Social Security Actuarial Status

Recent Experience and Prospects for the Future

Presented by Stephen C. Goss, Chief Actuary, 

Social Security Administration

Association of Government Accountants

Baltimore Chapter

February 17, 2021
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Three Legged Stool: Basis for Retirement 

Planning

Common Wisdom—Aim for 75-80 Percent Replacement Rate

Retirement Income

Social 

Security
Defined Benefit Plans Replaced by DC Plans: 

And Lump Sum Options Increasing for DB Plans

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0 %

10%

20%

30%

40%

50%

60% 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Private-Sector Workers Participating in Employment-Based Retirement 

Plans, by Plan Type, 1979-2014

Defined Benefit Total Defined Contribution Total

Both Either

Source: U.S. Department of Labor Form 5500 Summaries 1979-1998, Pension Benefit Guaranty Corporation,

Current Population Survey 1999-2013, EBRI estimates 1999-2014.
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Social Security: What Does It Provide?

• Retirement and survivor monthly benefits started 1940

– Never missed a payment!

• Eligible age lowered from 65 to 62 in 1957 for women 

and 1962 for men

– Full retirement age rises from 65 to 67 by 2022

• Disability benefits started in 1957

• Benefits rise with average wage across 

generations—but with just with CPI after eligibility

• Payroll taxes roughly pay-as-you go

– Rose from 2% to 12.4% as system matured
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Social Security Financing

• Basically “pay-as-you-go” 

– Current workers provide for current beneficiaries

– Trust Funds are “contingency reserve” because CANNOT borrow

– Total spending to date cannot exceed income to date

• Current OASDI reserves (excess income) = $2.9 trillion

– Available to augment tax income as needed

• Reserves projected to deplete in 2034* under current law

– Expect Congress to act—as it always has

* Per OCACT update of 2020 Trustees’ baseline (11/24/20)
What We Do—Office of the Chief Actuary

1) Baseline projections of OASDI cost and revenue 

under current law

a) For the Trustees Reports 

b) For the President’s Budget

c) SSA and Consolidated Financial Statements

2) Estimates for proposals to change law, regulations, 

and policy, for Congress, the Administration, and 

others

3) Actuarial notes and studies

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What We Do–Annual Trustees Reports

1) Trust Fund operations of the past year and the 

next five years

2) Actuarial status of the trust funds

– This means the ability to meet the cost of scheduled 

benefits with scheduled revenue and trust fund 

reserves

– And the extent to which scheduled revenue will fall 

short, forcing cuts or delays in benefits in the absence 

of legislative change

3) Results used for SOSI in Financial Statements

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Full Scope Audit of the 75-year Projections

1) Statement of Social Insurance and Statement of 

Changes in Social Insurance Amounts, in the Agency 

Financial Statement and in the consolidated Financial 

Statement of the U.S. Government

2) Mandated by the FASAB

– For the 2020 audit, GT and GAO actuaries, economists, AND 

accountants!

– We received a clean opinion—again! CEAR award #23!

3) Audit starts after Trustees Report release through 

September

– Huge learning experience for all

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Full Scope Audit of the 75-year Projections

1) Audit covers all aspects of the Financial Statement

2) We review all assumptions and methods, and all 

changes

3) Review more than replication due to complexities

4) Extensive review of internal controls

5) Reasonableness of assumptions—as per attestation of 

the Chief Actuary

6) Sensitivity analysis

7) Subsequent events—where applicable

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For 2020, Subsequent Event Unprecedented 

1) COVID-19 not reflected in the 2020 Trustees Report

– Report issued in April, but assumptions were determined before 

pandemic was declared by the WHO in March

2) OCACT developed modifications to the 2020 TR 

assumptions in September/October per requirement by 

the auditors

3) Reflected experience and expectations at that time

4) Significant effects that caused us to indicate that 

evaluation of “solvency” proposals prior to the 2021 TR 

would be evaluated on the basis of the updated baseline 

https://www.ssa.gov/OACT/solvency/UpdatedBaseline_20201124.pdf

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Characteristics of COVID-19

• Highly communicable

• Transmissible prior to symptoms

– Many never show symptoms

• Immunity after infection may be limited

– Less than 12 months?; implications for “herd immunity”

– Potential for repeated reinfection?

• Death rate overall 0.4% to 1%: proportionate increase across 

ages 25 and over

• Compromise for survivors?

• Increasing mutations—vaccine or therapy? How effective?
Potential Path Going Forward

1918: worst case scenario? Will we do much better in 2021?

