THE 2001 ANNUAL REPORT OF THE BOARD OF 

TRUSTEES OF THE FEDERAL OLD-AGE AND 

SURVIVORS INSURANCE AND DISABILITY 

INSURANCE TRUST FUNDS

COMMUNICATION

FROM

THE BOARD OF TRUSTEES, FEDERAL OLD-AGE

AND SURVIVORS INSURANCE AND DISABILITY 

INSURANCE TRUST FUNDS

TRANSMITTING

THE 2001 ANNUAL REPORT OF THE BOARD OF TRUSTEES OF THE

FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND THE FEDERAL

DISABILITY INSURANCE TRUST FUNDS
.
(III)

LETTER OF TRANSMITTAL

BOARD OF TRUSTEES OF THE

FEDERAL OLD-AGE AND SURVIVORS INSURANCE

AND DISABILITY INSURANCE TRUST FUNDS,

Washington, D.C., March 19, 2001

The Honorable J. Dennis Hastert

Speaker of the House of Representatives

Washington, D.C.

The Honorable Richard B. Cheney

President of the Senate

Washington, D.C.

Gentlemen: 

We have the honor of transmitting to you the 2001 Annual Report of the Board of

Trustees of the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, the 61st such report.

Respectfully,

/S/ /S/

Paul H. O’Neill, Secretary of the

Treasury, and Managing

Trustee of the Trust Funds.

Elaine L. Chao, Secretary 

of Labor, and Trustee.

/S/ /S/

Tommy G. Thompson, Secretary of

Health and Human Services,

and Trustee.

William A. Halter,

Acting Commissioner

of Social Security, and Trustee.

/S/ /S/

John L. Palmer, Trustee. Thomas R. Saving, Trustee.

/S/

Paul N. Van de Water, Assistant Deputy

Commissioner for Policy, Social Security

Administration, and Acting Secretary, Board of Trustees.
.
CONTENTS

(V)

I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

A. HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

B. TRUST FUND FINANCIAL OPERATIONS IN 2000 . . . . . . . . 3

C. ASSUMPTIONS ABOUT THE FUTURE . . . . . . . . . . . . . . . . . . 5

D. PROJECTIONS OF FUTURE FINANCIAL STATUS . . . . . . . . 7

E. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND 

LEGISLATIVE CHANGES IN THE LAST YEAR . . . . . . . . . . . 15

A. OPERATIONS OF THE OLD-AGE AND SURVIVORS

INSURANCE (OASI) AND DISABILITY INSURANCE (DI) 

TRUST FUNDS, IN FISCAL YEAR 2000. . . . . . . . . . . . . . . . . . 15

1. OASI Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

2. DI Trust Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

3. OASI and DI Trust Funds, Combined . . . . . . . . . . . . . . . . . . . . 24

B. SOCIAL SECURITY AMENDMENTS SINCE THE 2000

REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

IV. ACTUARIAL ESTIMATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

A. SHORT-RANGE ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . . . 30

1. Operations of the OASI Trust Fund. . . . . . . . . . . . . . . . . . . . . . 31

2. Operations of the DI Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . 35

3. Operations of the Combined OASI and DI Trust Funds . . . . . . 38

4. Factors Underlying Changes in 10 Year Trust Fund Ratio

Estimates From the 2000 Report . . . . . . . . . . . . . . . . . . . . . . . . 40

B. LONG-RANGE ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

1. Annual Income Rates, Cost Rates, and Balances . . . . . . . . . . . 41

2. Comparison of Workers to Beneficiaries. . . . . . . . . . . . . . . . . . 47

3. Trust Fund Ratios. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

4. Summarized Income Rates, Cost Rates, and Balances . . . . . . . 54

5. Test of Long-Range Close Actuarial Balance . . . . . . . . . . . . . . 57

6. Income and Cost Rates by Component . . . . . . . . . . . . . . . . . . . 61

7. Reasons for Change in Actuarial Balance From Last Report . . 64

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

A. DEMOGRAPHIC ASSUMPTIONS AND METHODS . . . . . . . . 69

1. Fertility Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

2. Mortality Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

3. Immigration Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

4. Total Population Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
(VI)

5. Life Expectancy Estimates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

B. ECONOMIC ASSUMPTIONS AND METHODS . . . . . . . . . . . . 79

1. Productivity Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

2. Inflation Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

3. Average Earnings Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . 81

4. Assumed Real-Wage Differentials . . . . . . . . . . . . . . . . . . . . . . 82

5. Labor Force and Unemployment Estimates. . . . . . . . . . . . . . . . 85

6. GDP Estimates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

7. Interest Rate Estimates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

C. PROGRAM SPECIFIC ASSUMPTIONS AND METHODS. . . . 90

1. Automatically Adjusted Program Amounts. . . . . . . . . . . . . . . . 90

2. Covered Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

3. Taxable Payroll and Payroll Tax Revenue . . . . . . . . . . . . . . . . 97

4. Insured Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

5. Old-Age and Survivors Insurance Beneficiaries . . . . . . . . . . . . 99

6. Disability Insurance Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . 105

7. Average Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

8. Benefit Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

9. Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

10. Railroad Retirement Financial Interchange . . . . . . . . . . . . . . . . 112

11. Benefits to Uninsured Persons. . . . . . . . . . . . . . . . . . . . . . . . . . 113

12. Military-Service Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

13. Income From Taxation of Benefits . . . . . . . . . . . . . . . . . . . . . . 113

VI. APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS . . 114

B. HISTORY OF ACTUARIAL BALANCE ESTIMATES . . . . . . . 125

C. FISCAL YEAR PROJECTIONS THROUGH 2010 . . . . . . . . . . . 129

D. LONG-RANGE SENSITIVITY ANALYSIS . . . . . . . . . . . . . . . . 132

1. Total Fertility Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

2. Death Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

3. Net Immigration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

4. Real-Wage Differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

5. Consumer Price Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

6. Real Interest Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

7. Disability Incidence Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

8. Disability Termination Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

E. ESTIMATES FOR OASDI AND HI, SEPARATE AND

COMBINED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

1. Estimates as a Percentage of Taxable Payroll . . . . . . . . . . . . . . 142

2. Estimates as a Percentage of Gross Domestic Product . . . . . . . 148

3. Estimates in Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
(VII)

F. ANALYSIS OF BENEFIT DISBURSEMENTS FROM THE

OASI TRUST FUND WITH RESPECT TO DISABLED

BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

G. GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

LIST OF TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181

LIST OF FIGURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186

STATEMENT OF ACTUARIAL OPINION. . . . . . . . . . . . . . . 190
.
I. INTRODUCTION

The Board of Trustees of the Social Security Trust Funds report each year on

the current and projected financial condition of the Social Security program,

which is financed through two separate trust funds. The Old-Age and Survivors Insurance (OASI) Trust Fund pays monthly benefits to retired workers

(including disabled workers who have reached normal retirement age) and

their families and to survivors of deceased workers. The Disability Insurance

(DI) Trust Fund pays monthly benefits to disabled workers and their families1. The report on the current financial status of the funds includes an

accounting of the actual income and expenditures for the last year. For future

years, the projections of the trust funds’ financial condition reflect the Trustees’ considered judgment after review of available evidence and expert opinion about all the economic and demographic factors that affect income and

expenditures. Projections are presented separately for the next 10 years (the

short range) and for the next 75 years (the long range).

Although, in general, a greater degree of certainty can be presumed for projections encompassing the next few years than for a period as long as the

next 75 years, any estimation of the future is uncertain. Therefore, three

alternative sets of economic and demographic assumptions are used to show

a range of possible outcomes for all projections. The “intermediate” set of

assumptions, designated as alternative II, reflects the Trustees’ “best estimates” of future experience; the “low cost” alternative I is more optimistic,

and the “high cost” alternative III more pessimistic for the trust funds’ future

financial outlook. For both the short range and the long range, however, it is

important to understand that the projections in this report are only an indication of the expected trend and likely range of future trust fund experience.

Also, all projections are based on the Social Security program provisions in

current law and are not intended to anticipate any changes in these provisions

that might be made in the future.

For this report, demographic and economic assumptions for the early years

of the projection period were updated based on recent experience that was

more favorable than expected. The most significant changes were in demographic and disability assumptions. As a result, the projected financial status

for the Social Security program is slightly more favorable in this report, as

compared to the 2000 report.

 1 See appendix A for a description of these funds and a history of their operations.
Overview

2

II. OVERVIEW

A. HIGHLIGHTS

The major findings of this report are summarized below.

• Short-range results—Under the intermediate assumptions the OASI

and DI Trust Funds, individually and combined, are expected to be adequately financed over the next 10 years. The combined assets of the

OASI and DI Trust Funds are projected to increase from the level of

$1,049 billion at the beginning of 2001, or 239 percent of expenditures

in 2001, to $3,088 billion at the beginning of 2010, or 419 percent of

expenditures in 2010. Assets at the beginning of 2010 were projected to

rise to 406 percent of annual expenditures in last year’s report.

• Long-range results—Under the intermediate assumptions the combined OASDI Trust Funds are expected to become exhausted in 2038,

one year later than projected in last year’s report. The projected actuarial deficit is 1.86 percent of taxable payroll, 0.03 percent smaller than in

last year’s report. Between about 2010 and 2030, OASDI costs will

increase rapidly due to the retirement of the large baby-boom generation, and annual costs will exceed tax income starting in 2016. Thereafter, the upward shift in the average age of the population will continue,

but at a slower pace, due to expected increases in life expectancy and

the expected continuation of relatively low fertility rates. The OASDI

annual cost rate is projected to increase from 10.50 percent of taxable

payroll for 2001 to 19.39 percent for 2075, or 6.05 percent of taxable

payroll more than the projected income rate for that year. Expressed in

relation to the projected gross domestic product, the OASDI costs are

estimated to rise from the current level of 4.17 percent of GDP to 6.70

percent in 2075. Separately, the DI fund is projected to be exhausted in

2026 and the OASI fund in 2040.

• Low cost and high cost assumptions—Under the low cost assumptions, both the OASI and the DI Trust Funds are projected to be adequately financed throughout the 75-year projection period. Under the

high cost assumptions, the combined OASDI Trust Funds are projected

to be exhausted in 2027, and the OASDI cost rate rises sharply to 27.93

percent of taxable payroll by 2075. Individually, the DI fund would be

exhausted in 2014 and the OASI fund in 2030 under the high cost

assumptions.
3

Calendar Year 2000 Operations

B. TRUST FUND FINANCIAL OPERATIONS IN 2000

The table below shows the income and expenditures for the OASI, the DI,

and the combined OASI and DI Trust Funds in calendar year 2000.

Note: Totals do not necessarily equal the sums of rounded components.

Eighty-seven percent of total income to the trust funds consisted of taxes

paid by employees, employers and the self-employed on earnings covered by

the Social Security program. These payroll taxes are paid on covered earnings up to a specified maximum annual amount, called the contribution and

benefit base, which was $76,200 in 2000 and which increases automatically

as the average wage in the U.S. increases. The payroll tax rates scheduled

under current law for 2000 and later are shown in table II.B2. 

Income tax revenue that results from taxing up to 50 percent of Social Security benefits is credited to the OASI and DI Trust Funds and provided 2 percent of total income in 2000.1 The final major source of income to the trust

funds is interest earned on their invested assets. By law these assets are

invested in interest-bearing securities of the U.S. Government or in other

securities guaranteed for both principal and interest by the United States. In

2000 the combined trust fund assets earned interest at an effective annual

rate of 6.9 percent. This interest income provided 11 percent of total comTable II.B1.—Summary of 2000 Trust Fund Financial Operations

Amount in calendar year 2000 (in billions)

Type of income or expenditure OASI DI OASDI

Total income . . . . . . . . . . . . . . . . . . . . . . . . . . $490.5 $77.9 $568.4

Payroll taxes . . . . . . . . . . . . . . . . . . . . . . . . 421.4 71.1 492.5

Taxation of benefits. . . . . . . . . . . . . . . . . . . 11.6 .7 12.3

Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.5 6.9 64.5

Transfers from general fund of the Treasury — -.8 -.8

Total expenditures. . . . . . . . . . . . . . . . . . . . . . 358.3 56.8 415.1

Benefit payments. . . . . . . . . . . . . . . . . . . . . 352.7 55.0 407.6

Railroad Retirement financial interchange . 3.5 .2 3.7

Administrative expenses . . . . . . . . . . . . . . . 2.1 1.6 3.8

Table II.B2.—Tax Rates for 2000 and Later

OASI DI OASDI

Tax rate for employees and employers, each (in percent) . . 5.30 0.90 6.20

Tax rate for self-employed persons (in percent). . . . . . . . . . 10.60 1.80 12.40

 1 The Medicare Hospital Insurance Trust Fund receives the additional revenue from taxing up to 85 percent

of benefits.
Overview

4

bined trust fund income. For 2000, $0.8 billion was transferred from the DI

Trust Fund to the general fund of the Treasury to adjust past reimbursements

for the cost of noncontributory wage credits for military service prior to

1957. This adjustment is shown as an offset to income in table II.B1.

Over 98 percent of expenditures from the combined OASI and DI Trust

Funds in 2000 went to pay retirement, survivor and disability benefits totaling $407.6 billion. The financial interchange with the Railroad Retirement

program resulted in a payment of $3.7 billion from the combined OASI and

DI Trust Funds in 2000, or about 0.9 percent of total expenditures. The

administrative expenses of the Social Security program were $3.8 billion in

2000, or about 0.9 percent of total expenditures in the year.

Invested assets of the trust funds increased by $153.3 billion in 2000 because

income to each fund exceeded expenditures, as shown in table II.B3.

Note: Totals do not necessarily equal the sums of rounded components.

The assets of a trust fund provide a reserve that can be used to pay benefits in

years when expenditures exceed income due to, for example, a temporary

downturn in the economy. Such reserves allow for time to enact legislation to

correct unanticipated shortfalls, when needed, without disruption of the

timely payment of benefits. At the end of 2000, the combined assets of the

OASI and the DI Trust Funds were 239 percent of estimated expenditures for

the following year.

Table II.B3.—Trust Fund Results in 2000

[In billions]

OASI DI OASDI

Assets (end of 1999). . . . . . . . . . . . . . . . . . . . . . . $798.8 $97.3 $896.1

Income during 2000 . . . . . . . . . . . . . . . . . . . . . . . 490.5 77.9 568.4

Outgo during 2000 . . . . . . . . . . . . . . . . . . . . . . . . 358.3 56.8 415.1

Net increase in assets . . . . . . . . . . . . . . . . . . 132.2 21.1 153.3

Assets (end of 2000). . . . . . . . . . . . . . . . . . . . . . . 931.0 118.5 1,049.4
5

Future Assumptions

C. ASSUMPTIONS ABOUT THE FUTURE

The actual future income and expenditures of the OASI and DI Trust Funds

will depend on many factors, including future demographic and economic

conditions. These factors include the size and characteristics of the population receiving benefits, the level of monthly benefit amounts, the size and

characteristics of the work force, and the level of workers’ earnings. These

factors will depend in turn upon future birth rates, death rates, immigration,

marriage and divorce rates, retirement-age patterns, disability incidence and

termination rates, productivity gains, wage increases, inflation, and many

other economic, demographic, and program-related factors.

Assumptions regarding each of these variables must be made in order to

project trust fund financing in the future. The assumptions selected vary, in

most cases, from year to year during the first decade or more before reaching

ultimate assumed values for the remainder of the 75-year projection period.

This phasing-in process is particularly important if the projection period

begins when a variable that has experienced distinct cycles in the past is at,

or near, a cyclic extreme. An ultimate value for each variable is assumed for

the long-range projection because any cycles in factors are assumed to average out at that ultimate value over the long range.

Any projection of the future is, of course, uncertain. The degree of uncertainty involved can be illustrated by imagining how difficult it would have

been in 1925 to project the world of 1930, much less that of 2000. Three

alternative sets of assumptions are used in this report to recognize this uncertainty and provide a range of possible future experience. The intermediate set

of assumptions, designated as alternative II, reflects the Trustees’ best estimates of future experience; the low cost alternative I is more optimistic and

the high cost alternative III more pessimistic for the trust funds’ future financial outlook.

While no assurance can be given that actual future experience will fall within

the range provided by these sets of assumptions, there are factors that reduce

the inherent uncertainty. For example, the number of beneficiaries over age

65 is subject to less uncertainty for the next several decades because all of

these individuals are already born. In addition, the wage-indexing of many

program provisions has reduced the sensitivity of projections to some economic factors, even in the long term. Thus, projections presented in this

report can provide early notice of significant changes in future income and

expenditures, as, for example, when the baby-boom generation retires during

the period from 2010 to 2030. Also, the assumptions are reexamined each

year in light of recent experience and new information that may influence

future trends, and are revised when warranted. This careful review and

updating of the assumptions on an annual basis helps ensure that they provide a reasonable range of future possibilities.
Overview

6

Table II.C1 summarizes the ultimate values assumed for the key demographic and economic elements underlying the projections shown in this

report. These ultimate values generally apply after the first 10 years. Two

exceptions are the ultimate fertility rate and the ultimate mortality annual

rate of reduction, which are reached in 2025.

Table II.C1.—Ultimate Values of Key Economic and Demographic Assumptions

Ultimate assumptions Intermediate Low Cost High Cost

Economic:

Annual percentage change in:

Average wage in covered employment . . . . . . . . 4.3 3.8 4.8

Consumer Price Index (CPI) . . . . . . . . . . . . . . . . 3.3 2.3 4.3

Real-wage differential (percent) . . . . . . . . . . . . . . . 1.0 1.5 .5

Unemployment rate (percent) . . . . . . . . . . . . . . . . . . 5.5 4.5 6.5

Annual trust fund interest rate (percent) . . . . . . . . . . 6.3 6.0 6.5

Demographic:

Total fertility rate (children per woman) . . . . . . . . . . 1.95 2.2 1.7

Average annual percentage reduction in total agesex-adjusted death rates from 2025 to 20751 . . . .

 1 Actual ultimate assumptions for reductions in death rates are specified in detail, by age group, sex, and

cause of death.

.68 .31 1.20

Annual net immigration (in thousands) . . . . . . . . . . . 900 1,210 655
7

Future Financial Status

D. PROJECTIONS OF FUTURE FINANCIAL STATUS

Short-Range Actuarial Estimates

For the short range, the Trustees measure the adequacy of the trust funds by

comparing assets at the beginning of each year to projected expenditures for

that year under the intermediate set of assumptions. Having a trust fund ratio

of 100 percent or more—that is, assets at the beginning of each year at least

equal to projected outgo during the year—is considered a good indication of

a trust fund’s ability to cover most short-term contingencies. Both the OASI

and the DI trust fund ratios under the intermediate assumptions exceed 100

percent over the short-range period. Therefore, both programs are considered

to meet the Trustees’ short-term test for financial adequacy. Figure II.D1

below shows the trust fund ratios for the OASI and DI Trust Funds, combined, under all three sets of assumptions for the next 10 years.

During the short-range period, the income, expenditures and assets in dollars

of the combined OASI and DI Trust Funds are also of interest and are shown

in table II.D1. In addition, the combined trust fund ratios for each year are

shown in the table. Additional details on the components of income and

outgo, and the results for the individual trust funds are provided in

Chapter IV.

 Figure II.D1.—Short-Range OASDI Trust Fund Ratios

[Assets as a percentage of annual expenditures]

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

550%

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Calendar year

Historical Estimated

"Adequate" level for trust fund ratio

I

II

III
Overview

8

Long-Range Actuarial Estimates

The financial status of the trust funds over the next 75 years is measured in

terms of the cost and income rates (i.e., costs and income as a percent of taxable payroll), trust fund ratios, and the actuarial balance (also as a percentage

of taxable payroll). Considering Social Security’s cost as a percent of the

total U.S. economy (i.e., gross domestic product or GDP) provides an additional perspective.

The year-by-year relationship of the income and cost rates shown in figure

II.D2 illustrates the expected pattern of cash flow for the OASDI program

over the full 75-year period. As the figure shows, the pattern of the OASDI

program’s estimated cost rate is much different from that of the income rate,

which increases only slightly from just under to just over 13 percent during

the next 75 years as income from taxation of benefits increases. Only the

alternative II income rate is shown graphically because of the small difference among the three alternatives. Under the intermediate assumptions, the

OASDI cost rate is estimated to remain fairly stable and well below the

income rate for the next several years until about 2010. It then begins to

increase rapidly and first exceeds the income rate for 2016, producing cashflow deficits thereafter. The cost rate continues rising through about 2030 as

the baby-boom generation reaches retirement age. Thereafter, the cost rate is

estimated to be fairly stable for about 15 years as the baby-boom generation

ages and begins to decrease in size. However, by 2075, the projected continTable II.D1.—Abbreviated Operations of the Combined OASI and DI Trust Funds,

Calendar Years 2000-10

[Amounts in billions]

Calendar year

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Intermediate:

Income. . . . . . . . . . . . $568 $604 $642 $681 $722 $768 $814 $865 $916 $971 $1,029

Expenditures . . . . . . . 415 439 460 484 510 540 571 607 646 690 738

Net increase . . . . . . . . 153 165 182 198 212 228 243 258 270 281 291

Assets at end of year . 1,049 1,215 1,397 1,595 1,807 2,035 2,278 2,536 2,806 3,088 3,379

Trust fund ratio1 . . . .

 1 Represents assets at beginning of year (which are identical to assets at end of prior year) as a percentage of

expenditures during the year. See text concerning interpretation of these ratios.

216 239 264 289 313 335 356 375 393 407 419

Low Cost:

Income. . . . . . . . . . . . $568 $607 $648 $687 $729 $773 $819 $869 $920 $974 $1,032

Expenditures . . . . . . . 415 438 458 478 500 523 548 575 605 639 676

Net increase . . . . . . . . 153 170 191 209 229 250 272 294 315 335 356

Assets at end of year . 1,049 1,219 1,410 1,619 1,847 2,098 2,369 2,663 2,978 3,314 3,670

Trust fund ratio1 . . . . 216 240 266 295 324 353 383 412 440 466 490

High Cost:

Income. . . . . . . . . . . . $568 $592 $617 $668 $709 $749 $805 $859 $912 $967 $1,024

Expenditures . . . . . . . 415 440 465 494 533 582 621 663 711 766 826

Net increase . . . . . . . . 153 152 152 175 176 168 184 196 201 200 198

Assets at end of year . 1,049 1,201 1,354 1,528 1,704 1,871 2,055 2,251 2,451 2,652 2,850

Trust fund ratio1 . . . . 216 238 258 274 287 293 301 310 317 320 321
9

Future Financial Status

ued reductions in death rates and relatively low birth rates will cause a significant upward shift in the average age of the population and will push the cost

rate to over 19 percent of taxable payroll under the intermediate assumptions.

Costs are projected to exceed non-interest income starting in 2016, and

annual deficits occur throughout the remainder of the 75-year projection

period, reaching more than 6 percent of taxable payroll in 2075. Figure II.D2

shows that the annual deficits are increasing at the end of the projection

period. Although the projections in this report do not extend beyond 2075,

the upward shift in the average age of the population is likely to continue and

to increase the gap between OASDI costs and income.

The OASDI cost rates for alternatives I and III differ significantly from those

projected for alternative II but follow generally similar patterns. For the low

cost alternative I, the cost rate declines somewhat for the first 6 years, and

then rises, reaching the current level around 2010 and first exceeds the

income rate in 2020, with relatively small cash-flow deficits thereafter. The

cost rate rises to a peak of 14.98 percent of payroll in 2033. The cost rate

then declines gradually, reaching a level of 13.85 percent of payroll in 2072.

For the high cost alternative III, the cost rate rises generally throughout the

75-year period. It rises at a relatively fast pace over the next 5 years due to

two assumed economic recessions and between 2010 and 2030 because of

the aging of the baby-boom generation. The cost rate first exceeds the

income rate in 2012, with relatively large cash-flow deficits thereafter. After

2030 the projected cost rate continues rising and reaches 27.93 percent of

payroll for 2075.

 Figure II.D2.—Long-Range OASDI Annual Income Rate and Cost Rates

[As a percentage of taxable payroll]

0%

5%

10%

15%

20%

25%

30%

1985 1995 2005 2015 2025 2035 2045 2055 2065 2075

Calendar year

Income rate

Cost rates

III

II

I

Historical Estimated
Overview

10

The primary reason that the OASDI cost rate increases rapidly between 2010

and 2030 is that, as the large baby-boom generation born in the years 1946

through 1964 retires, the number of beneficiaries is projected to increase

much more rapidly than the number of workers. The estimated number of

workers per beneficiary is shown in figure II.D3. After the baby-boom generation is fully retired in about 2030, the beneficiary-to-worker ratio is relatively stable until about 2050. Thereafter, the number of workers per

beneficiary slowly declines, and the cost rate for OASDI slowly increases,

due primarily to projected continued reductions in death rates and relatively

low birth rates.

Due to the demographic changes and resulting rise in costs after 2010, the

trust fund ratio for OASDI declines after 2014. Under the intermediate

assumptions, interest earnings are required to supplement tax income in

order to pay benefits beginning in 2016, asset redemptions begin to reduce

the size of the combined trust funds in 2025, and the assets of the combined

OASI and DI Trust Funds are exhausted in 2038. Table II.D2 shows the maximum projected trust fund ratio of the OASI, DI, and combined funds, and

the year it is attained under all three sets of assumptions. It also shows the

year each fund’s assets are projected to be exhausted. 

 Figure II.D3.—Number of Covered Workers Per OASDI Beneficiary

0

1

2

3

4

1985 1995 2005 2015 2025 2035 2045 2055 2065 2075

Calendar year

Historical Estimated

III

II

I
11

Future Financial Status

The trust fund ratios for the combined OASI and DI Trust Funds are shown

graphically in figure II.D4.

Even if a trust fund’s assets are exhausted, tax income will continue to flow

into the fund. Table II.D3 shows the relationship between tax revenues and

estimated expenditures for the combined trust funds at the time of exhaustion

and at the end of the 75-year projection period under intermediate assumptions.

Table II.D2.—Projected Maximum Trust Fund Ratios Achieved and

Trust Fund Exhaustion Dates

OASI DI Combined

Intermediate:

Maximum trust fund ratio (percent) . . . . . . . . . . . . . 481 261 436

Year attained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 2007 2014

Year of exhaustion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2040 2026 2038

Low Cost:

Maximum trust fund ratio (percent) . . . . . . . . . . . . . 593 1,592 577

Year attained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 2076 2018

Year of exhaustion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ———

High Cost:

Maximum trust fund ratio (percent) . . . . . . . . . . . . . 374 205 321

Year attained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 2003 2010

Year of exhaustion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2030 2014 2027

 Figure II.D4.—Long-Range OASDI Trust Fund Ratios

[Assets as a percentage of annual expenditures]

0%

100%

200%

300%

400%

500%

600%

1985 1995 2005 2015 2025 2035 2045 2055 2065 2075

Calendar year

Historical Estimated

III

II

I
Overview

12

The actuarial balance is a measure of the program’s financial status for the

75-year valuation period as a whole. It is essentially the difference between

income and costs of the program expressed as a percentage of taxable payroll

summarized over the valuation period. As a single number, it provides a

summary of the adequacy of program financing for the period as a whole.

The number can also be interpreted as the percentage that would have to be

added to the current law income rate in each of the next 75 years, or subtracted from the cost rate in each year, to bring the funds into actuarial balance. In this report, the actuarial balance under intermediate assumptions is a

deficit of 1.86 percent of taxable payroll for the combined OASI and DI

Trust Funds. The comparable actuarial deficit number in the 2000 report was

1.89 percent.

Reasons for changes from last year’s report to this report in the long-range

actuarial balance under the intermediate assumptions are itemized in table

II.D4. Also shown are the estimated effects associated with each reason for

change.

Note: Totals do not necessarily equal the sums of rounded components.

Table II.D3.—Relationship Between OASDI Expenditures and Tax Income

at the Time of Exhaustion of the Combined Funds and at the

End of the 75-Year Projection Period Under Intermediate Assumptions

Year

Tax revenues as a 

percentage of expenditures

Percentage by which expenditures 

exceed tax revenues

2038 73% 38%

2075 67 49

Table II.D4.—Reasons for Change in the 75-Year Actuarial Balance 

Under Intermediate Assumptions

[As a percentage of taxable payroll]

Item OASI DI Combined

Shown in last year’s report:

Income rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.62 1.89 13.51

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.15 2.26 15.40

Actuarial balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.53 -.37 -1.89

Changes in actuarial balance due to changes in:

Legislation / Regulation . . . . . . . . . . . . . . . . . . . . . .00 .00 .00

Valuation period1 . . . . . . . . . . . . . . . . . . . . . . . . . . 

 1 In changing from the valuation period of last year’s report, which was 2000-74, to the valuation period of

this report, 2001-75, the relatively large negative annual balance for 2075 is included. This results in a larger

long-range actuarial deficit. The fund balance at the end of 2000, i.e., at the beginning of the projection

period, is included in the 75-year actuarial balance.

-.06 -.01 -.07

Demographic assumptions . . . . . . . . . . . . . . . . . . . +.08 +.01 +.09

Economic assumptions . . . . . . . . . . . . . . . . . . . . . . +.02 +.00 +.02

Disability assumptions . . . . . . . . . . . . . . . . . . . . . . .00 +.02 +.02

Projection methods and data . . . . . . . . . . . . . . . . . . -.04 +.02 -.02

Total change in actuarial balance . . . . . . . . . . . . . . . . -.01 +.04 +.03

Shown in this report:

Actuarial balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.53 -.33 -1.86

Income rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.68 1.90 13.58

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.21 2.23 15.44
13

Future Financial Status

Two laws were enacted since the 2000 report that have direct financial

effects on the OASDI program. These laws eliminated the Social Security

earnings test at normal retirement age and provided for adjustments to compensate for an error in the published levels of the Consumer Price Index for

1999. Neither change has a significant effect on the long-range actuarial balance.

A number of changes in assumptions, primarily for the early years of the projection period, had significant effects on the actuarial balance. These changes

were made based on recent data for birth rates, death rates, immigration,

average earnings, and disability experience that were more favorable than

had been projected in the 2000 report. In addition, several methodological

changes had effects on the actuarial balance. More detail on these changes is

presented in sections IV.A.4, IV.B.7 and chapter V of this report.

The cost of Social Security as a percentage of GDP, shown graphically in figure II.D5, follows the same upward pattern as the cost rate discussed earlier

for the same reasons, primarily the retirement of the baby boom generation

from 2010 to 2030 and the projected reductions in death rates and relatively

low birth rates thereafter. Today, the cost of Social Security is 4.2 percent of

GDP, but that cost is projected under the intermediate assumptions to

increase to 6.7 percent of GDP by 2075.

 Figure II.D5.—OASDI Cost as a Percentage of GDP

0%

2%

4%

6%

8%

10%

1970 1985 2000 2015 2030 2045 2060 2075

Calendar year

Historical Estimated

III

II

I
Overview

14

E. CONCLUSION

A significant shift upward in the average age of the United States population

in the decades ahead due to the aging of the baby-boom generation, and to

continuing lower fertility and increasing life expectancy will increase the

cost of Social Security faster than its income under current law. Based on the

Trustees’ best estimates, expenditures, which are now well below tax revenues, are expected to exceed tax revenues starting in 2016 (one year later

than in last year’s report) and throughout the remainder of the 75-year projection period. Assets in the Social Security combined trust funds are projected

to be adequate to allow full payment of benefits, until becoming exhausted in

2038, one year later than was projected in last year’s report. At that time

annual tax income to the trust funds is projected to equal about 73 percent of

program cost. Separately, the OASI and DI funds are projected to have sufficient funds to pay full benefits on time until 2040 and 2026, respectively. By

2075, however, annual tax income is projected to be only about two-thirds as

large as the annual cost of the OASDI program.

Over the full 75-year projection period the actuarial deficit estimated for the

combined trust funds is 1.86 percent of taxable payroll, a small improvement

from the deficit of 1.89 percent projected in last year’s report. This deficit

indicates that financial adequacy of the program for the next 75 years could

be restored (under the Trustees’ best estimates), if the Social Security payroll

tax were immediately and permanently increased, from its current level of

12.4 percent (combined employee-employer shares) to 14.26 percent. Alternatively, all current and future benefits could be reduced by about 13 percent

(or there could be some combination of tax increases and benefit reductions).

Changes of this magnitude would be sufficient to eliminate the actuarial deficit over the 75-year projection period. However, because of the upward shift

in the average age of the population, projected annual deficits begin in 2016

and increase to levels in excess of 6 percent of taxable payroll by the end of

the 75-year period. The large annual deficits at the end of the projection

period indicate that the annual cost will very likely continue to exceed tax

revenues after 2075. As a result, ensuring the sustainability of the system

beyond 2075 would require larger changes than those needed to restore actuarial balance for the 75-year period.

The trust fund deficits projected for the longer run should be addressed in a

timely way to allow for a gradual phasing in of any necessary changes and to

provide advance notice so that workers can adjust their plans to take account

of those changes. The sooner adjustments are made, the smaller and less

abrupt they will have to be. With informed public discussion and timely legislative action, Social Security will continue to play a critical role in the lives

of virtually every American.
15

Fiscal Year 2000 Operations

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND 

LEGISLATIVE CHANGES IN THE LAST YEAR

A. OPERATIONS OF THE OLD-AGE AND SURVIVORS INSURANCE 

(OASI) AND DISABILITY INSURANCE (DI) TRUST FUNDS, IN 

FISCAL YEAR 2000

Detailed information on the operations of the OASI and DI Trust Funds1

during fiscal year 2000 is presented in this section. Fiscal year data are

shown in this section because final calendar year data for 2000 were not

available at the time this report was prepared. All other data in the body of

the report are on a calendar year basis. Appendix C provides projections for

fiscal years 2001-10.

1. OASI Trust Fund

A statement of the income and disbursements of the Federal Old-Age and

Survivors Insurance Trust Fund in fiscal year 2000, and of the assets of the

fund at the beginning and end of the fiscal year, is presented in table III.A1.

Included in total receipts during fiscal year 2000 were $419.9 billion in payroll tax contributions. These contributions were partially offset by transfers

totaling $1.7 billion to the general fund of the Treasury for the estimated

amount of refunds to employees who worked for more than one employer

during a year and paid contributions on earnings in excess of the contribution

and benefit base. In addition, $7,220,000 was received from the general fund

of the Treasury representing partial payment for the estimated taxes that

would have been paid on deemed wage credits for military service in 2000 if

such credits had been considered to be covered wages. The remainder of this

payment, $218,780,000, is expected to be transferred, with interest, in 2001.

Net contributions thus amounted to $418.2 billion, an increase of 7.3 percent

over the amount in the preceding year. The increase in OASI tax contributions from fiscal year 1999 to fiscal year 2000 is due to increased earnings

and the increases in the contribution and benefit base that became effective

on January 1 of each year 1999 and 2000. Offsetting these two factors is the

reduction in the OASI allocation of the OASDI tax rate effective January

2000. (Table VI.A1 on page 115 shows the tax rates and contribution and

benefit bases in effect for past years.)

 1 Trust fund data are available by month, quarter, or year on the Internet at http://www.ssa.gov/OACT/ProgData/fundsQuery.html.
Financial Operations & Legislative Changes

16

Income from taxation of benefits amounted to $12.5 billion, of which nearly

99 percent represented amounts credited to the trust funds in advance, on an

estimated basis. The remaining 1 percent of the total income from taxation of

benefits represented amounts withheld from the benefits paid to nonresident

aliens.

Note: Totals do not necessarily equal the sums of rounded components.

Table III.A1.—Operations of the OASI Trust Fund, Fiscal Year 2000

[In thousands]

Total assets, September 30, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $762,170,038

Receipts:

Contributions:

Employment taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $419,907,178

Payments from the general fund of the Treasury for:

Contributions subject to refund . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,694,960

Employee-employer contributions on deemed wage credits for 

military service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,220

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418,219,438

Income from taxation of benefit payments:

Withheld from benefit payments to nonresident aliens. . . . . . . . . . . 137,910

All other, not subject to withholding. . . . . . . . . . . . . . . . . . . . . . . . . 12,338,000

Total income from taxation of benefits . . . . . . . . . . . . . . . . . . . . . 12,475,910

Reimbursement from the general fund for costs of payments to uninsured persons who attained age 72 before 1968. . . . . . . . . . . . . . . . 364

Investment income and interest adjustments:

Interest on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,530,717

Interest on transfers to the general fund account for the Supplemental Security Income program due to adjustment in allocation of 

administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,559

Interest on interfund transfers due to adjustment in allocation of 

administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -629

Interest on certain reimbursements from the general fund . . . . . . . . 222

Net investment income and interest adjustments . . . . . . . . . . . . . 53,531,868

Gifts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 484,228,056

Disbursements:

Benefit payments:

Gross benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,953,090

Offset for collected overpayments . . . . . . . . . . . . . . . . . . . . . . . . . . -1,032,342

Reimbursement from the general fund for unnegotiated checks. . . . -53,138

Net benefit payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347,867,610

Transfer to the Railroad Retirement “Social Security Equivalent

Benefit Account” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,538,208

Administrative expenses:

Social Security Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,803,100

Department of the Treasury. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,499

Reimbursement from the general fund for costs of furnishing 

information on deferred vested pension benefits . . . . . . . . . . . . . -3,263

Offsetting receipts from sales of supplies, materials, etc.. . . . . . . . . -1,980

Reimbursement from the general fund for costs of furnishing 

information related to the Coal Industry Retiree Health Benefit 

Act of 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -292

Reimbursement from the general fund for costs associated with 

union activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3,315

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,989,749

Total disbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353,395,567

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,832,489

Total assets, September 30, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 893,002,527
17

Fiscal Year 2000 Operations

Special payments are made to uninsured persons who either attained age 72

before 1968, or who attained age 72 after 1967 and had 3 quarters of coverage for each year after 1966 and before the year of attainment of age 72. The

costs associated with providing such payments to persons having fewer than

3 quarters of coverage are reimbursable from the general fund of the Treasury. Accordingly, a reimbursement of $364,000 was transferred to the OASI

Trust Fund in fiscal year 2000, as required by section 228 of the Social Security Act. The reimbursement reflected the costs of payments made in fiscal

year 1998.

The OASI Trust Fund was credited with interest netting $53.5 billion which

consisted of (1) interest earned on the investments of the trust fund, (2) interest on transfers between the trust fund and the general fund account for the

Supplemental Security Income program due to adjustments in the allocation

of administrative expenses, (3) interest arising from the revised allocation of

administrative expenses among the trust funds, and (4) interest on reimbursements to the trust fund for costs associated with union activities and pension

reform. The remaining $475,351 of receipts consisted of gifts received under

the provisions authorizing the deposit of money gifts or bequests in the trust

funds.

Of the $353.4 billion in total disbursements, $347.9 billion was for net benefit payments. The amount of net benefit payments in fiscal year 2000 represents an increase of 4.7 percent over the corresponding amount in fiscal year

1999. This increase is due primarily to (1) the automatic cost-of-living benefit increases of 1.3 percent and 2.4 percent which became effective for

December 1998 and December 1999 respectively, under the automaticadjustment provisions in section 215(i) of the Social Security Act, (2) an

increase in the total number of beneficiaries, and (3) an increase in the average benefit amount. The increases in items 2 and 3 were largely due to elimination of the retirement earnings test for beneficiaries over age 64 in 2000.

(See section III.B for further details on this legislation.)

Provisions of the Railroad Retirement Act require an annual financial interchange between the Railroad Retirement and OASDI programs. The purpose

of such provisions is to put the OASI and DI Trust Funds in the same financial position they would have been had railroad employment always been

covered by Social Security. Under those provisions, the Railroad Retirement

Board and the Commissioner of Social Security determined that a transfer of

$3.5 billion to the Social Security Equivalent Benefit Account from the

OASI Trust Fund was required in June 2000.
Financial Operations & Legislative Changes

18

The remaining $2.0 billion of disbursements from the OASI Trust Fund represented net administrative expenses. The expenses of administering the

OASDI and Medicare programs are allocated and charged directly to each of

the various trust funds through which those programs are financed, on the

basis of provisional estimates. Similarly, the expenses of administering the

Supplemental Security Income program are also allocated and charged

directly to the general fund of the Treasury on a provisional basis. Periodically, as actual experience develops and is analyzed, adjustments to the allocations of administrative expenses for prior periods are effected by interfund

transfers and transfers between the OASI Trust Fund and the general fund

account for the Supplemental Security Income program, with appropriate

interest adjustments.

Section 1131 of the Social Security Act authorizes annual reimbursements

from the general fund of the Treasury to the OASI Trust Fund for additional

administrative expenses incurred as a result of furnishing information on

deferred vested benefits to pension plan participants, as required by the

Employee Retirement Income Security Act of 1974 (Public Law 93-406).

The reimbursement in fiscal year 2000 amounted to $3,262,782.

The OASI Trust Fund was reimbursed $291,802 for expenses of providing

certain information required by the Coal Industry Retiree Health Benefit Act

of 1992 (part of the Energy Policy Act of 1992, Public Law 102-486). The

fund was also reimbursed $3,399,511 (including $84,293 in interest) for

costs associated with union activities, as authorized by Public Law 105-78.

The assets of the OASI Trust Fund at the end of fiscal year 2000 totaled

$893.0 billion, consisting of $893.5 billion in U.S. Government obligations

and, as an offset, an extension of credit amounting to $0.5 billion against

securities to be redeemed within the following few days. The effective

annual rate of interest earned by the assets of the OASI Trust Fund during

calendar year 2000 was 6.9 percent, as compared to 7.0 percent earned during calendar year 1999. Table III.A2 shows the total assets of the fund and

their distribution at the end of each fiscal year 1999 and 2000.
19

Fiscal Year 2000 Operations

Note: Special issues are always purchased at par value. Therefore, book value and par value are the same for

each special issue, and the common value is shown above. Where the maturity years are grouped, the

amount maturing in each year is the amount shown divided by the number of years.

Table III.A2.—Assets of the OASI Trust Fund, End of Fiscal Years 1999-2000

September 30, 1999 September 30, 2000

Obligations sold only to the trust funds (special issues): 

Certificates of indebtedness:

6 percent, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $25,191,079,000.00

6.125 percent, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,837,302,000.00

6.25 percent, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,588,109,000.00 —

6.25 percent, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 8,071,035,000.00

Bonds:

5.875 percent, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,169,272,000.00 —

5.875 percent, 2002-12 . . . . . . . . . . . . . . . . . . . . . . . . 67,862,003,000.00 67,862,003,000.00

5.875 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,258,869,000.00 43,258,869,000.00

6 percent, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,693,628,000.00 —

6 percent, 2002-11. . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,936,270,000.00 66,936,270,000.00

6 percent, 2012-13. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,387,256,000.00 13,387,256,000.00

6 percent, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,952,497,000.00 49,952,497,000.00

6.25 percent, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,150,975,000.00 —

6.25 percent, 2002-06 . . . . . . . . . . . . . . . . . . . . . . . . . 15,754,875,000.00 15,754,875,000.00

6.25 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,150,974,000.00 3,150,974,000.00

6.25 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,350,034,000.00 23,350,034,000.00

6.5 percent, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,795,524,000.00 —

6.5 percent, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,431,254,000.00 7,493,737,000.00

6.5 percent, 2002-03 . . . . . . . . . . . . . . . . . . . . . . . . . . 4,862,508,000.00 22,017,298,000.00

6.5 percent, 2004-09 . . . . . . . . . . . . . . . . . . . . . . . . . . 14,587,524,000.00 66,051,900,000.00

6.5 percent, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,742,844,000.00 38,320,240,000.00

6.5 percent, 2011-14 . . . . . . . . . . . . . . . . . . . . . . . . . . — 34,309,584,000.00

6.5 percent, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 58,529,893,000.00

6.875 percent, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,975,270,000.00 —

6.875 percent, 2001-03 . . . . . . . . . . . . . . . . . . . . . . . . 11,925,810,000.00 11,925,810,000.00

6.875 percent, 2004-09 . . . . . . . . . . . . . . . . . . . . . . . . 23,851,626,000.00 23,851,626,000.00

6.875 percent, 2010-11 . . . . . . . . . . . . . . . . . . . . . . . . 7,950,544,000.00 7,950,544,000.00

6.875 percent, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,089,596,000.00 37,089,596,000.00

7 percent, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,371,481,000.00 —

7 percent, 2001-03 . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,114,443,000.00 10,114,443,000.00

7 percent, 2004-10. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,600,360,000.00 23,600,360,000.00

7 percent, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,114,324,000.00 33,114,324,000.00

7.25 percent, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,961,556,000.00 —

7.25 percent, 2001-06 . . . . . . . . . . . . . . . . . . . . . . . . . 23,769,336,000.00 23,769,336,000.00

7.25 percent, 2007-08 . . . . . . . . . . . . . . . . . . . . . . . . . 7,923,114,000.00 7,923,114,000.00

7.25 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,311,591,000.00 27,311,591,000.00

7.375 percent, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,575,473,000.00 —

7.375 percent, 2001-06 . . . . . . . . . . . . . . . . . . . . . . . . 21,452,844,000.00 21,452,844,000.00

7.375 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,199,060,000.00 20,199,060,000.00

8.125 percent, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,611,349,000.00 —

8.125 percent, 2001-05 . . . . . . . . . . . . . . . . . . . . . . . . 18,056,740,000.00 18,056,740,000.00

8.125 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,623,586,000.00 16,623,586,000.00

8.375 percent, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 313,295,000.00 —

8.375 percent, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,370,396,000.00 2,370,396,000.00

8.625 percent, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,301,731,000.00 — 8.625 percent, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,301,731,000.00 1,301,731,000.00

8.625 percent, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,672,127,000.00 3,672,127,000.00

8.75 percent, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,099,802,000.00 —

8.75 percent, 2001-03 . . . . . . . . . . . . . . . . . . . . . . . . . 21,299,409,000.00 21,299,409,000.00

8.75 percent, 2004-05 . . . . . . . . . . . . . . . . . . . . . . . . . 26,024,476,000.00 26,024,476,000.00

9.25 percent, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,240,309,000.00 —

9.25 percent, 2001-02 . . . . . . . . . . . . . . . . . . . . . . . . . 4,480,616,000.00 4,480,616,000.00

9.25 percent, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,912,435,000.00 5,912,435,000.00

10.375 percent, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . 2,057,101,000.00 —

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 762,225,947,000.00 893,519,010,000.00

Undisbursed balances1 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

 1 Negative figures represent an extension of credit against securities to be redeemed within the following

few days.

-55,908,558.71 -516,482,844.04

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 762,170,038,441.29 893,002,527,155.96
Financial Operations & Legislative Changes

20

All securities held by the trust funds are backed by the full faith and credit of

the United States Government. Those currently held by the OASI Trust Fund

are special issues (i.e., securities sold only to the trust funds). These are of

two types: short-term certificates of indebtedness and long-term bonds. The

certificates of indebtedness are issued through the investment of receipts not

required to meet current expenditures, and they mature on the next June 30

following the date of issue. Special-issue bonds, on the other hand, are normally acquired only when special issues of either type mature on June 30.

The amount of bonds acquired on June 30 is equal to the amount of special

issues maturing, less amounts required to meet expenditures on that day.

Section 201(d) of the Social Security Act provides that the public-debt obligations issued for purchase by the OASI and DI Trust Funds shall have

maturities fixed with due regard for the needs of the funds. The usual practice has been to spread the holdings of special issues, as of each June 30, so

that the amounts maturing in each of the next 15 years are approximately

equal. Accordingly, the amounts and maturity dates of the OASI specialissue bonds purchased on June 30, 2000, were selected in such a way that the

maturity dates of the total portfolio of special issues were spread evenly over

the 15-year period 2001-15. See table III.A9 for the amount of bonds purchased on June 30, 2000.

2. DI Trust Fund

A statement of the income and disbursements of the Federal Disability Insurance Trust Fund in fiscal year 2000, and of the assets of the fund at the

beginning and end of the fiscal year, is presented in table III.A3.

Line entries in the DI statement are similar to those in the OASI statement

and the explanations of the OASI entries generally apply to DI as well. One

additional source of disbursements in the DI statement is $67,262,839 for the

costs of vocational rehabilitation services furnished to disabled-worker beneficiaries and to those children of disabled workers who were receiving benefits on the basis of disabilities that began before age 22. Reimbursement

from the trust funds for the costs of vocational rehabilitation services is made

only in those cases where the services contributed to the successful rehabilitation of the beneficiaries.

Net contributions amounted to $70.0 billion, an increase of 13.0 percent from

the amount in the preceding fiscal year. This increase is attributable to the

same factors, insofar as they apply to the DI program, that accounted for the

change in contributions to the OASI Trust Fund. Note, however, that the DI

allocation of the OASDI tax rate increased in January 2000.
21

Fiscal Year 2000 Operations

Of the $56.0 billion in total disbursements, $54.2 billion was for net benefit

payments. This represents an increase of 7.5 percent over the corresponding

amount of benefit payments in fiscal year 1999. This increase in DI benefit

payments was due to the same factors that resulted in the net increase in benefit payments from the OASI Trust Fund, except that elimination of the

retirement earnings test at the normal retirement age did not affect DI benefits. However, the number of persons receiving benefits from the DI Trust

Fund increased more rapidly in 2000 than the number receiving benefits

from the OASI Trust Fund.

Table III.A3.—Operations of the DI Trust Fund, Fiscal Year 2000

[In thousands]

Total assets, September 30, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $92,737,488

Receipts:

Contributions:

Employment taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $70,269,642

Payments from the general fund of the Treasury for:

Contributions subject to refund . . . . . . . . . . . . . . . . . . . . . . . . . . . -270,440

Employee-employer contributions on deemed wage 

credits for military service . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,631

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000,833

Income from taxation of benefit payments:

Withheld from benefit payments to nonresident aliens. . . . . . . . . . . 5,699

All other, not subject to withholding. . . . . . . . . . . . . . . . . . . . . . . . . 750,000

Total income from taxation of benefits . . . . . . . . . . . . . . . . . . . . . 755,699

Investment income and interest adjustments:

Interest on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,265,158

Interest on interfund transfers due to adjustment in allocation 

of administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 554

Net interest adjustments on disbursement of funds to certain 

State Disability Determination Services. . . . . . . . . . . . . . . . . . . . 340

Interest on reimbursement from the general fund for costs 

associated with union activity . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Total investment income and interest adjustments . . . . . . . . . . . . 6,266,119

Gifts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,022,695
Financial Operations & Legislative Changes

22

Note: Totals do not necessarily equal the sums of rounded components.

The assets of the DI Trust Fund at the end of fiscal year 2000 totaled $113.8

billion, consisting of $113.7 billion in U.S. Government obligations and cash

totaling $45 million. The effective annual rate of interest earned by the assets

of the DI Trust Fund during calendar year 2000 was 6.6 percent, the same as

the rate earned during calendar year 1999. Table III.A4 shows the total assets

of the fund and their distribution at the end of each fiscal year 1999 and

2000.

Disbursements:

Benefit payments:

Gross benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $54,528,777

Offset for collected overpayments . . . . . . . . . . . . . . . . . . . . . . . . . . -337,508

Reimbursement from the general fund for unnegotiated checks. . . . -17,516

Net benefit payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $54,173,753

Transfer to the Railroad Retirement “Social Security 

Equivalent Benefit Account” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159,371

Payment for costs of vocational rehabilitation services for disabled 

beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,263

Administrative expenses:

Social Security Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,574,207

Department of the Treasury. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,592

Reimbursement from the general fund for costs of furnishing 

information related to the Coal Industry Retiree Health Benefit 

Act of 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -234

Reimbursement from the general fund for costs associated with 

union activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2,676

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,607,889

Total disbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,008,276

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,014,420

Total assets, September 30, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,751,908

Table III.A3.—Operations of the DI Trust Fund, Fiscal Year 2000 (Cont.)

[In thousands]
23

Fiscal Year 2000 Operations

Note: Special issues are always purchased at par value. Therefore, book value and par value are the same for

each special issue, and the common value is shown above. Where the maturity years are grouped for special

issues, the amount maturing in each year is the amount shown divided by the number of years.

Table III.A4.—Assets of the DI Trust Fund, End of Fiscal Years 1999-2000

September 30, 1999 September 30, 2000

Investments in public-debt obligations:

Public issues: 

Treasury bonds: 

7.625 percent, 2002-07 . . . . . . . . . . . . . . . . . . . . . . $10,000,000.00 $10,000,000.00

8.25 percent, 2000-05 . . . . . . . . . . . . . . . . . . . . . . . 3,750,000.00 —

11.75 percent, 2005-10 . . . . . . . . . . . . . . . . . . . . . . 30,250,000.00 30,250,000.00

Total investments in public issues at par value, as 

shown above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,000,000.00 40,250,000.00

Unamortized premium or discount, net. . . . . . . . . . . . -175,752.45 -158,276.73

Total investments in public issues at book value . . . . 43,824,247.55 40,091,723.27

Obligations sold only to the trust funds (special issues):

Certificates of indebtedness: 

6 percent, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3,989,649,000.00

6.125 percent, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . — 847,414,000.00

6.25 percent, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . 4,284,031,000.00 —

6.25 percent, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . — 735,407,000.00

Bonds: 

5.875 percent, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . 916,286,000.00 —

5.875 percent, 2002-12 . . . . . . . . . . . . . . . . . . . . . . 10,079,146,000.00 10,079,146,000.00

5.875 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . 5,361,805,000.00 5,361,805,000.00

6 percent, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,612,426,000.00 —

6 percent, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,612,426,000.00 1,612,426,000.00

6 percent, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,437,946,000.00 1,437,946,000.00

6 percent, 2004-06. . . . . . . . . . . . . . . . . . . . . . . . . . 2,087,895,000.00 2,087,895,000.00

6 percent, 2007-12. . . . . . . . . . . . . . . . . . . . . . . . . . 4,175,796,000.00 4,175,796,000.00

6 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,967,000.00 695,967,000.00

6 percent, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,057,772,000.00 6,057,772,000.00

6.5 percent, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,147,659,000.00 —

6.5 percent, 2001-06 . . . . . . . . . . . . . . . . . . . . . . . . 12,885,954,000.00 20,788,608,000.00

6.5 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,147,659,000.00 3,464,767,000.00

6.5 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,064,120,000.00 4,381,228,000.00

6.5 percent, 2009-13 . . . . . . . . . . . . . . . . . . . . . . . . — 6,585,540,000.00

6.5 percent, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,317,109,000.00

6.5 percent, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . — 7,374,881,000.00

6.875 percent, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . 265,249,000.00 —

6.875 percent, 2001-02 . . . . . . . . . . . . . . . . . . . . . . 530,498,000.00 530,498,000.00

6.875 percent, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . 265,252,000.00 265,252,000.00

6.875 percent, 2004-07 . . . . . . . . . . . . . . . . . . . . . . 1,061,000,000.00 1,061,000,000.00

6.875 percent, 2008-09 . . . . . . . . . . . . . . . . . . . . . . 530,498,000.00 530,498,000.00

6.875 percent, 2010-12 . . . . . . . . . . . . . . . . . . . . . . 13,336,560,000.00 13,336,560,000.00

7 percent, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,116,151,000.00 —

7 percent, 2001-08. . . . . . . . . . . . . . . . . . . . . . . . . . 8,929,208,000.00 8,929,208,000.00

7 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,180,271,000.00 4,180,271,000.00

7.375 percent, 2004-06 . . . . . . . . . . . . . . . . . . . . . . 142,803,000.00 142,803,000.00

7.375 percent, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . 916,460,000.00 916,460,000.00

8.125 percent, 2004-05 . . . . . . . . . . . . . . . . . . . . . . 300,322,000.00 300,322,000.00

8.125 percent, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . 868,859,000.00 868,859,000.00

8.75 percent, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 174,477,000.00 174,477,000.00

8.75 percent, 2004-05 . . . . . . . . . . . . . . . . . . . . . . . 1,437,396,000.00 1,437,396,000.00

Total obligations sold only to the trust funds 

(special issues) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,621,892,000.00 113,666,960,000.00

Total investments in public-debt obligations (book value1)

 1 Par value, plus unamortized premium or less discount outstanding.

92,665,716,247.55 113,707,051,723.27

Undisbursed balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,772,242.16 44,856,526.13

Total assets (book value 1) . . . . . . . . . . . . . . . . . . . . . . . . . 92,737,488,489.71 113,751,908,249.40
Financial Operations & Legislative Changes

24

3. OASI and DI Trust Funds, Combined

A statement of the operations of the income and disbursements of the OASI

and DI Trust Funds, on a combined basis, is presented in table III.A5. The

entries in this table represent the sums of the corresponding values from

tables III.A1 and III.A3. For a discussion of the nature of these income and

expenditure transactions, reference should be made to the two preceding subsections covering OASI and DI separately.

