ageadjusted covered-worker rates

1

for 2088 are 70.1, 69.6, and 68.9 percent for

the low-cost, intermediate, and high-cost assumptions, respectively. For

women age 16 and over, the projected covered-worker rates for 2088 are

65.8, 64.9, and 63.9 percent for the low-cost, intermediate, and high-cost

assumptions, respectively. These rates are higher than the 2012 levels of

67.1 percent for males and 60.6 percent for women, due to the assumed

decreases in unemployment rates and assumed increase in labor force participation rates.

3. Insured Population

Eligibility for worker benefits under the OASDI program requires some

threshold level of work in covered employment. A worker satisfies this

requirement by his or her accumulation of quarters of coverage (QCs). Prior

to 1978, a worker earned one QC for each calendar quarter in which he or

she earned at least $50. In 1978, when annual earnings reporting replaced

quarterly reporting, the amount required to earn a QC (up to a maximum of

four per year) was set at $250. As specified in the law, the Social Security

Administration has adjusted this amount each year since then according to

changes in the AWI. Its value in 2014 is $1,200.

There are three types of insured status that a worker can acquire under the

OASDI program. The number and recency of QCs earned determine each

status. A worker acquires fully insured status when his or her total number of

QCs is greater than or equal to the number of years elapsed after the year of

attainment of age 21 (but not less than six). Once a worker has accumulated

40 QCs, he or she remains permanently fully insured. A worker acquires disability insured status if he or she is: (1) a fully insured worker who has accumulated 20 QCs during the 40-quarter period ending with the current quarter;

(2) a fully insured worker aged 24-30 who has accumulated QCs during onehalf of the quarters elapsed after the quarter of attainment of age 21 and up to

and including the current quarter; or (3) a fully insured worker under age 24

who has accumulated six QCs during the 12-quarter period ending with the

current quarter. A worker acquires currently insured status when he or she

1 Age-adjusted covered worker rates are adjusted to the 2012 age distribution of the Social Security area

population.
Assumptions and Methods

118

has accumulated six QCs during the 13-quarter period ending with the current quarter. Periods of disability reduce the number of quarters required for

insured status, but not below 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.

The Office of the Chief Actuary estimates the fully insured population, as a

percentage of the Social Security area population, by single year of age and

sex starting in 1969. The short-range model extrapolates the historical trend

in these rates from data in the Continuous Work History Sample. The model

uses information on quarters of coverage earned due to employment covered

by Social Security derived from tabulations of the Continuous Work History

Sample. The model also uses historical administrative data on beneficiaries

in force and estimated historical mortality rates. The model combines this

information to estimate the proportion of individuals who were alive and

fully insured as of the end of each historical year. Using projected mortality

rates and covered workers, the model extrapolates these rates into the future

and applies them to the historical and projected population to arrive at the

fully insured population by age and sex through the end of the short-range

period.

The long-range fully insured model uses 30,000 simulated work histories for

each sex and birth cohort, representing everyone except the other immigrant

population. For the other immigrant population, the model generates substantially lower percentages attaining fully insured status. The model constructs

simulated work histories using past coverage rates, earnings distributions,

and amounts required for crediting QCs, and develops them in a manner that

replicates historical individual variations in work patterns. The probability of

covered employment in any year is assumed to be higher for those who have

worked more consistently in the recent past. Model parameters are selected

so that simulated fully insured percentages are consistent with the fully

insured percentages estimated by the short-range model for the recent historical period.
119

Program Assumptions and Methods

The Office of the Chief Actuary estimates the disability insured population,

as a percentage of the fully insured population, by age and sex starting in

1970. The office bases historical values on a tabulation of the disability

insured population from the Continuous Work History Sample and estimates

of the fully insured population. The short-range model projects these percentages by using the relationship between the historical percentages and

covered worker rates. The long-range model projects these percentages by

using the same simulated work histories used to project the fully insured percentages. The long-range model makes additional adjustments to the model

simulations in order to bring the disability insured percentages in the historical and short-range periods into close agreement with those estimated from

the Continuous Work History Sample and the short-range model.

The office does not project the currently insured population because the

number of beneficiaries who are entitled to benefits based solely on currently

insured status has been very small and is likely to remain small in the future.

Using these insured models, the percentage of the Social Security area population aged 62 and over that is fully insured will increase from its estimated

level of 83.6 for December 31, 2011, to 88.8, 89.5, and 90.3 for December

31, 2090, under the low-cost, intermediate, and high-cost alternatives,

respectively. Over the projection period, the percentage for females increases

significantly, reflecting the past substantial growth in the employment of

younger cohorts of women. The percentage for males declines to a small

degree, reflecting, in part, increases in the percent of the population that is

classified as other immigrants and is thus less likely to have earnings

reported and credited to them. Under the intermediate assumptions, for

example, the percentage for males decreases slightly from 92.3 to 89.4, and

the percentage for females increases from 76.5 to 89.6.

4. Old-Age and Survivors Insurance Beneficiaries

The Office of the Chief Actuary projects the number of OASI beneficiaries

for each type of benefit separately by the sex of the worker on whose earnings the benefits are based and by the age of the beneficiary. For the longrange period, the office also projects the number of beneficiaries by marital

status for several types of benefits. The office uses two separate models in

making these projections. The short-range model makes projections during

the first 10 years of the projection period and the long-range model makes

projections thereafter.

The short-range model develops the number of retired-worker beneficiaries

by applying award rates to the aged fully insured population, excluding those
Assumptions and Methods

120

already receiving retired-worker, disabled-worker, aged-widow(er)’s, or

aged-spouse’s benefits, and by applying termination rates to the number of

retired-worker beneficiaries.

The long-range model projects the number of retired-worker beneficiaries

who were not previously converted from disabled-worker beneficiary status

as a percentage of the exposed population.1 For age 62, the model projects

this percentage by using a linear regression based on the historical relationship between this percentage, the labor force participation rate at age 62, and

the number of months from age 62 to normal retirement age. The percentage

for ages 70 and over is nearly 100 because delayed retirement credits cannot

be earned after age 70. The long-range model projects the percentage for

each age 63 through 69 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. The model adjusts these percentages for ages 62

through 69 to reflect changes in the normal retirement age.

The long-range model calculates the number of retired-worker beneficiaries

previously converted from disabled-worker beneficiary status using an

extension of disabled-worker death rates by age, sex, and duration.

The Office of the Chief Actuary estimates the number of aged-spouse beneficiaries, excluding those who are also receiving a retired-worker benefit, from

the population projected by age and sex. Benefits of aged-spouse beneficiaries depend on the earnings records of their husbands or wives, who are

referred to as “earners.” The short-range model projects insured aged-spouse

beneficiaries in conjunction with the retired-worker beneficiaries. This

model projects uninsured aged-spouse beneficiaries by applying award rates

to the aged uninsured male or female population and by applying termination

rates to the population already receiving such benefits.

The long-range model estimates aged-spouse beneficiaries separately for

those married and divorced. The model projects the number of married agedspouse beneficiaries, by age and sex, by applying a series of factors to the

number of spouses, aged 62 and over, in the population. These factors are the

probabilities that the spouse and the earner meet all of the conditions of

eligibility—that is, 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

1 The exposed population is the fully insured population age 62 and over, excluding persons entitled to or

converted from disabled-worker benefits and fully insured persons entitled only to widow(er)’s benefits.
121

Program Assumptions and Methods

pension based on earnings in noncovered employment. To calculate the estimated number of aged-spouse beneficiaries, the model applies a projected

prevalence rate to the resulting number of spouses.

The long-range model estimates the number of divorced aged-spouse beneficiaries, by age and sex, by applying the same factors to the number of

divorced persons aged 62 and over in the population, with three differences.

First, the model applies a factor to reflect the probability that the earner (former spouse) is still alive. If the former spouse is not alive, the person may be

entitled to a divorced widow(er)’s benefit. Second, the model applies a factor

to reflect the probability that the marriage to the former spouse lasted at least

10 years. Third, the model does not apply factor (3) in the previous paragraph because, effective January 1985, a divorced person is generally no longer required to wait for the former spouse to receive benefits.

The Office of the Chief Actuary bases 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, on the projected number of children

in the population. The short-range model develops the number of entitled

children by applying award rates to the number of children in the population

who have two living parents and by applying termination rates to the number

of children already receiving benefits.

The long-range model projects separately the number of entitled children by

sex of the earner parent. For each age under 18, the model multiplies the projected number of children with a parent aged 62 and over by the ratio of the

number of retired workers aged 62 to 71 to the number of members of the

population aged 62 to 71. For student beneficiaries, the model multiplies the

number of children aged 18 and 19 in the population by the probabilities that:

(1) the parent is alive, aged 62 or over, insured, and receiving a retiredworker benefit; and (2) the child is attending high school.

The Office of the Chief Actuary projects the number of disabled children,

aged 18 and over, of retired-worker beneficiaries from the adult population.

The short-range model applies award rates to the population and applies termination rates to the number of disabled children already receiving benefits.

The long-range model projects the number of disabled children in a manner

similar to that used for student children except for a factor that reflects the

probability of being disabled before age 22.

The short-range model develops the number of spouses of retired workers,

who are entitled to spouse benefits because they are caring for a child who is

under age 16 or disabled, by applying award rates to the number of awards to

children of retired workers and by applying termination rates to the number
Assumptions and Methods

122

of young spouses with a child in their care who are already receiving benefits. The long-range model projects the number of young-spouse beneficiaries with a child in their care as a proportion of the number of child

beneficiaries of retired workers, including projected changes in average family size.

The Office of the Chief Actuary projects the number of aged-widow(er) beneficiaries, excluding those who are also receiving a retired-worker benefit,

from the population by age and sex. The short-range model projects fully

insured aged-widow(er) beneficiaries in conjunction with the retired-worker

beneficiaries. The model projects the number of uninsured aged-widow(er)

beneficiaries by applying award rates to the aged uninsured male or female

population and by applying termination rates to the population already

receiving such benefits. The long-range model projects uninsured agedwidow(er) beneficiaries by marital status. The model multiplies the number

of widow(er)s in the population aged 60 and over by 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, the model applies the same factors to the number

of divorced persons aged 60 and over in the population and includes additional factors representing the probability that the person’s former earner

spouse has died and that the marriage lasted at least 10 years. The model

projects the number of insured aged-widow(er) beneficiaries who are ages 60

through 70 in a manner similar to that for uninsured aged-widow(er) beneficiaries. In addition, the model assumes that some insured widow(er)s who

had not applied for their retired-worker benefits will receive widow(er)’s

benefits. The model projects insured aged-widow(er) beneficiaries over age

70 by applying termination rates to the population that started receiving such

benefits prior to age 70.

The short-range model develops the number of disabled-widow(er) beneficiaries 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. The long-range model projects the number for each

cohort by age from 50 to normal retirement age 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 Office of the Chief Actuary bases the projected number of children

under age 18, and students aged 18 and 19, who are entitled to benefits as
123

Program Assumptions and Methods

survivors of deceased workers, on the number of children in the population

whose mothers or fathers are deceased. The short-range model develops the

number of entitled children by applying award rates to the number of

orphaned children and by applying termination rates to the number of children already receiving benefits.

The long-range model projects the number of child-survivor beneficiaries in

a manner similar to that for student beneficiaries of retired workers, except

that the model replaces the probability that the parent is aged 62 or over with

the probability that the parent is deceased.

The Office of the Chief Actuary projects the number of disabled-child-survivor beneficiaries, aged 18 and over, from the adult population. The shortrange model applies award rates to the population and applies termination

rates to the number of disabled-child-survivor beneficiaries already receiving

benefits. The long-range model projects the number of disabled-child-survivor beneficiaries in a manner similar to that for student-child-survivor beneficiaries, except for including an additional factor to reflect the probability of

being disabled before age 22.

The short-range model develops the numbers of entitled mother-survivor and

father-survivor beneficiaries by applying award rates to the number of

awards to child-survivor beneficiaries, in cases where the children are either

under age 16 or disabled, and by applying termination rates to the number of

mother-survivors and father-survivors already receiving benefits. The longrange model estimates the numbers of mother-survivor and father-survivor

beneficiaries, assuming they are not remarried, from the number of child-survivor beneficiaries.

The Office of the Chief Actuary projects the number of parent-survivor beneficiaries 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. The retired worker beneficiary counts include those

persons who receive a residual auxiliary benefit in addition to their retiredworker benefit. The office makes estimates of the number and amount of

residual payments separately for spouses and widow(er)s.
Assumptions and Methods

124

Table V.C4.—OASI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1945-2090

[In thousands]

Calendar year

Retired workers and auxiliaries Survivors

Worker Total

a Spouse Child

WidowwidowerMotherfather Child Parent

Historical data:

1945 . . . . . . . . . . 518 159 13 94 121 377 6 1,288

1950 . . . . . . . . . . 1,771 508 46 314 169 653 15 3,477

1955 . . . . . . . . . . 4,474 1,192 122 701 292 1,154 25 7,961

1960 . . . . . . . . . . 8,061 2,269 268 1,544 401 1,577 36 14,157

1965 . . . . . . . . . . 11,101 2,614 461 2,371 472 2,074 35 19,128

1970 . . . . . . . . . . 13,349 2,668 546 3,227 523 2,688 29 23,030

1975 . . . . . . . . . . 16,589 2,867 643 3,888 582 2,919 21 27,509

1980 . . . . . . . . . . 19,564 3,018 639 4,415 563 2,610 15 30,823

1985 . . . . . . . . . . 22,435 3,069 456 4,862 372 1,918 10 33,122

1990 . . . . . . . . . . 24,841 3,104 421 5,098 304 1,777 6 35,551

1995 . . . . . . . . . . 26,679 3,027 441 5,213 275 1,884 4 37,522

1996 . . . . . . . . . . 26,905 2,971 442 5,199 242 1,898 4 37,661

1997 . . . . . . . . . . 27,282 2,926 441 5,043 230 1,893 3 37,817

1998 . . . . . . . . . . 27,518 2,866 439 4,981 221 1,884 3 37,911

1999 . . . . . . . . . . 27,784 2,811 442 4,936 212 1,885 3 38,073

2000 . . . . . . . . . . 28,505 2,798 459 4,901 203 1,878 3 38,747

2001 . . . . . . . . . . 28,843 2,742 467 4,828 197 1,890 3 38,969

2002 . . . . . . . . . . 29,195 2,681 477 4,771 194 1,908 2 39,227

2003 . . . . . . . . . . 29,537 2,622 480 4,707 190 1,910 2 39,448

2004 . . . . . . . . . . 29,952 2,569 482 4,643 184 1,901 2 39,733

2005 . . . . . . . . . . 30,461 2,524 488 4,569 178 1,903 2 40,126

2006 . . . . . . . . . . 30,976 2,476 490 4,494 171 1,899 2 40,508

2007 . . . . . . . . . . 31,528 2,431 494 4,436 165 1,892 2 40,947

2008 . . . . . . . . . . 32,274 2,370 525 4,380 160 1,915 2 41,625

2009 . . . . . . . . . . 33,514 2,343 561 4,327 160 1,921 2 42,828

2010 . . . . . . . . . . 34,593 2,316 580 4,285 159 1,913 2 43,847

2011 . . . . . . . . . . 35,600 2,291 594 4,239 158 1,907 2 44,791

2012 . . . . . . . . . . 36,720 2,280 612 4,193 154 1,907 1 45,868

2013 . . . . . . . . . . 37,893 2,285 625 4,139 150 1,899 1 46,992

Intermediate:

2014 . . . . . . . . . . 39,294 2,280 640 4,158 147 1,904 1 48,424

2015 . . . . . . . . . . 40,824 2,283 654 4,169 145 1,908 1 49,985

2020 . . . . . . . . . . 49,265 2,320 755 4,192 138 1,937 1 58,608

2025 . . . . . . . . . . 56,969 2,248 855 4,110 137 1,966 1 66,286

2030 . . . . . . . . . . 64,251 2,245 930 3,900 142 1,975 1 73,444

2035 . . . . . . . . . . 69,014 2,257 996 3,667 147 2,017 1 78,099

2040 . . . . . . . . . . 71,414 2,261 1,021 3,473 146 2,004 1 80,320

2045 . . . . . . . . . . 72,844 2,262 1,028 3,322 143 1,969 1 81,568

2050 . . . . . . . . . . 74,649 2,286 1,046 3,208 139 1,926 1 83,256

2055 . . . . . . . . . . 77,198 2,344 1,070 3,129 136 1,886 1 85,763

2060 . . . . . . . . . . 80,296 2,441 1,088 3,084 133 1,858 1 88,900

2065 . . . . . . . . . . 83,381 2,543 1,101 3,073 131 1,841 1 92,072

2070 . . . . . . . . . . 86,770 2,653 1,136 3,084 129 1,831 1 95,604

2075 . . . . . . . . . . 89,751 2,750 1,154 3,103 125 1,816 1 98,701

2080 . . . . . . . . . . 91,965 2,831 1,161 3,138 122 1,795 1 101,014

2085 . . . . . . . . . . 95,063 2,932 1,195 3,177 119 1,775 1 104,261

2090 . . . . . . . . . . 98,905 3,036 1,232 3,204 116 1,759 1 108,254
125

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. Transfers from the General Fund of the Treasury reimburse the OASI Trust

Fund for the cost of most of these individuals.

2. Totals do not necessarily equal the sums of rounded components.

5. Disability Insurance Beneficiaries

The DI Trust Fund pays for benefits to disabled workers who: (1) satisfy the

disability insured requirements; (2) are unable to engage in any substantial

gainful activity due to a medically determinable physical or mental impairment severe enough to satisfy the requirements of the program; and (3) have

not yet attained normal retirement age. Spouses and children of such disabled

Low-cost:

2014 . . . . . . . . . . 39,287 2,280 640 4,157 147 1,905 1 48,417

2015 . . . . . . . . . . 40,802 2,283 654 4,167 145 1,910 1 49,961

2020 . . . . . . . . . . 49,045 2,321 758 4,174 140 1,957 1 58,395

2025 . . . . . . . . . . 56,346 2,220 870 4,113 137 2,060 1 65,748

2030 . . . . . . . . . . 62,996 2,214 957 3,932 141 2,140 1 72,382

2035 . . . . . . . . . . 67,044 2,213 1,041 3,726 145 2,274 1 76,443

2040 . . . . . . . . . . 68,752 2,190 1,086 3,554 145 2,348 1 78,076

2045 . . . . . . . . . . 69,643 2,162 1,117 3,419 144 2,391 1 78,877

2050 . . . . . . . . . . 71,049 2,158 1,166 3,311 144 2,417 1 80,246

2055 . . . . . . . . . . 73,371 2,185 1,222 3,231 145 2,439 1 82,595

2060 . . . . . . . . . . 76,285 2,247 1,269 3,179 149 2,472 1 85,601

2065 . . . . . . . . . . 79,166 2,319 1,309 3,156 153 2,532 1 88,636

2070 . . . . . . . . . . 82,192 2,412 1,375 3,159 157 2,606 1 91,901

2075 . . . . . . . . . . 84,685 2,502 1,424 3,174 160 2,672 1 94,618

2080 . . . . . . . . . . 86,543 2,581 1,457 3,221 163 2,728 1 96,693

2085 . . . . . . . . . . 89,753 2,687 1,530 3,299 166 2,783 1 100,218

2090 . . . . . . . . . . 94,365 2,794 1,616 3,384 169 2,846 1 105,175

High-cost:

2014 . . . . . . . . . . 39,302 2,280 640 4,159 147 1,904 1 48,434

2015 . . . . . . . . . . 40,847 2,283 654 4,172 145 1,907 1 50,008

2020 . . . . . . . . . . 49,481 2,317 750 4,209 136 1,913 1 58,806

2025 . . . . . . . . . . 57,647 2,279 838 4,097 138 1,864 1 66,864

2030 . . . . . . . . . . 65,562 2,294 901 3,854 142 1,803 1 74,556

2035 . . . . . . . . . . 71,065 2,344 949 3,590 142 1,761 1 79,853

2040 . . . . . . . . . . 74,223 2,388 956 3,369 136 1,679 1 82,752

2045 . . . . . . . . . . 76,264 2,424 939 3,204 127 1,588 1 84,549

2050 . . . . . . . . . . 78,516 2,482 928 3,089 118 1,503 1 86,636

2055 . . . . . . . . . . 81,317 2,568 921 3,015 110 1,430 1 89,361

2060 . . . . . . . . . . 84,631 2,677 913 2,978 103 1,372 1 92,675

2065 . . . . . . . . . . 87,923 2,786 901 2,972 96 1,320 1 95,999

2070 . . . . . . . . . . 91,647 2,905 907 2,977 89 1,274 1 99,800

2075 . . . . . . . . . . 95,088 3,006 901 2,987 82 1,229 1 103,294

2080 . . . . . . . . . . 97,636 3,078 887 2,993 76 1,184 1 105,855

2085 . . . . . . . . . . 100,463 3,162 889 2,992 70 1,140 1 108,719

2090 . . . . . . . . . . 103,244 3,253 892 2,969 65 1,101 1 111,527

a Retired-worker beneficiaries include 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 1945-2090 (Cont.)

[In thousands]

Calendar year

Retired workers and auxiliaries Survivors

Worker Total

a Spouse Child

WidowwidowerMotherfather Child Parent
Assumptions and Methods

126

workers may also receive DI benefits provided they satisfy certain criteria,

primarily age and earnings requirements.

The Office of the Chief Actuary projects the number of disabled-worker beneficiaries in current-payment status (disability prevalence) for each future

year. The projections start with the number in current-payment status as of

December 2013. Projections of the number of new beneficiaries awarded

benefits each year (disability incidence) and the number of beneficiaries

leaving the disability rolls each year then determine the number in currentpayment status in later years. Beneficiaries leave the rolls due to death and

recovery (disability terminations) and due to conversion from disabledworker to retired-worker beneficiary status at normal retirement age, after

which the OASI Trust Fund pays for benefits. The remainder of this section

describes the concepts of disability incidence, termination, and prevalence.

a. Disability Incidence

The disability incidence rate is the ratio of the number of new beneficiaries

awarded benefits each year to the number of individuals who meet insured

requirements but are not yet receiving benefits (the disability-exposed population1). The Office of the Chief Actuary projects the number of newly

awarded beneficiaries for each future year by multiplying assumed age-sexspecific disability incidence rates and the projected disability-exposed population by age and sex.

Figure V.C3 illustrates the historical and estimated incidence rates under the

three alternatives. Incidence rates have varied substantially during the historical period since 1970 due to a variety of demographic and economic factors,

along with changes in legislation and program administration. The solid lines

in figure V.C3 show the incidence rate adjusted to the age-sex distribution of

the disability-exposed population for 2000. This adjustment allows a comparison of incidence rates over time by focusing on the likelihood of becoming disabled, and by excluding the effects of a changing distribution of the

population toward ages where disability is more or less likely.

The dashed lines in figure V.C3 represent the gross (unadjusted) incidence

rates. The changing age-sex distribution of the exposed population over time

influences these unadjusted rates. The gross incidence rate fell substantially

below the age-sex-adjusted rate between 1975 and 1995 as the baby-boom

generation swelled the size of the younger working-age population, where

1 The disability-exposed population excludes those receiving benefits, while the disability insured population includes them. Section V.C.3 of this report describes the projection of the disability insured population.
127

Program Assumptions and Methods

disability incidence is lower than in older populations. After 1995, the gross

rate rose faster than the age-sex-adjusted rate as the baby-boom generation

moved into an age range where disability incidence peaks. After 2023, the

projected gross incidence rate declines relative to the age-sex-adjusted rate

as the baby-boom generation moves above the normal retirement age and the

lower-birth-rate cohorts of the 1970s enter prime disability ages (50 to normal retirement age). As these smaller cohorts age beyond normal retirement

age, by about 2050, the gross incidence rate returns to a higher relative level

under the intermediate assumptions. Thereafter, the gross rate remains higher

and reflects the persistently higher average age of the working-age population, which is largely due to lower birth rates since 1965.

For the first 10 years of the projection period (through 2023), incidence rates

reflect several factors including: (1) aspects of program administration, such

as efforts to reduce the disability backlog and recent changes to how claims

are adjudicated; (2) assumed future unemployment rates; and (3) underlying

trends in incidence. As described in section V.B.5, all three sets of economic

assumptions reflect a continuation of the gradual economic recovery from

the recession that began in December 2007. The corresponding projected

unemployment rates follow near-term paths specific to the three alternative

sets of economic assumptions, then gradually move toward their respective

ultimate levels. At the beginning of the recent period of high unemployment,

disability incidence rates were well above the general trend level, with rates

reaching a peak in 2010. Over the last few years, incidence rates have subsided as the economy has recovered. At the beginning of the projection

period, disability incidence rates briefly drop below the general trend level

for each alternative because some of the earlier additional awards would

have occurred in a later year. Over the rest of the short-range period, disability incidence rates under each alternative evolve toward their ultimate levels

along trajectories consistent with the assumed unemployment rates. After

2023, age-sex-specific incidence rates trend toward the ultimate rates

assumed for the long-range projections and reach these ultimate rates in

2033. These ultimate age-sex-specific disability incidence rates were

selected based on careful analysis of historical levels and patterns and

expected future conditions, including the impact of scheduled increases in

the normal retirement age.1 The ultimate incidence rates represent the

expected average rates of incidence for the future.

1 Projected 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 reductions in retirement benefits as the

normal retirement age rises.
Assumptions and Methods

128

For the intermediate alternative, the Trustees assume that the ultimate agesex-adjusted incidence rate (adjusted to the disability-exposed population for

the year 2000) will be 5.4 awards per thousand exposed, which is the same as

in last year’s report. Figure V.C3 illustrates that the estimated ultimate agesex-adjusted incidence rate of 5.4 is slightly higher than the average rate for

the historical period 1970 through 2013, reflecting the increase in female

incidence rates over this period. However, a similar comparison using gross

incidence rates gives a different result. The estimated ultimate gross incidence rate is substantially greater than the average gross rate over the historical period due to the large changes in the age-sex distribution of the

disability-exposed population between 1970 and 2010.

The Trustees assume that the ultimate age-sex-adjusted incidence rates for

the low-cost and high-cost alternatives will be 4.3 and 6.5 awards per thousand exposed, or about 17 percent lower and 25 percent higher than the average for the historical period, respectively. These ultimate age-sex-adjusted

incidence rates are similar to those in last year’s report.

Figure V.C3.—DI Disability Incidence Rates, 1970-2090

[Awards per thousand disability-exposed]

0

1

2

3

4

5

6

7

8

9

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Gross incidence rates

Age-sex-adjusted

incidence rates

I

II

III

Historical Estimated
129

Program Assumptions and Methods

b. Disability Termination

Beneficiaries stop receiving disability benefits when they die, recover from

their medically-determinable disabling condition, or return to work. Disabled-worker beneficiaries who return to substantial work for an extended

period are deemed to have recovered, and their benefits are then terminated.

The termination rate is the ratio of the number of terminations for these reasons to the average number of disabled-worker beneficiaries during the year.

The Office of the Chief Actuary projects termination rates by age, sex, and

reason for termination. In addition, the office projects termination rates by

duration of entitlement to disabled-worker benefits in the long-range period

(post-2023).

In the short-range period (through 2023), the projected age-sex-adjusted

death rate (adjusted to the 2000 disabled-worker population) under the intermediate assumptions gradually declines from 25.7 deaths per thousand beneficiaries in 2013 to about 22.6 per thousand by 2023. The projected age-sexadjusted recovery rate (medical improvement and return to work) under the

intermediate assumptions rises from a level of 8.5 per thousand beneficiaries

in 2013 (reflecting temporarily lower levels of continuing disability reviews)

to 11.4 per thousand beneficiaries by 2023. Under the low-cost and high-cost

assumptions, total age-sex-adjusted termination rates due to death and recovery are roughly 10-15 percent higher or lower, respectively, than under the

intermediate assumptions.

For the long-range period (post-2023), the Office of the Chief Actuary projects death and recovery rates by age, sex, and duration of entitlement relative

to the average level of rates experienced over the base period 2001-2005.

The assumed ultimate age-sex-adjusted recovery rate for disabled workers is

about 10.4 per thousand beneficiaries. The assumed ultimate age-sexadjusted recovery rates for the low-cost and high-cost alternatives are about

12.6 and 8.3 recoveries per thousand beneficiaries, respectively. Recovery

rates by age, sex, and duration of entitlement reach ultimate levels in the

twentieth year of the projection period (2033) for all three sets of assumptions. In contrast, death rates by age and sex change throughout the longrange period at the same rate as death rates in the general population. From

the age-sex-adjusted death rate of 25.7 per thousand beneficiaries in 2013,

this rate decreases to 18.1, 11.1, and 6.5 per thousand disabled-worker beneficiaries for 2090 under the low-cost, intermediate, and high-cost assumptions, respectively.

Figure V.C4 illustrates gross and age-sex-adjusted total termination rates

(including both recoveries and deaths) for disabled-worker beneficiaries for
Assumptions and Methods

130

the historical period since 1970, and for the projection period through 2090.

In the near term, through 2017, recovery terminations are projected to

increase, consistent with the assumption that the Social Security Administration will receive sufficient budget appropriations to reduce the pending backlog of continuing disability reviews. As with incidence rates, the age-sexadjusted termination rate illustrates the real change in the tendency to terminate benefits. Changes in the age-sex distribution of the beneficiary population influence the gross termination rate. A shift in the beneficiary population

to older ages, as occurred over the past 20 years when the baby-boom generation moved into pre-retirement ages, increases gross death termination rates

relative to the age-sex-adjusted rates.

c. Comparison of Incidence, Termination, and Conversion

Incidence and termination rates are the foundation for projecting the number

of disabled-worker beneficiaries in current-payment status. At normal retirement age, disabled-worker beneficiaries convert to retired-worker status and

leave the DI rolls.

Figure V.C5 compares the historical and projected (intermediate) levels of

incidence, termination, and conversion on both a gross basis and an age-sexFigure V.C4.—DI Disability Termination Rates, 1970-2090

[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 2090

Calendar year

Gross termination rates

Age-sex-adjusted

termination rates

II

III

I

Historical Estimated
131

Program Assumptions and Methods

adjusted basis. Incidence rates have varied widely, and the Trustees expect

the age-sex adjusted rates under the intermediate assumptions to remain near

the middle of the high and low extremes experienced since 1970. Termination rates have declined and the Trustees expect them to continue to decline,

largely because of declining death rates.

Conversions are simply a transfer of beneficiaries at normal retirement age

from the DI Trust Fund account to the OASI Trust Fund account. Therefore,

the disability “conversion” rate is 100 percent for disabled-worker beneficiaries reaching normal retirement age in a given year and zero at all other ages.

After conversion, recovery from the disabling condition is no longer relevant. The conversion ratio is the number of conversions in a given year (that

is, beneficiaries who reach normal retirement age) divided by the average

number of disabled-worker beneficiaries at all ages in that year. The ratio is

constant on an age-sex-adjusted basis, except for the two periods during

which normal retirement age increases under current law. On a gross basis,

however, the conversion ratio rises and falls with the changing proportion of

all disabled-worker beneficiaries who attain normal retirement age in a given

year. The gross conversion ratio generally increases from 2002 to 2030 due

to aging of the beneficiary population.
Assumptions and Methods

132

d. DI Beneficiaries and Disability Prevalence Rates

The Office of the Chief Actuary makes detailed projections of disabledworker awards, terminations, and conversions and combines these to project

the number of disabled workers receiving benefits over the next 75 years.

Table V.C5 presents the projected numbers of disabled workers in currentpayment status. The number of disabled workers in current-payment status

grows from 8.9 million at the end of 2013, to 12.6 million, 14.5 million, and

15.4 million at the end of 2090, under the low-cost, intermediate, and highcost assumptions, respectively. Of course, much of this growth results from

the growth and aging of the population described earlier in this chapter. Table

V.C5 also presents projected numbers of auxiliary beneficiaries and disability prevalence rates on both a gross basis and an age-sex-adjusted basis.

Figure V.C5.—Comparison of DI Disability Incidence Rates, Termination Rates and

Conversion Ratios Under Intermediate Assumptions, 1970-2090

[Awards per thousand disability-exposed;

terminations and conversions per thousand disabled-worker beneficiaries]

0

20

40

60

80

100

120

140

160

0

1

2

3

4

5

6

7

8

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Termination rates

&

Conversion ratios

Incidence rates

Calendar year

Gross incidence rates

Age-sex-adjusted incidence rates

Gross conversion ratios

Age-sex-adjusted conversion ratios

Gross termination rates

Historical Estimated

Age-sex-adjusted termination rates
133

Program Assumptions and Methods

Table V.C5.—DI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1960-2090

[Beneficiaries in thousands; prevalence rates per thousand persons insured for disability benefits]

Calendar year

Disabledworker

beneficiaries

Auxiliary beneficiaries

Total

beneficiaries

Disability

prevalence rates

Spouse Child Gross

Age-sexadjusteda

Historical data:

1960. . . . . . . . . . . . 455 77 155 687 — —

1965. . . . . . . . . . . . 988 193 558 1,739 — —

1970. . . . . . . . . . . . 1,493 283 889 2,665 20 18

1975. . . . . . . . . . . . 2,488 453 1,411 4,351 29 28

1980. . . . . . . . . . . . 2,856 462 1,359 4,677 28 31

1985. . . . . . . . . . . . 2,653 306 945 3,904 24 26

1990. . . . . . . . . . . . 3,007 266 989 4,261 25 28

1995. . . . . . . . . . . . 4,179 264 1,409 5,852 33 35

1996. . . . . . . . . . . . 4,378 224 1,463 6,065 34 36

1997. . . . . . . . . . . . 4,501 207 1,438 6,146 34 36

1998. . . . . . . . . . . . 4,691 190 1,446 6,327 35 36

1999. . . . . . . . . . . . 4,870 176 1,468 6,514 36 36

2000. . . . . . . . . . . . 5,036 165 1,466 6,667 36 36

2001. . . . . . . . . . . . 5,268 157 1,482 6,907 38 37

2002. . . . . . . . . . . . 5,539 152 1,526 7,217 39 38

2003. . . . . . . . . . . . 5,869 151 1,571 7,590 41 38

2004. . . . . . . . . . . . 6,198 153 1,599 7,950 43 39

2005. . . . . . . . . . . . 6,519 157 1,633 8,309 45 40

2006. . . . . . . . . . . . 6,807 156 1,652 8,615 46 40

2007. . . . . . . . . . . . 7,099 154 1,665 8,918 48 41

2008. . . . . . . . . . . . 7,427 155 1,692 9,273 50 41

2009. . . . . . . . . . . . 7,788 159 1,749 9,695 52 43

2010. . . . . . . . . . . . 8,204 161 1,820 10,185 55 44

2011. . . . . . . . . . . . 8,576 164 1,874 10,614 58 46

2012. . . . . . . . . . . . 8,827 163 1,900 10,890 59 46

2013. . . . . . . . . . . . 8,941 157 1,889 10,987 59 46

Intermediate:

2014. . . . . . . . . . . . 9,014 155 1,880 11,050 60 46

2015. . . . . . . . . . . . 9,101 154 1,886 11,141 60 46

2020. . . . . . . . . . . . 9,415 157 1,926 11,498 61 46

2025. . . . . . . . . . . . 9,948 169 1,995 12,112 62 46

2030. . . . . . . . . . . . 9,918 178 2,125 12,222 61 46

2035. . . . . . . . . . . . 10,085 197 2,307 12,589 61 46

2040. . . . . . . . . . . . 10,410 205 2,419 13,034 62 47

2045. . . . . . . . . . . . 11,049 219 2,492 13,760 63 47

2050. . . . . . . . . . . . 11,505 225 2,546 14,276 64 48

2055. . . . . . . . . . . . 11,921 236 2,606 14,764 65 48

2060. . . . . . . . . . . . 12,126 243 2,684 15,052 65 49

2065. . . . . . . . . . . . 12,485 253 2,778 15,516 65 49

2070. . . . . . . . . . . . 12,815 262 2,868 15,944 66 49

2075. . . . . . . . . . . . 13,090 264 2,934 16,289 66 49

2080. . . . . . . . . . . . 13,705 276 2,991 16,973 67 49

2085. . . . . . . . . . . . 14,214 288 3,052 17,554 68 50

2090. . . . . . . . . . . . 14,476 293 3,123 17,892 68 50
Assumptions and Methods

134

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

The disability prevalence rate is the ratio of the number of disabled-worker

beneficiaries in current-payment status to the number of persons insured for

disability benefits. Figure V.C6 illustrates the historical and projected disability prevalence rates on both a gross basis and on an age-sex-adjusted

basis (adjusted to the 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. Figure V.C5 depicts patterns for incidence and termiLow-cost:

2014. . . . . . . . . . . . 8,936 155 1,853 10,944 59 46

2015. . . . . . . . . . . . 8,921 153 1,833 10,907 59 45

2020. . . . . . . . . . . . 8,698 154 1,770 10,621 56 42

2025. . . . . . . . . . . . 8,754 145 1,779 10,678 54 40

2030. . . . . . . . . . . . 8,363 144 1,848 10,355 51 38

2035. . . . . . . . . . . . 8,212 150 1,986 10,348 49 37

2040. . . . . . . . . . . . 8,287 148 2,092 10,527 48 37

2045. . . . . . . . . . . . 8,685 153 2,185 11,023 48 37

2050. . . . . . . . . . . . 8,988 153 2,268 11,409 48 37

2055. . . . . . . . . . . . 9,297 159 2,356 11,812 48 37

2060. . . . . . . . . . . . 9,485 163 2,464 12,112 47 37

2065. . . . . . . . . . . . 9,828 172 2,606 12,605 47 37

2070. . . . . . . . . . . . 10,199 180 2,758 13,137 47 38

2075. . . . . . . . . . . . 10,603 184 2,897 13,684 46 38

2080. . . . . . . . . . . . 11,356 196 3,031 14,583 47 38

2085. . . . . . . . . . . . 12,086 208 3,167 15,461 48 38

2090. . . . . . . . . . . . 12,638 215 3,314 16,167 48 38

High-cost:

2014. . . . . . . . . . . . 9,093 156 1,906 11,155 60 47

2015. . . . . . . . . . . . 9,286 156 1,940 11,382 61 47

2020. . . . . . . . . . . . 10,152 161 2,083 12,395 67 50

2025. . . . . . . . . . . . 11,137 195 2,202 13,533 71 52

2030. . . . . . . . . . . . 11,477 220 2,376 14,073 72 54

2035. . . . . . . . . . . . 11,979 256 2,565 14,800 74 56

2040. . . . . . . . . . . . 12,563 275 2,645 15,483 76 57

2045. . . . . . . . . . . . 13,450 297 2,665 16,413 79 58

2050. . . . . . . . . . . . 14,057 307 2,661 17,025 82 59

2055. . . . . . . . . . . . 14,564 322 2,668 17,554 84 60

2060. . . . . . . . . . . . 14,748 327 2,697 17,772 85 60

2065. . . . . . . . . . . . 15,063 336 2,721 18,121 87 61

2070. . . . . . . . . . . . 15,256 343 2,727 18,326 89 61

2075. . . . . . . . . . . . 15,254 338 2,703 18,295 89 61

2080. . . . . . . . . . . . 15,513 344 2,671 18,529 91 61

2085. . . . . . . . . . . . 15,566 352 2,648 18,566 92 62

2090. . . . . . . . . . . . 15,352 352 2,639 18,344 91 62

a Adjusted to the age-sex distribution of the insured population for the year 2000.

