SOCIAL SECURITY

Office of the Chief Actuary

December 21, 2020 

The Honorable Chuck Grassley 

Senate Finance Committee

United States Senate

Washington, DC 20510 

The Honorable Kevin Brady

Committee on Ways and Means

United States House of Representatives

Washington, DC 20515 

Dear Chairman Grassley and Ranking Member Brady: 

This letter is in response to your December 7, 2020 letter (enclosed) regarding implications of 

changes in the national average wage index (AWI) for benefit levels under Social Security and 

potential Congressional actions. The decline in the AWI for 2009 was unprecedented. The 

possibility of another decline in the AWI for 2020 is apparent, with circumstances being quite 

different now. Thank you for asking me to address your concerns and to clarify and expand on 

my statements in the testimony before the House Ways and Means Subcommittee on Social 

Security on July 17, 2020 (available at 

https://www.ssa.gov/OACT/testimony/HouseWM_20200717.pdf). 

My testimony discussed broadly the implications of COVID-19 on Social Security. Your inquiry 

refers to the following paragraph on page 4 of the testimony regarding the effect of the decline in 

the AWI for 2009 on benefit levels for beneficiaries becoming newly eligible in 2011: 

“In 2009, due to the recession, the AWI failed to increase from the level of the prior year 

for the first time. The AWI for 2009 declined to 1.5 percent below the AWI level for 

2008. This affected the benefit levels for all Social Security beneficiaries with initial 

benefit eligibility in 2011, because workers’ earnings and the PIA formula bend points 

used in benefit computations are wage indexed up through the second year prior to their 

initial benefit eligibility. As a result, the 2011 benefit for workers who became newly 

eligible in 2011 was 1.5 percent less than the 2010 benefit for workers with similar career 

earnings who became newly eligible in 2010. That reduction will persist for the lifetime 

of those workers who became newly eligible in 2011. While policymakers did recognize 

this effect in 2010, no changes were made in the law at that time—mainly because the 

reduction in the AWI and benefit levels was small, and it was known that the first cost of 
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living adjustment (COLA) applicable for those affected would be relatively large (3.6 

percent, versus no COLA in the prior two years).”

As indicated, the AWI declined for 2009 compared to the prior year, for the first time in the 

history of this index, which started for 1951. Since 1951, there were several recessions, none of 

which had resulted in a decline in the AWI, so this was quite unexpected. The implications for 

benefit levels for those becoming newly eligible (for example, attaining age 62 for retired worker 

benefits) from one year to the next, is complicated. The primary insurance amount (PIA) 

computed for January through November of 2011 for those becoming newly eligible in 2011 was 

1.5 percent lower than the PIA for workers with equivalent earnings histories who became newly 

eligible in 2010. However, the difference in benefit level at the time of actual initial entitlement 

for benefits (which depends on the age at which a retired worker beneficiary chooses to start 

their benefit entitlement) generally also reflects one or more cost of living adjustments (COLAs), 

because most new retired worker beneficiaries choose to start their benefit entitlement some 

months after they attain age 62. 

In comparing benefits for retired workers becoming eligible in 2011 versus in 2010, the 

implications of the first COLA for each group was also unprecedented. Individuals attaining age 

62 in 2010 received no COLA for December of their first year of eligibility and through 

November of the following year. That there would be no COLA for December of 2010 was 

announced at the same time that the level of the AWI for 2009 was announced, in October 2010. 

Thus, it was known then that the benefit level for retired workers becoming eligible in 2010 

would have no COLA applied for at least the first 12 months of their benefit eligibility (through 

November 2011). 

However, the peculiar circumstance that led to no COLA for December 2010 left little doubt that 

there would be a positive COLA in December 2011, which would be applicable for December 

2011 through November 2012 for those becoming newly eligible in 2011. The large COLA of 

5.8 percent for December 2008, which was based on a surge in consumer prices (the CPI-W) for 

the third quarter of 2008, was followed by a large 5-percent decline in prices by December 2008. 

This meant that there could be no COLA thereafter until consumer prices rose to a level above 

that for the third quarter of 2008, offsetting the earlier 5-percent drop. At the time of the 

computation of the COLA for December 2010 in October 2010, the CPI-W for the third quarter 

of 2010 was still 0.6 percent below the level for the third quarter of 2008, so there was no 

December 2010 COLA. At the same time, the CPI had been rising at an annual rate of 2.6 

percent from December 2008 to September 2010, and by 1.5 percent from the third quarter of 

2009 to the third quarter of 2010. Thus, as of October 2010, a positive COLA for December 

2011 was understood to be highly likely. The Trustees Report of August 2010 projected a 

December 2011 COLA of 1.2 percent, which would have made the PIA level for December 2011 

through November 2012 for new retired workers becoming eligible in 2011 just 0.3 percent 

below the PIA for December 2010 through November 2011 for equivalent retired workers 

becoming eligible by attaining age 62 in 2010. 