Table III.A5.—Operations of the Combined OASI and DI Trust Funds, 

Fiscal Year 2000

[In thousands]

Total assets, September 30, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $854,907,527

Receipts:

Contributions:

Employment taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $490,176,820

Payments from the general fund of the Treasury for:

Contributions subject to refund . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,965,400

Employee-employer contributions on deemed wage

credits for military service . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,851

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 488,220,271

Income from taxation of benefit payments:

Withheld from benefit payments to nonresident aliens. . . . . . . . . . . 143,609

All other, not subject to withholding. . . . . . . . . . . . . . . . . . . . . . . . . 13,088,000

Total income from taxation of benefits . . . . . . . . . . . . . . . . . . . . . 13,231,609

Reimbursement from the general fund for costs of payments to 

uninsured persons who attained age 72 before 1968 . . . . . . . . . . . . 364

Investment income and interest adjustments:

Interest on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,795,875

Interest on transfers to the general fund account for the

Supplemental Security Income program due to adjustment in 

allocation of administrative expenses. . . . . . . . . . . . . . . . . . . . . . 1,559

Interest on interfund transfers due to adjustment in allocation of 

administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -75

Interest on certain reimbursements from the general fund . . . . . . . . 290

Net interest adjustments on disbursement of funds to certain State 

Disability Determination Services . . . . . . . . . . . . . . . . . . . . . . . . 340

Net investment income and interest adjustments . . . . . . . . . . . . . 59,797,987

Gifts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561,250,751

Disbursements:

Benefit payments:

Gross benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403,481,867

Offset for collected overpayments . . . . . . . . . . . . . . . . . . . . . . . . . . -1,369,850

Reimbursement from the general fund for unnegotiated checks. . . . -70,655

Net benefit payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402,041,363

Transfer to the Railroad Retirement “Social Security Equivalent 

Benefit Account” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,697,579

Payment for costs of vocational rehabilitation services for disabled 

beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,263
25

Fiscal Year 2000 Operations

Note: Totals do not necessarily equal the sums of rounded components.

To provide a context for estimates of future trust fund income and expenditures provided later in this report, table III.A6 compares past estimates of

contributions and benefit payments for fiscal year 2000, as shown in the

1996-2000 Annual Reports, with the corresponding actual amounts in 2000.

A number of factors can contribute to differences between estimates and subsequent actual amounts, including actual values for key economic, demographic, and other variables that differ from assumed levels. Another factor

contributing to such differences is new legislation. In particular, legislation

eliminating the retirement earnings test for workers over the normal retirement age was enacted shortly after publication of the 2000 report. Consequently, actual OASI benefit payments in 2000 were larger than estimated

for the 2000 report. In addition, the actual amount of DI benefit payments in

2000 was significantly below estimates in the 1996-97 reports, due to

slower-than-expected growth in the number of disabled workers.

Disbursements: (Cont.)

Administrative expenses:

Social Security Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,377,307

Department of the Treasury. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232,091

Reimbursement from the general fund for costs of furnishing 

information on deferred vested pension benefits . . . . . . . . . . . . . -3,263

Offsetting receipts from sales of supplies, materials, etc.. . . . . . . . . -1,980

Reimbursement from the general fund for costs of furnishing 

information related to the Coal Industry Retiree Health Benefit 

Act of 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -526

Reimbursement from the general fund for costs associated with 

union activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5,991

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,597,638

Total disbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409,403,843

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,846,908

Total assets, September 30, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,006,754,435

Table III.A5.—Operations of the Combined OASI and DI Trust Funds, 

Fiscal Year 2000 (Cont.)

[In thousands]
Financial Operations & Legislative Changes

26

At the end of fiscal year 2000, about 45.3 million persons were receiving

monthly benefits under the OASDI program. Of these persons, about 38.7

million and 6.6 million were receiving monthly benefits from the OASI Trust

Fund and the DI Trust Fund, respectively. The number of persons receiving

benefits from the OASI and DI Trust Funds grew by 1.8 percent and 2.5 percent, respectively, during the fiscal year. The estimated distribution of benefit

payments in fiscal years 1999 and 2000, by type of beneficiary, is shown in

table III.A7 for each trust fund separately.

Table III.A6.—Comparison of Actual Fiscal Year 2000 Trust Fund Operations

With Estimates Made in Prior Reports 1

[Amounts in millions]

 1 The estimates shown are based on the intermediate assumptions.

Net contributions2

 2 “Actual” contributions for 2000 reflect adjustments for prior fiscal years (see appendix A on page 116 for

description of these adjustments). “Estimated” contributions also include such adjustments, but on an estimated basis.

Benefit payments3

 3 Includes payments, if any, for vocational rehabilitation services furnished to disabled persons receiving

benefits because of their disabilities.

Amount

Difference

from actual

(percent) Amount

Difference

from actual

(percent)

OASI Trust Fund:

Estimate in 1996 report . . . . . . . . . . . . . $386,563 -7.6 $361,828 4.0

Estimate in 1997 report . . . . . . . . . . . . . 387,014 -7.5 359,711 3.4

Estimate in 1998 report . . . . . . . . . . . . . 391,503 -6.4 347,181 -.2

Estimate in 1999 report . . . . . . . . . . . . . 399,868 -4.4 343,934 -1.1

Estimate in 2000 report . . . . . . . . . . . . . 417,634 -.1 344,475 -1.0

Actual amount . . . . . . . . . . . . . . . . . . . . 418,219 — 347,868 —

DI Trust Fund:

Estimate in 1996 report . . . . . . . . . . . . . 64,501 -7.9 59,057 8.9

Estimate in 1997 report . . . . . . . . . . . . . 64,585 -7.7 57,682 6.3

Estimate in 1998 report . . . . . . . . . . . . . 65,322 -6.7 54,448 .4

Estimate in 1999 report . . . . . . . . . . . . . 66,715 -4.7 54,070 -.3

Estimate in 2000 report . . . . . . . . . . . . . 69,915 -.1 53,964 -.5

Actual amount . . . . . . . . . . . . . . . . . . . . 70,001 — 54,241 —

OASI and DI Trust Funds, combined:

Estimate in 1996 report . . . . . . . . . . . . . 451,064 -7.6 420,885 4.7

Estimate in 1997 report . . . . . . . . . . . . . 451,599 -7.5 417,393 3.8

Estimate in 1998 report . . . . . . . . . . . . . 456,825 -6.4 401,630 -.1

Estimate in 1999 report . . . . . . . . . . . . . 466,583 -4.4 398,004 -1.0

Estimate in 2000 report . . . . . . . . . . . . . 487,549 -.1 398,439 -.9

Actual amount . . . . . . . . . . . . . . . . . . . . 488,220 — 402,109 —
27

Fiscal Year 2000 Operations

Note: Totals do not necessarily equal the sums of rounded components.

Net administrative expenses charged to the OASI and DI Trust Funds in fiscal year 2000 totaled $3.6 billion. This amount represented 0.7 percent of

contribution income and 0.9 percent of expenditures. Corresponding percentages for each trust fund separately and for the OASDI program as a whole

are shown in table III.A8 for each of the last 5 years.

Table III.A7.—Distribution of Benefit Payments by Type of Beneficiary or Payment, 

Fiscal Years 1999-2000

[Amounts in millions]

Fiscal year 1999 Fiscal year 2000

Amount

Percentage

of total Amount

Percentage

of total

Total OASDI benefit payments. . . . . . . . . $382,780 100.0 $402,041 100.0

OASI benefit payments. . . . . . . . . . . . . 332,369 86.8 347,868 86.5

DI benefit payments . . . . . . . . . . . . . . . 50,411 13.2 54,174 13.5

OASI benefit payments, total . . . . . . . . . . 332,369 100.0 347,868 100.0

Monthly benefits:

Retired workers and auxiliaries. . . . . 257,177 77.4 270,467 77.8

Retired workers . . . . . . . . . . . . . . . 236,805 71.2 249,564 71.7

Wives and husbands . . . . . . . . . . . 18,395 5.5 18,818 5.4

Children . . . . . . . . . . . . . . . . . . . . . 1,978 .6 2,085 .6

Survivors of deceased workers . . . . . 74,976 22.6 77,189 22.2

Aged widows and widowers . . . . . 60,202 18.1 62,045 17.8

Disabled widows and widowers . . 1,257 .4 1,302 .4

Parents . . . . . . . . . . . . . . . . . . . . . . 28 (1)

 1 Less than 0.5 percent.

27 (1)

Children . . . . . . . . . . . . . . . . . . . . . 12,079 3.6 12,411 3.6

Widowed mothers and fathers 

caring for child beneficiaries . . 1,410 .4 1,405 .4

Uninsured persons generally aged 72 

before 1968. . . . . . . . . . . . . . . . . . (2)

 2 Less than $500,000.

(1) (2) (1)

Lump-sum death payments . . . . . . . . . . 216 .1 212 .1

DI benefit payments, total. . . . . . . . . . . . . 50,411 100.0 54,174 100.0

Disabled workers. . . . . . . . . . . . . . . . 45,594 90.4 49,145 90.7

Wives and husbands . . . . . . . . . . . . . 436 .9 425 .8

Children. . . . . . . . . . . . . . . . . . . . . . . 4,381 8.7 4,604 8.5

Table III.A8.—Administrative Expenses as a Percentage of Contribution Income and of 

Total Expenditures, Fiscal Years 1996-2000

Fiscal year 

OASI Trust Fund DI Trust Fund

OASI and DI

Trust Funds,

combined

Contribution

income

Total

expenditures

Contribution

income

Total

expenditures

Contribution

income

Total

expenditures

1996. . . . . . . . . . 0.6 0.6 1.9 2.4 0.8 0.8

1997. . . . . . . . . . .6 .6 2.2 2.6 .8 .9

1998. . . . . . . . . . .6 .6 2.7 3.2 .9 .9

1999. . . . . . . . . . .5 .5 2.5 2.9 .7 .9

2000. . . . . . . . . . .5 .6 2.3 2.9 .7 .9
Financial Operations & Legislative Changes

28

Tables III.A2 and III.A4, presented earlier, showed the assets of the OASI

and DI Trust Funds at the end of fiscal years 1999 and 2000. The changes in

the invested assets of the funds between those two dates are a result of the

acquisition and disposition of securities during fiscal year 2000. Table III.A9

presents these investment transactions for each trust fund separately and

combined.

Note: All investments are shown at par value.

Table III.A9.—Trust Fund Investment Transactions, Fiscal Year 2000

[In thousands]

OASI

Trust Fund

DI

Trust Fund

OASI and DI

Trust Funds,

combined

Invested assets, September 30, 1999. . . . . . . $762,225,947 $92,665,892 $854,891,839

Acquisitions:

Special issues:

Certificates of indebtedness . . . . . . . . . 459,929,918 74,845,313 534,775,231

Bonds 1 . . . . . . . . . . . . . . . . . . . . . . . . . 

 1 Amounts shown were purchased on June 30, 2000. The interest rate on such purchases was 6.5 percent.

178,613,434 25,814,400 204,427,834

Public issues:

Treasury bonds . . . . . . . . . . . . . . . . . . . ———

Total acquisitions. . . . . . . . . . . . . . . . . . 638,543,352 100,659,713 739,203,065

Dispositions:

Special issues:

Certificates of indebtedness . . . . . . . . . 454,418,611 73,556,874 527,975,485

Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . 52,831,678 6,057,771 58,889,449

Public issues:

Treasury bonds . . . . . . . . . . . . . . . . . . . — 3,750 3,750

Total dispositions. . . . . . . . . . . . . . . . . . 507,250,289 79,618,395 586,868,684

Net increase in invested assets . . . . . . . . . . . 131,293,063 21,041,318 152,334,381

Invested assets, September 30, 2000. . . . . . . 893,519,010 113,707,210 1,007,226,220
29

Social Security Amendments in 2000

B. SOCIAL SECURITY AMENDMENTS SINCE THE 2000 REPORT

Since the 2000 Annual Report was transmitted to Congress on March 30,

2000, two laws have been enacted that have direct financial effects on the

OASDI program. 

First, the Senior Citizens’ Freedom to Work Act of 2000 (Public Law

106-182, enacted on April 7, 2000) eliminated the Social Security retirement

earnings test beginning with the month in which a person attains normal

retirement age. This amendment is effective with respect to taxable years

ending after December 31, 1999. Additional provisions of this amendment

are decribed below.

• For any earnings in months prior to attaining the normal retirement age

within the calendar year of such attainment (2000 and later), the new

law applies the earnings limit formerly specified for those at the normal

retirement age ($17,000 in 2000, $25,000 in 2001 and $30,000 in 2002)

and the corresponding reduction rate ($1 for $3 offset).

• The new law permits, beginning with the month in which the beneficiary reaches normal retirement age and ending with the month prior to

attainment of age 70, the retired worker to earn a delayed retirement

credit for any month for which the retired worker requests that benefits

not be paid even though he/she is already on the benefit rolls.

Second, Section 308 of H.R. 5662, enacted by Public Law 106-554, on

December 21, 2000 (the Consolidated Appropriations Act, 2001) requires

that payments to beneficiaries of the OASDI program be made to compensate for any shortfall resulting from a technical error in the computation of

the Consumer Price Index for 1999.

The actuarial estimates shown in this report reflect the expected effects of

these amendments. Each of these amendments has a significant effect on the

short-range operations of the OASI and DI Trust Funds (see section IV.A4).

However, the long-range financial effect of each of these new laws on the

OASDI program is negligible (see section IV.B7).
Actuarial Estimates

30

IV. ACTUARIAL ESTIMATES

This chapter presents actuarial estimates of the future financial condition of

the Social Security program. These estimates include projected income and

expenditures of the OASI and DI Trust Funds, in dollars over the next 10

years and as a percentage of taxable payroll over the full 75-year period,

along with a discussion of a variety of measures of the adequacy of current

program financing. As described in the Overview section of this report, these

estimates depend upon a broad set of demographic and economic assumptions. Since these assumptions are subject to uncertainty, the estimates presented in this section are prepared under three sets of assumptions, to show a

range of possible outcomes for all projections. The intermediate set of

assumptions, designated as alternative II, reflects the Trustees’ best estimates

of future experience; the low cost alternative I is more optimistic and the

high cost alternative III more pessimistic for the trust funds’ future financial

outlook. The intermediate estimates are shown first in the tables in this

report, followed by the low cost and high cost estimates. These sets of

assumptions, along with actuarial methods used to produce the estimates, are

described in chapter V. In this chapter, the estimates and measures of trust

fund financial adequacy for the short range (2001-10) are presented first, followed by estimates and measures of financial status for the long range

(2001-75).

A. SHORT-RANGE ESTIMATES

In the short range, the adequacy of the trust fund level is generally measured

by the “trust fund ratio,” which is defined to be the assets at the beginning of

the year expressed as a percentage of the projected outgo during the year.

Thus, the trust fund ratio represents the proportion of a year’s outgo which

can be paid with the funds available at the beginning of the year. During periods when trust fund income exceeds disbursements, the trust funds serve to

help fund a portion of the Social Security program’s accruing financial obligations in advance. During periods when trust fund disbursements exceed

income, as might happen during an economic recession, trust fund assets are

used to meet the shortfall. In the event of recurring shortfalls for an extended

period, the trust funds can allow time for the development, enactment, and

implementation of legislation to restore financial stability to the program.

The test of financial adequacy over the short-range projection period is applicable to the OASI and DI Trust Funds individually and on a combined basis.

The requirements of this test are as follows: If the estimated trust fund ratio

is at least 100 percent at the beginning of the projection period, then it must

be projected to remain at or above 100 percent throughout the 10-year projection period. Alternatively, if the ratio is initially less than 100 percent,

then it must be projected to reach a level of at least 100 percent by the begin-
31

Short-Range Estimates

ning of the sixth year and to remain at or above 100 percent throughout the

remainder of the 10-year period. In addition, the fund’s estimated assets at

the beginning of each month of the 10-year period must be sufficient to cover

that month’s disbursements. This test is applied on the basis of the intermediate estimates. Failure to meet this test by either trust fund is an indication that

solvency of the program over the next 10 years is in question and that legislative action is needed to improve the short-range financial adequacy of the

program.

1. Operations of the OASI Trust Fund

This subsection presents estimates of the operations and financial status of

the OASI Trust Fund for the period 2001-10, based on the assumptions

described in chapter V. No changes are assumed to occur in the present statutory provisions and regulations under which the OASDI program operates.1

These estimates are shown in table IV.A1 and indicate that the assets of the

OASI Trust Fund would continue to increase rapidly throughout the next 10

years under all three sets of assumptions. Also, based on the intermediate

assumptions, the assets of the OASI Trust Fund would continue to exceed

100 percent of annual expenditures by a steadily increasing amount through

the end of 2010. Consequently, the OASI Trust Fund satisfies the test of

short-range financial adequacy by a wide margin. The estimates in table

IV.A1 also indicate that the short-range test would be satisfied even under the

high cost assumptions (see figure IV.A1 for graphical illustration of these

results).

The increases in estimated income shown in table IV.A1 under each set of

assumptions reflect increases in estimated taxable earnings and growth in

interest earnings on the invested assets of the trust fund. For each alternative,

employment and earnings are assumed to increase in every year through

2010 (with the exception that employment is estimated to decline temporarily during the economic recessions assumed under the high cost assumptions described in section V.B on page 79). The number of persons with

taxable earnings would increase on the basis of alternatives I, II, and III from

 1 The estimates shown in this subsection reflect 12 months of benefit payments in each year of the shortrange projection period. In practice, 13 benefit payments have been made in certain years, with the next year

having only 11 payments. This situation resulted from the statutory requirement that benefit checks be delivered early when the normal check delivery date is a Saturday, Sunday, or legal public holiday. For example,

the benefit checks for December 1998 would normally have been delivered on January 3, 1999; however,

because that day was a Sunday, and the two preceding days a Saturday and a holiday, the checks were actually delivered on December 31, 1998. The annual benefit figures are shown as if those benefit checks were

delivered on the usual date. Whenever this situation occurs, only the portion of benefits payable on January

3 would be delivered in December. The benefits payable later in January due to payment cycling, which

began in June 1997, would still be paid in January.
Actuarial Estimates

32

153 million during calendar year 2000 to about 167 million, 164 million, and

161 million, respectively, in 2010. The total annual amount of taxable earnings is projected to increase from $3,983 billion in 2000 to $6,511 billion,

$6,532 billion, and $6,606 billion, in 2010, on the basis of alternatives I, II,

and III, respectively. (In constant 2000 dollars—taking account of assumed

increases in the CPI from 2000 to 2010 under each alternative—the estimated amounts of taxable earnings in 2010 are $5,134 billion, $4,786 billion,

and $4,338 billion, respectively.) These increases in taxable earnings are due

primarily to (1) projected increases in employment levels as the working age

(20-64) population increases and in average earnings in covered employment, (2) increases in the contribution and benefit base in 2001-10 under the

automatic-adjustment provisions, and (3) various provisions enacted in 1983

and later, including extensions of coverage to additional categories of workers.

Growth in interest earnings represents a significant component of the overall

increase in trust fund income during this period. Although interest rates payable on trust fund investments are not assumed to change substantially from

current levels, the continuing rapid increase in OASI assets will result in a

corresponding increase in interest income. By 2010, interest income to the

OASI Trust Fund is projected to be about 20 percent of total trust fund

income on the basis of the intermediate assumptions, as compared to 11.7

percent in 2000.

 Figure IV.A1.—Short-Range OASI and DI Trust Fund Ratios

[Assets as a percentage of annual expenditures]

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

550%

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Calendar year

OASI

DI

Historical Estimated

"Adequate" level for trust fund ratio

I

II

III

I

II

III
33

Short-Range Estimates

Note: Totals do not necessarily equal the sums of rounded components.

Table IV.A1.—Operations of the OASI Trust Fund, Calendar Years 1996-2010 1

[Amounts in billions]

 1 A detailed description of the components of income and expenditures, along with complete historical values, is presented in appendix A.

Calendar

year

Income Expenditures Assets

Total2

 2 “Total Income” column includes transfers made between the OASI Trust Fund and the general fund of the

Treasury that are not included in the separate components of income shown. These transfers consist of payments for (1) the cost of noncontributory wage credits for military service before 1957, and (2) the cost of

benefits to certain uninsured persons who attained age 72 before 1968. In 2001, these transfers include an

estimated $414 million from the general fund of the Treasury to the OASI Trust Fund for the cost of pre1957 military service wage credits. Otherwise, these transfers are estimated to be less than $500,000 in each

year of the projection period.

Net

contributions

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratio 3

 3 The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets at

the end of the prior year shown in the “Amount at end of year” column) as a percentage of expenditures during the year. See text beginning on page 34 concerning interpretation of these ratios.

Historical data:

1996 . . $363.7 $321.6 $6.5 $35.7 $308.2 $302.9 $1.8 $3.6 $55.5 $514.0 149

1997 . . 397.2 349.9 7.4 39.8 322.1 316.3 2.1 3.7 75.1 589.1 160

1998 . . 424.8 371.2 9.1 44.5 332.3 326.8 1.9 3.7 92.5 681.6 177

1999 . . 457.0 396.4 10.9 49.8 339.9 334.4 1.8 3.7 117.2 798.8 201

2000 . . 490.5 421.4 11.6 57.5 358.3 352.7 2.1 3.5 132.2 931.0 223

Intermediate:

2001 . . 520.1 443.0 12.2 64.6 378.1 372.6 2.3 3.2 142.0 1,073.0 246

2002 . . 552.6 466.9 13.2 72.6 394.7 388.7 2.4 3.6 158.0 1,231.0 272

2003 . . 586.2 490.1 14.3 81.8 413.0 407.1 2.4 3.6 173.2 1,404.2 298

2004 . . 621.7 514.1 15.5 92.1 433.3 427.4 2.4 3.6 188.4 1,592.6 324

2005 . . 661.1 540.5 16.7 103.9 455.8 449.9 2.4 3.6 205.2 1,797.9 349

2006 . . 701.7 567.0 17.9 116.9 480.3 474.5 2.4 3.4 221.4 2,019.3 374

2007 . . 745.8 595.7 19.2 130.9 507.6 501.5 2.5 3.6 238.2 2,257.4 398

2008 . . 791.2 624.5 20.7 146.0 538.3 532.1 2.5 3.7 252.9 2,510.4 419

2009 . . 839.9 655.5 22.6 161.9 573.8 567.5 2.5 3.8 266.1 2,776.5 438

2010 . . 890.8 687.5 24.7 178.6 612.6 606.2 2.6 3.8 278.1 3,054.6 453

Low Cost:

2001 . . 522.7 445.3 12.2 64.8 377.9 372.4 2.3 3.2 144.8 1,075.8 246

2002 . . 557.6 471.0 13.2 73.4 394.1 388.1 2.4 3.6 163.5 1,239.3 273

2003 . . 591.3 494.4 14.2 82.7 410.6 404.7 2.4 3.6 180.6 1,419.9 302

2004 . . 626.7 518.8 15.3 92.7 427.3 421.4 2.4 3.6 199.4 1,619.3 332

2005 . . 665.2 544.7 16.3 104.3 445.6 439.7 2.4 3.5 219.7 1,839.0 363

2006 . . 705.0 570.7 17.3 117.0 465.0 459.3 2.4 3.3 240.0 2,078.9 395

2007 . . 748.0 598.6 18.4 131.0 486.3 480.4 2.4 3.5 261.7 2,340.6 427

2008 . . 792.2 626.1 19.7 146.4 510.5 504.6 2.4 3.5 281.7 2,622.3 459

2009 . . 839.8 655.2 21.2 163.4 538.9 532.9 2.5 3.5 300.9 2,923.2 487

2010 . . 889.8 685.3 23.0 181.5 570.1 564.0 2.5 3.5 319.7 3,243.0 513

High Cost:

2001 . . 510.0 433.6 12.2 63.8 378.3 372.8 2.3 3.2 131.7 1,062.7 246

2002 . . 531.2 448.0 13.2 70.0 396.4 390.4 2.4 3.6 134.9 1,197.5 268

2003 . . 575.7 479.0 14.5 82.2 417.6 411.6 2.4 3.6 158.1 1,355.6 287

2004 . . 611.1 498.6 16.0 96.5 447.6 441.5 2.4 3.6 163.5 1,519.1 303

2005 . . 646.7 522.5 17.7 106.5 484.7 478.5 2.5 3.8 162.0 1,681.1 313

2006 . . 696.0 558.3 19.1 118.6 514.4 508.1 2.5 3.7 181.6 1,862.7 327

2007 . . 744.1 592.4 20.6 131.0 546.1 539.5 2.6 4.0 198.0 2,060.7 341

2008 . . 791.4 625.2 22.4 143.8 582.5 575.8 2.6 4.1 208.9 2,269.6 354

2009 . . 841.0 659.3 24.6 157.1 625.8 618.9 2.7 4.2 215.2 2,484.8 363

2010 . . 893.1 695.3 27.1 170.8 673.1 666.0 2.7 4.4 220.0 2,704.8 369
Actuarial Estimates

34

Rising expenditures during 2001-10 reflect automatic benefit increases as

well as the upward trend in the number of beneficiaries and in the average

monthly earnings underlying benefits payable by the program. The growth in

the number of beneficiaries in the past and the expected growth in the future

result both from the increase in the aged population and from the increase in

the proportion of the population which is eligible for benefits.

Growth has also occurred, and will continue to occur, in the proportion of

eligible persons who receive benefits. This growth is due to several factors,

including (1) the amendments enacted since 1950 which affect the conditions

governing the receipt of benefits and (2) the increasing percentage of eligible

persons who have attained normal retirement age and who therefore may

receive benefits regardless of earnings.

The estimates under all three sets of assumptions shown in table IV.A1 indicate that income to the OASI Trust Fund would substantially exceed expenditures in every year of the short-range projection period, and assets are

therefore estimated to increase substantially.

The portion of the OASI Trust Fund that is not needed to meet day-to-day

expenditures is used to purchase investments, generally in special publicdebt obligations of the U.S. Government. The cash used to make these purchases becomes part of the general fund of the Treasury and can be used to

meet various Federal outlays or to reduce the amount of publicly-held Federal debt. Interest is paid to the trust fund on these securities and, when the

securities mature or are redeemed prior to maturity, general fund revenues

are used to repay the principal to the trust fund. Thus, the investment operations of the trust fund result in various cash flows between the trust fund and

the general fund of the Treasury.

Currently, the excess of tax income to the OASI Trust Fund over the fund’s

expenditures is borrowed by the general fund, resulting in a substantial net

cash flow to the general fund. As discussed in the following section on page

52, this cash flow will reverse sometime in the next 10-20 years; as increasingly larger amounts of annual interest income are used in that period to meet

benefit payments and other expenditures, revenue from the general fund of

the Treasury will be drawn upon to provide the necessary cash. The accumulation and subsequent redemption of substantial trust fund assets has important public policy and economic implications that extend well beyond the

operation of the OASDI program itself. Discussion of these broader issues is

not within the scope of this report.

In interpreting the trust fund ratios in table IV.A1, it should be noted that at

the beginning of any month there must be sufficient assets on hand to meet

the benefit payments that are payable at the beginning of that month. The
35

Short-Range Estimates

specific minimum amount of assets required for this purpose depends on a

number of factors and varies somewhat from month to month. Currently,

assets of roughly 6 to 7 percent of annual expenditures are sufficient for this

purpose, although this minimum requirement will decline very gradually in

the future as cycling of payments throughout the month phases in and

replaces payment of most benefits on the third of the month. If the assets of

either the OASI or DI Trust Fund at the end of a month fall below the minimum amount needed to meet the benefits payable at the beginning of the

next month, section 201(a) of the Social Security Act provides for an

advance transfer to the trust fund of all the taxes that are expected to be

received by the fund in the next month. Thus, the difference between (1) the

sum of the estimated trust fund ratios shown in table IV.A1 and the advance

tax transfers for January expressed as a percentage of total expenditures in

the year and (2) the minimum level required to pay benefits on time, represents the reserve available to handle adverse contingencies.

2. Operations of the DI Trust Fund

The estimated operations and financial status of the DI Trust Fund during

calendar years 2001-10 under the three sets of assumptions are shown in

table IV.A2, together with figures on actual experience in 1996-2000.

Income is generally projected to increase steadily under each alternative,

reflecting most of the same factors described previously in connection with

the OASI Trust Fund. The estimates indicate that the assets of the DI Trust

Fund would also continue to increase throughout the next 10 years under the

intermediate and low cost assumptions, but at a slightly lower rate than for

the OASI Trust Fund. Under the high cost assumptions, DI assets would

increase through 2006 and decline steadily thereafter.

Expenditures are estimated to increase because of automatic benefit

increases and projected increases in the amounts of average monthly earnings on which benefits are based. In addition, under all three sets of assumptions, the number of DI beneficiaries in current-payment status is projected

to continue increasing throughout the short-range projection period, at somewhat lower levels than anticipated in last year’s report. The projected annual

average growth rate in the number of DI worker beneficiaries is roughly 3.7

percent over the period 2000-10. Growth is largely attributable to the gradual

progression of the baby-boom generation toward ages 50-64 at which higher

rates of disability incidence are experienced.

The proportion of insured workers who apply for and are awarded disability

benefits in a given year is referred to as the disability incidence rate. Due to

the substantial variation exhibited by incidence rates in the past and the diffi-
Actuarial Estimates

36

culty in determining reliable explanatory factors for this variation, any projection of future incidence rates necessarily will be uncertain. The 2000

disability incidence rate (calculated on an age-sex-adjusted basis) was 4.58

awards per 1,000 insured workers. This figure was about 6.9 percent lower

than the average incidence rate of 4.92 per thousand that was experienced

during the period 1975-99. Under the intermediate assumptions, incidence

rates are assumed to decrease by less than 1 percent in 2001 and then to

increase gradually for the remainder of the short-range projection period, to

roughly 4.7 per thousand, slightly below the average level for the past 25

years. Under the low cost alternative, incidence rates decline by about 13

percent to roughly 4 per thousand by the end of the short-range period. The

high cost alternative assumes that incidence rates increase by 20 percent to

roughly 5.5 per thousand over the next 10 years.

The proportion of DI beneficiaries whose benefits terminate in a given year

has also fluctuated significantly in the past. Over the last 20 years, the rates

of benefit termination due to death or conversion to retirement benefits (at

attainment of normal retirement age) have declined very gradually. This

trend is attributable, in part, to the lower average age of new beneficiaries.

However, some recent program changes and health trends have also led to

improved mortality experience among the DI disabled workers. These

changes include legislation to exclude drug addicts and alcoholics from the

DI rolls; the diminished impact of AIDS on DI; continued increases in mental-impairment disabilities; and a rising number of awards to older workers,

which are based on vocational factors. The termination rate due to recovery

has been much more volatile. Currently, the proportion of disabled beneficiaries whose benefits cease because of their recovery from disability is very

low in comparison to levels experienced throughout the 1970s and early

1980s.

In this report, termination rates due to attainment of normal retirement age

are estimated to remain steady through 2002 at roughly 40 per thousand disabled. This rate then drops in 2003 and remains at a depressed level for 5

more years as a result of the increase in the normal retirement age which

begins with individuals attaining age 65 in that year. Age-specific death rates

for disabled beneficiaries are assumed to decline gradually from the current

experience levels. Projected levels of recovery terminations for this year’s

report remain consistent with last year’s report after adjusting for (1) 2000

actual experience, and (2) the somewhat higher numbers of disabled workers

expected to return to work and leave the DI rolls as a result of the provisions

in Public Law 106-170 enacted December 17, 1999. The overall termination

rate (reflecting all causes) is projected to either remain level (under the low

cost alternative) or decline slightly (under the intermediate and high cost
37

Short-Range Estimates

alternatives) during 2001-02. The overall rate then declines in 2003 due

largely to the increase in the normal retirement age cited above.

Note: Totals do not necessarily equal the sums of rounded components.

Table IV.A2.—Operations of the DI Trust Fund, Calendar Years 1996-2010 1

[Amounts in billions]

 1 A detailed description of the components of income and expenditures is presented in appendix A.

Calendar

year

Income Expenditures Assets

Total2

 2 “Total Income” column includes transfers made between the DI Trust Fund and the general fund of the

Treasury that are not included in the separate components of income shown. These transfers consist of payments for the cost of noncontributory wage credits for military service before 1957. In particular, a transfer

was made in December 2000 in the amount of $836 million from the DI Trust Fund to the general fund of the

Treasury. Such transfers are estimated to be less than $500,000 in each year of the projection period.

Net

contributions

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratio 3

 3 The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets at

the end of the prior year shown in the “Amount at end of year” column) as a percentage of expenditures during the year. See text beginning on page 34 concerning interpretation of these ratios.

Historical data:

1996 . . $60.7 $57.3 $0.4 $3.0 $45.4 $44.2 $1.2 (4)

 4 Less than $50 million.

$15.4 $52.9 83

1997 . . 60.5 56.0 .5 4.0 47.0 45.7 1.3 $0.1 13.5 66.4 113

1998 . . 64.4 59.0 .6 4.8 49.9 48.2 1.6 .2 14.4 80.8 133

1999 . . 69.5 63.2 .7 5.7 53.0 51.4 1.5 .1 16.5 97.3 152

2000 . . 77.9 71.1 .7 6.9 56.8 55.0 1.6 .2 21.1 118.5 171

Intermediate:

2001 . . 84.2 75.2 .7 8.2 60.7 59.1 1.6 (4) 23.4 141.9 195

2002 . . 89.6 79.3 .8 9.5 65.3 63.3 1.8 .2 24.4 166.2 217

2003 . . 95.1 83.2 .9 11.0 70.7 68.6 1.8 .2 24.4 190.6 235

2004 . . 100.7 87.3 1.0 12.4 76.9 74.7 2.0 .2 23.8 214.4 248

2005 . . 106.7 91.8 1.1 13.8 83.7 81.4 2.1 .3 22.9 237.3 256

2006 . . 112.7 96.3 1.2 15.2 91.1 88.7 2.2 .3 21.5 258.9 260

2007 . . 119.0 101.2 1.3 16.5 99.2 96.5 2.3 .4 19.8 278.6 261

2008 . . 125.1 106.0 1.4 17.6 107.7 104.8 2.4 .4 17.5 296.1 259

2009 . . 131.5 111.3 1.6 18.6 116.3 113.2 2.6 .5 15.3 311.4 255

2010 . . 138.0 116.7 1.8 19.5 125.1 121.9 2.7 .5 12.9 324.3 249

Low Cost:

2001 . . 84.6 75.6 .7 8.2 59.8 58.2 1.6 (4) 24.8 143.3 198

2002 . . 90.5 80.0 .8 9.8 63.5 61.6 1.8 .2 27.0 170.3 226

2003 . . 96.1 83.9 .9 11.3 67.8 65.7 1.8 .2 28.4 198.7 251

2004 . . 101.9 88.1 .9 12.9 72.4 70.2 1.9 .2 29.5 228.2 274

2005 . . 108.1 92.5 1.0 14.6 77.4 75.1 2.0 .3 30.7 258.9 295

2006 . . 114.4 96.9 1.1 16.4 82.8 80.4 2.2 .3 31.5 290.4 312

2007 . . 121.0 101.6 1.2 18.2 88.6 85.9 2.3 .4 32.4 322.8 328

2008 . . 127.7 106.3 1.3 20.1 94.4 91.6 2.4 .4 33.2 356.1 342

2009 . . 134.7 111.3 1.4 22.0 100.1 97.2 2.5 .4 34.5 390.6 356

2010 . . 141.9 116.4 1.5 24.1 105.9 102.8 2.6 .5 36.1 426.6 369

High Cost:

2001 . . 82.4 73.6 .8 8.0 62.2 60.6 1.6 (4) 20.2 138.7 190

2002 . . 85.9 76.1 .9 8.9 68.5 66.6 1.8 .2 17.3 156.0 202

2003 . . 92.7 81.3 1.0 10.4 76.0 73.9 1.9 .2 16.7 172.7 205

2004 . . 97.6 84.7 1.1 11.9 85.5 83.3 2.0 .3 12.1 184.8 202

2005 . . 102.3 88.7 1.2 12.4 96.8 94.4 2.1 .3 5.6 190.4 191

2006 . . 108.9 94.8 1.4 12.7 106.9 104.3 2.2 .3 2.1 192.5 178

2007 . . 114.9 100.6 1.5 12.8 117.4 114.6 2.4 .4 -2.4 190.0 164

2008 . . 120.3 106.2 1.7 12.4 128.6 125.5 2.5 .5 -8.2 181.8 148

2009 . . 125.6 112.0 1.9 11.7 140.3 137.1 2.7 .6 -14.7 167.0 130

2010 . . 130.7 118.1 2.2 10.5 152.5 149.0 2.9 .6 -21.8 145.3 110
Actuarial Estimates

38

At the beginning of calendar year 2000, the assets of the DI Trust Fund represented 171 percent of annual expenditures. During 2000, DI income

exceeded DI expenditures by $21.1 billion, contributing to an increase in the

trust fund ratio for the beginning of 2001 to about 195 percent. Under the

intermediate set of assumptions, total income is estimated to exceed expenditures in each year of the short-range projection period. However, the projected decline in the trust fund ratio from a peak of 261 percent in 2007 to

249 percent by the beginning of 2010 is an early warning of the eventual

shortfall in available DI Trust Fund assets needed to cover current expenditures—projected under the intermediate assumptions to occur after the end of

the short-range period.

Under the low cost assumptions, the trust fund ratio would increase rapidly

to 369 percent at the beginning of 2010. Under the high cost assumptions, the

assets of the DI Trust Fund would increase through 2006 and then decline

steadily thereafter, dipping below the level of 1 year’s expenditures near the

end of 2010.

Because DI assets were greater than 1 year’s expenditures at the beginning of

2001 and would remain above that level in 2002 and later the DI Trust Fund

satisfies the Trustees’ short-range test of financial adequacy under both the

intermediate and low cost assumptions. However, under the high cost

assumptions the DI Trust Fund fails to meet the short-range test of financial

adequacy, because assets fall below 1 year’s expenditures by the end of the

short-range period, as described above (see also figure IV.A1).

3. Operations of the Combined OASI and DI Trust Funds

The estimated operations and status of the OASI and DI Trust Funds, combined, during calendar years 2001-10 on the basis of the three alternatives,

are shown in table IV.A3, together with figures on actual experience in 1996-

2000. These amounts are the sums of the corresponding figures shown in

tables IV.A1 and IV.A2. Like the individual funds, the combined OASI and

DI Trust Funds meet the requirements of the short-range test of financial

adequacy (see also figure II.D1 on page 7).
39

Short-Range Estimates

Note: Totals do not necessarily equal the sums of rounded components.

Table IV.A3.—Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1996-2010 1

[Amounts in billions]

 1 A detailed description of the components of income and expenditures is presented in appendix A.

Calendar

year

Income Expenditures Assets

Total2

 2 “Total Income” column includes transfers made between the OASI and DI Trust Funds and the general

fund of the Treasury that are not included in the separate components of income shown. These transfers consist of payments for (1) the cost of noncontributory wage credits for military service before 1957, and (2) the

cost of benefits to certain uninsured persons who attained age 72 before 1968. In particular, a transfer was

made in December 2000 in the amount of $836 million from the DI Trust Fund to the general fund of the

Treasury. In 2001, an estimated $414 million will be transferred from the general fund of the Treasury to the

OASI Trust Fund for the cost of pre-1957 military service wage credits. Otherwise, these transfers are estimated to be less than $500,000 in each year of the projection period.

Net

contributions

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratio 3

 3 The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets at

the end of the prior year shown in the “Amount at end of year” column) as a percentage of expenditures during the year. See text beginning on page 34 concerning interpretation of these ratios.

Historical data:

1996 . . $424.5 $378.9 $6.8 $38.7 $353.6 $347.1 $3.0 $3.6 $70.9 $567.0 140

1997 . . 457.7 406.0 7.9 43.8 369.1 362.0 3.4 3.7 88.6 655.5 154

1998 . . 489.2 430.2 9.7 49.3 382.3 375.0 3.5 3.8 107.0 762.5 171

1999 . . 526.6 459.6 11.6 55.5 392.9 385.8 3.3 3.8 133.7 896.1 194

2000 . . 568.4 492.5 12.3 64.5 415.1 407.6 3.8 3.7 153.3 1,049.4 216

Intermediate:

2001 . . 604.3 518.2 12.9 72.7 438.9 431.8 3.9 3.2 165.4 1,214.9 239

2002 . . 642.3 546.1 14.0 82.1 459.9 452.0 4.1 3.8 182.3 1,397.2 264

2003 . . 681.3 573.3 15.2 92.8 483.7 475.7 4.2 3.8 197.6 1,594.8 289

2004 . . 722.4 601.4 16.5 104.5 510.2 502.0 4.3 3.8 212.2 1,807.0 313

2005 . . 767.7 632.3 17.7 117.7 539.6 531.2 4.5 3.9 228.2 2,035.2 335

2006 . . 814.4 663.3 19.0 132.1 571.5 563.1 4.6 3.7 242.9 2,278.1 356

2007 . . 864.7 696.9 20.5 147.3 606.8 598.0 4.8 4.0 257.9 2,536.1 375

2008 . . 916.3 730.5 22.2 163.6 645.9 636.9 4.9 4.1 270.4 2,806.5 393

2009 . . 971.5 766.8 24.2 180.5 690.0 680.7 5.1 4.2 281.4 3,087.9 407

2010 . . 1,028.8 804.2 26.4 198.1 737.8 728.1 5.3 4.4 291.0 3,378.9 419

Low Cost:

2001 . . 607.3 520.9 12.9 73.0 437.7 430.6 3.9 3.2 169.6 1,219.0 240

2002 . . 648.1 551.0 13.9 83.2 457.6 449.7 4.1 3.8 190.5 1,409.6 266

2003 . . 687.4 578.3 15.1 94.0 478.4 470.4 4.2 3.8 209.0 1,618.5 295

2004 . . 728.6 606.9 16.2 105.6 499.7 491.6 4.3 3.8 228.9 1,847.5 324

2005 . . 773.4 637.2 17.2 118.9 523.0 514.8 4.4 3.8 250.3 2,097.8 353

2006 . . 819.4 667.6 18.3 133.4 547.8 539.7 4.6 3.6 271.5 2,369.3 383

2007 . . 869.0 700.3 19.5 149.2 574.9 566.4 4.7 3.8 294.1 2,663.4 412

2008 . . 919.8 732.4 20.9 166.5 604.9 596.2 4.8 3.9 314.9 2,978.4 440

2009 . . 974.4 766.5 22.6 185.4 639.0 630.1 5.0 3.9 335.4 3,313.8 466

2010 . . 1,031.7 801.7 24.4 205.6 675.9 666.8 5.1 4.0 355.8 3,669.6 490

High Cost:

2001 . . 592.4 507.2 12.9 71.8 440.5 433.4 3.9 3.2 151.9 1,201.4 238

2002 . . 617.1 524.1 14.1 78.9 464.9 457.0 4.2 3.8 152.2 1,353.6 258

2003 . . 668.4 560.4 15.4 92.6 493.6 485.6 4.2 3.8 174.7 1,528.3 274

2004 . . 708.7 583.3 17.1 108.3 533.1 524.8 4.4 3.9 175.6 1,703.9 287

2005 . . 749.1 611.2 18.9 119.0 581.5 572.9 4.5 4.1 167.5 1,871.5 293

2006 . . 804.9 653.1 20.5 131.3 621.2 612.4 4.8 4.1 183.7 2,055.2 301

2007 . . 859.0 693.0 22.2 143.8 663.5 654.1 5.0 4.4 195.6 2,250.7 310

2008 . . 911.7 731.4 24.2 156.2 711.1 701.4 5.2 4.6 200.6 2,451.4 317

2009 . . 966.6 771.3 26.6 168.7 766.1 755.9 5.4 4.8 200.5 2,651.9 320

2010 . . 1,023.8 813.3 29.3 181.2 825.6 815.0 5.6 5.0 198.2 2,850.1 321
Actuarial Estimates

40

4. Factors Underlying Changes in 10 Year Trust Fund Ratio Estimates

From the 2000 Report

The factors underlying the changes in the intermediate estimates for the

OASI, DI and the combined funds from last year’s annual report to this

report are analyzed in table IV.A4. In the 2000 Annual Report, the trust fund

ratio for OASI was estimated to reach 434 percent at the beginning of

2009—the tenth projection year from that report. The corresponding ratio

shown in this report for the tenth projection year (2010) is 453 percent. If

there had been no changes to the projections, the estimated ratio at the beginning of 2010 would have been 15 percentage points higher than at the beginning of 2009. There were changes, however, to reflect the latest actual data,

as well as adjustments to the assumptions for future years. The cumulative

net effects of changes in economic assumptions (including re-estimates of

future tax revenue consistent with recent revisions to historical data) resulted

in an increase in the trust fund ratio of 1 percentage point by the beginning of

2010. Legislation enacted since last year’s report affecting the earnings test,

as described earlier, resulted in a decrease in the trust fund ratio of 8 percentage points. In addition, the tenth year trust fund ratio showed a small net

change due to the effects of (1) revised population projections, (2) revised

assumptions regarding future average benefit levels, projected numbers of

old-age and survivor beneficiaries, and (3) income from taxation of benefits.

Corresponding estimates of the factors underlying the changes in the financial projections for the DI Trust Fund, and for the OASI and DI Trust Funds

combined, are also shown in table IV.A4. The key factor affecting the new

trust fund ratio estimates for the DI Trust Fund was the decrease in the projected number of beneficiaries, as described earlier.

Note: Totals do not necessarily equal the sums of rounded components.

Table IV.A4.—Reasons for Change in Trust Fund Ratios at the Beginning 

of the Tenth Year of Projection

[In percent]

Item

OASI Trust

Fund

DI Trust

Fund

OASI and DI

Trust Funds,

combined

Trust fund ratio shown in last year’s report for

calendar year 2009 . . . . . . . . . . . . . . . . . . . . . . . . 434 223 397

Change in trust fund ratio due to changes in: 

Valuation period . . . . . . . . . . . . . . . . . . . . . . . . 15 -10 10

Demographic assumptions . . . . . . . . . . . . . . . . 4 (1)

 1 Between -0.5 and 0.5 percent.

3

Economic assumptions . . . . . . . . . . . . . . . . . . . 1 7 2

Programmatic assumptions . . . . . . . . . . . . . . . . 7 29 13

Legislation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8 (1) -6

Total change in trust fund ratio . . . . . . . . . . . . . . . 19 26 22

Trust fund ratio shown in this report for calendar 

year 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453 249 419
41

Long-Range Estimates

B. LONG-RANGE ESTIMATES

Three financial measures are useful in assessing the actuarial status of the

Social Security trust funds under the financing approach specified in current

law: (1) annual income and cost rates, and balances, (2) trust fund ratios, and

(3) actuarial balance. The first long-range estimates presented are the series

of projected annual balances (that is, the differences between the projected

annual income rates and annual cost rates). In assessing the financial condition of the program, particular attention should be paid to the level of the

annual balances at the end of the long-range period and the time at which the

annual balances may change from positive to negative values. The next measure to be discussed is the pattern of projected trust fund ratios. The trust

fund ratio represents the proportion of a year’s projected outgo that can be

paid with the funds available at the beginning of the year. Particular attention

should be paid to the amount and year of maximum trust fund ratio, to the

year of exhaustion of the funds, and to stability of the trust fund ratio in cases

where the ratio remains positive at the end of the long-range period. The

final measure discussed in this section is the actuarial balance, which summarizes the total income and expenditures over the valuation period and indicates whether projected income will be adequate. This section also includes a

comparison of workers to beneficiaries, the long-range test of close actuarial

balance and the reasons for change in the actuarial balance from the last

report.

If the 75-year actuarial balance is zero (or positive) then the trust fund ratio

at the end of the period, by definition, will be at 100 percent (or greater) and

financing for the program is considered to be adequate for the 75-year

period. Whether or not financial adequacy is stable in the sense that it is

likely to continue for subsequent 75-year periods in succeeding Trustees

Reports is also important when considering the actuarial status of the program. One indication of this stability is the behavior of the trust fund ratio at

the end of the projection period. If projected trust fund ratios for the last several years of the long-range period are constant or rising, then it is likely that

subsequent Trustees Reports will also show projections of financial adequacy (assuming no changes in economic and demographic assumptions).

1. Annual Income Rates, Cost Rates, and Balances

Basic to the consideration of the long-range actuarial status of the trust funds

are the concepts of income rate and cost rate, each of which is expressed as a

percentage of taxable payroll. The annual income rate is the ratio of income

from revenues (payroll tax contributions and income from the taxation of
Actuarial Estimates

42

benefits) to the OASDI taxable payroll for the year. The OASDI taxable payroll consists of the total earnings which are subject to OASDI taxes, with

some relatively small adjustments.1 Because the taxable payroll reflects

these adjustments, the annual income rate can be defined to be the sum of the

OASDI combined employee-employer contribution rate (or the payroll-tax

rate) scheduled in the law and the rate of income from taxation of benefits

(which is, in turn, expressed as a percentage of taxable payroll). As such, it

excludes reimbursements from the general fund of the Treasury for the costs

associated with special monthly payments to certain uninsured persons who

attained age 72 before 1968 and who have fewer than 3 quarters of coverage,

and net investment income.

The annual cost rate is the ratio of the cost (or outgo, expenditures, or disbursements) of the program to the taxable payroll for the year. In this context, the outgo is defined to include benefit payments, special monthly

payments to certain uninsured persons who have 3 or more quarters of coverage (and whose payments are therefore not reimbursable from the general

fund of the Treasury), administrative expenses, net transfers from the trust

funds to the Railroad Retirement program under the financial-interchange

provisions, and payments for vocational rehabilitation services for disabled

beneficiaries. For any year, the income rate minus the cost rate is referred to

as the balance for the year. (In this context, the term balance does not represent the assets of the trust funds, which are sometimes referred to as the balance in the trust funds.)

Table IV.B1 presents a comparison of the estimated annual income rates and

cost rates by trust fund and alternative. Detailed long-range projections of

trust fund operations, in nominal dollar amounts, are shown in appendix

VI.E.3 beginning on page 153.

The projections for OASI under the intermediate assumptions show the

income rate increasing slowly and steadily due to the combination of the flat

payroll tax rate and the gradually increasing effect of the taxation of benefits.

The pattern followed by the cost rate is much different. It is projected to

remain fairly stable for the next several years. However, from about 2010 to

2030 the cost rate increases rapidly as the baby-boom generation reaches

retirement age. After 2030 the cost rate rises less rapidly through 2037 and

then declines slightly for the next 9 years as the baby-boom generation ages

 1 Adjustments are made to include, after 1982, deemed wage credits based on military service, and to reflect

the lower effective tax rates (as compared to the combined employee-employer rate) which apply to multiple-employer “excess wages,” and which did apply, before 1984, to net earnings from self-employment and,

before 1988, to income from tips.
43

Long-Range Estimates

and begins to diminish and the relatively small birth cohorts of the late 1970s

reach retirement age. Thereafter, the cost rate rises steadily, but slowly,

reflecting projected reductions in death rates and continued relatively low

birth rates. The cost rate during the third 25-year subperiod (2051-2075) rises

to almost 17 percent of taxable payroll under the intermediate assumptions.

The income rate under these assumptions during the third 25-year subperiod

rises to about 11.5 percent of taxable payroll.

Projected income rates under the low cost and high cost sets of assumptions

are very similar to those projected for alternative II as they are largely a

reflection of the tax rates specified in the law. OASI cost rates for alternatives I and III differ significantly from those projected for alternative II, but

follow generally similar patterns. For the low cost alternative I, the cost rate

declines somewhat for the first 7 years, and then rises, reaching the current

level around 2012 and a peak of 13.26 percent of payroll for 2033. The cost

rate then declines gradually, reaching a level of 12.08 percent of payroll for

2075. For the high cost alternative III, the cost rate rises generally throughout

the 75-year period. It rises at a relatively fast pace over the next 5 years due

to the two assumed economic recessions, and between 2010 and 2030

because of the aging of the baby-boom generation. During the third 25-year

subperiod, the projected cost rate continues rising and reaches 24.33 percent

of payroll for 2075.

The projected pattern of the OASI annual balance is important in the analysis

of the financial condition of the program. Under the alternative II assumptions the annual balance is positive for 16 years (through 2016) and is negative thereafter. This annual deficit rises rapidly, reaching over 2 percent of

taxable payroll by 2023, and continues rising thereafter, to a level of 5.33

percent of taxable payroll for 2075.

Under the low cost assumptions the projected OASI annual balance is positive for 19 years (through 2019) and thereafter is negative. The deficit under

alternative I rises to a peak of 2.09 percent of taxable payroll for 2033, but

declines thereafter, as the effect of the baby-boom generation diminishes and

the assumed higher fertility rates increase the size of the work force. The deficit under alternative I declines to 0.86 percent of payroll for 2075. Under the

high cost assumptions, however, the OASI balance is projected to be positive

for only 13 years (through 2013) and to be negative thereafter, with a deficit

of 2.47 percent for 2020, 7.83 percent for 2050, and 12.43 percent of payroll

for 2075.
Actuarial Estimates

44

Table IV.B1.—Estimated Annual Income Rates and Cost Rates, 

Calendar Years 1990-2075

[As a percentage of taxable payroll]

OASI DI Combined

Calendar 

year

Income

rate 1 Cost rate Balance

Income

rate 1 Cost rate Balance

Income

rate 1 Cost rate Balance

Historical data:

1990 . . . . . 11.32 9.66 1.66 1.17 1.09 0.09 12.49 10.74 1.75

1991 . . . . . 11.44 10.15 1.29 1.21 1.18 .03 12.65 11.33 1.32

1992 . . . . . 11.43 10.27 1.16 1.21 1.27 -.06 12.64 11.54 1.10

1993 . . . . . 11.40 10.37 1.03 1.21 1.35 -.14 12.61 11.73 0.88

1994 . . . . . 10.70 10.22 .48 1.89 1.40 .49 12.59 11.62 0.97

1995 . . . . . 10.70 10.22 .48 1.88 1.44 .44 12.59 11.67 0.92

1996 . . . . . 10.73 10.06 .68 1.89 1.48 .41 12.62 11.53 1.09

1997 . . . . . 10.93 9.83 1.09 1.71 1.44 .28 12.64 11.27 1.37

1998 . . . . . 10.96 9.49 1.47 1.72 1.43 .29 12.68 10.91 1.77

1999 . . . . . 10.99 9.13 1.86 1.72 1.43 .29 12.71 10.56 2.15

2000 . . . . . 10.89 9.04 1.86 1.80 1.43 .37 12.69 10.47 2.22

Intermediate:

2001 . . . . . 10.90 9.04 1.86 1.82 1.45 .37 12.72 10.50 2.22

2002 . . . . . 10.90 8.94 1.96 1.82 1.48 .34 12.72 10.42 2.30

2003 . . . . . 10.91 8.91 2.00 1.82 1.53 .29 12.73 10.44 2.29

2004 . . . . . 10.92 8.91 2.01 1.82 1.58 .24 12.74 10.49 2.25

2005 . . . . . 10.93 8.92 2.00 1.82 1.64 .18 12.75 10.56 2.19

2006 . . . . . 10.93 8.95 1.98 1.82 1.70 .12 12.75 10.65 2.11

2007 . . . . . 10.94 9.02 1.92 1.82 1.76 .06 12.76 10.78 1.99

2008 . . . . . 10.95 9.11 1.84 1.82 1.82 (2) 12.78 10.93 1.84

2009 . . . . . 10.96 9.25 1.71 1.83 1.87 -.05 12.79 11.13 1.66

2010 . . . . . 10.98 9.42 1.56 1.83 1.92 -.10 12.81 11.34 1.46

2015 . . . . . 11.02 10.69 .33 1.83 2.11 -.28 12.85 12.80 .05

2020 . . . . . 11.08 12.39 -1.32 1.83 2.24 -.41 12.91 14.63 -1.72

2025 . . . . . 11.17 13.82 -2.66 1.84 2.38 -.54 13.00 16.20 -3.20

2030 . . . . . 11.25 14.91 -3.67 1.84 2.36 -.53 13.08 17.28 -4.20

2035 . . . . . 11.30 15.42 -4.12 1.84 2.32 -.49 13.13 17.74 -4.61

2040 . . . . . 11.32 15.37 -4.05 1.84 2.34 -.50 13.16 17.71 -4.55

2045 . . . . . 11.33 15.24 -3.90 1.84 2.44 -.59 13.18 17.67 -4.50

2050 . . . . . 11.35 15.29 -3.94 1.84 2.49 -.65 13.20 17.79 -4.59

2055 . . . . . 11.38 15.56 -4.18 1.85 2.53 -.69 13.23 18.10 -4.87

2060 . . . . . 11.41 15.94 -4.52 1.85 2.52 -.68 13.26 18.46 -5.20

2065 . . . . . 11.44 16.26 -4.82 1.85 2.53 -.68 13.29 18.79 -5.50

2070 . . . . . 11.47 16.55 -5.08 1.85 2.54 -.70 13.31 19.09 -5.78

2075 . . . . . 11.49 16.82 -5.33 1.85 2.57 -.72 13.34 19.39 -6.05

Low Cost:

2001 . . . . . 10.90 8.99 1.91 1.82 1.42 .40 12.72 10.41 2.30

2002 . . . . . 10.90 8.85 2.05 1.82 1.43 .39 12.71 10.27 2.44

2003 . . . . . 10.90 8.78 2.12 1.82 1.45 .37 12.72 10.23 2.49

2004 . . . . . 10.91 8.70 2.21 1.82 1.47 .34 12.73 10.18 2.55

2005 . . . . . 10.92 8.65 2.26 1.82 1.50 .31 12.73 10.16 2.58

2006 . . . . . 10.92 8.61 2.31 1.82 1.53 .29 12.74 10.14 2.60

2007 . . . . . 10.92 8.60 2.33 1.82 1.57 .25 12.75 10.16 2.58

2008 . . . . . 10.93 8.62 2.31 1.82 1.59 .23 12.75 10.21 2.54

2009 . . . . . 10.94 8.69 2.25 1.82 1.62 .21 12.76 10.31 2.45

2010 . . . . . 10.95 8.79 2.16 1.82 1.63 .19 12.78 10.43 2.35

2015 . . . . . 10.98 9.83 1.15 1.82 1.67 .15 12.81 11.50 1.30

2020 . . . . . 11.02 11.28 -.26 1.82 1.72 .11 12.85 13.00 -.15

2025 . . . . . 11.09 12.39 -1.29 1.83 1.79 .04 12.92 14.17 -1.25

2030 . . . . . 11.15 13.10 -1.95 1.83 1.75 .07 12.98 14.85 -1.87

2035 . . . . . 11.18 13.22 -2.04 1.83 1.71 .12 13.01 14.93 -1.92

2040 . . . . . 11.18 12.85 -1.66 1.83 1.70 .13 13.01 14.55 -1.54

2045 . . . . . 11.18 12.45 -1.27 1.83 1.75 .08 13.01 14.20 -1.18

2050 . . . . . 11.19 12.25 -1.06 1.83 1.76 .07 13.02 14.02 -1.00

2055 . . . . . 11.20 12.24 -1.04 1.83 1.77 .06 13.03 14.00 -.97

2060 . . . . . 11.21 12.26 -1.05 1.83 1.74 .09 13.05 14.00 -.96

2065 . . . . . 11.22 12.20 -.98 1.83 1.74 .09 13.05 13.94 -.89

2070 . . . . . 11.22 12.12 -.90 1.83 1.75 .08 13.06 13.87 -.81

2075 . . . . . 11.23 12.08 -.86 1.83 1.77 .07 13.06 13.85 -.79
45

Long-Range Estimates

Notes:

1. The income rate excludes interest income and certain transfers from the general fund of the Treasury.

2. Totals do not necessarily equal the sums of rounded components.

Under the intermediate alternative II assumptions, the cost rate for DI

increases slowly over the long-range period from 1.45 percent of taxable

payroll in 2001 to 2.57 in 2075. The income rate increases only very slightly

from 1.82 percent of taxable payroll in 2001 to 1.85 in 2075. The annual balance turns negative in 2009, and the annual deficit reaches 0.72 in 2075.

