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Session 5E: 

Updates on the Financial 

Status of Social Security 

and Proposals

Presenters: 

Steve Goss, ASA, MAAA

Chief Actuary, Social Security Administration

Karen Glenn, FSA, EA, MAAA

Deputy Chief Actuary, Social Security Administration

November 8, 2023

Moderator: 

Piotr Krekora, ASA, EA, FCA, MAAA

Senior Consultant, Gabriel, Roeder, Smith & Company
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What Do We Want to Share Today About Social 

Security and “Entitlements”?

1. What’s new in the 2023 Trustees Report (released March 31) 

regarding Social Security’s actuarial status?

2. What options can be considered for closing the financing gap?

3. How do Social Security and Medicare (“entitlements”) figure in 

the fiscal status of the federal government and the economy?
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What’s new in the 2023 Trustees 

Report (released March 31) regarding 

Social Security’s actuarial status?
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2023 Trustees Report Highlights

• Based on recent experience through the 3rd quarter of 2022, the Trustees 

lowered expectations for economic growth in 2023 and assumed a permanent 3-

percent lower level of GDP thereafter 

• This advanced the OASI (Old Age and Survivors Insurance) Trust Fund reserve 

depletion date one year earlier, from 2034 to 2033

• The DI (Disability Insurance) Trust Fund reserves are not projected to become 

depleted within 75 years

• The reserves of the combined OASDI Trust Funds are also projected to become 

depleted one year earlier, in 2034

• The year of combined OASDI reserve depletion has been in the range of 2033 to 

2035 for 12 years now; we are approaching the need for action
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The Current Financial/Actuarial Status of the OASDI Trust Funds

Cost is rising as a percent of payroll from 2008 to 2035, mainly due to birth rates 

affecting the population age distribution
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But Wait—After the 1983 Amendments, the 1983 Trustees 

Report Projected Reserve Depletion in 2063

• Lower birth rates were anticipated in 1983, and mortality projections 

were extremely accurate

• So over 80% of worsening in projections since 1983 Trustees Report 

was due to unanticipated economic experience

• Redistribution of earnings from 1983 to 2000 reduced taxable payroll, 

and payroll tax revenue, by 8%

• Depth of 2007-09 recession and slow recovery reduced employment 

and tax revenue
Earnings 

“Dispersion” 

Between 1983 and 

2000 Lowered the 

Percent of Earnings 

Taxable from 90% to 

82.5%

Overall, average 

earnings increased more 

than expected, but real 

growth was 62% for the 

top 6% of workers, while 

only 17% for lower 94% 

of workers.

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The Reduced Share of Earnings Subject to Payroll Tax Explains 

Most of the Increase in Cost as Percent of Payroll, Compared to 

the Projection in 1983

• But the depth of 

the 2007-09 

recession and slow 

recovery further 

reduced expected 

trust fund 

accumulation 

through 2019
Changes to Labor 

Productivity From 

2009 TR to 2023 TR

The assumed sustainable trend 

level of productivity was shifted 

downward several times between 

the 2009 TR and 2020 TR, in 

recognition of the persistent 

effects of the Great Recession 

once they became discernable in 

the data.

As a result of recent economic 

developments, the assumed 

sustainable trend level of 

productivity for the 2023 TR is 

assessed to be lower than the 

level assumed for the 2022 TR. 

The assumed long-term ultimate 

growth rate remains unchanged.

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58

63

68

73

78

83

88

93

2008Q12009Q12010Q12011Q12012Q12013Q12014Q12015Q12016Q12017Q12018Q12019Q12020Q12021Q12022Q12023Q12024Q12025Q12026Q12027Q12028Q12029Q12030Q12031Q12032Q1

Labor Productivity TR 2009-2023

(Real GDP per hour worked)

2009 TR

2012 TR

2015 TR

2016 TR

2018 TR

2020 TR

2022 TR

2023 TR (adj. for BLS

methodological changes)
Ratio of 

Employment to 

Population

Recovered very gradually 

after 2007-09 recession, 

but MUCH more rapidly 

after 2020 recession. 

The quits rate represents 

the number of voluntary 

separations, generally for 

a better job. This suggests 

a “tighter” labor market 

going forward, consistent 

with the changing age 

distribution.

