SOCIAL SECURITY ADMINISTRATION BALTIMORE, MD 21235-0001

SOCIAL SECURITY

Office of the Chief Actuary

July 15, 2020

The Honorable John Larson

Subcommittee on Social Security

Committee on Ways and Means

United States House of Representatives

Washington, D.C. 20515

Dear Chairman Larson:

I am writing in response to your request for our estimates of the financial effects on Social 

Security of enacting H.R. 7499, the Social Security COVID Correction and Equity Act, which

you introduced on July 9, 2020. The estimates provided here reflect the implications of enacting 

the bill in the context of an illustrative scenario that modifies intermediate assumptions and 

baseline projections of the 2020 Trustees Report. Development and use of this illustrative 

scenario is necessary in order to analyze and estimate the effects of Section 3 of the bill, because 

this section would have no effect under a direct application to the projections in the 2020 

Trustees Report. The illustrative scenario incorporates reduced economic growth through 

calendar year 2020, consistent with experience we have seen so far this year. Given the 

unprecedented level of uncertainty for the future course of the COVID-19 pandemic and its 

effects on our society, economy, and individual and governmental responses, we must 

understand that the actual experience for the balance of this year and beyond is very likely to 

differ substantially from the path illustrated in this scenario. 

This bill includes seven provisions with direct effects on the OASI and DI Trust Funds. We have 

enjoyed working closely with Nancy Perry, Kathryn Olson, Elisa Walker, and Scott Stephanou

in developing this proposal to meet your goals. The estimates and analysis provided here reflect 

the combined effort of many in the Office of the Chief Actuary, but particularly Karen Glenn, 

Christopher Chaplain, Daniel Nickerson, Kyle Burkhalter, Anna Kirjusina, Michael Clingman, 

and Sharon Chu.

Section 14 of the bill specifies that any increase in cost or reduction in revenue to the OASI and 

DI Trust Funds that would occur as a result of enactment of the provisions in the bill will be 

reimbursed annually from the General Fund of the Treasury. As a result, there would be no net 

effect on the actuarial status of the OASI and DI Trust Funds. The estimates provided here 

therefore indicate the magnitude of transfers that would be made from the General Fund of the 

Treasury to the OASI and DI Trust Funds in future years. Over the period including calendar 

years 2020 through 2029, we estimate that the total of increased cost and reduced revenue for the 

OASI and DI Trust Funds would be about $75 billion in nominal dollars, and that the total 
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amount over the period 2020 through 2094 would be about $144 billion in present value dollars 

(about 0.03 percent of taxable payroll over the period). All of these costs would be reimbursed 

from the General Fund of the Treasury on an annual basis. 

The balance of this letter describes briefly the effects of the seven individual provisions of the 

bill that would have direct effects on the OASDI program, and for the purpose of analyzing 

Section 3, a description of the illustrative scenario used here.

Section 3. For any year starting with 2020, if the National Average Wage Index (AWI) as 

computed under current law is lower than the AWI for any previous year, then the largest 

AWI among all previous years would be used for the purpose of computing the Average 

Indexed Monthly Earnings (AIME) and the Primary Insurance Amount (PIA) for all 

beneficiaries who become initially eligible for benefits two years after such year.

For the purpose of estimating the potential effect of this provision, we use an illustrative 

scenario, as mentioned above. Under this illustrative scenario, we assume that total wages in 

2020 in the U.S. will grow by 10 percent less than had been projected under the intermediate 

assumptions of the 2020 Trustees Report. In addition, we assume that the total number of 

workers with any wages in 2020 will be 1 percent less than had been projected for the 2020 

Trustees Report. Under these assumptions, the AWI would grow between 2019 and 2020 by 9.1 

percent less than the 3.5 percent increase that had been projected in the 2020 Trustees Report, 

resulting in a 2020 AWI that would be about 5.9 percent below the 2019 AWI. For the purpose 

of this illustrative scenario, it is assumed that the AWI would increase for 2021 to a level at or 

above the 2019 AWI, and that increases would occur for all subsequent years as had been 

projected in the 2020 Trustees Report. 

Under current law, using this illustrative scenario, indexing of career earnings (the AIME) and 

the PIA bend points would result in benefits in 2022 for individuals who become newly eligible 

in 2022 that would be 5.9 percent lower than the benefit in 2021 for a similar worker who 

becomes newly eligible in 2021. This provision would instead require that the benefits for 

individuals who become newly eligible in 2022 be computed using the 2019 AWI level in place 

of the actual 2020 AWI. This approach would increase the benefit level by 6.3 percent (1/0.941) 

above the current-law level under the illustrative scenario. The increase in the initial benefit 

level for those who become newly eligible in 2022 would also apply to their benefits in all years 

for the rest of their lifetime, and for benefits payable to their survivors and auxiliary beneficiaries 

based on the benefit computation for eligibility in 2022.