Under the low cost alternative I assumptions, the DI cost rate increases much

less, reaching 1.77 in 2075, with a positive annual balance throughout the

period. For the high cost alternative III assumptions, DI cost rises much

more, reaching 3.60 for 2075, with an annual deficit beginning in 2005 and

reaching 1.73 percent for 2075.

Also of interest are the annual income rate, cost rate, and balance for the

combined OASDI program. These rates are shown in table IV.B1 and are discussed in section II.D.

Figure IV.B1 shows in graphical form the patterns of the OASI and DI

annual income rates and cost rates. (The combined OASI and DI rates are

High Cost:

2001 . . . . . 10.91 9.25 1.66 1.82 1.52 0.30 12.73 10.77 1.95

2002 . . . . . 10.91 9.35 1.56 1.82 1.62 .20 12.73 10.97 1.76

2003 . . . . . 10.92 9.22 1.70 1.82 1.68 .14 12.74 10.89 1.85

2004 . . . . . 10.94 9.49 1.45 1.82 1.81 .01 12.76 11.31 1.45

2005 . . . . . 10.96 9.80 1.16 1.82 1.96 -.13 12.78 11.76 1.03

2006 . . . . . 10.96 9.73 1.23 1.83 2.02 -.20 12.79 11.75 1.03

2007 . . . . . 10.97 9.75 1.22 1.83 2.10 -.27 12.80 11.85 .95

2008 . . . . . 10.98 9.85 1.13 1.83 2.17 -.34 12.81 12.02 .79

2009 . . . . . 10.99 10.03 .96 1.83 2.25 -.42 12.83 12.28 .55

2010 . . . . . 11.01 10.23 .78 1.83 2.32 -.48 12.84 12.55 .30

2015 . . . . . 11.07 11.67 -.61 1.84 2.63 -.80 12.90 14.31 -1.40

2020 . . . . . 11.14 13.61 -2.47 1.84 2.81 -.97 12.98 16.41 -3.43

2025 . . . . . 11.25 15.39 -4.14 1.85 3.03 -1.18 13.10 18.42 -5.32

2030 . . . . . 11.35 16.96 -5.60 1.85 3.05 -1.20 13.20 20.00 -6.80

2035 . . . . . 11.44 18.01 -6.57 1.85 3.02 -1.17 13.29 21.03 -7.74

2040 . . . . . 11.49 18.49 -7.01 1.85 3.07 -1.22 13.34 21.57 -8.23

2045 . . . . . 11.53 18.85 -7.32 1.86 3.25 -1.39 13.39 22.10 -8.71

2050 . . . . . 11.58 19.41 -7.83 1.86 3.38 -1.52 13.44 22.79 -9.35

2055 . . . . . 11.64 20.23 -8.59 1.86 3.48 -1.62 13.50 23.71 -10.21

2060 . . . . . 11.70 21.25 -9.55 1.87 3.51 -1.64 13.57 24.76 -11.19

2065 . . . . . 11.77 22.31 -10.54 1.87 3.54 -1.67 13.64 25.85 -12.21

2070 . . . . . 11.84 23.36 -11.52 1.87 3.57 -1.70 13.71 26.92 -13.22

2075 . . . . . 11.90 24.33 -12.43 1.87 3.60 -1.73 13.77 27.93 -14.16

 1 Income rates for DI in 2000 and for OASI in 2001 are modified to include adjustments to the lump-sum

payments received in 1983 from the general fund of the Treasury for the cost of noncontributory wage credits

for military service in 1940-56.

 2 Between -0.005 and 0.005 percent of taxable payroll.

Table IV.B1.—Estimated Annual Income Rates and Cost Rates, 

Calendar Years 1990-2075 (Cont.)

[As a percentage of taxable payroll]

OASI DI Combined

Calendar 

year

Income

rate 1 Cost rate Balance

Income

rate 1 Cost rate Balance

Income

rate 1 Cost rate Balance
Actuarial Estimates

46

shown in figure II.D2 on page 9.) The income rates shown here are only for

alternative II in order to simplify the graphical presentation and because, as

shown in table IV.B1, the variation in the income rates by alternative is very

small. Income rates increase generally, but at a slow rate for each of the alternatives over the long-range period. Both increases in the income rate and

variation among the alternatives result from the relatively small component

of income from taxation of benefits. Increases in income from taxation of

benefits reflect increases in the total amount of benefits paid and the fact that

an increasing share of individual benefits will be subject to taxation, because

benefit taxation threshold amounts are not indexed.

The patterns of the annual balances for OASI and DI are indicated in figure

IV.B1. For each alternative, the magnitude of each of the positive balances in

the early years, as a percent of taxable payroll, is represented by the distance

between the appropriate cost-rate curve and the income-rate curve above it.

The magnitude of each of the deficits in subsequent years is represented by

the distance between the appropriate cost-rate curve and the income-rate

curve below it.

In the future, the cost of OASI, DI and the combined OASDI program as a

percent of taxable payroll will not necessarily be within the range encompassed by alternatives I and III. Nonetheless, because alternatives I and III

define a reasonably wide range of economic and demographic conditions, the

resulting estimates delineate a reasonable range for consideration of potential

future program costs.
47

Long-Range Estimates

2. Comparison of Workers to Beneficiaries

The primary reason that the estimated OASDI cost rate increases rapidly

after 2010 is that the number of beneficiaries is projected to increase more

rapidly than the number of covered workers. This occurs because the relatively large number of persons born during the period of high fertility rates

from the end of World War II through the mid-1960s will reach retirement

age, and begin to receive benefits, while the relatively small number of persons born during the subsequent period of low fertility rates will comprise

the labor force. A comparison of the numbers of covered workers and beneficiaries is shown in table IV.B2.

 Figure IV.B1.—Long-Range OASI and DI Annual Income Rates and Cost Rates

[As a percentage of taxable payroll]

0%

5%

10%

15%

20%

25%

1985 1995 2005 2015 2025 2035 2045 2055 2065 2075

Calendar year

Income rates

OASI cost rates

DI cost rates

Historical Estimated

OASI

DI III

II

I

III

II

I
Actuarial Estimates

48

Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2075

Covered

workers1

(in thousands)

Beneficiaries2 (in thousands)

Covered

workers per

OASDI

beneficiary

Beneficiaries

per 100

covered

Calendar year OASI DI OASDI workers

Historical data:

1945. . . . . . . . 46,390 1,106 — 1,106 41.9 2

1950. . . . . . . . 48,280 2,930 — 2,930 16.5 6

1955. . . . . . . . 65,200 7,563 — 7,563 8.6 12

1960. . . . . . . . 72,530 13,740 522 14,262 5.1 20

1965. . . . . . . . 80,680 18,509 1,648 20,157 4.0 25

1970. . . . . . . . 93,090 22,618 2,568 25,186 3.7 27

1975. . . . . . . . 100,200 26,998 4,125 31,123 3.2 31

1980. . . . . . . . 113,649 30,384 4,734 35,118 3.2 31

1985. . . . . . . . 120,565 32,776 3,874 36,650 3.3 30

1990. . . . . . . . 133,672 35,266 4,204 39,470 3.4 30

1991. . . . . . . . 132,969 35,785 4,388 40,172 3.3 30

1992. . . . . . . . 133,890 36,314 4,716 41,029 3.3 31

1993. . . . . . . . 136,117 36,758 5,083 41,840 3.3 31

1994. . . . . . . . 138,192 37,082 5,435 42,516 3.3 31

1995. . . . . . . . 141,027 37,376 5,731 43,108 3.3 31

1996. . . . . . . . 143,505 37,521 5,977 43,498 3.3 30

1997. . . . . . . . 146,305 37,705 6,087 43,793 3.3 30

1998. . . . . . . . 149,096 37,826 6,250 44,076 3.4 30

1999. . . . . . . . 151,186 37,934 6,433 44,367 3.4 29

2000. . . . . . . . 152,903 38,560 6,606 45,166 3.4 30

Intermediate:

2005. . . . . . . . 158,653 40,280 7,756 48,036 3.3 30

2010. . . . . . . . 164,125 43,630 9,130 52,760 3.1 32

2015. . . . . . . . 168,461 49,842 10,226 60,068 2.8 36

2020. . . . . . . . 171,234 57,350 11,123 68,474 2.5 40

2025. . . . . . . . 173,314 64,519 11,895 76,415 2.3 44

2030. . . . . . . . 175,562 70,438 12,057 82,495 2.1 47

2035. . . . . . . . 178,416 74,182 12,138 86,321 2.1 48

2040. . . . . . . . 181,385 75,603 12,433 88,036 2.1 49

2045. . . . . . . . 184,071 76,623 13,080 89,702 2.1 49

2050. . . . . . . . 186,389 78,210 13,528 91,738 2.0 49

2055. . . . . . . . 188,507 80,706 13,891 94,596 2.0 50

2060. . . . . . . . 190,555 83,581 14,024 97,604 2.0 51

2065. . . . . . . . 192,595 86,293 14,215 100,508 1.9 52

2070. . . . . . . . 194,551 88,789 14,463 103,252 1.9 53

2075. . . . . . . . 196,377 91,168 14,757 105,925 1.9 54

Low Cost:

2005. . . . . . . . 160,444 40,195 7,363 47,558 3.4 30

2010. . . . . . . . 167,454 43,334 8,213 51,547 3.2 31

2015. . . . . . . . 172,934 49,253 8,759 58,012 3.0 34

2020. . . . . . . . 176,716 56,387 9,179 65,566 2.7 37

2025. . . . . . . . 180,036 63,089 9,650 72,738 2.5 40

2030. . . . . . . . 183,989 68,303 9,717 78,020 2.4 42

2035. . . . . . . . 189,165 71,233 9,785 81,018 2.3 43

2040. . . . . . . . 195,085 71,908 10,063 81,971 2.4 42

2045. . . . . . . . 201,290 72,447 10,626 83,073 2.4 41

2050. . . . . . . . 207,446 73,749 11,057 84,806 2.4 41

2055. . . . . . . . 213,805 76,083 11,456 87,539 2.4 41

2060. . . . . . . . 220,579 78,748 11,726 90,474 2.4 41

2065. . . . . . . . 227,831 81,173 12,096 93,269 2.4 41

2070. . . . . . . . 235,318 83,494 12,573 96,067 2.4 41

2075. . . . . . . . 242,847 86,046 13,112 99,159 2.4 41
49

Long-Range Estimates

Notes: 

1. The number of beneficiaries does not include certain uninsured persons, most of whom both attained age

72 before 1968 and have fewer than 3 quarters of coverage, in which cases the costs are reimbursed by the

general fund of the Treasury. The number of such uninsured persons was 103 as of June 30, 2000. Totals do

not necessarily equal the sums of rounded components.

2. Historical covered worker data are subject to revision.

Table IV.B2 shows that the number of covered workers per beneficiary,

which was about 3.4 in 2000, is estimated to decline in the future. Based on

the low cost alternative I, for which high fertility rates and small reductions

in death rates are assumed, the ratio declines to 2.3 by 2031, and then rises

back to a level of 2.4 by 2038. Based on the high cost alternative III, for

which low fertility rates and large reductions in death rates are assumed, the

decline is much greater, reaching 1.8 by 2035, and 1.4 workers per beneficiary by 2069. Based on the intermediate alternative II, the ratio declines to

2.1 by 2029, and 1.9 workers per beneficiary by 2061.

The impact of the demographic shifts under the three alternatives on the

OASDI cost rates is better understood by considering the projected number

of beneficiaries per 100 workers. As compared to the 2000 level of 30 beneficiaries per 100 covered workers, this ratio is estimated to rise significantly

by 2075 to 41 under alternative I, 54 under alternative II, and 73 under alternative III. The significance of these numbers can be seen by comparing figure IV.B1 to figure IV.B2.

High Cost:

2005. . . . . . . . 154,112 40,350 8,399 48,748 3.2 32

2010. . . . . . . . 160,949 43,885 10,338 54,223 3.0 34

2015. . . . . . . . 164,611 50,430 11,729 62,159 2.6 38

2020. . . . . . . . 166,572 58,332 13,105 71,437 2.3 43

2025. . . . . . . . 167,663 66,048 14,170 80,219 2.1 48

2030. . . . . . . . 168,427 72,821 14,411 87,232 1.9 52

2035. . . . . . . . 169,269 77,598 14,488 92,086 1.8 54

2040. . . . . . . . 169,693 80,052 14,780 94,832 1.8 56

2045. . . . . . . . 169,363 81,890 15,493 97,383 1.7 57

2050. . . . . . . . 168,409 84,118 15,929 100,047 1.7 59

2055. . . . . . . . 166,984 87,105 16,209 103,314 1.6 62

2060. . . . . . . . 165,192 90,474 16,133 106,608 1.5 65

2065. . . . . . . . 163,102 93,709 16,047 109,755 1.5 67

2070. . . . . . . . 160,789 96,606 15,933 112,539 1.4 70

2075. . . . . . . . 158,357 99,028 15,849 114,877 1.4 73

 1 Workers who are paid at some time during the year for employment on which OASDI taxes are due. 2 Beneficiaries with monthly benefits in current-payment status as of June 30.

Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2075 (Cont.)

Covered

workers1

(in thousands)

Beneficiaries2 (in thousands)

Covered

workers per

OASDI

beneficiary

Beneficiaries

per 100

covered

Calendar year OASI DI OASDI workers
Actuarial Estimates

50

For each alternative, the shape of the curve in figure IV.B2, which shows

beneficiaries per 100 covered workers, is strikingly similar to that of the corresponding cost-rate curve in figure IV.B1, thereby emphasizing the extent to

which the cost of the OASDI program as a percentage of taxable payroll is

determined by the age distribution of the population. Because the cost rate is

basically the product of the number of beneficiaries and their average benefit, divided by the product of the number of covered workers and their average taxable earnings (and because average benefits rise at about the same

rate as average earnings), it is to be expected that the pattern of the annual

cost rates is similar to that of the annual ratios of beneficiaries to workers. A

graphical presentation of covered workers per beneficiary is shown in figure

II.D3 on page 10 of the Overview.

3. Trust Fund Ratios

Trust fund ratios are useful indicators of the adequacy of the financial

resources of the Social Security program at any point in time. For any year in

which the projected trust fund ratio is positive (i.e., the trust fund holds

assets at the beginning of the year), but is not positive for the following year,

the trust fund is projected to become exhausted during the year. Under

present law, the OASI and DI Trust Funds do not currently have the authority

to borrow. Therefore, exhaustion of the assets in either fund during a year,

 Figure IV.B2.—Number of OASDI Beneficiaries Per 100 Covered Workers

0

10

20

30

40

50

60

70

80

90

100

1985 1995 2005 2015 2025 2035 2045 2055 2065 2075

Calendar year

Historical Estimated

III

II

I
51

Long-Range Estimates

would mean there are no longer sufficient funds to cover the full amount of

benefits payable under present law.

The trust fund ratio also serves an additional important purpose in assessing

the actuarial status of the program. When the financing is adequate for the

timely payment of full benefits throughout the long-range period, the stability of the trust fund ratio toward the end of the period indicates the likelihood

that this projected adequacy will continue for subsequent Trustees Reports. If

the trust fund ratio toward the end of the period is level (or increasing) then

projected adequacy for the long-range period is likely to continue for subsequent reports.

Table IV.B3 shows, by alternative, the estimated trust fund ratios (without

regard to advance tax transfers that would be effected after the end of the 10-

year, short-range period) for the separate and combined OASI and DI Trust

Funds. Also shown in this table is the first year in which a fund is estimated

to be exhausted, reflecting the effect of the provision for advance tax transfers. The patterns of the OASI and DI trust fund ratios, over the 75-year

period, are shown graphically in figure IV.B3 for all three sets of assumptions. A graphical presentation of the combined OASDI ratios is shown in

figure II.D4 on page 11.

Based on alternative II, the OASI trust fund ratio rises steadily from 246 percent at the beginning of 2001, reaching a peak of 481 percent at the beginning of 2014. This increase in the OASI trust fund ratio results from the fact

that the annual income rate (which excludes interest) exceeds annual outgo

for several years (see table IV.B1). Thereafter, the OASI trust fund ratio

declines steadily, with the OASI Trust Fund becoming exhausted in 2040.

The DI trust fund ratio follows a pattern that is similar but unfolds more rapidly. The DI trust fund ratio is estimated to rise from 195 percent at the

beginning of 2001 to a peak of 261 percent in 2007, and to decline thereafter

until becoming exhausted in 2026.

The trust fund ratio for the combined OASI and DI Trust Funds rises from

239 percent for 2001 to a peak of 436 percent at the beginning of 2014.

Thereafter, the ratio declines, with the combined funds becoming exhausted

in 2038. Based on the intermediate estimates in last year’s report, the peak

fund ratio for the combined funds was estimated to be 421 percent in 2013

and the year of exhaustion was estimated to be 2037.

The trust fund ratio for the combined OASDI program first declines in 2015,

1 year before annual expenditures begin to exceed noninterest income. This

occurs because the increases in trust fund assets during 2014 and 2015,
Actuarial Estimates

52

reflecting interest income and small excesses of noninterest income over

cost, occur at a slower rate than does the annual cost of the program.

After 2014 the dollar amount of assets is projected to continue to rise through

the beginning of 2025 because interest income more than offsets the shortfall

in noninterest income. Revenue from the general fund of the Treasury will be

needed due to the cash-flow shortfall in increasingly large amounts, beginning in 2016, to redeem the trust funds’ special public-debt obligations. This

will differ from the experience of recent years when the trust funds have

been net lenders to the general fund. The change in the cash flow between

the trust funds and the general fund is expected to have important public policy and economic implications that go well beyond the operation of the

OASDI program itself. Discussion of these issues is outside the scope of this

report.

Based on the low cost alternative I assumptions, the trust fund ratio for the

DI program increases throughout the long-range projection period, reaching

the extremely high level of 1,592 percent for 2076. At the end of the longrange period, the DI trust fund ratio is rising by 25 percentage points per

year. Thus, subsequent reports are likely to contain projections of adequate

long-range financing of the DI program. For the OASI program, the trust

fund ratio rises to a peak of 593 percent for 2017, dropping thereafter to a

level of 381 percent by 2076. At the end of the period the OASI trust fund

ratio is declining by 1 percentage point per year. For the combined OASDI

program, the trust fund ratio follows a pattern similar to that for OASI, peaking at 577 percent for 2018, and then falling to 485 percent for 2041. However, after 2041 the combined OASI and DI trust fund ratio rises slowly,

reaching 536 percent for 2076, with an annual increase at a rate of 3 percentage points. Thus, due to the size of the trust fund ratios and their near stability, subsequent Trustees Reports are likely to contain projections of adequate

long-range financing of the OASI and combined OASI and DI programs. A

stable trust fund ratio at the end of the valuation period indicates that the

actuarial balance for Trustees Reports in subsequent years can be expected to

remain about the same as long as assumptions are realized.

In contrast, under the high cost alternative III, the OASI trust fund ratio is

estimated to peak at 374 percent for 2012, thereafter declining to fund

exhaustion by the end of 2030. The DI trust fund ratio is estimated to peak at

205 percent for 2003, thereafter declining to fund exhaustion by the end of

2014. The combined OASDI trust fund ratio is estimated to rise to a peak of

321 percent for 2010, declining thereafter to fund exhaustion by the end of

2027.
53

Long-Range Estimates

Thus, because of the high ultimate cost rates that are projected under all but

the low cost assumptions, it is likely that income will eventually need to be

increased and/or program costs will need to be reduced in order to prevent

the trust funds from becoming exhausted.

Even under the high cost assumptions, however, the combined OASI and DI

funds on hand plus their estimated future income would be able to cover their

combined expenditures for 26 years into the future (until 2027). Under the

alternative II assumptions the combined starting funds plus estimated future

income would be able to cover expenditures for about 37 years into the

future (until 2038). The program would be able to cover expenditures for the

indefinite future under the more optimistic assumptions in alternative I. In

the 2000 report, the combined trust funds were projected to be exhausted in

2026 under alternative III and in 2037 under alternative II.

.

Note: See page 179 for definition of trust fund ratio. The combined ratios shown for years after the DI fund

is estimated to be exhausted are theoretical and are shown for informational purposes only.

Table IV.B3.—Estimated Trust Fund Ratios, Calendar Years 2001-75

[In percent]

Calendar year

Intermediate Low Cost High Cost

OASI DI

Combined OASI DICombined OASI DICombined

2001. . . . . . . . . . . . 246 195 239 246 198 240 246 190 238

2002. . . . . . . . . . . . 272 217 264 273 226 266 268 202 258

2003. . . . . . . . . . . . 298 235 289 302 251 295 287 205 274

2004. . . . . . . . . . . . 324 248 313 332 274 324 303 202 287

2005. . . . . . . . . . . . 349 256 335 363 295 353 313 191 293

2006. . . . . . . . . . . . 374 260 356 395 312 383 327 178 301

2007. . . . . . . . . . . . 398 261 375 427 328 412 341 164 310

2008. . . . . . . . . . . . 419 259 393 459 342 440 354 148 317

2009. . . . . . . . . . . . 438 255 407 487 356 466 363 130 320

2010. . . . . . . . . . . . 453 249 419 513 369 490 369 110 321

2015. . . . . . . . . . . . 480 201 434 586 440 565 357 (1) 289

2020. . . . . . . . . . . . 437 127 389 584 505 573 280 (1) 202

2025. . . . . . . . . . . . 357 31 309 552 552 552 163 (1) 78

2030. . . . . . . . . . . . 255 (1)

 1 The trust fund is estimated to have been exhausted by the beginning of this year. The last line of the table

shows the specific year of trust fund exhaustion.

208 507 624 521 17 (1) (1)

2035. . . . . . . . . . . . 138 (1) 93 465 723 494 (1) (1) (1)

2040. . . . . . . . . . . . 13 (1) (1) 440 821 485 (1) (1) (1)

2045. . . . . . . . . . . . (1) (1) (1) 429 894 486 (1) (1) (1)

2050. . . . . . . . . . . . (1) (1) (1) 422 979 492 (1) (1) (1)

2055. . . . . . . . . . . . (1) (1) (1) 414 1,075 497 (1) (1) (1)

2060. . . . . . . . . . . . (1) (1) (1) 403 1,197 502 (1) (1) (1)

2065. . . . . . . . . . . . (1) (1) (1) 393 1,324 509 (1) (1) (1)

2070. . . . . . . . . . . . (1) (1) (1) 387 1,446 521 (1) (1) (1)

2075. . . . . . . . . . . . (1) (1) (1) 382 1,567 533 (1) (1) (1)

Trust fund is estimated to be 

exhausted in:. . . 2040 2026 2038 (2)

 2 The fund is not estimated to be exhausted within the projection period.

(2) (2) 2030 2014 2027
Actuarial Estimates

54

A graphic illustration of the trust fund ratios for the separate OASI and DI

Trust Funds is shown in figure IV.B3 for each of the alternative sets of

assumptions. A graphic illustration of the trust fund ratios for the combined

trust funds is shown in figure II.D4.

4. Summarized Income Rates, Cost Rates, and Balances

Summarized values for the full 75-year period are useful in analyzing the

long-range adequacy of financing for the program over the period as a whole

under present law and under proposed modifications to the law. In order to

focus on the full 75-year period as well as on broad patterns through the

period, tables IV.B4 and IV.B5 summarize, on a present-value basis, the projected annual figures shown in table IV.B1 for various periods within the

overall 75-year projection period.

Table IV.B4 shows rates on a present-value basis summarized for each of the

25-year subperiods, excluding both the assets of the trust funds on hand at

the beginning of the period and the cost of accumulating a target trust fund

balance by the end of the period. These rates are useful for comparing the

total cash flows of tax income and expenditures, as an indicator of the degree

to which tax income during the period is sufficient to meet the outgo estimated for the period.

 Figure IV.B3.—Long-Range OASI and DI Trust Fund Ratios

[Assets as a percentage of annual expenditures]

0%

200%

400%

600%

800%

1,000%

1,200%

1,400%

1,600%

1985 1995 2005 2015 2025 2035 2045 2055 2065 2075

Calendar year

OASI

DI

Historical Estimated

III II

I

I

II III
55

Long-Range Estimates

For the combined OASDI program, a positive balance is projected for the

first 25-year subperiod under both the low cost alternative I and the intermediate alternative II. A deficit is projected for the first 25-year subperiod

under the high cost alternative III. Deficits are projected for the second and

third subperiods under all three alternatives.

Note: Totals do not necessarily equal the sums of rounded components.

Table IV.B5 shows summarized rates for valuation periods of the first 25, the

first 50, and the entire 75 years of the long-range projection period, including

the funds on hand at the start of the period and the cost of accumulating a target trust fund balance equal to 100 percent of annual expenditures by the end

of the period. The actuarial balance for each of these three valuation periods

is equal to the difference between the summarized income rate and the summarized cost rate for the corresponding period. An actuarial balance of zero

for any period would indicate that estimated outgo for the period could be

met, on average, with a remaining trust fund balance at the end of the period

equal to 100 percent of the following year’s outgo. A negative actuarial balance indicates that, over the next 75 years, the present value of income to the

program plus the existing trust fund falls short of the present value of expenditures by the program plus the cost of reaching a target trust fund balance of

one year’s expenditures by the end of the period—deficits for some years

within the period are not fully offset by surpluses in other years. Combined

with a falling trust fund ratio, this signals the possibility of continuing cashTable IV.B4.—Summarized Income Rates and Cost Rates for 25-Year Subperiods1, 

Calendar Years 2001-75

[As a percentage of taxable payroll]

 1 Income rates do not include beginning trust fund balances and cost rates do not include the cost of accumulating target trust fund balances.

Subperiod

OASI DI Combined

Income

rate

Cost

rate Balance

Income

rate

Cost

rate Balance

Income

rate

Cost

rate Balance

Intermediate:

2001-25 . . . . . . 10.99 10.48 0.52 1.82 1.95 -0.13 12.82 12.43 0.39

2026-50 . . . . . . 11.28 15.12 -3.84 1.84 2.38 -.54 13.11 17.50 -4.39

2051-75 . . . . . . 11.41 16.04 -4.63 1.84 2.53 -.69 13.26 18.58 -5.32

Low Cost:

2001-25 . . . . . . 10.96 9.77 1.19 1.82 1.62 .20 12.78 11.39 1.39

2026-50 . . . . . . 11.16 12.83 -1.67 1.83 1.74 .09 12.98 14.57 -1.58

2051-75 . . . . . . 11.20 12.20 -1.00 1.83 1.75 .08 13.03 13.95 -.92

High Cost:

2001-25 . . . . . . 11.03 11.40 -.37 1.83 2.38 -.55 12.86 13.78 -.92

2026-50 . . . . . . 11.43 17.93 -6.50 1.85 3.12 -1.27 13.28 21.04 -7.76

2051-75 . . . . . . 11.72 21.69 -9.97 1.86 3.52 -1.65 13.58 25.21 -11.62
Actuarial Estimates

56

flow deficits, implying that the current-law level of financing is not sustainable.

Note: Totals do not necessarily equal the sums of rounded components.

The values in table IV.B5 show that the combined OASDI program is

expected to operate with a positive actuarial balance over the 25-year valuation period under alternatives I and II. For the 25-year valuation period the

summarized values indicate actuarial balances of 2.12 percent of taxable

payroll under alternative I, 1.05 percent under alternative II, and -0.32 percent under alternative III. Thus, the program is more than adequately

financed for the 25-year valuation period under all but the high cost alternative III projections. For the 50-year valuation period the OASDI program

would have a positive actuarial balance of 0.74 percent under alternative I,

but would have deficits of 1.03 percent under alternative II and 3.29 percent

under alternative III. Thus, the program is more than adequately financed for

the 50-year valuation period under only the low cost set of assumptions.

For the entire 75-year valuation period, the combined OASDI program

would again have actuarial deficits except under the low cost set of assumptions. The actuarial balance for this long-range valuation period is projected

Table IV.B5.—Summarized Income Rates and Cost Rates for Valuation Periods1, 

Calendar Years 2001-75

[As a percentage of taxable payroll]

 1 Income rates include beginning trust fund balances and cost rates include the cost of reaching an ending

fund target equal to 100 percent of annual expenditures by the end of the period.

Valuation

period

OASI DI Combined

Income

rate

Cost

rate

Actuarial

balance

Income

rate

Cost

rate

Actuarial

balance

Income

rate

Cost

rate

Actuarial

balance

Intermediate:

25 years:

2001-25 . . . . 12.07 10.95 1.12 1.96 2.03 -0.07 14.03 12.98 1.05

50 years:

2001-50 . . . . 11.75 12.54 -.79 1.91 2.16 -.25 13.66 14.70 -1.03

75 years:

2001-75 . . . . 11.68 13.21 -1.53 1.90 2.23 -.33 13.58 15.44 -1.86

Low Cost:

25 years:

2001-25 . . . . 12.03 10.19 1.84 1.96 1.68 .27 13.99 11.87 2.12

50 years:

2001-50 . . . . 11.68 11.16 .52 1.90 1.69 .21 13.58 12.85 .74

75 years:

2001-75 . . . . 11.58 11.34 .24 1.89 1.70 .19 13.47 13.04 .43

High Cost:

25 years:

2001-25 . . . . 12.13 11.94 .19 1.97 2.49 -.51 14.10 14.42 -.32

50 years:

2001-50 . . . . 11.84 14.32 -2.48 1.92 2.73 -.81 13.77 17.05 -3.29

75 years:

2001-75 . . . . 11.82 15.80 -3.98 1.91 2.88 -.97 13.73 18.68 -4.95
57

Long-Range Estimates

to be 0.43 percent of taxable payroll under alternative I, -1.86 percent under

alternative II, and -4.95 percent under alternative III.

Assuming the Trustees’ intermediate assumptions are realized, the deficit of

1.86 percent of payroll indicates that financial adequacy of the program for

the next 75 years could be restored if the Social Security payroll tax were

immediately and permanently increased from its current level of 12.4 percent

(combined employee-employer shares) to 14.26 percent. Alternatively, all

current and future benefits could be reduced by about 13 percent (or there

could be some combination of tax increases and benefit reductions). Changes

of this magnitude would be sufficient to eliminate the actuarial deficit over

the 75-year projection period. However, because of the upward shift in the

average age of the population, projected annual deficits begin in 2016 and

increase to levels in excess of 6 percent of taxable payroll by the end of the

75-year period. The large annual deficits at the end of the projection period

indicate that the annual cost will very likely continue to exceed tax revenues

after 2075. As a result, ensuring the sustainability of the system would eventually require larger changes than those needed to restore actuarial balance

for the 75-year period.

As may be concluded from tables IV.B4 and IV.B5, the financial condition of

the DI program is substantially weaker than that of the OASI program for the

first 25 years. Summarized over the full 75-year period, however, long-range

deficits for the OASI and DI programs under intermediate assumptions are

more similar, relative to the level of program costs.

5. Test of Long-Range Close Actuarial Balance

The long-range test of close actuarial balance applies to a set of valuation

periods beginning with the first 10 years and continuing through the first 11

years, the first 12 years, etc., up to and including the full 75-year projection

period. Under the long-range test, the summarized income rate and cost rate

are calculated for each of the 66 valuation periods in the full 75-year longrange projection period, with the first of these periods consisting of the next

10 years. Each succeeding period becomes longer by 1 year, culminating

with the period consisting of the next 75 years. The long-range test is met if,

for each of the 66 time periods, the actuarial balance is not less than zero or

is negative by, at most, a specified percentage of the summarized cost rate for

the same time period. The percentage allowed for a negative actuarial balance is 5 percent for the full 75-year period. For shorter periods, the allowable percentage begins with zero for the first 10 years and increases

uniformly for longer periods, until it reaches the maximum percentage of 5

percent allowed for the 75-year period. The criterion for meeting the test is
Actuarial Estimates

58

less stringent for the longer periods in recognition of the greater uncertainty

associated with estimates for more distant years.

When a negative actuarial balance in excess of the allowable percentage of

the summarized cost rate is projected for one or more of the 66 separate valuation periods, the program fails the long-range test of close actuarial balance.

Being out of close actuarial balance indicates that the program is expected to

experience financial problems in the future and that ways of improving the

financial status of the program should be considered. The sooner the actuarial balance is less than the minimum allowable balance, expressed as a percentage of the summarized cost rate, the more urgent is the need for

corrective action. However, it is recognized that necessary changes in program financing or benefit provisions should not be put off until the last possible moment if future beneficiaries and workers are to effectively plan for

their retirement.

Table IV.B6 presents a comparison of the estimated actuarial balances with

the minimum allowable balance (or maximum allowable deficit) under the

long-range test, each expressed as a percentage of the summarized cost rate,

based on the intermediate alternative II estimates. Values are shown for only

14 of the valuation periods: those of length 10 years, 15 years, and continuing in 5-year increments through 75 years. However, each of the 66 periods—those of length 10 years, 11 years, and continuing in 1-year increments

through 75 years—is considered for the test. These minimum allowable balances are calculated to show the limit for each valuation period resulting

from the graduated tolerance scale. The patterns in the estimated balances as

a percentage of the summarized cost rates, as well as that for the minimum

allowable balance, are presented graphically in figure IV.B4 for the OASI,

DI and combined OASDI programs. Values shown for the 25-year, 50-year,

and 75-year valuation periods correspond to those presented in table IV.B5.

For the OASI program, the estimated actuarial balance as a percentage of the

summarized cost rate exceeds the minimum allowable for valuation periods

of length 10 years through 39 years, under the intermediate alternative II

estimates. For valuation periods of length greater than 39 years, the estimated actuarial balance is less than the minimum allowable. For the full 75-

year long-range period the estimated actuarial balance reaches -11.61 percent

of the summarized cost rate, for a shortfall of 6.61 percent, from the minimum allowable balance of -5.0 percent of the summarized cost rate. Thus,

although the OASI program satisfies the short-range test of financial adequacy (as discussed earlier on page 30), it is not in long-range close actuarial

balance.
59

Long-Range Estimates

For the DI program, the estimated actuarial balance as a percentage of the

summarized cost rate exceeds the minimum allowable balance for valuation

periods of length 10 through 21 years under the intermediate alternative II

estimates. For valuation periods of length greater than 21 years, the estimated actuarial balance is less than the minimum allowable. For the full 75-

year long-range period the estimated actuarial balance reaches -14.76 percent

of the summarized cost rate, for a shortfall of 9.76 percent, from the minimum allowable balance of -5.0 percent of the summarized cost rate. Thus,

the DI program, although meeting the short-range test of financial adequacy,

is not in long-range close actuarial balance. 

Financing for the DI program is much less adequate than for the OASI program during the first 25 years even though long-range actuarial deficits are

more comparable over the entire 75-year period. This occurs because much

more of the increase in the long-range cost due to the aging of the large

baby-boom generation occurs earlier for the DI program than for the OASI

program. As a result, tax rates that are relatively more adequate for the OASI

program during the first 25 years become relatively less adequate later in the

long-range period.

For the combined OASDI program, the estimated actuarial balance as a percentage of the summarized cost rate exceeds the minimum allowable balance

for valuation periods of length 10 years through 37 years. For valuation periods of length greater than 37 years, the estimated actuarial balance is below

the minimum allowable balance. The size of the shortfall from the minimum

allowable balance rises gradually, reaching 7.06 percent of the summarized

cost rate for the full 75-year long-range valuation period. Thus, although the

OASDI program satisfies the short-range test of financial adequacy, it is out

of long-range close actuarial balance.

The OASI and DI programs, both separate and combined, were also found to

be out of close actuarial balance in last year’s report. The estimated deficits

for the OASI, DI, and combined OASDI programs in this report are similar

to those shown in last year’s report.
Actuarial Estimates

60

Note: Totals do not necessarily equal the sums of rounded components.

Table IV.B6.—Comparison of Estimated Long-Range Actuarial Balances With the 

Minimum Allowable in the Test for Close Actuarial Balance, 

Based on Intermediate Assumptions

Rates

(percentage of taxable payroll)

 Values expressed as a

percentage of cost rate

Valuation

period

Summarized

income rate

Summarized

cost rate

Actuarial

balance

Actuarial

balance

Minimum

allowable

actuarial

 balance

OASI:

10 years: 2001-10 . . . . . . 13.35 9.98 3.37 33.78 0.00

15 years: 2001-15 . . . . . . 12.61 10.06 2.55 25.33 -.38

20 years: 2001-20 . . . . . . 12.26 10.46 1.80 17.22 -.77

25 years: 2001-25 . . . . . . 12.07 10.95 1.12 10.23 -1.15

30 years: 2001-30 . . . . . . 11.95 11.42 .53 4.62 -1.54

35 years: 2001-35 . . . . . . 11.87 11.83 .04 .38 -1.92

40 years: 2001-40 . . . . . . 11.82 12.14 -.32 -2.60 -2.31

45 years: 2001-45 . . . . . . 11.78 12.36 -.58 -4.69 -2.69

50 years: 2001-50 . . . . . . 11.75 12.54 -.79 -6.28 -3.08

55 years: 2001-55 . . . . . . 11.73 12.69 -.97 -7.61 -3.46

60 years: 2001-60 . . . . . . 11.71 12.84 -1.13 -8.79 -3.85

65 years: 2001-65 . . . . . . 11.70 12.97 -1.28 -9.84 -4.23

70 years: 2001-70 . . . . . . 11.69 13.10 -1.41 -10.78 -4.62

75 years: 2001-75 . . . . . . 11.68 13.21 -1.53 -11.61 -5.00

DI:

10 years: 2001-10 . . . . . . 2.13 1.86 .27 14.44 .00

15 years: 2001-15 . . . . . . 2.03 1.92 .12 6.06 -.38

20 years: 2001-20 . . . . . . 1.99 1.98 .01 .53 -.77

25 years: 2001-25 . . . . . . 1.96 2.03 -.07 -3.58 -1.15

30 years: 2001-30 . . . . . . 1.94 2.08 -.13 -6.31 -1.54

35 years: 2001-35 . . . . . . 1.93 2.10 -.17 -7.95 -1.92

40 years: 2001-40 . . . . . . 1.92 2.12 -.19 -9.16 -2.31

45 years: 2001-45 . . . . . . 1.92 2.14 -.22 -10.33 -2.69

50 years: 2001-50 . . . . . . 1.91 2.16 -.25 -11.41 -3.08

55 years: 2001-55 . . . . . . 1.91 2.18 -.27 -12.36 -3.46

60 years: 2001-60 . . . . . . 1.90 2.19 -.29 -13.12 -3.85

65 years: 2001-65 . . . . . . 1.90 2.20 -.30 -13.74 -4.23

70 years: 2001-70 . . . . . . 1.90 2.22 -.32 -14.28 -4.62

75 years: 2001-75 . . . . . . 1.90 2.23 -.33 -14.76 -5.00

OASDI:

10 years: 2001-10 . . . . . . 15.48 11.84 3.64 30.74 .00

15 years: 2001-15 . . . . . . 14.65 11.98 2.66 22.24 -.38

20 years: 2001-20 . . . . . . 14.25 12.44 1.81 14.57 -.77

25 years: 2001-25 . . . . . . 14.03 12.98 1.05 8.07 -1.15

30 years: 2001-30 . . . . . . 13.89 13.50 .40 2.94 -1.54

35 years: 2001-35 . . . . . . 13.81 13.93 -.12 -.88 -1.92

40 years: 2001-40 . . . . . . 13.74 14.25 -.51 -3.57 -2.31

45 years: 2001-45 . . . . . . 13.70 14.50 -.80 -5.52 -2.69

50 years: 2001-50 . . . . . . 13.66 14.70 -1.03 -7.04 -3.08

55 years: 2001-55 . . . . . . 13.64 14.87 -1.24 -8.31 -3.46

60 years: 2001-60 . . . . . . 13.61 15.03 -1.42 -9.42 -3.85

65 years: 2001-65 . . . . . . 13.60 15.18 -1.58 -10.41 -4.23

70 years: 2001-70 . . . . . . 13.59 15.32 -1.73 -11.28 -4.62

75 years: 2001-75 13.58 15.44 -1.86 -12.06 -5.00
61

Long-Range Estimates

6. Income and Cost Rates by Component

Annual income rates and their components are shown in table IV.B7 for each

alternative set of assumptions. The annual income rates reflect the scheduled

payroll tax rates and the projected income from the taxation of benefits

expressed as a percentage of taxable payroll. (Increasing income from taxation of benefits reflects rising benefit and income levels and the fact that benefit-taxation threshold amounts are not indexed.)

Summarized income and cost rates, along with their components, are presented in table IV.B8 for 25-year, 50-year, and 75-year valuation periods.

Summarized income rates include the starting trust fund balance in addition

to the components included in the annual income rates. The summarized cost

rates include the cost of reaching and maintaining an ending trust fund target

of 100 percent of annual expenditures by the end of the period in addition to

the expenditures included in the annual cost rates.

It may be noted that the payroll tax income expressed as a percentage of taxable payroll is slightly smaller than the actual tax rates in effect for each

period. This results from the fact that all OASDI income and outgo amounts

presented in this report are computed on a cash basis, i.e., amounts are attributed to the year in which they are actually received by, or expended from, the

 Figure IV.B4.—Long-Range Test of Close Actuarial Balance

[Comparison of Estimated Long-Range Actuarial Balances With the Minimum 

Allowable for Close Actuarial Balance Under Intermediate Assumptions]

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075

Ending year of valuation period

 Actuarial balance as percentage

 of summarized cost rate

 Minimum allowable actuarial balance

OASI

OASDI

DI
Actuarial Estimates

62

fund, while taxable payroll is allocated to the year in which earnings are

paid. Because earnings are paid to workers before the corresponding payroll

taxes are credited to the funds, payroll tax income for a particular year

reflects a combination of the taxable payrolls from that year and from prior

years, when payroll was smaller. Dividing payroll tax income by taxable

payroll for a particular year, or period of years, will thus generally result in

an income rate that is slightly less than the applicable tax rate for the period.

Table IV.B7.—Components of Annual Income Rates, Calendar Years 2001-75

[As a percentage of taxable payroll]

OASI DI Combined

Calendar year

Payroll

tax rate

Taxation

of

benefits Total

Payroll

tax rate

Taxation

of

benefits Total

Payroll

tax rate

Taxation

of

benefits Total

Intermediate:

2001. . . . . . 10.60 0.30 10.90 1.80 0.02 1.82 12.40 0.32 12.72

2002. . . . . . 10.60 .30 10.90 1.80 .02 1.82 12.40 .32 12.72

2003. . . . . . 10.60 .31 10.91 1.80 .02 1.82 12.40 .33 12.73

2004. . . . . . 10.60 .32 10.92 1.80 .02 1.82 12.40 .34 12.74

2005. . . . . . 10.60 .33 10.93 1.80 .02 1.82 12.40 .35 12.75

2006. . . . . . 10.60 .33 10.93 1.80 .02 1.82 12.40 .35 12.75

2007. . . . . . 10.60 .34 10.94 1.80 .02 1.82 12.40 .36 12.76

2008. . . . . . 10.60 .35 10.95 1.80 .02 1.82 12.40 .38 12.78

2009. . . . . . 10.60 .36 10.96 1.80 .03 1.83 12.40 .39 12.79

2010. . . . . . 10.60 .38 10.98 1.80 .03 1.83 12.40 .41 12.81

2015. . . . . . 10.60 .42 11.02 1.80 .03 1.83 12.40 .45 12.85

2020. . . . . . 10.60 .48 11.08 1.80 .03 1.83 12.40 .51 12.91

2025. . . . . . 10.60 .57 11.17 1.80 .04 1.84 12.40 .60 13.00

2030. . . . . . 10.60 .65 11.25 1.80 .04 1.84 12.40 .68 13.08

2035. . . . . . 10.60 .70 11.30 1.80 .04 1.84 12.40 .73 13.13

2040. . . . . . 10.60 .72 11.32 1.80 .04 1.84 12.40 .76 13.16

2045. . . . . . 10.60 .73 11.33 1.80 .04 1.84 12.40 .78 13.18

2050. . . . . . 10.60 .75 11.35 1.80 .04 1.84 12.40 .80 13.20

2055. . . . . . 10.60 .78 11.38 1.80 .05 1.85 12.40 .83 13.23

2060. . . . . . 10.60 .81 11.41 1.80 .05 1.85 12.40 .86 13.26

2065. . . . . . 10.60 .84 11.44 1.80 .05 1.85 12.40 .89 13.29

2070. . . . . . 10.60 .87 11.47 1.80 .05 1.85 12.40 .91 13.31

2075. . . . . . 10.60 .89 11.49 1.80 .05 1.85 12.40 .94 13.34
63

Long-Range Estimates

Note: Totals do not necessarily equal the sums of rounded components.

Low Cost:

2001. . . . . . 10.60 0.30 10.90 1.80 0.02 1.82 12.40 0.32 12.72

2002. . . . . . 10.60 .30 10.90 1.80 .02 1.82 12.40 .31 12.71

2003. . . . . . 10.60 .30 10.90 1.80 .02 1.82 12.40 .32 12.72

2004. . . . . . 10.60 .31 10.91 1.80 .02 1.82 12.40 .33 12.73

2005. . . . . . 10.60 .32 10.92 1.80 .02 1.82 12.40 .33 12.73

2006. . . . . . 10.60 .32 10.92 1.80 .02 1.82 12.40 .34 12.74

2007. . . . . . 10.60 .32 10.92 1.80 .02 1.82 12.40 .35 12.75

2008. . . . . . 10.60 .33 10.93 1.80 .02 1.82 12.40 .35 12.75

2009. . . . . . 10.60 .34 10.94 1.80 .02 1.82 12.40 .36 12.76

2010. . . . . . 10.60 .35 10.95 1.80 .02 1.82 12.40 .38 12.78

2015. . . . . . 10.60 .38 10.98 1.80 .02 1.82 12.40 .41 12.81

2020. . . . . . 10.60 .42 11.02 1.80 .02 1.82 12.40 .45 12.85

2025. . . . . . 10.60 .49 11.09 1.80 .03 1.83 12.40 .52 12.92

2030. . . . . . 10.60 .55 11.15 1.80 .03 1.83 12.40 .58 12.98

2035. . . . . . 10.60 .58 11.18 1.80 .03 1.83 12.40 .61 13.01

2040. . . . . . 10.60 .58 11.18 1.80 .03 1.83 12.40 .61 13.01

2045. . . . . . 10.60 .58 11.18 1.80 .03 1.83 12.40 .61 13.01

2050. . . . . . 10.60 .59 11.19 1.80 .03 1.83 12.40 .62 13.02

2055. . . . . . 10.60 .60 11.20 1.80 .03 1.83 12.40 .63 13.03

2060. . . . . . 10.60 .61 11.21 1.80 .03 1.83 12.40 .65 13.05

2065. . . . . . 10.60 .62 11.22 1.80 .03 1.83 12.40 .65 13.05

2070. . . . . . 10.60 .62 11.22 1.80 .03 1.83 12.40 .66 13.06

2075. . . . . . 10.60 .63 11.23 1.80 .03 1.83 12.40 .66 13.06

High Cost:

2001. . . . . . 10.60 .31 10.91 1.80 .02 1.82 12.40 .33 12.73

2002. . . . . . 10.60 .31 10.91 1.80 .02 1.82 12.40 .33 12.73

2003. . . . . . 10.60 .32 10.92 1.80 .02 1.82 12.40 .34 12.74

2004. . . . . . 10.60 .34 10.94 1.80 .02 1.82 12.40 .36 12.76

2005. . . . . . 10.60 .36 10.96 1.80 .02 1.82 12.40 .38 12.78

2006. . . . . . 10.60 .36 10.96 1.80 .03 1.83 12.40 .39 12.79

2007. . . . . . 10.60 .37 10.97 1.80 .03 1.83 12.40 .40 12.80

2008. . . . . . 10.60 .38 10.98 1.80 .03 1.83 12.40 .41 12.81

2009. . . . . . 10.60 .39 10.99 1.80 .03 1.83 12.40 .43 12.83

2010. . . . . . 10.60 .41 11.01 1.80 .03 1.83 12.40 .44 12.84

2015. . . . . . 10.60 .47 11.07 1.80 .04 1.84 12.40 .50 12.90

2020. . . . . . 10.60 .54 11.14 1.80 .04 1.84 12.40 .58 12.98

2025. . . . . . 10.60 .65 11.25 1.80 .05 1.85 12.40 .70 13.10

2030. . . . . . 10.60 .75 11.35 1.80 .05 1.85 12.40 .80 13.20

2035. . . . . . 10.60 .84 11.44 1.80 .05 1.85 12.40 .89 13.29

2040. . . . . . 10.60 .89 11.49 1.80 .05 1.85 12.40 .94 13.34

2045. . . . . . 10.60 .93 11.53 1.80 .06 1.86 12.40 .99 13.39

2050. . . . . . 10.60 .98 11.58 1.80 .06 1.86 12.40 1.04 13.44

2055. . . . . . 10.60 1.04 11.64 1.80 .06 1.86 12.40 1.10 13.50

2060. . . . . . 10.60 1.10 11.70 1.80 .07 1.87 12.40 1.17 13.57

2065. . . . . . 10.60 1.17 11.77 1.80 .07 1.87 12.40 1.24 13.64

2070. . . . . . 10.60 1.24 11.84 1.80 .07 1.87 12.40 1.31 13.71

2075. . . . . . 10.60 1.30 11.90 1.80 .07 1.87 12.40 1.37 13.77

Table IV.B7.—Components of Annual Income Rates, Calendar Years 2001-75 (Cont.)

[As a percentage of taxable payroll]

OASI DI Combined

Calendar year

Payroll

tax rate

Taxation

of

benefits Total

Payroll

tax rate

Taxation

of

benefits Total

Payroll

tax rate

Taxation

of

benefits Total
Actuarial Estimates

64

.

Note: Totals do not necessarily equal the sums of rounded components.

7. Reasons for Change in Actuarial Balance From Last Report

Reasons for changes from last year’s report to this report in the long-range

actuarial balance under the intermediate assumptions are itemized in table

IV.B9. Also shown are the estimated effects associated with each reason for

change.

Table IV.B8.—Components of Summarized Income Rates and Cost Rates, 

Calendar Years 2001-75

[As a percentage of taxable payroll]

Income rate Cost rate

Valuation period

Payroll

tax

Taxation

of

 benefits

Beginning

fund

 balance Total

Disburse

ments

Ending

fund

 balance Total

OASI:

Intermediate:

2001-25 . . . . . . . . 10.59 0.40 1.07 12.07 10.48 0.47 10.95

2001-50 . . . . . . . . 10.59 .52 .64 11.75 12.34 .20 12.54

2001-75 . . . . . . . . 10.59 .58 .51 11.68 13.10 .11 13.21

Low Cost:

2001-25 . . . . . . . . 10.59 .37 1.07 12.03 9.77 .42 10.19

2001-50 . . . . . . . . 10.59 .45 .64 11.68 10.99 .16 11.16

2001-75 . . . . . . . . 10.59 .48 .51 11.58 11.25 .09 11.34

High Cost:

2001-25 . . . . . . . . 10.59 .44 1.10 12.13 11.40 .54 11.94

2001-50 . . . . . . . . 10.59 .61 .65 11.84 14.06 .26 14.32

2001-75 . . 10.59 .71 .51 11.82 15.64 .16 15.80

DI:

Intermediate:

2001-25 . . . . . . . . 1.80 .03 .14 1.96 1.95 .08 2.03

2001-50 . . . . . . . . 1.80 .03 .08 1.91 2.12 .03 2.16

2001-75 . . . . . . . . 1.80 .03 .07 1.90 2.21 .02 2.23

Low Cost:

2001-25 . . . . . . . . 1.80 .02 .14 1.96 1.62 .06 1.68

2001-50 . . . . . . . . 1.80 .02 .08 1.90 1.67 .02 1.69

2001-75 . . . . . . . . 1.80 .03 .06 1.89 1.69 .01 1.70

High Cost:

2001-25 . . . . . . . . 1.80 .03 .14 1.97 2.38 .10 2.49

2001-50 . . . . . . . . 1.80 .04 .08 1.92 2.68 .05 2.73

2001-75 . . . . . . . . 1.80 .05 .07 1.91 2.85 .02 2.88

OASDI:

Intermediate:

2001-25 . . . . . . . . 12.39 .43 1.21 14.03 12.43 .55 12.98

2001-50 . . . . . . . . 12.39 .55 .73 13.66 14.46 .23 14.70

2001-75 . . . . . . . . 12.39 .62 .58 13.58 15.31 .13 15.44

Low Cost:

2001-25 . . . . . . . . 12.39 .39 1.21 13.99 11.39 .47 11.87

2001-50 . . . . . . . . 12.39 .47 .72 13.58 12.66 .19 12.85

2001-75 . . . . . . . . 12.39 .51 .57 13.47 12.94 .10 13.04

High Cost:

2001-25 . . . . . . . . 12.39 .48 1.24 14.10 13.78 .64 14.42

2001-50 . . . . . . . . 12.39 .65 .73 13.77 16.74 .31 17.05

2001-75 . . . . . . . . 12.39 .76 .58 13.73 18.49 .18 18.68
65

Long-Range Estimates

Note: Totals do not necessarily equal the sums of rounded components.

Two legislative changes have been enacted since the last report that have

effects on the financing of the Social Security program, see section III.B. The

first change eliminates the earnings test for Social Security beneficiaries who

have attained normal retirement age, effective beginning in 2000. The second

change provides for an adjustment to benefits in order to compensate for the

effects of an error in the published Consumer Price Index for 1999. The

effects of each of these changes on the actuarial balance is negligible (less

than 0.005 percent of taxable payroll) for both OASI and DI.