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0

0.5

1

1.5

2

2.5

3

3.5

0.50

0.55

0.60

0.65

0.70

2001Q12001Q32002Q12002Q32003Q12003Q32004Q12004Q32005Q12005Q32006Q12006Q32007Q12007Q32008Q12008Q32009Q12009Q32010Q12010Q32011Q12011Q32012Q12012Q32013Q12013Q32014Q12014Q32015Q12015Q32016Q12016Q32017Q12017Q32018Q12018Q32019Q12019Q32020Q12020Q32021Q12021Q32022Q12022Q3

Quits Rate versus Ratio of Employment to Population

(16 and older, age-sex adjusted)

Quits Rate

E/Pop 
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Age of Starting Social Security Retirement Benefits 

Continues to Increase, Even in 2020 Pandemic/Recession

0

10

20

30

40

50

60

70

80

90

100

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Female Retired Worker Beneficiaries In Current Payment Status as 

Percent of Insured Population 

(excluding those receiving only some other OASDI benefit)

62.5 63.5 64.5 65.5 66.5 67.5 68.5 69.5 70.5

Recession

Eliminate Earnings 

Test Over NRA

Deemed Filing 

applies to all Retired 

Workers

0

10

20

30

40

50

60

70

80

90

100

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Male Retired Worker Beneficiaries In Current Payment Status as 

Percent of Insured Population 

(excluding those receiving only some other OASDI benefit)

62.5 63.5 64.5 65.5 66.5 67.5 68.5 69.5 70.5

Recession

Eliminate Earnings 

Test Over NRA

NRA starts

increase 

over 66
Disability 

Incidence Rate 

Also Remains 

Historically Low

DI disabled worker 

incidence rate rose sharply 

in the 2008 recession and 

has declined since the peak 

in 2010 to extraordinarily 

low levels in 2016 through 

2022.

What will be the NET effect 

of COVID and post-COVID 

conditions? 

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2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

1990 1995 2000 2005 2010 2015 2020 2025 2030

DI Age-Sex-Adjusted Incidence Rates:

Historical and Intermediate Assumptions for 2012 through 2023 Trustees Reports

2012TR

2013TR

2014TR

2015TR

2016TR

2017TR

Average 1990-2022 5.0

Ultimate Assumption 4.8

2018TR

2019TR

2020TR

2021TR

2022TR

2023 TR
Mortality 

Experience: Ages 

65 and Older

Increased mortality in the 

near-term to reflect the 

effects of the COVID-19 

pandemic.

What will the net effect of 

the pandemic be on 

mortality in the future?

We assume offsetting 

effects for the residual 

population after the 

pandemic, around 2025.

, 

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Ratio of Age-Sex 

Adjusted Death 

Rates to Same 

Quarter in 2019

Death rates for causes other 

than COVID have been about 

5% higher in the pandemic 

period through 2022 than 

they were in 2019.

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Source: NCHS Quarterly Provisional Estimates as of March 20, 2023
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What options can be considered 

for closing the financing gap?
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By 2034, We Need to Reduce Scheduled Benefits by 

One-Fourth or Increase Revenue by One-Third

• Lower scheduled benefits:

• Increase the NRA—Reduce retirees but not disabled; consider less increase 

for long-career low-pay earners, as Simpson/Bowles 2010

• Reduce the COLA—Most affects the oldest

• Reduce growth in benefits—Modify the PIA formula to increase benefits from 

generation to generation with price inflation, not average earnings

• Increase scheduled revenue:

• Increase payroll taxes—By raising the 12.4% tax rate or taxing some or all 

earnings above the current taxable maximum

• Take advantage of returns on private-sector investments—Invest trust fund 

reserves, or tax investment income as in the 2010 ACA
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Retired Worker Benefit Replacement Rates, Both 

Scheduled and Payable Under Current Law
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Question: How Much Should Social Security Provide? 

What Share of Pre-Retirement Earnings to “Replace”?

• Note that “career-average CPI-indexed earnings” are not the 

appropriate basis

o The standard of living increases through time—new goods and services do 

not increase the CPI, but actually reduce its growth rate

o Career-average wage-indexed earnings approximate late career earnings 

(Actuarial Note 155, 2014)

o Career-average wage-indexed earnings are also the basis for determining 

Social Security benefit levels

• In total, financial planners generally suggest about 75% to 80% of 

late career earnings level
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If Reduce Benefits, By How Much, and For Whom? 