• Will we avert a substantial 

additional wave in 2021? If 

so, we may be able to 

return to “normal” by the 

end of the year

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Source: The Spanish Flu and the Stock Market: The Pandemic of 1919

by Bryan Taylor | Feb 27, 2020 | Economics, Historical, Insights Figure 1. Death Rates of the Spanish Flu, June 1918 to May 1919
2020 Subsequent Event Changes: Demographic

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Assumption/measure 2020 2021 2022 2023 2024 2025

Fertility (TFR)

2020 TR 1.69 1.70 1.73 1.77 1.82 1.87

Subsequent event 1.69 1.57 1.66 1.83 1.88 1.93

Difference 0.00 -0.13 -0.07 0.06 0.06 0.06

Mortality (age-sex-adjusted central death rate)

2020 TR 790.4 784.9 779.2 773.2 767.1 760.9

Subsequent event 885.2 832.0 794.8 773.2 767.1 760.9

Difference 94.8 47.1 15.6 0.0 0.0 0.0

Net LPR immigration (levels in thousands)

2020 TR 788 788 788 788 788 788

Subsequent event 428 428 1,028 1,028 1,028 788

Difference -360 -360 240 240 240 0

Net other-than-LPR immigration (levels in thousands)

2020 TR 631 614 597 586 576 567

Subsequent event -449 -442 1,366 1,339 1,312 564

Difference -1,080 -1,056 769 753 736 - 3
2020 Subsequent Event Changes: Disability

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Assumption/measure 2020 2021 2022 2023 2024 2025

Disability incidence (age-sex-adjusted rate per thousand exposed)

2020 TR 4.34 4.18 4.25 4.53 4.77 4.80

Subsequent event 3.87 4.52 4.53 4.57 4.70 4.81

Difference -0.47 0.34 0.28 0.04 -0.07 0.01

Disability termination (age-sex-adjusted rate per thousand beneficiaries)

2020 TR 41.31 39.16 38.56 38.04 37.51 36.90

Subsequent event 42.79 40.64 39.05 38.04 37.51 36.90

Difference 1.48 1.48 0.49 0.00 0.00 0.00
2020 Subsequent Event Changes: Economic

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Assumption/measure 2020 2021 2022 2023 2024 2025

Productivity, total US economy (annual percentage change)

2020 TR 1.26 1.99 1.86 1.67 1.62 1.63

Subsequent event 3.20 1.77 0.76 0.67 1.22 1.46

Difference 1.94 -0.22 -1.10 -1.00 -0.40 -0.17

Average wage in covered employment (annual percentage change)

2020 TR 3.50 4.44 4.09 3.83 3.78 3.81

Subsequent event -4.33 8.23 5.99 3.17 3.45 3.66

Difference -7.83 3.79 1.90 -0.66 -0.33 -0.15

CPI-W (annual percentage change)

2020 TR 2.27 2.43 2.40 2.40 2.40 2.40

Subsequent event 1.23 1.65 2.05 2.36 2.40 2.40

Difference -1.04 -0.78 -0.35 -0.04 0.00 0.00

Real-wage differential (percent)

2020 TR 1.23 2.01 1.69 1.43 1.38 1.41

Subsequent event -5.56 6.58 3.93 0.80 1.05 1.26

Difference -6.79 4.57 2.24 -0.63 -0.33 -0.15

Unemployment rate (percent)

2020 TR 3.8 4.2 4.6 5.0 5.0 5.0

Subsequent event 8.3 6.5 5.2 5.0 5.0 5.0

Difference 4.5 2.3 0.6 0.0 0.0 0.0
2020 Subsequent Event Changes: Economic, cont.

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Assumption/measure 2020 2021 2022 2023 2024 2025

Total employment, military and civilian (annual percentage change)

2020 TR 0.9 0.3 0.3 0.4 0.6 0.5

Subsequent event -6.4 3.0 3.2 2.0 1.0 0.7

Difference -7.3 2.7 2.9 1.6 0.4 0.2

Real GDP (annual percentage change)

2020 TR 2.1 2.3 2.2 2.1 2.1 2.1

Subsequent event -3.5 4.7 3.9 2.7 2.1 2.1

Difference -5.6 2.4 1.7 0.6 0.0 0.0

Trust fund new-issue real interest rate (percent)

2020 TR 0.0 -0.1 0.5 0.9 1.2 1.6

Subsequent event 1.0 -0.6 -0.8 -0.7 -0.2 0.4

Difference 1.0 -0.5 -1.3 -1.6 -1.4 -1.2

Average wage index

2020 TR 55,641.66 58,112.16 60,499.07 62,823.60 65,207.33 67,697.32

Percent change from prior year 3.51 4.44 4.11 3.84 3.79 3.82

Subsequent event 51,603.14 55,788.36 59,076.46 60,918.68 62,996.21 65,290.06

Percent change from prior year -4.01 8.11 5.89 3.12 3.41 3.64
Current Actuarial Status

• Projections from the 2020 Trustees Report

• And the Subsequent Event Update!

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SOLVENCY: OASDI Long-Range Actuarial Deficit Increased by 0.07 Percent of Payroll

o Reserve depletion date varied from 2029 to 2042 in reports over the past 30 years 

o For OASDI and OASI, 2034 and 2033, one year earlier than 2020 Trustees Report

o For DI, 2059, six years earlier than the 2020 Trustees Report

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OASDI Annual Cost and Non-Interest Income as Percent of Taxable Payroll 

Persistent Negative Annual Cash-Flow Balance Starting in 2010 

Both rates higher for update in 2020 ONLY because of lower payroll
SUSTAINABILITY: 

Cost as percent of 

GDP Under 2020 

Trustees Report

Rises from a 4.2 

percent average in 

1990-2008, to about 5.9 

percent by 2038, then 

declines to 5.8 percent 

by 2053, and generally 

increases to 5.9 percent 

by 2094.