Table V.C5.—DI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1960-2090 (Cont.)

[Beneficiaries in thousands; prevalence rates per thousand persons insured for disability benefits]

Calendar year

Disabledworker

beneficiaries

Auxiliary beneficiaries

Total

beneficiaries

Disability

prevalence rates

Spouse Child Gross

Age-sexadjusteda
135

Program Assumptions and Methods

nation rates, which are helpful for understanding the trend in prevalence

rates. Annual incidence and termination rates are not directly comparable or

combinable because their denominators differ.

Age-sex-adjusted prevalence rates have increased primarily because: (1) termination rates have declined; (2) incidence rates at younger ages have

increased relative to rates at older ages; and (3) incidence rates have

increased substantially for women to parity with men. Gross prevalence rates

have increased more than age-sex-adjusted prevalence rates ever since the

baby-boom generation began to reach ages 45 through normal retirement

age, a time of life when disability incidence rates are relatively high. The

Office of the Chief Actuary projects both gross and age-sex adjusted prevalence rates to grow at a slower pace based on assumed stabilization in three

factors: (1) the age distribution of the general population; (2) the age distribution of the disability insured population; and (3) incidence rates by age and

gender. As these factors gradually stabilize, the declining death termination

rate continues to have a small influence toward higher disability prevalence

rates.

Figure V.C6.—DI Disability Prevalence Rates, 1970-2090

[Rate per thousand persons insured for disability benefits]

0

10

20

30

40

50

60

70

80

90

100

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Gross prevalence rates

Age-sex-adjusted

prevalence rates

III

II

II

I

I

Historical Estimated

III
Assumptions and Methods

136

As mentioned above in the discussion of incidence and termination rates, the

age-sex-adjusted prevalence rate isolates the changing trend in the underlying likelihood of receiving benefits for the insured population, without

reflecting changes in the age distribution of the population. As with incidence rates, gross disability prevalence rates declined relative to the age-sexadjusted rate when the baby-boom generation reached working age between

1970 and 1990; this trend reflects the lower disability prevalence rates associated with younger ages. Conversely, the gross rate of disability prevalence

has increased relative to the age-sex-adjusted rate after 1990 due to the aging

of the baby-boom generation into ages with higher disability prevalence

rates.

Under the intermediate assumptions, the projected age-sex-adjusted disability prevalence rate grows from 46.3 per thousand disability insured at the end

of 2013 to 49.8 per thousand at the end of 2090. As mentioned above, the

Office of the Chief Actuary projects that the growth in prevalence will slow

relative to the historical period.

Under the low-cost and high-cost assumptions, the age-sex-adjusted disability prevalence rate decreases to 38.1 per thousand and increases to 61.7 per

thousand insured workers at the end of 2090, 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, auxiliary beneficiaries are qualifying spouses and children of disabled

workers. A spouse must either be at least age 62 or have an eligible child

beneficiary in his or her care who is either under age 16 or disabled prior to

age 22. A child must be: (1) under age 18; (2) age 18 or 19 and still a student

in high school; or (3) age 18 or older and disabled prior to age 22.

The projection of the number of auxiliary beneficiaries relies on the projected number of disabled-worker beneficiaries. In the short-range period

(2014-23), the Office of the Chief Actuary projects incidence and termination rates for each category of auxiliary beneficiary. After 2023, the office

projects child beneficiaries at ages 18 and under in relation to the projected

number of children in the population using the probability that either of their

parents is a disabled-worker beneficiary. The office projects the remaining

categories of children and spouses in a similar manner.

6. Covered and Taxable Earnings, Taxable Payroll, and Payroll Tax

Contributions

Covered earnings are the sum of covered wages and covered self-employment net earnings. The Office of the Chief Actuary projects covered wages
137

Program Assumptions and Methods

for component sectors of the economy (i.e., private, State and local, Federal

civilian, and military) based on the projected overall growth of sectoral and

total wages in the U.S. economy. The projections of covered wages also

reflect changes in covered employment due to a relative increase in non-covered undocumented immigrants and to the mandatory coverage of new hires

in the Federal civilian sector. The office projects covered self-employment

net earnings based on the growth in net proprietors’ income in the U.S. economy.

Taxable earnings are the amount of covered earnings subject to the Social

Security payroll tax. Taxable wages for an employee are total covered wages

from all wage employment up to the contribution and benefit base. Taxable

wages for an employer are the sum of all covered wages paid to each

employee up to the base. Employees with multiple jobs whose total wages

exceed the base are eligible for a refund of excess employee taxes withheld;

employers are not eligible for a refund on this basis. For self-employed

workers with no taxable wages, taxable earnings are the amount of covered

self-employment net earnings up to the base. For self-employed workers

with taxable wages less than the base, covered self-employment net earnings

are taxable up to the difference between the base and their taxable wages.

For projection purposes, the Office of the Chief Actuary computes taxable

earnings based on a proportion of covered earnings that is at or below the

base.

The OASDI taxable payroll (see table VI.F6) for a year is the amount of

earnings which, when multiplied by the combined OASDI employeeemployer payroll tax rate for that year, yields the total amount of payroll

taxes due from wages paid and self-employment net earnings for the year.

The Trustees use taxable payroll to determine income rates, cost rates, and

actuarial balances. Taxable payroll is derived by adjusting total taxable earnings to account for categories of earnings that are taxed at rates other than the

combined employee-employer rate and to take into account amounts credited

as wages that were not included in normally reported wages. For 1951 and

later, taxable earnings are reduced by one-half of the amount of wages paid

to employees with multiple jobs that exceed the contribution and benefit

base. For 1983 through 2001, deemed wage credits for military service after

1956 are added to taxable earnings. The self-employment tax rates for 1951

through 1983 were less than the combined employee-employer rates; therefore, the self-employment component of taxable payroll for those years is

reduced by multiplying the ratio of the self-employment rate to the combined

employee-employer rate times the taxable self-employment net earnings.

Finally, for 1966 through 1979, employers were exempt from paying their
Assumptions and Methods

138

share of payroll tax on their employees’ tips and, for 1980 through 1987,

employers paid tax on only part of their employees’ tips. For those years, the

taxable payroll is reduced by half of the amount of tips for which the

employer owed no payroll tax.

The ratio of taxable payroll to covered earnings (the taxable ratio) fell from

88.3 percent for 1984 to 82.5 percent for 2000, mostly due to much higher

increases in wage levels for very high earners than for all other earners. From

2000 to 2010, the taxable ratio varied with the business cycle, rising during

economic downturns and falling during recoveries. Specifically, the taxable

ratio rose to 85.5 percent for 2002, declined to 82.3 percent for 2007, rose to

85.0 percent for 2009, and was 82.5 percent for 2012.

For the 2014 report, the Trustees assume a level for the taxable ratio at the

end of the short range period (2023) of 82.5 percent for the intermediate

assumptions, 81.0 percent for the high-cost assumptions (or 1.5 percentage

points lower than the intermediate assumptions), and 84.0 percent for the

low-cost assumptions (or 1.5 percentage points higher than the intermediate

assumptions). These are the same assumptions that the Trustees made for the

end of the short range period (2022) for the 2013 report.

The Office of the Chief Actuary projects payroll tax contributions using the

patterns of tax collection required by Federal laws and regulations. The

office determines payroll tax liabilities by multiplying the scheduled tax rates

for each year by the amount of taxable wages and self-employment net earnings for that year. The office then splits these liabilities into amounts by collection period. For wages, Federal law requires that employers withhold

OASDI and HI payroll taxes and Federal individual income taxes from

employees’ pay. As an employer’s accumulation of such taxes (including the

employer share of payroll taxes) meets certain thresholds, which the Department of the Treasury determines, the employer must deposit these taxes with

the U.S. Treasury by a specific day, depending on the amount of money

involved.

1 For projection purposes, the office splits the payroll tax contributions related to wages into amounts paid in the same quarter as incurred and

in the following quarter. Self-employed workers must make estimated tax

payments on their earnings four times during the year and make up any

underestimate on their individual income tax returns. The projection splits

1 Generally, the higher the amount of liability, the sooner the taxes must be paid. For smaller employers,

payment is due by the middle of the month following when the liability was incurred. Medium-size employers have three banking days in which to make their deposits. Larger employers must make payment on the

next business day after paying their employees.
139

Program Assumptions and Methods

the self-employed tax liabilities by collection quarter to reflect this pattern of

receipts.

The projected tax contributions also reflect the method used to ensure that

money transferred to the trust funds is adjusted, over time, to equal the actual

liability owed. Because payers generally make tax payments without identifying the separate OASDI contribution amounts, Treasury makes daily transfers of money from the general fund to the trust funds on an initial estimated

basis. The Social Security Administration periodically certifies the amounts

of wages and self-employment net earnings on which tax contributions are

owed for each year, at which time Treasury determines adjustments to appropriations to reconcile tax liabilities with deposits in the trust funds. This process also includes periodic transfers from the trust funds to the general fund

for contributions on wages in excess of the contribution and benefit base.

Table V.C6 shows the payroll tax contribution rates applicable under current

law in each calendar year and the allocation of these rates between the OASI

and DI Trust Funds.1 It also shows the contribution and benefit base for each

year through 2014.

1 Table VI.G1 shows the payroll tax contribution rates for the Hospital Insurance (HI) program.
Assumptions and Methods

140

Table V.C6.—Contribution and Benefit Base and Payroll Tax Contribution Rates

Calendar years

Contribution

and benefit

base

Payroll tax contribution rates (percent)

Employees and employers,

combineda Self-employed

b

OASDI OASI DI OASDI OASI DI

1937-49 . . . . . . . . . $3,000 2.00 2.00 — — — —

1950. . . . . . . . . . . . 3,000 3.00 3.00 — — — —

1951-53 . . . . . . . . . 3,600 3.00 3.00 — 2.2500 2.2500 —

1954. . . . . . . . . . . . 3,600 4.00 4.00 — 3.0000 3.0000 —

1955-56 . . . . . . . . . 4,200 4.00 4.00 — 3.0000 3.0000 —

1957-58 . . . . . . . . . 4,200 4.50 4.00 0.50 3.3750 3.0000 0.3750

1959. . . . . . . . . . . . 4,800 5.00 4.50 .50 3.7500 3.3750 .3750

1960-61 . . . . . . . . . 4,800 6.00 5.50 .50 4.5000 4.1250 .3750

1962. . . . . . . . . . . . 4,800 6.25 5.75 .50 4.7000 4.3250 .3750

1963-65 . . . . . . . . . 4,800 7.25 6.75 .50 5.4000 5.0250 .3750

1966. . . . . . . . . . . . 6,600 7.70 7.00 .70 5.8000 5.2750 .5250

1967. . . . . . . . . . . . 6,600 7.80 7.10 .70 5.9000 5.3750 .5250

1968. . . . . . . . . . . . 7,800 7.60 6.65 .95 5.8000 5.0875 .7125

1969. . . . . . . . . . . . 7,800 8.40 7.45 .95 6.3000 5.5875 .7125

1970. . . . . . . . . . . . 7,800 8.40 7.30 1.10 6.3000 5.4750 .8250

1971. . . . . . . . . . . . 7,800 9.20 8.10 1.10 6.9000 6.0750 .8250

1972. . . . . . . . . . . . 9,000 9.20 8.10 1.10 6.9000 6.0750 .8250

1973. . . . . . . . . . . . 10,800 9.70 8.60 1.10 7.0000 6.2050 .7950

1974. . . . . . . . . . . . 13,200 9.90 8.75 1.15 7.0000 6.1850 .8150

1975. . . . . . . . . . . . 14,100 9.90 8.75 1.15 7.0000 6.1850 .8150

1976. . . . . . . . . . . . 15,300 9.90 8.75 1.15 7.0000 6.1850 .8150

1977. . . . . . . . . . . . 16,500 9.90 8.75 1.15 7.0000 6.1850 .8150

1978. . . . . . . . . . . . 17,700 10.10 8.55 1.55 7.1000 6.0100 1.0900

1979. . . . . . . . . . . . 22,900 10.16 8.66 1.50 7.0500 6.0100 1.0400

1980. . . . . . . . . . . . 25,900 10.16 9.04 1.12 7.0500 6.2725 .7775

1981. . . . . . . . . . . . 29,700 10.70 9.40 1.30 8.0000 7.0250 .9750

1982. . . . . . . . . . . . 32,400 10.80 9.15 1.65 8.0500 6.8125 1.2375

1983. . . . . . . . . . . . 35,700 10.80 9.55 1.25 8.0500 7.1125 .9375

1984c. . . . . . . . . . . 37,800 11.40 10.40 1.00 11.4000 10.4000 1.0000

1985c. . . . . . . . . . . 39,600 11.40 10.40 1.00 11.4000 10.4000 1.0000

1986c. . . . . . . . . . . 42,000 11.40 10.40 1.00 11.4000 10.4000 1.0000

1987c. . . . . . . . . . . 43,800 11.40 10.40 1.00 11.4000 10.4000 1.0000

1988c. . . . . . . . . . . 45,000 12.12 11.06 1.06 12.1200 11.0600 1.0600

1989c. . . . . . . . . . . 48,000 12.12 11.06 1.06 12.1200 11.0600 1.0600

1990 . . . . . . . . . . . 51,300 12.40 11.20 1.20 12.4000 11.2000 1.2000

1991. . . . . . . . . . . . 53,400 12.40 11.20 1.20 12.4000 11.2000 1.2000

1992. . . . . . . . . . . . 55,500 12.40 11.20 1.20 12.4000 11.2000 1.2000

1993. . . . . . . . . . . . 57,600 12.40 11.20 1.20 12.4000 11.2000 1.2000

1994. . . . . . . . . . . . 60,600 12.40 10.52 1.88 12.4000 10.5200 1.8800

1995. . . . . . . . . . . . 61,200 12.40 10.52 1.88 12.4000 10.5200 1.8800

1996. . . . . . . . . . . . 62,700 12.40 10.52 1.88 12.4000 10.5200 1.8800

1997. . . . . . . . . . . . 65,400 12.40 10.70 1.70 12.4000 10.7000 1.7000

1998. . . . . . . . . . . . 68,400 12.40 10.70 1.70 12.4000 10.7000 1.7000

1999. . . . . . . . . . . . 72,600 12.40 10.70 1.70 12.4000 10.7000 1.7000

2000. . . . . . . . . . . . 76,200 12.40 10.60 1.80 12.4000 10.6000 1.8000

2001. . . . . . . . . . . . 80,400 12.40 10.60 1.80 12.4000 10.6000 1.8000

2002. . . . . . . . . . . . 84,900 12.40 10.60 1.80 12.4000 10.6000 1.8000

2003. . . . . . . . . . . . 87,000 12.40 10.60 1.80 12.4000 10.6000 1.8000

2004. . . . . . . . . . . . 87,900 12.40 10.60 1.80 12.4000 10.6000 1.8000

2005. . . . . . . . . . . . 90,000 12.40 10.60 1.80 12.4000 10.6000 1.8000
141

Program Assumptions and Methods

7. Income From Taxation of Benefits

Under current law, the OASI and DI Trust Funds are credited with income

tax revenue from the taxation of up to the first 50 percent of OASI and DI

benefit payments. (The HI Trust Fund receives the remainder of the income

tax revenue from the taxation of up to 85 percent of OASI and DI benefit

payments.) Benefits are taxed for beneficiaries with income (including half

of benefits and all non-taxable interest) exceeding specified levels.

For the short-range period, the Office of the Chief Actuary estimates the

income to the trust funds from taxation of benefits by applying the following

two factors (projected by the Office of Tax Analysis, Department of the Treasury) to total OASI and DI scheduled benefits: (1) the percentage of scheduled benefits (limited to 50 percent) that is taxable; and (2) the average

marginal tax rate applicable to those benefits.

For the long-range period, the office estimates the income to the trust funds

from taxation of benefits by applying projected ratios of taxation of OASI

2006. . . . . . . . . . . . $94,200 12.40 10.60 1.80 12.4000 10.6000 1.8000

2007. . . . . . . . . . . . 97,500 12.40 10.60 1.80 12.4000 10.6000 1.8000

2008. . . . . . . . . . . . 102,000 12.40 10.60 1.80 12.4000 10.6000 1.8000

2009. . . . . . . . . . . . 106,800 12.40 10.60 1.80 12.4000 10.6000 1.8000

2010d. . . . . . . . . . . 106,800 12.40 10.60 1.80 12.4000 10.6000 1.8000

2011d. . . . . . . . . . . 106,800 10.40 8.89 1.51 10.4000 8.8900 1.5100

2012d . . . . . . . . . . . 110,100 10.40 8.89 1.51 10.4000 8.8900 1.5100

2013. . . . . . . . . . . . 113,700 12.40 10.60 1.80 12.4000 10.6000 1.8000

2014. . . . . . . . . . . . 117,000 12.40 10.60 1.80 12.4000 10.6000 1.8000

2015 and later . . . .

e 12.40 10.60 1.80 12.4000 10.6000 1.8000

a Except as noted below, the combined employee/employer rate is divided equally between employees and

employers.

b Beginning in 1990, self-employed persons receive 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 then applies to net earnings after this deduction,

but subject to the OASDI base.

c

In 1984 only, employees received an immediate credit of 0.3 percent of taxable wages against their OASDI

payroll tax contributions. The self-employed received similar credits of 2.7 percent, 2.3 percent, and

2.0 percent against their combined OASDI and Hospital Insurance (HI) contributions on net earnings from

self-employment in 1984, 1985, and 1986-89, respectively. The General Fund of the Treasury reimbursed the

trust funds for these credits.

d Public Law 111-147 exempted most employers from paying the employer share of OASDI payroll tax on

wages paid during the period March 19, 2010 through December 31, 2010 to certain qualified individuals

hired after February 3, 2010. Public Law 111-312 reduced the OASDI payroll tax rate for 2011 by 2 percentage points for employees and for self-employed workers. Public Law 112-96 extended the 2011 rate reduction through 2012. These laws require that the General Fund of the Treasury reimburse the OASI and DI

Trust Funds for these temporary reductions in 2010 through 2012 payroll tax revenue, in order to “replicate

to the extent possible” revenue that would have been received if the combined employee/employer payroll

tax rates had remained at 12.4 percent for OASDI (10.6 percent for OASI and 1.8 percent for DI).

e Subject to automatic adjustment based on increases in average wages.

Table V.C6.—Contribution and Benefit Base and Payroll Tax Contribution Rates (Cont.)

Calendar years

Contribution

and benefit

base

Payroll tax contribution rates (percent)

Employees and employers,

combineda Self-employed

b

OASDI OASI DI OASDI OASI DI
Assumptions and Methods

142

and DI benefits to total OASI and DI scheduled benefits. The income thresholds used for benefit taxation are, by law, constant in the future, while

income and benefit levels continue to rise. Accordingly, projected ratios of

income from taxation of benefits to the amount of benefits increase gradually. Ultimate tax ratios for OASI and DI benefits used in the projection rely

on estimates from the Office of Tax Analysis in the Department of the Treasury.

8. Average Benefits

Projections of average benefits for each benefit type reflect recent historical

averages, projected average primary insurance amounts (PIAs), and projected ratios of average benefits to average PIAs. Calculations of average

PIAs are based on projected distributions of beneficiaries by duration from

year of initial entitlement, average PIAs at initial entitlement, and increases

in PIAs after initial entitlement. Projected increases in average PIAs after initial entitlement depend on automatic benefit increases, recomputations to

reflect additional covered earnings, and differences in mortality by level of

lifetime earnings. Calculations of future average PIAs at initial entitlement

are based on projected earnings histories, which in turn reflect a combination

of the actual earnings histories associated with a sample of 2008 initial entitlements and more recent actual earnings levels by age and sex for covered

workers.

For retired-worker, aged-spouse, and aged-widow(er) benefits, the percentage of the PIA that is payable depends on the age at initial entitlement to

benefits. Projected ratios of average benefits to average PIAs for these types

of benefits are based on projections of age distributions at initial entitlement.

9. Scheduled Benefits

For each type of benefit, scheduled benefits are the product of the number of

beneficiaries and the corresponding average monthly benefit. The shortrange model calculates scheduled benefits on a quarterly basis. The longrange model calculates all scheduled benefits on an annual basis, using the

number of beneficiaries at the beginning and end of the year. Adjustments to

these annual scheduled benefits include retroactive payments to newly

awarded beneficiaries and other amounts not reflected in the regular monthly

scheduled benefits.

Scheduled lump-sum death benefits are estimated as the product of: (1) the

number of lump-sum death payments projected on the basis of the assumed

death rates, the projected fully insured population, and the estimated percent-
143

Program Assumptions and Methods

age of the fully insured population that will qualify for lump-sum death payments; and (2) the amount of the lump-sum death payment, which is $255

(unindexed since 1973).

10.Illustrative Scheduled Benefit Amounts

Table V.C7 shows, under the intermediate assumptions, future benefit

amounts payable upon retirement at the normal retirement age and at age 65,

for various hypothetical workers attaining age 65 in 2014 and subsequent

years. The illustrative benefit amounts in table V.C7 are presented in CPIindexed 2014 dollars—that is, adjusted to 2014 levels by the CPI indexing

series shown in table VI.G6. As a point of comparison, Table V.C7 also

shows the national average wage index (AWI) for 2014 and subsequent years

in CPI-indexed 2014 dollars.

The normal retirement age was 65 for individuals who reached age 62 before

2000. It increased to age 66 during the period 2000-05, at a rate of 2 months

per year as workers attained age 62. Under current law, the normal retirement

age will increase to age 67 during the period 2017-22, also by 2 months per

year as workers attain age 62. The illustrative benefit amounts shown in table

V.C7 for retirees at age 65 are lower than the amounts shown for retirees at

normal retirement age because the statute requires actuarial reduction of benefits taken before normal retirement age.

Table V.C7 shows five different pre-retirement earnings patterns. Four of

these patterns assume the earnings history of workers with scaled-earnings

patterns

1 and reflect very low, low, medium, and high career-average levels

of pre-retirement earnings starting at age 21. The fifth pattern assumes the

earnings history of a steady maximum earner starting at age 22. The four

scaled-earnings patterns derive from earnings experienced by insured workers during 1991-2010. These earnings levels differ by age. The career-average level of earnings for each scaled case targets a percent of the AWI.

For the scaled medium earner, the career-average earnings level is about

equal to the AWI (or $46,787 for 2014). For the scaled very low, low, and

high earners, the career-average earnings level is about 25 percent, 45 percent, and 160 percent of the AWI, respectively (or $11,697, $21,054, and

$74,859, respectively, for 2014). The steady maximum earner has earnings at

or above the contribution and benefit base for each year starting at age 22

through the year prior to retirement (or $117,000 for 2014).

1 Actuarial Note 2013.3 has more details on scaled-earnings patterns.

See www.socialsecurity.gov/OACT/NOTES/ran3/an2013-3.html.
Assumptions and Methods

144

11. Administrative Expenses

The projection of administrative expenses through the short-range period is

based on historical experience and the projected growth in average wages.

The Office of Budget of the Social Security Administration provides estiTable V.C7.—Annual Scheduled Benefit Amounts for Retired Workers

With Various Pre-Retirement Earnings Patterns

Based on Intermediate Assumptions, Calendar Years 2014-90

Benefits in 2014 dollarsa with retirement at normal retirement age

a Annual amounts are the total for the 12-month period starting with the month of retirement, adjusted to be

in 2014 dollars by using the CPI indexing series from table VI.G6.

Year attain

age 65b

b Attains age 65 on January 1 of the year.

Age at

retirement

Scaled very

low

earningsc

c Career-average earnings at about 25 percent of the AWI.

Scaled low

earningsd

d Career-average earnings at about 45 percent of the AWI.

Scaled

medium

earningse

e Career-average earnings at about 100 percent of the AWI. Such a worker would have career-average earnings at approximately the 56th percentile of all new retired worker beneficiaries.

Scaled high

earningsf

f Career-average earnings at about 160 percent of the AWI.

Steady

maximum

earningsg

g Earnings for each year at or above the contribution and benefit base.

National

Average Wage

Index in 2014

dollars

h

h Average Wage Index from table VI.G6, adjusted to be in 2014 dollars by using the CPI indexing series

from table VI.G6.

2014 . . . . 66:0 $9,031 $11,814 $19,477 $25,821 $31,338 $46,787

2015 . . . . 66:0 8,910 11,668 19,227 25,483 31,000 48,120

2020 . . . . 66:2 9,592 12,549 20,698 27,409 33,549 53,266

2025 . . . . 67:0 10,546 13,799 22,744 30,132 37,096 56,522

2030 . . . . 67:0 11,192 14,645 24,140 31,978 39,407 59,997

2035 . . . . 67:0 11,878 15,542 25,623 33,948 41,855 63,635

2040 . . . . 67:0 12,600 16,482 27,173 35,997 44,351 67,311

2045 . . . . 67:0 13,324 17,437 28,740 38,078 46,933 71,119

2050 . . . . 67:0 14,084 18,427 30,369 40,236 49,529 75,056

2055 . . . . 67:0 14,860 19,443 32,047 42,461 52,171 79,193

2060 . . . . 67:0 15,683 20,518 33,815 44,803 55,001 83,525

2065 . . . . 67:0 16,538 21,637 35,663 47,253 58,018 88,061

2070 . . . . 67:0 17,439 22,815 37,601 49,820 61,175 92,817

2075 . . . . 67:0 18,380 24,047 39,631 52,511 64,489 97,905

2080 . . . . 67:0 19,390 25,367 41,807 55,391 68,029 103,369

2085 . . . . 67:0 20,472 26,783 44,141 58,483 71,826 109,194

2090 . . . . 67:0 21,625 28,293 46,628 61,778 75,875 115,390

Benefits in 2014 dollars with retirement at age 65

2014 . . . . 65:0 $8,459 $11,077 $18,251 $24,198 $29,209 $46,787

2015 . . . . 65:0 8,336 10,895 17,968 23,817 28,851 48,120

2020 . . . . 65:0 8,840 11,572 19,078 25,270 30,806 53,266

2025 . . . . 65:0 9,134 11,954 19,710 26,115 31,901 56,522

2030 . . . . 65:0 9,696 12,690 20,917 27,714 33,904 59,997

2035 . . . . 65:0 10,297 13,471 22,202 29,417 36,016 63,635

2040 . . . . 65:0 10,916 14,287 23,545 31,199 38,169 67,311

2045 . . . . 65:0 11,547 15,114 24,909 33,001 40,398 71,119

2050 . . . . 65:0 12,202 15,966 26,317 34,867 42,639 75,056

2055 . . . . 65:0 12,879 16,851 27,774 36,800 44,912 79,193

2060 . . . . 65:0 13,590 17,781 29,305 38,829 47,352 83,525

2065 . . . . 65:0 14,334 18,754 30,906 40,953 49,952 88,061

2070 . . . . 65:0 15,113 19,774 32,587 43,178 52,670 92,817

2075 . . . . 65:0 15,930 20,841 34,346 45,508 55,522 97,905

2080 . . . . 65:0 16,804 21,985 36,232 48,005 58,570 103,369

2085 . . . . 65:0 17,742 23,212 38,256 50,684 61,839 109,194

2090 . . . . 65:0 18,742 24,520 40,411 53,542 65,324 115,390
145

Program Assumptions and Methods

mates for the first several years of the projection. For years after the shortrange period, projected administrative expenses reflect increases in the number of beneficiaries and increases in the average wage. However, the

increases in average wage are partially offset by assumed administrative productivity gains.

12.Railroad Retirement Financial Interchange

Railroad workers are covered under a separate multi-tiered benefit plan, with

a first tier of coverage similar to OASDI coverage. An annual financial interchange between the Railroad Retirement fund and the OASI and DI Trust

Funds is made to resolve the difference between: (1) the amount of OASDI

benefits that would be paid to railroad workers and their families if railroad

employment had been covered under the OASDI program, plus administrative expenses associated with these benefits; and (2) the amount of OASDI

payroll tax and income tax that would be received with allowances for interest from railroad workers.

Calculation of the financial interchange with the Railroad Retirement reflects

trends similar to those used in estimating the cost of OASDI benefits. The

annual short-range net cost for the OASI and DI Trust Funds averages about

$5 billion and the long-range summarized net cost for the OASI and DI Trust

Funds is 0.04 percent of taxable payroll.

13.Military Service Transfers

Beginning in 1966, the General Fund of the Treasury reimbursed the OASI

and DI Trust Funds annually for the cost (including administrative expenses)

of providing additional benefit payments resulting from noncontributory

wage credits for military service performed prior to 1957. The 1983 amendments modified the reimbursement mechanism and the timing of the reimbursements, and required a reimbursement in 1983 to include all future costs

attributable to the wage credits. The amendments also require adjustments to

that 1983 reimbursement every fifth year, beginning with 1985, to account

for actual data.
Appendices

146

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. These

funds conduct the financial operations of the OASI and DI programs. The

Board of Trustees is responsible for overseeing the financial operations of

these funds. The following paragraphs describe the various components of

trust fund income and outgo. Following this description, tables VI.A1 and

VI.A2 present the historical operations of the separate trust funds since their

inception, and table VI.A3 presents the operations of the theoretical combined trust funds during the period when they have co-existed.

The primary receipts of these two funds are amounts appropriated under permanent authority on the basis of payroll tax contributions. Federal law

requires that all employees who work in OASDI covered employment, and

their employers, make payroll tax contributions on their wages. Employees

and their employers must also make payroll tax contributions on monthly

cash tips if such tips are at least $20. Self-employed persons must make payroll tax contributions on their covered net earnings from self-employment.

The Federal Government 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.

Income also includes various reimbursements from the General Fund of the

Treasury, such as: (1) the cost of noncontributory wage credits for military

service before 1957, and periodic adjustments to previous determinations of

this cost; (2) the cost in 1971-82 of deemed wage credits for military service

performed after 1956; (3) the cost of benefits to certain uninsured persons

who attained age 72 before 1968; (4) the cost of payroll tax credits provided

to employees in 1984 and self-employed persons in 1984-89 by Public Law

98-21; (5) the cost in 2009-17 of excluding certain self-employment earnings

from SECA taxes under Public Law 110-246; and (6) payroll tax revenue

forgone under the provisions of Public Laws 111-147, 111-312, 112-78,

and 112-96.

Beginning in 1984, Federal law subjected up to 50 percent of an individual’s

or couple’s OASDI benefits to Federal income taxation under certain circumstances. Effective for taxable years beginning after 1993, the law increased
147

History of Trust Fund Operations

the maximum percentage from 50 percent to 85 percent. Treasury credits the

proceeds from this taxation of up to 50 percent of benefits 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 Treasury makes subsequent adjustments based on the actual amounts shown on annual income tax records.

Each of the OASI and DI Trust Funds receives the income taxes paid on the

benefits from that trust fund.

2

Another source of income to the trust funds is interest received on investments held by the trust funds. On a daily basis, Treasury invests trust fund

income not required to meet current operating expenses, primarily in interest-bearing obligations of the U.S. Government. These investments include

the special public-debt obligations described in the next paragraph. The

Social Security Act also authorizes the trust funds to hold obligations guaranteed as to both principal and interest by the United States. The act therefore permits the trust funds to hold certain Federally sponsored agency

obligations and marketable obligations.

3 The trust funds may acquire any of

these obligations 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 for special obligations newly issued in any month is the average

market yield, as of the last business day of the prior month, on all of the outstanding marketable U.S. obligations that are due or callable more than 4

years in the future. This rate is rounded to the nearest one-eighth of one percent. Beginning January 1999, in calculating the average market yield rate

for this purpose, the Treasury incorporates the yield to the call date when a

callable bond’s market price is above par.

Although the Social Security Act does not authorize the purchase or sale of

special issues in the open market, the Treasury may redeem them at any time

at par value. In practice, the Treasury redeems special issues prior to maturity only when needed to meet current operating expenses. Given this separation from market-based valuations, changes in market yield rates do not

cause fluctuations in principal value. As is true for marketable Treasury

1 The HI Trust Fund receives the additional tax revenue resulting from the increase to 85 percent.

2 A special provision applies to benefits paid to nonresident aliens. Effective for taxable years beginning

after 1994, Public Law 103-465 subjects benefits to a flat-rate tax, usually 25.5 percent, before they are

paid. Therefore, this tax remains in the trust funds. From 1984 to 1994, the flat-rate tax was usually

15 percent.

3 The Social Security Act requires the trust funds to acquire special-issue obligations unless the Managing

Trustee determines that the purchase of marketable obligations is in the public interest. The purchase of marketable obligations has been quite limited and has not occurred since 1980.
Appendices

148

securities held by the public, the full faith and credit of the U.S. Government

backs all of the investments held by the trust funds.

The primary expenditures of the OASI and DI Trust Funds are: (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 prohibits 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 to disabled persons receiving cash benefits

because of their disabilities, where such services contributed to their successful rehabilitation; and (2) net costs of the provisions of the Railroad Retirement Act that provide for a system of coordination and financial interchange

between the Railroad Retirement program and the Social Security program.

Under the financial interchange provisions, the Railroad Retirement program’s Social Security Equivalent Benefit Account and the trust funds interchange amounts on an annual basis so that each trust fund is in the same

position it would have been had railroad employment always been covered

under Social Security.