In changing from the valuation period of last year’s report, which was 2000-

74, to the valuation period of this report, 2001-75, the relatively large negative annual balance for 2075 is included. This results in a larger long-range

actuarial deficit. (Note that the fund balance at the end of 2000, i.e., at the

beginning of the projection period, is included in the 75-year actuarial balance.)

Ultimate demographic assumptions are unchanged from last year’s report.

However, new data have resulted in several changes in starting levels and

assumptions for early years in the projection period. Preliminary data for

1999 indicate a higher birth rate than was estimated for the 2000 report.

Starting levels of birth rates and rates for the years of transition from the

most recent data to the ultimate assumptions were updated to reflect these

data. Updated mortality data for 1998 indicate much less decline in death

Table IV.B9.—Reasons for Change in the 75-Year Actuarial Balance

Under Intermediate Assumptions

[As a percentage of taxable payroll]

Item OASI DI Combined

Shown in last year’s report:

Income rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.62 1.89 13.51

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.15 2.26 15.40

Actuarial balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.53 -.37 -1.89

Changes in actuarial balance due to changes in:

Legislation / Regulation . . . . . . . . . . . . . . . . . . . . . .00 .00 .00

Valuation period 1 . . . . . . . . . . . . . . . . . . . . . . . . . . 

 1 In changing from the valuation period of last year’s report, which was 2000-74, to the valuation period of

this report, 2001-75, the relatively large negative annual balance for 2075 is included. This results in a larger

long-range actuarial deficit. The fund balance at the end of 2000, i.e., at the beginning of the projection

period, is included in the 75-year actuarial balance.

-.06 -.01 -.07

Demographic assumptions . . . . . . . . . . . . . . . . . . . +.08 +.01 +.09

Economic assumptions . . . . . . . . . . . . . . . . . . . . . . +.02 +.00 +.02

Disability assumptions . . . . . . . . . . . . . . . . . . . . . . .00 +.02 +.02

Projection methods and data . . . . . . . . . . . . . . . . . . -.04 +.02 -.02

Total change in actuarial balance . . . . . . . . . . . . . . . . -.01 +.04 +.03

Shown in this report:

Actuarial balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.53 -.33 -1.86

Income rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.68 1.90 13.58

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.21 2.23 15.44
Actuarial Estimates

66

rates for that year than was indicated by preliminary data used in the 2000

report. The updated data result in a higher starting level for death rates and a

slightly slower decline in years through 2026. The age distribution assumed

for legal residents who emigrate from the United States was modified to

reflect recently available data. This results in a somewhat higher average for

emigrants. Each of these three updates results in a reduction (improvement)

in the actuarial deficit. The total effect is a reduction of 0.09 percent of taxable payroll.

Ultimate economic assumptions are unchanged for the 2001 report. However, faster economic growth in 2000 and for the next several years, results

in slightly higher assumed growth during the short range. By the time any

evidence of slower growth for the fourth calendar quarter of 2000 was available, assumptions for this report were already established. However, this

slower growth is assumed to be temporary, and to have no effect on the

underlying growth potential of the economy over the short range. Thus, on

balance, the updates made for economic assumptions in this report result in a

small reduction in the actuarial deficit of 0.02 percent of payroll.

Long-range disability incidence and termination rate assumptions were

updated to reflect recent data on distributions by age and sex. These updates

were made in conjunction with reductions in assumed levels of age-sex specific incidence rates beginning part of the way through the short-range

period. The combination of these changes result in ultimate disability prevalence rates that are very similar to those projected in last year’s report. These

changes reduced the actuarial deficit by about 0.02 percent of payroll.

Several methodological improvements and updates of program-specific data

were made for projections in the 2001 report. The method for projecting the

effect of other-than-legal immigration on the number of beneficiaries was

improved by replacing an adjustment to retirement prevalence rates with a

model for the effect of other-than-legal immigration on the percentage of the

resident population that achieves fully insured status under the OASDI program. A method for projecting interest rates was introduced that takes into

account changes in the state of the economy. The model for projecting the

number of workers in covered employment based on the size of the

employed labor force was updated to reflect recent data. An updated sample

of new benefit awards was used for projecting average benefit levels. Finally,

several changes in the methods for projecting average benefit levels for

female workers were made that improve the estimated distribution of retirees

by the number of years of work in covered employment. Together these

changes result in an increase in the actuarial deficit for the OASDI program

of 0.02 percent of taxable payroll.
67

Long-Range Estimates

The cost of the OASDI program has been discussed in this section in relation

to taxable payroll, which is a program-related concept that is very useful in

analyzing the financial status of the OASDI program. The cost can also be

discussed in relation to broader economic concepts, such as the gross domestic product (GDP). OASDI outlays generally rise from about 4.2 percent of

GDP currently to about 6.7 percent of GDP by the end of the 75-year projection period under alternative II. Discussion of both the cost and the taxable

payroll of the OASDI program in relation to GDP is presented in appendix

VI.E.2 beginning on page 148.
Assumptions & Methods

68

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

The future income and outgo of the OASDI program will depend on many

economic, demographic, and program-specific factors. Trust fund income

will depend on how these factors affect the size and composition of the

working population and the level and distribution of earnings. Similarly, trust

fund outgo will depend on how these factors affect the size and composition

of the beneficiary population and the general level of benefits.

Basic assumptions are developed for several of these factors based on analysis of historical trends and conditions, and on expected future conditions.

These include fertility, mortality, immigration, marriage, divorce, productivity, inflation, average earnings, unemployment, retirement, and disability

incidence and termination. Other factors are projected using methods that

reflect historical and expected future relationships to the basic assumptions.

These include total population, life expectancy, labor force, gross domestic

product, interest rates, and a myriad of program-specific factors. It should be

noted that all factors included in any consistent set of assumptions are interrelated directly or indirectly. It is also important to note that these interrelationships can and do change over time.

The assumptions and methods used in this report are reexamined each year in

light of recent experience and new information about future conditions, and

are revised if warranted.

Because projections of these factors and their interrelationships are inherently uncertain, estimates are shown in this report on the basis of three plausible sets of assumptions, designated as intermediate (alternative II), low cost

(alternative I), and high cost (alternative III). The intermediate set, alternative II, represents the Board’s best estimate of the future course of the population and the economy. In terms of the net effect on the status of the OASDI

program, the low cost alternative I is the most optimistic, and the high cost

alternative III is the most pessimistic.

Although these three sets of economic and demographic assumptions have

been developed using the best available information, the resulting estimates

should be interpreted with care. The estimates are not intended to be specific

predictions of the future financial status of the OASDI program, but rather,

they are intended to be indicators of the expected trend and likely range of

future income and outgo, under a variety of plausible economic and demographic conditions.
69

Demographic Assumptions and Methods

The values for each of the economic, demographic and program-specific factors are assumed to move from recently experienced levels or trends, toward

long-range ultimate values over the next 5 to 30 years. The ultimate values

assumed after the first 5 to 30 years for both the economic and the demographic factors are intended to represent average experience or growth rates.

Actual future values will exhibit fluctuations or cyclical patterns, as in the

past.

The following sections discuss in abbreviated form the various assumptions

and methods required to make the estimates of trust fund financial status

which are the heart of this report.1 There are, of course, many interrelationships among these factors that make a sequential presentation somewhat misleading. Nevertheless, the following sections roughly follow the order used

in building the trust fund estimates presented in chapter IV.

A. DEMOGRAPHIC ASSUMPTIONS AND METHODS

The principal demographic assumptions relating to fertility, mortality, and

net immigration for the three alternatives are shown in table V.A1. The

rationales for selecting these assumptions are discussed in the following

three sections.

1. Fertility Assumptions

Historically, fertility rates in the United States have fluctuated widely. The

total fertility rate2 decreased from 3.3 children per woman after World War I

to 2.1 during the Great Depression, rose to 3.7 in 1957, and then fell to 1.7 in

1976. After 1976, the total fertility rate began to rise again, reaching a level

of 2.07 for 1991. Since then, the total fertility rate has remained fairly stable.

These variations in fertility rates have resulted from changes in many factors,

including social attitudes, economic conditions, and the use of birth-control

methods. Future fertility rates may be expected to remain close to recent lev-

 1 Further details about the assumptions, methods, and actuarial estimates are contained in Actuarial Studies

published by the Office of the Chief Actuary, Social Security Administration. A complete list of available

studies may be found on the Internet at http://www.ssa.gov/OACT/NOTES/actstud.html. To obtain copies of

such Studies, or of this report, submit a request via our Internet request form; or write to: Office of the Chief

Actuary, 700 Altmeyer Building, 6401 Security Boulevard, Baltimore, MD 21235; or call (410) 965-3015.

This entire report, along with supplemental year-by-year tables, may also be found at http://www.ssa.gov/

OACT/TR/TR01/index.html.

 2 Defined to be the average number of children that would be born to a woman in her lifetime if she were to

experience the birth rates by age observed in, or assumed for, the selected year, and if she were to survive the

entire childbearing period. A rate of 2.1 would ultimately result in a nearly constant population if net immigration were zero and if death rates were constant.
Assumptions & Methods

70

els. The recent historical and projected trends in certain population characteristics are consistent with a continued relatively low fertility rate. These

trends include the rising percentages of women who have never married, of

women who are divorced, and of young women who are in the labor force.

Based on consideration of these factors, ultimate total fertility rates of 2.2,

1.95, and 1.7 children per woman were selected for alternatives I, II, and III,

respectively. For each alternative, the total fertility rate is assumed to gradually trend into its ultimate level in 2025 starting from the estimated level for

1999 of 2.07. 

2. Mortality Assumptions

Over the last century, death rates in the United States have declined substantially, but at varying rates. Historical rates used in preparing this report were

calculated using data from the National Center for Health Statistics (NCHS)

that are final for 1900-981. For ages 65 and over, Medicare final data for

years 1968 through 1998 were used. 

The total age-sex-adjusted death rate2 declined at an average rate of 1.12

percent per year between 1900 and 1998. Between 1968 and 1998, the period

for which death rates are available by cause, the total age-sex-adjusted death

rate (for all causes combined) declined at an average rate of 1.28 percent per

year. However, since 1982, total age-sex-adjusted death rates have declined

more slowly, at an average rate of 0.65 percent between 1982 and 1998. 

Historical death rates have declined much more slowly for older ages than

for the rest of the population. The age-sex-adjusted death rate for ages 65 and

over declined at an average rate of 0.74 percent per year between 1900 and

1998. Between 1968 and 1998 the age-sex-adjusted death rate for these ages

declined at an average annual rate of 1.07 percent. Since 1982 the age-sexadjusted death rate for the aged has declined more slowly, at an average

annual rate of 0.40 percent between 1982 and 1998.

Such reductions in death rates have resulted from many factors, including

increased medical knowledge and availability of health-care services, and

improvements in sanitation and nutrition. Based on consideration of the

expected rate of future progress in these and other areas, three alternative

sets of ultimate annual percentage reductions in central death rates by age,

sex, and cause of death were selected for 2025 and later. The intermediate

 1 Including rates by cause of death starting in 1968.

 2 Calculated here as the crude rate that would occur in the enumerated total population as of April 1, 1990, if

that population were to experience the death rates by age and sex for the selected year.
71

Demographic Assumptions and Methods

set, which is used for alternative II, is considered to be the most likely to

occur. Except for those causes of death which primarily affect children and

people of working age, the average annual percentage reductions used for

alternative I are smaller than those for alternative II, while those used for

alternative III are greater.

Between 1998 and 2025, the reductions in central death rates for alternative

II are assumed to change gradually from the average annual reductions by

age, sex, and cause of death observed between 1968 and 1998, to the ultimate annual percentage reductions by age, sex, and cause of death assumed

for 2025 and later. The reductions in death rates under alternatives I and III

are also assumed to change gradually by 2025 to their ultimate levels, but

starting from levels which are, respectively, 50 or 150 percent of the average

annual reductions observed between 1968 and 1998.

After adjustment for changes in the age-sex distribution of the population,

the resulting total death rates are projected to decline at ultimate average

annual rates of about 0.31 percent, 0.68 percent, and 1.20 percent between

2025 and 2075 for alternatives I, II, and III, respectively. In keeping with the

patterns observed in the historical data, future assumed rates of decline are

greater for younger ages than for older ages, but to a lesser degree than in the

past. Accordingly, age-sex-adjusted death rates for ages 65 and over are projected to decline at average annual rates of about 0.28 percent, 0.65 percent,

and 1.16 percent between 2025 and 2075 for alternatives I, II, and III, respectively.

Projections of age-sex-adjusted death rates are presented in table V.A1 for

the total (all ages), for under age 65, and for ages 65 and over. Projected

death rates for the total, as shown in table V.A1, are slightly higher than

those death rates in last year’s report. Inclusion of additional data for 1998

resulted in the estimation of higher mortality rates overall for starting levels

and slightly lower rates of reduction during the first 25 years of the projection period. The ultimate rates of decline in mortality, that are assumed to

apply after the first 25 years of the projection period, are the same as those

used in last year’s report.

There is currently a wide range of opinion among experts on the likely rate

of future decline in death rates. For example, the 1999 Technical Panel on

Assumptions and Methods appointed by the Social Security Advisory Board

expected ultimate rates of decline in mortality that are considerably higher

than the rates of decline assumed for this report. Others believe that biological and social factors may slow future rates of decline in mortality. Evolving

mortality trends and developments in health care and life style will be moni-
Assumptions & Methods

72

tored closely to determine what further modifications to the assumed ultimate rates of decline in mortality may be warranted for future reports

3. Immigration Assumptions

Annual legal immigration increased after World War II to around 300,000

persons per year and remained around that level until shortly after 1960.

With the Immigration Act of 1965 and other related changes, annual legal

immigration increased to about 400,000 and remained fairly stable until

1977. Between 1977 and 1990, legal immigration once again increased averaging about 580,0001 per year. The Immigration Act of 1990, which took

effect in fiscal year 1992, restructured the immigration categories and

increased significantly the number of immigrants who may legally enter the

United States.

For calendar year 1999, legal immigration is estimated to be 660,000 persons. Net legal immigration (after considering emigration) is estimated to be

495,000 persons and net other-than-legal immigration is estimated to be

300,000 persons. For calendar year 2000, net legal immigration is estimated

to be 540,000 persons and net other-than-legal is estimated to be 300,000

persons.

The total level of net immigration (legal and other-than-legal, combined)

under the intermediate projection is assumed to be 840,000 persons in 2001

and 900,000 persons2 for each year after 2001. For the low cost assumptions,

net immigration is assumed to rise from a level of 1,050,000 persons in 2001

to an ultimate level of 1,210,000 persons3 for each year 2003 and later.

Under the high cost assumption, net immigration for 2001 and later is

assumed to be 655,000 persons4 per year. 

The levels of net immigration during 2000 to 2002 are slightly different from

those used in last year’s report. In addition, the age-sex distribution of annual

legal emigration is revised from the distribution used in last year’s report in

order to reflect more recent data. This revision results in an increase of

almost 2 years in the assumed average age of emigrants from the Social

Security area. The ultimate levels of net immigration are the same as those

assumed in last year’s report.

 1 Excludes those persons admitted under the Immigration Reform and Control Act of 1986.

 2 600,000 net legal immigrants plus 300,000 net other-than-legal immigrants.

 3 760,000 net legal immigrants plus 450,000 net other-than-legal immigrants.

 4 455,000 net legal immigrants plus 200,000 net other-than-legal immigrants.
73

Demographic Assumptions and Methods

Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2075

Calendar year

Total

fertility

rate1

Age-sex-adjusted death rate2

per 100,000, by age: Net immigration

Total Under 65 65 and over Legal3 Otherthan-legal4

Historical data:

1940. . . . . . . . 2.23 1,672.6 656.1 8,791.1

1945. . . . . . . . 2.42 1,488.6 584.4 7,820.1

1950. . . . . . . . 3.03 1,339.9 480.0 7,361.7 186,890

1955. . . . . . . . 3.50 1,243.0 424.7 6,973.6 178,343

1960. . . . . . . . 3.61 1,237.9 418.8 6,973.1 199,049

1965. . . . . . . . 2.88 1,210.8 411.7 6,806.6 222,523

1970. . . . . . . . 2.43 1,138.4 403.7 6,283.5 279,995

1975. . . . . . . . 1.77 1,020.9 352.5 5,701.7 289,646

1980. . . . . . . . 1.85 961.1 316.8 5,473.1 397,979

1985. . . . . . . . 1.84 912.3 289.9 5,270.4 427,507

1990. . . . . . . . 2.07 865.8 277.5 4,985.5 492,083

1991. . . . . . . . 2.07 854.8 275.2 4,913.5 528,004

1992. . . . . . . . 2.06 843.7 269.7 4,862.5 607,976

1993. . . . . . . . 2.04 863.5 273.3 4,996.0 660,011

1994. . . . . . . . 2.04 852.4 271.2 4,922.3 598,796

1995. . . . . . . . 2.02 850.1 268.3 4,923.8 537,146

1996. . . . . . . . 2.03 837.1 257.8 4,894.0 683,449

1997. . . . . . . . 2.04 822.5 246.1 4,858.9 596,873

1998. . . . . . . . 2.06 816.1 240.0 4,850.3 494,642

1999 5 . . . . . . 2.07 809.8 237.8 4,815.3 495,000 300,000

20005. . . . . . . 2.07 803.0 233.8 4,788.8 540,000 300,000

Intermediate: 

2005. . . . . . . . 2.04 773.7 215.5 4,682.9 600,000 300,000

2010. . . . . . . . 2.02 751.1 199.9 4,611.1 600,000 300,000

2015. . . . . . . . 2.00 728.5 187.5 4,516.8 600,000 300,000

2020. . . . . . . . 1.97 701.7 178.3 4,366.8 600,000 300,000

2025. . . . . . . . 1.95 674.8 170.4 4,206.7 600,000 300,000

2030. . . . . . . . 1.95 649.4 163.2 4,054.1 600,000 300,000

2035. . . . . . . . 1.95 625.6 156.4 3,911.1 600,000 300,000

2040. . . . . . . . 1.95 603.3 150.1 3,776.9 600,000 300,000

2045. . . . . . . . 1.95 582.3 144.1 3,650.7 600,000 300,000

2050. . . . . . . . 1.95 562.6 138.6 3,532.1 600,000 300,000

2055. . . . . . . . 1.95 544.1 133.3 3,420.3 600,000 300,000

2060. . . . . . . . 1.95 526.6 128.4 3,314.8 600,000 300,000

2065. . . . . . . . 1.95 510.1 123.8 3,215.1 600,000 300,000

2070. . . . . . . . 1.95 494.5 119.4 3,120.9 600,000 300,000

2075. . . . . . . . 1.95 479.7 115.3 3,031.7 600,000 300,000

Low Cost: 

2005. . . . . . . . 2.09 800.8 222.4 4,851.6 760,000 450,000

2010. . . . . . . . 2.12 804.0 214.4 4,933.2 760,000 450,000

2015. . . . . . . . 2.14 801.2 207.1 4,961.9 760,000 450,000

2020. . . . . . . . 2.17 789.3 200.9 4,909.5 760,000 450,000

2025. . . . . . . . 2.20 775.5 195.5 4,836.6 760,000 450,000

2030. . . . . . . . 2.20 762.0 190.5 4,763.6 760,000 450,000

2035. . . . . . . . 2.20 749.1 185.8 4,693.3 760,000 450,000

2040. . . . . . . . 2.20 736.7 181.3 4,625.5 760,000 450,000

2045. . . . . . . . 2.20 724.8 177.1 4,560.1 760,000 450,000

2050. . . . . . . . 2.20 713.4 173.1 4,497.1 760,000 450,000

2055. . . . . . . . 2.20 702.5 169.3 4,436.4 760,000 450,000

2060. . . . . . . . 2.20 692.0 165.6 4,377.7 760,000 450,000

2065. . . . . . . . 2.20 681.8 162.1 4,321.2 760,000 450,000

2070. . . . . . . . 2.20 672.1 158.8 4,266.6 760,000 450,000

2075. . . . . . . . 2.20 662.8 155.7 4,213.8 760,000 450,000
Assumptions & Methods

74

4. Total Population Estimates

Combining the above assumptions for future fertility, mortality, and net

immigration with data on marriage and divorce rates based on data from

NCHS, projections were made of the population in the Social Security area

by age, sex, and marital status as of January 1 of each year 2000 through

2080. The starting Social Security area population for January 1, 1999, uses

as a basis the Census Bureau’s estimate of the residents of the 50 states and

D.C., and Armed Forces overseas. This base estimate is adjusted for net census undercount and increased for other U.S. citizens living abroad (including

residents of U.S. territories) and for non-citizens living abroad who are

insured for Social Security benefits. This starting population was then projected using assumed rates of birth, death, marriage and divorce, and

assumed levels of migration.

High Cost:

2005. . . . . . . . 1.99 747.5 208.6 4,521.2 455,000 200,000

2010. . . . . . . . 1.92 704.1 188.5 4,314.9 455,000 200,000

2015. . . . . . . . 1.85 663.7 172.1 4,106.0 455,000 200,000

2020. . . . . . . . 1.78 621.0 159.0 3,856.2 455,000 200,000

2025. . . . . . . . 1.70 579.9 147.3 3,609.4 455,000 200,000

2030. . . . . . . . 1.70 542.2 136.8 3,381.5 455,000 200,000

2035. . . . . . . . 1.70 507.8 127.2 3,173.1 455,000 200,000

2040. . . . . . . . 1.70 476.3 118.4 2,982.3 455,000 200,000

2045. . . . . . . . 1.70 447.4 110.4 2,807.4 455,000 200,000

2050. . . . . . . . 1.70 421.0 103.1 2,646.9 455,000 200,000

2055. . . . . . . . 1.70 396.7 96.4 2,499.4 455,000 200,000

2060. . . . . . . . 1.70 374.3 90.2 2,363.7 455,000 200,000

2065. . . . . . . . 1.70 353.7 84.5 2,238.6 455,000 200,000

2070. . . . . . . . 1.70 334.7 79.3 2,123.2 455,000 200,000

2075. . . . . . . . 1.70 317.2 74.5 2,016.6 455,000 200,000

 1 The total fertility rate for any year is the average number of children who would be born to a woman in her

lifetime if she were to experience the birth rates by age observed in, or assumed for, the selected year, and if

she were to survive the entire childbearing period. The ultimate total fertility rate is assumed to be reached in

2025.

 2 The age-sex-adjusted death rate is the crude rate that would occur in the enumerated total population as of

April 1, 1990, if that population were to experience the death rates by age and sex observed in, or assumed

for, the selected year.

 3 Historical estimates of net legal immigration assume a 25 percent reduction in legal immigration due to

legal emigration. Estimates do not include persons legalized under the Immigration Reform and Control Act

of 1986.

 4 Other-than-legal net immigration is estimated to average between 225,000 and 300,000 persons per year

over the period 1980-98.

 5 Preliminary or estimated.

Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2075 (Cont.)

Calendar year

Total

fertility

rate1

Age-sex-adjusted death rate2

per 100,000, by age: Net immigration

Total Under 65 65 and over Legal3 Otherthan-legal4
75

Demographic Assumptions and Methods

Table V.A2 shows the projected population as of July 1 by broad age group,

for the three alternatives. Also shown are tabulated aged and total dependency ratios (see table footnotes for definitions).

Table V.A2.—Social Security Area Population as of July 1 and Dependency Ratios,

Calendar Years 1950-2075 

Population (in thousands) Dependency ratio

Calendar year Under 20 20-64

65 and

over Total Aged1 Total2

Historical data:

1950. . . . . . . . . . . . . 53,895 92,739 12,752 159,386 0.138 0.719

1960. . . . . . . . . . . . . 72,989 99,842 17,250 190,081 .173 .904

1965. . . . . . . . . . . . . 80,134 104,833 19,092 204,059 .182 .947

1970. . . . . . . . . . . . . 80,685 113,194 20,921 214,800 .185 .898

1975. . . . . . . . . . . . . 78,438 122,862 23,266 224,566 .189 .828

1980. . . . . . . . . . . . . 74,570 134,431 26,149 235,150 .195 .749

1985. . . . . . . . . . . . . 73,248 144,897 29,065 247,210 .201 .706

1990. . . . . . . . . . . . . 75,171 152,968 32,026 260,166 .209 .701

1995. . . . . . . . . . . . . 79,234 159,817 34,470 273,522 .216 .711

2000. . . . . . . . . . . . . 81,909 168,215 35,449 285,573 .211 .698

Intermediate:

2005. . . . . . . . . . . . . 83,050 177,702 36,624 297,376 .206 .673

2010. . . . . . . . . . . . . 83,529 186,005 39,508 309,042 .212 .661

2015. . . . . . . . . . . . . 83,903 191,422 45,341 320,666 .237 .675

2020. . . . . . . . . . . . . 85,157 193,966 52,761 331,884 .272 .711

2025. . . . . . . . . . . . . 86,423 194,350 61,384 342,158 .316 .761

2030. . . . . . . . . . . . . 87,351 195,130 68,672 351,153 .352 .800

2035. . . . . . . . . . . . . 87,863 198,438 72,587 358,888 .366 .809

2040. . . . . . . . . . . . . 88,344 203,050 74,131 365,526 .365 .800

2045. . . . . . . . . . . . . 89,103 207,049 75,223 371,374 .363 .794

2050. . . . . . . . . . . . . 90,070 209,618 77,108 376,796 .368 .798

2055. . . . . . . . . . . . . 90,975 211,419 79,784 382,179 .377 .808

2060. . . . . . . . . . . . . 91,729 212,867 83,159 387,755 .391 .822

2065. . . . . . . . . . . . . 92,397 215,068 86,041 393,506 .400 .830

2070. . . . . . . . . . . . . 93,101 217,430 88,653 399,184 .408 .836

2075. . . . . . . . . . . . . 93,884 219,593 91,098 404,575 .415 .842

Low Cost:

2005. . . . . . . . . . . . . 83,750 178,485 36,511 298,746 .205 .674

2010. . . . . . . . . . . . . 85,513 187,806 39,077 312,396 .208 .663

2015. . . . . . . . . . . . . 87,742 194,272 44,459 326,473 .229 .680

2020. . . . . . . . . . . . . 91,461 197,946 51,324 340,731 .259 .721

2025. . . . . . . . . . . . . 95,631 199,811 59,233 354,674 .296 .775

2030. . . . . . . . . . . . . 99,500 202,641 65,636 367,777 .324 .815

2035. . . . . . . . . . . . . 102,801 208,564 68,603 379,968 .329 .822

2040. . . . . . . . . . . . . 106,032 216,331 69,307 391,670 .320 .811

2045. . . . . . . . . . . . . 109,517 224,040 69,832 403,389 .312 .801

2050. . . . . . . . . . . . . 113,340 230,775 71,414 415,529 .309 .801

2055. . . . . . . . . . . . . 117,307 237,145 73,910 428,362 .312 .806

2060. . . . . . . . . . . . . 121,154 243,736 77,065 441,955 .316 .813

2065. . . . . . . . . . . . . 124,877 251,693 79,600 456,170 .316 .812

2070. . . . . . . . . . . . . 128,643 260,201 81,931 470,775 .315 .809

2075. . . . . . . . . . . . . 132,575 268,632 84,432 485,638 .314 .808
Assumptions & Methods

76

Note: Totals do not necessarily equal the sums of rounded components.

5. Life Expectancy Estimates

Life expectancy, or average remaining number of years expected prior to

death, is a useful analytical concept. Life expectancy is calculated in two different forms, for two separate purposes.

Period life expectancy is calculated for a given year using the actual or

expected death rates at each age for that year. It is a useful summary statistic

for illustrating the overall level of the death rates experienced in a single

year. It is thus closely related to the age-sex-adjusted death rate that is discussed in section V.A.2. Period life expectancy for a particular year may be

viewed as the expected remaining life at a selected age only if it is assumed

that there is no change in death rates after that year.

Cohort life expectancy truly answers the question “What is the expected

average remaining lifetime for an individual at a selected age in a given

year?” Cohort life expectancies are calculated using death rates not from a

single year, but from the series of years in which the individual will actually

reach each succeeding age if he or she survives.

Tables V.A3 and V.A4 present historical and projected life expectancies calculated on both period and cohort bases. Cohort life expectancies are somewhat greater than period life expectancies for the same year. This is because

death rates for any given age tend to decline as time passes and the cohort

grows older.

High Cost:

2005. . . . . . . . . . . . . 82,408 177,040 36,735 296,182 0.207 0.673

2010. . . . . . . . . . . . . 81,718 184,540 39,928 306,186 .216 .659

2015. . . . . . . . . . . . . 80,366 189,120 46,206 315,692 .244 .669

2020. . . . . . . . . . . . . 79,337 190,780 54,217 324,335 .284 .700

2025. . . . . . . . . . . . . 77,983 189,956 63,646 331,584 .335 .746

2030. . . . . . . . . . . . . 76,348 188,993 71,973 337,314 .381 .785

2035. . . . . . . . . . . . . 74,555 190,026 77,052 341,633 .405 .798

2040. . . . . . . . . . . . . 72,881 191,872 79,723 344,476 .416 .795

2045. . . . . . . . . . . . . 71,630 192,598 81,736 345,964 .424 .796

2050. . . . . . . . . . . . . 70,580 191,511 84,309 346,401 .440 .809

2055. . . . . . . . . . . . . 69,379 189,356 87,519 346,254 .462 .829

2060. . . . . . . . . . . . . 68,081 186,416 91,408 345,906 .490 .856

2065. . . . . . . . . . . . . 66,815 183,790 94,877 345,482 .516 .880

2070. . . . . . . . . . . . . 65,671 181,151 97,961 344,783 .541 .903

2075. . . . . . . . . . . . . 64,638 178,398 100,520 343,557 .563 .926

 1 Population aged 65 and over, divided by population aged 20-64.

 2 Sum of population aged 65 and over, and population under age 20, divided by population aged 20-64.

Table V.A2.—Social Security Area Population as of July 1 and Dependency Ratios,

Calendar Years 1950-2075 (Cont.)

Population (in thousands) Dependency ratio

Calendar year Under 20 20-64

65 and

over Total Aged1 Total2
77

Demographic Assumptions and Methods

Table V.A3.—Period Life Expectancies1

 1 The period life expectancy at a given age for a given year represents the average number of years of life

remaining if a group of persons at that age were to experience the mortality rates for that year over the course

of their remaining life.

Calendar

year

Low Cost Intermediate High Cost

At birth At age 65 At birth At age 65 At birth At age 65

Male Female Male Female Male Female Male Female Male Female Male Female

Historical data:

1940 . . . 61.4 65.7 11.9 13.4

1945 . . . 62.9 68.4 12.6 14.4

1950 . . . 65.6 71.1 12.8 15.1

1955 . . . 66.7 72.8 13.1 15.6

1960 . . . 66.7 73.2 12.9 15.9

1965 . . . 66.8 73.8 12.9 16.3

1970 . . . 67.2 74.9 13.1 17.1

1975 . . . 68.7 76.6 13.7 18.0

1980 . . . 69.9 77.5 14.0 18.4

1985 . . . 71.1 78.2 14.4 18.6

1990 . . . 71.8 78.9 15.0 19.0

1991 . . . 71.9 79.0 15.1 19.1

1992 . . . 72.2 79.2 15.2 19.2

1993 . . . 72.0 78.9 15.1 19.0

1994 . . . 72.2 79.0 15.3 19.0

1995 . . . 72.4 79.0 15.3 19.0

1996 . . . 72.8 79.1 15.4 19.0

1997 . . . 73.3 79.3 15.5 19.1

1998 . . . 73.5 79.3 15.6 19.0

19992 . . 

 2 Preliminary or estimated.

73.6 79.4 15.7 19.1

20002 . . 73.8 79.5 15.7 19.1

Projected:

2005 . . . 74.2 79.6 15.8 19.0 74.6 80.0 16.0 19.3 75.0 80.4 16.3 19.6

2010 . . . 74.5 79.5 15.8 18.8 75.3 80.3 16.3 19.3 76.0 81.1 16.7 19.9

2015 . . . 74.8 79.6 15.8 18.7 75.9 80.7 16.5 19.5 76.9 81.7 17.1 20.3

2020 . . . 75.0 79.8 15.9 18.8 76.4 81.1 16.8 19.7 77.7 82.4 17.7 20.8

2025 . . . 75.3 80.0 16.1 18.9 76.9 81.5 17.0 20.0 78.5 83.1 18.2 21.3

2030 . . . 75.5 80.2 16.2 19.0 77.3 81.9 17.3 20.3 79.3 83.8 18.7 21.8

2035 . . . 75.8 80.4 16.3 19.1 77.8 82.3 17.6 20.6 80.1 84.4 19.3 22.3

2040 . . . 76.0 80.6 16.4 19.2 78.2 82.6 17.9 20.8 80.8 85.1 19.8 22.8

2045 . . . 76.2 80.7 16.5 19.3 78.6 83.0 18.2 21.1 81.5 85.7 20.3 23.3

2050 . . . 76.4 80.9 16.6 19.4 79.0 83.3 18.4 21.4 82.2 86.3 20.7 23.7

2055 . . . 76.7 81.1 16.7 19.5 79.4 83.7 18.7 21.6 82.8 86.9 21.2 24.2

2060 . . . 76.9 81.2 16.8 19.6 79.8 84.0 18.9 21.9 83.5 87.4 21.7 24.6

2065 . . . 77.0 81.4 16.9 19.7 80.2 84.3 19.2 22.1 84.1 88.0 22.1 25.0

2070 . . . 77.2 81.6 17.0 19.8 80.5 84.7 19.4 22.4 84.7 88.5 22.6 25.5

2075 . . . 77.4 81.7 17.1 19.9 80.9 85.0 19.7 22.6 85.2 89.0 23.0 25.9
Assumptions & Methods

78

Table V.A4.—Cohort Life Expectancies1

 1 The cohort life expectancy at a given age for a given year represents the average number of years of life

remaining if a group of persons at that age were to experience the mortality rates for the series of years in

which they reach each succeeding age.

Calendar

year

Low Cost Intermediate High Cost

At birth At age 652

 2 Age 65 cohort life expectancies are based on actual data prior to 1970.

At birth At age 652 At birth At age 652

Male Female Male Female Male Female Male Female Male Female Male Female

1940 68.7 75.0 12.7 14.7 69.2 75.8 12.7 14.7 69.8 76.6 12.7 14.7

1945 . . . 70.1 76.3 13.0 15.4 70.8 77.2 13.0 15.4 71.7 78.3 13.0 15.4

1950 . . . 71.1 77.2 13.1 16.2 72.1 78.4 13.1 16.2 73.2 79.7 13.1 16.2

1955 . . . 71.7 77.7 13.1 16.7 72.9 79.1 13.1 16.7 74.3 80.7 13.1 16.7

1960 . . . 72.2 78.0 13.2 17.4 73.6 79.6 13.2 17.4 75.3 81.5 13.2 17.4

1965 . . . 72.8 78.4 13.5 18.0 74.5 80.2 13.5 18.0 76.5 82.4 13.5 18.0

1970 . . . 73.6 79.0 13.8 18.5 75.5 81.0 13.8 18.6 77.9 83.5 13.8 18.6

1975 . . . 74.3 79.5 14.2 18.8 76.4 81.7 14.3 18.8 79.1 84.6 14.3 18.8

1980 . . . 74.9 79.9 14.7 18.8 77.3 82.4 14.7 18.9 80.3 85.5 14.8 19.0

1985 . . . 75.3 80.3 15.1 18.9 77.9 82.9 15.2 19.1 81.3 86.3 15.3 19.2

1990 . . . 75.7 80.6 15.4 18.9 78.5 83.4 15.6 19.2 82.2 87.1 15.8 19.6

1991 . . . 75.8 80.6 15.4 18.9 78.7 83.5 15.6 19.3 82.4 87.2 15.9 19.6

1992 . . . 75.9 80.7 15.5 18.9 78.8 83.6 15.7 19.3 82.6 87.4 15.9 19.7

1993 . . . 75.9 80.7 15.5 18.9 78.9 83.7 15.8 19.3 82.8 87.5 16.0 19.8

1994 . . . 76.0 80.8 15.6 18.9 79.0 83.8 15.8 19.4 82.9 87.7 16.1 19.8

1995 . . . 76.1 80.8 15.6 18.9 79.1 83.9 15.9 19.4 83.1 87.8 16.2 19.9

1996 . . . 76.2 80.9 15.6 18.9 79.3 84.0 16.0 19.4 83.3 88.0 16.3 20.0

1997 . . . 76.2 80.9 15.7 18.9 79.3 84.1 16.0 19.5 83.5 88.1 16.5 20.1

1998 . . . 76.3 81.0 15.7 18.9 79.4 84.1 16.1 19.5 83.6 88.2 16.6 20.2

1999 . . . 76.3 81.0 15.7 18.9 79.5 84.2 16.2 19.5 83.8 88.4 16.7 20.2

2000 . . . 76.4 81.1 15.7 18.8 79.6 84.3 16.2 19.6 83.9 88.5 16.8 20.3

2005 . . . 76.6 81.3 15.8 18.8 80.1 84.7 16.5 19.8 84.8 89.2 17.3 20.8

2010 . . . 76.9 81.4 16.0 18.9 80.6 85.1 16.9 20.0 85.5 89.8 17.9 21.2

2015 . . . 77.1 81.6 16.1 19.0 81.0 85.4 17.2 20.3 86.2 90.4 18.4 21.8

2020 . . . 77.3 81.8 16.2 19.1 81.4 85.7 17.5 20.6 86.8 90.9 19.0 22.3

2025 . . . 77.5 82.0 16.3 19.2 81.7 86.1 17.8 20.8 87.4 91.4 19.6 22.8

2030 . . . 77.7 82.1 16.4 19.3 82.1 86.4 18.0 21.1 88.0 91.9 20.1 23.4

2035 . . . 77.9 82.3 16.5 19.4 82.4 86.6 18.3 21.4 88.5 92.4 20.6 23.9

2040 . . . 78.1 82.4 16.6 19.5 82.8 86.9 18.6 21.7 89.0 92.9 21.2 24.3

2045 . . . 78.3 82.5 16.7 19.6 83.1 87.2 18.9 21.9 89.6 93.3 21.7 24.8

2050 . . . 78.4 82.7 16.8 19.7 83.4 87.5 19.1 22.2 90.1 93.7 22.2 25.3

2055 . . . 78.6 82.8 16.9 19.8 83.7 87.7 19.4 22.4 90.6 94.2 22.6 25.7

2060 . . . 78.7 82.9 17.0 19.9 84.0 88.0 19.6 22.7 91.0 94.6 23.1 26.2

2065 . . . 78.9 83.0 17.1 20.0 84.3 88.2 19.9 22.9 91.5 95.0 23.6 26.6

2070 . . . 79.0 83.2 17.2 20.1 84.6 88.5 20.1 23.1 91.9 95.4 24.0 27.0

2075 . . . 79.2 83.3 17.3 20.2 84.9 88.7 20.3 23.4 92.4 95.8 24.5 27.4
79

Economic Assumptions and Methods

B. ECONOMIC ASSUMPTIONS AND METHODS

The basic economic assumptions are embodied in three alternatives that are

designed to vary Social Security’s financial status, and illustrate the likely

range of outcomes that might be encountered. The intermediate assumptions

reflect the Trustees’ consensus expectation of moderate economic growth

throughout the projection period. The low cost assumptions represent a more

optimistic outlook, with relatively stronger economic growth. The high cost

assumptions represent a relatively pessimistic forecast, with weaker economic growth and two recessions in the short-range period. Economic cycles

are not included in assumptions beyond the first 5 to 10 years of the projection period because they have little effect on the long-range estimates of

financial status.

The following sections 1 through 4 discuss the basic economic assumptions

that are summarized in table V.B1. The subsequent sections 5 through 7 discuss additional economic factors, summarized in table V.B2, that are critical

to the projections of the future financial status of the combined OASDI Trust

Funds.

1. Productivity Assumptions

Total U.S. economy productivity is defined as the ratio of real gross domestic

produce (GDP) to hours worked by all workers.1 The rate of change in total

productivity is a major determinant in the growth of average earnings. For

the 40 years from 1959-99, annual increases in total productivity averaged

1.8 percent, the result of average annual increases of 2.6, 1.8, 1.3, and 1.5

percent for the 10-year periods 1959-69, 1969-79, 1979-89 and 1989-99,

respectively. The ultimate annual increases in productivity are assumed to be

1.8, 1.5, and 1.2 percent for alternatives I, II, and III, respectively. These are

the same ultimate rates assumed for the 2000 report.

For alternative II, the annual change in productivity is assumed to decrease

from 3.2 percent in 2000 to 2.1 percent in 2001 and 2002, then gradually

decrease further to the 1.4 to 1.5 percent range between 2006 and 2010.

Some of this slowdown in productivity growth reflects the assumption that

the latest historical level of real GDP is greater than the sustainable fullemployment (or potential) level. Thus, the future growth in real GDP (and

therefore productivity) includes a component that gradually pulls the level of

 1 Historical levels of real GDP are from the Bureau of Economic Analysis’ (BEA) National Income and

Product Accounts (NIPA). Historical total hours worked is an unpublished series provided by the Bureau of

Labor Statistics (BLS), and is for all civilian and military wage and salary workers and the self-employed.
Assumptions & Methods

80

the real GDP down to the full-employment path. For alternative I, the annual

change in productivity decreases from 3.2 percent in 2000 to 2.3 percent in

2002, then decreases gradually to the 1.7 to 1.8 percent range between 2007

and 2010. For alternative III, the annual change in productivity decreases

from 3.2 percent in 2000 to 0.5 percent in 2001, then varies with projected

changes in the business cycle, until reaching its ultimate growth rate of 1.2

percent in 2010.

2. Inflation Assumptions

Future changes in the Consumer Price Index for Urban Wage Earners and

Clerical Workers (hereafter denoted as CPI) will directly affect the OASDI

program through the automatic cost-of-living benefit increases. Future

changes in the GDP chain-type price index (hereafter, the GDP deflator) may

affect the nominal levels of the GDP, wages, self-employment income, average earnings, and the taxable payroll.

Historically, the CPI has increased, on average, by 4.4 percent for the 40

years from 1959 to 1999, the result of average annual increases of 2.3, 7.1,

5.3, and 2.9 percent for the 10-year periods 1959-69, 1969-79, 1979-89 and

1989-99, respectively. The GDP deflator has increased by 4.0 percent for

1959 to 1999, and 2.3, 6.6, 4.8, and 2.3 percent annually for the same respective 10-year periods. It should be noted that several methodological changes

made by the Bureau of Labor Statistics in methods for computing the CPI

since 1995 will tend to reduce the difference between the growth rates of

these indices in the future.

The ultimate annual increases in the CPI are assumed to be 2.3, 3.3, and 4.3

percent for alternatives I, II, and III, respectively. For each alternative, the

ultimate annual increase in the GDP deflator is assumed to be equal to the

sum of the annual increases in the CPI and a -0.2 percentage price differential. This differential is based primarily on methodological differences in the

construction of the two indices. Hence, for alternative II, the ultimate annual

increase in the GDP deflator is 3.1 percent, the sum of the 3.3 percent

assumed ultimate annual increase in the CPI and the -0.2 percent price differential. Similarly, the ultimate annual increases in the GDP deflator are 2.1

and 4.1 percent for alternatives I and III, respectively. The assumed ultimate

annual rates of increase in the CPI and the GDP deflator for each alternative

are the same as those used in the 2000 report. 

For alternative II, the annual change in the CPI is assumed to decrease from

3.5 percent in 2000 to 3.0 percent in 2001, then increase gradually to the

assumed ultimate rate of 3.3 percent by 2006. For alternative I, the annual
81

Economic Assumptions and Methods

change in the CPI decreases from 3.5 percent in 2000 to 3.0 percent in 2001,

then decreases gradually to the assumed ultimate rate of 2.3 percent by 2004.

For alternative III, the annual change in the CPI decreases from 3.5 percent

in 2000 to 3.1 percent in 2001, and reaches its assumed ultimate rate of 4.3

percent in 2008. For all three alternatives, the price differential, defined as

the percent change in the GDP deflator less the CPI percent change, is -1.3

percentage points in 2000, and is projected to move smoothly toward -0.2

percentage point by 2006.

3. Average Earnings Assumptions

The level of average (nominal) earnings in OASDI covered employment for

each year has a direct effect on the size of the taxable payroll and on the

future level of average benefits. In addition, increases in the level of average

wages in the U.S. economy directly affect the indexation, under the automatic-adjustment provisions in the law, of the OASDI benefit formulas, the

contribution and benefit base, the exempt amounts under the retirement earnings test, the amount of earnings required for a quarter of coverage, and

under certain circumstances, the automatic cost-of-living benefit increases.

These concepts are closely linked to average U.S. earnings, defined as the

ratio of the sum of total U.S. wage and salary disbursements and proprietor

income to the sum of total U.S. military and total civilian (household)

employment. The growth rates in average U.S. earnings can be broken down

into the growth rates for total U.S. economy productivity and the GDP price

index (see previous two sections), and to the growth rates for other components, including average hours worked, the ratio of earnings to compensation

(which includes fringe benefits), and the ratio of compensation to GDP.

Over the last 40 years, the average percent change in average hours worked

was -0.2, the result of annual average changes of -0.2, -0.7, -0.1, and 0.3 percent for the 10-year periods 1959-1969, 1969-1979, 1979-1989, and 1989-

1999, respectively. Some of the recent increase in the average percent change

in average hours worked is believed to be associated with changes in the distribution of employment by age/sex and by educational attainment. In the

future, these distributional effects are expected to fade. The average percent

change in the ratio of earnings to compensation was -0.2 percent from 1959

to 1999. The assumed ultimate annual rates of change are 0.0, -0.1, and -0.2

percent for average hours worked, and -0.1, -0.2, and -0.3 percent for the

ratio of earnings to compensation, for alternatives I, II, and III, respectively.

No ultimate change is assumed for the ratio of compensation to GDP. 
Assumptions & Methods

82

The assumed ultimate annual growth rate in average U.S. earnings is 4.3 percent for the intermediate alternative II. This reflects assumed ultimate annual

growth rates of 1.5, -0.2, -0.1, and 3.1 percent for productivity, the ratio of

earnings to compensation, average hours worked, and the GDP deflator

respectively. Similarly, the assumed ultimate annual growth rate in average

nominal U.S. earnings is 3.8 percent for alternative I and 4.8 percent for

alternative III. (See table V.B1 for historical and assumed future values.)

The assumed ultimate annual growth rates in average U.S. earnings are very

similar to the assumed ultimate annual growth rates for average earnings in

OASDI covered employment, and for the average wage in OASDI covered

employment (henceforth the average covered wage). Thus, the assumed ultimate annual growth rates in average covered wages are 3.8, 4.3, and 4.8 percent for alternatives I, II, and III, respectively. For alternative II, the annual

rate of change in the average covered wage is assumed to drop from the estimated 5.5 percent increase in 2000 to 4.9 percent in 2001, 4.8 percent in

2002, the 4.2 to 4.4 percent range from 2003 to 2008, and then to the ultimate assumed average rate of 4.3 percent in 2009 and thereafter.

4. Assumed Real-Wage Differentials

For simplicity, real increases in the average covered wage have traditionally

been expressed in the form of real-wage differentials—i.e., the percentage

increase in the average covered wage minus the percentage increase in the

CPI. Over the last 40 years, 1960-99, the real-wage differential averaged 1.1

percentage points, the result of averages of 2.0, 0.4, 0.5, and 1.5 percentage

points for the 10-year periods 1960-69, 1970-79, 1980-89 and 1990-99,

respectively. The assumed ultimate annual average covered real-wage differentials are 1.5, 1.0, and 0.5 percentage point(s) for alternatives I, II, and III,

respectively.

Based on preliminary data, the real-wage differential was 2.0 percentage

points in 2000. For alternative II, the real-wage differential is projected to

fall to about 1.9 percentage points in 2001 and 2002, 1.3 percentage points in

2003, 1.2 percentage points in 2004 to 2006, then to about the ultimate

assumed differential of 1.0 percentage point (4.3 percent nominal wage

growth less 3.3 percent CPI inflation) for 2007 and thereafter.

For the low cost alternative I, the real-wage differential is assumed to be in

the range of 1.4 percentage points to 2.2 percentage points between 2001 and

2009, remaining at the ultimate assumed real-wage differential of 1.5 percentage points thereafter. For the high cost alternative III, the real-wage differential for the short-range period is projected to fluctuate between -1.8 and
83

Economic Assumptions and Methods

2.1 percentage points, eventually stabilizing at about 0.5 percentage point in

2008 and later.

Table V.B1.—Principal Economic Assumptions

Calendar year 

Average annual percentage increase in—

Realwage

differential1

Productivity:

Total

economy

Earnings as

a percent of

compensation

Average

hours

worked

GDP

price

index

Average

annual wage

in covered

employment

Consumer

Price

Index2

Historical data:

1960 to 1965 . . 3.4 -0.2 0.0 1.4 3.2 1.2 2.0

1965 to 1970 . . 1.9 -.4 -.7 4.1 5.8 4.2 1.6

1970 to 1975 . . 2.1 -.7 -.9 6.6 6.6 6.8 -.1

1975 to 1980 . . 1.0 -.6 -.2 7.3 8.7 8.9 -.2

1980 to 1985 . . 1.6 -.2 -.1 5.3 6.7 5.2 1.4

1985 to 1990 . . 1.2 .0 .0 3.3 4.7 3.8 .9

1990 to 1995 . . 1.1 -.1 .3 2.5 3.4 3.0 .4

1995 to 2000 . . 2.3 .7 .4 1.8 5.4 2.4 3.0

1990. . . . . . . . . 1.1 -.2 -.5 3.9 5.1 5.2 -.1

1991. . . . . . . . . 1.1 -.5 -.6 3.6 3.0 4.1 -1.1

1992. . . . . . . . . 2.9 .2 -.4 2.4 4.9 2.9 2.0

1993. . . . . . . . . .3 -1.0 1.0 2.4 1.9 2.8 -.9

1994. . . . . . . . . 1.1 -.4 .7 2.1 3.4 2.5 1.0

1995. . . . . . . . . .4 1.0 .9 2.2 4.0 2.9 1.1

1996. . . . . . . . . 2.2 1.2 .0 1.9 4.5 2.9 1.6

1997. . . . . . . . . 1.6 1.2 .6 1.9 6.0 2.3 3.7

1998. . . . . . . . . 2.0 .5 .9 1.3 5.7 1.3 4.4

1999. . . . . . . . . 2.5 .3 .2 1.5 5.7 2.2 3.5

2000. . . . . . . . . 3.2 .2 .6 2.2 5.5 3.5 2.0

Intermediate: 

2001. . . . . . . . . 2.1 -.3 .2 2.3 4.9 3.0 1.9

2002. . . . . . . . . 2.1 -.1 .1 2.3 4.8 2.9 1.9

2003. . . . . . . . . 1.9 -.1 .1 2.5 4.3 3.0 1.3

2004. . . . . . . . . 1.8 -.1 .0 2.7 4.3 3.1 1.2

2005. . . . . . . . . 1.6 -.2 .0 2.9 4.4 3.2 1.2

2006. . . . . . . . . 1.5 -.2 .0 3.1 4.4 3.3 1.2

2007. . . . . . . . . 1.4 -.2 .0 3.1 4.3 3.3 1.0

2008. . . . . . . . . 1.5 -.2 -.1 3.1 4.2 3.3 .9

2009. . . . . . . . . 1.5 -.2 -.1 3.1 4.3 3.3 1.0

2010. . . . . . . . . 1.4 -.2 -.1 3.1 4.3 3.3 1.0

2015. . . . . . . . . 1.5 -.2 -.1 3.1 4.3 3.3 1.0

2020. . . . . . . . . 1.5 -.2 -.1 3.1 4.3 3.3 1.0

2025. . . . . . . . . 1.5 -.2 -.1 3.1 4.3 3.3 1.0

2030. . . . . . . . . 1.5 -.2 -.1 3.1 4.3 3.3 1.0

2035. . . . . . . . . 1.5 -.2 -.1 3.1 4.3 3.3 1.0

2040. . . . . . . . . 1.5 -.2 -.1 3.1 4.3 3.3 1.0

2045. . . . . . . . . 1.5 -.2 -.1 3.1 4.3 3.3 1.0

2050. . . . . . . . . 1.5 -.2 -.1 3.1 4.3 3.3 1.0

2055. . . . . . . . . 1.5 -.2 -.1 3.1 4.3 3.3 1.0

2060. . . . . . . . . 1.5 -.2 -.1 3.1 4.3 3.3 1.0

2065. . . . . . . . . 1.5 -.2 -.1 3.1 4.3 3.3 1.0

2070. . . . . . . . . 1.5 -.2 -.1 3.1 4.3 3.3 1.0

2075. . . . . . . . . 1.5 -.2 -.1 3.1 4.3 3.3 1.0
Assumptions & Methods

84

Low Cost: 

2001. . . . . . . . . 2.2 -0.2 0.2 2.3 5.1 3.0 2.2

2002. . . . . . . . . 2.3 -.1 .1 2.1 4.8 2.6 2.2

2003. . . . . . . . . 2.1 -.1 .1 1.8 4.0 2.4 1.6

2004. . . . . . . . . 2.0 -.1 .0 1.9 4.0 2.3 1.7

2005. . . . . . . . . 1.9 -.1 .0 2.0 3.9 2.3 1.6

2006. . . . . . . . . 1.9 -.1 .0 2.1 4.0 2.3 1.7

2007. . . . . . . . . 1.7 -.1 .0 2.1 3.8 2.3 1.5

2008. . . . . . . . . 1.8 -.1 .0 2.1 3.7 2.3 1.4

2009. . . . . . . . . 1.8 -.1 .0 2.1 3.8 2.3 1.5

2010. . . . . . . . . 1.7 -.1 .0 2.1 3.8 2.3 1.5

2015. . . . . . . . . 1.8 -.1 .0 2.1 3.8 2.3 1.5

2020. . . . . . . . . 1.8 -.1 .0 2.1 3.8 2.3 1.5

2025. . . . . . . . . 1.8 -.1 .0 2.1 3.8 2.3 1.5

2030. . . . . . . . . 1.8 -.1 .0 2.1 3.8 2.3 1.5

2035. . . . . . . . . 1.8 -.1 .0 2.1 3.8 2.3 1.5

2040. . . . . . . . . 1.8 -.1 .0 2.1 3.8 2.3 1.5

2045. . . . . . . . . 1.8 -.1 .0 2.1 3.8 2.3 1.5

2050. . . . . . . . . 1.8 -.1 .0 2.1 3.8 2.3 1.5

2055. . . . . . . . . 1.8 -.1 .0 2.1 3.8 2.3 1.5

2060. . . . . . . . . 1.8 -.1 .0 2.1 3.8 2.3 1.5

2065. . . . . . . . . 1.8 -.1 .0 2.1 3.8 2.3 1.5

2070. . . . . . . . . 1.8 -.1 .0 2.1 3.8 2.3 1.5

2075. . . . . . . . . 1.8 -.1 .0 2.1 3.8 2.3 1.5

High Cost: 

2001. . . . . . . . . .5 -.4 .1 2.5 2.9 3.1 -.3

2002. . . . . . . . . 1.2 -.2 -.2 2.9 3.6 3.4 .2

2003. . . . . . . . . 2.3 -.1 -.2 4.5 6.8 5.0 1.7

2004. . . . . . . . . -.3 -.4 -.2 5.7 4.3 6.1 -1.8

2005. . . . . . . . . 2.2 -.3 -.2 4.1 5.2 4.4 .7

2006. . . . . . . . . 2.0 -.2 -.2 3.6 5.9 3.8 2.1

2007. . . . . . . . . 1.1 -.3 -.2 3.9 5.0 4.1 1.0

2008. . . . . . . . . 1.1 -.3 -.2 4.1 4.8 4.3 .5

2009. . . . . . . . . 1.1 -.3 -.2 4.1 4.8 4.3 .4

2010. . . . . . . . . 1.2 -.3 -.2 4.1 4.9 4.3 .6

2015. . . . . . . . . 1.2 -.3 -.2 4.1 4.8 4.3 .5

2020. . . . . . . . . 1.2 -.3 -.2 4.1 4.8 4.3 .5

2025. . . . . . . . . 1.2 -.3 -.2 4.1 4.8 4.3 .5

2030. . . . . . . . . 1.2 -.3 -.2 4.1 4.8 4.3 .5

2035. . . . . . . . . 1.2 -.3 -.2 4.1 4.8 4.3 .5

2040. . . . . . . . . 1.2 -.3 -.2 4.1 4.8 4.3 .5

2045. . . . . . . . . 1.2 -.3 -.2 4.1 4.8 4.3 .5

2050. . . . . . . . . 1.2 -.3 -.2 4.1 4.8 4.3 .5

2055. . . . . . . . . 1.2 -.3 -.2 4.1 4.8 4.3 .5

2060. . . . . . . . . 1.2 -.3 -.2 4.1 4.8 4.3 .5

2065. . . . . . . . . 1.2 -.3 -.2 4.1 4.8 4.3 .5

2070. . . . . . . . . 1.2 -.3 -.2 4.1 4.8 4.3 .5

2075. . . . . . . . . 1.2 -.3 -.2 4.1 4.8 4.3 .5

 1 The real-wage differential is the difference between the percentage increases, before rounding, in the average annual wage in covered employment, and the average annual Consumer Price Index.