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0%

1%

2%

3%

4%

5%

6%

7%

8%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar Year

OASDI Cost and Non-Interest Income as a Percentage of GDP

Historical Projected

Cost

Non-interest Income
From the 2020 TR...

Why Cost Rises 

Between 2008 and 

2035 as Percent of 

Payroll and GDP:

Aging—Change in 

Age Distribution

Mainly due to drop in 

birth rates

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0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Aged Dependency Ratio 2020 TR

Population 65+/(20-64) 

Actual and TR Intermediate

TFR remains at 3.0 after 1964

TFR remains at 3.3 after 1964

Historical Projected
Applications for 

Disability Benefits 

Remain Historically 

Low: Even Lower 

in 2020

At the peak of the last 

economic cycle in 2007, 

applications were low, but 

increased rapidly in the 

recession from 1.5 million in 

2007 to 1.9 million in 2010.

In 2016 through 2020, 

applications have dropped 

below the 2007 level.

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1.3

1.4

1.5

1.6

1.7

1.8

1.9

2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 (millions)

Social Security Disabled Worker Receipts at Disability Determination 

Services by Calendar Year: Historical and Intermediate Assumptions 

for 2012 through 2020 Trustees Reports

2012TR

2017TR

2016TR

2015TR

2014TR

2013TR

2018TR

2019TR 2020TR
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Implications of COVID-19 for Changes in OASDI

• Over the long-range period, likely minor

– The pandemic-induced recession may be largely recovered by 2023 

with little permanent effect

– Note that Trustees Reports have incorporated the likelihood of 

periodic negative events

• Specifically, Trustees Report ultimate mortality decline has been assumed to be 

at around 0.73 percent on average; others have persistently assumed 1.0 

percent or higher in the long term with no deceleration

• The Trustees Reports have also assumed long-term unemployment rates will 

be higher than “forecasters”

• However, there are near-term considerations
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Average Wage Index (AWI): “Notch” and “Boost”

• The AWI declined in 2009 by 1.5%, and may decline by more for 2020

• If the AWI declines for 2020 then ALL beneficiaries becoming newly 

eligible in 2022 (retirees, disabled, survivors) would have benefits 

permanently lower than those who became eligible a year earlier (notch)

• But for those becoming eligible after 2022 who had earnings in 2020, the 

indexed value of their 2020 earnings will be increased (boost)

• The net effect on actuarial status would be small—and likelihood of a 

substantial decrease now seems small

• Two bills have been introduced to address this possibility for the 2020 

AWI, and for the possibility of declines in the future; see testimony at 

https://www.ssa.gov/oact/testimony/HouseWM_20200717.pdf
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Currently-Proposed Comprehensive 

Changes for OASDI

•Social Security 2100 Act was introduced last year

• Increase payroll tax rate and gradually eliminate the taxable 

maximum

• Some benefit enhancements

•In addition, bipartisan support for changing the Windfall 

Elimination Provision

•Comprehensive changes proposed by Sam Johnson have 

not been reintroduced since he passed away
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Some Ways to Lower Cost

• Lower benefits for retirees–not disabled?

• Increase normal retirement age (lowers OASDI cost, but increases DI cost)

• Can exempt long-career low earners (Simpson Bowles 2010)

• Lower benefits mainly for high earners?

• Reduce PIA above some level

• Noting that higher earners generally live longer

• Lower benefits mainly for the oldest old?

• Reduce the COLA

• Others say increase it with the CPI-E (based on purchases of consumers 

over age 62)
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Some Ways to Increase Revenue

• Raise the 12.4 percent OASDI payroll tax rate?

• Raise tax on highest earners?

• Increase taxable maximum amount

• Some tax on all earnings above the maximum

• Tax employer group health insurance premiums?

• Affects only middle class if taxable maximum remains

• Tax investment income?

• Or potentially a wealth tax?
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Finally, Timing for Changes

• Historically, Congress has waited until reserve depletion 

is imminent 

• Given uncertainties, difficult to lower benefits or raise taxes until necessary

• Enacting “sooner” allows more options, more gradual 

phase in, and more advance notice

• Best example: 17-year delay in implementing NRA increase in 1983 

amendments

• OASDI reserve depletion now projected for 2034

• One year sooner in update due to COVID-19

• The date has varied between 2029 and 2042 over the past 30 years
For More Information Go to 

http://www.ssa.gov/oact/

• There you will find:

• The 2020 and all prior OASDI Trustees Reports

• Detailed single-year tables for recent reports

• Our estimates for comprehensive proposals

• Actuarial notes; including replacement rates

• Actuarial studies; including stochastic

• Extensive databases

• Congressional testimonies

• Presentations by OCACT employees

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