In February of 2011, the CPI-W for January was published at a level exceeding the level for the 

third quarter of 2008, and was followed shortly thereafter by a rapid rise through the third quarter 

of 2011, resulting in a 3.6-percent COLA for December 2011. As a result, it was known in 
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October 2011 that the PIA level for December 2011 through November 2012 for new retired 

workers becoming eligible in 2011 would be more than 2 percent above the PIA for December 

2010 through November 2011 for equivalent retired workers becoming eligible in 2010.

Below, please see answers to the three specific questions you have raised. 

1. What is the metric by which you ascertain whether a benefit reduction is “small” enough to 

justify lack of congressional action or large enough to justify action? 

Answer: That determination is of course solely at the discretion of Congress. As described 

above, based on information known in October 2010, including the Trustees’ projections of 

August 2010, the benefit level available for retirees reaching age 62 in 2011 for the 12 months 

starting in December of their eligibility year was expected to be only around 0.3 percent below 

the level of benefits for equivalent retirees reaching age 62 in 2010 for the 12 months starting in 

December of their eligibility year. By October 2011, it was known that there would be no 

reduction in such benefit levels, but rather an increase for those becoming newly eligible in 2011 

compared to those becoming newly eligible in 2010. Following the experience of the reduction 

in the AWI for 2009, we are better positioned to analyze the implications of a possible large 

reduction in the AWI for 2020. We have welcomed the opportunity to work with Congressional 

staff and members on the development of and estimates for proposals to address the implications 

of a reduction in the AWI. 

2. Please explain what you meant by “it was known” 1 what the 2011 COLA2 was going to be at 

the time the 2009 AWI reduction was announced on October 15, 2010. 

Answer: As described above, all evidence as of October 15, 2010 indicated that there would be a 

positive COLA for December 2011. However, it was not until October 2011 that the level of the 

COLA for December 2011 was certain. I was not precise in my testimony when suggesting that

the final level of the 2011 COLA was known “at that time,” in 2010. My intention was to 

indicate that the actual level of the 2011 COLA was known in that general time frame (that is,

within the year after the drop in AWI was first known), and not that it was known with certainty 

in October 2010. I apologize for any confusion my imprecise statement has created. It was not 

at all my intention to mislead.

3. When it was identified to you prior to the hearing that your above quoted statement was 

misleading, you declined to correct your testimony. Please explain why you chose to present 

misleading testimony to Congress. 

Answer: I have attempted to explain the complexity of this particular issue above. The way in 

which the first ever drop in AWI for 2009 interacted with COLAs in that time frame resulted in 

only a small expected reduction in benefits for those newly eligible in 2011. The July 17, 2020 

 1 By “known,” we mean actual realizations that are recorded in official data and used for benefit determination. 

Assumptions and forecasts, such as those from Trustees Reports, are not known realizations. 2 Benefits calculated using the 2009 AWI were first paid in 2011. The 2011 COLA, announced on October 19, 

2011, was the first COLA applied to benefits that were calculated using the 2009 AWI, and affected benefits 

received beginning in January 2012. 
Page 4 – The Honorable Chuck Grassley and The Honorable Kevin Brady

hearing and my testimony focused broadly on many current issues related to COVID-19 and 

Social Security. I appreciate your sharing the concern and asking for the fuller explanation of the 

complex nature of benefit computations and comparisons. I hope that this response will be 

helpful in clarifying. 

I have enjoyed working with both of you and your staffs from my position in the Office of the 

Chief Actuary at the Social Security Administration, where I have served as Chief Actuary since 

2001, and prior to that as Deputy Chief Actuary. Our office’s mission has always been to provide 

objective information and analysis to assist lawmakers, the Social Security Board of Trustees, 

the Commissioner of Social Security, and the Administration in maintaining and evolving the 

Social Security and Supplemental Security Income programs to best serve the American people. 

We are in very frequent contact with Committee staff and through that presume we are keeping 

you informed. However, we welcome the opportunity to engage in Committee hearings and 

letters like this to inform you directly.

We look forward to continuing work with you and your staffs, assisting you in finding the best 

approaches for improving all aspects of the Social Security programs. 

