Discussion with the National Tax Bureau 

Beijing Division on Social Security 

Actuarial Models and Estimates

Stephen Goss and Jason Schultz

Office of the Chief Actuary 

United States Social Security Administration

August 23 and 24, 2022
Areas for Discussion

Day one

1. Introduction of US Social Security actuarial statistics/method

a. SSA’s establishment of institution and responsibility

b. SSA’s most recent typical case studies

c. Summary of adjustment system of social security insurance rate

Day two

2. Introduction of US Social Security actuarial model

a. The principle of the actuarial model

b. Explanation of leading indicators 

c. Information operating of actuarial model/introduction of operating system

d. Summary of actuarial report

2
1. Introduction of US social security actuarial statistics/method

a. SSA’s establishment of institution and responsibility

What we do at US Social Security Administration:

• Administer Social Security (Old-Age and Survivors Insurance, Disability 

Insurance) and Supplemental Security Income programs

• Provides income security for virtually all in the US in the event of: 

– Becoming disabled, 

– Dying and leaving behind surviving family members, or

– Reaching old age (62 for Social Security, 65 for SSI)

• Provides a bridge to health care through Medicare and Medicaid

3
Role of the Office of the Chief Actuary

• Evaluate financial status of OASDI and SSI

– Project future population, workforce, employment, tax revenue, 

benefits, and status of trust funds for OASDI

• Projections for the President’s FY Budget and MSR

• Projections for Annual Trustees Report (OASDI)

– Board of Trustees: Treasury, HHS, DOL, SSA

• Projections for Annual SSI Report (SSI)

• Estimate effects of all changes considered for law and 

regulations by the Administration and Congress

4
Role of the Office of the Chief Actuary

• For Social Security, projections under current law are crucial to 

indicate when and to what degree changes will be needed to 

maintain “solvency”

• For OASDI and SSI, crucial to know what cost will become in the 

future, near term dollars, long term share of GDP and taxable 

earnings

• We compute the COLA and compile W-2s to develop the 

national average wage index for benefit growth

• We estimate the payroll tax liability that Treasury deposits in 

the Trust Funds 

5
6

Social Security Financing

• Basically “pay-as-you-go” 

– Current workers provide for current beneficiaries

– Social Security cannot borrow

– Trust Fund securities provide a “contingency reserve”

• Current OASDI reserves (excess income) = $2.85 trillion

– Available to augment tax income as needed

– About 3 times the annual cost of the program

• Reserves projected to deplete in 2022 Trustees Report 

– 2034 for OASI, 2035 for OASI and DI on a combined basis

– Expect Congress to act—as it always has
1. Introduction of US social security actuarial statistics/method

b. SSA’s most recent typical case studies

• Historically, the US Congress considers changes that will 

increase revenue, or reduce scheduled benefits, or both, when 

future income will be insufficient to fully pay for future 

scheduled benefits

• So let’s start with the actuarial status under current law

7
Solvency: OASI+DI 

Trust Fund Reserve 

Depletion in 2035 

(one year later than last year)

Reserve depletion date varied 

from 2029 to 2042 in reports 

over the past 30 years (1993-

2022).

DI Trust Fund: reserves do not 

deplete.

Due largely to continued low 

recent and near-term disability 

applications and awards, and a 

lower assumed ultimate 

disability incidence rate.

8

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Calendar Year

Social Security Trust Fund Ratios

Assets as a Percent of Annual Cost

Trustees Report Intermediate Projections

2022 TR DI

2021 TR DI

2022 TR OASI

2021 TR OASI

2022 TR OASDI

2021 TR OASDI

Historical Projected

Tax Rate

Reallocation
OASDI Annual Cost 

and Non-Interest 

Income as Percent 

of Taxable Payroll

Persistent negative annual 

cash-flow balance starting in 

2010.

80 percent of scheduled 

benefits still payable at trust 

fund reserve depletion.

Annual deficit in 2096: 4.25 

percent of payroll: 0.09 

percent smaller than last 

year

9

0%

5%

10%

15%

20%

25%

2005 2015 2025 2035 2045 2055 2065 2075 2085 2095

Calendar Year

OASDI Non-Interest Income, Cost and Expenditures 

as Percentages of Taxable Payroll

Cost: Scheduled and 

payable benefits

Cost: Scheduled but not 

fully payable benefits

Non-interest Income Expenditures: Payable benefits = income 

after trust fund depletion in 2035

Payable benefits as percent 

of scheduled benefits:

2022-34: 100%

2035: 80%

2096: 74%

Historical Projected
SUSTAINABILITY: 

Cost as percent 

of GDP

Rises from a 4.2 percent 

average in 1990-2008, to a 

peak of about 6.2 percent for 

2077, and then declines to 

5.9 percent by 2096.