 2 The Consumer Price Index is the annual average value for the calendar year of the Consumer Price Index

for Urban Wage Earners and Clerical Workers (CPI-W).

Table V.B1.—Principal Economic Assumptions (Cont.)

Calendar year 

Average annual percentage increase in—

Realwage

differential1

Productivity:

Total

economy

Earnings as

a percent of

compensation

Average

hours

worked

GDP

price

index

Average

annual wage

in covered

employment

Consumer

Price

Index2
85

Economic Assumptions and Methods

5. Labor Force and Unemployment Estimates

The civilian labor force is projected as the sum of components that subdivide

the population by age, sex, marital status and presence of children. The projected labor force for each of these components is the product of expected

population levels and labor force participation rates specific to the category.

Projections of the labor force participation rates take into account a lagged

cohort effect, the percentages of the population that are disabled or in the

military, the levels of Social Security retirement benefits, and the state of the

economy.

The annual rate of growth in the size of the labor force decreased from an

average of about 2.0 percent per year during the 1970s and 1980s to about

1.2 percent from 1991 to 1999. Further slowing of labor force growth is projected due to a substantial slowing of growth in the working age population

in the future as the natural consequence of the baby-boom generation

approaching retirement and the succeeding lower-birth-rate cohorts reaching

working age. The projected slowdown in labor force growth also reflects the

cessation of relatively rapid growth in labor force participation rates, particularly for women, by about 2005. Under alternative II, after 1999 the labor

force is projected to increase by about 0.9 percent per year, on average,

through 2010, and to increase much more slowly thereafter, ultimately reaching a 0.2 percent annual growth rate toward the end of the 75-year projection

period.

For men, the projected age-adjusted labor force participation rates for 2075

for alternatives I, II, and III are 1.3, 1.3, and 1.1 percentage points lower,

respectively, than the 1999 level of 74.7 percent. (Age-adjusted labor force

participation rates are adjusted to the 1999 age distribution of the non-institutionalized U.S. population.) These declines are due to the business cycle,

increases in the disability prevalence rates, and increases in the proportion of

workers who are never married. For women, the projected age-adjusted labor

force participation rates for 2075 for alternatives I, II, and III are 0.6, 0.6,

and 0.4 percentage point higher, respectively, than the 1999 level of 60.0 percent. These increases are due, in part, to cohort-effect increases in the labor

force participation rates for older workers, and to increases in the proportion

of workers who are never married. 

The ultimate projected labor force participation rates are not basic assumptions. They are derived from a historically based structural relationship using

economic and demographic assumptions specific to each alternative. However, because no variation in the structural relationship is assumed, and participation rates are not highly sensitive to most of the economic and
Assumptions & Methods

86

demographic assumptions, the ultimate projected labor force participation

rates vary only slightly across alternatives.

Unemployment rates are presented in the most commonly cited form, the

civilian rate. For years after 2010, unemployment rates are presented as total

age-sex adjusted rates (using the age-sex distribution of the 1999 civilian

labor force). These age-sex adjusted rates allow for more meaningful comparisons across time periods. The ultimate age-sex adjusted unemployment

rate for each alternative is assumed to be reached by 2010. The ultimate

assumed unemployment rates are 4.5, 5.5, and 6.5 percent for alternatives I,

II and III, respectively. These are the same values assumed in the 2000

report.

Prior to 2011, the total unemployment rate is constructed from projected levels of unemployment for various age-sex components. Each component is

projected based on a specification (consistent with Okun’s Law) relating

changes in the unemployment rate to the changes in the business cycle, as

measured by the ratio of the actual to potential GDP. For each alternative, the

total unemployment rate is projected to rise toward the ultimate assumed rate

as the economy moves toward the long-range sustainable growth path.

6. GDP Estimates

The real growth rate in GDP increases with the growth rates in total employment, productivity, and average hours worked. Total employment is the sum

of the U.S. Armed Forces and total civilian employment, which is based on

the projected total civilian labor force and unemployment rates. For the 30

year period from 1969 to 1999, the average growth rate in real GDP was 3.1

percent, and approximately 1.7, 1.5, and -0.2 percent for its components—

total employment, productivity, and average hours worked, respectively.

For alternative II, the average annual growth in real GDP is projected to be

2.4 percent over the short-range projection period (2000-10), a slower rate

than the 3.1 percent average observed over the historical 30-year period

(1969-99). This slowdown is primarily due to slower projected growth in

total employment. For alternative I, annual real growth in GDP is projected

to average 2.9 percent over the next 10 years. The relatively faster growth is

due mostly to a higher assumed rate of growth in worker productivity. For

alternative III, relatively weak economic growth is assumed for the first

quarter of 2001, followed by a recession lasting 3 quarters, and resulting in a

total decline in real GDP of 0.7 percent. After 8 quarters of recovery, a second recession, with a total decline in real GDP of 2.5 percent, is assumed to

begin in the first quarter of 2004, lasting 4 quarters. After the second reces-
87

Economic Assumptions and Methods

sion, a moderate economic recovery is assumed through 2007, with continued modest economic growth thereafter. For alternative III, annual growth in

real GDP is projected to average 1.6 percent for the next 10 years, from 2000

to 2010.

After 2010, no economic cycles are assumed, and thus projected rates of

growth in real GDP are determined by the full-employment rates of growth

projected for total employment, and assumed for labor productivity and average hours worked. For alternative II, the projected rate of growth for real

GDP falls toward the assumed productivity growth rate because of the projected decline in labor force growth over the period. By 2075, the growth in

real GDP slows to about 1.6 percent, due to the assumed ultimate percent

changes of 0.2, 1.5, and -0.1 for total employment, productivity, and average

hours worked, respectively.

7. Interest Rate Estimates

The interest rate presented in this report is the nominal interest rate, which is

(generally) compounded semiannually, for special U.S. Government obligations issuable to the trust funds in each of the 12 months of the year. The real

interest rate (ex post) is defined to be the annual (compounded) yield rate for

investments in these securities divided by the annual rate of growth in the

CPI for the first year after issuance.

In developing a reasonable range of assumed ultimate future real interest

rates for the three alternatives, historical experience was examined for the 40

years, 1960-99, and for each of the 10-year subperiods, 1960-69, 1970-79,

1980-89, and 1990-99. For the 40-year period, the real interest rate averaged

3.2 percent per year. For the four 10-year subperiods, the real interest rates

averaged 2.1, 0.7, 5.6 and 4.5 percent, respectively. The assumed ultimate

real interest rates are 3.7 percent, 3.0 percent, and 2.2 percent for alternatives

I, II, and III, respectively. The ultimate real yields are assumed to be reached

by the end of the short-range period. These annual real yields are the same as

those assumed in the 2000 report.

For the 10-year short-range projection period, nominal interest rates are projected based on changes in the business cycle and changes in the CPI. Under

the intermediate assumptions, the nominal interest rate is projected to drop

from 6.2 percent in 2000 to 5.6 percent in 2001, reflecting a slowing economy and a lower rate of inflation. Thereafter, the nominal interest rate rises

gradually, reaching the ultimate assumed level of about 6.3 percent in 2009.

For the low cost alternative I assumptions, the average annual nominal interest rate is assumed to reach an ultimate level of about 6.0 percent in 2009. In
Assumptions & Methods

88

the high cost alternative III, it is assumed to peak at 8.3 percent in 2003, and

then decline to an ultimate rate of about 6.5 percent in 2008.

Table V.B2.—Additional Economic Factors

Calendar year 

Average

annual

unemployment rate1

(percent)

Average annual percentage increase in—

Average

annual

interest

rate2

(percent)

Labor

force3 Total

employment4 RealGDP5

Historical data:

1960 to 1965 . . . . . 5.5 1.3 1.6 5.0 4.0

1965 to 1970 . . . . . 3.9 2.2 2.1 3.4 5.9

1970 to 1975 . . . . . 6.1 2.5 1.5 2.7 6.7

1975 to 1980 . . . . . 6.8 2.7 2.9 3.7 8.5

1980 to 1985 . . . . . 8.3 1.5 1.5 3.1 12.1

1985 to 1990 . . . . . 5.9 1.7 2.0 3.2 8.5

1990 to 1995 . . . . . 6.6 1.0 .9 2.4 7.0

1995 to 2000 . . . . . 4.6 1.3 1.6 4.3 6.2

1990. . . . . . . . . . . . 5.6 1.6 1.2 1.8 8.6

1991. . . . . . . . . . . . 6.9 .4 -.9 -.5 8.0

1992. . . . . . . . . . . . 7.5 1.4 .5 3.1 7.1

1993. . . . . . . . . . . . 6.9 .8 1.3 2.7 6.1

1994. . . . . . . . . . . . 6.1 1.4 2.2 4.0 7.1

1995. . . . . . . . . . . . 5.6 1.0 1.4 2.7 6.9

1996. . . . . . . . . . . . 5.4 1.2 1.4 3.6 6.6

1997. . . . . . . . . . . . 4.9 1.8 2.2 4.4 6.6

1998. . . . . . . . . . . . 4.5 1.0 1.4 4.4 5.6

1999. . . . . . . . . . . . 4.2 1.2 1.5 4.2 5.9

2000. . . . . . . . . . . . 4.0 1.1 1.3 5.1 6.2

Intermediate: 

2001. . . . . . . . . . . . 4.2 1.0 .8 3.1 5.6

2002. . . . . . . . . . . . 4.4 1.1 .9 3.1 6.0

2003. . . . . . . . . . . . 4.6 .9 .6 2.6 6.0

2004. . . . . . . . . . . . 4.8 .8 .6 2.4 6.2

2005. . . . . . . . . . . . 4.9 .8 .7 2.3 6.2

2006. . . . . . . . . . . . 5.1 .8 .7 2.2 6.3

2007. . . . . . . . . . . . 5.2 .8 .7 2.0 6.3

2008. . . . . . . . . . . . 5.3 .7 .6 2.0 6.2

2009. . . . . . . . . . . . 5.4 .7 .6 2.0 6.3

2010. . . . . . . . . . . . 5.5 .7 .6 2.0 6.3

2015. . . . . . . . . . . . 5.5 .4 .4 1.8 6.3

2020. . . . . . . . . . . . 5.5 .3 .3 1.7 6.3

2025. . . . . . . . . . . . 5.5 .2 .2 1.6 6.3

2030. . . . . . . . . . . . 5.5 .3 .3 1.7 6.3

2035. . . . . . . . . . . . 5.5 .4 .4 1.7 6.3

2040. . . . . . . . . . . . 5.5 .3 .3 1.7 6.3

2045. . . . . . . . . . . . 5.5 .3 .3 1.7 6.3

2050. . . . . . . . . . . . 5.5 .2 .2 1.6 6.3

2055. . . . . . . . . . . . 5.5 .2 .2 1.6 6.3

2060. . . . . . . . . . . . 5.5 .2 .2 1.6 6.3

2065. . . . . . . . . . . . 5.5 .2 .2 1.6 6.3

2070. . . . . . . . . . . . 5.5 .2 .2 1.6 6.3

2075. . . . . . . . . . . . 5.5 .2 .2 1.6 6.3
89

Economic Assumptions and Methods

Low Cost: 

2001. . . . . . . . . . . . 4.0 1.1 1.0 3.5 5.8

2002. . . . . . . . . . . . 4.1 1.3 1.2 3.5 6.1

2003. . . . . . . . . . . . 4.2 1.0 .9 3.1 5.8

2004. . . . . . . . . . . . 4.2 1.0 .9 3.0 5.8

2005. . . . . . . . . . . . 4.2 1.0 1.0 2.9 5.9

2006. . . . . . . . . . . . 4.2 1.0 1.0 2.9 5.9

2007. . . . . . . . . . . . 4.3 1.0 .9 2.7 5.9

2008. . . . . . . . . . . . 4.3 .9 .8 2.6 5.9

2009. . . . . . . . . . . . 4.4 .8 .8 2.6 6.0

2010. . . . . . . . . . . . 4.5 .9 .8 2.5 6.0

2015. . . . . . . . . . . . 4.5 .5 .5 2.3 6.0

2020. . . . . . . . . . . . 4.5 .4 .4 2.2 6.0

2025. . . . . . . . . . . . 4.5 .4 .4 2.2 6.0

2030. . . . . . . . . . . . 4.5 .5 .5 2.3 6.0

2035. . . . . . . . . . . . 4.5 .6 .6 2.4 6.0

2040. . . . . . . . . . . . 4.5 .6 .6 2.4 6.0

2045. . . . . . . . . . . . 4.5 .6 .6 2.4 6.0

2050. . . . . . . . . . . . 4.5 .6 .6 2.4 6.0

2055. . . . . . . . . . . . 4.5 .6 .6 2.4 6.0

2060. . . . . . . . . . . . 4.5 .6 .6 2.4 6.0

2065. . . . . . . . . . . . 4.5 .6 .6 2.4 6.0

2070. . . . . . . . . . . . 4.5 .6 .6 2.4 6.0

2075. . . . . . . . . . . . 4.5 .6 .6 2.4 6.0

High Cost: 

2001. . . . . . . . . . . . 4.7 .9 .1 .8 5.2

2002. . . . . . . . . . . . 5.6 .7 -.2 .8 5.9

2003. . . . . . . . . . . . 5.4 .8 1.0 3.1 8.3

2004. . . . . . . . . . . . 6.3 .7 -.3 -.7 7.5

2005. . . . . . . . . . . . 7.3 .3 -.7 1.3 6.7

2006. . . . . . . . . . . . 6.6 .9 1.5 3.3 7.0

2007. . . . . . . . . . . . 6.4 .9 1.1 2.1 6.6

2008. . . . . . . . . . . . 6.5 .8 .7 1.7 6.5

2009. . . . . . . . . . . . 6.5 .6 .6 1.6 6.5

2010. . . . . . . . . . . . 6.5 .7 .7 1.7 6.5

2015. . . . . . . . . . . . 6.5 .3 .3 1.3 6.5

2020. . . . . . . . . . . . 6.5 .2 .2 1.2 6.5

2025. . . . . . . . . . . . 6.5 .1 .1 1.1 6.5

2030. . . . . . . . . . . . 6.5 .1 .1 1.1 6.5

2035. . . . . . . . . . . . 6.5 .1 .1 1.1 6.5

2040. . . . . . . . . . . . 6.5 .0 .0 1.0 6.5

2045. . . . . . . . . . . . 6.5 -.1 -.1 .9 6.5

2050. . . . . . . . . . . . 6.5 -.2 -.2 .8 6.5

2055. . . . . . . . . . . . 6.5 -.2 -.2 .8 6.5

2060. . . . . . . . . . . . 6.5 -.3 -.3 .7 6.5

2065. . . . . . . . . . . . 6.5 -.3 -.3 .7 6.5

2070. . . . . . . . . . . . 6.5 -.3 -.3 .7 6.5

2075. . . . . . . . . . . . 6.5 -.3 -.3 .7 6.5

 1 Unadjusted civilian unemployment rates are shown through 2010. Thereafter, the rates are adjusted to the

age-sex distribution of the civilian labor force in 1999.

 2 The average annual interest rate is the average of the nominal interest rates, which, in practice, are compounded semiannually, for special public-debt obligations issuable to the trust funds in each of the 12

months of the year.

 3 The U.S. civilian labor force concept is used here.

 4 Total of civilian and military employment in the U.S. economy.

 5 The real GDP (gross domestic product) is the value of total output of goods and services, expressed in

1996 dollars.

Table V.B2.—Additional Economic Factors (Cont.)

Calendar year 

Average

annual

unemployment rate1

(percent)

Average annual percentage increase in—

Average

annual

interest

rate2

(percent)

Labor

force3 Total

employment4 RealGDP5
Assumptions & Methods

90

C. PROGRAM SPECIFIC ASSUMPTIONS AND METHODS

The demographic and economic assumptions and methods described in the

previous section are input to the set of models used to project future income

and outgo under the OASDI program. In some cases, the economic assumptions result in the direct calculation of program parameters as described in

the following subsection. These parameters affect the level of payroll taxes

collected and the level of benefits paid and are calculated using formulas

described explicitly in the Social Security Act. In other cases, the combination of demographic and economic assumptions are used indirectly to drive

more complicated models that project the numbers of future workers covered

under OASDI and the levels of their covered earnings, and the numbers of

future beneficiaries and the expected levels of their benefits. The following

subsections provide brief descriptions of the derivations of these program

specific factors.

1. Automatically Adjusted Program Amounts

The Social Security Act specifies that certain program amounts affecting the

determination of OASDI benefits are to be adjusted annually, in general, to

reflect changes in the economy. The law prescribes specific formulas that,

when applied to reported statistics, produce automatic revisions in these program amounts and hence in the benefit-computation procedures. These automatic adjustments are based upon measured changes in the national average

wage index and the CPI.1 In this section, values are shown for program

amounts that are subject to automatic adjustment, from the time that such

adjustments became effective through 2010. Projected values for future years

are based on the economic assumptions described in the preceding section of

this report.

The following two tables present the historical and projected values of the

CPI-based benefit increases, as well as the average wage index series and the

values of many of the wage-indexed program amounts. In each table, the

projections are shown under the three alternative sets of economic assumptions described in the previous section. Table V.C1 includes:

• The annual percentage increases which have been applied to OASDI

benefits under automatic cost-of-living adjustment provisions in the

Social Security Act, based on increases in the CPI.

 1 Details of these indexation procedures are published annually in the Federal Register, and are also available on the Internet at http://www.ssa.gov/OACT/COLA/index.html.
91

Program Assumptions and Methods

• The annual levels of and percentage increases in the national average

wage index. Under section 215(b)(3) of the Social Security Act, the

national average wage index for each year after 1950 is used to index

the taxable earnings of most workers first becoming eligible for benefits

in 1979 or later. This procedure converts a worker’s past earnings to

approximately their equivalent values near the time of the worker’s

retirement or other eligibility, and these indexed values are used to calculate the worker’s benefit. The average wage index is also used to

adjust most of the other program amounts that are subject to the automatic-adjustment provisions.

• The OASDI contribution and benefit base—the maximum amount of

earning subject to the OASDI payroll tax in the specified year.

• The retirement earnings test exempt amounts—the annual amount of

earnings below which beneficiaries are not subject to benefit withholding. A lower exempt amount applies in years before a beneficiary

attains normal retirement age. A higher amount applies for the year in

which the beneficiary attains normal retirement age. As described earlier, under legislation enacted in 2000, the retirement test no longer

applies beginning with the attainment of normal retirement age.

Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and 

Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2010

OASDI

benefit 

increases1

(percent) 

Average wage index2 OASDI

contribution 

and benefit 

base 3

Retirement earnings

test exempt amount

Calendar year Amount

Increase

(percent)

Under

NRA4 At NRA5

Historical data:

1975. . . . . . . . . . . 8.0 $8,630.92 7.5 $14,100 $2,520 $2,520

1976. . . . . . . . . . . 6.4 9,226.48 6.9 15,300 2,760 2,760

1977. . . . . . . . . . . 5.9 9,779.44 6.0 16,500 3,000 3,000

1978. . . . . . . . . . . 6.5 10,556.03 7.9 17,700 3,240 4,000

1979. . . . . . . . . . . 9.9 11,479.46 8.7 22,900 3,480 4,500

1980. . . . . . . . . . . 14.3 12,513.46 9.0 25,900 3,720 5,000

1981. . . . . . . . . . . 11.2 13,773.10 10.1 29,700 4,080 5,500

1982. . . . . . . . . . . 7.4 14,531.34 5.5 32,400 4,440 6,000

1983. . . . . . . . . . . 3.5 15,239.24 4.9 35,700 4,920 6,600

1984. . . . . . . . . . . 3.5 16,135.07 5.9 37,800 5,160 6,960

1985. . . . . . . . . . . 3.1 16,822.51 4.3 39,600 5,400 7,320

1986. . . . . . . . . . . 1.3 17,321.82 3.0 42,000 5,760 7,800

1987. . . . . . . . . . . 4.2 18,426.51 6.4 43,800 6,000 8,160

1988. . . . . . . . . . . 4.0 19,334.04 4.9 45,000 6,120 8,400

1989. . . . . . . . . . . 4.7 20,099.55 4.0 48,000 6,480 8,880

1990. . . . . . . . . . . 5.4 21,027.98 4.6 51,300 6,840 9,360

1991. . . . . . . . . . . 3.7 21,811.60 3.7 53,400 7,080 9,720

1992. . . . . . . . . . . 3.0 22,935.42 5.2 55,500 7,440 10,200

1993. . . . . . . . . . . 2.6 23,132.67 .9 57,600 7,680 10,560

1994. . . . . . . . . . . 2.8 23,753.53 2.7 60,600 8,040 11,160

1995. . . . . . . . . . . 2.6 24,705.66 4.0 61,200 8,160 11,280

1996. . . . . . . . . . . 2.9 25,913.90 4.9 62,700 8,280 12,500

1997. . . . . . . . . . . 2.1 27,426.00 5.8 65,400 8,640 13,500

1998. . . . . . . . . . . 1.3 28,861.44 5.2 68,400 9,120 14,500

1999. . . . . . . . . . . 62.5 30,469.84 5.6 72,600 9,600 15,500
Assumptions & Methods

92

Other wage-indexed amounts are shown in table V.C2. The table provides

historical values from 1978, when the amount of earnings required for a

quarter of coverage was first indexed, through 2001, and also shows projected amounts through 2010. These other wage-indexed program amounts

are:

Intermediate:

2000. . . . . . . . . . . 73.5 $32,104.67 5.4 7$76,200 7$10,080 $17,000

2001. . . . . . . . . . . 2.8 33,680.35 4.9 780,400 710,680 25,000

2002. . . . . . . . . . . 2.9 35,277.03 4.7 84,900 11,280 30,000

2003. . . . . . . . . . . 3.0 36,781.09 4.3 89,100 11,760 31,440

2004. . . . . . . . . . . 3.1 38,372.33 4.3 93,300 12,360 33,000

2005. . . . . . . . . . . 3.2 40,044.65 4.4 97,200 12,840 34,320

2006. . . . . . . . . . . 3.3 41,799.45 4.4 101,400 13,440 35,880

2007. . . . . . . . . . . 3.3 43,575.71 4.2 105,900 14,040 37,440

2008. . . . . . . . . . . 3.3 45,416.27 4.2 110,400 14,640 39,000

2009. . . . . . . . . . . 3.3 47,350.68 4.3 115,200 15,240 40,680

2010. . . . . . . . . . . 3.3 49,366.08 4.3 120,000 15,960 42,480

Low Cost:

2000. . . . . . . . . . . 73.5 32,193.94 5.7 776,200 710,080 17,000

2001. . . . . . . . . . . 2.8 33,758.97 4.9 7 80,400 7 10,680 25,000

2002. . . . . . . . . . . 2.6 35,383.30 4.8 85,200 11,280 30,000

2003. . . . . . . . . . . 2.3 36,787.92 4.0 89,100 11,880 31,440

2004. . . . . . . . . . . 2.3 38,246.59 4.0 93,600 12,360 33,000

2005. . . . . . . . . . . 2.3 39,741.55 3.9 97,200 12,840 34,320

2006. . . . . . . . . . . 2.3 41,303.97 3.9 101,100 13,440 35,640

2007. . . . . . . . . . . 2.3 42,878.54 3.8 105,000 13,920 37,080

2008. . . . . . . . . . . 2.3 44,472.96 3.7 109,200 14,520 38,520

2009. . . . . . . . . . . 2.3 46,154.75 3.8 113,400 15,000 39,960

2010. . . . . . . . . . . 2.3 47,901.25 3.8 117,600 15,600 41,400

High Cost:

2000. . . . . . . . . . . 73.5 32,074.32 5.3 776,200 710,080 17,000

2001. . . . . . . . . . . 3.1 33,075.64 3.1 780,400 710,680 25,000

2002. . . . . . . . . . . 3.5 34,268.35 3.6 84,600 11,280 30,000

2003. . . . . . . . . . . 5.2 36,541.14 6.6 87,300 11,640 30,960

2004. . . . . . . . . . . 6.2 38,138.27 4.4 90,600 12,000 32,040

2005. . . . . . . . . . . 4.0 40,100.04 5.1 96,600 12,840 34,200

2006. . . . . . . . . . . 3.9 42,440.05 5.8 100,800 13,320 35,640

2007. . . . . . . . . . . 4.1 44,574.76 5.0 105,900 14,040 37,560

2008. . . . . . . . . . . 4.3 46,686.87 4.7 112,200 14,880 39,720

2009. . . . . . . . . . . 4.3 48,896.61 4.7 117,900 15,600 41,640

2010. . . . . . . . . . . 4.3 51,265.10 4.8 123,300 16,320 43,680

 1 Effective with benefits payable for June in each year 1975-82, and for December in each year after 1982.

 2 See table VI.E7 on page 155 for projected dollar amounts of the average wage index beyond 2010.

 3 Amounts for 1979-81 were specified by Public Law 95-216. The bases for years after 1989 were increased

slightly by changes to the indexing procedure, as required by Public Law 101-239. 

 4 Normal retirement age. See table V.C3 for specific values.

 5 In 1955-82, the retirement earnings test did not apply at ages 72 and over; in 1983-99, the test did not apply

at ages 70 and over; beginning in 2000, it does not apply beginning with the month of attainment of NRA. In

the year of attainment of NRA, the higher exempt amount applies to earnings in the year prior to the month

of NRA attainment. Amounts for 1978-82 specified by Public Law 95-216; for 1996-2002, Public Law

104-121.

 6 Originally determined as 2.4 percent, but pursuant to Public Law 106-554, is effectively now 2.5 percent.

 7 Actual amount, as determined under automatic-adjustment provisions.

Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and 

Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2010 (Cont.)

OASDI

benefit 

increases1

(percent) 

Average wage index2 OASDI

contribution 

and benefit 

base 3

Retirement earnings

test exempt amount

Calendar year Amount

Increase

(percent)

Under

NRA4 At NRA5
93

Program Assumptions and Methods

• The bend points in the formula for computing the primary insurance

amount (PIA) for workers who reach age 62, become disabled, or die in

a given year. These bend points indicate three ranges in a worker’s average indexed monthly earnings (AIME) over which a certain percent factor, 90, 32, or 15 percent respectively, is applied to determine the

worker’s PIA. Figure V.C1 presents the PIA formula for 2001.

• Bend points in the formula used to compute the maximum total amount

of monthly benefits payable on the basis of the earnings of a retired or

deceased worker. This formula is a function of the worker’s PIA, and

relies on four intervals and percentages. Figure V.C2 presents the maximum-family-benefit formula for 2001.

 Figure V.C1.—Primary-Insurance-Amount Formula for the 2001 Cohort

 Figure V.C2.—Maximum-Family-Benefit Formula for the 2001 Cohort

32% 

15% 

90% 

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000

Average indexed monthly earnings

Primary insurance amount 

Second

bend point

($3,381)

First

bend point

($561)

272% 

150% 

175% 134% 

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$0 $500 $1,000 $1,500 $2,000

Primary insurance amount

 Maximum family benefit 

Third

bend point

($1,349)

Second

bend point

($1,034)

First

bend point

($717)
Assumptions & Methods

94

• The amount of earnings required in a year to be credited with a quarter

of coverage (QC). The number and timing of QCs earned is used to

determine an individual’s insured status—the basic requirement for

benefit eligibility under OASDI.

• The old-law contribution and benefit base—the OASDI contribution

and benefit base that would have been in effect in each year after 1978

under the automatic-adjustment provisions as in effect before the enactment of the 1977 amendments. This old-law base is used in determining

special-minimum benefits for certain workers who have many years of

low earnings in covered employment. Beginning in 1986, the old-law

base is also used in the calculation of OASDI benefits for certain workers who are eligible to receive pensions based on noncovered employment. In addition, it is used for certain purposes under the Railroad

Retirement program and the Employee Retirement Income Security Act

of 1974.

Table V.C2.—Selected Wage-Indexed Program Amounts, 

Calendar Years 1978-2010

AIME bend

points in PIA

formula1

PIA bend points

in maximumfamily-benefit formula2

Earnings

required

for a

quarter of

coverage

Old law

contribution and

benefit base Calendar year First Second First Second Third 3

Historical data:

1978. . . . . . . . (4) (4) (4) (4) (4) 5 $250 (4)

1979. . . . . . . . 5 $180 5 $1,085 5 $230 5 $332 5 $433 260 $18,900

1980. . . . . . . . 194 1,171 248 358 467 290 20,400

1981. . . . . . . . 211 1,274 270 390 508 310 22,200

1982. . . . . . . . 230 1,388 294 425 554 340 24,300

1983. . . . . . . . 254 1,528 324 468 610 370 26,700

1984. . . . . . . . 267 1,612 342 493 643 390 28,200

1985. . . . . . . . 280 1,691 358 517 675 410 29,700

1986. . . . . . . . 297 1,790 379 548 714 440 31,500

1987. . . . . . . . 310 1,866 396 571 745 460 32,700

1988. . . . . . . . 319 1,922 407 588 767 470 33,600

1989. . . . . . . . 339 2,044 433 626 816 500 35,700

1990. . . . . . . . 356 2,145 455 656 856 520 38,100

1991. . . . . . . . 370 2,230 473 682 890 540 39,600

1992. . . . . . . . 387 2,333 495 714 931 570 41,400

1993. . . . . . . . 401 2,420 513 740 966 590 42,900

1994. . . . . . . . 422 2,545 539 779 1,016 620 45,000

1995. . . . . . . . 426 2,567 544 785 1,024 630 45,300

1996. . . . . . . . 437 2,635 559 806 1,052 640 46,500

1997. . . . . . . . 455 2,741 581 839 1,094 670 48,600

1998. . . . . . . . 477 2,875 609 880 1,147 700 50,700

1999. . . . . . . . 505 3,043 645 931 1,214 740 53,700

2000. . . . . . . . 531 3,202 679 980 1,278 780 56,700

2001. . . . . . . . 561 3,381 717 1,034 1,349 830 59,700
95

Program Assumptions and Methods

Intermediate:

2002. . . . . . . . $591 $3,562 $755 $1,090 $1,421 $870 $63,000

2003. . . . . . . . 620 3,737 792 1,143 1,491 910 66,000

2004. . . . . . . . 649 3,914 830 1,198 1,562 960 69,300

2005. . . . . . . . 677 4,081 865 1,249 1,629 1,000 72,300

2006. . . . . . . . 706 4,257 902 1,303 1,699 1,040 75,300

2007. . . . . . . . 737 4,443 942 1,359 1,773 1,090 78,600

2008. . . . . . . . 769 4,638 983 1,419 1,851 1,130 81,900

2009. . . . . . . . 802 4,835 1,025 1,479 1,929 1,180 85,500

2010. . . . . . . . 836 5,039 1,068 1,542 2,011 1,230 89,100

Low Cost:

2002. . . . . . . . 593 3,572 757 1,093 1,425 870 63,300

2003. . . . . . . . 621 3,745 794 1,146 1,495 910 66,300

2004. . . . . . . . 651 3,926 832 1,201 1,567 960 69,300

2005. . . . . . . . 677 4,082 865 1,249 1,629 1,000 72,300

2006. . . . . . . . 704 4,243 900 1,298 1,693 1,040 75,000

2007. . . . . . . . 731 4,409 935 1,349 1,760 1,080 78,000

2008. . . . . . . . 760 4,583 971 1,402 1,829 1,120 81,000

2009. . . . . . . . 789 4,757 1,008 1,456 1,899 1,160 84,000

2010. . . . . . . . 819 4,934 1,046 1,510 1,969 1,210 87,300

High Cost:

2002. . . . . . . . 590 3,559 754 1,089 1,420 870 63,000

2003. . . . . . . . 609 3,670 778 1,123 1,464 900 64,800

2004. . . . . . . . 631 3,802 806 1,163 1,517 930 67,200

2005. . . . . . . . 673 4,054 859 1,241 1,618 990 71,700

2006. . . . . . . . 702 4,231 897 1,295 1,689 1,030 74,700

2007. . . . . . . . 738 4,449 943 1,361 1,775 1,090 78,600

2008. . . . . . . . 781 4,709 998 1,441 1,879 1,150 83,400

2009. . . . . . . . 820 4,945 1,048 1,513 1,974 1,210 87,600

2010. . . . . . . . 859 5,180 1,098 1,585 2,067 1,270 91,500

 1 The formula to compute a PIA is (1) 90% of AIME below the first bend point, plus (2) 32% of AIME in

excess of the first bend point but not in excess of the second, plus (3) 15% of AIME in excess of the second

bend point. The bend points pertain to the first year a beneficiary becomes eligible for benefits.

 2 The formula to compute a family maximum is (1) 150% of PIA below the first bend point, plus (2) 272%

of PIA in excess of the first bend point but not in excess of the second, plus (3) 134% of PIA in excess of the

second bend point but not in excess of the third, plus (4) 175% of PIA in excess of the third bend point.

 3 Contribution and benefit base that would have been determined automatically under the law in effect prior

to enactment of the Social Security Amendments of 1977. The bases for years after 1989 were increased

slightly by changes to the indexing procedure to determine the base, as required by Public Law 101-239.

 4 No provision in law for this amount in this year.

 5 Amount specified for first year by Social Security Amendments of 1977; amounts for subsequent years

subject to automatic-adjustment provisions.

Table V.C2.—Selected Wage-Indexed Program Amounts, 

Calendar Years 1978-2010 (Cont.)

AIME bend

points in PIA

formula1

PIA bend points

in maximumfamily-benefit formula2

Earnings

required

for a

quarter of

coverage

Old law

contribution and

benefit base Calendar year First Second First Second Third 3
Assumptions & Methods

96

In addition to the program amounts affecting the determination of OASDI

benefits that reflect changes in the economy, there are certain legislated

changes that have affected, and will affect, benefits. Two such changes are

the scheduled increases in the normal retirement age and in the delayed

retirement credits. Table V.C3 shows the scheduled changes in these two

important items and their effect on benefits expressed as a percentage of PIA.

2. Covered Employment

Projections of the total labor force and unemployment rate are based on

Bureau of Labor Statistics definitions from the Current Population Survey

(CPS), and thus represent the average weekly number of employed and

unemployed persons, aged 16 and over, in the U.S. in a calendar year. Total

Table V.C3.—Legislated Changes in Normal Retirement Age and Delayed Retirement 

Credits, for Persons Reaching Age 62 in Each Year 1986 and Later

Year of birth

Year of

attainment of

age 62

Normal

retirement

age (NRA)

Credit for each 

year of delayed 

retirement after

NRA (percent)

Benefit, as a percentage of PIA, 

beginning at age —

62 65 66 67 70

1924 1986 . . . . . . 65 . . . . . . . 3 80 100 103 106 115

1925 . . . . . . . 1987 . . . . . . 65 . . . . . . . 3 1/2 80 100 103 1/2 107 117 1/2

1926 . . . . . . . 1988 . . . . . . 65 . . . . . . . 3 1/2 80 100 103 1/2 107 117 1/2

1927 . . . . . . . 1989 . . . . . . 65 . . . . . . . 4 80 100 104 108 120

1928 . . . . . . . 1990 . . . . . . 65 . . . . . . . 4 80 100 104 108 120

1929 . . . . . . . 1991 . . . . . . 65 . . . . . . . 4 1/2 80 100 104 1/2 109 122 1/2

1930 . . . . . . . 1992 . . . . . . 65 . . . . . . . 4 1/2 80 100 104 1/2 109 122 1/2

1931 . . . . . . . 1993 . . . . . . 65 . . . . . . . 5 80 100 105 110 125

1932 . . . . . . . 1994 . . . . . . 65 . . . . . . . 5 80 100 105 110 125

1933 . . . . . . . 1995 . . . . . . 65 . . . . . . . 5 1/2 80 100 105 1/2 111 127 1/2

1934 . . . . . . . 1996 . . . . . . 65 . . . . . . . 5 1/2 80 100 105 1/2 111 127 1/2

1935 . . . . . . . 1997 . . . . . . 65 . . . . . . . 6 80 100 106 112 130

1936 . . . . . . . 1998 . . . . . . 65 . . . . . . . 6 80 100 106 112 130

1937 . . . . . . . 1999 . . . . . . 65 . . . . . . . 6 1/2 80 100 106 1/2 113 132 1/2

1938 . . . . . . . 2000 . . . . . . 65, 2 mo . . 6 1/2 79 1/6 98 8/9 105 5/12 111 11/12 131 5/12

1939 . . . . . . . 2001 . . . . . . 65, 4 mo . . 7 78 1/3 97 7/9 104 2/3 111 2/3 132 2/3

1940 . . . . . . . 2002 . . . . . . 65, 6 mo . . 7 77 1/2 96 2/3 103 1/2 110 1/2 131 1/2

1941 . . . . . . . 2003 . . . . . . 65, 8 mo . . 7 1/2 76 2/3 95 5/9 102 1/2 110 132 1/2

1942 . . . . . . . 2004 . . . . . . 65, 10 mo . 7 1/2 75 5/6 94 4/9 101 1/4 108 3/4 131 1/4

1943-54 . . . . 2005-16. . . . 66 . . . . . . . 8 75 93 1/3 100 108 132

1955 . . . . . . . 2017 . . . . . . 66, 2 mo . . 8 74 1/6 92 2/9 98 8/9 106 2/3 130 2/3

1956 . . . . . . . 2018 . . . . . . 66, 4 mo . . 8 73 1/3 91 1/9 97 7/9 105 1/3 129 1/3

1957 . . . . . . . 2019 . . . . . . 66, 6 mo . . 8 72 1/2 90 96 2/3 104 128

1958 . . . . . . . 2020 . . . . . . 66, 8 mo . . 8 71 2/3 88 8/9 95 5/9 102 2/3 126 2/3

1959 . . . . . . . 2021 . . . . . . 66, 10 mo . 8 70 5/6 87 7/9 94 4/9 101 1/3 125 1/3

1960 & later. 2022 & later 67 . . . . . . . 8 70 86 2/3 93 1/3 100 124
97

Program Assumptions and Methods

covered workers in a year are the number of persons who have any OASDI

covered earnings at any time during the year. For those aged 16 and over,

projected covered employment is the sum of age-sex components, each of

which is projected as a ratio to the CPS concept of employment. For those

under age 16, projected covered employment is the sum of age-sex components, each of which is projected as a ratio to the Social Security area population. The projection methodology accounts for changes in the business cycle,

the quarterly pattern of growth in employment within each year, changes in

non-OASDI covered employment, the increase in coverage of Federal civilian employment as a result of the 1983 Social Security Amendments, and

changes in the number of other-than-legal aliens estimated to be residing

within the Social Security coverage area.

Covered worker rates are defined as the ratio of OASDI covered workers to

the Social Security area population. The projected age-adjusted coverage rate

for men, aged 16 and over, changes from its 1999 level of 74.7 percent to

72.5, 71.9, and 71.5 percent for 2075 for alternatives I, II, and III, respectively. (Age-adjusted covered worker rates are adjusted to the 1999 age distribution of the Social Security area population.) For women, it remains at its

1999 level of 63.4 percent for alternative I, and changes to 62.9 and 62.3 percent for 2075 for alternatives II and III, respectively.

3. Taxable Payroll and Payroll Tax Revenue

The OASDI taxable payroll is the amount of earnings in a year which, when

multiplied by the combined employee-employer tax rate, yields the total

amount of taxes due from wages and self-employed income in the year. Taxable payroll is used in estimating OASDI income and in determining income

and cost rates and actuarial balances. (See section IV.B.1, Annual Income

Rates, Cost Rates, and Balances, for definitions of these terms.) Taxable payroll is computed from taxable earnings, defined as the sum of wages and selfemployment earnings subject to the Social Security tax. Wages are adjusted

to take into account the “excess wages” earned by workers with multiple jobs

whose combined wages exceed the taxable earnings base. Also, beginning in

1983, taxable payroll includes deemed wage credits for military service.

Prior to 1984, the self-employed tax rate was less than the combined

employee-employer rate, thus taxable self-employed earnings were weighted

to reflect this. Also, prior to 1988, employers were exempt from Social Security tax on part of their employees’ tips; taxable payroll was reduced by half

of this exempt amount to take this into account.

Taxable earnings for employees, employers, and the self-employed were estimated from total earnings in covered employment. Covered earnings are
Assumptions & Methods

98

summed from component sectors, each of which is based on the projected

growth of U.S. earnings and a factor that reflects any projected change in

coverage (e.g., the increase in coverage in the Federal civilian sector due to

mandatory coverage of newly hired employees). The level of taxable earnings, that is, covered earnings at or below the taxable earnings base, was then

estimated based on adjustments to the latest available historical earnings distributions for wage and self-employed workers. The ratio of taxable to covered earnings decreased from about 90.2 percent in 1983 to 87.9 percent in

1994, or by an average annual rate of -0.2 percent. The ratio is estimated to

have fallen further to 84.3 percent in 1999, or at an average annual rate of

-0.8 percent, due mainly to the increased proportion of very high wage earners.

Some of this historical decline was projected to continue through 2010 in all

alternatives. The taxable earnings ratio was projected to be about 84.2, 83.5,

and 82.9 percent in 2010 in alternatives I, II, and III, respectively, or to

change at an average annual rate of about 0.0, -0.1, and -0.2 percent. After

2010, the taxable to covered ratio was held approximately constant in each

alternative. 

Payroll tax revenue was computed by applying the appropriate tax rates to

taxable wages and self-employment income, taking into account the lag

between the time the tax liability is incurred and when the taxes are collected. In the case of wages, employers are required to deposit withholding

taxes with the Treasury on a schedule determined by the amount of tax liability incurred. (Generally, the higher the amount of liability, the sooner the

taxes must be paid—ranging from the middle of the following month to, for

companies with very large payrolls, the next banking day after wages are

paid.) Self-employed workers are required to make estimated tax payments

on their earnings four times during the year, as well as making up any underestimate on their individual income tax return. The pattern of actual receipts

by the Treasury is taken into account when estimating self-employed tax collections.

4. Insured Population

There are three basic types of insured status under the OASDI program: fully

insured, currently insured, and disability insured. Fully insured status is

required of an aged worker for eligibility to a primary retirement benefit and

for the eligibility of that worker’s spouse and children to auxiliary benefits.

Fully insured status is also required of a deceased worker for the eligibility of

the worker’s survivors to benefits (with the exception of child survivors and

parents of eligible child survivors, in which cases the deceased worker is
99

Program Assumptions and Methods

required to have had either currently insured status or fully insured status).

Disability insured status, which is more restrictive than fully insured status,

is required of a disabled worker for eligibility to a primary disability benefit

and for the eligibility of the worker’s spouse and children to auxiliary benefits.

Projections of the percentage of the population that is fully insured were

made by age and sex, from estimated distributions of workers by accumulated quarters of coverage based on past and projected coverage rates and

amounts of earnings required for quarters of coverage. Currently insured status was disregarded for purposes of these estimates, because the number of

cases in which eligibility for benefits is based solely on currently insured status is relatively small. Projections of the percentage of fully insured persons

who are also disability insured were made by age and sex based on past and

projected coverage rates, the requirements for disability insured status, and

their historical relationships. Finally, the fully insured and disability insured

populations were developed from the projected total population by applying

the appropriate percentages.

Under this procedure, the percentage of the Social Security area population

aged 62 and over that is fully insured is projected to increase from its estimated level of 77.8 for December 31, 1996, to 88.5, 89.2, and 89.6 for

December 31, 2075, based on alternatives I, II, and III, respectively. The percentage for females is projected to increase significantly, while that for males

is projected to decrease slightly. Based on alternative II, for example, the percentage for males is projected to decrease during this period from 91.4 to

90.5, while that for females is projected to increase from 67.9 to 88.1.

The fully insured population by age and sex was further subdivided by marital status, using the variation in labor force participation rates by marital status to estimate the variation in coverage rates by marital status. These

coverage rates were then used to estimate the variation in the fully insured

rates by marital status.

5. Old-Age and Survivors Insurance Beneficiaries

The number of OASI beneficiaries was projected for each type of benefit

separately, by the sex of the worker on whose earnings the benefits are based,

and by the age of the beneficiary. For selected types of benefits, the number

of beneficiaries was also projected by marital status. 

For the short-range period, the number of retired-worker beneficiaries was

developed by applying award rates to the aged fully insured population less

those insured persons entitled to retired-worker, disabled-worker, or
Assumptions & Methods

100

widow(er)’s benefits, and by applying termination rates to the number of persons already receiving retired-worker benefits.

For the long-range period, the number of retired-worker beneficiaries not

previously converted from disabled-worker beneficiary status was projected

as a percentage of the exposed population, i.e., the aged fully insured population less persons entitled to or converted from disability benefits and insured

persons entitled to widow(er)’s benefits. The percentage for age 62 was projected by a simple linear regression which uses the projected labor force participation rate for age 62. The percentage for ages 70 and over was assumed

to be nearly 100, because the retirement earnings test and delayed retirement

credit do not apply after age 70, but was adjusted for the statistical difference

between in-force data and in-current-payment data. The percentage for each

age 63 through 69 was projected from the December 31, 2000 retired-worker

beneficiaries data which reflects the elimination of the earnings test after

normal retirement age, with an adjustment for changes in the portion of the

primary insurance amount that is payable at each age of entitlement. As the

normal retirement age increases, the number of retired-worker beneficiaries

not automatically converted from disabled-worker beneficiary status as a

percentage of the exposed population is gradually adjusted downward at

each age 63 through 69.

For the long-range period also, the number of retired-worker beneficiaries

previously converted from disabled-worker beneficiaries was calculated as

an extension beyond normal retirement age of the calculation of disabledworker beneficiaries.

The number of aged-spouse beneficiaries was estimated from the population

projected by age and sex. The benefits of aged-spouse beneficiaries are based

on the earnings records of their husbands or wives, who are referred to as

“wage earners.” In the short-range period, a regression equation was used to

project the number of aged-spouse beneficiaries, as a proportion of the aged

uninsured female or male population. In the long-range period, aged-spouse

beneficiaries were estimated from the population projected by age, sex, and

marital status. To the number of spouses aged 62 and over in the population,

a series of factors were applied, representing the probabilities that the spouse

and the wage earner meet all of the conditions of eligibility—i.e., the probabilities that (1) the wage earner is 62 or over, (2) the wage earner is insured,

(3) the wage earner is receiving benefits, (4) the spouse is not receiving a

benefit for the care of an entitled child, (5) the spouse is not insured, and (6)

the spouse is not eligible to receive a significant government pension based

on earnings in noncovered employment. To the resulting number of spouses
101

Program Assumptions and Methods

was applied a projected prevalence rate to calculate the estimated number of

aged-spouse beneficiaries.

In addition, the same factors were applied to the number of divorced persons

aged 62 and over in the population, with three differences. First, an additional factor is required to reflect the probability that the person’s former

wage-earner spouse is still alive (otherwise, the person may be entitled to a

divorced widow(er)’s benefit). Second, a factor is required to reflect the

probability that the marriage to the wage-earner spouse was at least 10 years

in duration. Third, factor (3) above was not applied because, effective for

January 1985, a divorced person generally need not wait to receive benefits

until the former wage-earner spouse is receiving benefits.

The projected numbers of children under age 18, and students aged 18, who

are eligible for benefits as children of retired-worker beneficiaries, were

based on the projected number of children in the population. In the shortrange period, the number of entitled children was developed by applying

award rates to the number of children in the population where both parents

are alive, and by applying termination rates to the number of children already

receiving benefits.

In the long-range period, the number of entitled children was projected separately by sex of the wage-earner parent. To the number of children in the

population, factors were applied representing the probabilities that the parent

is alive, aged 62 or over, insured, and receiving a retired-worker benefit.

Another factor was applied representing the probability that the child is not

entitled to a benefit based on the other parent’s earnings. In addition, a factor

was applied to reduce the number of beneficiaries to reflect the more restrictive requirements for entitlement of stepchildren that were enacted in Public

Law 104-121. For children aged 18, a factor representing the probability that

the child is attending a secondary school was also applied.

The number of disabled children aged 18 and over of retired-worker beneficiaries was projected from the adult population. In the short-range period,

award rates were applied to the population, and termination rates were

applied to the number of disabled children already receiving benefits. In the

long-range period, disabled children were projected in a manner similar to

that for children under 18, with the inclusion of a factor representing the

probability of being disabled since childhood.

In the short-range period, the number of entitled young-spouse beneficiaries

was developed by applying award rates to the number of awards to children

of retired workers, where the children are either under age 16 or disabled,

and by applying termination rates to the number of young-spouses already
Assumptions & Methods

102

receiving benefits. In the long-range period, young-spouse beneficiaries were

projected as a proportion of the projected number of child beneficiaries of

retired workers, taking into account projected changes in average family

size.

The number of aged-widow(er) beneficiaries was projected from the population by age and sex. In the short-range period, insured aged-widow(er) beneficiaries were projected concurrently with the retired-worker beneficiaries. A

regression equation projected the number of uninsured aged-widow(er) beneficiaries, as a proportion of the uninsured aged female or male population not

receiving any type of benefit. In the long-range period, aged-widow(er) beneficiaries were projected from the population by age, sex, and marital status.

Four factors were applied to the number of widow(er)s in the population

aged 60 and over. These factors represent the probabilities that (1) the

deceased wage earner was fully insured at death, (2) the widow(er) is not

receiving a benefit for the care of an entitled child, (3) the widow(er) is not

fully insured, and (4) the widow(er)’s benefits are not withheld because of

receipt of a significant government pension based on earnings in noncovered

employment. In addition, some insured widow(er)s who had not applied for

their retired-worker benefits are assumed to receive widow(er)’s benefits.

Also, the same factors were applied to the number of divorced persons aged

60 and over in the population, with additional factors representing the probability that the person’s former wage-earner spouse is deceased and that the

marriage was at least 10 years in duration.

In the short-range period, the number of disabled-widow(er) beneficiaries

was estimated as a proportion of the uninsured female or male population

aged 50-64. In the long-range period, the number was projected for each age

50 through 64 as a percentage of the widowed and divorced populations,

adjusted for the insured status of the deceased spouse and the prevalence of

disability.

The projected numbers of children under age 18, and students aged 18, who

are eligible for benefits as survivors of deceased workers, were based on the

projected number of children in the population whose mothers or fathers are

deceased. In the short-range period, the number of entitled children was

developed by applying award rates to the number of orphaned children, and

by applying termination rates to the number of children already receiving

benefits.

In the long-range period, the number of child-survivor beneficiaries was projected in a manner analogous to that for child beneficiaries of retired workers, with the factor representing the probability that the parent is aged 62 or
103

Program Assumptions and Methods

over replaced by a factor that represented the probability that the parent is

deceased.

In the short-range period, the numbers of entitled mother-survivor and fathersurvivor beneficiaries were developed by applying award rates to the number

of awards to child-survivor beneficiaries, where the children are either under

age 16 or disabled, and by applying termination rates to the number of

mother-survivors and father-survivors already receiving benefits. In the longrange period, mother-survivor and father-survivor beneficiaries were estimated from the number of child-survivor beneficiaries, taking into account

projected changes in average family size.

The number of parent-survivor beneficiaries was projected based on the historical pattern of the number of such beneficiaries.

Table V.C4 shows the projected number of beneficiaries under the OASI program by type of benefit. Included among the beneficiaries who receive

retired-worker benefits are some persons who also receive a residual benefit

consisting of the excess of an auxiliary benefit over their retired-worker benefit. Estimates of the number of such residual payments were made separately for spouses and widow(er)s.

Table V.C4.—OASI Beneficiaries With Benefits in Current-Payment Status 

at the End of Calendar Years 1945-2075

[In thousands]

Retired workers and auxiliaries Survivors

Calendar year Worker Total

Wifehusband ChildWidowwidowerMotherfather Child Parent

Historical data:

1945. . . . . . . . . 518 159 13 94 121 377 6 1,288

1950. . . . . . . . . 1,771 508 46 314 169 653 15 3,477

1955. . . . . . . . . 4,474 1,192 122 701 292 1,154 25 7,961

1960. . . . . . . . . 8,061 2,269 268 1,544 401 1,577 36 14,157

1965. . . . . . . . . 11,101 2,614 461 2,371 472 2,074 35 19,128

1970. . . . . . . . . 13,349 2,668 546 3,227 523 2,688 29 23,030

1975. . . . . . . . . 16,589 2,867 643 3,888 582 2,919 21 27,509

1980. . . . . . . . . 19,564 3,018 639 4,415 563 2,610 15 30,823

1985. . . . . . . . . 22,435 3,069 456 4,863 372 1,918 10 33,123

1986. . . . . . . . . 22,985 3,088 450 4,931 350 1,878 9 33,691

1987. . . . . . . . . 23,444 3,090 439 4,984 329 1,837 8 34,130

1988. . . . . . . . . 23,862 3,086 432 5,029 318 1,809 7 34,543

1989. . . . . . . . . 24,331 3,093 422 5,071 312 1,782 6 35,017

1990. . . . . . . . . 24,841 3,101 421 5,111 304 1,777 6 35,562

1991. . . . . . . . . 25,293 3,104 425 5,158 301 1,792 5 36,078

1992. . . . . . . . . 25,762 3,112 431 5,205 294 1,808 5 36,618

1993. . . . . . . . . 26,109 3,094 436 5,224 289 1,837 5 36,994

1994. . . . . . . . . 26,412 3,066 440 5,232 283 1,865 4 37,303

1995. . . . . . . . . 26,679 3,026 441 5,226 275 1,884 4 37,534

1996. . . . . . . . . 26,905 2,970 442 5,210 242 1,898 4 37,671

1997. . . . . . . . . 27,282 2,922 441 5,053 230 1,893 3 37,825

1998. . . . . . . . . 27,518 2,864 439 4,990 221 1,884 3 37,918

1999. . . . . . . . . 27,784 2,811 442 4,944 212 1,885 3 38,081

2000. . . . . . . . . 28,505 2,798 459 4,901 203 1,878 3 38,748
Assumptions & Methods

104

Note: The number of beneficiaries does not include certain uninsured persons, most of whom both attained

age 72 before 1968 and have fewer than 3 quarters of coverage, in which case the costs are reimbursed by

the general fund of the Treasury. The number of such uninsured persons was 89 as of December 31, 2000.

Totals do not necessarily equal the sums of rounded components.

Intermediate:

2005. . . . . . . . . 30,345 2,716 481 4,870 178 1,866 2 40,458

2010. . . . . . . . . 34,176 2,663 476 4,960 162 1,777 2 44,215

2015. . . . . . . . . 40,437 2,627 543 5,078 149 1,700 3 50,537

2020. . . . . . . . . 47,969 2,627 634 5,129 142 1,633 3 58,137

2025. . . . . . . . . 54,851 2,703 710 5,167 140 1,609 3 65,184

2030. . . . . . . . . 60,551 2,734 750 5,155 138 1,597 3 70,929

2035. . . . . . . . . 64,011 2,736 771 5,154 134 1,581 3 74,390

2040. . . . . . . . . 65,350 2,701 774 5,174 130 1,555 3 75,688

2045. . . . . . . . . 66,343 2,744 781 5,216 126 1,531 3 76,744

2050. . . . . . . . . 67,922 2,819 795 5,237 123 1,508 3 78,406

2055. . . . . . . . . 70,360 2,944 820 5,248 119 1,485 3 80,980

2060. . . . . . . . . 73,128 3,056 841 5,261 116 1,461 3 83,865

2065. . . . . . . . . 75,675 3,165 856 5,301 113 1,439 3 86,552

2070. . . . . . . . . 78,006 3,253 868 5,372 110 1,419 3 89,029

2075. . . . . . . . . 80,230 3,340 880 5,445 106 1,400 3 91,405

Low Cost:

2005. . . . . . . . . 30,262 2,707 482 4,858 179 1,871 2 40,361

2010. . . . . . . . . 33,878 2,633 482 4,918 166 1,809 2 43,888

2015. . . . . . . . . 39,787 2,542 547 5,076 150 1,809 3 49,914

2020. . . . . . . . . 46,891 2,498 644 5,144 143 1,808 3 57,131

2025. . . . . . . . . 53,238 2,533 728 5,208 141 1,846 3 63,698

2030. . . . . . . . . 58,155 2,525 779 5,214 140 1,895 3 68,711

2035. . . . . . . . . 60,770 2,494 813 5,206 139 1,936 3 71,361

2040. . . . . . . . . 61,367 2,436 831 5,196 139 1,959 3 71,931

2045. . . . . . . . . 61,898 2,468 854 5,196 138 1,975 3 72,532

2050. . . . . . . . . 63,183 2,536 886 5,180 139 1,997 3 73,924

2055. . . . . . . . . 65,421 2,651 933 5,173 141 2,023 3 76,344

2060. . . . . . . . . 67,901 2,744 973 5,190 143 2,051 3 79,005

2065. . . . . . . . . 70,086 2,831 1,007 5,253 144 2,080 3 81,405

2070. . . . . . . . . 72,170 2,907 1,038 5,358 146 2,109 3 83,731

2075. . . . . . . . . 74,491 2,996 1,073 5,474 147 2,139 3 86,323

High Cost:

2005. . . . . . . . . 30,415 2,726 479 4,882 177 1,857 2 40,539

2010. . . . . . . . . 34,428 2,693 471 5,001 158 1,746 2 44,499

2015. . . . . . . . . 41,068 2,720 539 5,063 151 1,614 3 51,159

2020. . . . . . . . . 49,040 2,776 626 5,084 142 1,494 3 59,165

2025. . . . . . . . . 56,539 2,909 694 5,081 137 1,416 3 66,779

2030. . . . . . . . . 63,166 3,001 723 5,039 130 1,351 3 73,412

2035. . . . . . . . . 67,670 3,062 729 5,037 121 1,288 3 77,910

2040. . . . . . . . . 70,008 3,082 715 5,084 112 1,225 3 80,229

2045. . . . . . . . . 71,760 3,170 705 5,167 104 1,174 3 82,083

2050. . . . . . . . . 73,944 3,279 697 5,226 96 1,126 3 84,370

2055. . . . . . . . . 76,868 3,437 701 5,252 88 1,076 3 87,424

2060. . . . . . . . . 80,178 3,578 701 5,243 81 1,028 3 90,812

2065. . . . . . . . . 83,310 3,712 701 5,233 75 983 3 94,017

2070. . . . . . . . . 86,107 3,811 697 5,241 69 942 3 96,871

2075. . . . . . . . . 88,439 3,894 694 5,248 64 906 3 99,248

Table V.C4.—OASI Beneficiaries With Benefits in Current-Payment Status 

at the End of Calendar Years 1945-2075 (Cont.)