As an example of the effects of a decline in the 2020 AWI on benefit levels, consider a newly 

eligible retired worker beneficiary in 2021 who had earnings at the level of the AWI over his

career. Under the intermediate assumptions of the 2020 Trustees Report, this worker would be 

eligible for a monthly PIA of about $2,000 in 2021 (subject to a reduction for early retirement). 

For a similar newly eligible beneficiary in 2022, the PIA in 2022 was projected to be 3.5 percent 

higher than $2,000, or about $2,070. Under the illustrative scenario, where the AWI would grow 

by 9.1 percent less from 2019 to 2020 than had been expected, the monthly PIA for the newly 

eligible worker in 2022 would be about $1,881, which is about $119 lower than the initial benefit 

for the worker becoming newly eligible in 2021. Assuming enactment of this bill, the PIA for 

the worker who becomes newly eligible in 2022 would be about $2,000.
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The cost for the increase in benefit payments due to this provision under the illustrative scenario 

would be about $21 billion in nominal dollars over the period 2020-2029, and about $90 billion 

in present value dollars over the period 2020-2094. As for all provisions in this bill, this added 

cost for the OASI and DI Trust Funds would be would be reimbursed on an annual basis from 

the General Fund of the Treasury. 

Note that reduction in the AWI for 2020 under the illustrative scenario would result in a 10-

percent increase in the indexed level of earnings received in 2020 (for benefit computation 

purposes) for individuals who become initially eligible for benefits after 2022. For those 

affected, the increase in benefit level would generally be less than 0.3 percent, and would 

average about 0.15 percent due to this indexation of their 2020 earnings. This provision would 

not alter that effect. 

Section 4. Increase the first PIA formula factor from 90 percent to 93 percent for all benefits 

payable for months of entitlement from January 2020 through December 2020, including 

benefits for those who become newly eligible both before and after January 2020.

The cost for the increase in benefit payments due to this provision would be about $17 billion in 

nominal dollars over the period 2020-2029. As for all provisions in this bill, this added cost for 

the OASI and DI Trust Funds would be would be reimbursed on an annual basis from the 

General Fund of the Treasury.

Section 5. Increase the special minimum PIA for all benefits payable for months of entitlement 

from January 2020 through December 2020, including benefits for those who become newly 

eligible both before and after January 2020. 

The cost for the increase in benefit payments due to this provision would be about $15 billion in 

nominal dollars over the period 2020-2029. As for all provisions in this bill, this added cost for 

the OASI and DI Trust Funds would be would be reimbursed on an annual basis from the 

General Fund of the Treasury.

Section 6. Replace the current-law thresholds for federal income taxation of OASDI benefits 

with a single set of thresholds at $35,000 for single filers and $50,000 for joint filers for 

taxation of up to 85 percent of OASDI benefits, effective for any tax year that begins in 

calendar year 2019. The amount of revenue from taxation of OASDI benefits that would be 

allocated to the HI Trust Fund will be at the same level as if the current-law computation (in 

the absence of this provision) were applied.

The reduction in revenue due to this provision would be about $6 billion in nominal dollars over 

the period 2020-2029. As for all provisions in this bill, this reduced revenue for the OASI and 

DI Trust Funds would be would be reimbursed on an annual basis from the General Fund of the 

Treasury.

Section 7. Extend eligibility for student benefits up to age 23 for months of entitlement from 

January 2020 through December 2020, including benefits for those who become newly 

eligible both before and after January 2020. 
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The cost for the increase in benefit payments due to this provision would be about $6 billion in 

nominal dollars over the period 2020-2029. As for all provisions in this bill, this added cost for 

the OASI and DI Trust Funds would be would be reimbursed on an annual basis from the 

General Fund of the Treasury.

Section 8. Increase the benefit payable to qualifying widow(er) beneficiaries to 75 percent of 

the sum of their own retired worker or disabled worker benefit and the PIA of their deceased 

spouse, for months of entitlement from January 2020 through December 2020, including 

benefits for those who become newly eligible both before and after January 2020. 

The cost for the increase in benefit payments due to this provision would be about $8 billion in 

nominal dollars over the period 2020-2029. As for all provisions in this bill, this added cost for 

the OASI and DI Trust Funds would be would be reimbursed on an annual basis from the 

General Fund of the Treasury.

Section 9. Extend eligibility for a child dependent benefit on the account of a beneficiary to 

whom the child is a grandchild, stepgrandchild, or other first degree, second-degree, thirddegree, fourth-degree, or fifth-degree relative of an individual or the individual’s spouse, for 

months of entitlement from January 2020 through December 2020, including benefits for 

those who become newly eligible both before and after January 2020. Eligibility to the 

benefit would require custody by court order of the child to the grandparent, stepgrandparent, 

or other qualifying relative. 

The cost for the increase in benefit payments due to this provision would be about $2 billion in 

nominal dollars over the period 2020-2029. As for all provisions in this bill, this added cost for 

the OASI and DI Trust Funds would be would be reimbursed on an annual basis from the 

General Fund of the Treasury.

We hope these estimates are helpful. Please let me know if we may provide further assistance.

Sincerely,

 

Stephen C. Goss, ASA, MAAA

Chief Actuary