The statements of the operations of the trust funds in this report do not

include the net worth of facilities and other fixed capital assets 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. As a

result of this unavailability, the actuarial status of the trust funds does not

take these assets into account.
149

History of Trust Fund Operations

Table VI.A1.— Operations of the OASI Trust Fund, Calendar Years 1937-2013

[Dollar amounts in billions]

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsaTaxation of

benefits

Net

interestb Total

Benefit

paymentsc

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratio

d

1937e. $0.8 $0.8 — — f f f — — $0.8 $0.8 —

1938e. .4 .4 — — f f f — — .4 1.1 7,660

1939e. .6 .6 — — f f f — — .6 1.7 8,086

1940 . . .4 .3 — — f $0.1 f f — .3 2.0 2,781

1941 . . .8 .8 — — $0.1 .1 $0.1 f — .7 2.8 1,782

1942 . . 1.1 1.0 — — .1 .2 .1 f — .9 3.7 1,737

1943 . . 1.3 1.2 — — .1 .2 .2 f — 1.1 4.8 1,891

1944 . . 1.4 1.3 — — .1 .2 .2

f — 1.2 6.0 2,025

1945 . . 1.4 1.3 — — .1 .3 .3

f — 1.1 7.1 1,975

1946 . . 1.4 1.3 — — .2 .4 .4

f — 1.0 8.1 1,704

1947 . . 1.7 1.6

f — .2 .5 .5f — 1.2 9.4 1,592

1948 . . 2.0 1.7

f — .3 .6 .6 $0.1 — 1.4 10.7 1,542

1949 . . 1.8 1.7 f — .1 .7 .7 .1 — 1.1 11.8 1,487

1950 . . 2.9 2.7 f — .3 1.0 1.0 .1 — 1.9 13.7 1,156

1951 . . 3.8 3.4

f — .4 2.0 1.9 .1 — 1.8 15.5 698

1952 . . 4.2 3.8 — — .4 2.3 2.2 .1 — 1.9 17.4 681

1953 . . 4.4 3.9 — — .4 3.1 3.0 .1 — 1.3 18.7 564

1954 . . 5.6 5.2 — — .4 3.7 3.7 .1

f 1.9 20.6 500

1955 . . 6.2 5.7 — — .5 5.1 5.0 .1 f 1.1 21.7 405

1956 . . 6.7 6.2 — — .5 5.8 5.7 .1 f.9 22.5 371

1957 . . 7.4 6.8 — — .6 7.5 7.3 .2

f

-.1 22.4 300

1958 . . 8.1 7.6 — — .6 8.6 8.3 .2 $0.1 -.5 21.9 259

1959 . . 8.6 8.1 — — .5 10.3 9.8 .2 .3 -1.7 20.1 212

1960 . . 11.4 10.9 — — .5 11.2 10.7 .2 .3 .2 20.3 180

1961 . . 11.8 11.3 — — .5 12.4 11.9 .2 .3 -.6 19.7 163

1962 . . 12.6 12.1 — — .5 14.0 13.4 .3 .4 -1.4 18.3 141

1963 . . 15.1 14.5 — — .5 14.9 14.2 .3 .4 .1 18.5 123

1964 . . 16.3 15.7 — — .6 15.6 14.9 .3 .4 .6 19.1 118

1965 . . 16.6 16.0 — — .6 17.5 16.7 .3 .4 -.9 18.2 109

1966 . . 21.3 20.6 $0.1 — .6 19.0 18.3 .3 .4 2.3 20.6 96

1967 . . 24.0 23.1 .1 — .8 20.4 19.5 .4 .5 3.7 24.2 101

1968 . . 25.0 23.7 .4 — .9 23.6 22.6 .5 .4 1.5 25.7 103

1969 . . 29.6 27.9 .4 — 1.2 25.2 24.2 .5 .5 4.4 30.1 102

1970 . . 32.2 30.3 .4 — 1.5 29.8 28.8 .5 .6 2.4 32.5 101

1971 . . 35.9 33.7 .5 — 1.7 34.5 33.4 .5 .6 1.3 33.8 94

1972 . . 40.1 37.8 .5 — 1.8 38.5 37.1 .7 .7 1.5 35.3 88

1973 . . 48.3 46.0 .4 — 1.9 47.2 45.7 .6 .8 1.2 36.5 75

1974 . . 54.7 52.1 .4 — 2.2 53.4 51.6 .9 .9 1.3 37.8 68

1975 . . 59.6 56.8 .4 — 2.4 60.4 58.5 .9 1.0 -.8 37.0 63

1976 . . 66.3 63.4 .6 — 2.3 67.9 65.7 1.0 1.2 -1.6 35.4 54

1977 . . 72.4 69.6 .6 — 2.2 75.3 73.1 1.0 1.2 -2.9 32.5 47

1978 . . 78.1 75.5 .6 — 2.0 83.1 80.4 1.1 1.6 -5.0 27.5 39

1979 . . 90.3 87.9 .6 — 1.8 93.1 90.6 1.1 1.4 -2.9 24.7 30

1980 . . 105.8 103.5 .5 — 1.8 107.7 105.1 1.2 1.4 -1.8 22.8 23

1981 . . 125.4 122.6 .7 — 2.1 126.7 123.8 1.3 1.6 -1.3 21.5 18

1982 . . 125.2 123.7 .7 — .8 142.1 138.8 1.5 1.8 g .6 22.1 15

1983 . . 150.6 138.3 5.5 — 6.7 153.0 149.2 1.5 2.3 -2.4 19.7 14

1984 . . 169.3 159.5 4.7 $2.8 2.3 161.9 157.8 1.6 2.4 7.4 27.1 h20
Appendices

150

1985 . . $184.2 $175.1 $4.0 $3.2 $1.9 $171.2 $167.2 $1.6 $2.3 g$8.7 $35.8

h24

1986 . . 197.4 189.1 1.8 3.4 3.1 181.0 176.8 1.6 2.6

g3.2 39.1h28

1987 . . 210.7 201.1 1.7 3.3 4.7 187.7 183.6 1.5 2.6 23.1 62.1

h30

1988 . . 240.8 227.7 2.1 3.4 7.6 200.0 195.5 1.8 2.8 40.7 102.9 h41

1989 . . 264.7 248.1 2.1 2.4 12.0 212.5 208.0 1.7 2.8 52.2 155.1

h59

1990 . . 286.7 266.1 -.7 4.8 16.4 227.5 223.0 1.6 3.0 59.1 214.2

h78

1991 . . 299.3 272.5 .1 5.9 20.8 245.6 240.5 1.8 3.4 53.7 267.8 87

1992 . . 311.2 281.1 -.1 5.9 24.3 259.9 254.9 1.8 3.1 51.3 319.1 103

1993 . . 323.3 290.9 f 5.3 27.0 273.1 267.8 2.0 3.4 50.2 369.3 117

1994 . . 328.3 293.3 f 5.0 29.9 284.1 279.1 1.6 3.4 44.1 413.5 130

1995 . . 342.8 304.7 -.2 5.5 32.8 297.8 291.6 2.1 4.1 45.0 458.5 139

1996 . . 363.7 321.6 f 6.5 35.7 308.2 302.9 1.8 3.6 55.5 514.0 149

1997 . . 397.2 349.9 f 7.4 39.8 322.1 316.3 2.1 3.7 75.1 589.1 160

1998 . . 424.8 371.2 f 9.1 44.5 332.3 326.8 1.9 3.7 92.5 681.6 177

1999 . . 457.0 396.4 f 10.9 49.8 339.9 334.4 1.8 3.7 117.2 798.8 201

2000 . . 490.5 421.4 f 11.6 57.5 358.3 352.7 2.1 3.5 132.2 931.0 223

2001 . . 518.1 441.5 f 11.9 64.7 377.5 372.3 2.0 3.3 140.6 1,071.5 247

2002 . . 539.7 455.2 .4 12.9 71.2 393.7 388.1 2.1 3.5 146.0 1,217.5 272

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

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

2005 . . 604.3 506.9 -.3 13.8 84.0 441.9 435.4 3.0 3.6 162.4 1,663.0 340

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

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

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

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

2010 . . 677.1 544.8 2.0 22.1 108.2 584.9 577.4 3.5 3.9 92.2 2,429.0 400

2011 . . 698.8 482.4 87.8 22.2 106.5 603.8 596.2 3.5 4.1 95.0 2,524.1 402

2012 . . 731.1 503.9 97.7 26.7 102.8 645.5 637.9 3.4 4.1 85.6 2,609.7 391

2013 . . 743.8 620.8 4.2 20.7 98.1 679.5 672.1 3.4 3.9 64.3 2,674.0 384

a

Includes reimbursements from the General Fund of the Treasury to the OASI Trust Fund for: (1) the cost of

noncontributory wage credits for military service before 1957; (2) the cost in 1971-82 of deemed wage credits

for military service performed after 1956; (3) the cost of benefits to certain uninsured persons who attained age

72 before 1968; (4) the cost of payroll tax credits provided to employees in 1984 and self-employed persons in

1984-89 by Public Law 98-21; (5) the cost in 2009-17 of excluding certain self-employment earnings from

SECA taxes under Public Law 110-246; and (6) payroll tax revenue forgone under the provisions of Public

Laws 111-147, 111-312, 112-78, and 112-96.

b Net interest includes net profits or losses on marketable investments. Beginning in 1967, the trust fund pays

administrative expenses on an estimated basis, with a final adjustment including interest made in the following

fiscal year. Net interest includes the amounts of these interest adjustments. The 1970 report describes the

accounting for administrative expenses for years prior to 1967. Beginning in October 1973, figures include relatively small amounts of gifts to the fund. Net interest for 1983-86 reflects payments for interest on amounts

owed under the interfund borrowing provisions. During 1983-90, net interest reflects interest reimbursements

paid from the trust fund to the general fund on advance tax transfers.

c Beginning in 1966, includes payments for vocational rehabilitation services furnished to disabled persons

receiving benefits because of their disabilities. Beginning in 1983, net benefit amounts include reimbursements

paid from the general fund to the trust fund for unnegotiated benefit checks.

d The “Trust fund ratio” column represents asset reserves at the beginning of a year as a percentage of expenditures during the year. The table shows no ratio for 1937 because no reserves existed at the beginning of the year.

e Operations prior to 1940 are for the Old-Age Reserve Account established by the original Social Security Act.

The 1939 Amendments transferred the asset reserves of the Account to the OASI Trust Fund effective January

1, 1940.

f Between -$50 million and $50 million.

g Reflects interfund borrowing and subsequent repayment of loans. The OASI Trust Fund borrowed

$17.5 billion from the DI and HI Trust Funds in 1982 and repaid the loans in 1985 ($4.4 billion) and 1986

($13.2 billion).

h Reserves used for the trust fund ratio calculation include January advance tax transfers.

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

Table VI.A1.— Operations of the OASI Trust Fund, Calendar Years 1937-2013 (Cont.)

[Dollar amounts in billions]

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsaTaxation of

benefits

Net

interestb Total

Benefit

payments

c

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiod
151

History of Trust Fund Operations

Table VI.A2.— Operations of the DI Trust Fund, Calendar Years 1957-2013

[Dollar amounts in billions]

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsaTaxation of

benefits

Net

interestb Total

Benefit

payments

c

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratio

d

1957. . . $0.7 $0.7 — — e $0.1 $0.1 e — $0.6 $0.6 —

1958. . . 1.0 1.0 — — e.3 .2 e — .7 1.4 249

1959. . . .9 .9 — — e.5 .5 e e .4 1.8 284

1960. . . 1.1 1.0 — — $0.1 .6 .6

e e .5 2.3 304

1961. . . 1.1 1.0 — — .1 1.0 .9 $0.1 e.1 2.4 239

1962. . . 1.1 1.0 — — .1 1.2 1.1 .1 e-.1 2.4 206

1963. . . 1.2 1.1 — — .1 1.3 1.2 .1 e-.1 2.2 183

1964. . . 1.2 1.2 — — .1 1.4 1.3 .1 e-.2 2.0 159

1965. . . 1.2 1.2 — — .1 1.7 1.6 .1 e-.4 1.6 121

1966. . . 2.1 2.0

e — .1 1.9 1.8 .1e

.1 1.7 82

1967. . . 2.4 2.3

e — .1 2.1 1.9 .1e

.3 2.0 83

1968. . . 3.5 3.3

e — .1 2.5 2.3 .1e 1.0 3.0 83

1969. . . 3.8 3.6

e — .2 2.7 2.6 .1e 1.1 4.1 111

1970. . . 4.8 4.5

e — .3 3.3 3.1 .2e 1.5 5.6 126

1971. . . 5.0 4.6 $0.1 — .4 4.0 3.8 .2 e 1.0 6.6 140

1972. . . 5.6 5.1 .1 — .4 4.8 4.5 .2 e.8 7.5 140

1973. . . 6.4 5.9 .1 — .5 6.0 5.8 .2 e.5 7.9 125

1974. . . 7.4 6.8 .1 — .5 7.2 7.0 .2 e.2 8.1 110

1975. . . 8.0 7.4 .1 — .5 8.8 8.5 .3 e-.8 7.4 92

1976. . . 8.8 8.2 .1 — .4 10.4 10.1 .3 e-1.6 5.7 71

1977. . . 9.6 9.1 .1 — .3 11.9 11.5 .4 e-2.4 3.4 48

1978. . . 13.8 13.4 .1 — .3 13.0 12.6 .3 e.9 4.2 26

1979. . . 15.6 15.1 .1 — .4 14.2 13.8 .4 e 1.4 5.6 30

1980. . . 13.9 13.3 .1 — .5 15.9 15.5 .4 e-2.0 3.6 35

1981. . . 17.1 16.7 .2 — .2 17.7 17.2 .4 e-.6 3.0 21

1982. . . 22.7 22.0 .2 — .5 18.0 17.4 .6 e f -.4 2.7 17

1983. . . 20.7 18.0 1.1 — 1.6 18.2 17.5 .6 e 2.5 5.2 15

1984. . . 17.3 15.5 .4 $0.2 1.2 18.5 17.9 .6 e-1.2 4.0 g35

1985. . . 19.3 17.0 1.2 .2 .9 19.5 18.8 .6 e f2.4 6.3

g27

1986. . . 19.4 18.2 .2 .2 .8 20.5 19.9 .6 $0.1 f1.5 7.8 g38

1987. . . 20.3 19.5 .2

e

.6 21.4 20.5 .8 .1 -1.1 6.7

g44

1988. . . 22.7 21.8 .2 .1 .6 22.5 21.7 .7 .1 .2 6.9

g38

1989. . . 24.8 23.8 .2 .1 .7 23.8 22.9 .8 .1 1.0 7.9

g38

1990. . . 28.8 28.4 -.6 .1 .9 25.6 24.8 .7 .1 3.2 11.1 g40

1991. . . 30.4 29.1

e

.2 1.1 28.6 27.7 .8 .1 1.8 12.9 39

1992. . . 31.4 30.1

e

.2 1.1 32.0 31.1 .8 .1 -.6 12.3 40

1993. . . 32.3 31.2

e

.3 .8 35.7 34.6 1.0 .1 -3.4 9.0 35

1994. . . 52.8 51.4

e

.3 1.2 38.9 37.7 1.0 .1 14.0 22.9 23

1995. . . 56.7 54.4 -.2 .3 2.2 42.1 40.9 1.1 .1 14.6 37.6 55

1996. . . 60.7 57.3

e

.4 3.0 45.4 44.2 1.2 e 15.4 52.9 83

1997. . . 60.5 56.0

e

.5 4.0 47.0 45.7 1.3 .1 13.5 66.4 113

1998. . . 64.4 59.0

e

.6 4.8 49.9 48.2 1.6 .2 14.4 80.8 133

1999. . . 69.5 63.2

e

.7 5.7 53.0 51.4 1.5 .1 16.5 97.3 152

2000. . . 77.9 71.1 -.8 .7 6.9 56.8 55.0 1.6 .2 21.1 118.5 171

2001. . . 83.9 74.9

e

.8 8.2 61.4 59.6 1.7 e 22.5 141.0 193

2002. . . 87.4 77.3

e

.9 9.2 67.9 65.7 2.0 .2 19.5 160.5 208

2003. . . 88.1 77.4

e

.9 9.7 73.1 70.9 2.0 .2 15.0 175.4 219

2004. . . 91.4 80.3

e 1.1 10.0 80.6 78.2 2.2 .2 10.8 186.2 218
Appendices

152

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

2006 . . 102.6 90.8

e 1.2 10.6 94.5 91.7 2.3 .4 8.2 203.8 207

2007 . . 109.9 95.2

e 1.4 13.2 98.8 95.9 2.5 .4 11.1 214.9 206

2008 . . 109.8 97.6

e 1.3 11.0 109.0 106.0 2.5 .4 .9 215.8 197

2009 . . 109.3 96.9

e 2.0 10.5 121.5 118.3 2.7 .4 -12.2 203.5 178

2010 . . 104.0 92.5 $0.4 1.9 9.3 127.7 124.2 3.0 .5 -23.6 179.9 159

2011 . . 106.3 81.9 14.9 1.6 7.9 132.3 128.9 2.9 .5 -26.1 153.9 136

2012 . . 109.1 85.6 16.5 .6 6.4 140.3 136.9 2.9 .5 -31.2 122.7 110

2013 . . 111.2 105.4 .7 .4 4.7 143.4 140.1 2.8 .6 -32.2 90.4 86

a

Includes reimbursements from the General Fund of the Treasury to the DI Trust Fund for: (1) the cost of noncontributory wage credits for military service before 1957; (2) the cost in 1971-82 of deemed wage credits for

military service performed after 1956; (3) the cost of payroll tax credits provided to employees in 1984 and selfemployed persons in 1984-89 by Public Law 98-21; (4) the cost in 2009-17 of excluding certain self-employment earnings from SECA taxes under Public Law 110-246; and (5) payroll tax revenue forgone under the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.

b Net interest includes net profits or losses on marketable investments. Beginning in 1967, the trust fund pays

administrative expenses on an estimated basis, with a final adjustment including interest made in the following

fiscal year. Net interest includes the amounts of these interest adjustments. The 1970 report describes the

accounting for administrative expenses for years prior to 1967. Beginning in July 1974, figures include relatively small amounts of gifts to the fund. Net interest for 1983-86 reflects payments for interest on amounts

owed under the interfund borrowing provisions. During 1983-90, net interest reflects interest reimbursements

paid from the trust fund to the general fund on advance tax transfers.

c Beginning in 1966, includes payments for vocational rehabilitation services furnished to disabled persons

receiving benefits because of their disabilities. Beginning in 1983, net benefit amounts include reimbursements

paid from the general fund to the trust fund for unnegotiated benefit checks.

d The “Trust fund ratio” column represents asset reserves at the beginning of a year as a percentage of expenditures during the year. The table shows no ratio for 1957 because no reserves existed at the beginning of the year.

e Between -$50 million and $50 million.

f Reflects interfund borrowing and subsequent repayment of loans. The DI Trust Fund loaned $5.1 billion to the

OASI Trust Fund in 1982. The OASI Trust Fund repaid the loan in 1985 ($2.5 billion) and 1986 ($2.5 billion).

g Reserves used for the trust fund ratio calculation include January advance tax transfers.

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

Table VI.A2.— Operations of the DI Trust Fund, Calendar Years 1957-2013 (Cont.)

[Dollar amounts in billions]

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsaTaxation of

benefits

Net

interestb Total

Benefit

paymentsc

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratio

d
153

History of Trust Fund Operations

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

Calendar Years 1957-2013

[Dollar amounts in billions]

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsaTaxation of

benefits

Net

interestb Total

Benefit

paymentsc

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratio

d

1957 . . $8.1 $7.5 — — $0.6 $7.6 $7.4 $0.2

e $0.5 $23.0 298

1958 9.1 8.5 — — .6 8.9 8.6 .2 $0.1 .2 23.2 259

1959 . . 9.5 8.9 — — .6 10.8 10.3 .2 .3 -1.3 22.0 215

1960 . . 12.4 11.9 — — .6 11.8 11.2 .2 .3 .6 22.6 186

1961 . . 12.9 12.3 — — .6 13.4 12.7 .3 .3 -.5 22.2 169

1962 . . 13.7 13.1 — — .6 15.2 14.5 .3 .4 -1.5 20.7 146

1963 . . 16.2 15.6 — — .6 16.2 15.4 .3 .4

e 20.7 128

1964 . . 17.5 16.8 — — .6 17.0 16.2 .4 .4 .5 21.2 122

1965 . . 17.9 17.2 — — .7 19.2 18.3 .4 .5 -1.3 19.8 110

1966 . . 23.4 22.6 $0.1 — .7 20.9 20.1 .4 .5 2.5 22.3 95

1967 . . 26.4 25.4 .1 — .9 22.5 21.4 .5 .5 3.9 26.3 99

1968 . . 28.5 27.0 .4 — 1.0 26.0 25.0 .6 .5 2.5 28.7 101

1969 . . 33.3 31.5 .5 — 1.3 27.9 26.8 .6 .5 5.5 34.2 103

1970 . . 37.0 34.7 .5 — 1.8 33.1 31.9 .6 .6 3.9 38.1 103

1971 . . 40.9 38.3 .5 — 2.0 38.5 37.2 .7 .6 2.4 40.4 99

1972 . . 45.6 42.9 .5 — 2.2 43.3 41.6 .9 .7 2.3 42.8 93

1973 . . 54.8 51.9 .5 — 2.4 53.1 51.5 .8 .8 1.6 44.4 80

1974 . . 62.1 58.9 .5 — 2.7 60.6 58.6 1.1 .9 1.5 45.9 73

1975 . . 67.6 64.3 .5 — 2.9 69.2 67.0 1.2 1.0 -1.5 44.3 66

1976 . . 75.0 71.6 .7 — 2.7 78.2 75.8 1.2 1.2 -3.2 41.1 57

1977 . . 82.0 78.7 .7 — 2.5 87.3 84.7 1.4 1.2 -5.3 35.9 47

1978 . . 91.9 88.9 .8 — 2.3 96.0 93.0 1.4 1.6 -4.1 31.7 37

1979 . . 105.9 103.0 .7 — 2.2 107.3 104.4 1.5 1.5 -1.5 30.3 30

1980 . . 119.7 116.7 .7 — 2.3 123.5 120.6 1.5 1.4 -3.8 26.5 25

1981 . . 142.4 139.4 .8 — 2.2 144.4 141.0 1.7 1.6 -1.9 24.5 18

1982 . . 147.9 145.7 .9 — 1.4 160.1 156.2 2.1 1.8

f

.2 24.8 15

1983 . . 171.3 156.3 6.7 — 8.3 171.2 166.7 2.2 2.3 .1 24.9 14

1984 . . 186.6 175.0 5.2 $3.0 3.4 180.4 175.7 2.3 2.4 6.2 31.1 g21

1985 . . 203.5 192.1 5.2 3.4 2.7 190.6 186.1 2.2 2.4

f11.1 42.2 g24

1986 . . 216.8 207.4 1.9 3.7 3.9 201.5 196.7 2.2 2.7

f 4.7 46.9g29

1987 . . 231.0 220.6 1.9 3.2 5.3 209.1 204.1 2.4 2.6 21.9 68.8

g31

1988 . . 263.5 249.5 2.3 3.4 8.2 222.5 217.1 2.5 2.9 41.0 109.8 g41

1989 . . 289.4 271.9 2.3 2.5 12.7 236.2 230.9 2.4 2.9 53.2 163.0 g57

1990 . . 315.4 294.5 -1.3 5.0 17.2 253.1 247.8 2.3 3.0 62.3 225.3 g75

1991 . . 329.7 301.6 .1 6.1 21.9 274.2 268.2 2.6 3.5 55.5 280.7 82

1992 . . 342.6 311.3 -.1 6.1 25.4 291.9 286.0 2.7 3.2 50.7 331.5 96

1993 . . 355.6 322.0 .1 5.6 27.9 308.8 302.4 3.0 3.4 46.8 378.3 107

1994 . . 381.1 344.7 e 5.3 31.1 323.0 316.8 2.7 3.5 58.1 436.4 117

1995 . . 399.5 359.1 -.4 5.8 35.0 339.8 332.6 3.1 4.1 59.7 496.1 128

1996 . . 424.5 378.9 e 6.8 38.7 353.6 347.0 3.0 3.6 70.9 567.0 140

1997 . . 457.7 406.0 e 7.9 43.8 369.1 362.0 3.4 3.7 88.6 655.5 154

1998 . . 489.2 430.2 e 9.7 49.3 382.3 375.0 3.5 3.8 106.9 762.5 171

1999 . . 526.6 459.6 e 11.6 55.5 392.9 385.8 3.3 3.8 133.7 896.1 194

2000 . . 568.4 492.5 -.8 12.3 64.5 415.1 407.6 3.8 3.7 153.3 1,049.4 216

2001 . . 602.0 516.4 e 12.7 72.9 438.9 431.9 3.7 3.3 163.1 1,212.5 239

2002 . . 627.1 532.5 .4 13.8 80.4 461.7 453.8 4.2 3.6 165.4 1,378.0 263

2003 . . 631.9 533.5 e 13.4 84.9 479.1 470.8 4.6 3.7 152.8 1,530.8 288

2004 . . 657.7 553.0 e 15.7 89.0 501.6 493.3 4.5 3.8 156.1 1,686.8 305
Appendices

154

Tables VI.A4 and VI.A5 show the total asset reserves of the OASI Trust

Fund and the DI Trust Fund, respectively, at the end of calendar years 2012

and 2013. The tables show reserves by interest rate and year of maturity.

Bonds issued to the trust funds in 2013 had an interest rate of 1.75 percent,

compared with an interest rate of 1.375 percent for bonds issued in 2012.

2005 . . $701.8 $592.9 -$0.3 $14.9 $94.3 $529.9 $520.7 $5.3 $3.9 $171.8 $1,858.7 318

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

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

2008 . . 805.3 672.1 e 16.9 116.3 625.1 615.3 5.7 4.0 180.2 2,418.7 358

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

2010 . . 781.1 637.3 2.4 23.9 117.5 712.5 701.6 6.5 4.4 68.6 2,609.0 357

2011 . . 805.1 564.2 102.7 23.8 114.4 736.1 725.1 6.4 4.6 69.0 2,677.9 354

2012 . . 840.2 589.5 114.3 27.3 109.1 785.8 774.8 6.3 4.7 54.4 2,732.3 341

2013 . . 855.0 726.2 4.9 21.1 102.8 822.9 812.3 6.2 4.5 32.1 2,764.4 332

a

Includes reimbursements from the General Fund of the Treasury to the OASI and DI Trust Funds for: (1) the

cost of noncontributory wage credits for military service before 1957; (2) the cost in 1971-82 of deemed wage

credits for military service performed after 1956; (3) the cost of benefits to certain uninsured persons who

attained age 72 before 1968; (4) the cost of payroll tax credits provided to employees in 1984 and self-employed

persons in 1984-89 by Public Law 98-21; (5) the cost in 2009-17 of excluding certain self-employment earnings

from SECA taxes under Public Law 110-246; and (6) payroll tax revenue forgone under the provisions of Public

Laws 111-147, 111-312, 112-78, and 112-96.

b Net interest includes net profits or losses on marketable investments. Beginning in 1967, the trust funds pay

administrative expenses on an estimated basis, with a final adjustment including interest made in the following

fiscal year. Net interest includes the amounts of these interest adjustments. The 1970 report describes the

accounting for administrative expenses for years prior to 1967. Beginning in October 1973, figures include relatively small amounts of gifts to the funds. Net interest for 1983-86 reflects payments for interest on amounts

owed under the interfund borrowing provisions. During 1983-90, net interest reflects interest reimbursements

paid from the trust funds to the general fund on advance tax transfers.

c Beginning in 1966, includes payments for vocational rehabilitation services furnished to disabled persons

receiving benefits because of their disabilities. Beginning in 1983, net benefit amounts include reimbursements

paid from the general fund to the trust funds for unnegotiated benefit checks.

d The “Trust fund ratio” column represents asset reserves at the beginning of a year as a percentage of expenditures during the year.

e Between -$50 million and $50 million.

f Reflects interfund borrowing and subsequent repayment of loans. The OASI trust fund borrowed $12.4 billion

from the HI Trust Fund in 1982 and repaid the loan in 1985 ($1.8 billion) and 1986 ($10.6 billion).

g Reserves used for the trust fund ratio calculation include January advance tax transfers.

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

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

Calendar Years 1957-2013 (Cont.)

[Dollar amounts in billions]

Calendar

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsaTaxation of

benefits

Net

interestb Total

Benefit

payments

c

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratio

d
155

History of Trust Fund Operations

Note: Amounts of special issues are at par value. The trust fund purchases and redeems special issues at par

value. The table groups equal amounts that mature in two or more years at a given interest rate. A negative

undisbursed balance represents an extension of credit against securities to be redeemed in the next few days.

Table VI.A4.—OASI Trust Fund Asset Reserves, End of Calendar Years 2012 and 2013

[In thousands]

December 31, 2012 December 31, 2013

Obligations sold only to the trust funds (special issues):

Certificates of indebtedness:

1.375 percent, 2013 $60,511,850 —

2.250 percent, 2014 — $60,392,770

Bonds:

1.375 percent, 2014 6,693,019 —

1.375 percent, 2015-16 13,386,038 13,386,038

1.375 percent, 2017-25 60,237,180 60,237,180

1.375 percent, 2026 6,693,019 6,693,019

1.375 percent, 2027 173,240,401 173,240,401

1.750 percent, 2015-18 — 19,632,744

1.750 percent, 2019-25 — 34,357,295

1.750 percent, 2026-27 — 9,816,372

1.750 percent, 2028 — 178,148,587

2.500 percent, 2014 5,971,788 —

2.500 percent, 2015-16 11,943,576 11,943,576

2.500 percent, 2017-25 53,746,083 53,746,083

2.500 percent, 2026 166,547,382 166,547,382

2.875 percent, 2014 7,264,431 —

2.875 percent, 2015 7,264,431 7,264,431

2.875 percent, 2016-24 65,379,888 65,379,888

2.875 percent, 2025 160,575,595 160,575,595

3.250 percent, 2014 10,628,271 —

3.250 percent, 2015 10,628,271 10,628,271

3.250 percent, 2016-23 85,026,160 85,026,160

3.250 percent, 2024 153,311,163 153,311,163

3.500 percent, 2014 9,513,751 —

3.500 percent, 2015 9,513,751 9,513,751

3.500 percent, 2016-17 19,027,504 19,027,504

3.500 percent, 2018 86,900,994 86,900,994

4.000 percent, 2013 3,300,605 —

4.000 percent, 2014 12,075,192 —

4.000 percent, 2015-22 96,601,536 96,601,536

4.000 percent, 2023 142,682,893 142,682,893

4.125 percent, 2013 10,516,946 —

4.125 percent, 2014 10,516,946 9,439,581

4.125 percent, 2015-19 52,584,730 52,584,730

4.125 percent, 2020 106,585,700 106,585,700

4.625 percent, 2013 9,167,664 —

4.625 percent, 2014-15 18,335,328 18,335,328

4.625 percent, 2016-18 27,502,989 27,502,989

4.625 percent, 2019 96,068,657 96,068,657

5.000 percent, 2013 12,454,232 —

5.000 percent, 2014-21 99,633,856 99,633,856

5.000 percent, 2022 130,607,701 130,607,701

5.125 percent, 2013 11,567,866 —

5.125 percent, 2014-19 69,407,196 69,407,196

5.125 percent, 2020 11,567,769 11,567,769

5.125 percent, 2021 118,153,469 118,153,469

5.250 percent, 2013 9,235,912 —

5.250 percent, 2014-15 18,471,824 18,471,824

5.250 percent, 2016 9,235,911 9,235,911

5.250 percent, 2017 77,387,242 77,387,242

5.625 percent, 2013 9,621,437 —

5.625 percent, 2014-15 19,242,874 19,242,874

5.625 percent, 2016 68,151,331 68,151,331

5.875 percent, 2013 43,258,869 —

6.000 percent, 2013 6,693,628 —

6.000 percent, 2014 49,952,497 49,952,497

6.500 percent, 2013 8,577,396 —

6.500 percent, 2014 8,577,396 8,577,396

6.500 percent, 2015 58,529,893 58,529,893

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,610,272,031 2,674,489,577

Undisbursed balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -604,215 -504,358

Total asset reserves 2,609,667,816 2,673,985,219
Appendices

156

Note: Amounts of special issues are at par value. The trust fund purchases and redeems special issues at par

value. The table groups equal amounts that mature in two or more years at a given interest rate. A negative

undisbursed balance represents an extension of credit against securities to be redeemed in the next few days.

Table VI.A5.—DI Trust Fund Asset Reserves, End of Calendar Years 2012 and 2013

[In thousands]

December 31, 2012 December 31, 2013

Obligations sold only to the trust funds (special issues):

Certificates of indebtedness:

1.375 percent, 2013 $5,102,991 —

2.250 percent, 2014 — $4,270,852

Bonds:

3.250 percent, 2017 877,560 —

3.250 percent, 2018 877,560 —

3.250 percent, 2019-20 1,755,120 1,755,120

3.500 percent, 2017 1,115,128 —

3.500 percent, 2018 11,378,384 8,022,082

4.000 percent, 2017 622,571 —

4.000 percent, 2018-19 1,245,142 1,245,142

4.000 percent, 2020-22 1,867,716 1,867,716

4.000 percent, 2023 14,675,554 14,675,554

4.125 percent, 2017 677,385 —

4.125 percent, 2018-19 1,354,772 1,354,772

4.125 percent, 2020 12,911,283 12,911,283

4.625 percent, 2016 54,468 —

4.625 percent, 2017 855,497 —

4.625 percent, 2018 855,497 855,497

4.625 percent, 2019 12,233,881 12,233,881

5.000 percent, 2016 476,586 —

5.000 percent, 2017 476,586 —

5.000 percent, 2018-19 953,172 953,172

5.000 percent, 2020-21 953,168 953,168

5.000 percent, 2022 14,052,982 14,052,982

5.125 percent, 2016 665,131 —

5.125 percent, 2017 665,131 —

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, 2016 1,363,408 —

5.250 percent, 2017 10,263,256 —

5.625 percent, 2016 8,899,848 —

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,801,550 90,722,994

Undisbursed balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -135,125 -277,640

Total asset reserves 122,666,425 90,445,354
157

History of Actuarial Status

B. HISTORY OF ACTUARIAL STATUS ESTIMATES

This appendix chronicles the history of the OASDI actuarial balance and the

year of theoretical combined OASI and DI Trust Fund reserve depletion

since 1982. The actuarial balance is the principal summary measure of longrange actuarial status. The 1983 report was the last report for which the actuarial balance was positive. Section IV.B.4 defines actuarial balance in detail.

The two basic components of actuarial balance are the summarized income

rate and the summarized cost rate, both of which are expressed as percentages of taxable payroll. For any given period, the actuarial balance is the difference between the present value of non-interest income for the period and

the present value of the cost for the period, each divided by the present value

of taxable payroll for all years in the period. The computation of the actuarial

balance also includes:

• In the reports for 1988 and later, the amount of the trust fund asset

reserves on hand at the beginning of the valuation period; and

• In the reports for 1991 and later, the present value of a target trust fund

asset reserve equal to 100 percent of the annual cost to be reached and

maintained at the end of the valuation period.

Reports prior to 1973 used the current method of calculating the actuarial

balance based on present values, but the reports of 1973-87 did not. During

that period, the reports used the average-cost method, a simpler method

which approximates the results of the present-value approach. Under the

average-cost method, the sum of the annual cost rates over the 75-year projection period was divided by the total number of years, 75, to obtain the

average cost rate per year. A similar computation produced the average

income rate. The actuarial balance was the difference between the average

income rate and the average cost rate.

When the 1973 report introduced the average-cost method, the long-range

financing of the program was more nearly on a pay-as-you-go basis. Also,

the long-range demographic and economic assumptions in that report produced an annual rate of growth in taxable payroll which was about the same

as the annual rate at which the trust funds earned interest. In either situation

(i.e., pay-as-you-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.
Appendices

158

After the 1977 and 1983 Social Security Amendments, estimates showed

substantial increases in the trust funds continuing well into the 21st century.

These laws changed the program’s financing from essentially pay-as-you-go

to partial advance funding. Also, the reports from 1973-87 phased in reductions in long-range fertility rates and average real-wage growth, which produced an annual rate of growth in long-range taxable earnings which was

significantly lower than the assumed interest rate. As a result of the difference between this rate of growth and the assumed interest rate, the results of

the average-cost method and the present-value method in the reports for

1973-87 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 presentvalue method, by contrast, accounts for the full effect of the assumed interest

rates. The 1988 report reintroduced the present-value method of calculating

the actuarial balance in order to fully reflect the effects of interest.

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 contains the estimated OASDI actuarial balances, summarized

income rates, and summarized cost rates for the 1982 report through the current report. The reports presented these values on the basis of the intermediate assumptions, which recent reports refer to as alternative II and reports

prior to 1991 referred to as alternative II-B.
159

History of Actuarial Status

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

Table VI.B1.—Long-Range OASDI Actuarial Balances and Trust Fund Reserve

Depletion Dates as Shown in the Trustees Reports for 1982-2014a

[As a percentage of taxable payroll]

a The reports compute the actuarial balance and year of trust fund reserve depletion based on the intermediate assumptions, which the 1982-90 reports referred to as alternative II-B and the 1991 and later reports

refer to as alternative II.

Year of report

Summarized

income rate

Summarized

cost rate

Actuarial

balance

b

b The definition and method of calculating the actuarial balance were changed in 1988 and 1991. See text

for details.

Change from

previous yearc

c A detailed year-by-year breakdown of the reasons for the changes in the actuarial balance since the 1983

Trustees Report may be found in Actuarial Note 2014.8 at www.socialsecurity.gov/OACT/NOTES/ran8/

index.html.

Year of

combined trust

fund reserve

depletion

1982 12.27 14.09 -1.82

d 1983

1983 12.87 12.84 +.02 +1.84 solvent

1984 12.90 12.95 -.06 -.08 solvent

1985 12.94 13.35 -.41 -.35 2049

1986 12.96 13.40 -.44 -.03 2051

1987 12.89 13.51 -.62 -.18 2051

1988 12.94 13.52 -.58 +.04 2048

1989 13.02 13.72 -.70 -.13 2046

1990 13.04 13.95 -.91 -.21 2043

1991 13.11 14.19 -1.08 -.17 2041

1992 13.16 14.63 -1.46 -.38 2036

1993 13.21 14.67 -1.46

d

d Between -0.005 and 0.005 percent of taxable payroll.

2036

1994 13.24 15.37 -2.13 -.66 2029

1995 13.27 15.44 -2.17 -.04 2030

1996 13.33 15.52 -2.19 -.02 2029

1997 13.37 15.60 -2.23 -.03 2029

1998 13.45 15.64 -2.19 +.04 2032

1999 13.49 15.56 -2.07 +.12 2034

2000 13.51 15.40 -1.89 +.17 2037

2001 13.58 15.44 -1.86 +.03 2038

2002 13.72 15.59 -1.87 -.01 2041

2003 13.78 15.70 -1.92 -.04 2042

2004 13.84 15.73 -1.89 +.03 2042

2005 13.87 15.79 -1.92 -.04 2041

2006 13.88 15.90 -2.02 -.09 2040

2007 13.92 15.87 -1.95 +.06 2041

2008 13.94 15.63 -1.70 +.26 2041

2009 14.02 16.02 -2.00 -.30 2037

2010 14.01 15.93 -1.92 +.08 2037

2011 14.02 16.25 -2.22 -.30 2036

2012 14.02 16.69 -2.67 -.44 2033

2013 13.88 16.60 -2.72 -.05 2033

2014 13.89 16.77 -2.88 -.16 2033
Appendices

160

recent history: the actuarial balance of -1.82 for the 1982 report improved to

+0.02 for the 1983 report. In 1985, the estimated actuarial balance changed

largely because of an adjustment made to the method for estimating the age

distribution of immigrants.

Rebenchmarking of the National Income and Product Accounts and changes

in demographic assumptions contributed to the change in the actuarial balance for 1987. Various changes in assumptions and methods for the 1988

report had roughly offsetting effects on the actuarial balance. In 1989 and

1990, changes in economic assumptions accounted for most of the changes

in the estimated actuarial balance.

In 1991, the effect of legislation, changes in economic assumptions, and the

introduction of the cost of reaching and maintaining an ending target trust

fund 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 economic assumptions and methodology

caused increases in the actuarial balance, although reductions in the balance

caused by the change in valuation period and changes in demographic

assumptions partially offset these increases. For the 2001 report, increases

caused by changes in the demographic starting values, although partially off-
161

History of Actuarial Status

set 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, changes in the valuation period and the demographic assumptions—

both decreases in the actuarial balance—were offset by changes in the economic assumptions, while an increase due to disability assumptions was

slightly more than offset by a decrease due to changes in the projection methods and data. For the 2003 report, an 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. In the 2004 report,

increases due to changing the method of projecting benefit levels for higher

earners more than offset decreases in the actuarial balance arising from the

change in the valuation period and the net effect of other changes in programmatic data and methods.

For the 2005 report, an increase due to changing the method of projecting

future average benefit levels was more than offset by decreases due to

changes in the valuation period, updated starting values for the economic

assumptions, and other methodological changes. In 2006, decreases in the

actuarial balance due to the change in the valuation period, a reduction in the

ultimate annual real interest rate, and improvements in calculating mortality

for disabled workers, were greater in aggregate than increases in the actuarial

balance due to changes in demographic starting values and the ultimate total

fertility rate, as well as other programmatic data and method changes. For the

2007 report, increases in the actuarial balance arising from revised disability

incidence rate assumptions, improvements in average benefit level projections, and changes in near-term economic projections, more than offset

decreases in the balance due to the valuation period change and updated historical mortality data.

For the 2008 report, the large increase in the actuarial balance was primarily

due to changes in immigration projection methods and assumptions. These

changes more than offset the decreases in the actuarial balance due to the

change in the valuation period and the lower starting and ultimate mortality

rates. In 2009, changes in starting values and near-term economic assumptions due to the economic recession, faster ultimate rates of decline in death

rates for ages 65-84, and the change in the valuation period accounted for

most of the large decrease in the actuarial balance. Legislative changes, in

particular the estimated effects of the Patient Protection and Affordable Care

Act and the Health Care and Education Reconciliation Act of 2010, were the

main reason for the increase in the actuarial balance for the 2010 report. The

change in the valuation period partially offset this increase; there were also
Appendices

162

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

offsetting effects.

For the 2011 report, changes in mortality projections, due to new starting

values and revised methods, were the most significant of several factors contributing to the increase in the deficit. These mortality changes resulted in

lower death rates for the population age 65 and over. Adding to this negative

effect were near-term lower levels of net other immigration and real earnings

than assumed in the 2010 report.