[In thousands]

Retired workers and auxiliaries Survivors

Calendar year Worker Total

Wifehusband ChildWidowwidowerMotherfather Child Parent
105

Program Assumptions and Methods

6. Disability Insurance Beneficiaries

Benefits are paid from the DI Trust Fund to individuals who satisfy the disability-insured requirements who, are unable to engage in substantial gainful

activity due to medically determinable physical or mental impairment severe

enough to satisfy the requirements of the program, and have not yet attained

normal retirement age. Spouses and children of such disabled workers may

also receive DI benefits provided they satisfy certain criteria, mostly depending upon age or the age of a child in the care of the non-disabled spouse. In

projecting future benefit outlays from the DI Trust Fund, the number of DI

beneficiaries is projected for each type of beneficiary separately, by the sex

of the disabled worker on whose earnings the benefits are based, and the age

of the beneficiary. Such projections are accomplished using standard actuarial methods reflecting future additions to the DI rolls through awards of new

benefits, and subtractions from the rolls due to death, recovery, or administrative conversion upon attainment of normal retirement age from status as a

disabled-worker beneficiary to status as a retired-worker beneficiary. The

long-range and short-range models used to make these projections are both

constructed from this basic outline, but differ in some details reflecting their

respective uses.

The number of new entitlements to disabled-worker benefits during each

year is projected by applying assumed age-sex specific disability incidence

rates to the projected disability-exposed population.1 Long-range ultimate

disability incidence rates are selected based on careful analysis of historical

patterns and expected future conditions, including the impact of scheduled

increases in the normal retirement age.2 Incidence rates for the first half of

the short-range period reflect the most recent actual experience along with

consideration of other factors expected to affect the processing of disability

claims in the near term. Over the latter half of the short-range period, incidence rates are assumed to trend into levels consistent with the long-range

ultimate incidence rate assumptions.

These assumed incidence rates are summarized in figure V.C3 and table

V.C5. As illustrated in figure V.C3, incidence rates have varied within a wide

range over the past 30 years. Although not completely understood, this variation is attributed in large part to a variety of economic and demographic fac-

 1 The disability-exposed population is the disability-insured population that is not currently entitled for disabled-worker benefits.

 2 Incidence rates are adjusted upward to account for the additional workers who are expected to file for disability benefits rather than for reduced retirement benefits that are even more reduced when the NRA is

greater than age 65.
Assumptions & Methods

106

tors, along with the effects of changes due to legislation and program

administration.1 The solid lines in figure V.C3 illustrate values of the summarized incidence rate, age-sex adjusted to the distribution of the disabilityexposed population for 1998. Such adjustment facilitates meaningful comparisons over long periods of time. From a historically high level of about 7

awards per thousand insured in 1975, age-sex-adjusted rates declined to

about 3.6 per thousand by 1982. Following a gradual trend upward, rates

increased to about 5.7 per thousand by 1992 and have since declined to about

4.6 per thousand in 2000. Figure V.C3 also displays the age-sex-adjusted

short-range incidence rates under the three alternative sets of assumptions.

Gross (unadjusted) incidence rates are also shown in figure V.C3 in dashed

lines. These unadjusted rates are heavily influenced by the changing age-sex

distribution of the exposed population over time. This is most noticeable in

the period 2000 to 2010 when the aging baby-boom generation will be concentrated in the ages of highest disability incidence.

 1 A more detailed discussion of the recent history of the DI program is presented in Actuarial Study 114,

“Social Security Disability Insurance Program Worker Experience”, June 1999. This study can be found on

the Internet at http://www.ssa.gov/OACT/NOTES/AS114/as114Foreword.html.

 Figure V.C3.—DI Disabled Worker Incidence Rates, 1970-2010

[Awards per thousand disability exposed]

0

1

2

3

4

5

6

7

8

1970 1975 1980 1985 1990 1995 2000 2005 2010

Calendar year

Gross incidence rates

Age-sex adjusted

incidence rates

Historical Projected

II

III

I
107

Program Assumptions and Methods

Table V.C5 presents the long-range ultimate incidence rate assumptions agesex adjusted to the disability-exposed population as of January 1, 1996. The

table also indicates the year in which the ultimate values are attained, along

with an indication of the relationship between those ultimate rates and the

rates for the base period (1994-96) that was used to develop relative levels of

disability incidence by age and sex for long-range assumptions.

The number of disabled-worker beneficiaries having their benefits terminated during each year is projected by applying assumed termination rates to

the disabled-worker population. The termination rates are developed by age,

sex, and reason for termination.1 In addition, in the long-range period, termination rates are also assumed to vary by duration of entitlement to disabledworker benefits. To this number of terminations is added the number of disabled-worker beneficiaries who would be automatically converted to retiredworker beneficiaries upon attainment of the normal retirement age.

In the short-range period, gross death rates under the intermediate assumptions are projected to remain relatively constant at between 35 and 37 deaths

per thousand disabled workers. This is about the same as projected under the

intermediate set of assumptions for last year’s report. The pattern of projected recovery rates under the intermediate assumptions is consistent with

assumed levels of continuing disability reviews required to fulfill the legislative mandate for regular reviews of all disabled beneficiaries. Under low cost

(high cost) assumptions, terminations due to death, recovery, and other reasons increase (decrease) to levels roughly 10 percent higher (lower) than

those under the intermediate assumptions.

Table V.C5.—Long-Range Ultimate Disabled Worker Age-Sex Adjusted 

Incidence Rates1

 1 Number of annual new disabled-worker entitlements per thousand disability-exposed, age-sex adjusted to

the disability-exposed population as of January 1, 1996.

Ultimate

incidence rate

Year ultimate

rate is attained

Percentage change

from base period 2

to ultimate rate

 2 Base period rate for long-range incidence rate assumptions is 5.0 per thousand representing the average

age-sex adjusted incidence rate for 1994-96.

Intermediate assumption. . . . . 5.6 2026 +10

Low cost assumption . . . . . . . 4.5 2026 -12

High cost assumption . . . . . . . 6.7 2026 +32

 1 Reasons for termination include death, recovery and (in the short range only) a small residual category of

terminations for special administrative reasons.
Assumptions & Methods

108

For the long-range period, projection of death rates and recovery rates begins

with an analysis of such rates split by age, sex, and duration of entitlement

over the base period 1991-95.1 Under the intermediate assumptions, recovery rates for both males and females, are assumed to remain approximately

constant after 2010. Death rates over the long-range period are assumed to

change gradually, at about the same trend as for death rates in the general

population, reaching levels in 2075 which are lower than the base period

level by 49 percent for males and 40 percent for females.

Under the low cost assumptions, recovery rates and death rates are assumed

to be higher than the corresponding levels assumed for the intermediate

assumptions. Ultimate recovery rates are assumed to be higher than the base

period rate by 125 percent for males and by 89 percent for females, while

death rates are assumed to change gradually reaching levels in 2075 which

are lower than the base period level by 32 percent for males and 21 percent

for females.

Under the high cost assumptions, recovery rates and death rates are assumed

to be lower than the corresponding levels assumed for the intermediate

assumptions. Ultimate recovery rates are assumed to be higher than the base

period rate by 50 percent for males and by 26 percent for females, while

death rates are assumed to change gradually reaching levels in 2075 which

are lower than the base period level by 63 percent for males and 56 percent

for females.

These detailed projections of disabled-worker entitlements and terminations

are combined using standard multiple decrement techniques to produce projections of numbers of disabled workers in current-payment status over the

75-year projection period. These projections are presented in table V.C6. As

indicated in that table, the number of disabled workers in current-payment

status is projected to grow from 5.0 million at the end of 2000, to 10.4 million, 11.9 million, or 13.2 million at the end of 2075, under the low cost,

intermediate, or high cost assumptions, respectively. Of course, much of this

growth is a direct result of the growth and aging of the population described

earlier in this chapter. 

Another way to view this projected growth in disabled workers is to compare

the size of the projected disabled-worker population to the size of the underlying disability-insured population reflecting the age-sex distribution of the

insured population as of January 1, 1996. Such a ratio eliminates the effects

of the aging population and is referred to as the disabled worker age-sex

 1 The termination rate analysis was based on work presented in Actuarial Study 114 referenced previously.
109

Program Assumptions and Methods

adjusted prevalence rate. Expressed in these terms, the prevalence of disability is projected to grow from 33.9 per thousand disability insured at the

beginning of 2000, to 35.2 per thousand, 46.5 per thousand, and 58.9 per

thousand at the beginning of 2075, under the low cost, intermediate, and high

cost assumptions, respectively.

Table V.C6 also presents projections of the numbers of auxiliary beneficiaries paid from the DI Trust Fund. As indicated at the beginning of this subsection, such auxiliary beneficiaries consist of qualifying spouses and

children of disabled workers. In the case of children, the child must be either

(1) under age 18, (2) age 18 and still a student in high school, or (3) over age

18 and disabled prior to age 22. In the case of spouses, the spouse must either

be at least age 62, or have an eligible child beneficiary who is either under

age 16 or disabled in his or her care. 

In general, such auxiliary beneficiaries are projected in a manner that is

related to the projected number of disabled-worker beneficiaries. In the

short-range period, this is accomplished for family members of disabledworker beneficiaries by projecting incidence and termination rates for each

category of auxiliary beneficiary. In the long-range period, the child beneficiaries at ages 18 and under are projected in relation to the projected number

of children in the population, by applying factors representing the probability

that either of their parents is insured and disabled. Spouses eligible because

they have an eligible child in care are projected relative to the projected number of such children. The remaining categories of children and spouses are

projected in relation to the projected number of disabled-worker beneficiaries.
Assumptions & Methods

110

Table V.C6.—DI Beneficiaries With Benefits in Current-Payment Status at the End of 

Calendar Years 1960-2075

[In thousands]

Calendar year

Disabled

worker

Auxiliaries

Total

Wifehusband Child

Historical data:

1960. . . . . . . . . . . . . . . . . . . . . . . . . . 455 77 155 687

1965. . . . . . . . . . . . . . . . . . . . . . . . . . 988 193 558 1,739

1970. . . . . . . . . . . . . . . . . . . . . . . . . . 1,493 283 889 2,665

1975. . . . . . . . . . . . . . . . . . . . . . . . . . 2,488 453 1,411 4,351

1980. . . . . . . . . . . . . . . . . . . . . . . . . . 2,856 462 1,359 4,677

1985. . . . . . . . . . . . . . . . . . . . . . . . . . 2,653 306 945 3,904

1986. . . . . . . . . . . . . . . . . . . . . . . . . . 2,725 301 965 3,991

1987. . . . . . . . . . . . . . . . . . . . . . . . . . 2,782 291 968 4,041

1988. . . . . . . . . . . . . . . . . . . . . . . . . . 2,826 281 963 4,070

1989. . . . . . . . . . . . . . . . . . . . . . . . . . 2,891 271 962 4,124

1990. . . . . . . . . . . . . . . . . . . . . . . . . . 3,007 266 989 4,261

1991. . . . . . . . . . . . . . . . . . . . . . . . . . 3,191 266 1,052 4,509

1992. . . . . . . . . . . . . . . . . . . . . . . . . . 3,464 271 1,151 4,886

1993. . . . . . . . . . . . . . . . . . . . . . . . . . 3,721 273 1,255 5,249

1994. . . . . . . . . . . . . . . . . . . . . . . . . . 3,958 271 1,350 5,579

1995. . . . . . . . . . . . . . . . . . . . . . . . . . 4,179 264 1,409 5,852

1996. . . . . . . . . . . . . . . . . . . . . . . . . . 4,378 224 1,463 6,065

1997. . . . . . . . . . . . . . . . . . . . . . . . . . 4,501 207 1,438 6,146

1998. . . . . . . . . . . . . . . . . . . . . . . . . . 4,691 190 1,446 6,327

1999. . . . . . . . . . . . . . . . . . . . . . . . . . 4,870 176 1,468 6,514

2000. . . . . . . . . . . . . . . . . . . . . . . . . . 5,036 165 1,466 6,667

Intermediate:

2005. . . . . . . . . . . . . . . . . . . . . . . . . . 6,148 153 1,579 7,880

2010. . . . . . . . . . . . . . . . . . . . . . . . . . 7,277 166 1,797 9,239

2015. . . . . . . . . . . . . . . . . . . . . . . . . . 8,263 165 1,912 10,340

2020. . . . . . . . . . . . . . . . . . . . . . . . . . 8,978 185 2,015 11,179

2025. . . . . . . . . . . . . . . . . . . . . . . . . . 9,641 216 2,106 11,963

2030. . . . . . . . . . . . . . . . . . . . . . . . . . 9,644 216 2,187 12,048

2035. . . . . . . . . . . . . . . . . . . . . . . . . . 9,698 217 2,253 12,168

2040. . . . . . . . . . . . . . . . . . . . . . . . . . 9,968 218 2,302 12,488

2045. . . . . . . . . . . . . . . . . . . . . . . . . . 10,558 233 2,347 13,139

2050. . . . . . . . . . . . . . . . . . . . . . . . . . 10,936 240 2,388 13,564

2055. . . . . . . . . . . . . . . . . . . . . . . . . . 11,239 249 2,433 13,921

2060. . . . . . . . . . . . . . . . . . . . . . . . . . 11,310 249 2,474 14,034

2065. . . . . . . . . . . . . . . . . . . . . . . . . . 11,475 253 2,511 14,239

2070. . . . . . . . . . . . . . . . . . . . . . . . . . 11,691 257 2,544 14,491

2075. . . . . . . . . . . . . . . . . . . . . . . . . . 11,947 263 2,576 14,786

Low Cost:

2005. . . . . . . . . . . . . . . . . . . . . . . . . . 5,805 144 1,491 7,441

2010. . . . . . . . . . . . . . . . . . . . . . . . . . 6,510 147 1,610 8,268

2015. . . . . . . . . . . . . . . . . . . . . . . . . . 7,044 132 1,634 8,811

2020. . . . . . . . . . . . . . . . . . . . . . . . . . 7,377 138 1,687 9,202

2025. . . . . . . . . . . . . . . . . . . . . . . . . . 7,771 154 1,768 9,694

2030. . . . . . . . . . . . . . . . . . . . . . . . . . 7,695 149 1,863 9,708

2035. . . . . . . . . . . . . . . . . . . . . . . . . . 7,709 146 1,956 9,811

2040. . . . . . . . . . . . . . . . . . . . . . . . . . 7,930 146 2,035 10,111

2045. . . . . . . . . . . . . . . . . . . . . . . . . . 8,418 157 2,103 10,678

2050. . . . . . . . . . . . . . . . . . . . . . . . . . 8,755 163 2,177 11,095

2055. . . . . . . . . . . . . . . . . . . . . . . . . . 9,058 171 2,265 11,493

2060. . . . . . . . . . . . . . . . . . . . . . . . . . 9,224 173 2,356 11,753

2065. . . . . . . . . . . . . . . . . . . . . . . . . . 9,514 178 2,447 12,140

2070. . . . . . . . . . . . . . . . . . . . . . . . . . 9,905 184 2,536 12,625

2075. . . . . . . . . . . . . . . . . . . . . . . . . . 10,350 192 2,625 13,166
111

Program Assumptions and Methods

Note: Totals do not necessarily equal the sums of rounded components.

7. Average Benefits

Average benefits were projected by type of benefit based on recent historical

averages, projected average primary insurance amounts (PIAs), and projected ratios of average benefits to average PIAs. Average PIAs were calculated from projected distributions of beneficiaries by duration from year of

award, average awarded PIAs, and increases thereto since the year of award,

reflecting automatic benefit increases, recomputations to reflect additional

covered earnings, and other factors. Average awarded PIAs were calculated

from projected earnings histories, which were developed from the actual

earnings histories associated with a sample of awards made in 1999, with

adjustment in age distribution to reflect the effect of the Senior Citizens’

Freedom to Work Act of 2000 (Public Law 106-182, enacted on April 7,

2000) as described in section III.B. A sample of 1998 awards was used for

the 2000 report.

For several types of benefits—retired-worker, aged-spouse, and agedwidow(er) benefits—the percentage of the PIA that is payable depends on

the age at initial entitlement to benefits. Projected ratios of average benefits

to average PIAs for these types of benefits were based on projections of age

distributions at initial entitlement.

8. Benefit Payments

For each type of benefit, benefit payments were calculated as the product of

a number of beneficiaries and a corresponding average monthly benefit. In

High Cost:

2005. . . . . . . . . . . . . . . . . . . . . . . . . . 6,690 171 1,731 8,592

2010. . . . . . . . . . . . . . . . . . . . . . . . . . 8,263 188 2,031 10,483

2015. . . . . . . . . . . . . . . . . . . . . . . . . . 9,507 207 2,191 11,906

2020. . . . . . . . . . . . . . . . . . . . . . . . . . 10,616 247 2,330 13,193

2025. . . . . . . . . . . . . . . . . . . . . . . . . . 11,555 297 2,409 14,260

2030. . . . . . . . . . . . . . . . . . . . . . . . . . 11,645 305 2,451 14,400

2035. . . . . . . . . . . . . . . . . . . . . . . . . . 11,744 309 2,466 14,518

2040. . . . . . . . . . . . . . . . . . . . . . . . . . 12,065 311 2,464 14,840

2045. . . . . . . . . . . . . . . . . . . . . . . . . . 12,754 329 2,474 15,556

2050. . . . . . . . . . . . . . . . . . . . . . . . . . 13,156 334 2,470 15,959

2055. . . . . . . . . . . . . . . . . . . . . . . . . . 13,426 342 2,459 16,227

2060. . . . . . . . . . . . . . . . . . . . . . . . . . 13,344 337 2,437 16,118

2065. . . . . . . . . . . . . . . . . . . . . . . . . . 13,294 334 2,410 16,038

2070. . . . . . . . . . . . . . . . . . . . . . . . . . 13,215 331 2,379 15,924

2075. . . . . . . . . . . . . . . . . . . . . . . . . . 13,158 332 2,350 15,840

Table V.C6.—DI Beneficiaries With Benefits in Current-Payment Status at the End of 

Calendar Years 1960-2075 (Cont.)

[In thousands]

Calendar year

Disabled

worker

Auxiliaries

Total

Wifehusband Child
Assumptions & Methods

112

the short-range period, benefit payments were calculated on a quarterly

basis. In the long-range period, all benefit payments were calculated on an

annual basis, using the number of beneficiaries on December 31. These

amounts were adjusted to include retroactive payments to newly awarded

beneficiaries, and other amounts not reflected in the regular monthly benefit

payments.

Lump-sum death payments were calculated as the product of (1) the number

of such payments, which was projected on the basis of the assumed death

rates, the projected fully insured population, and the estimated percentage of

the fully insured population that would qualify for benefits, and (2) the

amount of the lump-sum death payment, which is $255 (not indexed in

future years).

9. Administrative Expenses

The projection of administrative expenses through 2010 is based on historical experience and the expected growth in average wages. Additionally, estimates for the first several years of the projection are provided by the Office

of Budget. For years after 2010, administrative expenses are assumed to

increase because of increases in the number of beneficiaries and increases in

the average wage which will more than offset assumed improvements in

administrative productivity.

10. Railroad Retirement Financial Interchange

Railroad workers are covered under a separate multi-tiered plan, the first tier

being very similar to OASDI coverage. An annual financial interchange

between the Railroad Retirement fund and the OASI and DI funds is made

reflecting the difference between (1) the amount of OASDI benefits that

would be paid to railroad workers and their families if railroad employment

had been covered under the OASDI program and administrative expenses

associated with these benefits, and (2) the amount of OASDI payroll tax and

income tax that would be received with allowances for interest from railroad

workers.

The effect of the financial interchange with the Railroad Retirement program

was evaluated on the basis of trends similar to those used in estimating the

cost of OASDI benefits. The resulting effect was annual short-range costs of

about $3-5 billion and a long-range summarized cost of 0.04 percent of taxable payroll to the OASDI program.
113

Program Assumptions and Methods

11. Benefits to Uninsured Persons

Some older persons had little or no chance to become fully insured for Social

Security benefits during their working lifetimes. Special payments from the

OASI Trust Fund may be granted to uninsured persons who either:

(1) attained age 72 before 1968, or (2) attained age 72 in 1968 or later and

had 3 quarters of coverage for each year after 1966 and before the year of

attainment of age 72. Benefits and costs associated with uninsured persons of

the first type above are reimbursable from the general fund of the Treasury.

All projected costs associated with reimbursable and non-reimbursable payments to uninsured persons are insignificant.

12. Military-Service Transfers

As a result of the 1983 amendments, the OASI and DI Trust Funds received

lump-sum payments, in May 1983, for the cost (including administrative

expenses) of providing additional benefit payments resulting from noncontributory wage credits for military service performed prior to 1957. Adjustments to the payments were made in 1985, 1990, 1995, and 2000, and may

be made every fifth year thereafter. The adjustments for 2000 included a

transfer of $836 million from the DI Trust Fund to the general fund of the

Treasury. Note that $393 million that was scheduled to be transferred from

the general fund to the OASI Trust Fund did not occur, and will be made—

with an allowance for interest—in 2001.

13. Income From Taxation of Benefits

Under present law, the OASI and DI Trust Funds are credited with the additional income taxes attributable to the taxation of the first 50 percent of

OASDI benefit payments. (The remainder of the income taxes attributable to

the taxation of up to 85 percent of OASDI benefit payments is credited to the

HI Trust Fund.) For the short-range period, income to the trust funds from

such taxation was estimated by applying the following two factors to total

OASI and DI benefit payments: (1) the percentage of benefit payments (limited to 50 percent) that is taxable, and (2) the average tax rate applicable to

those benefits. For the long-range period, income to the trust funds from such

taxation was estimated by applying projected ratios of such income to total

OASI and DI benefit payments. Because the income thresholds used for benefit taxation are, by law, constant in the future, their values in relation to

future income and benefit levels will decline. Thus, ratios of income from

taxation of benefits to the amount of benefits are projected to increase. These

ratios were projected reflecting the results of a model developed by the

Office of Tax Analysis, Department of the Treasury, relating OASDI benefit

payments to total personal income for a sample of recent tax returns.
Appendices

114

VI. APPENDICES

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS

The Federal Old-Age and Survivors Insurance (OASI) Trust Fund was established on January 1, 1940, as a separate account in the United States Treasury. The Federal Disability Insurance (DI) Trust Fund, another separate

account in the United States Treasury was established on August 1, 1956. All

the financial operations of the OASI and DI programs are handled through

these respective funds. The Board of Trustees1 is responsible for overseeing

the financial operations of these funds. The following paragraphs describe

the various components of trust fund income and outgo. The tables at the end

of this section present the historical operations of the separate trust funds

since their inception, as well as the operations of the combined trust funds

during the period when they have co-existed.

The primary receipts of these two funds are amounts appropriated to each of

them under permanent authority on the basis of contributions payable by

workers, their employers, and individuals with self-employment income, in

work covered by the OASDI program. All employees, and their employers,

in covered employment are required to pay contributions with respect to their

wages. Employees, and their employers, are also required to pay contributions with respect to cash tips, if the individual’s monthly cash tips amount to

at least $20. All self-employed persons are required to pay contributions with

respect to their covered net earnings from self-employment. In addition to

paying the required employer contributions on the wages of covered Federal

employees, the Federal Government also pays amounts equivalent to the

combined employer and employee contributions that would be paid on

deemed wage credits attributable to military service performed after 1956 if

such wage credits were covered wages.

In general, an individual’s contributions, or taxes, are computed on wages or

net earnings from self-employment, or both wages and net self-employment

earnings combined, up to a specified maximum annual amount. The contributions are determined first on the wages and then on any net self-employment earnings, such that the total does not exceed the annual maximum

amount. An employee who pays contributions on wages in excess of the

 1 The Board is composed of six members, four of whom serve automatically by virtue of their positions in

the Federal Government: the Secretary of the Treasury, who is the Managing Trustee, the Secretary of Labor,

the Secretary of Health and Human Services, and the Commissioner of Social Security. The other two members are appointed by the President and confirmed by the Senate to serve as public representatives: John L.

Palmer and Thomas R. Saving are currently serving 4-year terms that began on October 28, 2000.
115

History of Trust Fund Operations

annual maximum amount (because of employment with two or more

employers) is eligible for a refund of the excess employee contributions.

The monthly benefit amount to which an individual (or his or her spouse and

children) may become entitled under the OASDI program is based on the

individual’s taxable earnings during his or her lifetime. For almost all persons who first become eligible to receive benefits in 1979 or later, the earnings used in the computation of benefits are indexed to reflect increases in

average wage levels.

The contribution, or tax, rates applicable under current law in each calendar

year and the allocation of these rates between the OASI and DI Trust Funds

are shown in table VI.A1.1 The maximum amount of earnings on which

OASDI contributions are payable in a year, which is also the maximum

amount of earnings creditable in that year for benefit-computation purposes,

is called the contribution and benefit base. The contribution and benefit base

for each year through 2001 is also shown in table VI.A1.

 1 The contribution rates for the Hospital Insurance (HI) program, and for the OASDI and HI programs combined, are shown in table VI.E1.

Table VI.A1.—Contribution and Benefit Base and Contribution Rates

Calendar years

Contribution

and benefit

base

Contribution rates (percent)

Employees and employers,

each Self-employed

OASDI OASI DI OASDI OASI DI

1937-49 . . . . . . . . . $3,000 1.000 1.000 — ———

1950. . . . . . . . . . . . 3,000 1.500 1.500 — ———

1951-53 . . . . . . . . . 3,600 1.500 1.500 — 2.2500 2.2500 — 1954. . . . . . . . . . . . 3,600 2.000 2.000 — 3.0000 3.0000 —

1955-56 . . . . . . . . . 4,200 2.000 2.000 — 3.0000 3.0000 —

1957-58 . . . . . . . . . 4,200 2.250 2.000 0.250 3.3750 3.0000 0.3750

1959. . . . . . . . . . . . 4,800 2.500 2.250 .250 3.7500 3.3750 .3750

1960-61 . . . . . . . . . 4,800 3.000 2.750 .250 4.5000 4.1250 .3750

1962. . . . . . . . . . . . 4,800 3.125 2.875 .250 4.7000 4.3250 .3750

1963-65 . . . . . . . . . 4,800 3.625 3.375 .250 5.4000 5.0250 .3750

1966. . . . . . . . . . . . 6,600 3.850 3.500 .350 5.8000 5.2750 .5250

1967. . . . . . . . . . . . 6,600 3.900 3.550 .350 5.9000 5.3750 .5250

1968. . . . . . . . . . . . 7,800 3.800 3.325 .475 5.8000 5.0875 .7125

1969. . . . . . . . . . . . 7,800 4.200 3.725 .475 6.3000 5.5875 .7125

1970. . . . . . . . . . . . 7,800 4.200 3.650 .550 6.3000 5.4750 .8250

1971. . . . . . . . . . . . 7,800 4.600 4.050 .550 6.9000 6.0750 .8250

1972. . . . . . . . . . . . 9,000 4.600 4.050 .550 6.9000 6.0750 .8250

1973. . . . . . . . . . . . 10,800 4.850 4.300 .550 7.0000 6.2050 .7950

1974. . . . . . . . . . . . 13,200 4.950 4.375 .575 7.0000 6.1850 .8150

1975. . . . . . . . . . . . 14,100 4.950 4.375 .575 7.0000 6.1850 .8150

1976. . . . . . . . . . . . 15,300 4.950 4.375 .575 7.0000 6.1850 .8150

1977. . . . . . . . . . . . 16,500 4.950 4.375 .575 7.0000 6.1850 .8150

1978. . . . . . . . . . . . 17,700 5.050 4.275 .775 7.1000 6.0100 1.0900

1979. . . . . . . . . . . . 22,900 5.080 4.330 .750 7.0500 6.0100 1.0400

1980. . . . . . . . . . . . 25,900 5.080 4.520 .560 7.0500 6.2725 .7775
Appendices

116

All contributions are collected by the Internal Revenue Service and deposited in the general fund of the Treasury. The contributions are immediately

and automatically appropriated to the trust funds on an estimated basis. The

exact amount of contributions received is not known initially because the

OASDI and HI contributions and individual income taxes are not separately

identified in collection reports received by the Internal Revenue Service.

Periodic adjustments are subsequently made to the extent that the estimates

are found to differ from the amounts of contributions actually payable as

determined from reported earnings. Adjustments are also made to account

for any refunds to employees (with more than one employer) who paid contributions on wages in excess of the contribution and benefit base.

Beginning in 1984, up to one-half of an individual’s or couple’s OASDI benefits was subject to Federal income taxation under certain circumstances.

1981. . . . . . . . . . . . $29,700 5.350 4.700 0.650 8.0000 7.0250 0.9750

1982. . . . . . . . . . . . 32,400 5.400 4.575 .825 8.0500 6.8125 1.2375

1983. . . . . . . . . . . . 35,700 5.400 4.775 .625 8.0500 7.1125 .9375

19841 . . . . . . . . . . 37,800 5.700 5.200 .500 11.4000 10.4000 1.0000

19851. . . . . . . . . . . 39,600 5.700 5.200 .500 11.4000 10.4000 1.0000

19861. . . . . . . . . . . 42,000 5.700 5.200 .500 11.4000 10.4000 1.0000

19871. . . . . . . . . . . 43,800 5.700 5.200 .500 11.4000 10.4000 1.0000

19881. . . . . . . . . . . 45,000 6.060 5.530 .530 12.1200 11.0600 1.0600

19891. . . . . . . . . . . 48,000 6.060 5.530 .530 12.1200 11.0600 1.0600

1990 . . . . . . . . . . . 51,300 6.200 5.600 .600 12.4000 11.2000 1.2000

1991. . . . . . . . . . . . 53,400 6.200 5.600 .600 12.4000 11.2000 1.2000

1992. . . . . . . . . . . . 55,500 6.200 5.600 .600 12.4000 11.2000 1.2000

1993. . . . . . . . . . . . 57,600 6.200 5.600 .600 12.4000 11.2000 1.2000

1994. . . . . . . . . . . . 60,600 6.200 5.260 .940 12.4000 10.5200 1.8800

1995. . . . . . . . . . . . 61,200 6.200 5.260 .940 12.4000 10.5200 1.8800

1996. . . . . . . . . . . . 62,700 6.200 5.260 .940 12.4000 10.5200 1.8800

1997. . . . . . . . . . . . 65,400 6.200 5.350 .850 12.4000 10.7000 1.7000

1998. . . . . . . . . . . . 68,400 6.200 5.350 .850 12.4000 10.7000 1.7000

1999. . . . . . . . . . . . 72,600 6.200 5.350 .850 12.4000 10.7000 1.7000

2000. . . . . . . . . . . . 76,200 6.200 5.300 .900 12.4000 10.6000 1.8000

2001. . . . . . . . . . . . 80,400 6.200 5.300 .900 12.4000 10.6000 1.8000

2002 and later . . . . (2) 6.200 5.300 .900 12.4000 10.6000 1.8000

 1 In 1984 only, an immediate credit of 0.3 percent of taxable wages was allowed against the OASDI contributions paid by employees, which resulted in an effective contribution rate of 5.4 percent. The appropriations of

contributions to the trust funds, however, were based on the combined employee-employer rate of 11.4 percent,

as if the credit for employees did not apply. Similar credits of 2.7 percent, 2.3 percent, and 2.0 percent were

allowed against the combined OASDI and Hospital Insurance (HI) contributions on net earnings from selfemployment in 1984, 1985, and 1986-89, respectively. Beginning in 1990, self-employed persons are allowed a

deduction, for purposes of computing their net earnings, equal to half of the combined OASDI and HI contributions that would be payable without regard to the contribution and benefit base. The OASDI contribution rate is

then applied to net earnings after this deduction, but subject to the OASDI base.

 2 Subject to automatic adjustment based on increases in average wages.

Table VI.A1.—Contribution and Benefit Base and Contribution Rates (Cont.)

Calendar years

Contribution

and benefit

base

Contribution rates (percent)

Employees and employers,

each Self-employed

OASDI OASI DI OASDI OASI DI
117

History of Trust Fund Operations

Effective for taxable years beginning after 1993, the maximum percentage of

benefits subject to taxation was increased from 50 percent to 85 percent. The

proceeds from taxation of up to 50 percent of benefits are credited to the

OASI and DI Trust Funds in advance, on an estimated basis, at the beginning

of each calendar quarter, with no reimbursement to the general fund for interest costs attributable to the advance transfers.1 Subsequent adjustments are

made based on the actual amounts as shown on annual income tax records.

The amounts appropriated from the general fund of the Treasury are allocated to the OASI and DI Trust Funds on the basis of the income taxes paid

on the benefits from each fund.2

Another source of income to the trust funds is interest received on investments held by the trust funds. That portion of each trust fund which is not

required to meet current expenditures for benefits and administration is

invested, on a daily basis, primarily in interest-bearing obligations of the

U.S. Government (including special public-debt obligations described

below). Investments may also be made in obligations guaranteed as to both

principal and interest by the United States, including certain Federally sponsored agency obligations that are designated in the laws authorizing their

issuance as lawful investments for fiduciary and trust funds under the control

and authority of the United States or any officer of the United States. These

obligations may be acquired on original issue at the issue price or by purchase of outstanding obligations at their market price.

The Social Security Act authorizes the issuance of special public-debt obligations for purchase exclusively by the trust funds. The Act provides that the

interest rate on new special obligations will be the average market yield, as

of the last business day of a month, on all of the outstanding marketable U.S.

obligations that are due or callable more than 4 years in the future. The rate

so calculated is rounded to the nearest one-eighth of one percent and applies

to new issues in the following month. Beginning January 1999, in calculating

the average market yield rate for this purpose, the Treasury incorporates the

yield to the call date when a callable bond’s market price is above par.

Although the special issues cannot be bought or sold in the open market, they

are nonetheless redeemable at all times at par value and thus bear no risk of

fluctuations in principal value due to changes in interest rates. Just as in the

 1 The additional tax revenues resulting from the increase to 85 percent are transferred to the HI Trust Fund.

 2 A special provision applies to benefits paid to nonresident aliens. Under Public Law 103-465, effective for

taxable years beginning after 1994, a flat-rate tax, usually 25.5 percent, is withheld from the benefits before

they are paid and, therefore, remains in the trust funds. From 1984 to 1994 the flat-rate tax that was withheld

was usually 15 percent.
Appendices

118

case of marketable securities, all of the investments held by the trust funds

are backed by the full faith and credit of the U.S. Government.

Income is also affected by provisions of the Social Security Act for (1) transfers between the general fund of the Treasury and the OASI and DI Trust

Funds for any adjustments to prior payments for the cost arising from the

granting of noncontributory wage credits for military service prior to 1957,

according to periodic determinations; (2) annual reimbursements from the

general fund of the Treasury to the OASI Trust Fund for any costs arising

from the special monthly cash payments to certain uninsured persons—i.e.,

those who attained age 72 before 1968 and who generally are not eligible for

cash benefits under other provisions of the OASDI program; and (3) the

receipt of unconditional money gifts or bequests made for the benefit of the

trust funds or any activity financed through the funds.

The primary expenditures of the OASI and DI Trust Funds are for (1)

OASDI benefit payments, net of any reimbursements from the general fund

of the Treasury for unnegotiated benefit checks, and (2) expenses incurred by

the Social Security Administration and the Department of the Treasury in

administering the OASDI program and the provisions of the Internal Revenue Code relating to the collection of contributions. Such administrative

expenses include expenditures for construction, rental and lease, or purchase

of office buildings and related facilities for the Social Security Administration. The Social Security Act does not permit expenditures from the OASI

and DI Trust Funds for any purpose not related to the payment of benefits or

administrative costs for the OASDI program.

The expenditures of the trust funds are also affected by (1) costs of vocational rehabilitation services furnished as an additional benefit to disabled

persons receiving cash benefits because of their disabilities where such services contributed to their successful rehabilitation, and (2) the provisions of

the Railroad Retirement Act which provide for a system of coordination and

financial interchange between the Railroad Retirement program and the

Social Security program. Under the latter provisions, transfers between the

Railroad Retirement program’s Social Security Equivalent Benefit Account

and the trust funds are made on an annual basis in order to place each trust

fund in the same position in which it would have been if railroad employment had always been covered under Social Security.

The net worth of facilities and other fixed capital assets is not carried in the

statements of the operations of the trust funds presented in this report. This is

because the value of fixed capital assets does not represent funds available

for the payment of benefits or administrative expenditures, and therefore is

not considered in assessing the actuarial status of the trust funds.
119

History of Trust Fund Operations

Table VI.A2.—Historical Operations of the OASI Trust Fund, 

Calendar Years 1937-2000

[Amounts in billions]

Calendar

year

Income Expenditures Assets

Total1

Net

contributions2

Taxation of

benefits

Net

interest 3 Total

Benefit

payments 4

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

Fund

ratio 5

1937 . . . $0.8 $0.8 — (6) (6) (6) — — $0.8 $0.8 100

1938 . . . .4 .4 — (6) (6) (6) — — .4 1.1 7,660

1939 . . . .6 .6 — (6) (6) (6) — — .6 1.7 8,086

1940 . . . .4 .3 — (6) $0.1 (6) (6) — .3 2.0 2,781

1941 . . . .8 .8 — $0.1 .1 $0.1 (6) — .7 2.8 1,782

1942 . . . 1.1 1.0 — .1 .2 .1 (6) — .9 3.7 1,737

1943 . . . 1.3 1.2 — .1 .2 .2 (6) — 1.1 4.8 1,891

1944 . . . 1.4 1.3 — .1 .2 .2 (6) — 1.2 6.0 2,025

1945 . . . 1.4 1.3 — .1 .3 .3 (6) — 1.1 7.1 1,975

1946 . . . 1.4 1.3 — .2 .4 .4 (6) — 1.0 8.2 1,704

1947 . . . 1.7 1.6 — .2 .5 .5 (6) — 1.2 9.4 1,592

1948 . . . 2.0 1.7 — .3 .6 .6 $0.1 — 1.4 10.7 1,542

1949 . . . 1.8 1.7 — .1 .7 .7 .1 — 1.1 11.8 1,487

1950 . . . 2.9 2.7 — .3 1.0 1.0 .1 — 1.9 13.7 1,156

1951 . . . 3.8 3.4 — .4 2.0 1.9 .1 — 1.8 15.5 698

1952 . . . 4.2 3.8 — .4 2.3 2.2 .1 — 1.9 17.4 681

1953 . . . 4.4 3.9 — .4 3.1 3.0 .1 — 1.3 18.7 564

1954 . . . 5.6 5.2 — .4 3.7 3.7 .1 (6) 1.9 20.6 500

1955 . . . 6.2 5.7 — .5 5.1 5.0 .1 (6) 1.1 21.7 405

1956 . . . 6.7 6.2 — .5 5.8 5.7 .1 (6) .9 22.5 371

1957 . . . 7.4 6.8 — .6 7.5 7.3 .2 (6) -.1 22.4 300

1958 . . . 8.1 7.6 — .6 8.6 8.3 .2 $0.1 -.5 21.9 259

1959 . . . 8.6 8.1 — .5 10.3 9.8 .2 .3 -1.7 20.1 212

1960 . . . 11.4 10.9 — .5 11.2 10.7 .2 .3 .2 20.3 180

1961 . . . 11.8 11.3 — .5 12.4 11.9 .2 .3 -.6 19.7 163

1962 . . . 12.6 12.1 — .5 14.0 13.4 .3 .4 -1.4 18.3 141

1963 . . . 15.1 14.5 — .5 14.9 14.2 .3 .4 .1 18.5 123

1964 . . . 16.3 15.7 — .6 15.6 14.9 .3 .4 .6 19.1 118

1965 . . . 16.6 16.0 — .6 17.5 16.7 .3 .4 -.9 18.2 109

1966 . . . 21.3 20.6 — .6 19.0 18.3 .3 .4 2.3 20.6 96

1967 . . . 24.0 23.1 — .8 20.4 19.5 .4 .5 3.7 24.2 101

1968 . . . 25.0 23.7 — .9 23.6 22.6 .5 .4 1.5 25.7 103

1969 . . . 29.6 27.9 — 1.2 25.2 24.2 .5 .5 4.4 30.1 102

1970 . . . 32.2 30.3 — 1.5 29.8 28.8 .5 .6 2.4 32.5 101

1971 . . . 35.9 33.7 — 1.7 34.5 33.4 .5 .6 1.3 33.8 94

1972 . . . 40.1 37.8 — 1.8 38.5 37.1 .7 .7 1.5 35.3 88

1973 . . . 48.3 46.0 — 1.9 47.2 45.7 .6 .8 1.2 36.5 75

1974 . . . 54.7 52.1 — 2.2 53.4 51.6 .9 .9 1.3 37.8 68

1975 . . . 59.6 56.8 — 2.4 60.4 58.5 .9 1.0 -.8 37.0 63

1976 . . . 66.3 63.4 — 2.3 67.9 65.7 1.0 1.2 -1.6 35.4 54

1977 . . . 72.4 69.6 — 2.2 75.3 73.1 1.0 1.2 -2.9 32.5 47

1978 . . . 78.1 75.5 — 2.0 83.1 80.4 1.1 1.6 -5.0 27.5 39

1979 . . . 90.3 87.9 — 1.8 93.1 90.6 1.1 1.4 -2.9 24.7 30

1980 . . . 105.8 103.4 — 1.8 107.7 105.1 1.2 1.4 -1.8 22.8 23

1981 . . . 125.4 122.6 — 2.1 126.7 123.8 1.3 1.6 -1.3 21.5 18

1982 . . . 125.2 123.7 — .8 142.1 138.8 1.5 1.8 .6 22.1 15

1983 . . . 150.6 138.3 — 6.7 153.0 149.2 1.5 2.3 -2.4 19.7 14

1984 . . . 169.3 164.1 $2.8 2.3 161.9 157.8 1.6 2.4 7.4 27.1 20

1985 . . . 184.2 177.0 3.2 1.9 171.2 167.2 1.6 2.3 7 8.7 35.8 24

1986 . . . 197.4 190.7 3.4 3.1 181.0 176.8 1.6 2.6 7 3.2 39.1 28

1987 . . . 210.7 202.7 3.3 4.7 187.7 183.6 1.5 2.6 23.1 62.1 30

1988 . . . 240.8 229.8 3.4 7.6 200.0 195.5 1.8 2.8 40.8 102.9 41

1989 . . . 264.7 250.2 2.4 12.0 212.5 208.0 1.7 2.8 52.2 155.1 59
Appendices

120

Note: Totals do not necessarily equal the sums of rounded components.

1990 . . . $286.7 $267.5 $4.8 $16.4 $227.5 $223.0 $1.6 $3.0 $59.1 $214.2 78

1991 . . . 299.3 272.6 5.9 20.8 245.6 240.5 1.8 3.4 53.7 267.8 87

1992 . . . 311.2 281.0 5.9 24.3 259.9 254.9 1.8 3.1 51.3 319.2 103

1993 . . . 323.3 290.9 5.3 27.0 273.1 267.8 2.0 3.4 50.2 369.3 117

1994 . . . 328.3 293.3 5.0 29.9 284.1 279.1 1.6 3.4 44.1 413.5 130

1995 . . . 342.8 304.6 5.5 32.8 297.8 291.6 2.1 4.1 45.0 458.5 139

1996 . . . 363.7 321.6 6.5 35.7 308.2 302.9 1.8 3.6 55.5 514.0 149

1997 . . . 397.2 349.9 7.4 39.8 322.1 316.3 2.1 3.7 75.1 589.1 160

1998 . . . 424.8 371.2 9.1 44.5 332.3 326.8 1.9 3.7 92.5 681.6 177

1999 . . . 457.0 396.4 10.9 49.8 339.9 334.4 1.8 3.7 117.2 798.8 201

2000 . . . 490.5 421.4 11.6 57.5 358.3 352.7 2.1 3.5 132.2 931.0 223

 1 Includes payments from the general fund of the Treasury to the trust funds for (1) in 1947-51 and in 1966 and

later, for costs of noncontributory wage credits for military service performed before 1957; (2) in 1971-82, for

costs of deemed wage credits for military service performed after 1956; and (3) in 1968 and later, for costs of

benefits to certain uninsured persons who attained age 72 before 1968. Differences in past year total income and

sum of individual column amounts are due to these payments. OASI historical payments from the general fund

of the Treasury may be found on the Internet at http://www.ssa.gov/STATS/t4a1Income.html.

 2 Beginning in 1983, includes transfers from general fund of Treasury representing contributions that would

have been paid on deemed wage credits for military service in 1957 and later, if such credits were considered to

be covered wages.

 3 Net interest includes net profits or losses on marketable investments. Beginning in 1967, administrative

expenses are charged to the trust fund on an estimated basis, with a final adjustment, including interest, made in

the following fiscal year. The amounts of these interest adjustments are included in net interest. For years prior

to 1967, a description of the method of accounting for administrative expenses is contained in the 1970 Annual

Report. Beginning in October 1973, the figures shown include relatively small amounts of gifts to the fund. Net

interest for 1983-86 reflects payments from a borrowing trust fund to a lending trust fund for interest on

amounts owed under the interfund borrowing provisions. During 1983-90, interest paid from the trust fund to

the general fund on advance tax transfers is reflected. The amount shown for 1985 includes an interest adjustment of $88 million on unnegotiated checks issued before April 1985.

 4 Beginning in 1966, includes payments for vocational rehabilitation services furnished to disabled persons

receiving benefits because of their disabilities. Beginning in 1983, amounts are reduced by amount of reimbursement for unnegotiated benefit checks.

 5 The “Trust fund ratio” column represents assets at the beginning of a year as a percentage of expenditures during the year. For years 1984-90, assets at the beginning of a year include January advance tax transfers. 6 Less than $50 million. 7 Reflects offset for repayment from the OASI Trust Fund of amounts borrowed from the DI and HI Trust Funds

in 1982. The amount repaid in 1985 was $4.4 billion; in 1986, the amount was $13.2 billion.

Table VI.A2.—Historical Operations of the OASI Trust Fund, 

Calendar Years 1937-2000 (Cont.)

[Amounts in billions]

Calendar

year

Income Expenditures Assets

Total1

Net

contributions2

Taxation of

benefits

Net

interest 3 Total

Benefit

payments 4

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

Fund

ratio 5
121

History of Trust Fund Operations

Table VI.A3.—Historical Operations of the DI Trust Fund, 

Calendar Years 1957-2000

[Amounts in billions]

Calendar

year

Income Expenditures Assets

Total 1

 1 Includes payments from the general fund of the Treasury to the trust funds for (1) in 1947-51 and in 1966 and

later, for costs of noncontributory wage credits for military service performed before 1957 and (2) in 1971-82, for

costs of deemed wage credits for military service performed after 1956. Differences in past year total income and

sum of individual column amounts are due to these payments. DI historical payments from the general fund of the

Treasury may be found on the Internet at http://www.ssa.gov/STATS/t4a2Income.html.

Net

contributions2

Taxation of

benefits

Net

interest 3 Total

Benefit

payments 4

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

Fund

ratio 5

1957. . . $0.7 $0.7 — (6) $0.1 $0.1 (6) — $0.6 $0.6 100

1958. . . 1.0 1.0 — (6) .3 .2 (6) — .7 1.4 249

1959. . . .9 .9 — (6) .5 .5 $0.1 (6) .4 1.8 284

1960. . . 1.1 1.0 — $0.1 .6 .6 (6) (6) .5 2.3 304

1961. . . 1.1 1.0 — .1 1.0 .9 .1 (6) .1 2.4 239

1962. . . 1.1 1.0 — .1 1.2 1.1 .1 (6) -.1 2.4 206

1963. . . 1.2 1.1 — .1 1.3 1.2 .1 (6) -.1 2.2 183

1964. . . 1.2 1.2 — .1 1.4 1.3 .1 (6) -.2 2.0 159

1965. . . 1.2 1.2 — .1 1.7 1.6 .1 (6) -.4 1.6 121

1966. . . 2.1 2.0 — .1 1.9 1.8 .1 (6) .1 1.7 82

1967. . . 2.4 2.3 — .1 2.1 2.0 .1 (6) .3 2.0 83

1968. . . 3.5 3.3 — .1 2.5 2.3 .1 (6) 1.0 3.0 83

1969. . . 3.8 3.6 — .2 2.7 2.6 .1 (6) 1.1 4.1 111

1970. . . 4.8 4.5 — .3 3.3 3.1 .2 (6) 1.5 5.6 126

1971. . . 5.0 4.6 — .4 4.0 3.8 .2 (6) 1.0 6.6 140

1972. . . 5.6 5.1 — .4 4.8 4.5 .2 (6) .8 7.5 140

1973. . . 6.4 5.9 — .5 6.0 5.8 .2 (6) .5 7.9 125

1974. . . 7.4 6.8 — .5 7.2 7.0 .2 (6) .2 8.1 110

1975. . . 8.0 7.4 — .5 8.8 8.5 .3 (6) -.8 7.4 92

1976. . . 8.8 8.2 — .4 10.4 10.1 .3 (6) -1.6 5.7 71

1977. . . 9.6 9.1 — .3 11.9 11.5 .4 (6) -2.4 3.4 48

1978. . . 13.8 13.4 — .3 13.0 12.6 .3 (6) .9 4.2 26

1979. . . 15.6 15.1 — .4 14.2 13.8 .4 (6) 1.4 5.6 30

1980. . . 13.9 13.3 — .5 15.9 15.5 .4 (6) -2.0 3.6 35

1981. . . 17.1 16.7 — .2 17.7 17.2 .4 (6) -.6 3.0 21

1982. . . 22.7 22.0 — .5 18.0 17.4 .6 (6) -.4 2.7 17

1983. . . 20.7 18.0 — 1.6 18.2 17.5 .6 (6) 2.5 5.2 15

1984. . . 17.3 15.9 $0.2 1.2 18.5 17.9 .6 (6) -1.2 4.0 35

1985. . . 19.3 17.2 .2 .9 19.5 18.8 .6 (6) 7 2.4 6.3 27

1986. . . 19.4 18.4 .2 .8 20.5 19.9 .6 $0.1 7 1.5 7.8 38

1987. . . 20.3 19.7 (6) .6 21.4 20.5 .8 .1 -1.1 6.7 44

1988. . . 22.7 22.0 .1 .6 22.5 21.7 .7 .1 .2 6.9 38

1989. . . 24.8 24.0 .1 .7 23.8 22.9 .8 .1 1.0 7.9 38

1990. . . 28.8 28.5 .1 .9 25.6 24.8 .7 .1 3.2 11.1 40

1991. . . 30.4 29.1 .2 1.1 28.6 27.7 .8 .1 1.8 12.9 39

1992. . . 31.4 30.1 .2 1.1 32.0 31.1 .8 .1 -.6 12.3 40

1993. . . 32.3 31.2 .3 .8 35.7 34.6 1.0 .1 -3.4 9.0 35

1994. . . 52.8 51.4 .3 1.2 38.9 37.7 1.0 .1 14.0 22.9 23

1995. . . 56.7 54.4 .3 2.2 42.1 40.9 1.1 .1 14.6 37.6 55

1996. . . 60.7 57.3 .4 3.0 45.4 44.2 1.2 (6) 15.4 52.9 83

1997. . . 60.5 56.0 .5 4.0 47.0 45.7 1.3 .1 13.5 66.4 113

1998. . . 64.4 59.0 .6 4.8 49.9 48.2 1.6 .2 14.4 80.8 133

1999. . . 69.5 63.2 .7 5.7 53.0 51.4 1.5 .1 16.5 97.3 152

2000. . . 77.9 71.1 .7 6.9 56.8 55.0 1.6 .2 21.1 118.5 171
Appendices

122

Note: Totals do not necessarily equal the sums of rounded components.

 2 Beginning in 1983, includes transfers from general fund of Treasury representing contributions that would have

been paid on deemed wage credits for military service in 1957 and later, if such credits were considered to be

covered wages.

 3 Net interest includes net profits or losses on marketable investments. Beginning in 1967, administrative

expenses are charged to the trust fund on an estimated basis, with a final adjustment, including interest, made in

the following fiscal year. The amounts of these interest adjustments are included in net interest. For years prior to

1967, a description of the method of accounting for administrative expenses is contained in the 1970 Annual

Report. Beginning in July 1974, the figures shown include relatively small amounts of gifts to the fund. Net interest for 1983-86 reflects payments from a borrowing trust fund to a lending trust fund for interest on amounts

owed under the interfund borrowing provisions. During 1983-90, interest paid from the trust fund to the general

fund on advance tax transfers is reflected. The amount shown for 1985 includes an interest adjustment of $14.8

million on unnegotiated checks issued before April 1985.

 4 Beginning in 1966, includes payments for vocational rehabilitation services furnished to disabled persons

receiving benefits because of their disabilities. Beginning in 1983, amounts are reduced by amount of reimbursement for unnegotiated benefit checks.

 5 The “Trust fund ratio” column represents assets at the beginning of a year as a percentage of expenditures during the year. For years 1984-90, assets at the beginning of a year include January advance tax transfers. 6 Less than $50 million. 7 Reflects offset for repayment from the OASI Trust Fund of amounts borrowed from the DI Trust Fund in 1982.

An amount of $2.5 billion was repaid in each year 1985 and 1986.
123

History of Trust Fund Operations

Table VI.A4.—Historical Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1957-2000

[Amounts in billions]

Calendar

year

Income Expenditures Assets

Total 1

 1 Includes payments from the general fund of the Treasury to the trust funds for (1) in 1947-51 and in 1966 and

later, for costs of noncontributory wage credits for military service performed before 1957; (2) in 1971-82, for

costs of deemed wage credits for military service performed after 1956; and (3) in 1968 and later, for costs of

benefits to certain uninsured persons who attained age 72 before 1968. Differences in past year total income and

sum of individual column amounts are due to these payments. OASDI historical payments from the general fund

of the Treasury may be found on the Internet at http://www.ssa.gov/STATS/t4a3Income.html.