10

0%

1%

2%

3%

4%

5%

6%

7%

8%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Calendar Year

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

Historical Projected

Cost

Non-interest Income
1. Introduction of US social security actuarial statistics/method

b. SSA’s most recent typical case studies

• Changes considered over the most recent two to three years have primarily 

included increased taxes to pay for the currently scheduled benefits

◦ Currently a payroll tax of 12.4 percent on annual earnings up to $147,000 (roughly 3 

times the national average wage level) provides most of the revenue for the program

 About 82 percent of all earnings are taxed

 If all earnings were taxed, this could eliminate about 2/3 of the long-range shortfall

 For our estimates, we assume there will be some behavioral response to increase in taxes

◦ We assume that employers and employees will reallocate employee compensation, avoiding 

about 5 percent of the potential revenue increase 

• Other proposals have considered taxing investment income for Social Security

◦ Also premiums paid toward Employer Sponsored Group Health Insurance, and even an 

inheritance tax

11
1. Introduction of US social security actuarial statistics/method

b. SSA’s most recent typical case studies

• But changes in scheduled benefits have also been considered, such as:

◦ Increasing the Normal Retirement Age

◦ Reducing the annual cost-of-living adjustment

◦ Indexing benefits from one generation to the next by price change rather than wage growth

• A history of legislative proposals from the Congress and others that we have 

developed estimates for can be found at https://www.ssa.gov/oact/solvency/index.html

• Also, a listing of individual provisions for change that have been proposed, with our 

current estimates for their effect can be found at 

https://www.ssa.gov/oact/solvency/provisions/index.html

◦ We update the estimates for these provisions annually

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1. Introduction of US social security actuarial statistics/method

c. Summary of adjustment system of social security insurance rate

• The payroll tax rate (on annual earned income up to $147,000) is fixed in law, and can 

only be changed by a change in the law 

• However, the earnings limit (the $147,000) for the 12.4 percent tax is automatically 

adjusted each year to keep up with growth in the average wage level for all wage earners

• In addition, up to 85 percent of benefits is subject to federal personal income tax, with 

most of the proceeds transferred to the Social Security Trust Funds. Benefits are taxed 

only to the extent that total income, including half of Social Security benefits, exceeds 

$25,000 per year for an individual or $32,000 for a married couple. These thresholds are 

fixed.

• The final source of revenue is interest earnings on Social Security Trust Fund asset 

reserves, which are currently about $2.85 trillion, or a little less than 3 times the annual 

cost of the program benefits

13
1. Introduction of US social security actuarial statistics/method

c. Summary of adjustment system of social security insurance rate

• The level of “scheduled” benefits is prescribed in current law, and can only be changed by a 

change in the law

• However, if the combination of current tax income and asset reserves in the trust funds are 

not enough to pay the scheduled benefits, then full scheduled benefits cannot be paid on a 

timely basis

• Congress has never allowed benefits to fall below the scheduled level due to insufficient 

funding

◦ Congress has always made changes to revenue or scheduled benefit levels to maintain benefits

• One automatic adjustment is in the law: if trust fund reserves fall below 20 percent of annual 

program cost, then the annual cost of living adjustment will be the lower of price and average 

wage increase

• There are no automatic adjustments for the payroll tax rate provided in the law

14
Scheduled and Projected Payable Benefit Levels Under 

Current Law, As Percentage of Career Average Earnings Level

15
Day two

2. Introduction of US Social Security actuarial model

a. The principle of the actuarial model

Basic components:

1. Demographic—project the US population by age sex, marital status

2. Economic—project the US economy including GDP, employment, earnings, interest, etc.

3. Project Social Security “program” parameters—retirement and disability rates

Develop projections of all scheduled revenue and costs for the future

o Then project the levels of Trust Fund reserves to determine adequacy of financing

o Inform policymakers of actuarial status, particularly when and by how much shortfall

o This allows Congress time to work toward changes in law that will be acceptable

16
2. Introduction of US Social Security actuarial model

b. Explanation of leading indicators

US Social Security is financed on basically a Pay-As-You-Go basis

◦ Current workers pay taxes on earnings, financing benefits for current beneficiaries

◦ Thus, the age distribution of the population is the most important factor; birth rates and immigration are key

17
2. Introduction of US Social Security actuarial model

b. Explanation of leading indicators

Rate of improvement in mortality is an additional key factor

18
Secular Stagnation in Labor Force? Recovery of 

Employment

19

Employment has recovered: measured labor force participation is still below recent peaks

0.50

0.55

0.60

0.65

0.70

0.75

0.80

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Labor Force Participation Rates

2022 TR

Age 16+, Age-Sex Adjusted

Female 16+, Age Adjusted

Male 16+, Age Adjusted

Historical Projected

0.50

0.55

0.60

0.65

0.70

0.75

0.80

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Ratio of Employment to Population 

2022 TR

Age 16+, Age-Sex Adjusted

Women 16+, Age Adjusted

Men 16+, Age Adjusted

Historical Projected
Ratio of 

Employment to 

Population vs. 