For the 2012 report, changes in economic assumptions and starting values

accounted for about half of the decrease in actuarial balance. Updating starting economic data resulted in higher benefit levels, lower payroll taxes, and

lower real interest rates in the short term than projected in the previous year.

Other factors worsening the actuarial balance were the change in valuation

period, changes to starting demographic values, changes to ultimate disability incidence assumptions, and methodology changes and data updates.

For the 2013 report, the change in valuation period accounted for the entire

net change in the actuarial balance. The effects of substantially lower death

rates for 2009 than previously projected and the American Taxpayer Relief

Act of 2012 (which lowered the federal marginal income tax rates) were offset by updates of program-specific data and methodology improvements.

The primary factors improving the actuarial balance were changes in ultimate age-sex specific unemployment rates, changes in modeling the number

of workers insured, changes in average benefit levels due to the update of the

sample, changes in projections of income from taxation of benefits, and other

method changes and data updates.

Section IV.B.6 describes changes affecting the actuarial balance shown for

the 2014 report.
163

Fiscal Year Operations and Projections

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2023

Tables VI.C1, VI.C2, and VI.C3 contain details of the fiscal year 2013 operations of the OASI, DI, and the theoretical combined OASI and DI Trust

Funds, respectively. The fiscal year for the U.S. Government is the 12-month

period ending September 30. Fiscal year 2013 is the most recent fiscal year

for which complete information is available. These tables are similar to the

calendar year operations tables in section III.A. Please see that section for a

description of the various items of income and outgo.
Appendices

164

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

Table VI.C1.—Operations of the OASI Trust Fund, Fiscal Year 2013

[In millions]

Total asset reserves, September 30, 2012 $2,585,936

Receipts:

Net payroll tax contributions:

Payroll tax contributions

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

a

Includes adjustments for prior years

$591,372

Payments from the General Fund of the Treasury for payroll tax contributions subject to refunda

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,396

Net payroll tax contributions

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589,976

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L.s 111-312, 112-78, and 112-96a. 26,328

Reduction in payroll tax contributions due to P.L. 111-147a. . . . . . . . . . . . . . . . . . 98

Reimbursements directed by P.L. 110-246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

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

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b

b Between -$0.5 and $0.5 million.

Reimbursement for the costs of payments to uninsured persons who attained

age 72 before 1968 b

Net general fund reimbursements

a 26,433

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 175

All other, not subject to withholding

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,969

Total income from taxation of benefitsa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23,144

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,113

Interest adjustmentsc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

c

Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust fund and

the general fund account for the Supplemental Security Income program; (2) interest arising from the revised

allocation of administrative expenses among the trust funds; and (3) interest on certain reimbursements to the

trust fund.

2

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 100,115

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 739,668

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death payments

d . . . . . . . . . . . . . . . . . . . . . . . . . .

d

Includes net reductions for the recovery of overpayments.

663,243

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -51

Payment for costs of vocational rehabilitation services for disabled beneficiaries 4

Net benefit payments

d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663,195

Financial interchange with the Railroad Retirement “Social Security Equivalent

Benefit Account”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,948

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,848

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573

Offsetting receipts from sales of supplies, materials, etc. . . . . . . . . . . . . . . . . . . . . -4

Miscellaneous reimbursements from the general fund e. . . . . . . . . . . . . . . . . . . . .

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

related to administering the OASI program.

-7

Net administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,410

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670,554

Net increase in asset reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,114

Total asset reserves, September 30, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,655,049
165

Fiscal Year Operations and Projections

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

Table VI.C2.—Operations of the DI Trust Fund, Fiscal Year 2013

[In millions]

Total asset reserves, September 30, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $131,981

Receipts:

Net payroll tax contributions:

Payroll tax contributionsa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

a

Includes adjustments for prior years.

$100,406

Payments from the General Fund of the Treasury for payroll tax contributions subject to refunda

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -237

Net payroll tax contributionsa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,169

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L.s 111-312, 112-78, and 112-96a. 4,486

Reduction in payroll tax contributions due to P.L. 111-147a. . . . . . . . . . . . . . . . . . 17

Reimbursements directed by P.L. 110-246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

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

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b

b Between -$0.5 and $0.5 million.

Net general fund reimbursementsa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,504

Income based on taxation of benefit payments:

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

All other, not subject to withholdinga. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,047

Total income from taxation of benefitsa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,051

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,536

Interest adjustments

c

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

c

Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust fund and

the general fund account for the Supplemental Security Income program; (2) interest arising from the revised

allocation of administrative expenses among the trust funds; and (3) interest on certain reimbursements to

the trust fund.

1

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 5,538

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,262

Disbursements:

Benefit payments:

Monthly benefitsd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

d Includes net reductions for the recovery of overpayments.

139,390

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -24

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 80

Net benefit payments

d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139,446

Financial interchange with the Railroad Retirement “Social Security Equivalent

Benefit Account” 551

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,634

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Demonstration projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Miscellaneous reimbursements from the general funde. . . . . . . . . . . . . . . . . . . . . .

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

related to administering the DI program.

-3

Net administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,760

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,757

Net increase in asset reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31,494

Total asset reserves, September 30, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,486
Appendices

166

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

Table VI.C3.—Operations of the Combined OASI and DI Trust Funds, Fiscal Year 2013

[In millions]

Total asset reserves, September 30, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,717,916

Receipts:

Net payroll tax contributions:

Payroll tax contributionsa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

a

Includes adjustments for prior years.

$691,778

Payments from the General Fund of the Treasury for payroll tax contributions subject to refunda

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,633

Net payroll tax contributionsa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 690,145

Reimbursements from the general fund:

Reduction in payroll tax contributions due to P.L.s 111-312, 112-78, and 112-96a. 30,814

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

a

. . . . . . . . . . . . . . . . . . 115

Reimbursements directed by P.L. 110-246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

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

b

b Between -$0.5 and $0.5 million.

Reimbursement for the costs of payments to uninsured persons who attained

age 72 before 1968 b

Net general fund reimbursements

a 30,937

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 180

All other, not subject to withholding

a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,016

Total income from taxation of benefitsa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,196

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,649

Interest adjustmentsc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

c

Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust funds

and the general fund account for the Supplemental Security Income program; (2) interest arising from the

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

3

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 105,653

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 850,930

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death paymentsd . . . . . . . . . . . . . . . . . . . . . . . . . .

d Includes net reductions for the recovery of overpayments.

802,633

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -75

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 83

Net benefit paymentsd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 802,641

Financial interchange with the Railroad Retirement “Social Security Equivalent

Benefit Account”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,499

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,482

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681

Offsetting receipts from sales of supplies, materials, etc. . . . . . . . . . . . . . . . . . . . . -4

Demonstration projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Miscellaneous reimbursements from the general funde. . . . . . . . . . . . . . . . . . . . . .

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

related to administering the OASI and DI programs.

-10

Net administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,171

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 813,311

Net increase in asset reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,619

Total asset reserves, September 30, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,755,536
167

Fiscal Year Operations and Projections

Tables VI.C4, VI.C5, and VI.C6 show estimates of the operations and status of

the OASI, DI, and the combined OASI and DI Trust Funds, respectively,

during fiscal years 2009-23.

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

Table VI.C4.—Operations of the OASI Trust Fund, Fiscal Years 2009-23

[Dollar amounts in billions]

Fiscal

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsa

a

Includes reimbursements from the General Fund of the Treasury to the OASI Trust Fund for: (1) the cost of

noncontributory wage credits for military service before 1957; (2) the cost of benefits to certain uninsured persons who attained age 72 before 1968; (3) the cost of payroll tax credits provided to employees in 1984 and

self-employed persons in 1984-89 by Public Law 98-21; (4) the cost in 2009-17 of excluding certain selfemployment earnings from SECA taxes under Public Law 110-246; and (5) payroll tax revenue forgone under

the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.

Taxation of

benefits

Net

interest Total

Benefit

payments

b

b Projected benefits are estimated as scheduled under current law.

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioc

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

reserves 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:

2009 . $697.3 $571.2 d

d Between -$50 million and $50 million.

$19.0 $107.1 $551.5 $544.5 $3.4 $3.7 $145.8 $2,295.8 390

2010 . 682.4 552.0 $0.7 21.1 108.6 579.9 572.5 3.5 3.9 102.5 2,398.4 396

2011 . 692.5 495.0 68.9 21.2 107.4 599.2 591.5 3.6 4.1 93.3 2,491.7 400

2012 . 729.0 500.7 95.9 27.2 105.2 634.7 627.2 3.4 4.1 94.3 2,585.9 393

2013 . 739.7 590.0 26.4 23.1 100.1 670.6 663.2 3.4 3.9 69.1 2,655.0 386

Intermediate:

2014 . 762.4 641.2 .3 24.6 96.4 706.7 699.7 2.8 4.1 55.8 2,710.8 376

2015 . 800.3 675.0 .2 30.0 95.1 748.0 740.5 3.2 4.2 52.3 2,763.1 362

2016 . 852.0 723.8 .1 33.0 95.1 795.0 787.4 3.2 4.3 57.0 2,820.1 348

2017 . 897.2 763.5 .1 36.5 97.2 847.4 839.9 3.4 4.1 49.8 2,869.9 333

2018 . 951.5 810.1 d 40.0 101.4 905.6 897.4 3.5 4.6 46.0 2,915.9 317

2019 . 1,005.4 855.6 d 43.7 106.0 968.8 960.4 3.7 4.7 36.6 2,952.5 301

2020 . 1,054.8 896.2 d 47.6 110.9 1,037.0 1,028.4 3.8 4.9 17.8 2,970.3 285

2021 . 1,113.5 947.9 d 51.6 114.0 1,105.6 1,096.8 3.9 4.9 7.9 2,978.2 269

2022 . 1,167.1 995.2 d 55.8 116.1 1,178.7 1,169.5 4.0 5.2 -11.6 2,966.6 253

2023 . 1,215.8 1,036.8 d 60.4 118.7 1,257.1 1,247.7 4.1 5.3 -41.2 2,925.4 236

Low-cost:

2014 . 765.0 643.5 .3 24.6 96.6 706.6 699.7 2.8 4.1 58.3 2,713.4 376

2015 . 826.3 698.6 .2 30.0 97.5 748.8 741.4 3.2 4.2 77.4 2,790.8 362

2016 . 898.7 762.7 .1 33.3 102.5 801.8 794.3 3.2 4.3 96.9 2,887.7 348

2017 . 970.6 821.9 .1 37.2 111.5 863.9 856.3 3.5 4.1 106.8 2,994.4 334

2018 . 1,050.4 885.9 d 41.2 123.2 932.2 924.0 3.7 4.6 118.2 3,112.6 321

2019 . 1,129.0 949.3 d 45.4 134.4 1,005.2 996.6 3.8 4.8 123.9 3,236.5 310

2020 . 1,206.4 1,009.6 d 49.7 147.0 1,083.2 1,074.2 4.0 5.0 123.2 3,359.6 299

2021 . 1,295.3 1,081.5 d 54.3 159.5 1,162.5 1,153.4 4.2 5.0 132.8 3,492.4 289

2022 . 1,384.7 1,152.8 d 59.1 172.8 1,247.8 1,238.1 4.4 5.3 136.9 3,629.3 280

2023 . 1,472.3 1,219.9 d 64.4 188.0 1,340.1 1,330.2 4.6 5.4 132.2 3,761.5 271

High-cost:

2014 . 759.3 638.1 .3 24.6 96.3 706.7 699.8 2.8 4.1 52.5 2,707.6 376

2015 . 769.7 647.0 .2 30.0 92.5 747.7 740.2 3.2 4.3 22.0 2,729.5 362

2016 . 805.7 683.9 .1 32.9 88.8 791.3 783.6 3.2 4.4 14.4 2,744.0 345

2017 . 831.0 707.9 .1 36.1 86.9 838.0 830.5 3.3 4.2 -7.1 2,736.9 327

2018 . 862.0 738.0 d 39.3 84.6 889.5 881.4 3.4 4.7 -27.5 2,709.4 308

2019 . 894.4 767.0 d 42.7 84.8 945.1 936.9 3.5 4.8 -50.7 2,658.7 287

2020 . 920.3 792.5 d 46.1 81.7 1,004.8 996.3 3.6 4.9 -84.5 2,574.2 265

2021 . 956.5 827.8 d 49.6 79.1 1,063.6 1,055.1 3.6 4.9 -107.1 2,467.1 242

2022 . 988.0 860.0 d 53.3 74.6 1,125.7 1,116.9 3.7 5.2 -137.7 2,329.3 219

2023 . 1,010.9 885.6 d 57.3 68.0 1,191.7 1,182.8 3.8 5.2 -180.9 2,148.5 195
Appendices

168

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

Table VI.C5.—Operations of the DI Trust Fund, Fiscal Years 2009-23

[Dollar amounts in billions]

Fiscal

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsa

a

Includes reimbursements from the General Fund of the Treasury to the DI Trust Fund for: (1) the cost of noncontributory wage credits for military service before 1957; (2) the cost of payroll tax credits provided to

employees in 1984 and self-employed persons in 1984-89 by Public Law 98-21; (3) the cost in 2009-17 of

excluding certain self-employment earnings from SECA taxes under Public Law 110-246; and (4) payroll tax

revenue forgone under the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.

Taxation of

benefits

Net

interest Total

Benefit

paymentsb

b Projected benefits are estimated as scheduled under current law.

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioc

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

reserves 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:

2009. . $109.7 $97.0

d

d Between -$50 million and $50 million.

$1.8 $10.8 118.1 $115.1 $2.6 $0.4 -$8.5 $207.8 183

2010. . 105.5 93.7 $0.1 1.7 9.9 126.3 122.9 2.9 .5 -20.8 186.9 164

2011 . . 106.2 84.0 11.7 1.9 8.6 131.5 128.0 3.0 .5 -25.3 161.7 142

2012. . 108.8 85.1 16.2 .4 7.2 138.5 135.1 2.9 .5 -29.7 132.0 117

2013. . 111.3 100.2 4.5 1.1 5.5 142.8 139.4 2.8 .6 -31.5 100.5 92

Intermediate:

2014. . 113.9 108.9 .1 1.0 4.0 145.4 142.1 2.8 .4 -31.4 69.1 69

2015. . 119.1 114.6

d 1.8 2.7 150.0 146.2 3.4 .4 -30.9 38.2 46

2016. . 126.2 122.9

d 2.0 1.2 154.4 150.9 3.1 .4 -28.3 9.9 25

2017. .

e

e The DI Trust Funds become depleted in fiscal years 2017 and 2016 under the intermediate and high-cost

assumptions, respectively. Accordingly, certain trust fund operations values from the year of trust fund reserve

depletion through 2023 are not meaningful under present law.

129.7

d 2.2e 159.9 156.0 3.5 .3 e e 6

2018. .

e 137.6d 2.4e 165.6 161.5 3.9 .3 e e e

2019. .

e 145.3d 2.6e 172.0 167.6 4.1 .3 e e e

2020. .

e 152.2d 2.8e 178.8 174.2 4.4 .2 e e e

2021. .

e 161.0d 3.1e 187.1 182.3 4.6 .2 e e e

2022. .

e 169.0d 3.3e 196.1 191.1 4.9 .2 e e e

2023. .

e 176.1d 3.6e 205.4 200.1 5.1 .1 e e e

Low-cost:

2014. . 114.3 109.3 .1 1.0 4.0 144.0 140.8 2.8 .4 -29.7 70.8 70

2015. . 123.2 118.6

d 1.8 2.8 146.9 143.1 3.4 .4 -23.7 47.1 48

2016. . 133.3 129.5

d 1.9 1.9 150.4 146.9 3.1 .4 -17.1 30.0 31

2017. . 142.8 139.6

d 2.1 1.1 155.5 151.5 3.6 .3 -12.7 17.3 19

2018. . 153.3 150.4

d 2.3 .5 160.8 156.5 4.0 .3 -7.5 9.8 11

2019. . 164.1 161.2

d 2.5 .4 166.5 161.9 4.4 .3 -2.4 7.4 6

2020. . 174.4 171.4

d 2.7 .2 172.7 167.8 4.7 .2 1.7 9.0 4

2021. . 187.1 183.7

d 3.0 .5 180.3 175.1 5.1 .2 6.8 15.8 5

2022. . 199.9 195.8

d 3.2 1.0 188.8 183.2 5.4 .1 11.2 27.0 8

2023. . 212.4 207.2

d 3.4 1.8 197.5 191.6 5.8 .1 14.8 41.8 14

High-cost:

2014. . 113.4 108.4 .1 1.0 4.0 146.8 143.6 2.8 .4 -33.3 67.1 68

2015. . 114.2 109.9

d 1.8 2.5 153.4 149.6 3.4 .4 -39.2 28.0 44

2016. .

e 116.1d 2.1e 159.3 155.7 3.1 .4 e e 18

2017. .

e 120.2d 2.3e 165.8 162.0 3.4 .4 e e e

2018. .

e 125.3d 2.5e 172.2 168.2 3.7 .3 e e e

2019. .

e 130.2d 2.7e 179.1 175.0 3.9 .3 e e e

2020. .

e 134.6d 3.0e 186.4 182.1 4.1 .2 e e e

2021. .

e 140.6d 3.2e 194.9 190.4 4.3 .2 e e e

2022. .

e 146.0d 3.5e 203.9 199.3 4.5 .2 e e e

2023. .

e 150.4d 3.7e 213.0 208.2 4.6 .2 e e e
169

Fiscal Year Operations and Projections

Table VI.C6.—Operations of the Combined OASI and DI Trust Funds,

Fiscal Years 2009-23

[Dollar amounts in billions]

Fiscal

year

Income Cost Asset Reserves

Total

Net payroll tax

contributions

GF

reimbursementsa

a

Includes reimbursements from the General Fund of the Treasury to the OASI and DI Trust Funds for: (1) the

cost of noncontributory wage credits for military service before 1957; (2) the cost of benefits to certain uninsured persons who attained age 72 before 1968; (3) the cost of payroll tax credits provided to employees in 1984

and self-employed persons in 1984-89 by Public Law 98-21; (4) the cost in 2009-17 of excluding certain selfemployment earnings from SECA taxes under Public Law 110-246; and (5) payroll tax revenue forgone under

the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.

Taxation of

benefits

Net

interest Total

Benefit

paymentsb

b Projected benefits are estimated as scheduled under current law.

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioc

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

reserves 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:

2009 . . $807.0 $668.2

d

d Between -$50 million and $50 million.

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

$20.8 $118.0 $669.7 $659.6 $6.0 $4.1 $137.3 $2,503.6 353

2010 . . 788.0 645.8 $0.9 22.8 118.5 706.3 695.4 6.4 4.4 81.7 2,585.3 354

2011 . . 798.7 579.1 80.6 23.1 116.0 730.7 719.5 6.7 4.6 68.0 2,653.3 354

2012 . . 837.8 585.7 112.2 27.5 112.4 773.2 762.3 6.3 4.7 64.6 2,717.9 343

2013 . . 850.9 690.1 30.9 24.2 105.7 813.3 802.6 6.2 4.5 37.6 2,755.5 334

Intermediate:

2014 . . 876.4 750.1 .3 25.6 100.4 852.0 841.9 5.6 4.6 24.3 2,779.9 323

2015 . . 919.4 789.6 .2 31.8 97.8 898.0 886.7 6.6 4.7 21.4 2,801.3 310

2016 . . 978.2 846.7 .1 35.0 96.3 949.4 938.3 6.4 4.7 28.8 2,830.0 295

2017 . . 1,029.0 893.1 .1 38.7 97.1 1,007.3 995.9 6.9 4.5 21.7 2,851.7 281

2018 . . 1,090.2 947.6

d 42.4 100.1 1,071.2 1,058.9 7.4 4.9 19.0 2,870.7 266

2019 . . 1,150.5 1,000.9

d 46.4 103.2 1,140.7 1,128.0 7.8 5.0 9.8 2,880.5 252

2020 . . 1,205.6 1,048.4

d 50.5 106.6 1,215.8 1,202.6 8.2 5.1 -10.3 2,870.2 237

2021 . . 1,271.7 1,108.8

d 54.7 108.1 1,292.7 1,279.1 8.5 5.1 -21.0 2,849.2 222

2022 . . 1,331.9 1,164.1

d 59.2 108.6 1,374.8 1,360.6 8.9 5.4 -42.9 2,806.3 207

2023 . . 1,386.1 1,212.8

d 64.0 109.3 1,462.5 1,447.8 9.3 5.4 -76.4 2,729.9 192

Low-cost:

2014 . . 879.3 752.8 .3 25.6 100.6 850.7 840.5 5.6 4.6 28.6 2,784.1 324

2015 . . 949.5 817.2 .2 31.8 100.3 895.8 884.5 6.6 4.6 53.7 2,837.9 311

2016 . . 1,032.0 892.2 .1 35.2 104.4 952.2 941.1 6.4 4.7 79.8 2,917.7 298

2017 . . 1,113.4 961.5 .1 39.3 112.5 1,019.4 1,007.9 7.1 4.4 94.0 3,011.7 286

2018 . . 1,203.7 1,036.3

d 43.5 123.8 1,093.0 1,080.5 7.7 4.9 110.7 3,122.3 276

2019 . . 1,293.2 1,110.4

d 47.9 134.8 1,171.7 1,158.5 8.2 5.0 121.5 3,243.8 266

2020 . . 1,380.8 1,181.1

d 52.5 147.2 1,255.9 1,242.0 8.7 5.2 124.8 3,368.6 258

2021 . . 1,482.5 1,265.2

d 57.2 160.1 1,342.9 1,328.4 9.2 5.2 139.6 3,508.2 251

2022 . . 1,584.6 1,348.5

d 62.3 173.8 1,436.6 1,421.3 9.8 5.5 148.1 3,656.3 244

2023 . . 1,684.7 1,427.1

d 67.8 189.8 1,537.7 1,521.8 10.3 5.6 147.0 3,803.3 238

High-cost:

2014 . . 872.7 746.5 .3 25.6 100.3 853.5 843.3 5.6 4.6 19.2 2,774.7 323

2015 . . 883.9 756.9 .2 31.8 95.0 901.1 889.8 6.6 4.7 -17.2 2,757.5 308

2016 . . 924.5 800.1 .1 34.9 89.4 950.5 939.4 6.4 4.8 -26.1 2,731.5 290

2017 . . 952.7 828.2 .1 38.3 86.1 1,003.8 992.5 6.8 4.6 -51.1 2,680.3 272

2018 . . 987.2 863.4

d 41.8 82.0 1,061.8 1,049.7 7.1 5.0 -74.5 2,605.8 252

2019 . . 1,022.8 897.2

d 45.4 80.2 1,124.3 1,111.8 7.4 5.1 -101.5 2,504.3 232

2020 . . 1,050.9 927.1

d 49.1 74.7 1,191.2 1,178.4 7.6 5.2 -140.3 2,364.0 210

2021 . . 1,090.7 968.4

d 52.9 69.4 1,258.5 1,245.5 7.9 5.1 -167.8 2,196.2 188

2022 . . 1,125.0 1,006.1

d 56.8 62.1 1,329.7 1,316.2 8.2 5.3 -204.7 1,991.5 165

2023 . . 1,149.4 1,036.0

d 61.0 52.4 1,404.8 1,391.0 8.4 5.4 -255.4 1,736.1 142
Appendices

170

D. LONG-RANGE SENSITIVITY ANALYSIS

This appendix presents estimates that illustrate the sensitivity of the longrange actuarial status of the OASDI program to changes in selected individual assumptions. The estimates based on the three alternative sets of assumptions, which were presented earlier in this report, illustrate the effects of

varying all of the principal assumptions simultaneously, in order to portray a

significantly more optimistic or pessimistic future. For each sensitivity analysis presented in this appendix, the intermediate alternative II projection is

the reference point, and one assumption is varied within that alternative. The

variation used for each individual assumption is the same as the level 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. Following each table is a discussion of the estimated changes in cost rates. The

change in each of the actuarial balances is approximately equal to the change

in the corresponding cost rate, but in the opposite direction. This appendix

does not discuss income rates following each table because income rates

vary only slightly with changes in assumptions. This stability occurs because

the combined rate, which includes payroll taxes and reimbursements from

the General Fund of the Treasury, is constant for the entire 75-year valuation

period.

1. Total Fertility Rate

Table VI.D1 shows OASDI income rates, cost rates, and actuarial balances

on the basis of alternative II with various assumptions about the ultimate

total fertility rate. The Trustees assume that total fertility will ultimately be

1.7, 2.0, and 2.3 children per woman under alternatives III, II, and I, respectively. The total fertility rate reaches ultimate values in 2038.
171

Long-Range Sensitivity Analysis

For the 25-year period, the cost rate for the three fertility assumptions varies

by only about 0.06 percent of taxable payroll. In contrast, the 75-year cost

rate varies over a wide range, decreasing from 17.20 to 16.36 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

-3.27 to -2.51 percent.

During the 25-year period, the very slight increases in the working population resulting from higher fertility (than that experienced in an alternative

scenario) are more than offset by decreases in the female labor force and

increases in the number of child beneficiaries. Therefore, program cost

increases slightly with higher fertility. For the 75-year long-range period,

however, changes in fertility have a relatively greater effect 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 0.13 percent

of taxable payroll.

Table VI.D1.—Sensitivity of OASDI Measures to Varying Fertility Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate total fertility ratea b

a The total fertility rate for any year is the average number of children that would be born to a woman in her

lifetime if she were to experience, at each age of her life, the birth rate observed in, or assumed for, the

selected year, and if she were to survive the entire childbearing period. The ultimate total fertility rate is

reached in 2038.

b Ultimate total fertility rates used for this analysis are: 1.7 from the alternative III assumptions, 2.0 from the

alternative II assumptions, and 2.3 from the alternative I assumptions. All other assumptions used for this

analysis are from alternative II.

1.7 2.0 2.3

Summarized income rate:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.74 14.75 14.75

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.09 14.08 14.07

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.93 13.89 13.85

Summarized cost rate:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.22 16.25 16.28

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.61 16.50 16.40

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.20 16.77 16.36

Actuarial balance:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.48 -1.50 -1.53

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.52 -2.42 -2.33

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3.27 -2.88 -2.51

Annual balance for 2088 . . . . . . . . . . . . . . . . . . . . . . . . . . -7.18 -4.90 -3.06

Year of combined trust fund reserve depletion . . . . . . . . 2033 2033 2032
Appendices

172

2. Death Rates

Table VI.D2 shows 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 2013-88. These assumptions are described

in section V.A.2. The Trustees assume that the age-sex-adjusted death rates

will decline at average annual rates of 0.41 percent, 0.79 percent, and

1.20 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 Trustees assume that decreases in

death rates will occur gradually. The 25-year cost rate increases from

16.10 percent (for an average annual death-rate reduction of 0.41 percent) to

16.39 percent (for an average annual death-rate reduction of 1.20 percent).

The 75-year cost rate increases from 16.29 to 17.26 percent. The actuarial

balance decreases from -1.35 to -1.65 percent for the 25-year period, and

from -2.42 to -3.36 percent for the 75-year period.

Lower death rates raise both the income (through increased taxable payroll)

and the cost of the OASDI program. 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

Table VI.D2.—Sensitivity of OASDI Measures to Varying Death-Rate Assumptions

[As a percentage of taxable payroll]

Valuation period

Average annual death-rate reduction

a b

a The average annual death-rate reduction is the average annual geometric rate of decline in the age-sexadjusted death rate between 2013 and 2088. The overall age-sex-adjusted death rate decreases from 2013 to

2088 by 27 percent, 45 percent, and 60 percent for alternatives I, II, and III, respectively.

b The average annual death-rate reductions used for this analysis are: 0.41 percent from the alternative I

assumptions, 0.79 percent from the alternative II assumptions, and 1.20 percent from the alternative III

assumptions. All other assumptions used for this analysis are from alternative II.

0.41 percent 0.79 percent 1.20 percent

Summarized income rate:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.75 14.75 14.74

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.07 14.08 14.09

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.88 13.89 13.90

Summarized cost rate:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.10 16.25 16.39

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.16 16.50 16.86

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.29 16.77 17.26

Actuarial balance:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.35 -1.50 -1.65

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.09 -2.42 -2.77

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.42 -2.88 -3.36

Annual balance for 2088 . . . . . . . . . . . . . . . . . . . . . . . . . . -3.91 -4.90 -5.89

Year of combined trust fund reserve depletion . . . . . . . . 2033 2033 2032
173

Long-Range Sensitivity Analysis

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). Reductions for people at age 50 to retirement eligibility age result

in significant increases to the taxable payroll. However, 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 in death

rates do not result in significant increases in the numbers of covered workers

or beneficiaries. Consequently, if death rates decline by about the same relative amount for all ages, the cost increases faster than the rate of growth in

payroll, which results in higher cost rates and 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 0.12

percent of taxable payroll.

3. Net Immigration

Table VI.D3 shows OASDI income rates, cost rates, and actuarial balances

under alternative II with various assumptions about the magnitude of net

immigration. The Trustees assume that annual net immigration will average

830,000 persons, 1,125,000 persons, and 1,430,000 persons over the longrange period under alternatives III, II, and I, respectively.

Table VI.D3.—Sensitivity of OASDI Measures to Varying Net-Immigration Assumptions

[As a percentage of taxable payroll]

Valuation period

Average annual net immigrationa b

a Net immigration per year is the annual net immigration to the Social Security area, including both legal and

other immigration, averaged over the 75-year projection period.

b The average annual net immigration assumptions used for this analysis are: 830,000 from the alternative III

assumptions, 1,125,000 from the alternative II assumptions, and 1,430,000 from the alternative I assumptions. All other assumptions used for this analysis are from alternative II.

830,000 1,125,000 1,430,000

Summarized income rate:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.78 14.75 14.72

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.11 14.08 14.05

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.93 13.89 13.86

Summarized cost rate:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.44 16.25 16.09

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.75 16.50 16.27

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.05 16.77 16.52

Actuarial balance:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.66 -1.50 -1.37

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.64 -2.42 -2.23

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3.12 -2.88 -2.67

Annual balance for 2088 . . . . . . . . . . . . . . . . . . . . . . . . . . -5.34 -4.90 -4.53

Year of combined trust fund reserve depletion . . . . . . . . 2032 2033 2033
Appendices

174

For all three periods, when net immigration increases, the cost rate decreases.

For the 25-year period, the cost rate decreases from 16.44 percent of taxable

payroll (for average annual net immigration of 830,000 persons) to

16.09 percent (for average annual net immigration of 1,430,000 persons).

For the 50-year period, it decreases from 16.75 percent to 16.27 percent, and

for the 75-year period, it decreases from 17.05 percent to 16.52 percent. The

actuarial balance increases from -1.66 to -1.37 percent for the 25-year

period, from -2.64 to -2.23 percent for the 50-year period, and from -3.12 to

-2.67 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 0.08 percent of taxable payroll.

4. Real-Wage Differential

Table VI.D4 shows OASDI income rates, cost rates, and actuarial balances

on the basis of alternative II with various assumptions about the real-wage

differential. The Trustees assume the ultimate real-wage differential will be

0.51 percentage point, 1.13 percentage points, and 1.76 percentage points

under alternatives III, II, and I, respectively. In each case, the ultimate annual

increase in the CPI is 2.70 percent (consistent with alternative II). Therefore,

the ultimate percentage increases in average annual wages in covered

employment are 3.21, 3.83, and 4.46 percent.

For the 25-year period, the cost rate decreases from 17.01 percent (for a realwage differential of 0.51 percentage point) to 15.50 percent (for a differential

of 1.76 percentage points). For the 50-year period, it decreases from 17.61 to

15.43 percent, and for the 75-year period it decreases from 17.98 to

15.59 percent. The actuarial balance increases from -2.13 to -0.89 percent for

the 25-year period, from -3.36 to -1.52 percent for the 50-year period, and

from -3.90 to -1.88 percent for the 75-year period.
175

Long-Range Sensitivity Analysis

The cost rate decreases with increasing real-wage differentials. Higher wages

increase taxable payroll immediately, but they increase benefit levels only

gradually as new beneficiaries become entitled. In addition, cost-of-living

adjustments (COLAs) to benefits depend not on changes in wages, but on

changes in prices. Each 0.5-percentage-point increase in the real-wage differential increases the long-range actuarial balance by about 0.81 percent of

taxable payroll.

5. Consumer Price Index

Table VI.D5 shows OASDI income rates, cost rates, and actuarial balances

on the basis of alternative II with various assumptions about the rate of

increase for the Consumer Price Index (CPI). The Trustees assume the

annual increase in the CPI will be 3.40 percent, 2.70 percent, and

2.00 percent under alternatives I, II, and III, respectively.

1

In each case, the

ultimate real-wage differential is 1.13 percentage points (consistent with

alternative II), yielding ultimate percentage increases in average annual

wages in covered employment of 4.53, 3.83, and 3.13 percent.

Table VI.D4.—Sensitivity of OASDI Measures to Varying Real-Wage Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate percentage increase in wages-CPIa b

a The first value in each pair is the ultimate annual percentage increase in average wages in covered employment. The second value is the ultimate annual percentage increase in the Consumer Price Index. The difference between the two values is the ultimate real-wage differential.

b The ultimate real-wage differentials of 0.51, 1.13, and 1.76 percentage points are the same as in alternatives III, II, and I, respectively. All other assumptions used for this analysis are from alternative II.

3.21-2.70 3.83-2.70 4.46-2.70

Summarized income rate:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.88 14.75 14.61

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.25 14.08 13.91

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.08 13.89 13.71

Summarized cost rate:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.01 16.25 15.50

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.61 16.50 15.43

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.98 16.77 15.59

Actuarial balance:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.13 -1.50 -.89

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3.36 -2.42 -1.52

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3.90 -2.88 -1.88

Annual balance for 2088 . . . . . . . . . . . . . . . . . . . . . . . . . . -6.86 -4.90 -3.19

Year of combined trust fund reserve depletion . . . . . . . . 2031 2033 2036

1

In prior reports, alternative I included a lower ultimate annual change in the CPI and alternative III

included a higher ultimate annual change in the CPI than was included for alternative II.
Appendices

176

For all three periods, the cost rate increases when the assumed rates of

increase in the CPI are smaller. For the 25-year period, the cost rate increases

from 16.13 (for CPI increases of 3.40 percent) to 16.37 percent (for CPI

increases of 2.00 percent). For the 50-year period, it increases from 16.35 to

16.67 percent, and for the 75-year period, it increases from 16.60 to

16.95 percent. The actuarial balance decreases from -1.41 to -1.60 percent

for the 25-year period, from -2.29 to -2.57 percent for the 50-year period,

and from -2.73 to -3.04 percent for the 75-year period.

The time lag between the effects of the CPI changes on taxable payroll and

on scheduled benefits explains these patterns. When the rate of increase in

the CPI is greater and the real-wage differential is constant, then: (1) the

effect on taxable payroll due to a greater rate of increase in average wages

occurs immediately; and (2) the effect on benefits due to a larger COLA

occurs with a lag of about 1 year. As a result of these effects, the higher taxable payrolls have a stronger effect than the higher benefits, which results in

lower cost rates. Each 1.0-percentage-point decrease in the rate of the change

in the CPI decreases the long-range actuarial balance by about 0.22 percent

of taxable payroll.

Table VI.D5.—Sensitivity of OASDI Measures to Varying CPI-Increase Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate percentage increase in wages-CPIa b

a The first value in each pair is the ultimate annual percentage increase in average wages in covered employment. The second value is the ultimate annual percentage increase in the Consumer Price Index. The difference between the two values is the ultimate real-wage differential.

b The ultimate CPI increases of 3.40, 2.70, and 2.00 percent are the same as in alternatives I, II, and III,

respectively. The ultimate real-wage differential of 1.13 percentage points is the same as in alternative II. All

other assumptions used for this analysis are also from alternative II.

4.53-3.40 3.83-2.70 3.13-2.00

Summarized income rate:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.72 14.75 14.77

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.06 14.08 14.10

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.87 13.89 13.91

Summarized cost rate:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.13 16.25 16.37

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.35 16.50 16.67

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.60 16.77 16.95

Actuarial balance:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.41 -1.50 -1.60

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.29 -2.42 -2.57

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.73 -2.88 -3.04

Annual balance for 2088 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.70 -4.90 -5.12

Year of combined trust fund reserve depletion . . . . . . . . 2033 2033 2032
177

Long-Range Sensitivity Analysis

6. Real Interest Rate

Table VI.D6 shows OASDI income rates, cost rates, and actuarial balances

under alternative II with various assumptions about the annual real interest

rate (compounded semiannually) for special public-debt obligations issuable

to the trust funds. The Trustees assume that the ultimate annual real interest

rate will be 2.4 percent, 2.9 percent, and 3.4 percent under alternatives III, II,

and I, respectively. In each case, the ultimate annual increase in the CPI is

2.70 percent, which is consistent with alternative II. Therefore, the ultimate

annual yields are 5.2, 5.7, and 6.2 percent, respectively.

For the 25-year period, the cost rate decreases with increasing real interest

rates from 16.32 percent (for an ultimate real interest rate of 2.4 percent) to

16.18 percent (for an ultimate real interest rate of 3.4 percent). For the 50-

year period, it decreases from 16.60 to 16.41 percent and, for the 75-year

period, it decreases from 16.91 to 16.64 percent. The actuarial balance

increases from -1.64 to -1.37 percent for the 25-year period, from -2.60 to

-2.25 percent for the 50-year period, and from -3.10 to -2.66 percent for the

75-year period. Each 0.5-percentage-point increase in the real interest rate

increases the long-range actuarial balance by about 0.22 percent of taxable

payroll.

Table VI.D6.—Sensitivity of OASDI Measures to Varying Real-Interest Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate annual real interest ratea b

a The ultimate real interest rate is the effective annual yield on asset reserves held by the trust funds divided

by the annual rate of growth in the CPI.

b The ultimate annual real interest rates used for this analysis are: 2.4 percent from the alternative III

assumptions, 2.9 percent from the alternative II assumptions, and 3.4 percent from the alternative I assumptions. All other assumptions used for this analysis are from alternative II.