Net

contributions2

Taxation of

benefits

Net

interest 3 Total

Benefit

payments 4

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

Fund

ratio 5

1957 . . . $8.1 $7.5 — $0.6 $7.6 $7.4 $0.2 (6) $0.5 $23.0 298

1958 . . . 9.1 8.5 — .6 8.9 8.6 .2 $0.1 .2 23.2 259

1959 . . . 9.5 8.9 — .6 10.8 10.3 .2 .3 -1.3 22.0 215

1960 . . . 12.4 11.9 — .6 11.8 11.2 .2 .3 .6 22.6 186

1961 . . . 12.9 12.3 — .6 13.4 12.7 .3 .3 -.5 22.2 169

1962 . . . 13.7 13.1 — .6 15.2 14.5 .3 .4 -1.5 20.7 146

1963 . . . 16.2 15.6 — .6 16.2 15.4 .3 .4 (6) 20.7 128

1964 . . . 17.5 16.8 — .6 17.0 16.2 .4 .4 .5 21.2 122

1965 . . . 17.9 17.2 — .7 19.2 18.3 .4 .5 -1.3 19.8 110

1966 . . . 23.4 22.6 — .7 20.9 20.1 .4 .5 2.5 22.3 95

1967 . . . 26.4 25.4 — .9 22.5 21.4 .5 .5 3.9 26.3 99

1968 . . . 28.5 27.0 — 1.0 26.0 25.0 .6 .5 2.5 28.7 101

1969 . . . 33.3 31.5 — 1.3 27.9 26.8 .6 .5 5.5 34.2 103

1970 . . . 37.0 34.7 — 1.8 33.1 31.9 .6 .6 3.9 38.1 103

1971 . . . 40.9 38.3 — 2.0 38.5 37.2 .7 .6 2.4 40.4 99

1972 . . . 45.6 42.9 — 2.2 43.3 41.6 .9 .7 2.3 42.8 93

1973 . . . 54.8 51.9 — 2.4 53.1 51.5 .8 .8 1.6 44.4 80

1974 . . . 62.1 58.9 — 2.7 60.6 58.6 1.1 .9 1.5 45.9 73

1975 . . . 67.6 64.3 — 2.9 69.2 67.0 1.2 1.0 -1.5 44.3 66

1976 . . . 75.0 71.6 — 2.7 78.2 75.8 1.2 1.2 -3.2 41.1 57

1977 . . . 82.0 78.7 — 2.5 87.3 84.7 1.4 1.2 -5.3 35.9 47

1978 . . . 91.9 88.9 — 2.3 96.0 93.0 1.4 1.6 -4.1 31.7 37

1979 . . . 105.9 103.0 — 2.2 107.3 104.4 1.5 1.5 -1.5 30.3 30

1980 . . . 119.7 116.7 — 2.3 123.6 120.6 1.5 1.4 -3.8 26.5 25

1981 . . . 142.4 139.4 — 2.2 144.4 141.0 1.7 1.6 -1.9 24.5 18

1982 . . . 147.9 145.7 — 1.4 160.1 156.2 2.1 1.8 .2 24.8 15

1983 . . . 171.3 156.3 — 8.3 171.2 166.7 2.2 2.3 .1 24.9 14

1984 . . . 186.6 180.1 $3.0 3.4 180.4 175.7 2.3 2.4 6.2 31.1 21

1985 . . . 203.5 194.1 3.4 2.7 190.6 186.1 2.2 2.4 7 11.1 42.2 24

1986 . . . 216.8 209.1 3.7 3.9 201.5 196.7 2.2 2.7 7 4.7 46.9 29

1987 . . . 231.0 222.4 3.2 5.3 209.1 204.1 2.4 2.6 21.9 68.8 31

1988 . . . 263.5 251.8 3.4 8.2 222.5 217.1 2.5 2.9 41.0 109.8 41

1989 . . . 289.4 274.2 2.5 12.7 236.2 230.9 2.4 2.9 53.2 163.0 57

1990 . . . 315.4 296.1 5.0 17.2 253.1 247.8 2.3 3.0 62.3 225.3 75

1991 . . . 329.7 301.7 6.1 21.9 274.2 268.2 2.6 3.5 55.5 280.7 82

1992 . . . 342.6 311.1 6.1 25.4 291.9 286.0 2.7 3.2 50.7 331.5 96

1993 . . . 355.6 322.1 5.6 27.9 308.8 302.4 3.0 3.4 46.8 378.3 107

1994 . . . 381.1 344.7 5.3 31.1 323.0 316.8 2.7 3.5 58.1 436.4 117

1995 . . . 399.5 359.0 5.8 35.0 339.8 332.6 3.1 4.1 59.7 496.1 128

1996 . . . 424.5 378.9 6.8 38.7 353.6 347.1 3.0 3.6 70.9 567.0 140

1997 . . . 457.7 406.0 7.9 43.8 369.1 362.0 3.4 3.7 88.6 655.5 154

1998 . . . 489.2 430.2 9.7 49.3 382.3 375.0 3.5 3.8 107.0 762.5 171

1999 . . . 526.6 459.6 11.6 55.5 392.9 385.8 3.3 3.8 133.7 896.1 194

2000 . . . 568.4 492.5 12.3 64.5 415.1 407.6 3.8 3.7 153.3 1,049.4 216
Appendices

124

Note: Totals do not necessarily equal the sums of rounded components.

 2 Beginning in 1983, includes transfers from general fund of Treasury representing contributions that would

have been paid on deemed wage credits for military service in 1957 and later, if such credits were considered to

be covered wages.

 3 Net interest includes net profits or losses on marketable investments. Beginning in 1967, administrative

expenses are charged to the trust funds on an estimated basis, with a final adjustment, including interest, made in

the following fiscal year. The amounts of these interest adjustments are included in net interest. For years prior to

1967, a description of the method of accounting for administrative expenses is contained in the 1970 Annual

Report. Beginning in October 1973, the figures shown include relatively small amounts of gifts to the funds. Net

interest for 1983-86 reflects payments from a borrowing trust fund to a lending trust fund for interest on amounts

owed under the interfund borrowing provisions. During 1983-90, interest paid from the trust funds to the general

fund on advance tax transfers is reflected. The amount shown for 1985 includes an interest adjustment of $102.8

million on unnegotiated checks issued before April 1985.

 4 Beginning in 1966, includes payments for vocational rehabilitation services furnished to disabled persons

receiving benefits because of their disabilities. Beginning in 1983, amounts are reduced by amount of reimbursement for unnegotiated benefit checks.

 5 The “Trust fund ratio” column represents assets at the beginning of a year as a percentage of expenditures during the year. For years 1984-90, assets at the beginning of a year include January advance tax transfers. 6 Less than $50 million. 7 Reflects offset for repayment from the OASI Trust Fund of amounts borrowed from the HI Trust Fund in 1982.

The amount repaid in 1985 was $1.8 billion; in 1986, the amount was $10.6 billion.
125

History of Actuarial Balances

B. HISTORY OF ACTUARIAL BALANCE ESTIMATES

This appendix chronicles the history of the principal summary measure of

long-range actuarial status, namely the actuarial balance, since 1983. The

1983 report was the last report for which the actuarial balance was positive.

Actuarial balance is defined in detail in chapter IV, Actuarial Estimates.

Conceptually, the two basic components of actuarial balance are the summarized income rate and the summarized cost rate. Both rates are expressed as

percentages of taxable payroll. For any given period, the actuarial balance is

the difference between the present value of tax income for the period, and the

present value of the outgo for the period, each divided by the present value of

taxable payroll for all years in the period. Also included in the calculation of

the actuarial balance are:

• The amount of the trust fund balances on hand at the beginning of the

valuation period, as shown in the reports for 1988 and later, and

• The present value of a target trust fund balance equal to 100 percent of

the amount of annual outgo to be reached and maintained by the end of

the valuation period, as shown in the reports for 1991 and later.

It should be noted that the current method of calculating the actuarial balance

based on present values, though used prior to the 1973 Annual Report, was

not used for the annual reports of 1973-87. Instead, a simpler method that

approximates the results of the present-value approach, called the averagecost method, was used during that period. Under the average-cost method,

the sum of the annual cost rates (which are expressed as percentages of taxable payroll) over the 75-year projection period was divided by the total

number of years, 75, to obtain the average cost rate per year. The average

income rate was similarly calculated, and the difference between the average

income rate and the average cost rate was called the actuarial balance.

In 1973, when the average-cost method was first used, the long-range financing of the program was more nearly on a pay-as-you-go basis. Also, based on

the long-range economic and demographic assumptions then being used, the

annual rate of growth in taxable payroll was about the same as the annual

rate at which the trust funds earned interest. In either situation (i.e., pay-asyou-go financing, where the annual income rate is the same as the annual

cost rate, or an annual rate of growth in taxable payroll equal to the annual

interest rate), the average-cost method produces the same result as the

present-value method. However, by 1988, neither of these situations still

existed.

As a result of legislation enacted in 1977 and in 1983, substantial increases

in the trust funds were estimated to occur well into the 21st century, so that
Appendices

126

the program was partially advance funded, rather than being funded on a

pay-as-you-go basis. Also, because of reductions in long-range fertility rates

and average real-wage growth that were assumed in the annual reports over

the period 1973-87, the annual rate of growth in taxable earnings assumed

for the long range became significantly lower than the assumed interest rate.

Therefore, during the period 1973-87, the results of the average-cost method

and the present-value method began to diverge, and by 1988 they were quite

different. While the average-cost method still accounted for most of the

effects of the assumed interest rate, it no longer accounted for all of the interest effects. The present-value method, of course, does account for the full

effect of the assumed interest rates. So, in 1988, the present-value method of

calculating the actuarial balance was reintroduced.

A positive actuarial balance indicates that estimated income is more than sufficient to meet estimated trust fund obligations for the period as a whole. A

negative actuarial balance indicates that estimated income is insufficient to

meet estimated trust fund obligations for the entire period. An actuarial balance of zero indicates that the estimated income exactly matches estimated

trust fund obligations for the period.

Table VI.B1 shows the estimated OASDI actuarial balances, as well as the

summarized income and cost rates, for the annual reports 1983-2000, along

with the estimates for the current report. The values shown are based on the

intermediate alternative II assumptions, or alternative II-B for years prior to

1991.
127

History of Actuarial Balances

Note: Totals do not necessarily equal the sums of rounded components.

For several of the years included in the table, significant legislative changes

or definitional changes affected the estimated actuarial balance. The Social

Security Amendments of 1983 accounted for the largest single change in

recent history. The actuarial balance of -1.82 for the 1982 report improved to

+0.02 for the 1983 report. In 1985, the estimated actuarial balance changed

largely because of an adjustment made to the method for estimating the age

distribution of immigrants.

Rebenchmarking of the National Income and Product Accounts and changes

in demographic assumptions contributed to the change in the actuarial balance for 1987. Various changes in assumptions and methods for the 1988

report had roughly offsetting effects on the actuarial balance. In 1989 and

1990, changes in economic assumptions accounted for most of the changes

in the estimated actuarial balance. In 1991, the effect of legislation, changes

in economic assumptions, and the introduction of the cost of reaching and

maintaining an ending trust fund target combined to produce the change in

the actuarial balance. In 1992, changes in disability assumptions and the

method for projecting average benefit levels accounted for most of the

change in the actuarial balance. In 1993, numerous small changes in assumptions and methods had offsetting effects on the actuarial balance. In 1994,

changes in the real-wage assumptions, disability rates, and the earnings samTable VI.B1.—Long-Range OASDI Actuarial Balances1 as Shown 

in the Trustees Reports for 1983-2001

[As a percentage of taxable payroll]

 1 Values shown are based on the intermediate alternative II assumptions for 1991-2001, and on the intermediate alternative II-B assumptions for 1982-90.

Year of report

Summarized

income rate

Summarized

cost rate Actuarialbalance

Change from

previous year

1983. . . . . . . . . . . . . . . . . . . . . . . . . . 12.87 12.84 +0.02 +1.84

1984. . . . . . . . . . . . . . . . . . . . . . . . . . 12.90 12.95 -.06 -.08

1985. . . . . . . . . . . . . . . . . . . . . . . . . . 12.94 13.35 -.41 -.35

1986. . . . . . . . . . . . . . . . . . . . . . . . . . 12.96 13.40 -.44 -.03

1987. . . . . . . . . . . . . . . . . . . . . . . . . . 12.89 13.51 -.62 -.18

1988. . . . . . . . . . . . . . . . . . . . . . . . . . 12.94 13.52 -.58 +.04

1989. . . . . . . . . . . . . . . . . . . . . . . . . . 13.02 13.72 -.70 -.13

1990. . . . . . . . . . . . . . . . . . . . . . . . . . 13.04 13.95 -.91 -.21

1991. . . . . . . . . . . . . . . . . . . . . . . . . . 13.11 14.19 -1.08 -.17

1992. . . . . . . . . . . . . . . . . . . . . . . . . . 13.16 14.63 -1.46 -.38

1993. . . . . . . . . . . . . . . . . . . . . . . . . . 13.21 14.67 -1.46 (2)

 2 Between -0.005 and 0.005 percent of taxable payroll.

1994. . . . . . . . . . . . . . . . . . . . . . . . . . 13.24 15.37 -2.13 -.66

1995. . . . . . . . . . . . . . . . . . . . . . . . . . 13.27 15.44 -2.17 -.04

1996. . . . . . . . . . . . . . . . . . . . . . . . . . 13.33 15.52 -2.19 -.02

1997. . . . . . . . . . . . . . . . . . . . . . . . . . 13.37 15.60 -2.23 -.03

1998. . . . . . . . . . . . . . . . . . . . . . . . . . 13.45 15.64 -2.19 +.04

1999. . . . . . . . . . . . . . . . . . . . . . . . . . 13.49 15.56 -2.07 +.12

2000. . . . . . . . . . . . . . . . . . . . . . . . . . 13.51 15.40 -1.89 +.17

2001. . . . . . . . . . . . . . . . . . . . . . . . . . 13.58 15.44 -1.86 +.03
Appendices

128

ple used for projecting average benefit levels accounted for most of the

change in the actuarial balance. In 1995, numerous small changes had largely

offsetting effects on the actuarial balance, including a substantial reallocation

of the payroll tax rate, which reduced the OASI actuarial balance, but

increased the DI actuarial balance. In 1996, a change in the method of projecting dually-entitled beneficiaries produced a large increase in the actuarial

balance, which almost totally offset decreases produced by changes in the

valuation period and in the economic and demographic assumptions. Various

changes in assumptions and methods for the 1997 report had roughly offsetting effects on the actuarial balance. In 1998, increases caused by changes in

the economic assumptions, although partially offset by decreases produced

by changes in the valuation period and in the demographic assumptions,

accounted for most of the changes in the estimated actuarial balance. In

1999, increases caused by changes in the economic assumptions related to

improvements in the CPI by the Bureau of Labor Statistics accounted for

most of the changes in the estimated actuarial balance. For the 2000 report,

changes in the actuarial balance resulted from changes in economic assumptions and methodology; however, these increases in the balance were partially offset by reductions caused by the change in valuation period and

changes in demographic assumptions. Changes affecting the actuarial balance shown for the 2001 report are described in section IV.B.7.
129

Short-Range Fiscal Year Projections

C. FISCAL YEAR PROJECTIONS THROUGH 2010

Estimates of the operations and status of the OASI, DI and the combined

OASI and DI Trust Funds during fiscal years (12 months ending on

September 30) 1996-2010 are presented in tables VI.C1, VI.C2 and VI.C3,

respectively. 

Note: Totals do not necessarily equal the sums of rounded components.

Table VI.C1.—Operations of the OASI Trust Fund in Fiscal Years 1996-2010

[Amounts in billions]

Fiscal 

year

Income Expenditures Assets

Total1

 1 “Total Income” column includes transfers made between the OASI Trust Fund and the general fund of the

Treasury that are not included in the separate components of income shown. These transfers consist of payments for (1) the cost of noncontributory wage credits for military service before 1957, and (2) the cost of

benefits to certain uninsured persons who attained age 72 before 1968. In 2002, these transfers include an

estimated $414 million from the general fund of the Treasury to the OASI Trust Fund for the cost of pre1957 military service wage credits. Otherwise, these transfers are estimated to be less than $500,000 in each

year of the projection period.

Net

contributions

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratio 2

 2 The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets at

the end of the prior year shown in the “Amount at end of year” column) as a percentage of expenditures during the year. See text beginning on page 34 concerning interpretation of these ratios.

Historical data:

1996 . . $356.8 $317.2 $5.8 $34.0 $305.3 $300.0 $1.8 $3.6 $51.5 $499.5 147

1997 . . 386.5 342.3 6.5 37.7 318.5 312.9 2.0 3.7 67.9 567.4 157

1998 . . 415.7 364.9 8.6 42.2 330.0 324.3 2.0 3.7 85.7 653.1 172

1999 . . 447.0 389.9 10.2 46.8 337.9 332.4 1.8 3.7 109.1 762.2 193

2000 . . 484.2 418.2 12.5 53.5 353.4 347.9 2.0 3.5 130.8 893.0 216

Intermediate:

2001 . . 512.0 438.7 12.1 61.2 373.5 368.0 2.2 3.2 138.5 1,031.5 239

2002 . . 543.0 461.2 12.9 68.4 390.4 384.4 2.4 3.6 152.6 1,184.1 264

2003 . . 575.5 484.3 14.0 77.2 408.4 402.4 2.4 3.6 167.1 1,351.2 290

2004 . . 608.6 506.6 15.2 86.8 428.1 422.2 2.4 3.6 180.5 1,531.7 316

2005 . . 651.5 537.4 16.4 97.8 450.1 444.1 2.4 3.6 201.4 1,733.1 340

2006 . . 689.0 561.2 17.5 110.3 474.1 468.2 2.4 3.4 214.9 1,948.0 366

2007 . . 731.9 589.4 18.8 123.7 500.7 494.6 2.5 3.6 231.2 2,179.3 389

2008 . . 775.6 617.1 20.3 138.2 530.3 524.2 2.5 3.7 245.3 2,424.6 411

2009 . . 822.3 646.3 22.1 153.9 564.5 558.2 2.5 3.8 257.7 2,682.3 429

2010 . . 875.3 681.1 24.1 170.1 602.8 596.4 2.6 3.8 272.5 2,954.8 445

Low Cost:

2001 . . 513.7 440.3 12.1 61.3 373.3 367.9 2.2 3.2 140.4 1,033.4 239

2002 . . 547.4 465.1 12.9 69.0 389.9 383.9 2.4 3.6 157.5 1,190.9 265

2003 . . 580.4 488.5 14.0 78.0 406.5 400.5 2.4 3.6 174.0 1,364.8 293

2004 . . 613.6 511.1 15.0 87.5 423.0 417.1 2.4 3.6 190.6 1,555.4 323

2005 . . 656.0 541.7 16.0 98.3 440.9 435.0 2.4 3.5 215.1 1,770.5 353

2006 . . 692.4 564.9 17.0 110.4 460.0 454.3 2.4 3.3 232.4 2,002.9 385

2007 . . 734.4 592.5 18.1 123.8 480.9 475.0 2.4 3.5 253.5 2,256.4 416

2008 . . 776.7 618.9 19.3 138.5 504.2 498.2 2.4 3.5 272.6 2,529.0 448

2009 . . 822.0 646.5 20.8 154.7 531.4 525.4 2.5 3.5 290.6 2,819.6 476

2010 . . 874.1 679.4 22.5 172.2 562.1 556.1 2.5 3.5 312.0 3,131.6 502

High Cost:

2001 . . 506.0 432.7 12.1 61.1 373.6 368.1 2.2 3.2 132.4 1,025.4 239

2002 . . 522.3 442.3 13.0 66.6 391.7 385.7 2.4 3.6 130.6 1,156.0 262

2003 . . 560.4 471.4 14.2 74.9 412.3 406.3 2.4 3.6 148.1 1,304.1 280

2004 . . 601.6 495.8 15.6 90.2 440.0 434.0 2.4 3.6 161.6 1,465.7 296

2005 . . 635.2 516.4 17.3 101.5 475.4 469.2 2.4 3.8 159.8 1,625.5 308

2006 . . 682.2 551.1 18.8 112.3 506.9 500.6 2.5 3.7 175.3 1,800.8 321

2007 . . 730.4 585.3 20.3 124.8 538.1 531.5 2.6 4.0 192.3 1,993.1 335

2008 . . 775.9 616.7 22.0 137.3 573.2 566.5 2.6 4.1 202.7 2,195.8 348

2009 . . 823.8 649.4 24.1 150.4 614.6 607.7 2.7 4.2 209.2 2,405.0 357

2010 . . 878.4 688.1 26.5 163.8 661.2 654.1 2.7 4.4 217.2 2,622.3 364
Appendices

130

Note: Totals do not necessarily equal the sums of rounded components.

Table VI.C2.—Operations of the DI Trust Fund in Fiscal Years 1996-2010

[Amounts in billions]

Fiscal year

Income Expenditures Assets

Total1

 1 “Total Income” column includes transfers made between the DI Trust Fund and the general fund of the

Treasury that are not included in the separate components of income shown. These transfers consist of payments for the cost of noncontributory wage credits for military service before 1957. In particular, a transfer

was made in December 2000 in the amount of $836 million from the DI Trust Fund to the general fund of the

Treasury. Such transfers are estimated to be less than $500,000 in each year of the projection period.

Net

contributions

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratio 2

 2 The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets at

the end of the prior year shown in the “Amount at end of year” column) as a percentage of expenditures during the year. See text beginning on page 34 concerning interpretation of these ratios.

Historical data:

1996 . . $59.2 $56.6 $0.4 $2.5 $44.3 $43.3 $1.1 (3)

 3 Less than $50 million.

$14.9 $50.1 79

1997 . . 60.1 56.2 .4 3.5 46.7 45.4 1.2 $0.1 13.4 63.5 107

1998 . . 62.9 58.0 .5 4.4 49.3 47.6 1.6 .2 13.6 77.1 129

1999 . . 67.8 61.9 .6 5.2 52.1 50.5 1.5 .1 15.7 92.7 148

2000 . . 77.0 70.0 .8 6.3 56.0 54.2 1.6 .2 21.0 113.8 166

Intermediate:

2001 . . 81.8 74.3 .7 7.6 59.5 58.0 1.6 (3) 22.2 136.0 191

2002 . . 87.9 78.3 .8 8.8 64.1 62.2 1.7 .2 23.8 159.8 212

2003 . . 93.4 82.2 .9 10.3 69.3 67.2 1.8 .2 24.1 183.9 231

2004 . . 98.6 86.0 .9 11.7 75.3 73.1 1.9 .2 23.3 207.2 244

2005 . . 105.4 91.3 1.0 13.1 82.0 79.7 2.0 .3 23.4 230.6 253

2006 . . 111.0 95.3 1.1 14.5 89.3 86.8 2.2 .3 21.7 252.3 258

2007 . . 117.2 100.1 1.3 15.9 97.2 94.5 2.3 .4 20.1 272.4 260

2008 . . 123.3 104.8 1.4 17.1 105.5 102.7 2.4 .4 17.7 290.1 258

2009 . . 129.5 109.7 1.6 18.2 114.2 111.1 2.5 .5 15.3 305.4 254

2010 . . 136.5 115.7 1.7 19.1 122.9 119.7 2.7 .5 13.6 319.0 249

Low Cost:

2001 . . 82.0 74.5 .7 7.6 58.9 57.3 1.6 (3) 23.1 136.9 193

2002 . . 88.7 79.0 .8 9.0 62.6 60.7 1.7 .2 26.2 163.1 219

2003 . . 94.4 82.9 .8 10.6 66.7 64.7 1.8 .2 27.7 190.7 245

2004 . . 99.8 86.8 .9 12.1 71.2 69.1 1.9 .2 28.6 219.3 268

2005 . . 106.7 92.0 1.0 13.8 76.2 73.9 2.0 .3 30.5 249.8 288

2006 . . 112.5 95.9 1.0 15.5 81.5 79.1 2.1 .3 31.0 280.8 307

2007 . . 119.0 100.6 1.1 17.3 87.1 84.5 2.2 .4 31.9 312.8 322

2008 . . 125.5 105.1 1.2 19.1 93.0 90.2 2.4 .4 32.5 345.3 336

2009 . . 132.2 109.8 1.3 21.0 98.8 95.8 2.5 .4 33.4 378.6 350

2010 . . 139.9 115.4 1.5 23.0 104.4 101.3 2.6 .5 35.4 414.1 363

High Cost:

2001 . . 80.7 73.3 .8 7.6 60.5 58.9 1.6 (3) 20.3 134.0 188

2002 . . 84.4 75.1 .8 8.5 67.0 65.0 1.7 .2 17.4 151.5 200

2003 . . 90.5 80.0 .9 9.6 74.1 72.0 1.8 .2 16.4 167.9 204

2004 . . 96.5 84.2 1.0 11.3 83.1 80.9 1.9 .3 13.4 181.3 202

2005 . . 101.1 87.7 1.2 12.2 93.9 91.6 2.1 .3 7.1 188.4 193

2006 . . 107.5 93.6 1.3 12.6 104.4 101.8 2.2 .3 3.2 191.6 181

2007 . . 113.7 99.4 1.5 12.8 114.8 112.0 2.4 .4 -1.0 190.6 167

2008 . . 119.0 104.7 1.7 12.6 125.8 122.8 2.5 .5 -6.7 183.9 152

2009 . . 124.3 110.3 1.9 12.1 137.4 134.2 2.6 .6 -13.2 170.7 134

2010 . . 130.1 116.9 2.1 11.1 149.4 146.0 2.8 .6 -19.3 151.4 114
131

Short-Range Fiscal Year Projections

Note: Totals do not necessarily equal the sums of rounded components.

Table VI.C3.—Operations of the Combined OASI and DI Trust Funds

in Fiscal Years 1996-2010

[Amounts in billions]

Fiscal year

Income Expenditures Assets

Total1

 1 “Total Income” column includes transfers made between the OASI and DI Trust Funds and the general fund

of the Treasury that are not included in the separate components of income shown. These transfers consist of

payments for (1) the cost of noncontributory wage credits for military service before 1957, and (2) the cost of

benefits to certain uninsured persons who attained age 72 before 1968. In particular, a transfer was made in

December 2000 in the amount of $836 million from the DI Trust Fund to the general fund of the Treasury. In

2002, an estimated $414 million will be transferred from the general fund of the Treasury to the OASI Trust

Fund for the cost of pre-1957 military service wage credits. Otherwise, these transfers are estimated to be less

than $500,000 in each year of the projection period.

Net

contributions

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratio 2

 2 The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets at

the end of the prior year shown in the “Amount at end of year” column) as a percentage of expenditures during

the year. See text beginning on page 34 concerning interpretation of these ratios.

Historical data:

1996. . . $416.1 $373.7 $6.2 $36.5 $349.7 $343.2 $2.9 $3.6 $66.4 $549.6 138

1997. . . 446.6 398.5 6.9 41.2 365.2 358.3 3.2 3.7 81.3 630.9 150

1998. . . 478.6 422.9 9.1 46.6 379.3 371.9 3.6 3.8 99.3 730.2 166

1999. . . 514.7 451.9 10.8 52.1 390.0 382.8 3.4 3.8 124.7 854.9 187

2000. . . 561.3 488.2 13.2 59.8 409.4 402.1 3.6 3.7 151.8 1,006.8 209

Intermediate:

2001. . 593.7 512.9 12.8 68.8 433.0 425.9 3.9 3.2 160.7 1,167.5 233

2002. . 630.9 539.5 13.7 77.3 454.5 446.6 4.1 3.8 176.4 1,343.9 257

2003. . 668.8 566.5 14.9 87.4 477.7 469.7 4.2 3.8 191.2 1,535.1 281

2004. . 707.2 592.6 16.1 98.5 503.4 495.3 4.3 3.8 203.8 1,738.9 305

2005. . 756.9 628.6 17.4 110.9 532.1 523.8 4.4 3.9 224.8 1,963.7 327

2006. . 800.0 656.5 18.7 124.8 563.3 555.0 4.6 3.7 236.6 2,200.3 349

2007. . 849.2 689.5 20.1 139.6 597.9 589.1 4.7 4.0 251.3 2,451.6 368

2008. . 898.9 721.8 21.7 155.3 635.9 626.9 4.9 4.1 263.0 2,714.7 386

2009. . 951.8 756.0 23.7 172.1 678.7 669.4 5.1 4.2 273.1 2,987.7 400

2010. . 1,011.8 796.8 25.9 189.2 725.7 716.1 5.2 4.4 286.1 3,273.9 412

Low Cost:

2001. . 595.7 514.9 12.8 68.9 432.2 425.2 3.9 3.2 163.5 1,170.3 233

2002. . 636.1 544.1 13.7 77.9 452.4 444.5 4.1 3.8 183.7 1,354.0 259

2003. . 674.8 571.4 14.8 88.6 473.1 465.2 4.2 3.8 201.6 1,555.6 286

2004. . 713.4 597.9 15.9 99.6 494.3 486.2 4.3 3.8 219.1 1,774.7 315

2005. . 762.7 633.7 17.0 112.1 517.1 508.9 4.4 3.8 245.7 2,020.4 343

2006. . 804.9 660.8 18.1 126.0 541.5 533.3 4.5 3.6 263.4 2,283.8 373

2007. . 853.5 693.1 19.2 141.1 568.0 559.5 4.7 3.8 285.4 2,569.2 402

2008. . 902.2 724.0 20.6 157.6 597.1 588.5 4.8 3.9 305.1 2,874.3 430

2009. . 954.1 756.2 22.1 175.7 630.2 621.3 4.9 3.9 324.0 3,198.3 456

2010. . 1,014.0 794.7 24.0 195.3 666.6 657.5 5.1 4.0 347.4 3,545.7 480

High Cost:

2001. . 586.7 506.0 12.9 68.7 434.1 427.0 3.9 3.2 152.6 1,159.4 232

2002. . 606.7 517.5 13.8 75.0 458.6 450.7 4.1 3.8 148.0 1,307.4 253

2003. . 650.9 551.4 15.1 84.4 486.4 478.3 4.2 3.8 164.6 1,472.0 269

2004. . 698.1 580.0 16.7 101.5 523.1 514.9 4.3 3.9 175.0 1,647.0 281

2005. . 736.3 604.1 18.5 113.7 569.3 560.7 4.5 4.1 167.0 1,813.9 289

2006. . 789.7 644.7 20.1 124.9 611.2 602.4 4.7 4.1 178.5 1,992.4 297

2007. . 844.1 684.7 21.8 137.6 652.8 643.5 4.9 4.4 191.3 2,183.7 305

2008. . 894.9 721.4 23.7 149.9 698.9 689.2 5.1 4.6 196.0 2,379.7 312

2009. . 948.1 759.6 25.9 162.5 752.0 742.0 5.3 4.8 196.0 2,575.7 316

2010. . 1,008.5 805.0 28.6 174.9 810.6 800.0 5.5 5.0 197.9 2,773.6 318
Appendices

132

D. LONG-RANGE SENSITIVITY ANALYSIS

This appendix presents estimates which illustrate the sensitivity of the longrange actuarial status of the OASDI program to changes in selected individual assumptions. The estimates based on the three alternative sets of assumptions (see sections IV.B, V.A, and V.B) illustrate the effects of varying all of

the principal assumptions simultaneously in order to portray a generally

more optimistic or pessimistic future, in terms of the financial status of the

OASDI program. In the sensitivity analysis presented in this appendix, alternative II is used as the reference point, and one assumption at a time is varied

within that alternative. Similar variations in the selected assumptions within

the other alternatives would result in similar relative variations in the longrange estimates.

Each table that follows shows the effects of changing a particular assumption

of the OASDI summarized income rates, summarized cost rates, and actuarial balances for 25-year, 50-year, and 75-year valuation periods. Because the

annual payroll tax rate is constant for the entire 75-year valuation period, the

income rate varies only slightly with changes in assumptions and, therefore,

is not considered in the discussion of the tables. The change in each of the

actuarial balances is approximately equal to the change in the corresponding

cost rate, but in the opposite direction.

1. Total Fertility Rate

Table VI.D1 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

the ultimate total fertility rate. These assumptions are that the ultimate total

fertility rate will be 1.7, 1.95, and 2.2 children per woman as assumed for

alternatives III, II, and I, respectively. The rate is assumed to change gradually from its current level and to reach the various ultimate values in 2025.
133

Long-Range Sensitivity Analysis

For the 25-year period, the cost rate for the three fertility assumptions varies

by only about 0.03 percent of taxable payroll. In contrast, the 75-year cost

rate varies over a wide range, decreasing from 15.75 to 15.12 percent, as the

assumed ultimate total fertility rate increases from 1.7 to 2.2. Similarly,

while the 25-year actuarial balance varies by only 0.03 percent of taxable

payroll, the 75-year actuarial balance varies over a much wider range, from

-2.14 to -1.57 percent.

During the 25-year period, the very slight increases in the working population resulting from increases in fertility are more than offset by decreases in

the female labor force and increases in the number of child beneficiaries.

Hence, the program cost slightly increases with higher fertility. For the 75-

year long-range period, however, changes in fertility have a relatively greater

impact on the labor force than on the beneficiary population. As a result, an

increase in fertility significantly reduces the cost rate. Each increase of 0.1 in

the ultimate total fertility rate increases the long-range actuarial balance by

about 0.11 percent of taxable payroll.

2. Death Rates

Table VI.D2 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

future reductions in death rates for the period 2000-75. These assumptions

are the same as those used for alternatives I, II, and III, which are described

in section V.A2. The age-sex-adjusted death rates decline at average annual

Table VI.D1.—Sensitivity to Varying Fertility Assumptions

[As a percentage of taxable payroll]

Ultimate total fertility rate1

 1 The total fertility rate for any year is the average number of children who would be born to a woman in her

lifetime if she were to experience the birth rates by age observed in, or assumed for, the selected year, and if

she were to survive the entire childbearing period. The ultimate total fertility rate is assumed to be reached in

2025.

Valuation period 1.7 1.95 2.2

Summarized income rate:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.02 14.03 14.03

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.67 13.66 13.65

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.61 13.58 13.55

Summarized cost rate:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.96 12.98 12.99

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.77 14.70 14.61

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.75 15.44 15.12

Actuarial balance:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +1.07 +1.05 +1.04

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.10 -1.03 -.95

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.14 -1.86 -1.57

Year of combined trust fund exhaustion. . . . . . . . . . . . . 2038 2038 2038
Appendices

134

rates of 0.26 percent, 0.68 percent, and 1.23 percent for alternatives I, II, and

III, respectively. It should be noted that these reductions do not apply uniformly to all ages, as some variation by age was assumed consistent with the

objective of selecting assumptions for alternatives I and III that are relatively

more optimistic and more pessimistic, respectively, in terms of the financing

of the OASDI program.

The variation in cost for the 25-year period is less pronounced than the variation for the 75-year period because the decreases in death rates are assumed

to occur gradually. The 25-year cost rate increases from 12.79 percent (for an

average annual death-rate reduction of 0.26 percent) to 13.15 percent (for an

average annual death-rate reduction of 1.23 percent). The 75-year cost rate

increases from 14.73 to 16.22 percent. The actuarial balance decreases from

+1.23 to +0.88 percent for the 25-year period, and from -1.18 to -2.61 percent for the 75-year period.

Lower death rates cause both the income (as well as taxable payroll) and the

outgo of the OASDI program to be higher than they would otherwise be. The

relative increase in outgo, however, exceeds the relative increase in taxable

payroll. For any given year, reductions in the death rates for people who have

attained the retirement eligibility age of 62 (people whose death rates are the

highest) increase the number of retired-worker beneficiaries (and, therefore,

the amount of retirement benefits paid) without adding significantly to the

number of covered workers (and, therefore, to the taxable payroll). Although

reductions for people aged 50 to retirement eligibility age do result in significant increases to the taxable payroll, those increases are not large enough to

offset the sum of the additional retirement benefits mentioned above and the

Table VI.D2.—Sensitivity to Varying Death-Rate Assumptions

[As a percentage of taxable payroll]

Average annual death-rate reduction1

 1 The average annual death-rate reduction is the average annual decline in the age-sex-adjusted death rate

during 2000-75. The overall decreases from the age-sex-adjusted death rate in 2000 to the corresponding

rate in 2075 are, in order, 17 percent, 40 percent, and 60 percent.

Valuation period 0.26 percent 0.68 percent 1.23 percent

Summarized income rate:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.02 14.03 14.03

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.64 13.66 13.68

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.55 13.58 13.61

Summarized cost rate:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.79 12.98 13.15

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.21 14.70 15.20

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.73 15.44 16.22

Actuarial balance:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +1.23 +1.05 +.88

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.57 -1.03 -1.52

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.18 -1.86 -2.61

Year of combined trust fund exhaustion. . . . . . . . . . . . . 2043 2038 2035
135

Long-Range Sensitivity Analysis

disability benefits paid to additional beneficiaries at these pre-retirement

ages, which are ages of high disability incidence. At ages under 50, death

rates are so low that even substantial reductions would not result in significant increases in the numbers of covered workers or beneficiaries. Consequently, if death rates for all ages are lowered by about the same relative

amount, outgo increases at a rate greater than the rate of growth in payroll,

thereby resulting in higher cost rates and, therefore, lower actuarial balances.

Each additional 0.1-percentage-point reduction in the average annual

death-rate reduction, relative to the 0.68-percent reduction assumed for alternative II, decreases the long-range actuarial balance by about 0.15 percent of

taxable payroll.

3. Net Immigration

Table VI.D3 shows the estimated OASDI income rates, cost rates, and actuarial balances, under alternative II with various assumptions about the magnitude of net immigration. These assumptions are that the annual net

immigration will be 655,000 persons, 900,000 persons, and 1,210,000 persons as assumed for alternatives III, II, and I, respectively.

For all three periods, the cost rate decreases with increasing rates of net

immigration. For the 25-year period, the cost rate decreases from 13.04 percent of taxable payroll (for annual net immigration of 655,000 persons) to

12.89 percent (for annual net immigration of 1,210,000 persons). For the 50-

year period, it decreases from 14.81 percent to 14.52 percent, and for the 75-

year period, it decreases from 15.57 percent to 15.25 percent. The actuarial

balance increases from +1.00 to +1.12 percent for the 25-year period, from

-1.13 to -0.89 for the 50-year period, and from -1.98 to -1.69 percent for the

75-year period.

Table VI.D3.—Sensitivity to Varying Net-Immigration Assumptions

[As a percentage of taxable payroll]

Net immigration per year

Valuation period 655,000 900,000 1,210,000

Summarized income rate:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.04 14.03 14.01

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.68 13.66 13.64

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.60 13.58 13.55

Summarized cost rate:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.04 12.98 12.89

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.81 14.70 14.52

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.57 15.44 15.25

Actuarial balance:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +1.00 +1.05 +1.12

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.13 -1.03 -.89

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.98 -1.86 -1.69

Year of combined trust fund exhaustion. . . . . . . . . . . . . 2037 2038 2040
Appendices

136

The cost rate decreases with increasing rates of net immigration because

immigration occurs at relatively young ages, thereby increasing the numbers

of covered workers earlier than the numbers of beneficiaries. Each additional

group of 100,000 immigrants relative to the 900,000 net immigration

assumed for alternative II, increases the long-range actuarial balance by

about 0.05 percent of taxable payroll.

4. Real-Wage Differential

Table VI.D4 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

the real-wage differential. These assumptions are that the ultimate real-wage

differential will be 0.5 percentage point, 1.0 percentage point, and 1.5 percentage points as assumed for alternatives III, II, and I, respectively. In each

case, the ultimate annual increase in the CPI is assumed to be 3.3 percent (as

assumed for alternative II), yielding ultimate percentage increases in average

annual wages in covered employment of 3.8, 4.3, and 4.8 percent under alternatives III, II, and I, respectively.

For the 25-year period, the cost rate decreases from 13.36 percent (for a realwage differential of 0.5 percentage point) to 12.60 percent (for a differential

of 1.5 percentage points). For the 50-year period, it decreases from 15.26 to

14.13 percent, and for the 75-year period it decreases from 16.04 to 14.83

percent. The actuarial balance increases from +0.74 to +1.35 percent for the

25-year period, from -1.51 to -0.56 for the 50-year period, and from -2.36 to

-1.35 percent for the 75-year period.

Table VI.D4.—Sensitivity to Varying Real-Wage Assumptions

[As a percentage of taxable payroll]

Ultimate percentage increase in wages-CPI1

 1 The first value in each pair is the assumed ultimate annual percentage increase in average wages in covered employment. The second value is the assumed ultimate annual percentage increase in the Consumer

Price Index. The difference between the two values is the real-wage differential.

Valuation period 3.8-3.3 4.3-3.3 4.8-3.3

Summarized income rate:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.10 14.03 13.96

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.75 13.66 13.57

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.68 13.58 13.48

Summarized cost rate:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.36 12.98 12.60

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.26 14.70 14.13

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.04 15.44 14.83

Actuarial balance:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.74 +1.05 +1.35

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.51 -1.03 -.56

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.36 -1.86 -1.35

Year of combined trust fund exhaustion. . . . . . . . . . . . . 2034 2038 2044
137

Long-Range Sensitivity Analysis

The cost rate decreases with increasing real-wage differentials, because,

although the initial benefit levels become gradually higher because of the

higher wages, they are more than offset by the immediate effect of those

wages on the taxable payroll. In addition, cost-of-living adjustments

(COLAs) to benefits are not affected by changes in wages, but only in prices.

Each 0.5-percentage-point increase in the assumed real-wage differential

increases the long-range actuarial balance by about 0.51 percent of taxable

payroll.

5. Consumer Price Index

Table VI.D5 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

the rate of increase for the Consumer Price Index (CPI). These assumptions

are that the ultimate annual increase in the CPI will be 2.3 percent, 3.3 percent, and 4.3 percent as assumed for alternatives I, II, and III, respectively. In

each case, the ultimate real-wage differential is assumed to be 1.0 percentage

point (as assumed for alternative II), yielding ultimate percentage increases

in average annual wages in covered employment of 3.3, 4.3, and 5.3 percent

under alternatives I, II, and III, respectively.

For all three periods, the cost rate decreases with greater assumed rates of

increase in the CPI. For the 25-year period, the cost rate decreases from

13.13 (for CPI increases of 2.3 percent) to 12.83 percent (for CPI increases

of 4.3 percent). For the 50-year period, it decreases from 14.91 to 14.48 perTable VI.D5.—Sensitivity to Varying CPI-Increase Assumptions

[As a percentage of taxable payroll]

Ultimate percentage increase in wages-CPI1

 1 The first value in each pair is the assumed ultimate annual percentage increase in average wages in covered employment. The second value is the assumed ultimate annual percentage increase in the Consumer

Price Index.

Valuation period 3.3-2.3 4.3-3.3 5.3-4.3

Summarized income rate:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.06 14.03 14.00

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.69 13.66 13.64

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.60 13.58 13.55

Summarized cost rate:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.13 12.98 12.83

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.91 14.70 14.48

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.69 15.44 15.20

Actuarial balance: 

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.93 +1.05 +1.17

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.23 -1.03 -.84

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.08 -1.86 -1.64

Year of combined trust fund exhaustion. . . . . . . . . . . . . 2037 2038 2040
Appendices

138

cent, and for the 75-year period, it decreases from 15.69 to 15.20 percent.

The actuarial balance increases from +0.93 to +1.17 percent for the 25-year

period, from -1.23 to -0.84 for the 50-year period, and from -2.08 to -1.64

percent for the 75-year period.

The patterns described above result primarily from the time lag between the

effects of the CPI changes on taxable payroll and on benefit payments. When

assuming a greater rate of increase in the CPI (in combination with a constant real-wage differential), the effect on taxable payroll of the resulting

greater rate of increase in average wages is experienced immediately, while

the COLA effect on benefits of the greater rate of increase in the CPI is experienced with a lag of about 1 year. In addition, the effect on initial benefits of

the greater rate of increase in average wages is experienced no sooner than 2

years later. Thus, the higher taxable payrolls have a stronger effect than the

higher benefits, thereby resulting in lower cost rates. The effect of each

1.0-percentage-point increase in the rate of change assumed for the CPI is an

increase in the long-range actuarial balance of about 0.22 percent of taxable

payroll.

6. Real Interest Rate

Table VI.D6 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

the annual real interest rate for special public-debt obligations issuable to the

trust funds, which are compounded semiannually. These assumptions are that

the ultimate annual real interest rate will be 2.2 percent, 3.0 percent, and 3.7

percent as assumed for alternatives III, II, and I, respectively. In each case,

the ultimate annual increase in the CPI is assumed to be 3.3 percent (as

assumed for alternative II), resulting in ultimate annual yields of 5.6, 6.4, and

7.1 percent under alternatives III, II, and I, respectively.
139

Long-Range Sensitivity Analysis

For the 25-year period, the cost rate decreases slightly with increasing real

interest rates from 13.13 percent (for an ultimate real interest rate of 2.2 percent) to 12.86 percent (for an ultimate real interest rate of 3.7 percent). For

the 50-year period, it decreases from 15.04 to 14.40 percent, and for the 75-

year period, it decreases from 15.94 to 15.03 percent. The actuarial balance

increases from +0.83 to +1.23 percent for the 25-year period, from -1.46 to

-0.67 percent for the 50-year period, and from -2.44 to -1.37 percent for the

75-year period. Each 0.5-percentage-point increase in the assumed real interest rate increases the long-range actuarial balance by about 0.36 percent of

taxable payroll.

7. Disability Incidence Rates

Table VI.D7 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions concerning future disability incidence rates. For all three alternatives, incidence

rates by age and sex are assumed to vary during the early years of the projection period before attaining ultimate levels in 2015. The ultimate levels

attained vary by sex. In comparison to the corresponding annual rates experienced during the base period 1994-96, the ultimate rates for men are about

12 percent lower for alternative I, about 10 percent higher for alternative II,

and about 32 percent higher for alternative III. For women they are about 18

percent lower for alternative I, 2 percent higher for alternative II, and 23 percent higher for alternative III. 

Table VI.D6.—Sensitivity to Varying Real-Interest Assumptions

[As a percentage of taxable payroll]

Ultimate annual real interest rate

Valuation period 2.2 percent 3.0 percent 3.7 percent

Summarized income rate:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.96 14.03 14.09

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.58 13.66 13.74

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.50 13.58 13.66

Summarized cost rate:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.13 12.98 12.86

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.04 14.70 14.40

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.94 15.44 15.03

Actuarial balance:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.83 +1.05 +1.23

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.46 -1.03 -.67

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.44 -1.86 -1.37

Year of combined trust fund exhaustion. . . . . . . . . . . . . 2036 2038 2042
Appendices

140

For the 25-year period, the cost rate increases with increasing disability incidence rates from 12.77 percent (for the relatively low rates assumed for alternative I) to 13.18 percent (for the relatively high rates assumed for

alternative III). For the 50-year period, it increases from 14.43 to 14.96 percent, and for the 75-year period, it increases from 15.15 to 15.72 percent.

The actuarial balance decreases from +1.25 to +0.85 percent for the 25-year

period, from -0.77 to -1.29 percent for the 50-year period, and from -1.58 to

-2.14 percent for the 75-year period.

8. Disability Termination Rates

Table VI.D8 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

future disability termination rates. For alternative II, death-termination rates

by age and sex are assumed to decline until they reach levels by the end of

the 75-year period that, for men and women, respectively, are about 49 percent and 40 percent lower than those experienced during the base period

1991-95. For the other alternatives, the rates are assumed to spread gradually

from the rates for alternative II. By the end of the projection period, for alternatives I and III, respectively, the rates for men are about 32 percent and 63

percent lower than those experienced during the base period; for women the

corresponding rates are about 21 percent and 56 percent lower than those

experienced during the base period.

For all three alternatives, ultimate recovery-termination rates by age and sex

are assumed to be attained in 2015. For alternative II, such rates are assumed

to be 87 percent higher for men and 58 percent higher for women than those

Table VI.D7.—Sensitivity to Varying Disability Incidence Assumptions

[As a percentage of taxable payroll]

Disability incidence rates

based on alternative—

Valuation period I II III

Summarized income rate:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.02 14.03 14.03

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.66 13.66 13.66

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.57 13.58 13.58

Summarized cost rate:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.77 12.98 13.18

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.43 14.70 14.96

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.15 15.44 15.72

Actuarial balance:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +1.25 +1.05 +.85

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.77 -1.03 -1.29

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.58 -1.86 -2.14

Year of combined trust fund exhaustion. . . . . . . . . . . . . 2041 2038 2036
141

Long-Range Sensitivity Analysis

experienced in the base period, 1991-95. The ultimate rates for alternative I

are assumed to be 125 percent higher for men and 89 percent higher for

women than those experienced in the base period. The ultimate rates for

alternative III are assumed to be 50 percent higher for men and 26 percent

higher for women than those experienced in the base period.

For the 25-year period, the cost rate increases with decreasing disability termination rates from 12.95 percent (for the relatively high rates assumed for

alternative I) to 13.01 percent (for the relatively low rates assumed for alternative III). For the 50-year period, it increases from 14.66 to 14.73 percent,

and for the 75-year period, it increases from 15.40 to 15.48 percent. The

actuarial balance decreases from +1.08 to +1.02 percent for the 25-year

period, from -1.00 to -1.07 percent for the 50-year period, and from -1.82 to

-1.90 percent for the 75-year period.

Table VI.D8.—Sensitivity to Varying Disability Termination Assumptions

[As a percentage of taxable payroll]

Disability termination rates

based on alternative—

Valuation period I II III

Summarized income rate:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.03 14.03 14.03

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.66 13.66 13.66

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.58 13.58 13.58

Summarized cost rate:

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.95 12.98 13.01

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.66 14.70 14.73

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.40 15.44 15.48

Actuarial balance: 

25-year: 2001-25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +1.08 +1.05 +1.02

50-year: 2001-50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.00 -1.03 -1.07

75-year: 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.82 -1.86 -1.90

Year of combined trust fund exhaustion. . . . . . . . . . . . . 2039 2038 2038
Appendices

142

E. ESTIMATES FOR OASDI AND HI, SEPARATE AND COMBINED

In this appendix, long-range actuarial estimates for the OASDI and Hospital

Insurance (HI) programs are presented separately and on a combined basis.

These estimates facilitate analysis of the adequacy of the income and assets

of these programs relative to their expenditures, under current law. Estimates

for the Supplementary Medical Insurance (SMI) program are not included in

this appendix because adequate financing is guaranteed in the law, and

because the SMI program is not financed through a payroll tax.

The emphasis in this appendix on combined operations, while significant,

should not obscure the analysis of the financial status of the individual trust

funds, which are legally separate and cannot be commingled. In addition, the

factors which determine the costs of the OASI, DI, and HI programs differ

substantially.

1. Estimates as a Percentage of Taxable Payroll

Comparing and combining cost and income rates for the OASDI and HI programs as percentages of taxable payroll requires a note of caution. The taxable payrolls for the HI program are larger than those estimated for the

OASDI program because (1) a larger maximum taxable amount was established for the HI program in 1991, with the maximum being eliminated altogether for the HI program in 1994, (2) a larger proportion of Federal, State,

and local government employees have their wages covered under the HI program, and (3) the earnings of railroad workers are included directly in the HI

taxable payroll but not in the OASDI taxable payroll (railroad contributions

for the equivalent of OASDI benefits are accounted for in a net interchange

that occurs annually between the OASDI and Railroad Retirement programs). As a result, the HI taxable payroll is about 25 percent larger than the

OASDI taxable payroll throughout the long-range period. Nonetheless, combined OASDI and HI rates shown in this section are computed by adding the

separately derived rates for the programs. The resulting combined rates may

be interpreted as those applicable to the taxable payroll in the amount of the

OASDI payroll, with the separate HI rates being additionally applicable to

the excess of the HI payroll over the OASDI payroll.

As with the OASI and DI Trust Funds, income to the HI Trust Fund comes

primarily from contributions paid by employees, employers, and selfemployed persons. The combined OASDI and HI contribution rate for

employees and their employers is often referred to as the FICA tax, because

it is authorized by the Federal Insurance Contributions Act. Contribution

rates for the OASDI and HI programs are shown in table VI.E1.
143

OASDI & HI: Percent of Payroll

Table VI.E2 shows estimated annual income rates and cost rates for the

OASDI program, the HI program, and the combined OASDI and HI programs, based on the low cost, intermediate, and high cost sets of assumptions

(alternatives I, II, and III) described earlier in this report. These annual rates

are intended to indicate the cash-flow operation of the programs. Therefore,

income rates exclude interest earned on trust fund assets and cost rates

exclude the cost of accumulating or maintaining target trust fund balances.

Table VI.E2 also shows the differences between income rates and cost rates,

called balances. Estimates shown for the combined trust funds are theoretical

because no authority currently exists for borrowing by or transfers among

these trust funds.

Under all three sets of assumptions, the combined OASDI and HI cost rate is

projected to rise above current levels, with the sharpest increase occurring

during the period 2010-30. Under the high cost set of assumptions, alternative III, annual deficits are projected to occur beginning in 2010, and to continue for the remainder of the 75-year projection period. The cost rate is

projected to rise to over three times its current level by the end of the projection period. Under the intermediate assumptions, alternative II, annual deficits begin by 2020, with the cost rate more than doubling by the end of the

projection period. Under the low cost assumptions, alternative I, the cost rate

is projected to increase by nearly 50 percent, by the end of the period, with

annual deficits beginning by 2025.

Table VI.E1.—Contribution Rates for the OASDI and HI Programs

[In percent]

Calendar years

Employees and employers,

each Self employed

OASDI HI

Combined OASDI HICombined

1966. . . . . . . . . . . . . . . . . . . . . . . 3.85 0.35 4.20 5.80 0.35 6.15

1967. . . . . . . . . . . . . . . . . . . . . . . 3.90 .50 4.40 5.90 .50 6.40

1968. . . . . . . . . . . . . . . . . . . . . . . 3.80 .60 4.40 5.80 .60 6.40

1969-70 . . . . . . . . . . . . . . . . . . . . 4.20 .60 4.80 6.30 .60 6.90

1971-72 . . . . . . . . . . . . . . . . . . . . 4.60 .60 5.20 6.90 .60 7.50

1973. . . . . . . . . . . . . . . . . . . . . . . 4.85 1.00 5.85 7.00 1.00 8.00

1974-77 . . . . . . . . . . . . . . . . . . . . 4.95 .90 5.85 7.00 .90 7.90

1978. . . . . . . . . . . . . . . . . . . . . . . 5.05 1.00 6.05 7.10 1.00 8.10

1979-80 . . . . . . . . . . . . . . . . . . . . 5.08 1.05 6.13 7.05 1.05 8.10

1981. . . . . . . . . . . . . . . . . . . . . . . 5.35 1.30 6.65 8.00 1.30 9.30

1982-83 . . . . . . . . . . . . . . . . . . . . 5.40 1.30 6.70 8.05 1.30 9.35

19841 . . . . . . . . . . . . . . . . . . . . .

 1 See footnote 1 under table VI.A1 in the section titled “History of the OASI and DI Trust Fund Operations”

for a description of tax credits allowed against the combined OASDI and HI taxes on net earnings from selfemployment in 1984-89.