Sincerely,

Stephen C. Goss, ASA, MAAA

Chief Actuary

Enclosure

cc: 

The Honorable Andrew Saul, Commissioner of Social Security and Trustee of the Old Age and 

Survivors Insurance and Disability Insurance Trust Funds 

The Honorable Steven Mnuchin, Secretary of the Treasury and Managing Trustee of the Old Age 

and Survivors Insurance and Disability Insurance Trust Funds
December 7, 2020

Stephen Goss

Chief Actuary

Social Security Administration

6401 Security Blvd.

Baltimore, MD 21235

Dear Mr. Goss:

We write to better understand a misleading statement in your recent testimony before the House 

Ways and Means Subcommittee on Social Security on July 17, 2020.1 Seniors, individuals with 

disabilities, and their families count on Social Security to provide important benefits and are 

understandably concerned by uncertainty about the virus’s impact on the National Average Wage 

Index (AWI) and Social Security benefits.2

The AWI typically increases from one year to the next, but has fallen in the past and may do so 

again in 2020. In 2009 the AWI was lower than the previous year and affected benefits of 

individuals initially eligible in 2011. According to your testimony, such an individual could 

have a benefit that is 1.5 percent less than the benefit of an individual with similar earnings who 

was initially eligible in the prior year and “[t]hat reduction will persist for the lifetime of those 

workers.”

In your testimony you stated: “While policymakers did recognize this effect in 2010, no changes 

were made in the law at that time—mainly because the reduction in the AWI and benefit levels 

was small and it was known that the first cost of living adjustment (COLA) applicable for those 

affected would be relatively large (3.6 percent, versus no COLA in the prior two years).” This 

statement asserts that the reason no action was taken in 2010 was because the benefit effect was 

“very small” and future COLAs were “known.” Given the importance of accurate representation 

of decisions by the 111th Congress, we are seeking clarification of this statement. 

1 “The Impact of COVID-19 on Social Security and its Beneficiaries,” hearing of the Subcommittee on Social 

Security, House Ways and Means Committee, on July 17, 2020. Video and testimonies available at 

https://waysandmeans.house.gov/legislation/hearings/impact-covid-19-social-security-and-its-beneficiaries. 2 Among other uses, the AWI is used as an input into determining benefits through its use in wage indexation of 

workers’ past earnings and the primary insurance amount (PIA) formula bend points. Many have speculated that the 

pandemic may lead to a decline in the AWI for 2020 relative to 2019. Among others who would be affected, anyone 

born in 1960, who becomes newly eligible for OASDI benefits in 2022, and whose past wages will be indexed in 

benefit determination using the percent change in the AWI between 2019 and 2020, could see reductions in benefits 

and replacement rates relative to similar earners whose benefits are determined in adjacent years.
1. What is the metric by which you ascertain whether a benefit reduction is “small” enough to 

justify lack of congressional action or large enough to justify action?

2. Please explain what you meant by “it was known” 3 what the 2011 COLA4 was going to be at 

the time the 2009 AWI reduction was announced on October 15, 2010.

3. When it was identified to you prior to the hearing that your above quoted statement was

misleading, you declined to correct your testimony. Please explain why you chose to present 

misleading testimony to Congress.

The Office of the Chief Actuary provides important information to help Congress decide how to 

strengthen Social Security. Congress reasonably expects that the information provided is 

accurate and technically sound, especially during a Congressional hearing. The role of the Chief 

Actuary ought to be much like an umpire at a baseball game, whose job it is to call balls and 

strikes, and not like the broadcasters who provide commentary. It is not the job of anyone at the 

Social Security Administration to justify decisions made by Congress and we are concerned by 

your recent attempt to do so. We look forward to your prompt reply, and request that you 

respond by December 21, 2020. 

Sincerely, 

________________________ _________________________

Chuck Grassley Kevin Brady

Chairman Ranking Member

Senate Finance Committee Committee on Ways and Means

cc: The Honorable Andrew Saul, Commissioner of Social Security and Trustee of the Old 

Age, Survivors, and Disability Insurance Trust Funds

The Honorable Steven Mnuchin, Secretary of the Treasury and Managing Trustee of the 

Old Age, Survivors, and Disability Insurance Trust Funds

3 By “known,” we mean actual realizations that are recorded in official data and used for benefit determination. 

Assumptions and forecasts, such as those from Trustees Reports, are not known realizations. 4 Benefits calculated using the 2009 AWI were first paid in 2011. The 2011 COLA, announced on October 19, 

2011, was the first COLA applied to benefits that were calculated using the 2009 AWI, and affected benefits 

received beginning in January 2012.