2.4 percent 2.9 percent 3.4 percent

Summarized income rate:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.68 14.75 14.81

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.00 14.08 14.16

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.80 13.89 13.98

Summarized cost rate:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.32 16.25 16.18

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.60 16.50 16.41

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.91 16.77 16.64

Actuarial balance:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.64 -1.50 -1.37

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.60 -2.42 -2.25

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3.10 -2.88 -2.66

Annual balance for 2088 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.90 -4.90 -4.90

Year of combined trust fund reserve depletion . . . . . . . . 2032 2033 2033
Appendices

178

7. Disability Incidence Rates

Table VI.D7 shows 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, the Trustees assume that

incidence rates by age and sex will vary during the early years of the projection period before attaining ultimate levels. In comparison to the historical

period 1970 through 2013, the ultimate age-sex-adjusted incidence rate is

about 4 percent higher for alternative II, 17 percent lower for alternative I,

and 25 percent higher for alternative III.

For the 25-year period, the cost rate increases with increasing disability incidence rates, from 16.04 percent (for the relatively low rates assumed for

alternative I) to 16.46 percent (for the relatively high rates assumed for alternative III). For the 50-year period, it increases from 16.24 to 16.76 percent,

and for the 75-year period, it increases from 16.49 to 17.04 percent. The

actuarial balance decreases from -1.30 to -1.71 percent for the 25-year

period, from -2.16 to -2.68 percent for the 50-year period, and from -2.61 to

-3.15 percent for the 75-year period.

8. Disability Termination Rates

Table VI.D8 shows OASDI income rates, cost rates, and actuarial balances

on the basis of alternative II with various assumptions about future disability

Table VI.D7.—Sensitivity of OASDI Measures 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: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.74 14.75 14.75

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.07 14.08 14.08

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.88 13.89 13.89

Summarized cost rate:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.04 16.25 16.46

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.24 16.50 16.76

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.49 16.77 17.04

Actuarial balance:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.30 -1.50 -1.71

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.16 -2.42 -2.68

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.61 -2.88 -3.15

Annual balance for 2088 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.57 -4.90 -5.22

Year of combined trust fund reserve depletion . . . . . . . . 2034 2033 2032
179

Long-Range Sensitivity Analysis

termination rates, including deaths and recoveries up to the age at which disabled-worker beneficiaries convert to retired-worker status.

For all three alternatives, the Trustees assume that death rates for disabledworker beneficiaries will decline throughout the long-range period. For alternative II, the age-sex-adjusted1 disability death rate declines to a level in

2088 that is about 56 percent lower than the level in 2013. For alternative I,

the age-sex-adjusted disability death rate declines to a level in 2088 that is

about 29 percent lower than the level in 2013. For alternative III, the agesex-adjusted disability death rate declines to a level in 2088 that is about

74 percent lower than the level in 2013.

For all three alternatives, ultimate recovery rates by age, sex, and duration

are attained in the twentieth year of the projection period. For alternative II,

the age-sex-adjusted1 recovery rate in 2033 is about 11 recoveries per thousand disabled-worker beneficiaries. For alternative I, the age-sex-adjusted

recovery rate in 2033 is about 13 recoveries per thousand disabled-worker

beneficiaries. For alternative III, the age-sex-adjusted recovery rate in 2033

is about 8 recoveries per thousand disabled-worker beneficiaries.

For the 25-year period, the cost rate increases with decreasing disability termination rates, from 16.21 percent (for the relatively high termination rates

assumed for alternative I) to 16.28 percent (for the relatively low termination

rates assumed for alternative III). For the 50-year period, it increases from

16.46 to 16.54 percent, and for the 75-year period, it increases from 16.73 to

1 Age adjusted to the total disabled workers in current-payment status as of the year 2000.

Table VI.D8.—Sensitivity of OASDI Measures 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: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.75 14.75 14.75

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.08 14.08 14.08

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.89 13.89 13.89

Summarized cost rate:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.21 16.25 16.28

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.46 16.50 16.54

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.73 16.77 16.80

Actuarial balance:

25-year: 2014-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.47 -1.50 -1.54

50-year: 2014-63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.38 -2.42 -2.46

75-year: 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.84 -2.88 -2.91

Annual balance for 2088 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.86 -4.90 -4.91

Year of combined trust fund reserve depletion . . . . . . . . 2033 2033 2032
Appendices

180

16.80 percent. The actuarial balance decreases from -1.47 to -1.54 percent

for the 25-year period, from -2.38 to -2.46 percent for the 50-year period,

and from -2.84 to -2.91 percent for the 75-year period.
181

StochasticProjections

E. STOCHASTIC PROJECTIONS AND UNCERTAINTY

Significant uncertainty surrounds the estimates under the intermediate

assumptions, especially for a period as long as 75 years. This appendix presents a way to illustrate the uncertainty of these estimates. The stochastic projections supplement the traditional methods of examining such uncertainty.

1. Background

The Trustees have traditionally shown estimates using the low-cost and highcost sets of specified assumptions to illustrate the presence of uncertainty.

These alternative estimates provide a range of possible outcomes for the projections. However, they do not provide an indication of the probability that

actual future experience will be inside or outside this range. This appendix

presents the results of a model, based on stochastic modeling techniques, that

estimates a probability distribution of future outcomes of the financial status

of the combined OASI and DI Trust Funds. This model, which was first

included in the 2003 report, is subject to further development.

2. Stochastic Methodology

Other sections of this report provide estimates of the financial status of the

combined OASI and DI Trust Funds using a scenario-based model. For the

scenario-based model, the Trustees use three alternative scenarios (low-cost,

intermediate, and high-cost) that make assumptions about levels of fertility,

changes in mortality, legal and other immigration levels, legal and other emigration levels, changes in the Consumer Price Index, changes in average real

wages, unemployment rates, trust fund real yield rates, and disability incidence and recovery rates. In general, the Trustees assume that each of these

variables will reach an ultimate value at a specific point during the longrange period, and will maintain that value throughout the remainder of the

period. The three alternative scenarios assume separate, specified values for

each of these variables. Chapter V contains more details about each of these

assumptions.

This appendix presents estimates of the probability that key measures of

OASDI solvency will fall in certain ranges, based on 5,000 independent stochastic simulations. Each simulation allows the above variables to vary

throughout the long-range period. The fluctuation of each variable over time

is simulated using historical data and standard time-series techniques. Generally, each variable is modeled using an equation that: (a) captures a relationship between current and prior years’ values of the variable; and (b)

introduces year-by-year random variation as observed in the historical
Appendices

182

period. For some variables, the equations also reflect relationships with other

variables. The equations contain parameters that are estimated using historical data for periods of at least 5 years and at most 110 years, depending on

the nature and quality of the available data. Each time-series equation is

designed so that, in the absence of random variation over time, the value of

the variable for each year equals its value under the intermediate assumptions.1

For each simulation, the stochastic method develops year-by-year random

variation for each variable using Monte Carlo techniques. Each simulation

produces an estimate of the financial status of the combined OASI and DI

Trust Funds. This appendix shows the distribution of results from 5,000 simulations of the model.

Readers should interpret the results from this model with caution and with an

understanding of the model’s limitations. Results are very sensitive to equation specifications, degrees of interdependence among variables, and the historical periods used for the estimates. For some variables, recent historical

variation may not provide a realistic representation of the potential variation

for the future. Also, results would differ if additional variables (such as labor

force participation rates, retirement rates, marriage rates, and divorce rates)

were also allowed to vary randomly. Furthermore, more variability would

result if statistical approaches were used to model uncertainty in the central

tendencies of the variables. Time-series modeling reflects only what

occurred in the historical period. Future uncertainty exists not only for the

underlying central tendency but also for the frequency and size of occasional

longer-term shifts in the central tendency. The future will bring with it the

likelihood of substantial shifts, as predicted by many experts and as seen in

prior centuries, that are not fully reflected in the current model. As a result,

readers should understand that the true range of uncertainty is larger than

indicated in this appendix.

3. Stochastic Results

Figure VI.E1 displays the probability distribution of the year-by-year

OASDI cost rates (that is, cost as a percentage of taxable payroll). The range

of the cost rates widens as the projections move further into the future, which

reflects increasing uncertainty. Because there is relatively little variation in

income rates across the 5,000 stochastic simulations, the figure includes the

1 More detail on this model, and stochastic modeling in general, is available at

www.socialsecurity.gov/OACT/stochastic/index.html.
183

StochasticProjections

income rate only under the intermediate assumptions. The two extreme lines

in this figure illustrate the range within which future annual cost rates are

projected by the current model to occur 95 percent of the time (i.e., a 95-percent confidence interval). In other words, the current model indicates that

there is a 2.5 percent probability that the cost rate in a given year will exceed

the upper bound and a 2.5 percent probability that it will fall below the lower

bound. Other lines in the figure delineate additional confidence intervals

(80-percent, 60-percent, 40-percent, and 20-percent) around future annual

cost rates. The median (50th percentile) cost rate for each year is the rate for

which half of the simulated outcomes are higher and half are lower for that

year. These lines do not represent the results of individual stochastic simulations. Instead, for each given year, they represent the percentile distribution

of cost rates based on all stochastic simulations for that year.

Figure VI.E2 presents the simulated probability distribution of the annual

trust fund ratios for the combined OASI and DI Trust Funds. The lines in this

figure display the median set (50th percentile) of estimated annual trust fund

ratios and delineate the 95-percent, 80-percent, 60-percent, 40-percent, and

20-percent confidence intervals expected for future annual trust fund ratios.

Figure VI.E1.—Long-Range OASDI Cost Rates From Stochastic Modeling

5%

10%

15%

20%

25%

30%

2014 2029 2044 2059 2074 2089

Projection year

50%

97.5%

2.5%

90%

10%

Income Rate
Appendices

184

These lines are not the results of individual stochastic simulations. For each

given year, they represent the percentile distribution of trust fund ratios

based on all stochastic simulations for that year.

Figure VI.E2 shows that the 95-percent confidence interval for the trust fund

depletion year ranges from 2028 to 2041, and there is a 50-percent probability of trust fund depletion by the end of 2033 (the median depletion year).

The median depletion year is the same as the Trustees project under the intermediate assumptions. The figure also shows confidence intervals for the trust

fund ratio in each year. For example, the 95-percent confidence interval for

the trust fund ratio in 2025 ranges from 242 to 82 percent of annual cost.

4. Comparison of Results: Stochastic to Low-Cost, Intermediate, and

High-Cost Alternatives

This section compares results from two different approaches for determining

ranges of uncertainty for trust fund actuarial status. One approach uses

results from the low-cost, intermediate, and high-cost alternative scenarios.

The other approach uses stochastic distributions of results. Each of these

approaches provides insights into uncertainty. Comparison of the results

Figure VI.E2.—Long-Range OASDI Trust Fund Ratios From Stochastic Modeling

0%

100%

200%

300%

400%

2014 2029 2044 2059 2074 2089

Projection year

50%

97.5%

2.5%

90%

10%
185

StochasticProjections

requires an understanding of the differences in the approaches. Two fundamental differences exist between the approach using alternative scenarios

and the stochastic approach.

The first fundamental difference relates to the presentation of results. Figure

VI.E3 shows projected OASDI annual cost rates for the low-cost, intermediate, and high-cost alternatives along with the annual cost rates at the 97.5th

percentile, 50th percentile, and 2.5th percentile for the stochastic simulations. While all values on each line for the alternatives are results from a single specified scenario, the values on each stochastic line may be results from

different simulations for different years. The one stochastic simulation (from

the 5,000 simulations) that yields results closest to a particular percentile in

one year may yield results that are distant from that percentile in another

year. Thus, the stochastic presentation illustrates distributions of the range of

potential results one year at a time, with no direct relationship of the results

among years.

Even with this fundamental difference in the presentation of results, figure

VI.E3 shows similar results between the range of OASDI cost rates resulting

from the alternatives and from the 95-percent confidence interval of stochastic results for years before 2030. After 2030, results for the alternatives show

a wider range. The cost rates for the high-cost alternative are somewhat

higher than the stochastic year-by-year results at the 97.5th percentile. The

intermediate alternative results generally show somewhat lower cost rates

than the stochastic year-by-year results at the 50th percentile. The cost rates

are lower for the low-cost alternative than for the stochastic year-by-year

results at the 2.5th percentile for years after 2030.

Both the alternatives and the stochastic results suggest that the range of

potential cost rates above the central levels (those for the intermediate alternative and for the median, respectively) is larger than the potential range

below these central results. The difference between the central results and the

higher cost levels (the high-cost alternative and the upper end of the 95-percent confidence range, respectively) is about 1.5 times as large as the difference between the central and lower cost levels for both models by the end of

the projection period.
Appendices

186

The second fundamental difference between the alternatives and the stochastic simulations is the method of assigning values for assumptions in the simulations. For the alternatives, the Trustees assign specific values for key

demographic and economic variables. In comparison to the intermediate

alternative, every value assigned to the high-cost alternative tends to raise

estimated program cost and every value assigned to the low-cost alternative

tends to reduce it throughout the projection period. In contrast, the stochastic

method randomly assigns values for the key demographic and economic

variables for each year in each of the 5,000 independent stochastic simulations. For each of the stochastic simulations, randomly assigned values for

the various assumptions may have varying effects on projected cost, with

some tending toward higher cost and some tending toward lower cost.

Figure VI.E4 compares the ranges of trust fund (unfunded obligation) ratios

for the alternative scenarios and the 95-percent confidence interval of the

stochastic simulations. This figure extends figure VI.E2 to show unfunded

obligation ratios, expressed as negative values below the zero percent line.

Unfunded obligation ratios are the ratio of the unfunded obligation through

the beginning of the year to the present value of annual cost for that year.

Figure VI.E3.—OASDI Cost Rates: Comparison of Stochastic to Low-Cost, Intermediate,

and High-Cost Alternatives

[as a percentage of taxable payroll]

10%

15%

20%

25%

30%

2014 2029 2044 2059 2074 2089

Projection year

Low-Cost

Intermediate

High-Cost

Stochastic 2.5%

Stochastic 50%

Stochastic 97.5%
187

StochasticProjections

Figure VI.E4 presents a more complete picture of the difference between the

results from the three alternative scenarios and the stochastic simulations.

The range of stochastic results for trust fund (unfunded obligation) ratios in

Figure VI.E4 appears to be consistent with the range seen for the stochastic

cost rates. That is, the difference between the central result (the median) and

the high-cost result (the lower level in the figure) is about 1.5 times as large

as the distance between the central and low-cost result by the end of the projection period. However, the range for the alternatives is substantially different. For the alternatives, the distance between the central and high-cost

projected trust fund (unfunded obligation) ratios is smaller than the difference between central and low-cost ratios, the opposite of the results for cost

rates.

The difference in the ranges of trust fund (unfunded obligation) ratios

between the alternatives and the stochastic results may be a little surprising

given the similarity of the ranges for cost rates. Several factors contribute to

Figure VI.E4.—OASDI Trust Fund (Unfunded Obligation) Ratios: Comparison of

Stochastic to Low-Cost, Intermediate, and High-Cost Alternativesa

[Asset reserves (unfunded obligation) as a percentage of annual cost]

a An unfunded obligation, shown as a negative value in this figure, is equivalent to the amount the trust

funds would need to have borrowed to date in order to pay all scheduled benefits (on a timely basis) after

trust fund asset reserves are depleted. Note that current law does not permit the trust funds to borrow.

-5000%

-4500%

-4000%

-3500%

-3000%

-2500%

-2000%

-1500%

-1000%

-500%

0%

500%

2014 2029 2044 2059 2074 2089

Projection year

Low-Cost

Intermediate

High-Cost

Stochastic 2.5%

Stochastic 50%

Stochastic 97.5%

Trustfund asset reserves (positive)

Unfunded obligation (negative)
Appendices

188

this finding, including the fact that cost rates are annual measures, while trust

fund (unfunded obligation) ratios are cumulative measures of all financial

activity up to that date. However, a clear difference between the ratios for the

alternatives and the ratios for the stochastic model is the assignment of interest rates.

For the stochastic model, real interest rates are assigned essentially randomly, and as a result, the range for trust fund (unfunded obligation) ratios is

consistent with the range for cost rates. But for the alternatives, real interest

rates are specified to be higher for the low-cost alternative and lower for the

high-cost alternative. This assignment has the effect of shifting the trust fund

(unfunded obligation) ratios up (higher or less negative) for both the highcost and low-cost alternatives. High interest rates boost the level of the positive trust fund ratio in alternative 1, and low interest rates reduce the magnitude of the negative ratio (unfunded obligation) for alternative 3. This

assignment of real interest rates contributes substantially to the upward shift

in the range of the ratios for the alternatives.

It is important to understand that the stochastic model’s 95-percent confidence intervals for any summary measure of trust fund finances would tend

to be narrower than the range produced for the low-cost and high-cost alternatives, even if the stochastic model’s 95-percent confidence interval for

annual cost rates were identical to the range defined by the low-cost and

high-cost projections. This is true because summary measures of trust fund

finances depend on cost rates for many years, and the probability that annual

cost rates, on average for individual stochastic simulations, will be at least as

low (high) as the 2.5 (97.5) percentile line is significantly lower than 2.5 percent. As a result, the relationship between the ranges presented for annual

cost rates and summary measures of trust fund finances is fundamentally different for the stochastic model than it is for the low-cost and high-cost alternatives.

This contrast in results and methods does not mean that either approach to

illustrating ranges of uncertainty, alternative scenarios or stochastic simulations, is superior to the other. The ranges are different and explainable.

Table VI.E1 displays long-range actuarial estimates for the combined

OASDI program using the two methods of illustrating uncertainty: (1) alternative scenarios and (2) stochastic simulations. The table shows stochastic

estimates for the median (50th percentile) and for the 95-percent and 80-percent confidence intervals. For comparison, the table shows scenario-based

estimates for the intermediate, low-cost, and high-cost assumptions. Each

individual stochastic estimate in the table is the level at that percentile from
189

StochasticProjections

the distribution of the 5,000 simulations. For each given percentile, the values in the table for each long-range actuarial measure are generally from different stochastic simulations.

The median stochastic estimates displayed in table VI.E1 are, in general,

slightly more pessimistic than the intermediate scenario-based estimates. The

median estimate of the long-range actuarial balance is -2.99 percent of taxable payroll, about 0.11 percentage point lower than projected under the

intermediate assumptions. The median first projected year that cost exceeds

non-interest income (as it did in 2010 through 2013), and remains in excess

of non-interest income throughout the remainder of the long-range period, is

2014. This is the same year as projected under the intermediate assumptions.

The median year that asset reserves first become depleted is 2033, also the

same as projected under the intermediate assumptions. The median estimates

of the annual cost rate for the 75th year of the projection period are

18.62 percent of taxable payroll and 6.26 percent of gross domestic product

(GDP). The comparable estimates under the intermediate assumptions are

18.19 percent of payroll and 6.12 percent of GDP.

For four measures in table VI.E1 (the actuarial balance, the first year cost

exceeds non-interest income and remains in excess through 2088, the first

projected year asset reserves become depleted, and annual cost in the 75th

year as a percent of taxable payroll), the 95-percent stochastic confidence

interval is narrower than the range defined by the low-cost and high-cost

alternatives. In other words, for these measures, the range defined by the

low-cost and high-cost alternatives contains the 95-percent confidence interval of the stochastic modeling projections. For the remaining two measures

(the open group unfunded obligation, and the annual cost in the 75th year as

a percent of GDP), one or both of the bounds of the 95-percent stochastic

confidence interval fall outside the range defined by the low-cost and highcost alternatives.
Appendices

190

Table VI.E1.—Long-Range Estimates Relating to the Actuarial Status of

the Combined OASDI Program

[Comparison of scenario-based and stochastic results]

Traditional

scenario-based model Stochastic model

IntermediateLowcostHighcost

Median

50th

percentile

80-percent

confidence interval

95-percent

confidence interval

10th

percentile

90th

percentile

2.5th

percentile

97.5th

percentile

Actuarial balance . . . . . . -2.88 a

a Between 0 and 0.005 percent of taxable payroll.

-6.56 -2.99 -4.25 -1.88 -4.98 -1.28

Open group unfunded

obligation (in trillions) $10.6 -$0.6 $21.0 $11.0 $17.2 $6.5 $21.6 $4.4

First projected year cost

exceeds non-interest

income and remains in

excess through 2088

b

.

b Cost also exceeded non-interest income in 2010 through 2013.

2014 c

c The annual balance is projected to be negative for a temporary period, returning to positive levels before the

end of the projection period.

2014 2014 2014 2020 2014 2077

First year asset reserves

become depleted

d . . . .

d For some stochastic simulations, the first year in which trust fund reserves become depleted does not indicate a permanent depletion of reserves.

2033 e

e Trust fund reserves are not estimated to be depleted within the projection period.

2028 2033 2029 2038 2028 2041

Annual cost in 75th year

(percent of taxable

payroll) . . . . . . . . . . . . 18.19 12.82 26.59 18.62 15.45 22.91 13.97 25.62

Annual cost in 75th year

(percent of GDP). . . . . 6.12 4.70 8.21 6.26 5.21 7.67 4.73 8.53
191

Infinite Horizon Projections

F. INFINITE HORIZON PROJECTIONS

Another measure of trust fund finances is the infinite horizon unfunded obligation, which takes account of all annual balances, even those after 75 years.

The extension of the time period past 75 years assumes that the current-law

OASDI program and the demographic and economic trends used for the 75-

year projection continue indefinitely.

Table VI.F1 shows that the OASDI open group unfunded obligation over the

infinite horizon is $24.9 trillion in present value, which is $14.3 trillion

larger than for the 75-year period. The $14.3 trillion increment reflects a significant financing gap projected for OASDI for years after 2088. Of course,

the degree of uncertainty associated with estimates increases substantially for

years further in the future.

The $24.9 trillion infinite horizon open group unfunded obligation is equivalent to 4.1 percent of taxable payroll or 1.4 percent of GDP. These relative

measures of the unfunded obligation over the infinite horizon express its

magnitude in relation to the resources potentially available to finance the

shortfall.

The summarized shortfalls for the 75-year period and through the infinite

horizon both reflect annual cash-flow shortfalls for all years after trust fund

reserve depletion. The annual shortfalls after trust fund reserve depletion rise

slowly and reflect increases in life expectancy after 2033. The summarized

shortfalls for the 75-year period, as percentages of taxable payroll and GDP,

are lower than those for the infinite horizon principally because only about

three-quarters of the years in the 75-year period have unfunded annual shortfalls, and annual shortfalls within the 75-year period represent a smaller

share of taxable payroll and GDP than do the shortfalls in later years.

The projected infinite horizon shortfall could be eliminated with additional

revenue equivalent to an immediate increase in the combined payroll tax rate

from 12.4 percent to about 16.7 percent (a relative increase of 35 percent).1

This shortfall could be eliminated by reducing cost in a manner equivalent to

an immediate and permanent reduction in benefits for all current and future

beneficiaries by 24.5 percent.

1 The indicated increase in the payroll tax rate of 4.3 percent is somewhat larger than the 4.1 percent infinite

horizon actuarial deficit because the indicated increase reflects a behavioral response to tax rate changes. In

particular, the calculation assumes that an increase in payroll taxes results in a small shift of wages and salaries to forms of employee compensation that are not subject to the payroll tax.
Appendices

192

Notes:

1. The present values of future taxable payroll for 2014-88 and for 2014 through the infinite horizon are

$386.9 trillion and $603.3 trillion, respectively.

2. The present values of GDP for 2014-88 and for 2014 through the infinite horizon are $1,093.7 trillion and

$1,816.7 trillion, respectively. Present values of GDP shown in the Medicare Trustees Report differ slightly

due to the use of interest discount rates that are specific to each program’s trust fund holdings.

Last year, the Trustees projected that the infinite horizon unfunded obligation

was $23.1 trillion in present value. If the assumptions, methods, and starting

values had not changed, moving the valuation date forward by 1 year would

have increased the unfunded obligation by about $0.9 trillion, to

$24.0 trillion. The net effects of changes in assumptions, methods, law, and

starting values increased the infinite horizon unfunded obligation by an additional $0.9 trillion, to $24.9 trillion in present value.

The infinite horizon unfunded obligation is 0.1 percentage point higher than

in last year’s report when expressed as a share of taxable payroll, and about

the same as last year when expressed as a share of GDP. The main changes

affecting the infinite horizon unfunded obligation for this report are revised

starting values, a change in the ultimate consumer-price index, legislative

changes, changes in near-term economic assumptions, and other method

changes. See section IV.B.6 for details regarding changes in law, data, methods, and assumptions.

a. Unfunded Obligations for Past, Current, and Future Participants

Table VI.F2 separates the components of the infinite horizon unfunded obligation (with the exception of general fund reimbursements) among past, current, and future participants. The table does not separate past general fund

reimbursements among participants because there is no clear basis for attributing the reimbursements across generations.

Table VI.F1.—Unfunded OASDI Obligations Through the Infinite Horizon,

Based on Intermediate Assumptions

[Present values as of January 1, 2014; dollar amounts in trillions]

Present

value

Expressed as a percentage

of future payroll and GDP

Taxable

payroll GDP

Unfunded obligation through the infinite horizona. . . . . . . . . . . .

a Present value of future cost less future non-interest income, reduced by the amount of trust fund asset

reserves at the beginning of 2014. Expressed as a percentage of payroll and GDP for the period 2014 through

the infinite horizon.

$24.9 4.1 1.4

Unfunded obligation through 2088b. . . . . . . . . . . . . . . . . . . . . . .

b Present value of future cost less future non-interest income through 2088, reduced by the amount of trust

fund reserves at the beginning of 2014. Expressed as a percentage of payroll and GDP for the period 2014

through 2088.

10.6 2.7 1.0
193

Infinite Horizon Projections

Past participants are defined as those no longer alive as of the valuation date.

Current participants are those age 15 and older as of 2014. Future participants are those under age 15 or not yet born.

The excess of the present value of cost for past and current participants over

the present value of dedicated tax income for past and current participants

produces an unfunded obligation for past and current participants of $26.1

trillion. Table VI.F2 also shows an unfunded obligation of $25.5 trillion for

past and current participants, including past and future general fund reimbursements. Future participants will pay dedicated taxes of $0.6 trillion more

into the system than the cost of their benefits ($53.6 trillion of dedicated tax

income as compared to $53.0 trillion of cost). The unfunded obligation for

all participants through the infinite horizon thus equals $24.9 trillion.

This accounting demonstrates that some generations are scheduled to receive

benefits with a present value exceeding the present value of their dedicated

tax income, while other generations are scheduled to receive benefits with a

present value less than the present value of their dedicated tax income,

whether past general fund reimbursements are included or not. Making

Social Security solvent over the infinite horizon requires some combination

of increased revenue or reduced benefits for current and future participants

amounting to $24.9 trillion in present value, 4.1 percent of future taxable

payroll, or 1.4 percent of future GDP.
Appendices

194

Notes:

1. The present value of future taxable payroll for 2014 through the infinite horizon is $603.3 trillion.

2. The present value of GDP for 2014 through the infinite horizon is $1,816.7 trillion.

3. Totals do not necessarily equal the sums of rounded components.

Table VI.F2.—Present Values of OASDI Cost Less Non-interest Income

and Unfunded Obligations for Program Participants,

Based on Intermediate Assumptions

[Present values as of January 1, 2014; dollar amounts in trillions]

Present

value

Expressed as a

percentage of future

payroll and GDP

Taxable

payroll GDP

Present value of past cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50.9 8.4 2.8

Less present value of past dedicated tax income . . . . . . . . . . . . . . . . . . 53.1 8.8 2.9

Plus present value of future cost for current participants . . . . . . . . . . . 54.6 9.1 3.0

Less present value of future dedicated tax income for current

participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.4 4.4 1.5

Equals unfunded obligation for past and current participants

excluding general fund reimbursements . . . . . . . . . . . . . . . . . . . . . . 26.1 4.3 1.4

Less present value of past general fund reimbursements

a

. . . . . . . . . . . .6 .1 b

Less present value of future general fund reimbursements over

the infinite horizona. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

cdb

Equals unfunded obligation for past and current participants

including general fund reimbursements . . . . . . . . . . . . . . . . . . . . . . 25.5 4.2 1.4

Plus present value of cost for future participants over the infinite

horizon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53.0 8.8 2.9

Less present value of dedicated tax income for future participants

over the infinite horizon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53.6 8.9 2.9

Equals unfunded obligation for all participants through the infinite

horizon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.9 4.1 1.4

a Distribution of general fund reimbursements among past, current, and future participants cannot be determined.

b Less than 0.05 percent of GDP.

c Less than $50 billion.

d Less than 0.05 percent of taxable payroll.
195

OASDI and HI: Percent of Payroll

G. ESTIMATES FOR OASDI AND HI, SEPARATE AND COMBINED

In this appendix, the Trustees present long-range actuarial estimates for the

OASDI and Hospital Insurance (HI) programs both separately and on a combined basis. These estimates facilitate analysis of the adequacy of the income

and asset reserves of these programs relative to their cost under current law.

This appendix does not include estimates for the Supplementary Medical

Insurance (SMI) program because adequate financing is guaranteed in the

law, and because the SMI program is not financed through a payroll tax. For

more information on Medicare estimates, please see the 2014 Medicare

Trustees Report.

The information 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

1. Estimates as a Percentage of Taxable Payroll

Comparing cost and income rates for the OASDI and HI programs as percentages of taxable payroll requires 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 eliminated altogether for the HI program in 1994; (2) a larger proportion of Federal, State, and local government

employees are 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.

As with the OASI and DI Trust Funds, income to the HI Trust Fund comes

primarily from contributions paid by employees, employers, and selfemployed persons. Table VI.G1 shows the OASDI and HI contribution rates

that are authorized in the Federal Insurance Contributions Act.

1 Note that this year’s low-cost (alternative I) assumptions include a higher (rather than lower as in past

years) rate of increase in the CPI than the intermediate (alternative II) assumptions. The high-cost (alternative III) assumptions include a lower (rather than higher as in past years) rate of increase in the CPI. This

change has varying effects on the results for the three trust funds.
Appendices

196

Table VI.G2 shows the Trustees’ estimates of annual income rates and cost

rates for the OASDI program and the HI program under the low-cost, intermediate, and high-cost sets of assumptions described earlier in this report.

The income rates reflect the tax rates shown in table VI.G1. For the HI proTable VI.G1.—Payroll Tax Contribution Rates for the OASDI and HI Programs

[In percent]

Calendar years

Employees and employers,

combineda

a Except as noted below, the combined employee/employer rate is divided equally between employees and

employers.

Employees

only Self employedb

b Beginning in 1990, self-employed persons receive 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 then applies to net earnings after this deduction,

but subject to the OASDI base.

OASDI

up to base

c

c The payroll tax on earnings for the OASDI program applies to annual earnings up to a contribution and

benefit base indexed to the average wage level. The base is $117,000 for 2014.

HI

all earningsd

d Prior to 1994, the payroll tax on earnings for the HI program applied to annual earnings up to a contribution base. The HI contribution base was eliminated beginning in 1994.

HI

over limit

e

e Starting with Federal personal income tax returns for tax year 2013, earned income exceeding $200,000 for

individual filers and $250,000 for married couples filing jointly is subject to an additional HI tax of

0.9 percent. These income limits are not indexed after 2013.

OASDI

up to basec

HI

all earningsd

HI

over limite

1966 . . . . . . . . . . . . . 7.70 0.70 — 5.80 0.35 —

1967 . . . . . . . . . . . . . 7.80 1.00 — 5.90 .50 —

1968 . . . . . . . . . . . . . 7.60 1.20 — 5.80 .60 —

1969-70 . . . . . . . . . . 8.40 1.20 — 6.30 .60 —

1971-72 . . . . . . . . . . 9.20 1.20 — 6.90 .60 —

1973 . . . . . . . . . . . . . 9.70 2.00 — 7.00 1.00 —

1974-77 . . . . . . . . . . 9.90 1.80 — 7.00 .90 —

1978 . . . . . . . . . . . . . 10.10 2.00 — 7.10 1.00 —

1979-80 . . . . . . . . . . 10.16 2.10 — 7.05 1.05 —

1981 . . . . . . . . . . . . . 10.70 2.60 — 8.00 1.30 —

1982-83 . . . . . . . . . . 10.80 2.60 — 8.05 1.30 —

1984f. . . . . . . . . . . . .

f

In 1984 only, employees received an immediate credit of 0.3 percent of taxable wages against their OASDI

payroll tax contributions. The self-employed received similar credits of 2.7 percent, 2.3 percent, and

2.0 percent against their combined OASDI and Hospital Insurance (HI) contributions on net earnings from

self-employment in 1984, 1985, and 1986-89, respectively. The General Fund of the Treasury reimbursed

the trust funds for these credits.

11.40 2.60 — 11.40 2.60 —

1985f. . . . . . . . . . . . 11.40 2.70 — 11.40 2.70 —

1986-87

f

. . . . . . . . . . 11.40 2.90 — 11.40 2.90 —

1988-89

f

. . . . . . . . . . 12.12 2.90 — 12.12 2.90 —

1990-2010g. . . . . . . .

g Public Law 111-147 exempted most employers from paying the employer share of OASDI payroll tax on

wages paid during the period March 19, 2010 through December 31, 2010 to certain qualified individuals

hired after February 3, 2010. Public Law 111-312, Public Law 112-78, and Public Law 112-96 reduced the

OASDI payroll tax rate for 2011 and 2012 by 2 percentage points for employees and for self-employed

workers. These laws require that the General Fund of the Treasury reimburse the OASI and DI Trust Funds

for these temporary reductions in 2010, 2011, and 2012 payroll tax revenue, in order to “replicate to the

extent possible” revenue that would have been received if the combined employee/employer payroll tax

rates had remained at 12.4 percent for OASDI (10.6 percent for OASI and 1.8 percent for DI).

12.40 2.90 — 12.40 2.90 —

2011-2012

g. . . . . . . . 10.40 2.90 — 10.40 2.90 —

2013 and later. . . . . . 12.40 2.90 0.90 12.40 2.90 0.90
197

OASDI and HI: Percent of Payroll

gram, the income rates reflect: (1) the additional 0.9 percent tax on employees for relatively high earnings; and (2) the portion of total payroll to which

the 0.9 percent rate applies. Annual income and cost rates indicate the cashflow operation of the programs. Therefore, income rates exclude interest

earned on trust fund asset reserves. Table VI.G2 also shows annual balances,

which are the differences between annual income rates and cost rates.

The Trustees project that the OASDI and HI cost rates will rise generally

above current levels under the intermediate and high-cost sets of assumptions. The greatest increase occurs during the period 2018-35 under both sets

of assumptions for OASDI and under the intermediate assumptions for HI.

Under the intermediate assumptions, the OASDI cost rate increases by

30 percent from its current level by 2088, while under the high-cost assumptions, the cost rate increases by 87 percent by 2088. For HI, cost rates

increase 64 percent and 238 percent from 2014-88 under the intermediate

and high-cost assumptions, respectively. Under the low-cost assumptions, the

OASDI and HI cost rates decrease from 2014-88 by 7 percent and 23 percent, respectively.

The Trustees project annual deficits for every year of the projection period

under the intermediate and high-cost assumptions for the OASDI program

and under the high-cost assumptions for HI. For the HI program intermediate

assumptions, the Trustees project a positive annual balance from 2015-21.

Under the low-cost assumptions, OASDI annual balances are negative

through 2076 and positive thereafter, while HI annual balances are positive

throughout the projection period.
Appendices

198

Table VI.G2.—OASDI and HI Annual Income Rates, Cost Rates, and Balances,

Calendar Years 2014-90

[As a percentage of taxable payroll

a

]

Calendar year

OASDI HI

Income

rate

Cost

rate Balance

Income

rate

Cost

rateb Balance

Intermediate:

2014 . . . . . . . . . . 12.67 13.95 -1.29 3.29 3.40 -0.11

2015 . . . . . . . . . . 12.92 13.97 -1.05 3.31 3.24 .06

2016 . . . . . . . . . . 12.89 13.97 -1.08 3.32 3.21 .11

2017 . . . . . . . . . . 12.91 13.97 -1.06 3.34 3.20 .14

2018 . . . . . . . . . . 12.93 14.02 -1.08 3.36 3.25 .10

2019 . . . . . . . . . . 12.95 14.15 -1.20 3.38 3.28 .10

2020 . . . . . . . . . . 12.96 14.33 -1.37 3.39 3.34 .05

2021 . . . . . . . . . . 12.98 14.50 -1.52 3.41 3.41 c

2022 . . . . . . . . . . 13.01 14.74 -1.73 3.43 3.49 -.06

2023 . . . . . . . . . . 13.03 15.00 -1.97 3.45 3.56 -.11

2025 . . . . . . . . . . 13.07 15.54 -2.47 3.50 3.82 -.33

2030 . . . . . . . . . . 13.15 16.60 -3.46 3.59 4.20 -.61

2035 . . . . . . . . . . 13.19 17.09 -3.90 3.67 4.55 -.89

2040 . . . . . . . . . . 13.20 17.09 -3.89 3.72 4.83 -1.10

2045 . . . . . . . . . . 13.20 16.94 -3.74 3.78 5.01 -1.23

2050 . . . . . . . . . . 13.20 16.89 -3.69 3.84 5.11 -1.27

2055 . . . . . . . . . . 13.21 17.01 -3.80 3.91 5.15 -1.24

2060 . . . . . . . . . . 13.23 17.26 -4.03 3.98 5.21 -1.23

2065 . . . . . . . . . . 13.25 17.50 -4.25 4.05 5.32 -1.27

2070 . . . . . . . . . . 13.26 17.74 -4.48 4.11 5.45 -1.33

2075 . . . . . . . . . . 13.27 17.88 -4.61 4.17 5.55 -1.38

2080 . . . . . . . . . . 13.27 17.90 -4.63 4.21 5.58 -1.36

2085 . . . . . . . . . . 13.28 18.04 -4.76 4.26 5.57 -1.31

2090 . . . . . . . . . . 13.30 18.29 -5.00 4.31 5.55 -1.24

Low-cost:

2014 . . . . . . . . . . 12.60 13.74 -1.14 3.29 3.28 .01

2015 . . . . . . . . . . 12.95 13.46 -.52 3.30 3.03 .27

2016 . . . . . . . . . . 12.86 13.25 -.39 3.31 2.94 .37

2017 . . . . . . . . . . 12.87 13.10 -.23 3.33 2.87 .46

2018 . . . . . . . . . . 12.89 13.05 -.16 3.34 2.86 .48

2019 . . . . . . . . . . 12.89 13.06 -.16 3.36 2.83 .53

2020 . . . . . . . . . . 12.90 13.11 -.21 3.38 2.82 .55

2021 . . . . . . . . . . 12.92 13.17 -.25 3.39 2.83 .56

2022 . . . . . . . . . . 12.94 13.26 -.32 3.41 2.83 .57

2023 . . . . . . . . . . 12.96 13.37 -.42 3.43 2.84 .59

2025 . . . . . . . . . . 12.99 13.67 -.69 3.47 2.93 .54

2030 . . . . . . . . . . 13.04 14.20 -1.16 3.58 2.92 .66

2035 . . . . . . . . . . 13.06 14.28 -1.22 3.67 2.86 .81

2040 . . . . . . . . . . 13.06 13.99 -.94 3.74 2.69 1.05

2045 . . . . . . . . . . 13.04 13.65 -.60 3.82 2.57 1.25

2050 . . . . . . . . . . 13.04 13.43 -.39 3.89 2.46 1.44

2055 . . . . . . . . . . 13.04 13.37 -.33 3.97 2.37 1.59

2060 . . . . . . . . . . 13.04 13.38 -.34 4.03 2.36 1.68

2065 . . . . . . . . . . 13.04 13.35 -.31 4.09 2.40 1.69

2070 . . . . . . . . . . 13.04 13.29 -.25 4.14 2.46 1.67

2075 . . . . . . . . . . 13.03 13.12 -.09 4.17 2.51 1.66

2080 . . . . . . . . . . 13.02 12.86 .15 4.20 2.53 1.68

2085 . . . . . . . . . . 13.01 12.78 .23 4.24 2.53 1.71

2090 . . . . . . . . . . 13.02 12.86 .15 4.28 2.55 1.73
199

OASDI and HI: Percent of Payroll

Notes:

1. The income rate excludes interest income.

2. Totals do not necessarily equal the sums of rounded components.

Table VI.G3 shows summarized values over the 25-year, 50-year, and 75-

year valuation periods. For each of those periods, the summarized income

rates include beginning trust fund asset reserves, and the summarized cost

rates include the cost of accumulating an ending fund reserve equal to

100 percent of annual cost at the end of the period.