• Increase NRA—as done in the 1983 Amendments

o Reduce monthly benefit for retirees (and most survivors) by about 7% for each 

year NRA is increased, but no change for disabled worker beneficiaries 

• Reduce the COLA—affects the oldest increasingly more as they age

• Reduce growth in benefits—modify the PIA formula to increase 

benefits across generations using price inflation, not average earnings 

growth

o 1976 Hsiao Commission—fix PIA factors at 80%, 35%, 25%

 But index PIA “bend points” and AIME by only CPI inflation (current law index is AWI)

o 1999 Kasich and 2001 Commission—true CPI indexing across generations

 Reduce PIA factors (90, 32, 15) by real growth in average wage

o Progressive Price Indexing—reduce for only the top half of career earners
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Effects of “Price Indexing” on Social Security Benefits 

• Very different effects on benefits for these 2 approaches

o Hsiao “compression of brackets” reduces Very Low earners 3 times Max earners

o Kasich and 2001 Commission reduce even more, “across the board”

o Both approaches continue reductions indefinitely

 Hsiao Commission 1976: Reduction of PIA Below Current Law 

Career Average Earnings Level as Percent of AWI

Very Low Low Medium High Max 

25% 45% 100% 160% 245%

2023 17% 15% 16% 15% 5%

2050 27% 22% 23% 20% 8%

2097 41% 36% 34% 28% 15%

 Assume implementation in 1976; 2023 TR growth rates

Kasich and 2001 Commission: Reduction of PIA Below Current Law 

Career Average Earnings Level as Percent of AWI

Very Low Low Medium High Max 

25% 45% 100% 160% 245%

2023 21% 21% 21% 21% 21%

2050 41% 41% 41% 41% 41%

2097 65% 65% 65% 65% 65%

 Assume implementation in 2001; 2023 TR growth rates
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If Increase Revenue, By How Much, and For Whom? 

• Increase payroll taxes by raising the 12.4% tax rate or taxing some or all 

earnings above the current taxable maximum

o Gradually raise the tax max to again apply to 90 percent of covered earnings

o Apply the payroll tax to earnings over $250,000 (Sanders) or $400,000 (Larson, 

Whitehouse)

o Apply to all covered earnings

• Take advantage of returns on private-sector investments

o Invest trust fund reserves, in higher yield private securities—Kerrey-Simpson 1995

o Tax net investment income, as in ACA—Larson, Sanders, Whitehouse

o Tax active S-corporation holders and active limited partners—Sanders, Whitehouse
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• Historically, Congress has waited until reserve depletion is imminent 

o Difficult to lower benefits or raise taxes until necessary

• Enacting sooner allows more options, more gradual phase in, and 

more advance notice

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

• OASDI reserve depletion now projected for 2034

o One year sooner than in the 2022 Trustees Report

o The date has varied between 2033 and 2035 over the past 12 years

o And between 2029 and 2042 over the past 30 years

Timing for Changes
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How do Social Security and Medicare 

(“entitlements”) figure in the fiscal status of 

the federal government and the economy?
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What Is the Projected Cost of OASDI and Medicare as a Share of GDP?

Under current law, both rise similarly to 6 percent of GDP; the Trustees also illustrate that 

Medicare might increase further without ACA
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How About National Health Expenditures?

How do we compare to other countries? Currently double per capita spending!

Will/can NHE really continue rising from 18% to 30% or more of GDP?
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A Note On Projected Federal Debt Held By the Public

Administration and CBO projections are VERY different—but both assume change in law 

to fully finance OASDHI by borrowing from the public after trust fund reserve depletion; 

in fact, trust funds cannot borrow and even REDUCE borrowing from the public
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So, What Is Plausible For the Cost of Social Security 

and Medicare Over the Next 75 Years?

• The bad news: due to lower birth rates and changing age distribution of the 

population, the number of beneficiaries for both programs will increase as 

a share of adult population and relative to potential workers

• The good news: with people living longer after eligibility age, cost per 

beneficiary will be constrained somewhat—only CPI increase after 

eligibility for Social Security and a smaller share die in a year for Medicare

• Question: is it plausible that the ACA and other means to slow health care 

cost are NOT possible, even as we seriously consider reducing cash benefit 

income for Social Security (which is needed for all expenses, including 

copayments and Medigap premiums)? How do other countries do it?
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For More Information About Social Security Go To 

www.ssa.gov/oact/

There you will find:

• The 2023 and all prior Social Security Trustees Reports

• Detailed single-year tables for recent reports

• Our estimates for comprehensive proposals and individual provisions

• Actuarial notes and studies

• Extensive databases

• Congressional testimonies

• Presentations by OCACT employees
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Questions?