Quits Rate

Ratio of employment to 

population has recovered 

rapidly since the Trustees 

Report projections were 

developed.

20

0

0.5

1

1.5

2

2.5

3

3.5

0.5

0.55

0.6

0.65

0.7

2000Q12000Q32001Q12001Q32002Q12002Q32003Q12003Q32004Q12004Q32005Q12005Q32006Q12006Q32007Q12007Q32008Q12008Q32009Q12009Q32010Q12010Q32011Q12011Q32012Q12012Q32013Q12013Q32014Q12014Q32015Q12015Q32016Q12016Q32017Q12017Q32018Q12018Q32019Q12019Q32020Q12020Q32021Q12021Q32022Q1

Ratio of U.S. Employment to Population versus Quits Rate

(16 and older, age-sex-adjusted)

Quits Rate

E/Pop 
Employment Over Age 65...

21

declined briefly with the 2020 recession, but is projected to continue rising. How much of this is 

from changing the NRA and earnings test? Is the best retirement approach a job (Paul Samuelson)?

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Male Ratio of Civilian Employment to Non-Institutionalized Population

25-54

55-59

60-64

65-69

70 and older

Start of 2008 

recession

Start of 2020 

recession

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Female Ratio of Civilian Employment to Non-Institutionalized Population

25-54

55-59

60-64

65-69

70 and older

Start of 2008 

recession

Start of 2020 

recession
Labor Productivity 

Growth Rate

The estimated annual growth in 

labor productivity in 2020 is 

2.63 percent, as employment 

declined more than GDP during 

the 2020 recession. As 

employment recovers, 

especially in the labor-intensive 

service industries, productivity 

growth is expected to slow to 

0.98 percent in 2021 and 0.69 

percent in 2022.

Projected slowdown in 

productivity growth in the nearterm is assumed to be 

temporary.

Ultimate annual change in labor 

productivity growth is 

unchanged from the 2021 TR.

22

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045

Percent

Labor Productivity Growth Rate

(intermediate assumptions)

Average 1955-2020 1.84%

20-year 

average

Historical Projected

2021 TR

2022 TR
Age of Starting Social Security 

Retirement Benefits

23

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

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
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 2021.

What will be the NET effect 

of COVID and post-COVID 

conditions? 

24

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 2022 Trustees Report

2012TR

2013TR

2014TR

2015TR

2016TR

2017TR

Average 1990-2021 5.04

Ultimate Assumption 4.80

2018TR

2019TR

2020TR

2021TR

2022TR
Fewer Disabled 

Worker 

Beneficiaries

Fewer now and in near 

term based on recent 

applications and 

incidence rates.

25

6,000

7,000

8,000

9,000

10,000

11,000

2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Calendar Year

Disabled Worker Beneficiaries

In Current Payment Status at End of Year (in thousands)

2008 TR (no recession)

2021 TR

2022 TR
Disabled Worker 

Prevalence Rates

Recover to level above 

that before the 2007-09 

recession?

26

DI Disability Prevalence Rates, 1970-2100
2. Introduction of US Social Security actuarial model

c. Information operating of actuarial model/introduction of 

operating system

• We use national data for population and the economy, and all Social 

Security program data

• We employ a multitude of models for different purposes and using 

different software

o Macro/aggregate models as well as microsimulation and stochastic

• Many special models developed for new proposals to alter the form of 

the plan

• For proposed changes in law, we project not only the program cost 

implications, but also the effects on beneficiary benefit levels, and 

worker tax rates, by career earnings levels

27
2. Introduction of US Social Security actuarial model

d. Summary of Actuarial Report

The principal objectives:

1. Develop projections of future cost and income, and actuarial status 

under current law, to advise policymakers and the general public

2. Work with policymakers in the development of proposals to change 

the law that will effectively and efficiently meet their stated goals

3. Develop the best possible estimates of the effects on proposed 

changes in law on workers, beneficiaries, program solvency, and the 

federal budget

28