High-cost:

2014 . . . . . . . . . . 12.75 14.24 -1.48 3.29 3.54 -.25

2015 . . . . . . . . . . 12.88 14.60 -1.72 3.32 3.49 -.17

2016 . . . . . . . . . . 12.93 14.87 -1.93 3.34 3.53 -.19

2017 . . . . . . . . . . 12.96 15.07 -2.11 3.36 3.59 -.23

2018 . . . . . . . . . . 12.99 15.30 -2.31 3.38 3.72 -.34

2019 . . . . . . . . . . 13.01 15.59 -2.58 3.40 3.83 -.43

2020 . . . . . . . . . . 13.03 15.91 -2.88 3.42 3.98 -.56

2021 . . . . . . . . . . 13.06 16.19 -3.13 3.44 4.14 -.70

2022 . . . . . . . . . . 13.09 16.51 -3.42 3.46 4.32 -.85

2023 . . . . . . . . . . 13.12 16.90 -3.79 3.49 4.50 -1.01

2025 . . . . . . . . . . 13.17 17.70 -4.54 3.53 5.02 -1.49

2030 . . . . . . . . . . 13.27 19.41 -6.15 3.62 6.11 -2.49

2035 . . . . . . . . . . 13.33 20.46 -7.13 3.69 7.34 -3.65

2040 . . . . . . . . . . 13.37 20.91 -7.54 3.74 8.51 -4.76

2045 . . . . . . . . . . 13.39 21.15 -7.76 3.79 9.61 -5.82

2050 . . . . . . . . . . 13.41 21.45 -8.04 3.83 10.42 -6.59

2055 . . . . . . . . . . 13.44 21.95 -8.50 3.89 10.95 -7.06

2060 . . . . . . . . . . 13.48 22.61 -9.13 3.95 11.30 -7.35

2065 . . . . . . . . . . 13.53 23.35 -9.82 4.01 11.55 -7.54

2070 . . . . . . . . . . 13.57 24.16 -10.59 4.09 11.82 -7.73

2075 . . . . . . . . . . 13.62 24.92 -11.30 4.16 12.03 -7.87

2080 . . . . . . . . . . 13.65 25.54 -11.88 4.22 12.06 -7.84

2085 . . . . . . . . . . 13.69 26.19 -12.50 4.29 12.02 -7.74

2090 . . . . . . . . . . 13.73 26.83 -13.10 4.35 12.25 -7.90

a The taxable payroll for HI is significantly larger than the taxable payroll for OASDI because the HI taxable

maximum amount was eliminated beginning in 1994, and because HI covers all Federal civilian employees,

all State and local government employees hired after April 1, 1986, and railroad employees.

b Estimated costs attributable to insured beneficiaries only, on an incurred basis. The Trustees expect benefits and administrative costs for non-insured persons to be financed through general revenue transfers and

premium payments, rather than through payroll taxes.

c Between 0 and 0.005 percent of taxable payroll.

Table VI.G2.—OASDI and HI Annual Income Rates, Cost Rates, and Balances,

Calendar Years 2014-90 (Cont.)

[As a percentage of taxable payroll

a

]

Calendar year

OASDI HI

Income

rate

Cost

rate Balance

Income

rate

Cost

rateb Balance
Appendices

200

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

The Trustees project that the OASDI and HI systems will each experience

large actuarial deficits for the 25-year, 50-year, and 75-year valuation periods

under the high-cost assumptions. Actuarial deficits under the intermediate

assumptions are smaller than those for the high-cost assumptions for all three

valuation periods. Under the low-cost assumptions, the HI system has a positive actuarial balance for all three valuation periods, while the actuarial balance for the OASDI system is positive for the 25-year period, slightly

negative for the 50-year period, and slightly positive for the 75-year period.

Table VI.G3.—Summarized OASDI and HI Income Rates and Cost Rates for Valuation

Periods,a Calendar Years 2014-88

[As a percentage of taxable payroll

b

]

Valuation

period

OASDI HI

Income

rate

Cost

rate

Actuarial

balance

Income

rate

Cost

rate

Actuarial

balance

Intermediate:

25-year:

2014-38 . . . . . . 14.75 16.25 -1.50 3.61 4.03 -0.42

50-year:

2014-63 . . . . . . 14.08 16.50 -2.42 3.71 4.46 -.75

75-year:

2014-88 . . . . . . 13.89 16.77 -2.88 3.82 4.69 -.87

Low-cost:

25-year:

2014-38 . . . . . . 14.50 14.30 .21 3.59 2.99 .60

50-year:

2014-63 . . . . . . 13.85 13.88 -.04 3.73 2.75 .98

75-year:

2014-88 . . . . . . 13.63 13.63 c 3.84 2.68 1.17

High-cost:

25-year:

2014-38 . . . . . . 15.01 18.56 -3.55 3.64 5.55 -1.90

50-year:

2014-63 . . . . . . 14.34 19.74 -5.40 3.72 7.45 -3.72

75-year:

2014-88 . . . . . . 14.19 20.75 -6.56 3.81 8.34 -4.52

a

Income rates include beginning trust fund asset reserves and cost rates include the cost of reaching an ending target trust fund equal to 100 percent of annual cost at the end of the period.

b The taxable payroll for HI is significantly larger than the taxable payroll for OASDI because the HI taxable

maximum amount was eliminated beginning 1994, and because HI covers all Federal civilian employees, all

State and local government employees hired after April 1, 1986, and railroad employees.

c Between 0 and 0.005 percent of taxable payroll.
201

OASDI and HI: Percent of GDP

2. Estimates as a Percentage of Gross Domestic Product

This section contains long-range projections of the operations of the theoretical 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 fund operations as a percentage of taxable payroll is the most useful

approach for assessing the financial status of the programs (see section

IV.B.1), expressing them as a percentage of the total value of goods and services produced in the United States provides an additional perspective.

Table VI.G4 shows non-interest income, total cost, and the resulting balance

of the combined OASI and DI Trust Funds, of the HI Trust Fund, and of the

combined OASI, DI, and HI Trust Funds, expressed as percentages of GDP

on the basis of each of the three alternative sets of assumptions. Table VI.G4

also contains estimates of GDP. For OASDI, non-interest income consists of

payroll tax contributions, proceeds from taxation of benefits, and reimbursements from the General Fund of the Treasury, if any. Cost consists of scheduled benefits, administrative expenses, financial interchange with the

Railroad Retirement program, and payments for vocational rehabilitation

services for disabled beneficiaries. For HI, non-interest income consists of

payroll tax contributions (including contributions from railroad employment), up to an additional 0.9 percent tax on earned income for relatively

high earners, proceeds from taxation of OASDI benefits, and reimbursements from the General Fund of the Treasury, if any. Cost consists of outlays

(benefits and administrative expenses) for insured beneficiaries. The Trustees show income and cost estimates on a cash basis for the OASDI program

and on an incurred basis for the HI program.

The Trustees project the OASDI annual balance (non-interest income less

cost) as a percentage of GDP to be negative throughout the projection period

under the intermediate and high-cost assumptions, and to be negative

through 2076 under the low-cost assumptions. Under the low-cost assumptions the OASDI annual deficit as a percentage of GDP decreases through

2018. After 2018, deficits increase to a peak in 2033 and then decrease

through 2076, after which annual balances are positive, reaching 0.07 percent of GDP in 2088. Under the intermediate assumptions, annual deficits

decrease from 2014 to 2015, generally increase through 2037, decrease from

2037 through 2051, and mostly increase thereafter. Under the high-cost

assumptions, annual deficits increase throughout the projection period.

The Trustees project that the HI balance as a percentage of GDP will be positive throughout the projection period under the low-cost assumptions. Under

the intermediate assumptions, the HI balance is negative for each year of the
Appendices

202

projection period except for 2015-21. Annual deficits increase through 2049

and remain relatively stable thereafter. Under the high-cost assumptions, the

HI balance is negative for all years of the projection period. Annual deficits

reach a peak in 2075 and mostly decline thereafter.

The combined OASDI and HI annual balance as a percentage of GDP is negative throughout the projection period under both the intermediate and highcost assumptions. Under the low-cost assumptions, the combined OASDI

and HI balance is negative through 2015, positive from 2016 through 2024,

negative from 2025 through 2037, and then positive and mostly rising thereafter. Under the intermediate assumptions, combined OASDI and HI annual

deficits decline from 2014 through 2017, increase from 2017 through 2041,

and mostly decrease through 2052. After 2052, annual deficits generally rise,

reaching 2.18 percent of GDP by 2088. Under the high-cost assumptions,

combined annual deficits rise throughout the projection period.

By 2088, the combined OASDI and HI annual balances as percentages of

GDP range from a positive balance of 0.85 percent for the low-cost assumptions to a deficit of 7.01 percent for the high-cost assumptions. Balances differ by a much smaller amount for the tenth year, 2023, ranging from a

positive balance of 0.11 percent for the low-cost assumptions to a deficit of

1.82 percent for the high-cost assumptions.

The summarized long-range (75-year) balance as a percentage of GDP for

the combined OASDI and HI programs varies among the three alternatives

by a relatively large amount, from a positive balance of 0.53 percent under

the low-cost assumptions to a deficit of 4.20 percent under the high-cost

assumptions. The 25-year summarized balance varies by a smaller amount,

from a positive balance of 0.35 percent to a deficit of 2.12 percent. Summarized rates are calculated on a present-value basis. They include the trust

fund balances on January 1, 2014 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.)
203

OASDI and HI: Percent of GDP

Table VI.G4.—OASDI and HI Annual and Summarized Income, Cost, and Balance

as a Percentage of GDP, Calendar Years 2014-90

Calendar year

Percentage of GDP

GDP in

dollars

(billions)

OASDI HI Combined

Incomea Cost Balance Incomea Cost Balance Incomea Cost Balance

Intermediate:

2014 . . . . . . 4.46 4.92 -0.45 1.45 1.50 -0.05 5.92 6.42 -0.50 $17,557

2015 . . . . . . 4.57 4.94 -.37 1.47 1.44 .03 6.04 6.38 -.34 18,426

2016 . . . . . . 4.59 4.97 -.38 1.49 1.44 .05 6.08 6.41 -.33 19,377

2017 . . . . . . 4.63 5.01 -.38 1.51 1.45 .06 6.14 6.46 -.32 20,400

2018 . . . . . . 4.67 5.06 -.39 1.53 1.48 .05 6.20 6.55 -.34 21,475

2019 . . . . . . 4.70 5.13 -.44 1.54 1.50 .04 6.24 6.63 -.39 22,578

2020 . . . . . . 4.71 5.21 -.50 1.55 1.53 .02 6.27 6.74 -.47 23,694

2021 . . . . . . 4.73 5.29 -.55 1.56 1.56 b 6.30 6.85 -.55 24,815

2022 . . . . . . 4.75 5.38 -.63 1.57 1.60 -.03 6.32 6.98 -.66 25,935

2023 . . . . . . 4.76 5.48 -.72 1.58 1.63 -.05 6.34 7.11 -.77 27,091

2025 . . . . . . 4.76 5.66 -.90 1.60 1.74 -.15 6.36 7.41 -1.05 29,575

2030 . . . . . . 4.76 6.01 -1.25 1.63 1.91 -.28 6.39 7.92 -1.53 36,750

2035 . . . . . . 4.75 6.16 -1.41 1.66 2.06 -.40 6.41 8.21 -1.81 45,659

2040 . . . . . . 4.73 6.12 -1.39 1.67 2.17 -.50 6.40 8.29 -1.89 57,003

2045 . . . . . . 4.70 6.03 -1.33 1.69 2.24 -.55 6.39 8.27 -1.88 71,254

2050 . . . . . . 4.67 5.97 -1.30 1.70 2.26 -.56 6.37 8.24 -1.87 88,833

2055 . . . . . . 4.64 5.97 -1.33 1.72 2.27 -.54 6.36 8.24 -1.88 110,392

2060 . . . . . . 4.61 6.01 -1.40 1.74 2.28 -.54 6.35 8.29 -1.94 136,921

2065 . . . . . . 4.58 6.05 -1.47 1.76 2.31 -.55 6.34 8.36 -2.02 169,890

2070 . . . . . . 4.55 6.09 -1.54 1.77 2.35 -.57 6.32 8.44 -2.11 211,004

2075 . . . . . . 4.52 6.10 -1.57 1.78 2.38 -.59 6.31 8.47 -2.16 262,181

2080 . . . . . . 4.50 6.07 -1.57 1.79 2.37 -.58 6.29 8.44 -2.15 325,644

2085 . . . . . . 4.48 6.08 -1.61 1.80 2.36 -.55 6.28 8.44 -2.16 403,770

2090 . . . . . . 4.46 6.14 -1.68 1.82 2.34 -.52 6.28 8.48 -2.20 499,900

Summarized rates: c

25-year:

2014-38 . . . 5.33 5.87 -.54 1.64 1.83 -.19 6.97 7.70 -.73

50-year:

2014-63 . . . 5.04 5.91 -.87 1.67 2.00 -.34 6.71 7.91 -1.20

75-year:

2014-88 . . . 4.91 5.93 -1.02 1.70 2.08 -.39 6.61 8.01 -1.41

Low-cost:

2014 . . . . . . 4.44 4.85 -.40 1.45 1.45 b 5.90 6.29 -.40 17,771

2015 . . . . . . 4.58 4.77 -.18 1.47 1.35 .12 6.06 6.12 -.06 19,032

2016 . . . . . . 4.59 4.73 -.14 1.49 1.32 .17 6.08 6.05 .03 20,464

2017 . . . . . . 4.65 4.73 -.08 1.51 1.30 .21 6.16 6.04 .12 21,918

2018 . . . . . . 4.71 4.76 -.06 1.53 1.31 .22 6.23 6.07 .16 23,335

2019 . . . . . . 4.74 4.80 -.06 1.54 1.29 .24 6.28 6.09 .18 24,843

2020 . . . . . . 4.76 4.84 -.08 1.55 1.29 .25 6.31 6.13 .18 26,401

2021 . . . . . . 4.79 4.88 -.09 1.56 1.30 .26 6.34 6.18 .17 27,969

2022 . . . . . . 4.82 4.93 -.12 1.57 1.30 .26 6.38 6.24 .15 29,611

2023 . . . . . . 4.84 4.99 -.16 1.57 1.31 .27 6.41 6.30 .11 31,324

2025 . . . . . . 4.84 5.10 -.26 1.59 1.34 .25 6.44 6.44 -.01 35,064

2030 . . . . . . 4.85 5.28 -.43 1.64 1.34 .30 6.49 6.62 -.13 46,398

2035 . . . . . . 4.85 5.31 -.45 1.68 1.31 .37 6.53 6.61 -.08 61,419

2040 . . . . . . 4.85 5.20 -.35 1.71 1.23 .48 6.56 6.43 .13 81,834

2045 . . . . . . 4.84 5.06 -.22 1.74 1.17 .57 6.58 6.23 .35 109,456

2050 . . . . . . 4.82 4.97 -.14 1.77 1.12 .65 6.59 6.08 .51 146,344

2055 . . . . . . 4.81 4.93 -.12 1.80 1.08 .72 6.61 6.01 .60 195,464

2060 . . . . . . 4.80 4.93 -.13 1.83 1.07 .76 6.63 6.00 .63 261,102

2065 . . . . . . 4.79 4.91 -.11 1.85 1.08 .76 6.64 5.99 .65 349,338

2070 . . . . . . 4.78 4.87 -.09 1.87 1.11 .76 6.65 5.98 .66 468,439

2075 . . . . . . 4.77 4.80 -.03 1.88 1.13 .75 6.65 5.94 .72 629,283

2080 . . . . . . 4.77 4.71 .06 1.89 1.14 .75 6.66 5.85 .81 845,859

2085 . . . . . . 4.77 4.68 .09 1.91 1.14 .77 6.67 5.82 .86 1,135,314

2090 . . . . . . 4.77 4.72 .06 1.93 1.15 .78 6.70 5.86 .84 1,521,298
Appendices

204

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

To compare trust fund operations expressed as percentages of taxable payroll

and those expressed as percentages of GDP, table VI.G5 displays ratios of

OASDI taxable payroll to GDP. HI taxable payroll is about 25 percent larger

than the OASDI taxable payroll throughout the long-range period; see section 1 of this appendix for a detailed description of the difference. The cost

Low-cost (Cont.):

Summarized rates: c

25-year:

2014-38 . . . 5.36 5.28 .08 1.64 1.37 .27 6.99 6.65 .35

50-year:

2014-63 . . . 5.12 5.13 -.01 1.70 1.25 .45 6.82 6.38 .43

75-year:

2014-88 . . . 5.03 5.03 b 1.75 1.22 .53 6.77 6.24 .53

High-cost:

2014 . . . . . . 4.49 5.01 -.52 1.45 1.56 -.11 5.94 6.57 -.63 17,268

2015 . . . . . . 4.54 5.14 -.61 1.47 1.54 -.08 6.01 6.69 -.68 17,750

2016 . . . . . . 4.57 5.26 -.68 1.49 1.57 -.08 6.06 6.83 -.77 18,332

2017 . . . . . . 4.60 5.35 -.75 1.51 1.61 -.10 6.11 6.97 -.85 19,002

2018 . . . . . . 4.64 5.46 -.82 1.53 1.68 -.15 6.17 7.15 -.98 19,710

2019 . . . . . . 4.65 5.58 -.92 1.54 1.74 -.19 6.20 7.32 -1.12 20,442

2020 . . . . . . 4.67 5.70 -1.03 1.56 1.81 -.25 6.23 7.51 -1.29 21,200

2021 . . . . . . 4.68 5.80 -1.12 1.57 1.89 -.32 6.25 7.69 -1.44 21,983

2022 . . . . . . 4.69 5.92 -1.23 1.59 1.98 -.39 6.28 7.90 -1.62 22,758

2023 . . . . . . 4.70 6.05 -1.36 1.60 2.06 -.46 6.29 8.11 -1.82 23,522

2025 . . . . . . 4.70 6.31 -1.62 1.61 2.29 -.68 6.30 8.60 -2.30 25,060

2030 . . . . . . 4.68 6.85 -2.17 1.63 2.76 -1.12 6.32 9.61 -3.30 29,275

2035 . . . . . . 4.66 7.16 -2.49 1.65 3.28 -1.63 6.31 10.44 -4.12 34,167

2040 . . . . . . 4.63 7.25 -2.61 1.66 3.77 -2.11 6.29 11.01 -4.72 39,978

2045 . . . . . . 4.59 7.25 -2.66 1.66 4.21 -2.55 6.25 11.46 -5.21 46,683

2050 . . . . . . 4.54 7.26 -2.72 1.66 4.51 -2.85 6.20 11.77 -5.57 54,209

2055 . . . . . . 4.49 7.34 -2.84 1.66 4.68 -3.02 6.16 12.02 -5.86 62,586

2060 . . . . . . 4.45 7.46 -3.01 1.67 4.77 -3.11 6.12 12.24 -6.12 71,948

2065 . . . . . . 4.41 7.61 -3.20 1.67 4.82 -3.14 6.08 12.43 -6.34 82,599

2070 . . . . . . 4.37 7.77 -3.41 1.68 4.87 -3.19 6.05 12.64 -6.59 94,757

2075 . . . . . . 4.33 7.92 -3.59 1.69 4.90 -3.20 6.02 12.81 -6.79 108,592

2080 . . . . . . 4.29 8.02 -3.73 1.70 4.86 -3.16 5.99 12.88 -6.89 124,200

2085 . . . . . . 4.25 8.14 -3.88 1.71 4.79 -3.08 5.96 12.93 -6.97 141,718

2090 . . . . . . 4.22 8.25 -4.03 1.72 4.83 -3.12 5.94 13.09 -7.15 161,487

Summarized rates: c

25-year:

2014-38 . . . 5.32 6.57 -1.26 1.64 2.50 -.86 6.96 9.07 -2.12

50-year:

2014-63 . . . 4.98 6.86 -1.88 1.65 3.30 -1.65 6.63 10.16 -3.53

75-year:

2014-88 . . . 4.83 7.07 -2.24 1.66 3.63 -1.97 6.49 10.70 -4.20

a

Income for individual years excludes interest on the trust funds. Interest is implicit in all summarized values.

b Between 0 and 0.005 percent of GDP.

c Summarized rates are calculated on a present-value basis. They include the value of the trust funds on

January 1, 2014 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.G4.—OASDI and HI Annual and Summarized Income, Cost, and Balance

as a Percentage of GDP, Calendar Years 2014-90 (Cont.)

Calendar year

Percentage of GDP

GDP in

dollars

(billions)

OASDI HI Combined

Incomea Cost Balance Incomea Cost Balance Incomea Cost Balance
205

OASDI and HI: Percent of GDP

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 reflect projected increases in U.S. employment, labor

productivity, average hours worked, and the GDP deflator. Projections of

taxable payroll reflect the components of 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, the Trustees project that the ratio of OASDI taxable payroll to GDP will decline mostly due to a projected decline in the

ratio of wages to employee compensation. Over the last five complete economic cycles, the ratio of wages to employee compensation declined at an

average annual rate of 0.25 percent. The Trustees project that the ratio of

wages to employee compensation will continue to decline, over the 65-year

period ending in 2088, at an average annual rate of 0.03, 0.13, and

0.23 percent for the low-cost, intermediate, and high-cost assumptions,

respectively.

Table VI.G5.—Ratio of OASDI Taxable Payroll to GDP, Calendar Years 2014-90

Calendar year Intermediate Low-cost High-cost

2014 . . . . . . . . . . . . . . . . . . . . . . . . . 0.352 0.353 0.352

2015 . . . . . . . . . . . . . . . . . . . . . . . . . .353 .354 .352

2016 . . . . . . . . . . . . . . . . . . . . . . . . . .356 .357 .354

2017 . . . . . . . . . . . . . . . . . . . . . . . . . .359 .361 .355

2018 . . . . . . . . . . . . . . . . . . . . . . . . . .361 .365 .357

2019 . . . . . . . . . . . . . . . . . . . . . . . . . .363 .367 .358

2020 . . . . . . . . . . . . . . . . . . . . . . . . . .364 .369 .358

2021 . . . . . . . . . . . . . . . . . . . . . . . . . .365 .370 .358

2022 . . . . . . . . . . . . . . . . . . . . . . . . . .365 .372 .359

2023 . . . . . . . . . . . . . . . . . . . . . . . . . .365 .373 .358

2025 . . . . . . . . . . . . . . . . . . . . . . . . . .364 .373 .357

2030 . . . . . . . . . . . . . . . . . . . . . . . . . .362 .372 .353

2035 . . . . . . . . . . . . . . . . . . . . . . . . . .360 .372 .350

2040 . . . . . . . . . . . . . . . . . . . . . . . . . .358 .371 .347

2045 . . . . . . . . . . . . . . . . . . . . . . . . . .356 .371 .343

2050 . . . . . . . . . . . . . . . . . . . . . . . . . .354 .370 .338

2055 . . . . . . . . . . . . . . . . . . . . . . . . . .351 .369 .334

2060 . . . . . . . . . . . . . . . . . . . . . . . . . .348 .368 .330

2065 . . . . . . . . . . . . . . . . . . . . . . . . . .346 .367 .326

2070 . . . . . . . . . . . . . . . . . . . . . . . . . .343 .367 .322

2075 . . . . . . . . . . . . . . . . . . . . . . . . . .341 .366 .318

2080 . . . . . . . . . . . . . . . . . . . . . . . . . .339 .366 .314

2085 . . . . . . . . . . . . . . . . . . . . . . . . . .337 .366 .311

2090 . . . . . . . . . . . . . . . . . . . . . . . . . .336 .367 .308
Appendices

206

3. Estimates in Dollars

This section contains long-range projections, in dollars, of the operations of

the theoretical combined OASI and DI Trust Funds and in some cases the HI

Trust Fund. Comparing current dollar values over long periods of time is difficult because of the effect of inflation. In order to compare dollar values in a

meaningful way, table VI.G6 provides several economic series or indices

which can be used to adjust current dollars for changes in prices, wages, or

other aspects of economic growth during the projection period. Any series of

values can be adjusted by dividing the value for each year by the corresponding index value for the year.

One of the most common forms of standardization is price indexing, which

uses some measure of change in the prices of consumer goods. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W,

hereafter referred to as CPI), published by the Bureau of Labor Statistics,

Department of Labor, is one such price index. The Social Security Administration (SSA) uses this index to determine the annual cost-of-living increases

for OASDI monthly benefits. The Trustees assume the ultimate annual rate

of increase in the CPI will be 3.4, 2.7, and 2.0 percent for the low-cost, intermediate, and high-cost sets of assumptions, respectively. Table VI.G7 provides CPI-indexed dollar values (those adjusted using the CPI in table

VI.G6), which indicate the relative purchasing power of the values over time.

Wage indexing is another type of standardization. It 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 209(k)(1) of the Social

Security Act. SSA uses this index to annually adjust the contribution and

benefit base and other earnings-related program amounts. The Trustees

assume that the average wage will grow by an average rate of 5.2, 3.8, and

2.5 percent under the low-cost, intermediate, and high-cost assumptions,

respectively, between 2023 and 2088. Wage-indexed values indicate the level

of a series relative to the standard of living of workers over time.

The taxable payroll index adjusts for the effects of changes in the number of

workers and changes in the proportion of earnings that are taxable, as well as

for the effects of price inflation and real-wage growth. The OASDI taxable

payroll consists of all earnings subject to OASDI taxation, with an adjustment for the lower effective tax rate on multiple-employer excess wages. A

series of values, divided by the taxable payroll, indicates the percentage of

payroll that each value represents, and thus the extent to which the series of

values increases or decreases as a percent of payroll over time.
207

OASDI and HI: Estimates in Dollars

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 section

2 of this appendix) indicate their relative share of the total output of the

economy. The Trustees make no explicit assumption about growth in taxable

payroll or GDP. These series reflect the 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.

Each interest-rate factor shown in table VI.G6 equals the average of the

assumed annual interest rates for special public-debt obligations issuable to

the trust funds in that year. The Trustees use a slightly different series of

interest rates, the actual annual yields on currently-held trust fund asset

reserves, to calculate the summarized values presented elsewhere in this

report. The Trustees assume that ultimate nominal interest rates, which in

practice are compounded semiannually, will equal 6.8, 5.6, and 4.4 percent

for the low-cost, intermediate, and high-cost assumptions, respectively.
Appendices

208

Table VI.G6.—Selected Economic Variables, Calendar Years 2013-90

[GDP and taxable payroll in billions]

Calendar year

Adjusted

CPI

a

Average

wage index

Taxable

payroll

b

Gross

domestic

product

Compound

interest-rate

factorc

Intermediate:

2013 . . . . . . . . . . . . . 98.42 $45,128.76 $5,892 $16,790 0.9720

2014 . . . . . . . . . . . . . 100.00 46,786.77 6,185 17,557 1.0000

2015 . . . . . . . . . . . . . 101.95 49,058.50 6,512 18,426 1.0359

2016 . . . . . . . . . . . . . 104.17 51,505.89 6,896 19,377 1.0796

2017 . . . . . . . . . . . . . 106.64 54,052.13 7,317 20,400 1.1310

2018 . . . . . . . . . . . . . 109.39 56,590.98 7,759 21,475 1.1896

2019 . . . . . . . . . . . . . 112.33 59,018.85 8,190 22,578 1.2541

2020 . . . . . . . . . . . . . 115.37 61,453.22 8,620 23,694 1.3240

2021 . . . . . . . . . . . . . 118.48 63,979.68 9,049 24,815 1.3979

2022 . . . . . . . . . . . . . 121.68 66,556.71 9,472 25,935 1.4764

2023 . . . . . . . . . . . . . 124.97 69,129.06 9,898 27,091 1.5603

2025 . . . . . . . . . . . . . 131.81 74,502.16 10,774 29,575 1.7425

2030 . . . . . . . . . . . . . 150.59 90,348.80 13,305 36,750 2.2967

2035 . . . . . . . . . . . . . 172.04 109,478.18 16,448 45,659 3.0272

2040 . . . . . . . . . . . . . 196.56 132,306.97 20,430 57,003 3.9899

2045 . . . . . . . . . . . . . 224.57 159,710.83 25,376 71,254 5.2589

2050 . . . . . . . . . . . . . 256.56 192,564.84 31,408 88,833 6.9315

2055 . . . . . . . . . . . . . 293.12 232,131.12 38,749 110,392 9.1359

2060 . . . . . . . . . . . . . 334.89 279,718.32 47,705 136,921 12.0416

2065 . . . . . . . . . . . . . 382.61 336,930.59 58,750 169,890 15.8713

2070 . . . . . . . . . . . . . 437.12 405,721.36 72,427 211,004 20.9190

2075 . . . . . . . . . . . . . 499.41 488,947.39 89,388 262,181 27.5721

2080 . . . . . . . . . . . . . 570.57 589,789.73 110,375 325,644 36.3412

2085 . . . . . . . . . . . . . 651.87 711,804.76 136,175 403,770 47.8992

2090 . . . . . . . . . . . . . 744.76 859,380.63 167,825 499,900 63.1331

Low-cost:

2013 . . . . . . . . . . . . . 98.24 45,167.40 5,896 16,807 .9674

2014 . . . . . . . . . . . . . 100.00 47,267.39 6,268 17,771 1.0000

2015 . . . . . . . . . . . . . 102.82 50,382.48 6,739 19,032 1.0499

2016 . . . . . . . . . . . . . 106.26 53,894.61 7,304 20,464 1.1120

2017 . . . . . . . . . . . . . 109.87 57,365.57 7,915 21,918 1.1808

2018 . . . . . . . . . . . . . 113.59 60,578.54 8,520 23,335 1.2542

2019 . . . . . . . . . . . . . 117.45 63,823.32 9,127 24,843 1.3347

2020 . . . . . . . . . . . . . 121.44 67,253.43 9,743 26,401 1.4225

2021 . . . . . . . . . . . . . 125.57 70,825.38 10,362 27,969 1.5185

2022 . . . . . . . . . . . . . 129.84 74,636.44 11,017 29,611 1.6227

2023 . . . . . . . . . . . . . 134.25 78,527.51 11,694 31,324 1.7348

2025 . . . . . . . . . . . . . 143.54 86,816.44 13,072 35,064 1.9830

2030 . . . . . . . . . . . . . 169.66 112,291.05 17,258 46,398 2.7704

2035 . . . . . . . . . . . . . 200.53 145,010.03 22,824 61,419 3.8703

2040 . . . . . . . . . . . . . 237.01 186,635.92 30,388 81,834 5.4069

2045 . . . . . . . . . . . . . 280.14 239,894.75 40,576 109,456 7.5536

2050 . . . . . . . . . . . . . 331.11 308,006.37 54,123 146,344 10.5526

2055 . . . . . . . . . . . . . 391.36 395,389.23 72,134 195,464 14.7423

2060 . . . . . . . . . . . . . 462.58 507,618.10 96,149 261,102 20.5954

2065 . . . . . . . . . . . . . 546.75 651,693.62 128,368 349,338 28.7724

2070 . . . . . . . . . . . . . 646.23 836,461.37 171,791 468,439 40.1959

2075 . . . . . . . . . . . . . 763.82 1,074,476.32 230,492 629,283 56.1549

2080 . . . . . . . . . . . . . 902.81 1,381,405.44 309,711 845,859 78.4500

2085 . . . . . . . . . . . . . 1,067.08 1,776,889.82 415,913 1,135,314 109.5969

2090 . . . . . . . . . . . . . 1,261.25 2,286,224.53 557,808 1,521,298 153.1100
209

OASDI and HI: Estimates in Dollars

Table VI.G7 shows the operations of the combined OASI and DI Trust Funds

in CPI-indexed 2014 dollars—that is, adjusted by the CPI indexing series as

discussed above. The following items are presented in the table: (1) noninterest income; (2) interest income; (3) total income; (4) total cost; and (5)

asset reserves at the end of the year. Non-interest income consists of payroll

tax contributions, income from taxation of benefits, and reimbursements

from the General Fund of the Treasury, if any. Cost consists of scheduled

benefits, administrative expenses, financial interchange with the Railroad

Retirement program, and payments for vocational rehabilitation services for

disabled beneficiaries. Table VI.G7 shows trust fund operations under the

low-cost, intermediate, and high-cost sets of assumptions.

High-cost:

2013 . . . . . . . . . . . . . 98.54 $45,105.29 $5,889 $16,779 0.9795

2014 . . . . . . . . . . . . . 100.00 46,114.81 6,078 17,268 1.0000

2015 . . . . . . . . . . . . . 101.46 47,560.56 6,255 17,750 1.0236

2016 . . . . . . . . . . . . . 102.96 49,256.28 6,482 18,332 1.0540

2017 . . . . . . . . . . . . . 104.68 51,103.87 6,751 19,002 1.0922

2018 . . . . . . . . . . . . . 106.65 52,927.59 7,036 19,710 1.1367

2019 . . . . . . . . . . . . . 108.77 54,656.72 7,313 20,442 1.1863

2020 . . . . . . . . . . . . . 110.95 56,418.17 7,594 21,200 1.2403

2021 . . . . . . . . . . . . . 113.17 58,168.47 7,879 21,983 1.2968

2022 . . . . . . . . . . . . . 115.43 59,886.69 8,162 22,758 1.3558

2023 . . . . . . . . . . . . . 117.74 61,502.02 8,424 23,522 1.4170

2025 . . . . . . . . . . . . . 122.50 64,600.56 8,938 25,060 1.5459

2030 . . . . . . . . . . . . . 135.24 73,426.07 10,336 29,275 1.9217

2035 . . . . . . . . . . . . . 149.32 83,461.41 11,954 34,167 2.3888

2040 . . . . . . . . . . . . . 164.86 94,705.85 13,852 39,978 2.9695

2045 . . . . . . . . . . . . . 182.02 107,341.82 15,996 46,683 3.6913

2050 . . . . . . . . . . . . . 200.97 121,503.01 18,349 54,209 4.5886

2055 . . . . . . . . . . . . . 221.88 137,498.50 20,923 62,586 5.7040

2060 . . . . . . . . . . . . . 244.98 155,456.62 23,749 71,948 7.0906

2065 . . . . . . . . . . . . . 270.47 175,611.55 26,915 82,599 8.8142

2070 . . . . . . . . . . . . . 298.63 198,288.48 30,479 94,757 10.9568

2075 . . . . . . . . . . . . . 329.71 224,061.18 34,502 108,592 13.6203

2080 . . . . . . . . . . . . . 364.02 253,439.27 39,010 124,200 16.9311

2085 . . . . . . . . . . . . . 401.91 286,866.61 44,043 141,718 21.0468

2090 . . . . . . . . . . . . . 443.74 324,883.28 49,679 161,487 26.1630

a CPI-W indexed to calendar year 2014.

b Total earnings subject to OASDI contribution rates, adjusted to reflect the lower effective contribution

rates (compared to the combined employee-employer rate) that apply to multiple-employer “excess wages.”

c

Incorporates 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.G6.—Selected Economic Variables, Calendar Years 2013-90

[GDP and taxable payroll in billions]

Calendar year

Adjusted

CPI

a

Average

wage index

Taxable

payroll

b

Gross

domestic

product

Compound

interest-rate

factorc
Appendices

210

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

Table VI.G7.—Operations of the Combined OASI and DI Trust Funds,

in CPI-indexed 2014 Dollars,a Calendar Years 2014-90

[In billions]

a CPI-indexed 2014 dollars equal current dollars adjusted by the CPI indexing series in table VI.G6.

Calendar year

Non-interest

income

Interest

income

Total

income Cost

Asset

reserves at

end of year

Intermediate:

2014 . . . . . . . . . . . . . $783.4 $99.0 $882.4 $863.1 $2,783.7

2015 . . . . . . . . . . . . . 825.3 94.8 920.1 892.3 2,758.3

2016 . . . . . . . . . . . . . 853.4 92.5 945.8 924.7 2,720.7

2017 . . . . . . . . . . . . . 885.7 92.0 977.7 958.7 2,676.7

2018 . . . . . . . . . . . . . 917.3 92.9 1,010.2 994.3 2,625.4

2019 . . . . . . . . . . . . . 943.8 93.4 1,037.2 1,031.5 2,562.2

2020 . . . . . . . . . . . . . 968.3 93.1 1,061.4 1,070.7 2,485.6

2021 . . . . . . . . . . . . . 991.4 91.6 1,083.0 1,107.6 2,395.7

2022 . . . . . . . . . . . . . 1,012.7 89.7 1,102.4 1,147.1 2,288.0

2023 . . . . . . . . . . . . . 1,032.1 87.6 1,119.7 1,188.3 2,159.3

2025 . . . . . . . . . . . . . 1,068.4 87.7 1,156.1 1,270.4 1,844.8

2030b. . . . . . . . . . . .

b The combined OASI and DI Trust Funds become depleted in 2033 under the intermediate assumptions and

in 2028 under the high-cost assumptions, so estimates for later years are not shown.

1,161.5 45.8 1,207.4 1,467.0 672.3

Low-cost:

2014 . . . . . . . . . . . . . 789.9 99.8 889.6 861.1 2,793.0

2015 . . . . . . . . . . . . . 848.6 98.7 947.3 882.5 2,781.2

2016 . . . . . . . . . . . . . 883.7 101.8 985.5 910.8 2,765.8

2017 . . . . . . . . . . . . . 926.9 107.2 1,034.2 943.8 2,765.3

2018 . . . . . . . . . . . . . 966.7 113.6 1,080.2 978.9 2,776.2

2019 . . . . . . . . . . . . . 1,002.1 119.8 1,121.9 1,014.9 2,791.9

2020 . . . . . . . . . . . . . 1,035.3 126.2 1,161.6 1,052.1 2,809.6

2021 . . . . . . . . . . . . . 1,066.3 132.7 1,199.0 1,087.1 2,829.1

2022 . . . . . . . . . . . . . 1,098.2 139.9 1,238.1 1,124.9 2,849.3

2023 . . . . . . . . . . . . . 1,128.5 147.6 1,276.0 1,164.7 2,866.9

2025 . . . . . . . . . . . . . 1,182.8 166.3 1,349.1 1,245.2 2,889.5

2030 . . . . . . . . . . . . . 1,326.5 190.8 1,517.3 1,444.7 2,859.3

2035 . . . . . . . . . . . . . 1,486.5 178.5 1,665.0 1,625.0 2,654.8

2040 . . . . . . . . . . . . . 1,673.8 163.4 1,837.3 1,794.1 2,426.2

2045 . . . . . . . . . . . . . 1,889.2 156.5 2,045.7 1,976.6 2,330.4

2050 . . . . . . . . . . . . . 2,130.9 158.5 2,289.3 2,194.8 2,367.4

2055 . . . . . . . . . . . . . 2,402.8 166.5 2,569.4 2,463.6 2,487.4

2060 . . . . . . . . . . . . . 2,710.5 174.0 2,884.5 2,781.7 2,590.0

2065 . . . . . . . . . . . . . 3,061.7 180.6 3,242.3 3,134.7 2,682.9

2070 . . . . . . . . . . . . . 3,465.9 189.4 3,655.3 3,532.0 2,812.3

2075 . . . . . . . . . . . . . 3,931.9 207.2 4,139.1 3,958.1 3,097.0

2080 . . . . . . . . . . . . . 4,465.1 251.3 4,716.4 4,412.0 3,806.3

2085 . . . . . . . . . . . . . 5,071.2 327.6 5,398.7 4,980.1 4,990.5

2090 . . . . . . . . . . . . . 5,756.3 420.1 6,176.5 5,688.3 6,394.2

High-cost:

2014 . . . . . . . . . . . . . 775.0 97.8 872.9 865.2 2,772.1

2015 . . . . . . . . . . . . . 793.9 90.8 884.8 900.1 2,717.1

2016 . . . . . . . . . . . . . 814.2 84.9 899.1 935.9 2,640.6

2017 . . . . . . . . . . . . . 835.7 80.2 915.9 972.0 2,541.1

2018 . . . . . . . . . . . . . 857.0 76.1 933.2 1,009.5 2,418.0

2019 . . . . . . . . . . . . . 874.7 71.3 946.0 1,048.4 2,268.3

2020 . . . . . . . . . . . . . 891.8 65.5 957.3 1,089.1 2,092.0

2021 . . . . . . . . . . . . . 909.0 57.9 966.9 1,127.1 1,890.7

2022 . . . . . . . . . . . . . 925.5 49.6 975.1 1,167.6 1,661.2

2023 . . . . . . . . . . . . . 938.5 41.1 979.5 1,209.4 1,398.8

2025b . . . . . . . . . . . . 960.7 30.0 990.6 1,291.7 784.8
211

OASDI and HI: Estimates in Dollars

Figure VI.G1 compares annual cost with annual total income and annual

non-interest income. The figure shows only the OASDI program under intermediate assumptions, and presents values in CPI-indexed 2014 dollars, consistent with table VI.G7. The difference between the income values for each

year is equal to the trust fund interest earnings. The figure illustrates that,

under intermediate assumptions: (1) annual cost exceeds non-interest income

in each year of the projection period; (2) total annual income, which includes

interest earnings on trust fund asset reserves, is sufficient to cover annual

cost for years 2014 through 2019; and (3) total annual income is not sufficient to cover annual cost for years beginning in 2020. From 2020 through

2032 (the year preceding the year of trust fund reserve depletion), annual

cost is covered by drawing down combined trust fund reserves.

Table VI.G8 shows the operations of the combined OASI and DI Trust Funds

in current dollars—that is, in dollars unadjusted for price inflation. The following items are presented in the table: (1) non-interest income; (2) interest

income; (3) total income; (4) total cost; and (5) asset reserves at the end of

the year. The Trustees present these estimates, using the low-cost, intermediate, and high-cost sets of demographic and economic assumptions, to facilitate independent analysis.

Figure VI.G1.—Estimated OASDI Income and Cost in CPI-indexed 2014 Dollars,

Based on Intermediate Assumptions

[In billions]

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2010 2015 2020 2025 2030 2035

Calendar year

Cost

Total income

Non-interest income
Appendices

212

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

Table VI.G8.—Operations of the Combined OASI and DI Trust Funds,

in Current Dollars, Calendar Years 2014-90

[In billions]

Calendar year

Non-interest

income

Interest

income

Total

income Cost

Asset

reserves at

end of year

Intermediate:

2014 . . . . . . . . . . . . . $783.4 $99.0 $882.4 $863.1 $2,783.7

2015 . . . . . . . . . . . . . 841.4 96.7 938.0 909.7 2,812.1

2016 . . . . . . . . . . . . . 888.9 96.3 985.3 963.3 2,834.1

2017 . . . . . . . . . . . . . 944.5 98.1 1,042.7 1,022.3 2,854.4

2018 . . . . . . . . . . . . . 1,003.4 101.6 1,105.0 1,087.6 2,871.8

2019 . . . . . . . . . . . . . 1,060.3 104.9 1,165.1 1,158.7 2,878.3

2020 . . . . . . . . . . . . . 1,117.1 107.4 1,224.5 1,235.2 2,867.6

2021 . . . . . . . . . . . . . 1,174.7 108.5 1,283.2 1,312.3 2,838.4

2022 . . . . . . . . . . . . . 1,232.3 109.2 1,341.4 1,395.8 2,784.1

2023 . . . . . . . . . . . . . 1,289.7 109.5 1,399.3 1,484.9 2,698.4

2025 . . . . . . . . . . . . . 1,408.2 115.6 1,523.8 1,674.5 2,431.6

2030a. . . . . . . . . . . .

a The combined OASI and DI Trust Funds become depleted in 2033 under the intermediate assumptions and

in 2028 under the high-cost assumptions, so estimates for later years are not shown.

1,749.1 69.0 1,818.1 2,209.2 1,012.5

Low-cost:

2014 . . . . . . . . . . . . . 789.9 99.8 889.6 861.1 2,793.0

2015 . . . . . . . . . . . . . 872.5 101.5 974.0 907.4 2,859.6

2016 . . . . . . . . . . . . . 939.1 108.1 1,047.2 967.8 2,939.0

2017 . . . . . . . . . . . . . 1,018.4 117.8 1,136.2 1,037.0 3,038.3

2018 . . . . . . . . . . . . . 1,098.0 129.0 1,227.0 1,111.9 3,153.4

2019 . . . . . . . . . . . . . 1,176.9 140.7 1,317.6 1,191.9 3,279.0

2020 . . . . . . . . . . . . . 1,257.3 153.3 1,410.6 1,277.6 3,412.0

2021 . . . . . . . . . . . . . 1,339.0 166.6 1,505.6 1,365.1 3,552.5

2022 . . . . . . . . . . . . . 1,425.9 181.7 1,607.5 1,460.6 3,699.4

2023 . . . . . . . . . . . . . 1,515.0 198.1 1,713.1 1,563.7 3,848.9

2025 . . . . . . . . . . . . . 1,697.8 238.7 1,936.5 1,787.3 4,147.6

2030 . . . . . . . . . . . . . 2,250.5 323.7 2,574.1 2,450.9 4,851.0

2035 . . . . . . . . . . . . . 2,980.8 357.9 3,338.7 3,258.6 5,323.7

2040 . . . . . . . . . . . . . 3,967.2 387.3 4,354.5 4,252.3 5,750.4

2045 . . . . . . . . . . . . . 5,292.5 438.3 5,730.8 5,537.2 6,528.3

2050 . . . . . . . . . . . . . 7,055.7 524.7 7,580.3 7,267.1 7,838.9

2055 . . . . . . . . . . . . . 9,403.8 651.8 10,055.6 9,641.8 9,734.9

2060 . . . . . . . . . . . . . 12,538.2 804.9 13,343.0 12,867.4 11,980.6

2065 . . . . . . . . . . . . . 16,739.8 987.5 17,727.3 17,138.7 14,668.7

2070 . . . . . . . . . . . . . 22,398.1 1,223.8 23,621.9 22,824.8 18,173.7

2075 . . . . . . . . . . . . . 30,032.9 1,582.6 31,615.5 30,233.1 23,655.3

2080 . . . . . . . . . . . . . 40,311.1 2,268.6 42,579.7 39,832.1 34,363.8

2085 . . . . . . . . . . . . . 54,113.5 3,495.2 57,608.7 53,141.8 53,252.7

2090 . . . . . . . . . . . . . 72,601.6 5,299.1 77,900.7 71,743.2 80,646.6

High-cost:

2014 . . . . . . . . . . . . . 775.0 97.8 872.9 865.2 2,772.1

2015 . . . . . . . . . . . . . 805.5 92.1 897.6 913.2 2,756.6

2016 . . . . . . . . . . . . . 838.3 87.4 925.7 963.6 2,718.8

2017 . . . . . . . . . . . . . 874.9 84.0 958.8 1,017.5 2,660.1

2018 . . . . . . . . . . . . . 914.0 81.2 995.2 1,076.6 2,578.7

2019 . . . . . . . . . . . . . 951.4 77.6 1,029.0 1,140.4 2,467.3

2020 . . . . . . . . . . . . . 989.5 72.6 1,062.1 1,208.3 2,321.0

2021 . . . . . . . . . . . . . 1,028.7 65.6 1,094.2 1,275.6 2,139.7

2022 . . . . . . . . . . . . . 1,068.3 57.2 1,125.6 1,347.7 1,917.5

2023 . . . . . . . . . . . . . 1,105.0 48.3 1,153.3 1,423.9 1,646.9

2025a. . . . . . . . . . . . 1,176.8 36.7 1,213.5 1,582.2 961.3
213

OASDI and HI: Estimates in Dollars

Table VI.G9 shows, in current dollars, the annual non-interest income and

cost of the combined OASI and DI Trust Funds, of the HI Trust Fund, and of

the combined OASI, DI, and HI Trust Funds, based on the low-cost, intermediate, and high-cost sets of assumptions. For OASDI, non-interest income

consists of payroll tax contributions, proceeds from taxation of OASDI benefits, and reimbursements from the General Fund of the Treasury, if any. Cost

consists of scheduled benefits, administrative expenses, financial interchange

with the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries. For HI, non-interest income consists of payroll tax contributions (including contributions from railroad

employment), up to an additional 0.9 percent tax on earned income for relatively high earners, proceeds from the taxation of OASDI benefits, and reimbursements from the General Fund of the Treasury, if any. Total cost consists

of outlays (scheduled benefits and administrative expenses) for insured beneficiaries. The Trustees show income and cost estimates on a cash basis for

the OASDI program and on an incurred basis for the HI program. Table

VI.G9 also shows the balance, which equals the difference between noninterest income and cost.
Appendices

214

Table VI.G9.—OASDI and HI Annual Non-interest Income, Cost, and

Balance in Current Dollars, Calendar Years 2014-90

[In billions]

Calendar

year

OASDI HI Combined

Noninterest

income Cost Balance

Noninterest

income Cost Balance

Noninterest

income Cost Balance

Intermediate:

2014 . . . . . $783 $863 -$80 $255 $263 -$8 $1,039 $1,127 -$88

2015 . . . . . 841 910 -68 271 266 5 1,112 1,176 -63

2016 . . . . . 889 963 -74 289 279 10 1,178 1,243 -65

2017 . . . . . 945 1,022 -78 308 296 13 1,253 1,318 -65

2018 . . . . . 1,003 1,088 -84 329 318 10 1,332 1,406 -74

2019 . . . . . 1,060 1,159 -98 348 338 10 1,408 1,497 -89

2020 . . . . . 1,117 1,235 -118 368 362 6 1,485 1,597 -112

2021 . . . . . 1,175 1,312 -138 388 388 a 1,563 1,700 -137

2022 . . . . . 1,232 1,396 -164 408 415 -7 1,640 1,810 -170

2023 . . . . . 1,290 1,485 -195 428 442 -14 1,718 1,927 -209

2025 . . . . . 1,408 1,674 -266 472 516 -44 1,880 2,191 -310

2030 . . . . . 1,749 2,209 -460 599 701 -103 2,348 2,911 -563

2035 . . . . . 2,169 2,811 -642 756 939 -183 2,925 3,750 -825

2040 . . . . . 2,696 3,491 -794 954 1,236 -282 3,650 4,727 -1,077

2045 . . . . . 3,349 4,299 -950 1,203 1,595 -393 4,552 5,894 -1,342

2050 . . . . . 4,146 5,305 -1,158 1,513 2,012 -499 5,660 7,317 -1,657

2055 . . . . . 5,120 6,593 -1,473 1,900 2,502 -602 7,020 9,095 -2,074

2060 . . . . . 6,312 8,233 -1,922 2,383 3,118 -735 8,695 11,352 -2,657

2065 . . . . . 7,782 10,279 -2,497 2,985 3,919 -934 10,768 14,198 -3,431

2070 . . . . . 9,605 12,848 -3,243 3,739 4,951 -1,212 13,344 17,799 -4,455

2075 . . . . . 11,863 15,984 -4,121 4,677 6,227 -1,550 16,540 22,211 -5,671

2080 . . . . . 14,650 19,759 -5,109 5,840 7,728 -1,888 20,490 27,487 -6,998

2085 . . . . . 18,085 24,569 -6,484 7,284 9,520 -2,237 25,369 34,090 -8,721

2090 . . . . . 22,313 30,699 -8,386 9,075 11,694 -2,619 31,387 42,392 -11,005

Low-cost:

2014 . . . . . 790 861 -71 258 258 1 1,048 1,119 -71

2015 . . . . . 873 907 -35 280 257 23 1,153 1,165 -12

2016 . . . . . 939 968 -29 305 271 34 1,245 1,239 6

2017 . . . . . 1,018 1,037 -19 332 286 46 1,350 1,323 27

2018 . . . . . 1,098 1,112 -14 357 305 52 1,455 1,417 38

2019 . . . . . 1,177 1,192 -15 382 322 60 1,559 1,514 45

2020 . . . . . 1,257 1,278 -20 408 342 67 1,666 1,619 46

2021 . . . . . 1,339 1,365 -26 435 363 72 1,774 1,728 46

2022 . . . . . 1,426 1,461 -35 464 386 78 1,890 1,846 43

2023 . . . . . 1,515 1,564 -49 493 409 84 2,008 1,973 36

2025 . . . . . 1,698 1,787 -90 559 471 87 2,256 2,259 -2

2030 . . . . . 2,250 2,451 -200 759 620 139 3,010 3,071 -61

2035 . . . . . 2,981 3,259 -278 1,029 803 227 4,010 4,061 -51

2040 . . . . . 3,967 4,252 -285 1,400 1,006 394 5,367 5,258 109

2045 . . . . . 5,292 5,537 -245 1,906 1,282 624 7,198 6,819 379

2050 . . . . . 7,056 7,267 -211 2,591 1,635 957 9,647 8,902 745

2055 . . . . . 9,404 9,642 -238 3,518 2,107 1,411 12,922 11,749 1,173

2060 . . . . . 12,538 12,867 -329 4,768 2,786 1,982 17,307 15,654 1,653

2065 . . . . . 16,740 17,139 -399 6,455 3,789 2,666 23,195 20,928 2,268

2070 . . . . . 22,398 22,825 -427 8,739 5,202 3,537 31,137 28,026 3,111

2075 . . . . . 30,033 30,233 -200 11,830 7,120 4,710 41,863 37,353 4,510

2080 . . . . . 40,311 39,832 479 16,007 9,624 6,383 56,318 49,456 6,862

2085 . . . . . 54,113 53,142 972 21,663 12,916 8,747 75,777 66,057 9,719

2090 . . . . . 72,602 71,743 858 29,323 17,464 11,859 101,925 89,207 12,718
215

OASDI and HI: Estimates in Dollars

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

High-cost:

2014 . . . . . $775 $865 -$90 $251 $269 -$19 $1,026 $1,135 -$109

2015 . . . . . 806 913 -108 260 274 -13 1,066 1,187 -121

2016 . . . . . 838 964 -125 273 288 -16 1,111 1,252 -141

2017 . . . . . 875 1,018 -143 287 306 -20 1,162 1,324 -162

2018 . . . . . 914 1,077 -163 301 332 -30 1,215 1,408 -193

2019 . . . . . 951 1,140 -189 316 356 -40 1,267 1,496 -229

2020 . . . . . 989 1,208 -219 331 384 -54 1,320 1,593 -273

2021 . . . . . 1,029 1,276 -247 346 416 -70 1,374 1,691 -317

2022 . . . . . 1,068 1,348 -279 361 450 -89 1,429 1,797 -368

2023 . . . . . 1,105 1,424 -319 375 484 -109 1,480 1,908 -428

2025 . . . . . 1,177 1,582 -405 403 574 -171 1,580 2,156 -576

2030 . . . . . 1,371 2,007 -635 478 807 -329 1,849 2,814 -965

2035 . . . . . 1,594 2,446 -852 564 1,121 -557 2,158 3,567 -1,409

2040 . . . . . 1,852 2,897 -1,045 663 1,506 -844 2,515 4,403 -1,889

2045 . . . . . 2,141 3,383 -1,242 775 1,965 -1,190 2,916 5,348 -2,432

2050 . . . . . 2,461 3,937 -1,476 899 2,445 -1,546 3,360 6,382 -3,022

2055 . . . . . 2,812 4,592 -1,779 1,040 2,930 -1,890 3,853 7,521 -3,669

2060 . . . . . 3,202 5,371 -2,168 1,200 3,435 -2,235 4,402 8,806 -4,404

2065 . . . . . 3,641 6,284 -2,643 1,383 3,981 -2,598 5,024 10,265 -5,241

2070 . . . . . 4,137 7,365 -3,228 1,595 4,615 -3,020 5,732 11,980 -6,248

2075 . . . . . 4,698 8,597 -3,899 1,837 5,317 -3,480 6,536 13,914 -7,379

2080 . . . . . 5,326 9,962 -4,635 2,110 6,033 -3,923 7,437 15,995 -8,558

2085 . . . . . 6,030 11,535 -5,505 2,421 6,790 -4,370 8,451 18,326 -9,875

2090 . . . . . 6,821 13,330 -6,509 2,773 7,807 -5,034 9,594 21,136 -11,543

a Between -$500 million and $500 million.

Table VI.G9.—OASDI and HI Annual Non-interest Income, Cost, and

Balance in Current Dollars, Calendar Years 2014-90 (Cont.)

[In billions]

Calendar

year

OASDI HI Combined

Noninterest

income Cost Balance

Noninterest

income Cost Balance

Noninterest

income Cost Balance
Appendices

216

H. 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, the OASI Trust Fund pays monthly benefits to disabled children aged 18 and over of retired and deceased workers if the disability began before age 18. The age by which disability must have begun

was later changed to age 22. Effective February 1968, the OASI Trust Fund

pays reduced monthly benefits 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.

As of December 31, 2013, about 1,065,000 individuals were receiving

monthly benefits from the OASI Trust Fund because of their disabilities or

the disabilities of children. This total includes approximately 26,000 mothers

and fathers (wives or husbands under normal retirement age of retiredworker 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. In calendar year 2013, the OASI Trust

Fund paid a total of $9,953 million to the people described above. Table

VI.H1 shows OASI scheduled benefits for disability for selected calendar

years during 1960-2013 and estimates for 2014-23 based on the intermediate

set of assumptions.
217

OASI Expenditures for the Disabled

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

Table VI.H1.—Benefit Disbursements From the OASI Trust Fund

With Respect to Disabled Beneficiaries

[Beneficiaries in thousands; scheduled benefits in millions]

Calendar year

Disabled beneficiaries, end of year Amount of scheduled benefits

a

a Beginning in 1966, includes payments for vocational rehabilitation services.

Total Children b

b Also includes certain mothers and fathers (see text).

Widowswidowers c

c

In 1984 and later years, includes only disabled widows and widowers aged 50-59, because disabled widows and widowers age 60 and older are eligible for the same benefit as a nondisabled aged widow or widower. Therefore, they are not receiving benefits solely because of a disability.

Total Childrenb

Widowswidowers

d

d In 1983 and prior years, includes 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),

compared to the higher nondisabled widow’s and widower’s benefits that would otherwise be payable. In

1984 and later years, includes only scheduled benefits to disabled widows and widowers aged 50-59 (see

footnote c).

Historical data:

1960 . . . . . . . . . 117 117 — $59 $59 —

1965 . . . . . . . . . 214 214 — 134 134 —

1970 . . . . . . . . . 316 281 36 301 260 $41

1975 . . . . . . . . . 435 376 58 664 560 104

1980 . . . . . . . . . 519 460 59 1,223 1,097 126

1985 . . . . . . . . . 594 547 47 2,072 1,885 187

1990 . . . . . . . . . 662 613 49 2,882 2,649 233

1991 . . . . . . . . . 687 627 61 3,179 2,875 304

1992 . . . . . . . . . 715 643 72 3,459 3,079 380

1993 . . . . . . . . . 740 659 81 3,752 3,296 456

1994 . . . . . . . . . 758 671 86 3,973 3,481 492

1995 . . . . . . . . . 772 681 91 4,202 3,672 531

1996 . . . . . . . . . 782 687 94 4,410 3,846 565

1997 . . . . . . . . . 789 693 96 4,646 4,050 596

1998 . . . . . . . . . 797 698 99 4,838 4,210 627

1999 . . . . . . . . . 805 702 102 4,991 4,336 655

2000 . . . . . . . . . 811 707 104 5,203 4,523 680

2001 . . . . . . . . . 817 712 105 5,520 4,802 718

2002 . . . . . . . . . 823 717 106 5,773 5,024 749

2003 . . . . . . . . . 827 722 105 5,950 5,184 764

2004 . . . . . . . . . 828 723 105 6,099 5,316 781

2005 . . . . . . . . . 836 728 108 6,449 5,556 834

2006 . . . . . . . . . 840 732 108 6,720 5,852 864

2007 . . . . . . . . . 851 744 107 7,053 6,181 869

2008 . . . . . . . . . 922 813 109 7,688 6,776 908

2009 . . . . . . . . . 969 857 112 8,595 7,618 974

2010 . . . . . . . . . 996 879 117 8,858 7,848 1,008

2011 . . . . . . . . . 1,020 899 121 9,136 8,085 1,050

2012 . . . . . . . . . 1,045 920 125 9,698 8,595 1,102

2013 . . . . . . . . . 1,065 939 126 9,953 8,840 1,109

Estimates under the intermediate assumptions:

2014 . . . . . . . . . 1,083 958 125 10,441 9,305 1,128

2015 . . . . . . . . . 1,100 976 124 10,832 9,695 1,130

2016 . . . . . . . . . 1,117 994 123 11,278 10,139 1,132

2017 . . . . . . . . . 1,132 1,012 121 11,756 10,612 1,136

2018 . . . . . . . . . 1,148 1,029 119 12,282 11,126 1,147

2019 . . . . . . . . . 1,163 1,046 117 12,850 11,680 1,161

2020 . . . . . . . . . 1,178 1,062 116 13,465 12,269 1,187

2021 . . . . . . . . . 1,194 1,078 116 14,110 12,877 1,223

2022 . . . . . . . . . 1,210 1,094 116 14,794 13,517 1,267

2023 . . . . . . . . . 1,226 1,110 117 15,502 14,187 1,304
Appendices

218

Under the intermediate assumptions, estimated total scheduled benefits from

the OASI Trust Fund with respect to disabled beneficiaries will increase

from $10,441 million in calendar year 2014 to $15,502 million in calendar

year 2023.

In calendar year 2013, 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 DI

fund to all children and spouses of disabled-worker beneficiaries) totaled

$150,108 million. Of this amount, $9,953 million, or 6.6 percent, represented

payments from the OASI Trust Fund. Table VI.H2 contains these and similar

figures for selected calendar years during 1960-2013 and estimates for calendar years 2014-23.
219

OASI Expenditures for the Disabled

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

Table VI.H2.—Benefit Disbursements Under the OASDI Program

With Respect to Disabled Beneficiaries

[Amounts in millions]

Calendar year Total

a

a Beginning in 1966, includes payments for vocational rehabilitation services.

DI Trust Fund b

b Scheduled benefits for disabled workers and their children and spouses.

OASI Trust Fund

Amount

c

c Scheduled benefits for disabled children aged 18 and over, for certain mothers and fathers (see text), and for

disabled widows and widowers (see footnote d, table VI.H1).

Percentage of total

Historical data:

1960 . . . . . . . . . $627 $568 $59 9.4

1965 . . . . . . . . . 1,707 1,573 134 7.9

1970 . . . . . . . . . 3,386 3,085 301 8.9

1975 . . . . . . . . . 9,169 8,505 664 7.2

1980 . . . . . . . . . 16,738 15,515 1,223 7.3

1985 . . . . . . . . . 20,908 18,836 2,072 9.9

1990 . . . . . . . . . 27,717 24,835 2,882 10.4

1991 . . . . . . . . . 30,877 27,698 3,179 10.3

1992 . . . . . . . . . 34,583 31,124 3,459 10.0

1993 . . . . . . . . . 38,378 34,626 3,752 9.8

1994 . . . . . . . . . 41,730 37,757 3,973 9.5

1995 . . . . . . . . . 45,140 40,937 4,202 9.3

1996 . . . . . . . . . 48,615 44,205 4,410 9.1

1997 . . . . . . . . . 50,358 45,712 4,646 9.2

1998 . . . . . . . . . 53,062 48,224 4,838 9.1

1999 . . . . . . . . . 56,390 51,399 4,991 8.9

2000 . . . . . . . . . 60,204 55,001 5,203 8.6

2001 . . . . . . . . . 65,157 59,637 5,520 8.5

2002 . . . . . . . . . 71,493 65,721 5,773 8.1

2003 . . . . . . . . . 76,902 70,952 5,950 7.7

2004 . . . . . . . . . 84,350 78,251 6,099 7.2

2005 . . . . . . . . . 91,835 85,386 6,449 7.0

2006 . . . . . . . . . 99,165 92,446 6,720 6.8

2007 . . . . . . . . . 106,200 99,147 7,053 6.6

2008 . . . . . . . . . 114,064 106,376 7,688 6.7

2009 . . . . . . . . . 127,002 118,407 8,595 6.8

2010 . . . . . . . . . 133,103 124,245 8,858 6.7

2011 . . . . . . . . . 138,115 128,979 9,136 6.6

2012 . . . . . . . . . 146,623 136,925 9,698 6.6

2013 . . . . . . . . . 150,108 140,155 9,953 6.6

Estimates under the intermediate assumptions:

2014 . . . . . . . . . 153,769 143,328 10,441 6.8

2015 . . . . . . . . . 158,124 147,292 10,832 6.9

2016 . . . . . . . . . 163,426 152,147 11,278 6.9

2017 . . . . . . . . . 169,023 157,266 11,756 7.0

2018 . . . . . . . . . 175,167 162,886 12,282 7.0

2019 . . . . . . . . . 182,009 169,158 12,850 7.1

2020 . . . . . . . . . 189,399 175,934 13,465 7.1

2021 . . . . . . . . . 198,614 184,504 14,110 7.1

2022 . . . . . . . . . 208,179 193,385 14,794 7.1

2023 . . . . . . . . . 217,988 202,486 15,502 7.1
Appendices

220

I. GLOSSARY

Actuarial balance. The difference between the summarized income rate and

the summarized cost rate over a given valuation period.

Actuarial deficit. A negative actuarial balance.

Administrative expenses. Expenses incurred by the Social Security Administration and the Department of the Treasury in administering the OASDI

program and the provisions of the Internal Revenue Code relating to the collection of contributions. Such administrative expenses are paid from the

OASI and DI Trust Funds.

Advance tax transfers. Amounts representing the estimated total OASDI

tax contributions for a given month. From May 1983 through November

1990, such amounts were credited to the OASI and DI Trust Funds at the

beginning of each month. The trust funds reimbursed the General Fund of

the Treasury for the associated loss of interest. Advance tax transfers are no

longer made unless needed in order to pay benefits.

Alternatives I, II, or III. See “Assumptions.”

Annual balance. The difference between the income rate and the cost rate

for a given year.

Asset reserves. 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 related to future trends in key factors that affect 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. This report presents three sets of demographic, economic, and program-specific assumptions:

• 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 a low-cost set of assumptions—it assumes relatively

rapid economic growth, high inflation, and favorable (from the standpoint of program financing) demographic and program-specific conditions.

• Alternative III is a high-cost set of assumptions—it assumes relatively

slow economic growth, low inflation, and unfavorable (from the standpoint of program financing) demographic and program-specific conditions.

See tables V.A1, V.B1, and V.B2.
221

Glossary

Automatic cost-of-living benefit increase. The annual increase in benefits,

effective for December, reflecting the increase, if any, in the cost of living. A

benefit increase is applicable only after a beneficiary becomes eligible for

benefits. In general, the benefit increase equals the percentage increase in the

Consumer Price Index for Urban Wage Earners and Clerical Workers

(CPI-W) measured from the third quarter of the previous year to the third

quarter of the current year. If there is no increase in the CPI-W, there is no

cost-of-living benefit increase. See table V.C1.

Auxiliary benefits. Monthly benefits payable to a spouse or child of a

retired or disabled worker, or to a survivor of a deceased worker.

Average indexed monthly earnings—AIME. The measure of lifetime

earnings used in determining the primary insurance amount (PIA) for most

workers who attain age 62, become disabled, or die after 1978. A worker’s

actual past earnings are adjusted by changes in the average wage index, in

order to bring them up to their approximately equivalent value at the time of

retirement or other eligibility for benefits.

Average wage index—AWI. A series that generally increases with the average amount of total wages for each year after 1950, including wages in noncovered employment and wages in covered employment in excess of the

OASDI contribution and benefit base. (See Title 20, Chapter III, section

404.211(c) of the Code of Federal Regulations for a more precise definition.)

These average wage amounts are used to index the taxable earnings of most

workers first becoming eligible for benefits in 1979 or later, and for automatic adjustments in the contribution and benefit base, bend points, earnings

test exempt amounts, and other wage-indexed amounts. See table V.C1.

Award. An administrative determination that an individual is entitled to

receive a specified type of OASDI benefit. Awards can represent not only

new entrants to the benefit rolls but also persons already on the rolls who

become entitled to a different type of benefit. Awards usually result in the

immediate payment of benefits, although payments may be deferred or withheld depending on the individual’s particular circumstances.

Baby boom. The period from the end of World War II (1946) through 1965

marked by unusually high birth rates.

Bend points. The dollar amounts defining the AIME or PIA brackets in the

benefit formulas. For the bend points for years 1979 and later, see table V.C2.

Beneficiary. A person who has been awarded benefits on the basis of his or

her own or another’s earnings record. The benefits may be either in currentpayment status or withheld.

Benefit award. See “Award.”

Benefit payments. The amounts disbursed for OASI and DI benefits by the

Department of the Treasury.
Appendices

222

Benefit termination. See “Termination.”

Best estimate assumptions. See “Assumptions.”

Board. See “Board of Trustees.”

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 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 President appoints and

the Senate confirms the other two members to serve as public representatives. Also referred to as the “Board” or the “Trustees.”

Cash flow. Actual or projected revenue and costs reflecting the levels of

payroll tax contribution rates and benefits scheduled in the law. Net cash

flow is the difference between non-interest income and cost.

Consumer Price Index—CPI. An official measure of inflation in consumer

prices. In this report, CPI refers to the Consumer Price Index for Urban Wage

Earners and Clerical Workers (CPI-W). The Bureau of Labor Statistics,

Department of Labor, publishes historical values for the CPI-W.

Contribution and benefit base. Annual dollar amount above which earnings in employment covered under the OASDI program are neither taxable

nor creditable for benefit-computation purposes. (Also referred to as maximum contribution and benefit base, annual creditable maximum, taxable

maximum, and maximum taxable.) See tables V.C1 and V.C6. See “HI contribution base.”

Contributions. See “Payroll tax contributions.”

Cost. The cost for a year includes scheduled benefits, administrative

expenses, financial interchange with the Railroad Retirement program, and

payments for vocational rehabilitation services for disabled beneficiaries.

Cost-of-living adjustment. See “Automatic cost-of-living benefit increase.”

Cost rate. The cost rate for a year is the ratio of the cost of the program to

the taxable payroll for the year.

Covered earnings. Earnings in employment covered by the OASDI program.

Covered employment. All employment for which earnings are creditable

for Social Security purposes. The program covers almost all employment.

Some exceptions are:

• State and local government employees whose employer has not elected

to be covered under Social Security and who are participating in an

employer-provided pension plan.
223

Glossary

• 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 based on services for wages in covered employment or income

from covered self-employment.

CPI-indexed dollars. Amounts adjusted by the CPI to the value of the dollar

in a particular year.

Creditable earnings. Wages or self-employment earnings posted to a

worker’s earnings record. Such earnings determine eligibility for benefits

and the amount of benefits on that worker’s record. The contribution and

benefit base is the maximum amount of creditable earnings for each worker

in a calendar year.

Current-cost financing. See “Pay-as-you-go financing.”

Current dollars. Amounts expressed in nominal dollars with no adjustment

for inflationary changes in the value of the dollar over time.

Currently insured status. A worker acquires currently insured status when

he or she has accumulated six quarters of coverage during the 13-quarter

period ending with the current quarter.

Current-payment status. Status of a beneficiary to whom a benefit is being

paid for a given month (with or without deductions, provided the deductions

add to less than a full month’s benefit).

Deemed wage credit. See “Military service wage credits.”

Delayed retirement credits. Increases in the benefit amount for certain individuals who did not receive benefits for months after attaining normal retirement age but before age 70. Delayed retirement credits apply to benefits for

January 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.”

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 at

all ages during the year.
Appendices

224

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 insured status. A worker acquires disability insured status if he

or she is: (1) a fully insured worker who has accumulated 20 quarters of coverage during the 40-quarter period ending with the current quarter; (2) a fully

insured worker aged 24-30 who has accumulated quarters of coverage during

one-half of the quarters elapsed after the quarter of attainment of age 21 and

up to and including the current quarter; or (3) a fully insured worker under

age 24 who has accumulated six quarters of coverage during the 12-quarter

period ending with the current quarter.

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 their

recovery or death.

Disabled-worker benefit. A monthly benefit payable to a disabled worker

under normal retirement age and insured for disability. Before November

1960, disability benefits were limited to disabled workers aged 50-64.

Disbursements. Actual expenditures (outgo) made or expected to be made

under current law, including benefits paid or payable, administrative

expenses, financial interchange with the Railroad Retirement program, and

payments for vocational rehabilitation services for disabled beneficiaries.

Earnings. Unless otherwise qualified, all wages from employment and net

earnings from self-employment, whether or not they are taxable or covered.

Earnings test. The provision requiring the withholding of benefits if beneficiaries under normal retirement age have earnings in excess of certain

exempt amounts. See table V.C1.

Economic assumptions. See “Assumptions.”

Effective interest rate. See “Interest rate.”

Excess wages. Wages in excess of the contribution and benefit base on

which a worker initially makes payroll tax contributions, usually as a result

of working for more than one employer during a year. Employee payroll

taxes on excess wages are refundable to affected employees, while the

employer taxes are not refundable.

Expenditures. See “Disbursements.”
225

Glossary

Federal Insurance Contributions Act—FICA. Provision authorizing payroll taxes on the wages of employed persons to provide for Old-Age, Survivors, and Disability Insurance, and for Hospital Insurance. Workers and their

employers generally pay the tax in equal amounts.

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 financial position it would have been had railroad employment always been covered under Social Security.

Fiscal year. The accounting year of the United States Government. A fiscal

year is the 12-month period ending September 30. For example, fiscal year

2014 began October 1, 2013, and will end September 30, 2014.

Full advance funding. A financing method in which contributions are established to match the full cost of future benefits as these costs are incurred

through current service. Such financing methods also provide for amortization over a fixed period of any financial obligation that is incurred at the

beginning of the program (or subsequent modification) as a result of granting

credit for past service.

Fully insured status. A worker acquires fully insured status when his or her

total number of quarters of coverage 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 quarters of coverage, he or she remains

permanently fully insured.

General Fund of the Treasury. Funds held by the Treasury of the United

States, other than receipts collected for a specific purpose (such as Social

Security), and maintained in a separate account for that purpose.

General fund reimbursements. Payments from the General Fund of the

Treasury to the trust funds for specific purposes defined in the law, including:

• The cost of noncontributory wage credits for military service before

1957, and periodic adjustments of previous determinations.

• The cost in 1971-82 of deemed wage credits for military service performed after 1956.

• The cost of benefits to certain uninsured persons who attained age 72

before 1968.

• The cost of payroll tax credits provided to employees in 1984 and selfemployed persons in 1984-89 by Public Law 98-21.

• The cost in 2009-17 of excluding certain self-employment earnings

from SECA taxes under Public Law 110-246.

• Payroll tax revenue forgone under the provisions of Public Laws 111-

147, 111-312, 112-78, and 112-96.
Appendices

226

The general fund also reimburses the trust funds for various other items,

including interest on checks which are not negotiated 6 months after the

month of issue and costs incurred in performing certain legislatively mandated activities not directly related to administering the OASI and DI programs.

Gross domestic product—GDP. The total dollar value of all goods and services produced by labor and property located in the United States, regardless

of who supplies the labor or property.

HI contribution base. Annual dollar amount above which earnings in

employment covered under the HI program are not taxable. (Also referred to

as maximum contribution base, taxable maximum, and maximum taxable.)

Beginning in 1994, the HI contribution base was eliminated.

High-cost assumptions. See “Assumptions.”

Hospital Insurance (HI) Trust Fund. See “Trust fund.”

Immigration. See “Legal immigration” and “Other immigration.”

Income. Income for a given year is the sum of tax revenue on a cash basis

(payroll tax contributions and income from the taxation of scheduled benefits), reimbursements from the General Fund of the Treasury, if any, and

interest credited to the trust funds.

Income rate. Ratio of non-interest income to the OASDI taxable payroll for

the year.

Infinite horizon. The period extending into the indefinite future.

Inflation. An increase in the general price level of goods and services.

Insured status. The state or condition of having sufficient quarters of coverage to meet the eligibility requirements for retired-worker or disabled-worker

benefits, or to permit the worker’s spouse and children or survivors to establish eligibility for benefits in the event of his or her disability, retirement, or

death. See “Quarters of coverage.”

Interest. A payment in exchange for the use of money during a specified

period.

Interest rate. Interest rates on new public-debt obligations issuable to Federal trust funds (see “Special public-debt obligation”) are determined

monthly. Such rates are 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 asset reserves 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 investments.
227

Glossary

Interfund borrowing. The borrowing of asset reserves by a trust fund

(OASI, DI, or HI) from another trust fund when the first fund is in danger of

depletion. The Social Security Act permitted interfund borrowing only

during 1982 through 1987, and required all amounts borrowed to be repaid

prior to the end of 1989. The only exercise of this authority occurred in 1982,

when the OASI Trust Fund borrowed 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 resident status during the

year.

Life expectancy. Average remaining number of years expected prior to

death. Period life expectancy is calculated for a given year using the actual or

expected death rates at each age for that year. Cohort life expectancy, sometimes referred to as generational life expectancy, is calculated for individuals

at a specific age in a given year using actual or expected death rates from the

years in which the individuals would actually reach each succeeding age if

they survive.

Long range. The next 75 years. The Trustees make long-range actuarial estimates for this period because it is approximately the maximum remaining

lifetime of current Social Security participants.

Low-cost assumptions. See “Assumptions.”

Lump-sum death payment. 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. 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 under Title XVIII of the Social Security Act to cover the

cost of hospitalization, medical care, and some related services for most people age 65 and over. In 1972, lawmakers extended coverage to people receiving Social Security Disability Insurance payments for 2 years and people
Appendices

228

with End-Stage Renal Disease. (For beneficiaries whose primary or secondary diagnosis is Amyotrophic Lateral Sclerosis, the 2-year waiting period is

waived.) In 2010, people exposed to environmental health hazards within

areas under a corresponding emergency declaration became Medicare-eligible. In 2006, prescription drug coverage was added as well. Medicare consists of two separate but coordinated trust funds—Hospital Insurance (HI,

Part A) and Supplementary Medical Insurance (SMI). The SMI trust fund is

composed of two separate accounts—the Part B account and the Part D

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.

Military service wage credits. Credits toward OASDI earnings records for

benefit computation purposes, recognizing that military personnel receive

non-wage compensation (such as food and shelter) in addition to their basic

pay and other cash payments. Military personnel do not pay payroll taxes on

these credits. 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.”

Non-interest income. Non-interest income for a given year is the sum of tax

revenue on a cash basis (payroll tax contributions and income from the taxation of scheduled benefits) and reimbursements from the General Fund of the

Treasury, if any.

Normal retirement age—NRA. The age at which a person may first

become entitled to retirement benefits without reduction based on age. For

persons reaching age 62 before 2000, the normal retirement age is 65. It will

increase gradually to 67 for persons reaching that age in 2027 or later, beginning with an increase to 65 years and 2 months for persons reaching age 65

in 2003. See table V.C3.

Old-Age and Survivors Insurance (OASI) Trust Fund. See “Trust fund.”

Old-law base. Amount the contribution and benefit base would have been if

the 1977 amendments had not provided for ad hoc increases. The Social

Security Amendments of 1972 provided for automatic annual indexing of the

contribution and benefit base. The Social Security Amendments of 1977

specified ad hoc bases for 1978-81, with subsequent bases updated in accor-
229

Glossary

dance with the normal indexing procedure. See table V.C2.

Open group unfunded obligation. See “Unfunded obligation.”

Other emigration. Other emigration for a given year consists of individuals

from the other-immigrant population who leave the Social Security area

during the year or who adjust status to become legal permanent residents

during the year.

Other immigration. Other immigration for a given year consists of individuals who enter the Social Security area and stay 6 months or more but without legal permanent resident status, such as undocumented immigrants and

temporary workers and students.

Outgo. See “Disbursements.”

Par value. The value printed on the face of a bond. For both public and special issues held by the trust funds, par value is also the redemption value at

maturity.

Partial advance funding. A financing method in which contributions are

established to provide a substantial accumulation of trust fund asset reserves,

thereby generating additional interest income to the trust funds and reducing

the need for payroll tax increases in periods when costs are relatively high.

Higher general contributions or additional borrowing may be required, however, to support the payment of such interest. While substantial, the trust

fund buildup under partial advance funding is much smaller than it would be

with full advance funding.

Pay-as-you-go financing. A financing method in which contributions are

established to produce just as much income as required to pay current benefits, with trust fund asset reserves built up only to the extent needed to prevent depletion of the fund by random economic fluctuations.

Payment cycling. Beneficiaries who applied for benefits before May 1,

1997, are paid on the third of the month. Persons applying for OASDI benefits after April 1997 generally are paid on the second, third, or fourth

Wednesday of the month following the month for which payment is due. The

particular Wednesday payment date is based on the earner’s date of birth. For

those born on the first through tenth, the benefit payment day is the second

Wednesday of the month; for those born on the eleventh through the twentieth, the benefit payment day is the third Wednesday of the month; and for

those born after the twentieth of the month, the payment day is the fourth

Wednesday of the month.
Appendices

230

Payroll tax contributions. The amount based on a percent of earnings, up to

an annual maximum, that must be paid by:

• employers and employees on wages from employment under the Federal Insurance Contributions Act,

• the self-employed on net earnings from self-employment under the

Self-Employment Contributions Act, and

• States on the wages of State and local government employees covered

under the Social Security Act through voluntary agreements under section 218 of the act.

Also referred to as payroll taxes.

Population in the Social Security area. See “Social Security area population.”

Present value. The equivalent value, at the present time, of a stream of values (either income or cost, past or future). Present values are used widely in

calculations involving financial transactions over long periods of time to

account for the time value of money, by discounting or accumulating these

transactions at the rate of interest. Present-value calculations for this report

use the effective yield on trust fund asset reserves.

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 typically related to the

worker’s average monthly wage or average indexed monthly earnings, is also

used as a base for computing all types of benefits payable on an 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 2014, a worker receives one quarter of coverage (up to a total of

four) for each $1,200 of annual covered earnings. For years after 1978, the

amount of earnings required for a quarter of coverage is subject to annual

automatic increases in proportion to increases in average wages. See table

V.C2.

Railroad retirement. A Federal insurance program, 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
231

Glossary

interchange between the Railroad Retirement program and the Social Security program.

Reallocation of payroll tax rates. An increase in the payroll tax rate for

either the OASI or DI Trust Fund, with a corresponding reduction in the rate

for the other fund, so that the total OASDI payroll tax rate is not changed.

Real-wage differential. The difference between the percentage increases in:

(1) the average annual wage in covered employment; and (2) the average

annual Consumer Price Index. See table V.B1.

Recession. A period of adverse economic conditions; in particular, two or

more successive calendar quarters of negative growth in gross domestic

product.

Reserves. See “Asset reserves.”

Retired-worker benefit. A monthly benefit payable to a fully insured retired

worker aged 62 or older or to a person entitled under the transitionally

insured status provision in the law.

Retirement earnings test. See “Earnings test.”

Retirement eligibility age. The age, currently age 62, at which a fully

insured individual first becomes eligible to receive retired-worker benefits.

Retirement test. See “Earnings test.”

Scheduled benefits. The level of benefits specified under current law.

Scenario-based 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.

Self-employment. Operation of a trade or business by an individual or by a

partnership in which an individual is a member.

Self-Employment Contributions Act–SECA. Provision authorizing Social

Security payroll taxes on the net earnings of most self-employed persons.

Short range. The next 10 years. The Trustees prepare short-range actuarial

estimates for this period because of the short-range test of financial adequacy. The Social Security Act requires estimates for 5 years; the Trustees

prepare estimates for an additional 5 years to help clarify trends which are

only starting to develop in the mandated first 5-year period.

Social Security Act. Provisions of the law governing most operations of the

Social Security program. The original Social Security Act is Public Law 74-

271, enacted August 14, 1935. With subsequent amendments, the Social

Security Act consists of 21 titles, of which three have been repealed. Title II

of the Social Security Act authorized the Old-Age, Survivors, and Disability

Insurance program.
Appendices

232

Social Security area population. The population comprised of: (1) residents

of the 50 States and the District of Columbia (adjusted for net census undercount); (2) civilian residents of Puerto Rico, the Virgin Islands, Guam,

American Samoa and the Northern Mariana Islands; (3) Federal civilian

employees and persons in the U.S. Armed Forces abroad and their dependents; (4) non-citizens living abroad who are insured for Social Security benefits; and (5) all other U.S. citizens abroad.

Solvency. A program is solvent at a point in time if it is able to pay scheduled benefits when due with scheduled financing. For example, the OASDI

program is solvent over any period for which the trust funds maintain a positive level of asset reserves.

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.A4 and VI.A5 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 20 degrees 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. A large number of simulations, each of which reflects random variation in the variable(s), produce

a distribution of potential outcomes.

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 earns 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.
233

Glossary

Summarized cost rate. The ratio of the present value of cost to the present

value of the taxable payroll for the years in a given period, expressed as a

percentage. To evaluate the financial adequacy of the program, the summarized cost rate is adjusted to include the cost of reaching and maintaining a

target trust fund level. A trust fund level of about 1 year’s cost is considered

to be an adequate reserve for unforeseen contingencies; therefore, the targeted trust fund ratio is 100 percent of annual cost. Accordingly, the adjusted

summarized cost rate is equal to the ratio of: (1) the sum of the present value

of the cost during the period plus the present value of the targeted ending

trust fund level; to (2) the present value of the taxable payroll during the projection period.

Summarized income rate. The ratio of the present value of scheduled noninterest income to the present value of taxable payroll for the years in a given

period, expressed as a percentage. To evaluate the financial adequacy of the

program, the summarized income rate is adjusted to include asset reserves on

hand at the beginning of the period. Accordingly, the adjusted summarized

income rate equals the ratio of: (1) the sum of the trust fund reserve at the

beginning of the period plus the present value of non-interest income during

the period; to (2) the present value of the taxable payroll for the years in the

period.

Supplemental Security Income—SSI. A Federally administered program

(often with State supplementation) of cash assistance for needy aged, blind,

or disabled persons. The General Fund of the Treasury funds SSI and the

Social Security Administration administers it.

Supplementary Medical Insurance (SMI) Trust Fund. See “Trust fund.”

Survivor benefit. Benefit payable to a survivor of a deceased worker.

Sustainable solvency. Sustainable solvency for the financing of the program

under a specified set of assumptions has been achieved when the projected

trust fund ratio is positive throughout the 75-year projection period and is

either stable or rising at the end of the period.

Taxable earnings. Wages or self-employment income, in employment covered by the OASDI or HI programs, that is under the applicable annual maximum taxable limit. For 1994 and later, no maximum taxable limit applies to

the HI program.

Taxable payroll. A weighted sum of taxable wages and taxable self-employment income. When multiplied by the combined employee-employer payroll

tax rate, taxable payroll yields the total amount of payroll taxes incurred by

employees, employers, and the self-employed for work during the period.

Taxable self-employment income. The maximum amount of net earnings

from self-employment by an earner which, when added to any taxable
Appendices

234

wages, does not exceed the contribution and benefit base. For HI beginning

in 1994, all net earnings from self-employment.

Taxable wages. See “Taxable earnings.”

Taxation of benefits. Beginning in 1984, Federal law subjected up to 50 percent of an individual’s or a couple’s OASDI benefits to Federal income taxation under certain circumstances. Treasury allocates the revenue derived

from this provision 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

law increased the maximum percentage from 50 percent to 85 percent. The

HI Trust Fund receives the additional tax revenue resulting from the increase

to 85 percent.

Taxes. See “Payroll tax contributions” and “Taxation of benefits.”

Termination. Cessation of payment because the beneficiary is no longer

entitled to receive a specific type of benefit. 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. The conditions required to

meet this test are:

• The trust fund satisfies the short-range test of financial adequacy;

• The trust fund ratios stay above zero throughout the 75-year projection

period, such that benefits would be payable in a timely manner throughout the period.

The Trustees apply the test to OASI, DI, and the combined OASDI program

based on the intermediate set of assumptions.

Test of short-range financial adequacy. The conditions required to meet

this test are:

• If the trust fund ratio for a fund is at least 100 percent at the beginning

of the projection period, the test requires that it remain at or above

100 percent throughout the 10-year projection period;

• If the ratio is initially less than 100 percent, then it must reach at least

100 percent within 5 years (without asset reserve depletion at any time

during this period) and then remain at or above 100 percent throughout

the remainder of the 10-year period.

The Trustees apply the test to OASI, DI, and the combined OASDI program

based on the intermediate set of assumptions.

Total fertility rate. The average number of children that would be born to a

woman in her lifetime if she were to experience the birth rates by age
235

Glossary

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 which hold the

payroll taxes received under the Federal Insurance Contributions Act and the

Self-Employment Contributions Act; payroll taxes resulting from coverage

of State and local government employees; any sums received under the

financial interchange with the railroad retirement account; voluntary hospital

and medical insurance premiums; and reimbursements or payments from the

General Fund of the Treasury. As required by law, the Department of the

Treasury invests funds not required to meet current expenditures in interestbearing securities backed by the full faith and credit of the U.S. Government.

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, 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, 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.

The trust funds are distinct legal entities which operate independently. Fund

operations are sometimes combined on a theoretical basis.

Trust fund ratio. A measure of trust fund adequacy. The asset reserves at

the beginning of a year, which do not include advance tax transfers,

expressed as a percentage of the cost for the year. The trust fund ratio represents the proportion of a year’s cost which could be paid solely with the

reserves at the beginning of the year.

Trustees. See “Board of Trustees.”

Unfunded obligation. A measure of the shortfall of trust fund income to

fully cover program cost through a specified date after depletion of trust fund
Appendices

236

asset reserves. This measure is computed as the excess of the present value

of the projected cost of the program through a specified date over the sum of:

(1) the value of trust fund reserves at the beginning of the valuation period;

and (2) the present value of the projected non-interest income of the program

through a specified date, assuming scheduled tax rates and benefit levels.

This measure can apply for all participants through a specified date, i.e., the

open group, or be limited to a specified subgroup of participants.

Unfunded obligation ratio. The unfunded obligation at the beginning of a

year expressed as a percentage of the present value of the cost for the year.

Unnegotiated check. A check which has not been cashed 6 months after the

end of the month in which the check was issued. When a check has been outstanding for a year, the Department of the Treasury administratively cancels

the check and reimburses the issuing trust fund separately for the amount of

the check and interest for the period the check was outstanding. The appropriate trust fund also receives an interest adjustment for the time the check

was outstanding if it is cashed 6-12 months after the month of issue. If a

check is presented for payment after it has been 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

them to return to gainful employment. The trust funds reimburse the providers of such services only in those cases where the services contributed to the

successful rehabilitation of the beneficiaries.

Year of depletion. The year in which a trust fund becomes unable to pay

benefits when due because the fund’s asset reserves have been used up.
List of Tables

237

LIST OF TABLES

II. OVERVIEW

II.B1 Summary of 2013 Trust Fund Financial Operations . . . . . . . . 6

II.B2 Payroll Tax Contribution Rates for 2013 . . . . . . . . . . . . . . . . 7

II.C1 Long-Range Values of Key Assumptions for the 75-year Projection

Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

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

Period and Trust Fund Reserve Depletion Dates. . . . . . . . . . . 15

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

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 21

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND

LEGISLATIVE CHANGES IN THE LAST YEAR

III.A1 Operations of the OASI Trust Fund, Calendar Year 2013 . . . . 28

III.A2 Operations of the DI Trust Fund, Calendar Year 2013 . . . . . . . 32

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

Calendar Year 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

III.A4 Comparison of Actual Calendar Year 2013 Trust Fund

Operations With Estimates Made in Prior Reports, Based on

Intermediate Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 35

III.A5 Distribution of Benefit Payments by Type of Beneficiary or

Payment, Calendar Years 2012 and 2013 . . . . . . . . . . . . . . . . 36

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

and of Total Expenditures, Calendar Years 2009-13 . . . . . . . . 37

III.A7 Trust Fund Investment Transactions, Calendar Year 2013 . . . . 37

IV. ACTUARIAL ESTIMATES

IV.A1 Operations of the OASI Trust Fund,

Calendar Years 2009-23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

IV.A2 Operations of the DI Trust Fund, Calendar Years 2009-23. . . . 44

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

Calendar Years 2009-23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

IV.A4 Reasons for Change in Trust Fund (Unfunded Obligation) Ratios

at the Beginning of the Tenth Year of Projection Under

Intermediate Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 48

IV.B1 Annual Income Rates, Cost Rates, and Balances,

Calendar Years 1990-2090 . . . . . . . . . . . . . . . . . . . . . . . . . . 52

IV.B2 Covered Workers and Beneficiaries,

Calendar Years 1945-2090 . . . . . . . . . . . . . . . . . . . . . . . . . . 57

IV.B3 Trust Fund Ratios, Calendar Years 2014-90 . . . . . . . . . . . . . . 62
List of Tables

238

IV.B4 Components of Summarized Income Rates and Cost Rates,

Calendar Years 2014-88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

IV.B5 Components of 75-Year Actuarial Balance

Under Intermediate Assumptions . . . . . . . . . . . . . . . . . . . . . 68

IV.B6 Reasons for Change in the 75-Year Actuarial Balance,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 70

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

V.A1 Principal Demographic Assumptions,

Calendar Years 1940-2090 . . . . . . . . . . . . . . . . . . . . . . . . . . 84

V.A2 Social Security Area Population on July 1 and

Dependency Ratios, Calendar Years 1945-2090 . . . . . . . . . . 87

V.A3 Period Life Expectancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

V.A4 Cohort Life Expectancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

V.B1 Principal Economic Assumptions . . . . . . . . . . . . . . . . . . . . . 99

V.B2 Additional Economic Factors . . . . . . . . . . . . . . . . . . . . . . . . 105

V.C1 Cost-of-Living Benefit Increases, Average Wage Index,

Contribution and Benefit Bases, and Retirement

Earnings Test Exempt Amounts, 1975-2023. . . . . . . . . . . . . . 110

V.C2 Values for Selected Wage-Indexed Program Parameters,

Calendar Years 1978-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . 114

V.C3 Legislated Changes in Normal Retirement Age and Delayed

Retirement Credits for Persons Reaching Age 62 in

Each Year 1986 and Later. . . . . . . . . . . . . . . . . . . . . . . . . . . 116

V.C4 OASI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1945-2090 . . . . . . . . . . . . . . . . 124

V.C5 DI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1960-2090 . . . . . . . . . . . . . . . . 133

V.C6 Contribution and Benefit Base and

Payroll Tax Contribution Rates . . . . . . . . . . . . . . . . . . . . . . . 140

V.C7 Annual Scheduled Benefit Amounts for Retired Workers

With Various Pre-Retirement Earnings Patterns

Based on Intermediate Assumptions,

Calendar Years 2014-90 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
List of Tables

239

VI. APPENDICES

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS

VI.A1 Operations of the OASI Trust Fund,

Calendar Years 1937-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . 149

VI.A2 Operations of the DI Trust Fund, Calendar Years 1957-2013 . . 151

VI.A3 Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1957-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . 153

VI.A4 OASI Trust Fund Asset Reserves, End of Calendar Years 2012 and

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

VI.A5 DI Trust Fund Asset Reserves, End of Calendar Years 2012 and

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

B. HISTORY OF ACTUARIAL STATUS ESTIMATES

VI.B1 Long-Range OASDI Actuarial Balances and

Trust Fund Reserve Depletion Dates as Shown in the

Trustees Reports for 1982-2014 . . . . . . . . . . . . . . . . . . . . . . 159

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2023

VI.C1 Operations of the OASI Trust Fund, Fiscal Year 2013. . . . . . . 164

VI.C2 Operations of the DI Trust Fund, Fiscal Year 2013 . . . . . . . . . 165

VI.C3 Operations of the Combined OASI and DI Trust Funds,

Fiscal Year 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

VI.C4 Operations of the OASI Trust Fund, Fiscal Years 2009-23 . . . 167

VI.C5 Operations of the DI Trust Fund, Fiscal Years 2009-23 . . . . . . 168

VI.C6 Operations of the Combined OASI and DI Trust Funds,

Fiscal Years 2009-23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

D. LONG-RANGE SENSITIVITY ANALYSIS

VI.D1 Sensitivity of OASDI Measures to Varying

Fertility Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171

VI.D2 Sensitivity of OASDI Measures to Varying

Death-Rate Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . 172

VI.D3 Sensitivity of OASDI Measures to Varying

Net-Immigration Assumptions . . . . . . . . . . . . . . . . . . . . . . . 173

VI.D4 Sensitivity of OASDI Measures to Varying

Real-Wage Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

VI.D5 Sensitivity of OASDI Measures to Varying

CPI-Increase Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 176

VI.D6 Sensitivity of OASDI Measures to Varying

Real-Interest Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 177
List of Tables

240

VI.D7 Sensitivity of OASDI Measures to Varying

Disability Incidence Assumptions . . . . . . . . . . . . . . . . . . . . . 178

VI.D8 Sensitivity of OASDI Measures to Varying

Disability Termination Assumptions . . . . . . . . . . . . . . . . . . . 179

E. STOCHASTIC PROJECTIONS AND UNCERTAINTY

VI.E1 Long-Range Estimates Relating to the Actuarial Status of

the Combined OASDI Program. . . . . . . . . . . . . . . . . . . . . . . 190

F. INFINITE HORIZON PROJECTIONS

VI.F1 Unfunded OASDI Obligations Through the Infinite Horizon,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 192

VI.F2 Present Values of OASDI Cost Less Non-interest Income

and Unfunded Obligations for Program Participants,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 194

G. ESTIMATES FOR OASDI AND HI,

SEPARATE AND COMBINED

VI.G1 Payroll Tax Contribution Rates for the OASDI and

HI Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196

VI.G2 OASDI and HI Annual Income Rates, Cost Rates,

and Balances, Calendar Years 2014-90 . . . . . . . . . . . . . . . . . 198

VI.G3 Summarized OASDI and HI Income Rates and Cost Rates for

Valuation Periods, Calendar Years 2014-88 . . . . . . . . . . . . . . 200

VI.G4 OASDI and HI Annual and Summarized Income, Cost, and

Balance as a Percentage of GDP, Calendar Years 2014-90. . . . 203

VI.G5 Ratio of OASDI Taxable Payroll to GDP,

Calendar Years 2014-90 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205

VI.G6 Selected Economic Variables, Calendar Years 2013-90 . . . . . . 208

VI.G7 Operations of the Combined OASI and DI Trust Funds,

in CPI-indexed 2014 Dollars, Calendar Years 2014-90 . . . . . . 210

VI.G8 Operations of the Combined OASI and DI Trust Funds,

in Current Dollars, Calendar Years 2014-90 . . . . . . . . . . . . . . 212

VI.G9 OASDI and HI Annual Non-interest Income, Cost, and

Balance in Current Dollars, Calendar Years 2014-90 . . . . . . . 214

H. ANALYSIS OF BENEFIT DISBURSEMENTS

FROM THE OASI TRUST FUND WITH

RESPECT TO DISABLED BENEFICIARIES

VI.H1 Benefit Disbursements From the OASI Trust Fund

With Respect to Disabled Beneficiaries . . . . . . . . . . . . . . . . . 217

VI.H2 Benefit Disbursements Under the OASDI Program

With Respect to Disabled Beneficiaries . . . . . . . . . . . . . . . . . 219
List of Figures

241

LIST OF FIGURES

II. OVERVIEW

II.D1 Short-Range OASI and DI Combined Trust Fund Ratio . . . . . 10

II.D2 OASDI Income, Cost, and Expenditures as Percentages of

Taxable Payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

II.D3 DI Income, Cost, and Expenditures as Percentages of

Taxable Payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

II.D4 Number of Covered Workers Per OASDI Beneficiary. . . . . . . 14

II.D5 OASDI Cost and Non-interest Income as a Percentage

of GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

II.D6 Cumulative Scheduled OASDI Income Less Cost,

From Program Inception Through Years 2013-88 . . . . . . . . . . 17

II.D7 Long-Range OASI and DI Combined Trust Fund Ratios

Under Alternative Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . 19

II.D8 Long-Range OASI and DI Combined Trust Fund Ratios

From Stochastic Modeling . . . . . . . . . . . . . . . . . . . . . . . . . . 20

II.D9 OASDI Annual Balances: 2013 and 2014 Trustees Reports. . . 22

IV. ACTUARIAL ESTIMATES

IV.A1 Short-Range OASI and DI Trust Fund Ratios. . . . . . . . . . . . . 42

IV.B1 Long-Range OASI and DI Annual Income Rates and

Cost Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

IV.B2 Number of OASDI Beneficiaries Per 100 Covered Workers . . 59

IV.B3 Long-Range OASI and DI Trust Fund Ratios. . . . . . . . . . . . . 63

IV.B4 OASDI Annual Balances: 2013 and 2014 Trustees Reports. . . 74

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

V.C1 Primary-Insurance-Amount Formula for Those Newly

Eligible in 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

V.C2 OASI Maximum-Family-Benefit Formula for Those Newly

Eligible in 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

V.C3 DI Disability Incidence Rates, 1970-2090 . . . . . . . . . . . . . . . 128

V.C4 DI Disability Termination Rates, 1970-2090 . . . . . . . . . . . . . 130

V.C5 Comparison of DI Disability Incidence Rates, Termination

Rates and Conversion Ratios Under

Intermediate Assumptions, 1970-2090. . . . . . . . . . . . . . . . . . 132

V.C6 DI Disability Prevalence Rates, 1970-2090 . . . . . . . . . . . . . . 135
List of Figures

242

VI. APPENDICES

VI.E1 Long-Range OASDI Cost Rates From Stochastic Modeling . . 183

VI.E2 Long-Range OASDI Trust Fund Ratios From

Stochastic Modeling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184

VI.E3 OASDI Cost Rates: Comparison of Stochastic to Low-Cost,

Intermediate, and High-Cost Alternatives . . . . . . . . . . . . . . . 186

VI.E4 OASDI Trust Fund (Unfunded Obligation) Ratios:

Comparison of Stochastic to Low-Cost, Intermediate,

and High-Cost Alternatives. . . . . . . . . . . . . . . . . . . . . . . . . . 187

VI.G1 Estimated OASDI Income and Cost in CPI-indexed

2014 Dollars, Based on Intermediate Assumptions . . . . . . . . . 211
243

Index

INDEX

A

Actuarial balance 10, 16, 49, 157, 170

Actuarial deficit 4, 16, 23, 65, 200

Actuarial estimates, LR 49

Actuarial estimates, SR 39

Adjusted program amounts 108

Administrative expenses 6, 36, 50, 144, 148, 164, 201, 209

Advance tax transfers 60, 150

Amendments 38

Annual balance 21, 49, 70

Asset reserves 2, 6, 9, 30, 164, 177, 195, 207

Assumptions 9, 75, 92, 108, 157, 170, 196, 201, 206, 216

Automatic cost-of-living benefit increase 43, 93, 108

Auxiliary benefits 118

Average benefits 142

Average earnings assumptions 95

Average indexed monthly earnings (AIME) 111

Average wage index 108, 206

Award 119

B

Baby-boom generation 3, 23, 50, 56, 101, 126

Bend points 111

Beneficiaries, DI 125

Beneficiary 13, 43, 56, 75, 109, 160, 171, 201, 209, 216

Beneficiary, OASI 119

Benefit payments 6, 50, 142, 148, 164

Benefit termination 8

Best estimate 8, 23, 39, 75

Board of Trustees 39, 92, 146

C

Constant dollars 211

Consumer Price Index 93, 175, 206, 221

Contribution and benefit base 42, 96, 109, 221

Contributions 6, 146, 164, 195, 201, 209, 220

Cost 3, 45

Cost rate 4, 11, 50, 195

Cost-of-living adjustment 108

Covered earnings 6, 108, 205

Covered employment 8, 42, 95, 116, 146, 174

Covered worker 58, 116, 173

Creditable earnings 223

Current dollars 206
Index

244

Current-payment status 45, 130, 132, 133, 221

D

Deemed wage credit 50

Delayed retirement credit 115

Demographic assumptions 8, 21, 39, 76, 101, 108, 157, 207, 220

Deterministic model 181, 190

DI beneficiaries 125

Disability 146, 173, 216

Disability conversion ratio 131

Disability incidence rate 75, 126, 128, 173, 178, 220

Disability Insurance Trust Fund 222

Disability prevalence rate 133, 135

Disability termination rate 178

Disabled-worker benefit 129, 223

Disbursements 26, 28, 31, 32, 34, 39, 164, 165, 166, 217, 219

E

Earnings 2, 6, 42, 50, 95, 109, 146, 158, 195, 205, 206, 220

Earnings test 96, 109, 221

Economic assumptions 8, 21, 39, 47, 92, 101, 108, 157, 207, 220

Excess wages 50, 206

Expenditures 6, 8, 30, 37, 39, 148, 224

F

Federal Insurance Contributions Act 195, 230

Fertility assumptions 76

Financial interchange 6, 145, 148

Fiscal year 80, 150, 163

Full advance funding 225

G

General Fund of the Treasury 41, 43, 44, 46, 150, 152, 154, 167, 168, 169,

220

General fund reimbursement 225

Gross domestic product 4, 10, 55, 75, 93, 103, 201

Gross domestic product projections 103

H

High-cost assumptions 8, 18, 39, 40, 51, 75, 92, 129, 170, 188, 196, 201,

206, 220

Hospital Insurance program 139, 195, 228

Hospital Insurance Trust Fund 201

I

Immigration 8, 75, 76, 79, 84, 173, 181, 220, 226
245

Index

Immigration assumptions 79

Income rate 4, 11, 50, 195

Infinite horizon 10

Inflation 8, 75, 93, 206, 220

Inflation assumptions 93

Insured population 8, 117

Insured status 113

Interest 42, 104, 147, 157, 164, 197, 220

Interest rate 75, 157, 177, 220

Interest rate projections 104

Interest rates 8

Interfund borrowing 150, 227

Intermediate assumptions 8, 39, 43, 51, 75, 129, 170, 197, 201, 206, 210,

211, 212, 216, 220

L

Labor force projections 100

Legal immigration 80, 85, 227

Life expectancy 3, 23, 75, 88, 100, 227

Life expectancy estimates 88

Long range 10, 49, 76, 120, 157, 195, 201

Low-cost assumptions 8, 18, 39, 51, 75, 92, 129, 170, 188, 196, 206, 220

Lump-sum death payment 142

M

Medicare 77, 228

Military service 41, 44, 46, 50, 145, 146, 150, 152, 154, 167, 168, 169

N

National average wage index 108, 206

Normal retirement age 109, 125, 143, 223

O

OASI beneficiaries 119

Old-Age and Survivors Insurance Trust Fund 146, 222

Old-law base 113

Other immigration 80, 173, 229

P

Par value 147

Partial advance funding 229

Pay-as-you-go financing 157

Payroll taxes 2, 108, 136, 160, 170, 191, 195, 209

Population estimates 86

Population in the Social Security area 42, 59, 86, 116, 173

Present value 157
Index

246

Primary insurance amount (PIA) 111

Productivity assumptions 93

Q

Quarters of coverage 117

R

Railroad Retirement 50, 64, 113, 145, 148, 164, 165, 166, 195, 201, 209,

222

Reallocation of tax rates 231

Real-wage differential 98, 174

Recession 11, 42

Retired-worker benefit 120, 173, 216

Retirement age 109, 143, 223

Retirement earnings test 96, 109

Retirement eligibility age 173

S

Scenario-based model 231

Scheduled benefits 176, 201, 209, 218, 231

scheduled benefits 40

Self-employment 50, 94, 196, 230

Self-Employment Contributions Act 230, 231

Sensitivity analysis 170

Short range 9, 39, 119

Social Security Act 108, 147, 206, 216, 222

Social Security amendments 38

Solvency 232

Special public-debt obligation 107, 147, 177

Stochastic projections 181

Substantial gainful activity 125, 223

Summarized balance 202

Summarized income and cost rates 64, 157, 170, 199, 220

Supplemental Security Income 164

Supplementary Medical Insurance program 195, 228

Survivor benefit 2, 7, 123, 221

Sustainable solvency 60, 61

T

Taxable earnings 42, 59, 109, 158, 221

Taxable payroll 4, 23, 50, 94, 117, 157, 171, 195, 201, 206, 222

Taxable self-employment income 233

Taxable wages 141, 196, 233

Taxation of benefits 6, 141, 201, 209, 226

Taxes 6, 108, 196
247

Index

Termination 75

Termination rate 8, 120, 178, 220

Test of short-range financial adequacy 40, 231

Total fertility rate 76, 170

Trust fund financial operations 6, 26, 40, 146

Trust fund ratio 9, 39, 49, 60, 150, 167, 235

Trust fund reserves 39

U

Unemployment projections 100

Unfunded obligation 4, 10, 16, 18, 49, 67, 68, 192, 193, 194, 229, 235, 236

Unnegotiated check 164

V

Valuation period 16, 47, 49, 157, 170, 199, 220

Vocational rehabilitation 50, 148, 165, 201, 209, 218, 222

Y

Year of depletion 11, 15, 49, 62
248

STATEMENT OF ACTUARIAL OPINION

It is my opinion that, with the important caveats noted below: (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. I am a

member of the American Academy of Actuaries and I meet the Qualification

Standards of the American Academy of Actuaries to render the actuarial

opinion contained herein.

Uncertainty Illustrations

Comparisons between projections for the three alternative scenarios (lowcost, intermediate, and high-cost) and the stochastic simulations presented in

this report should be made with a full understanding of the limitations on

these two approaches for illustrating uncertainty. The stochastic simulations

include random annual variations in several key parameters, but these annual

variations tend to cancel out over time so the average variation for each

parameter diminishes with longer periods, approaching zero variation across

the simulations. (See Actuarial Study 117 at www.socialsecurity.gov/OACT/

NOTES/s2000s.html for additional details.) For this and other reasons, the

variation reflected in the stochastic simulations is unreasonably small. In

addition, the variation across the three alternative scenarios was increased

this year by reversing the assignment of ultimate price inflation assumptions

between the low-cost and high-cost scenarios.

Federal Budget Accounting

This report focuses on the actuarial status of the OASI and DI Trust Funds

and includes important information on (1) the years in which trust fund asset

reserves are projected to be depleted and (2) the degree to which benefits

scheduled in the law would no longer be fully payable on a timely basis after

reserve depletion. However, the footnote on page 60 of this report directs the

reader to an appendix in the Medicare Trustees Report, which states, “The

trust fund perspective does not encompass the relationship between the

Medicare and Social Security trust funds and the overall federal budget.” The

reader of this report should consider this “overall” federal unified budget

perspective with care because the assumptions underlying unified budget

accounting are inconsistent with the assumptions of trust fund accounting.
249

In particular, trust fund accounting accurately reflects the law, under which

benefits cannot be paid in full on a timely basis after reserve depletion. In

contrast, unified budget accounting assumes that full scheduled benefits will

continue to be paid through transfers from the General Fund of the Treasury,

thus representing “a draw on other Federal resources for which there is no

earmarked source of revenue from the public.” Not only are such “draws”

not permissible under the law, no precedent exists for a change in the Social

Security Act to finance unfunded trust fund obligations with such draws on

other Federal resources. Under this unified budget accounting assumption,

$10.6 trillion of OASDI unfunded obligations, which are not payable under

the law over the next 75 years, are referred to as “expenditures” requiring a

“draw” from the General Fund of the Treasury.

In addition, unified budget accounting treats redemptions of trust fund

reserves as an addition to annual federal deficits, referring to these redemptions also as “a draw on other Federal resources.” In fact, redemptions of

trust fund reserves represent a deferred use of revenues earmarked for the

trust fund program alone, which have been collected in prior years and saved

for later use. These redemptions utilize the entire $2.8 trillion accumulation

of net past earmarked revenue for OASDI, but are referred to as draws on the

General Fund of the Treasury under the unified budget perspective.

Therefore, the actual operations of the trust funds under current law do not

draw on other Federal resources. Expenditures can only be paid from current

or deferred earmarked resources for the specific program financed from the

trust fund. Assertions that trust fund reserve redemption and shortfalls after

reserve depletion represent draws on other Federal resources are based on

assumptions that are inconsistent with the law and with actual trust fund

annual cash-flow operations.

In addition to federal budget annual cash flows, the budget perspective is

equally concerned with the build-up of federal debt. The total federal debt

subject to limit includes trust fund reserves. Thus, as trust fund reserves are

accumulated or redeemed, they are offset in the total federal debt by securities issued to the public, with no net effect on the total federal debt. Moreover, even in considering the federal debt owed to (held by) the public, there

is no net direct effect on that debt from accumulating and then redeeming

trust fund asset reserves. However, budget analysis frequently refers to both

trust fund reserve redemptions and trust fund obligations not payable under

the law after reserve depletion as factors that increase the federal debt held

by the public in the future. This assertion is not consistent with a full assessment of the investment and redemption flows of the trust funds or with the
250

limitations in the law on paying benefits after trust fund reserves are

depleted.

Benefit Replacement Rates

Finally, while the Trustees eliminated benefit replacement rates from the

report this year, a full analysis of benefit replacement rates is presented in

Actuarial Notes 155 and 2014.9 at www.socialsecurity.gov/OACT/NOTES/

actnote.html.

Stephen C. Goss

Associate of the Society of Actuaries

Member of the American Academy of Actuaries

Chief Actuary, Social Security Administration