5.70 1.30 7.00 11.40 2.60 14.00

1985. . . . . . . . . . . . . . . . . . . . . . . 5.70 1.35 7.05 11.40 2.70 14.10

1986-87 . . . . . . . . . . . . . . . . . . . . 5.70 1.45 7.15 11.40 2.90 14.30

1988-89 . . . . . . . . . . . . . . . . . . . . 6.06 1.45 7.51 12.12 2.90 15.02

1990 and later . . . . . . . . . . . . . . . 6.20 1.45 7.65 12.40 2.90 15.30
Appendices

144

Table VI.E2.—Estimated OASDI and HI Annual Income Rates, Cost Rates, 

and Balances,1 Calendar Years 2001-75

[As a percentage of taxable payroll1]

OASDI HI Combined

Calendar year

Income

rate2 Cost

rate Balance

Income

rate

Cost

rate Balance

Income

rate2 Costrate Balance

Intermediate:

2001. . . . . 12.72 10.50 2.22 3.06 2.72 0.34 15.78 13.22 2.56

2002. . . . . 12.72 10.42 2.30 3.07 2.69 .38 15.78 13.11 2.67

2003. . . . . 12.73 10.44 2.29 3.08 2.62 .45 15.80 13.06 2.74

2004. . . . . 12.74 10.49 2.25 3.08 2.65 .43 15.82 13.13 2.69

2005. . . . . 12.75 10.56 2.19 3.08 2.64 .42 15.83 13.22 2.61

2006. . . . . 12.75 10.65 2.11 3.09 2.68 .41 15.84 13.33 2.51

2007. . . . . 12.76 10.78 1.99 3.09 2.71 .39 15.86 13.48 2.37

2008. . . . . 12.78 10.93 1.84 3.10 2.74 .36 15.88 13.68 2.20

2009. . . . . 12.79 11.13 1.66 3.11 2.78 .33 15.90 13.91 1.99

2010. . . . . 12.81 11.34 1.46 3.12 2.82 .30 15.93 14.17 1.76

2015. . . . . 12.85 12.80 .05 3.13 3.13 (3) 15.98 15.93 .06

2020. . . . . 12.91 14.63 -1.72 3.15 3.58 -.43 16.06 18.21 -2.15

2025. . . . . 13.00 16.20 -3.20 3.20 4.18 -.98 16.20 20.38 -4.17

2030. . . . . 13.08 17.28 -4.20 3.24 4.90 -1.65 16.32 22.17 -5.85

2035. . . . . 13.13 17.74 -4.61 3.27 5.59 -2.32 16.41 23.34 -6.93

2040. . . . . 13.16 17.71 -4.55 3.29 6.21 -2.92 16.44 23.92 -7.48

2045. . . . . 13.18 17.67 -4.50 3.30 6.73 -3.44 16.47 24.41 -7.93

2050. . . . . 13.20 17.79 -4.59 3.31 7.21 -3.90 16.51 24.99 -8.49

2055. . . . . 13.23 18.10 -4.87 3.33 7.70 -4.38 16.56 25.80 -9.24

2060. . . . . 13.26 18.46 -5.20 3.35 8.31 -4.97 16.61 26.78 -10.17

2065. . . . . 13.29 18.79 -5.50 3.36 9.05 -5.69 16.65 27.84 -11.19

2070. . . . . 13.31 19.09 -5.78 3.38 9.87 -6.50 16.69 28.97 -12.28

2075. . . . . 13.34 19.39 -6.05 3.39 10.74 -7.35 16.73 30.13 -13.40

Low Cost:

2001. . . . . 12.72 10.41 2.30 3.06 2.65 .41 15.78 13.06 2.72

2002. . . . . 12.71 10.27 2.44 3.07 2.57 .50 15.78 12.84 2.94

2003. . . . . 12.72 10.23 2.49 3.07 2.46 .62 15.80 12.69 3.10

2004. . . . . 12.73 10.18 2.55 3.08 2.43 .65 15.81 12.61 3.20

2005. . . . . 12.73 10.16 2.58 3.08 2.40 .68 15.81 12.56 3.26

2006. . . . . 12.74 10.14 2.60 3.08 2.37 .71 15.82 12.51 3.31

2007. . . . . 12.75 10.16 2.58 3.09 2.35 .74 15.83 12.51 3.32

2008. . . . . 12.75 10.21 2.54 3.09 2.34 .76 15.84 12.55 3.30

2009. . . . . 12.76 10.31 2.45 3.10 2.33 .77 15.86 12.63 3.23

2010. . . . . 12.78 10.43 2.35 3.10 2.32 .79 15.88 12.74 3.14

2015. . . . . 12.81 11.50 1.30 3.11 2.34 .77 15.92 13.84 2.08

2020. . . . . 12.85 13.00 -.15 3.12 2.43 .69 15.97 15.43 .54

2025. . . . . 12.92 14.17 -1.25 3.16 2.58 .58 16.08 16.76 -.68

2030. . . . . 12.98 14.85 -1.87 3.19 2.76 .43 16.17 17.61 -1.44

2035. . . . . 13.01 14.93 -1.92 3.21 2.94 .27 16.21 17.86 -1.65

2040. . . . . 13.01 14.55 -1.54 3.21 3.10 .11 16.22 17.65 -1.42

2045. . . . . 13.01 14.20 -1.18 3.22 3.26 -.05 16.23 17.46 -1.23

2050. . . . . 13.02 14.02 -1.00 3.22 3.46 -.24 16.24 17.48 -1.24

2055. . . . . 13.03 14.00 -.97 3.23 3.70 -.47 16.26 17.70 -1.44

2060. . . . . 13.05 14.00 -.96 3.24 3.99 -.75 16.28 17.99 -1.71

2065. . . . . 13.05 13.94 -.89 3.24 4.34 -1.10 16.29 18.28 -1.99

2070. . . . . 13.06 13.87 -.81 3.24 4.74 -1.50 16.30 18.61 -2.31

2075. . . . . 13.06 13.85 -.79 3.25 5.15 -1.91 16.31 19.01 -2.70
145

OASDI & HI: Percent of Payroll

Notes:

1. The income rate excludes interest income and certain transfers from the general fund of the Treasury.

2. Totals do not necessarily equal the sums of rounded components.

Tables VI.E3 and VI.E4 show the estimates of summarized OASDI and HI

income rates, cost rates and balances for various time periods, based on all

three sets of assumptions. In table VI.E3 values are summarized over the

three 25-year subperiods (excluding the beginning fund balances and the cost

of accumulating ending fund targets). In table VI.E4 values are summarized

over the 25-year, 50-year, and 75-year valuation periods (for which beginning fund balances are included in the summarized income rates, and the cost

of accumulating an ending fund balance equal to 100 percent of annual

expenditures by the end of the period is included in the summarized cost

rates). Estimates shown for the combined trust funds are theoretical because

no authority currently exists for borrowing by or transfers among these trust

funds.

High Cost:

2001. . . . . 12.73 10.77 1.95 3.07 2.84 0.22 15.79 13.62 2.18

2002. . . . . 12.73 10.97 1.76 3.08 2.89 .19 15.81 13.86 1.95

2003. . . . . 12.74 10.89 1.85 3.08 2.83 .25 15.82 13.72 2.10

2004. . . . . 12.76 11.31 1.45 3.09 2.93 .16 15.85 14.23 1.62

2005. . . . . 12.78 11.76 1.03 3.10 3.01 .09 15.88 14.77 1.12

2006. . . . . 12.79 11.75 1.03 3.10 3.07 .03 15.89 14.83 1.07

2007. . . . . 12.80 11.85 .95 3.11 3.16 -.05 15.91 15.01 .90

2008. . . . . 12.81 12.02 .79 3.12 3.27 -.15 15.93 15.28 .64

2009. . . . . 12.83 12.28 .55 3.13 3.37 -.25 15.95 15.65 .30

2010. . . . . 12.84 12.55 .30 3.14 3.49 -.35 15.98 16.03 -.05

2015. . . . . 12.90 14.31 -1.40 3.16 4.24 -1.08 16.06 18.55 -2.48

2020. . . . . 12.98 16.41 -3.43 3.18 5.33 -2.15 16.16 21.74 -5.58

2025. . . . . 13.10 18.42 -5.32 3.24 6.84 -3.60 16.34 25.26 -8.92

2030. . . . . 13.20 20.00 -6.80 3.30 8.79 -5.49 16.50 28.79 -12.29

2035. . . . . 13.29 21.03 -7.74 3.35 10.78 -7.43 16.63 31.81 -15.18

2040. . . . . 13.34 21.57 -8.23 3.38 12.57 -9.19 16.72 34.14 -17.42

2045. . . . . 13.39 22.10 -8.71 3.40 14.05 -10.65 16.79 36.15 -19.36

2050. . . . . 13.44 22.79 -9.35 3.43 15.17 -11.74 16.87 37.96 -21.09

2055. . . . . 13.50 23.71 -10.21 3.46 16.22 -12.75 16.97 39.93 -22.96

2060. . . . . 13.57 24.76 -11.19 3.50 17.50 -14.00 17.07 42.26 -25.19

2065. . . . . 13.64 25.85 -12.21 3.54 19.06 -15.52 17.18 44.90 -27.73

2070. . . . . 13.71 26.92 -13.22 3.58 20.79 -17.22 17.28 47.72 -30.43

2075. . . . . 13.77 27.93 -14.16 3.61 22.60 -18.99 17.38 50.54 -33.16

 1 The taxable payroll for HI is significantly larger than the taxable payroll for OASDI because the HI taxable maximum amount was eliminated beginning 1994, and because HI covers all Federal civilian employees, including those hired before 1984, all State and local government employees hired after April 1, 1986,

and railroad employees. Combined OASDI and HI rates are computed as the sum of the separately derived

rates for each program.

 2 Income rates for 2001 are modified to include adjustments to the lump-sum payments received in 1983

from the general fund of the Treasury for the cost of noncontributory wage credits for military service in

1940-56.

 3 Between -0.005 and 0.005 percent of taxable payroll.

Table VI.E2.—Estimated OASDI and HI Annual Income Rates, Cost Rates, 

and Balances,1 Calendar Years 2001-75 (Cont.)

[As a percentage of taxable payroll1]

OASDI HI Combined

Calendar year

Income

rate2 Cost

rate Balance

Income

rate

Cost

rate Balance

Income

rate2 Costrate Balance
Appendices

146

Note: Totals do not necessarily equal the sums of rounded components.

Under the high cost alternative III, the combined OASDI and HI system is

projected to experience large deficits during the 25-year, 50-year, and 75-

year valuation periods (table VI.E4, including beginning trust fund balances

and the cost of ending fund targets). Deficits are also projected to occur during each 25-year subperiod of the 75-year projection period (table VI.E3,

excluding beginning trust fund balances and the cost of ending fund targets).

Under intermediate alternative II assumptions, deficits of smaller magnitude

than those for the high cost alternative III are projected to occur for the second and third 25-year subperiods, and for the 50-year and the 75-year valuation periods. Positive balances are projected for the first 25-year subperiod

and for the 25-year valuation period. Under the low cost alternative I, the

combined OASDI and HI system is projected to show positive balances for

the first 25-year subperiod and for each of the three valuation periods. Relatively small deficits are projected for the second and third 25-year subperiods.

Table VI.E3.—Summarized OASDI and HI Income Rates, Cost Rates, 

and Balances 1 for 25-Year Subperiods2, Calendar Years 2001-75

[As a percentage of taxable payroll1]

 1 The taxable payroll for HI is significantly larger than the taxable payroll for OASDI because the HI taxable maximum amount was eliminated beginning 1994, and because HI covers all Federal civilian employees, including those hired before 1984, all State and local government employees hired after April 1, 1986,

and railroad employees. Combined OASDI and HI rates are computed as the sum of the separately derived

rates for each program.

 2 For 25-year subperiods, income rates do not include beginning trust fund balances and cost rates do not

include the cost of reaching ending fund targets.

OASDI HI Combined

Subperiod

Income

 rate

 Cost

rate Balance

Income

rate

Cost

rate Balance

Income

rate

Cost

rate Balance

Intermediate:

2001-25 . . . . . . 12.82 12.43 0.39 3.12 3.10 0.02 15.94 15.53 0.41

2026-50 . . . . . . 13.11 17.50 -4.39 3.27 5.79 -2.52 16.38 23.29 -6.90

2051-75 . . . . . . 13.26 18.58 -5.32 3.35 8.73 -5.38 16.61 27.29 -10.70

Low Cost:

2001-25 . . . . . . 12.78 11.39 1.39 3.10 2.41 .69 15.88 13.81 2.08

2026-50 . . . . . . 12.98 14.57 -1.58 3.20 3.01 .20 16.19 17.58 -1.38

2051-75 . . . . . . 13.03 13.95 -.92 3.24 4.19 -.96 16.27 18.14 -1.88

High Cost:

2001-25 . . . . . . 12.86 13.78 -.92 3.14 4.13 -.99 16.00 17.91 -1.91

2026-50 . . . . . . 13.28 21.04 -7.76 3.35 11.35 -8.00 16.63 32.39 -15.76

2051-75 . . . . . . 13.58 25.21 -11.62 3.52 18.34 -14.82 17.10 43.55 -26.44
147

OASDI & HI: Percent of Payroll

Note: Totals do not necessarily equal the sums of rounded components.

Table VI.E4.—Summarized OASDI and HI Income Rates and Cost Rates1 for Valuation 

Periods2, Calendar Years 2001-75

[As a percentage of taxable payroll1]

 1 The taxable payroll for HI is significantly larger than the taxable payroll for OASDI because the HI taxable

maximum amount was eliminated beginning 1994, and because HI covers all Federal civilian employees,

including those hired before 1984, all State and local government employees hired after April 1, 1986, and

railroad employees. Combined OASDI and HI rates are computed as the sum of the separately derived rates

for each program.

 2 Income rates include beginning trust fund balances and cost rates include the cost of reaching an ending

fund target equal to 100 percent of annual expenditures by the end of the period.

Valuation

period 

OASDI HI Combined

Income

 rate

 Cost

rate

Actuarial

balance

Income

rate

Cost

rate

Actuarial

balance

Income

rate

Cost

rate

Actuarial

balance

Intermediate:

25-years:

2001-25 . . . . 14.03 12.98 1.05 3.28 3.24 0.04 17.31 16.22 1.09

50-years:

2001-50 . . . . 13.66 14.70 -1.03 3.28 4.30 -1.02 16.94 19.00 -2.05

75-years:

2001-75 . . . . 13.58 15.44 -1.86 3.29 5.26 -1.97 16.87 20.70 -3.83

Low Cost:

25-years:

2001-25 . . . . 13.99 11.87 2.12 3.26 2.50 .77 17.25 14.37 2.89

50-years:

2001-50 . . . . 13.58 12.85 .74 3.24 2.70 .54 16.82 15.55 1.28

75-years:

2001-75 . . . . 13.47 13.04 .43 3.24 3.03 .21 16.71 16.07 .64

High Cost:

25-years:

2001-25 . . . . 14.10 14.42 -.32 3.31 4.37 -1.07 17.41 18.79 -1.38

50-years:

2001-50 . . . . 13.77 17.05 -3.29 3.33 7.33 -4.01 17.10 24.38 -7.29

75-years:

2001-75 . . . . 13.73 18.68 -4.95 3.37 9.68 -6.31 17.10 28.36 -11.26
Appendices

148

2. Estimates as a Percentage of Gross Domestic Product

This section presents long-range projections of the operations of the combined Old-Age and Survivors Insurance and Disability Insurance (OASI and

DI) Trust Funds and of the Hospital Insurance (HI) Trust Fund expressed as a

percentage of gross domestic product (GDP). While expressing these fund

operations as a percentage of taxable payroll is the most useful approach for

assessing the financial status of the programs (see table IV.B1 and section

IV.B.1), analyzing them as a percentage of GDP provides an additional perspective on these fund operations in relation to the total value of goods and

services produced in the United States.

Table VI.E5 shows estimated income excluding interest, total outgo, and the

resulting balance of the combined OASI and DI Trust Funds, of the HI Trust

Fund, and of the combined OASI, DI, and HI Trust Funds, expressed as percentages of GDP on the basis of each of the three alternative sets of assumptions. The estimated GDP on which these percentages are based is also

shown in table VI.E5. For OASDI, income excluding interest consists of

payroll-tax contributions, proceeds from taxation of benefits, and various

reimbursements from the general fund of the Treasury. Total outgo consists

of benefit payments, administrative expenses, net transfers from the trust

funds to the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries. For HI, income excluding interest consists of payroll-tax contributions (including contributions from

railroad employment), proceeds from taxation of OASDI benefits, and payments from the general fund of the Treasury for contributions on deemed

wage credits for military service. Total outgo consists of outlays (benefits

and administrative expenses) for insured beneficiaries. Both the HI income

and outgo are on an incurred basis.

The OASDI balance (income excluding interest, less outgo) as a percentage

of GDP is projected to be positive on the basis of the low cost alternative I

until 2020. After 2019, deficits increase to a peak in about 2039, and

decrease thereafter. The OASDI balance is projected to be positive until 2016

on the basis of the intermediate alternative II and until 2012 on the basis of

the high cost alternative III, at which time balances become permanently

negative, with generally increasing deficits. The projected HI balance as a

percentage of GDP, is positive until 2045 on the basis of the low cost alternative I. The HI balance is projected to remain positive until about 2016 under

the intermediate alternative and 2007 under the high cost alternative, with

deficits increasing steadily thereafter. The combined OASDI and HI balance

as a percentage of GDP is projected to be positive until 2023 under the low

cost alternative I, until 2016 under the intermediate alternative II, and until
149

OASDI & HI: Percent of GDP

2010 under the high cost alternative III. Between 2010 and about 2035,

under all three alternatives, both the OASDI and HI balances as percentages

of GDP are projected to decline (or deficits increase) substantially because

the baby-boom generation reaches retirement age during these years. After

balances cease to be positive under the intermediate and high cost alternatives, the size of annual deficits increases fairly steadily for the OASDI and

HI programs, both separately and combined.

By 2075, the combined OASDI and HI balances as percentages of GDP,

based on the three alternatives, are projected to differ by a relatively large

amount: from a deficit of 1.20 percent for the low cost alternative I to a deficit of 12.26 percent for the high cost alternative III. Projected balances differ

by a much smaller amount by the tenth year, 2010, from a positive balance of

1.31 percent for the low cost alternative I to a deficit of 0.07 percent for the

high cost alternative III.

The summarized long-range (75-year) balance as a percentage of GDP for

the combined OASDI and HI programs varies by a relatively large amount

(from a positive 0.28 percent, based on the low cost alternative I, to a deficit

of 4.64 percent, based on the high cost alternative III). The 25-year summarized balance varies by a smaller amount (from a positive 1.22 percent to a

deficit of 0.64 percent). Summarized rates are calculated on the presentvalue basis including the trust fund balances on January 1, 2001 and the cost

of reaching and maintaining a target trust fund level equal to 100 percent of

annual expenditures by the end of the period. (See section IV.B.4 for further

explanation.)
Appendices

150

Table VI.E5.—OASDI and HI Annual and Summarized Income, Outgo, and Balance 

as a Percentage of GDP, Calendar Years 2001-75 

Calendar year

Percentage of GDP

GDP in

dollars

(billions)

OASDI HI Combined

Income1 Outgo

BalanceIncome1 OutgoBalanceIncome1 OutgoBalance

Intermediate:

2001. . . . . . . 5.05 4.17 0.88 1.52 1.35 0.17 6.56 5.52 1.05 $10,528

2002. . . . . . . 5.04 4.14 .90 1.52 1.33 .19 6.56 5.48 1.09 11,104

2003. . . . . . . 5.04 4.15 .90 1.52 1.30 .22 6.57 5.44 1.12 11,669

2004. . . . . . . 5.04 4.16 .88 1.52 1.31 .21 6.56 5.47 1.09 12,270

2005. . . . . . . 5.03 4.18 .85 1.52 1.32 .21 6.56 5.49 1.06 12,920

2006. . . . . . . 5.01 4.20 .81 1.52 1.32 .20 6.54 5.52 1.02 13,610

2007. . . . . . . 5.01 4.24 .77 1.53 1.33 .19 6.54 5.57 .96 14,313

2008. . . . . . . 5.00 4.29 .71 1.53 1.35 .18 6.53 5.64 .89 15,054

2009. . . . . . . 5.00 4.36 .64 1.53 1.37 .16 6.52 5.73 .80 15,832

2010. . . . . . . 4.99 4.43 .56 1.53 1.39 .15 6.52 5.82 .70 16,646

2015. . . . . . . 4.97 4.97 .01 1.53 1.53 (2) 6.50 6.49 .01 21,302

2020. . . . . . . 4.95 5.63 -.68 1.52 1.73 -.21 6.48 7.36 -.88 26,989

2025. . . . . . . 4.94 6.17 -1.23 1.53 2.00 -.47 6.47 8.17 -1.70 34,068

2030. . . . . . . 4.92 6.52 -1.60 1.54 2.32 -.78 6.46 8.84 -2.38 43,076

2035. . . . . . . 4.89 6.63 -1.73 1.54 2.63 -1.09 6.43 9.26 -2.83 54,670

2040. . . . . . . 4.86 6.55 -1.70 1.53 2.89 -1.36 6.39 9.45 -3.06 69,402

2045. . . . . . . 4.82 6.48 -1.66 1.52 3.11 -1.59 6.34 9.58 -3.25 87,872

2050. . . . . . . 4.78 6.45 -1.68 1.51 3.30 -1.78 6.29 9.75 -3.46 110,931

2055. . . . . . . 4.74 6.50 -1.76 1.51 3.49 -1.98 6.25 9.99 -3.74 139,814

2060. . . . . . . 4.71 6.57 -1.86 1.50 3.73 -2.23 6.21 10.30 -4.09 176,159

2065. . . . . . . 4.67 6.62 -1.95 1.50 4.03 -2.53 6.17 10.65 -4.48 221,981

2070. . . . . . . 4.64 6.67 -2.03 1.49 4.35 -2.87 6.12 11.02 -4.89 279,622

2075. . . . . . . 4.60 6.70 -2.10 1.48 4.69 -3.21 6.08 11.39 -5.31 351,946

Summarized rates:3

25-year:

 2001-25 . . . 5.47 5.06 .41 1.61 1.59 .02 7.08 6.65 .43

50-year:

 2001-50 . . . 5.23 5.62 -.40 1.58 2.05 -.48 6.80 7.68 -.87

75-year

 2001-75 . . . 5.11 5.81 -.70 1.56 2.46 -.90 6.67 8.27 -1.60

Low Cost:

2001. . . . . . . 5.05 4.14 .91 1.52 1.31 .20 6.57 5.45 1.12 10,573

2002. . . . . . . 5.06 4.10 .96 1.52 1.27 .25 6.58 5.37 1.21 11,173

2003. . . . . . . 5.06 4.08 .98 1.52 1.22 .31 6.58 5.30 1.29 11,725

2004. . . . . . . 5.06 4.06 1.00 1.52 1.20 .32 6.59 5.27 1.32 12,304

2005. . . . . . . 5.07 4.05 1.02 1.53 1.19 .34 6.59 5.24 1.36 12,917

2006. . . . . . . 5.06 4.04 1.02 1.53 1.17 .35 6.58 5.21 1.37 13,565

2007. . . . . . . 5.06 4.04 1.02 1.53 1.16 .37 6.59 5.20 1.39 14,222

2008. . . . . . . 5.06 4.06 1.00 1.53 1.16 .37 6.59 5.22 1.37 14,896

2009. . . . . . . 5.06 4.10 .96 1.53 1.15 .38 6.59 5.25 1.34 15,597

2010. . . . . . . 5.06 4.14 .92 1.54 1.15 .39 6.60 5.29 1.31 16,327

2015. . . . . . . 5.06 4.55 .50 1.54 1.15 .38 6.59 5.71 .89 20,445

2020. . . . . . . 5.05 5.12 -.07 1.54 1.20 .34 6.59 6.32 .27 25,317

2025. . . . . . . 5.06 5.56 -.50 1.55 1.26 .28 6.60 6.83 -.22 31,252

2030. . . . . . . 5.05 5.80 -.74 1.55 1.34 .21 6.61 7.14 -.53 38,722

2035. . . . . . . 5.04 5.80 -.76 1.56 1.42 .13 6.59 7.22 -.63 48,284

2040. . . . . . . 5.02 5.62 -.61 1.55 1.50 .06 6.57 7.12 -.55 60,376

2045. . . . . . . 4.99 5.46 -.47 1.54 1.57 -.02 6.54 7.03 -.49 75,477

2050. . . . . . . 4.97 5.37 -.39 1.54 1.65 -.11 6.51 7.02 -.51 94,206

2055. . . . . . . 4.95 5.34 -.38 1.54 1.76 -.22 6.49 7.10 -.61 117,550

2060. . . . . . . 4.93 5.31 -.38 1.53 1.89 -.36 6.47 7.20 -.73 146,834

2065. . . . . . . 4.91 5.26 -.35 1.53 2.05 -.52 6.44 7.31 -.87 183,657

2070. . . . . . . 4.89 5.21 -.32 1.52 2.23 -.70 6.41 7.43 -1.02 229,746

2075. . . . . . . 4.87 5.18 -.31 1.52 2.41 -.89 6.39 7.59 -1.20 287,147
151

OASDI & HI: Percent of GDP

Note: Totals do not necessarily equal the sums of rounded components.

The difference between trust fund operations expressed as percentages of

taxable payroll and those expressed as percentages of GDP can be understood by analyzing the estimated ratios of OASDI taxable payroll to GDP,

which are presented in table VI.E6. HI taxable payroll is about 25 percent

larger than the OASDI taxable payroll throughout the long-range period (see

appendix A for a detailed description of the difference). The cost as a perLow Cost (Cont.):

Summarized rates: 3

25-year:

 2001-25 . . . 5.55 4.71 0.84 1.61 1.23 0.38 7.16 5.94 1.22

50-year:

 2001-50 . . . 5.34 5.05 .29 1.59 1.32 .27 6.93 6.37 .56

75-year

 2001-75 . . . 5.25 5.08 .17 1.58 1.47 .11 6.82 6.55 .28

High Cost:

2001. . . . . . . 5.05 4.28 .78 1.51 1.40 .11 6.57 5.68 .89 $10,300

2002. . . . . . . 5.04 4.35 .69 1.52 1.43 .09 6.55 5.78 .78 10,689

2003. . . . . . . 5.00 4.29 .71 1.52 1.40 .12 6.52 5.68 .84 11,511

2004. . . . . . . 4.97 4.41 .56 1.52 1.44 .08 6.48 5.85 .64 12,082

2005. . . . . . . 4.94 4.56 .38 1.51 1.47 .04 6.46 6.03 .43 12,748

2006. . . . . . . 4.94 4.55 .38 1.52 1.50 .02 6.45 6.05 .40 13,647

2007. . . . . . . 4.94 4.58 .36 1.52 1.55 -.02 6.46 6.13 .33 14,472

2008. . . . . . . 4.93 4.64 .29 1.52 1.59 -.07 6.46 6.24 .22 15,310

2009. . . . . . . 4.93 4.73 .20 1.52 1.64 -.12 6.45 6.38 .08 16,190

2010. . . . . . . 4.92 4.82 .10 1.53 1.70 -.17 6.44 6.51 -.07 17,136

2015. . . . . . . 4.88 5.43 -.55 1.52 2.04 -.52 6.40 7.47 -1.07 22,468

2020. . . . . . . 4.85 6.14 -1.30 1.51 2.53 -1.02 6.36 8.68 -2.32 29,169

2025. . . . . . . 4.82 6.80 -1.98 1.52 3.20 -1.68 6.34 10.00 -3.66 37,707

2030. . . . . . . 4.79 7.28 -2.49 1.52 4.06 -2.53 6.32 11.34 -5.02 48,712

2035. . . . . . . 4.75 7.54 -2.79 1.52 4.91 -3.38 6.28 12.45 -6.17 62,971

2040. . . . . . . 4.71 7.63 -2.92 1.52 5.64 -4.13 6.22 13.27 -7.05 81,177

2045. . . . . . . 4.65 7.70 -3.05 1.51 6.22 -4.71 6.16 13.92 -7.76 104,077

2050. . . . . . . 4.61 7.83 -3.22 1.50 6.62 -5.13 6.10 14.45 -8.35 132,798

2055. . . . . . . 4.56 8.03 -3.47 1.49 6.98 -5.49 6.05 15.01 -8.96 168,866

2060. . . . . . . 4.52 8.26 -3.74 1.49 7.43 -5.94 6.00 15.69 -9.69 214,277

2065. . . . . . . 4.48 8.50 -4.03 1.48 7.98 -6.49 5.96 16.48 -10.52 271,491

2070. . . . . . . 4.43 8.73 -4.29 1.48 8.58 -7.11 5.91 17.31 -11.40 343,574

2075. . . . . . . 4.39 8.93 -4.54 1.47 9.20 -7.73 5.86 18.12 -12.26 434,372

Summarized rates: 3

25-year:

 2001-25 . . . 5.39 5.51 -.12 1.60 2.11 -.51 6.99 7.62 -.64

50-year:

 2001-50 . . . 5.11 6.33 -1.22 1.56 3.42 -1.86 6.68 9.75 -3.08

75-year

 2001-75 . . . 4.98 6.77 -1.79 1.55 4.39 -2.84 6.52 11.16 -4.64

 1 Income for individual years excludes interest on the trust funds. Interest is implicitly reflected in all summarized values.

 2 Between -0.005 and 0.005 percent of GDP.

 3 Summarized rates are calculated on the present-value basis including the value of the trust funds on January 1, 2001 and the cost of reaching and maintaining a target trust fund level equal to 100 percent of annual

expenditures by the end of the period.

Table VI.E5.—OASDI and HI Annual and Summarized Income, Outgo, and Balance 

as a Percentage of GDP, Calendar Years 2001-75 (Cont.)

Calendar year

Percentage of GDP

GDP in

dollars

(billions)

OASDI HI Combined

Income1 Outgo

BalanceIncome1 OutgoBalanceIncome1 OutgoBalance
Appendices

152

centage of GDP is approximately equal to the cost as a percentage of taxable

payroll multiplied by the ratio of taxable payroll to GDP.

Projections of GDP are based on the projected increases in U.S. employment,

labor productivity, average hours worked, and the GDP implicit price deflator. Projections of taxable payroll reflect the projected growth in GDP, along

with assumed changes in the ratio of worker compensation to GDP, the ratio

of earnings to worker compensation, the ratio of OASDI covered earnings to

total earnings, and the ratio of taxable to total covered earnings.

Over the long-range period, projected increases in taxable payroll differ from

projected increases in GDP primarily due to the assumed trend in the ratio of

wages to total employee compensation—i.e., wages plus fringe benefits. The

ratio of earnings to total worker compensation declined at an average annual

rate of 0.21 percent for the 40 years from 1959 to 1999. For the 10-year periods 1959-69, 1969-79, 1979-89 the ratio declined by 0.29, 0.62, and 0.15

percent, respectively. For the 10-year period 1989-99 the ratio increased by

0.22 percent. Ultimate future annual rates of decline in the ratio of wages to

employee compensation are assumed to be 0.1, 0.2, and 0.3 percent for alternatives I, II, and III, respectively. An additional factor that has made the

overall ratio of taxable payroll to GDP decline in recent years is the decline

in the ratio of taxable earnings to covered earnings, as a result of the relatively greater increases in earnings for persons with earnings above the benefit and contribution base. This decline in the taxable ratio is assumed to

continue at a slower pace through 2010, with no further decline thereafter.

Table VI.E6.—Ratio of OASDI Taxable Payroll to GDP, Calendar Years 2001-75 

Calendar year Intermediate Low Cost High Cost

2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.397 0.398 0.397

2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .397 .399 .396

2003. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .397 .399 .394

2004. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .397 .399 .390

2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .395 .399 .388

2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .394 .398 .387

2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .393 .398 .387

2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .392 .398 .386

2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .392 .397 .385

2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .391 .397 .384

2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .388 .396 .379

2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .385 .394 .374

2025. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .381 .392 .369

2030. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .377 .390 .364

2035. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .374 .388 .359

2040. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .370 .387 .354

2045. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .366 .385 .349

2050. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .363 .383 .344

2055. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .359 .381 .339

2060. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .356 .379 .334

2065. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .353 .377 .329

2070. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .349 .376 .324

2075. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .346 .374 .320
153

OASDI & HI: Estimates in Dollars

3. Estimates in Dollars

This section presents long-range projections in dollars of the operations of

the combined OASI and DI Trust Funds and in some cases the HI Trust

Fund. It provides the means to track the progress of the funds during the projection period. Meaningful comparison of current dollar values over long

periods of time can be difficult because of the tendency toward inflation.

Some means of removing inflation is thus generally desirable. Several economic series, or indices, are provided to allow current dollars to be adjusted

for changes in prices, wages, and certain other aspects of economic growth

during the projection period.

The selection of a particular index for adjustment of current dollars depends

upon the analyst’s decision as to which index provides the most useful standard for adjusting dollar amounts, over time, to create values that are appropriately comparable. Table VI.E7 presents five such indices for adjustment.

Adjustment of any series of values is accomplished by dividing the value for

each year by the corresponding index values for the year. This adjustment

removes the inflation in the index from the series of values.

One of the most common forms of standardization is based on some measure

of change in the prices of consumer goods. One such price index is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W,

hereafter referred to as CPI) which is published by the Bureau of Labor Statistics, Department of Labor. This is the index used to determine annual

increases in OASDI monthly benefits payable after the year of initial eligibility. The CPI is assumed to increase ultimately at annual rates of 2.3, 3.3, and

4.3 percent for the low cost, intermediate, and high cost sets of assumptions

(alternatives I, II, and III, respectively). Constant-dollar values (those

adjusted by dividing by the CPI) indicate the relative purchasing power of

the values over time. Constant-dollar values are provided in table VI.E8.

Another type of standardization combines the effects of price inflation and

real-wage growth. The wage index presented here is the SSA average wage

index, as defined in section 215(i)(1)(G) of the Social Security Act. This

index is used to make annual adjustments to many earnings-related quantities

embodied in the Social Security Act, such as the contribution and benefit

base. The average annual wage is assumed to increase ultimately by 3.8, 4.3,

and 4.8 percent under the low cost, intermediate, and high cost alternatives

(I, II, and III), respectively. Wage-indexed values indicate the level of a

series relative to the standard-of-living of workers over time.

The taxable payroll index adjusts for the effects of changes in the number of

workers and changes in the proportion of earnings that are taxable, as well as
Appendices

154

for the effects of price inflation and real-wage growth. The OASDI taxable

payroll consists of all earnings subject to OASDI taxation, adjusted for the

lower effective tax rate on multiple-employer excess wages, and including

deemed wage credits for military service. Values adjusted by dividing by the

taxable payroll indicate the percentage of payroll that each value represents,

and thus the extent to which the series of values increases or decreases as a

percent of payroll over time.

The GDP index adjusts for the growth in the aggregate amount of goods and

services produced in the United States. Values adjusted by GDP (see appendix VI.E.2) indicate their relative share of the total output of the economy.

No explicit assumptions are made about growth in taxable payroll or GDP.

These series are computed reflecting the other more basic demographic and

economic assumptions, as discussed in sections V.A and V.B, respectively.

Discounting at the rate of interest is another way of adjusting current dollars.

The series of interest-rate factors included here is based on the average of the

assumed annual interest rates for special public-debt obligations issuable to

the trust funds for each year. This series is slightly different from the interest

rates used to create summarized values elsewhere in this report, where the

actual yield on currently-held trust fund assets is used for each year. Ultimate

nominal interest rates, which, in practice, are compounded semiannually, are

assumed to be approximately 6.0, 6.3, and 6.5 percent for the low cost, intermediate, and high cost alternatives (I, II, and III), respectively.
155

OASDI & HI: Estimates in Dollars

Table VI.E7.—Selected Economic Variables, Calendar Years 2000-75

[GDP and taxable payroll in billions]

Calendar year

Adjusted

 CPI1 SSA average

wage index2 Taxable payroll3

Gross

domestic

 product

Compound

interest-rate

factor4

Intermediate:

2000. . . . . . . . . . . . 97.12 $32,104.67 $3,966 $9,982 0.9404

2001. . . . . . . . . . . . 100.00 33,680.35 4,181 10,528 1.0000

2002. . . . . . . . . . . . 102.88 35,277.03 4,414 11,104 1.0609

2003. . . . . . . . . . . . 105.92 36,781.09 4,634 11,669 1.1256

2004. . . . . . . . . . . . 109.20 38,372.33 4,866 12,270 1.1960

2005. . . . . . . . . . . . 112.71 40,044.65 5,109 12,920 1.2711

2006. . . . . . . . . . . . 116.39 41,799.45 5,367 13,610 1.3518

2007. . . . . . . . . . . . 120.24 43,575.71 5,630 14,313 1.4376

2008. . . . . . . . . . . . 124.21 45,416.27 5,908 15,054 1.5287

2009. . . . . . . . . . . . 128.29 47,350.68 6,201 15,832 1.6258

2010. . . . . . . . . . . . 132.55 49,366.08 6,504 16,646 1.7290

2015. . . . . . . . . . . . 155.89 60,932.66 8,263 21,302 2.3519

2020. . . . . . . . . . . . 183.38 75,209.33 10,378 26,989 3.1994

2025. . . . . . . . . . . . 215.70 92,831.05 12,978 34,068 4.3522

2030. . . . . . . . . . . . 253.71 114,581.58 16,251 43,076 5.9203

2035. . . . . . . . . . . . 298.45 141,428.31 20,426 54,670 8.0535

2040. . . . . . . . . . . . 351.01 174,565.28 25,680 69,402 10.9553

2045. . . . . . . . . . . . 412.88 215,466.33 32,202 87,872 14.9027

2050. . . . . . . . . . . . 485.68 265,950.59 40,259 110,931 20.2723

2055. . . . . . . . . . . . 571.25 328,263.43 50,251 139,814 27.5767

2060. . . . . . . . . . . . 671.94 405,176.31 62,702 176,159 37.5131

2065. . . . . . . . . . . . 790.40 500,110.06 78,250 221,981 51.0296

2070. . . . . . . . . . . . 929.73 617,287.00 97,619 279,622 69.4163

2075. . . . . . . . . . . . 1,093.56 761,918.78 121,686 351,946 94.4281

Low Cost:

2000. . . . . . . . . . . . 97.12 32,193.94 3,968 9,983 .9404

2001. . . . . . . . . . . . 100.00 33,758.97 4,204 10,573 1.0000

2002. . . . . . . . . . . . 102.65 35,383.30 4,453 11,173 1.0623

2003. . . . . . . . . . . . 105.06 36,787.92 4,675 11,725 1.1248

2004. . . . . . . . . . . . 107.48 38,246.59 4,910 12,304 1.1915

2005. . . . . . . . . . . . 109.95 39,741.55 5,148 12,917 1.2625

2006. . . . . . . . . . . . 112.48 41,303.97 5,402 13,565 1.3378

2007. . . . . . . . . . . . 115.07 42,878.54 5,657 14,222 1.4176

2008. . . . . . . . . . . . 117.71 44,472.96 5,922 14,896 1.5025

2009. . . . . . . . . . . . 120.41 46,154.75 6,198 15,597 1.5939

2010. . . . . . . . . . . . 123.17 47,901.25 6,483 16,327 1.6909

2015. . . . . . . . . . . . 138.01 57,720.97 8,094 20,445 2.2725

2020. . . . . . . . . . . . 154.63 69,553.72 9,981 25,317 3.0540

2025. . . . . . . . . . . . 173.26 83,812.18 12,262 31,252 4.1043

2030. . . . . . . . . . . . 194.13 100,993.62 15,117 38,722 5.5159

2035. . . . . . . . . . . . 217.54 121,697.23 18,755 48,284 7.4129

2040. . . . . . . . . . . . 243.70 146,645.07 23,338 60,376 9.9623

2045. . . . . . . . . . . . 273.03 176,707.19 29,033 75,477 13.3885

2050. . . . . . . . . . . . 305.92 212,932.03 36,063 94,206 17.9930

2055. . . . . . . . . . . . 342.78 256,582.93 44,782 117,550 24.1811

2060. . . . . . . . . . . . 384.07 309,182.23 55,670 146,834 32.4974

2065. . . . . . . . . . . . 430.30 372,564.35 69,298 183,657 43.6738

2070. . . . . . . . . . . . 482.12 448,939.75 86,274 229,746 58.6939

2075. . . . . . . . . . . . 540.14 540,972.05 107,312 287,147 78.8797
Appendices

156

Table VI.E8 shows estimated operations of the combined OASI and DI Trust

Funds in constant 2001 dollars (i.e., adjusted by the CPI indexing series as

discussed above). Items included in the table are: income excluding interest,

interest income, total income, total outgo, and assets at the end of the year.

Income excluding interest consists of payroll-tax contributions, income from

taxation of benefits, and miscellaneous reimbursements from the general

fund of the Treasury. Outgo consists of benefit payments, administrative

expenses, net transfers from the OASI and DI Trust Funds to the Railroad

Retirement program under the financial-interchange provisions, and payments for vocational rehabilitation services for disabled beneficiaries. These

estimates are based on the low cost, intermediate, and high cost sets of

assumptions (alternatives I, II, and III).

High Cost:

2000. . . . . . . . . . . . 96.96 $32,074.32 $3,960 $9,971 0.9404

2001. . . . . . . . . . . . 100.00 33,075.64 4,089 10,300 1.0000

2002. . . . . . . . . . . . 103.44 34,268.35 4,237 10,689 1.0604

2003. . . . . . . . . . . . 108.67 36,541.14 4,531 11,511 1.1506

2004. . . . . . . . . . . . 115.33 38,138.27 4,714 12,082 1.2387

2005. . . . . . . . . . . . 120.44 40,100.04 4,946 12,748 1.3232

2006. . . . . . . . . . . . 125.03 42,440.05 5,285 13,647 1.4179

2007. . . . . . . . . . . . 130.14 44,574.76 5,599 14,472 1.5137

2008. . . . . . . . . . . . 135.71 46,686.87 5,917 15,310 1.6137

2009. . . . . . . . . . . . 141.56 48,896.61 6,239 16,190 1.7203

2010. . . . . . . . . . . . 147.65 51,265.10 6,579 17,136 1.8339

2015. . . . . . . . . . . . 182.20 64,807.94 8,524 22,468 2.5251

2020. . . . . . . . . . . . 224.91 81,928.43 10,921 29,169 3.4768

2025. . . . . . . . . . . . 277.61 103,571.68 13,922 37,707 4.7872

2030. . . . . . . . . . . . 342.65 130,932.49 17,728 48,712 6.5914

2035. . . . . . . . . . . . 422.96 165,521.29 22,589 62,971 9.0757

2040. . . . . . . . . . . . 522.04 209,247.49 28,705 81,177 12.4963

2045. . . . . . . . . . . . 644.37 264,524.97 36,275 104,077 17.2061

2050. . . . . . . . . . . . 795.35 334,405.25 45,619 132,798 23.6909

2055. . . . . . . . . . . . 981.75 422,746.00 57,173 168,866 32.6199

2060. . . . . . . . . . . . 1,211.77 534,423.96 71,505 214,277 44.9142

2065. . . . . . . . . . . . 1,495.64 675,604.18 89,296 271,491 61.8420

2070. . . . . . . . . . . . 1,846.10 854,080.38 111,385 343,574 85.1500

2075. . . . . . . . . . . . 2,278.65 1,079,705.11 138,809 434,372 117.2425

 1 The CPI used to adjust OASDI benefits is the Consumer Price Index for Urban Wage Earners and Clerical

Workers (CPI), as defined by the Bureau of Labor Statistics, Department of Labor. The values shown are

adjusted by dividing the calendar-year annual average CPI by the analogous value for 2001, and multiplying

the result by 100, thereby initializing the CPI at 100 for 2001.

 2 The “SSA average wage index” is defined in section 215(i)(1)(G) of the Social Security Act; it is used in

the calculations of initial benefits and the automatic adjustment of the contribution and benefit base and

other wage-indexed program amounts.

 3 Taxable payroll consists of total earnings subject to OASDI contribution rates, adjusted to include deemed

wages based on military service and to reflect the lower effective contribution rates (compared to the combined employee-employer rate) which apply to multiple-employer “excess wages.” 4 The compound interest-rate factor is based on the average of the assumed annual interest rates for special

public-debt obligations issuable to the trust funds in the 12 months of the year, under each alternative.

Table VI.E7.—Selected Economic Variables, Calendar Years 2000-75 (Cont.)

[GDP and taxable payroll in billions]

Calendar year

Adjusted

 CPI1 SSA average

wage index2 Taxable payroll3

Gross

domestic

 product

Compound

interest-rate

factor4
157

OASDI & HI: Estimates in Dollars

Note: Totals do not necessarily equal the sums of rounded components.

Table VI.E8.—Operations of the Combined OASI and DI Trust Funds, 

in Constant 2001 Dollars1, Calendar Years 2001-75

[In billions]

 1 The adjustment from current to constant dollars is by the CPI indexing series shown in table VI.E7.

Calendar year

Income

excluding

interest

Interest

income

Total

 income Outgo

Assets at

 end of year

Intermediate:

2001. . . . . . . . . . . . $531.6 $72.7 $604.3 $438.9 $1,214.9

2002. . . . . . . . . . . . 544.4 79.8 624.3 447.1 1,358.1

2003. . . . . . . . . . . . 555.4 87.6 643.0 456.5 1,505.2

2004. . . . . . . . . . . . 565.7 95.7 661.4 467.1 1,654.4

2005. . . . . . . . . . . . 576.7 104.5 681.1 478.7 1,805.6

2006. . . . . . . . . . . . 586.1 113.4 699.5 490.9 1,956.8

2007. . . . . . . . . . . . 596.6 122.5 719.1 504.6 2,108.9

2008. . . . . . . . . . . . 605.9 131.7 737.6 520.0 2,259.2

2009. . . . . . . . . . . . 616.4 140.7 757.1 537.7 2,406.4

2010. . . . . . . . . . . . 626.7 149.5 776.1 556.6 2,549.0

2015. . . . . . . . . . . . 679.2 189.3 868.5 678.4 3,134.8

2020. . . . . . . . . . . . 728.6 204.1 932.7 827.9 3,328.6

2025. . . . . . . . . . . . 780.2 187.9 968.1 974.6 3,009.0

2030. . . . . . . . . . . . 835.6 139.9 975.5 1,106.5 2,170.4

20352. . . . . . . . . . . 

 2 Estimates for later years are not shown because the combined OASI and DI Trust Funds are estimated to

become exhausted in 2038 under the intermediate assumptions and in 2027 under the high cost assumptions.

896.4 63.2 959.6 1,214.2 870.8

Low Cost: 

2001. . . . . . . . . . . . 534.2 73.0 607.3 437.7 1,219.0

2002. . . . . . . . . . . . 550.3 81.0 631.3 445.7 1,373.0

2003. . . . . . . . . . . . 564.7 89.4 654.1 455.3 1,540.1

2004. . . . . . . . . . . . 579.5 98.2 677.7 464.8 1,718.3

2005. . . . . . . . . . . . 595.0 108.1 703.1 475.5 1,907.3

2006. . . . . . . . . . . . 609.7 118.6 728.2 486.9 2,105.8

2007. . . . . . . . . . . . 625.3 129.6 755.0 499.5 2,313.9

2008. . . . . . . . . . . . 639.8 141.4 781.2 513.7 2,529.4

2009. . . . . . . . . . . . 655.1 153.9 809.0 530.5 2,751.0

2010. . . . . . . . . . . . 670.4 166.9 837.3 548.5 2,977.9

2015. . . . . . . . . . . . 748.9 235.0 983.9 674.4 4,119.7

2020. . . . . . . . . . . . 826.9 293.4 1,120.3 838.7 5,090.8

2025. . . . . . . . . . . . 911.9 335.5 1,247.4 1,002.9 5,783.7

2030. . . . . . . . . . . . 1,007.7 363.3 1,371.0 1,156.0 6,236.1

2035. . . . . . . . . . . . 1,118.4 383.6 1,501.9 1,286.8 6,576.4

2040. . . . . . . . . . . . 1,242.6 408.1 1,650.6 1,392.8 7,009.8

2045. . . . . . . . . . . . 1,379.9 444.7 1,824.6 1,509.2 7,655.7

2050. . . . . . . . . . . . 1,530.6 493.5 2,024.1 1,651.9 8,506.6

2055. . . . . . . . . . . . 1,698.1 551.9 2,249.9 1,829.3 9,515.3

2060. . . . . . . . . . . . 1,885.8 617.8 2,503.6 2,029.5 10,653.2

2065. . . . . . . . . . . . 2,096.3 694.1 2,790.4 2,244.4 11,976.8

2070. . . . . . . . . . . . 2,330.1 784.8 3,114.9 2,481.2 13,550.2

2075. . . . . . . . . . . . 2,588.0 891.4 3,479.4 2,751.2 15,397.9

High Cost:

2001. . . . . . . . . . . . 520.6 71.8 592.4 440.5 1,201.4

2002. . . . . . . . . . . . 520.1 76.3 596.3 449.2 1,307.9

2003. . . . . . . . . . . . 529.8 85.2 615.0 454.2 1,406.3

2004. . . . . . . . . . . . 520.4 93.9 614.2 462.1 1,476.8

2005. . . . . . . . . . . . 523.1 98.8 621.9 482.8 1,553.6

2006. . . . . . . . . . . . 538.6 105.0 643.6 496.7 1,643.2

2007. . . . . . . . . . . . 549.3 110.4 659.8 509.6 1,728.7

2008. . . . . . . . . . . . 556.6 115.1 671.6 523.8 1,805.7

2009. . . . . . . . . . . . 563.5 119.2 682.7 541.1 1,872.9

2010. . . . . . . . . . . . 570.6 122.7 693.3 559.0 1,929.9

2015. . . . . . . . . . . . 601.8 125.9 727.7 669.2 1,991.1

2020. . . . . . . . . . . . 628.3 101.4 729.7 796.6 1,542.6

2025 2 . . . . . . . . . . 654.8 39.7 694.5 923.4 492.3
Appendices

158

Figure VI.E1 provides a comparison of annual outgo with total annual

income (including interest) and annual income excluding interest, for the

OASDI program under intermediate assumptions. All values are expressed in

constant dollars, as shown in table VI.E8. The difference between the income

values for each year is equal to the trust fund interest earnings. Thus the figure illustrates the fact that, under intermediate assumptions, combined

OASDI expenditures will be payable from (1) current tax income alone

through 2015, (2) current tax income plus amounts from the trust funds that

are less than annual interest income for years 2016 through 2024, and (3)

current tax income plus amounts from the trust funds that are greater than

annual interest income for years 2025 through 2037, i.e., through the year

preceding the year of trust fund exhaustion.

Table VI.E9 shows estimated operations of the combined OASI and DI Trust

Funds in current dollars—that is in dollars unadjusted for price inflation.

Items included in the table are: income excluding interest, interest income,

total income, total outgo, and assets at the end of the year. These estimates,

based on the low cost, intermediate, and high cost sets of economic and

demographic assumptions (I, II, and III), are presented to facilitate independent analysis.

 Figure VI.E1.—Estimated OASDI Income and Outgo in Constant Dollars,

Based on Alternative II

[In billions]

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

$1,100

$1,200

$1,300

2000 2005 2010 2015 2020 2025 2030 2035 2040

Calendar year

Outgo

Total income

Income excluding interest
159

OASDI & HI: Estimates in Dollars

Note: Totals do not necessarily equal the sums of rounded components.

Table VI.E9.—Operations of the Combined OASI and DI Trust Funds, 

in Current Dollars, Calendar Years 2001-75

[In billions]

Calendar year

Income

excluding

interest

Interest

income

Total

 income Outgo

Assets at end

of year

Intermediate:

2001 . . . . . . . . . . . $531.6 $72.7 $604.3 $438.9 $1,214.9

2002 . . . . . . . . . . . 560.1 82.1 642.3 459.9 1,397.2

2003 . . . . . . . . . . . 588.5 92.8 681.3 483.7 1,594.8

2004 . . . . . . . . . . . 617.9 104.5 722.4 510.2 1,807.0

2005 . . . . . . . . . . . 650.0 117.7 767.7 539.6 2,035.2

2006 . . . . . . . . . . . 682.3 132.1 814.4 571.5 2,278.1

2007 . . . . . . . . . . . 717.4 147.3 864.7 606.8 2,536.1

2008 . . . . . . . . . . . 752.7 163.6 916.3 645.9 2,806.5

2009 . . . . . . . . . . . 790.9 180.5 971.5 690.0 3,087.9

2010 . . . . . . . . . . . 830.7 198.1 1,028.8 737.8 3,378.9

2015 . . . . . . . . . . . 1,059.0 295.1 1,354.1 1,057.8 4,887.9

2020 . . . . . . . . . . . 1,336.2 374.3 1,710.5 1,518.4 6,104.8

2025 . . . . . . . . . . . 1,683.2 405.3 2,088.5 2,102.6 6,491.4

2030 . . . . . . . . . . . 2,120.5 354.9 2,475.4 2,807.7 5,507.5

20351 . . . . . . . . . . 

 1 Estimates for later years are not shown because the combined OASI and DI Trust Funds are estimated to

become exhausted in 2038 under the intermediate assumptions and in 2027 under the high cost assumptions.

2,675.7 188.6 2,864.3 3,624.2 2,599.1

Low Cost:

2001 . . . . . . . . . . . 534.2 73.0 607.3 437.7 1,219.0

2002 . . . . . . . . . . . 564.9 83.2 648.1 457.6 1,409.6

2003 . . . . . . . . . . . 593.4 94.0 687.4 478.4 1,618.5

2004 . . . . . . . . . . . 623.1 105.6 728.6 499.7 1,847.5

2005 . . . . . . . . . . . 654.5 118.9 773.4 523.0 2,097.8

2006 . . . . . . . . . . . 686.0 133.4 819.4 547.8 2,369.3

2007 . . . . . . . . . . . 719.8 149.2 869.0 574.9 2,663.4

2008 . . . . . . . . . . . 753.3 166.5 919.8 604.9 2,978.4

2009 . . . . . . . . . . . 789.1 185.4 974.4 639.0 3,313.8

2010 . . . . . . . . . . . 826.1 205.6 1,031.7 675.9 3,669.6

. 2015 . . . . . . . . . . . 1,033.9 324.4 1,358.4 931.1 5,688.0

2020 . . . . . . . . . . . 1,279.2 453.8 1,733.0 1,297.3 7,875.0

2025 . . . . . . . . . . . 1,580.5 581.6 2,162.0 1,738.1 10,024.2

2030 . . . . . . . . . . . 1,956.7 705.5 2,662.3 2,244.9 12,109.8

2035 . . . . . . . . . . . 2,433.2 834.5 3,267.8 2,799.6 14,308.2

2040 . . . . . . . . . . . 3,029.0 994.8 4,023.8 3,395.2 17,087.6

2045 . . . . . . . . . . . 3,768.7 1,214.6 4,983.3 4,122.0 20,909.4

2050 . . . . . . . . . . . 4,683.7 1,510.2 6,193.9 5,054.9 26,031.0

2055 . . . . . . . . . . . 5,821.9 1,892.2 7,714.1 6,271.7 32,623.9

2060 . . . . . . . . . . . 7,244.1 2,373.1 9,617.2 7,796.0 40,923.3

2065 . . . . . . . . . . . 9,022.2 2,987.4 12,009.6 9,659.8 51,547.5

2070 . . . . . . . . . . . 11,236.4 3,784.3 15,020.7 11,964.7 65,341.9

2075 . . . . . . . . . . . 13,982.6 4,816.4 18,799.0 14,864.5 83,192.7

High Cost:

2001 . . . . . . . . . . . 520.6 71.8 592.4 440.5 1,201.4

2002 . . . . . . . . . . . 538.2 78.9 617.1 464.9 1,353.6

2003 . . . . . . . . . . . 575.8 92.6 668.4 493.6 1,528.3

2004 . . . . . . . . . . . 600.4 108.3 708.7 533.1 1,703.9

2005 . . . . . . . . . . . 630.1 119.0 749.1 581.5 1,871.5

2006 . . . . . . . . . . . 673.6 131.3 804.9 621.2 2,055.2

2007 . . . . . . . . . . . 715.2 143.8 859.0 663.4 2,250.7

2008 . . . . . . . . . . . 755.5 156.2 911.7 711.1 2,451.4

2009 . . . . . . . . . . . 797.9 168.7 966.6 766.1 2,651.9

2010 . . . . . . . . . . . 842.6 181.2 1,023.8 825.6 2,850.1

2015 . . . . . . . . . . . 1,097.0 229.5 1,326.5 1,219.8 3,629.3

2020 . . . . . . . . . . . 1,413.6 228.2 1,641.8 1,792.2 3,470.6

2025 1 . . . . . . . . . . 1,818.5 110.1 1,928.6 2,564.2 1,367.2
Appendices

160

Table VI.E10 shows, in current dollars, estimated income (excluding interest) and estimated total outgo (excluding the cost of accumulating target trust

fund balances) of the combined OASI and DI Trust Funds, of the HI Trust

Fund, and of the combined OASI, DI, and HI Trust Funds, based on the low

cost, intermediate, and high cost sets of assumptions (alternatives I, II, and

III) described earlier in this report. For OASDI, income excluding interest

consists of payroll-tax contributions, proceeds from taxation of OASDI benefits, and miscellaneous transfers from the general fund of the Treasury.

Outgo consists of benefit payments, administrative expenses, net transfers

from the trust funds to the Railroad Retirement program, and payments for

vocational rehabilitation services for disabled beneficiaries. For HI, income

excluding interest consists of payroll-tax contributions (including contributions from railroad employment), proceeds from the taxation of OASDI benefits, and payments from the general fund of the Treasury for contributions

on deemed wage credits for military service. Total outgo consists of outlays

(benefits and administrative expenses) for insured beneficiaries. Income and

outgo estimates are shown on a cash basis for the OASDI program and on an

incurred basis for the HI program.

Table VI.E10 also shows the difference between income excluding interest

and outgo, which is called the balance. The balance indicates the size of the

net cash flow from tax income and expenditures to the funds.
161

OASDI & HI: Estimates in Dollars

Table VI.E10.—OASDI and HI Annual Income Excluding Interest, Outgo, and

Balance in Current Dollars, Calendar Years 2001-75

[In billions]

OASDI HI Combined

Calendar

year

Income

excluding

interest Outgo Balance

Income

excluding

interest Outgo Balance

Income

excluding

interest Outgo Balance

Intermediate:

2001. . . . . $532 $439 $93 $160 $142 $18 $691 $581 $110

2002. . . . . 560 460 100 169 148 21 729 608 121

2003. . . . . 589 484 105 178 152 26 766 635 131

2004. . . . . 618 510 108 187 161 26 805 671 134

2005. . . . . 650 540 110 197 170 27 847 710 137

2006. . . . . 682 571 111 207 180 27 890 752 138

2007. . . . . 717 607 111 218 191 27 936 798 138

2008. . . . . 753 646 107 230 203 27 983 849 133

2009. . . . . 791 690 101 242 217 26 1,033 907 126

2010. . . . . 831 738 93 255 231 24 1,086 969 117

2015. . . . . 1,059 1,058 1 326 325 1 1,385 1,383 2

2020. . . . . 1,336 1,518 -182 411 467 -56 1,748 1,986 -238

2025. . . . . 1,683 2,103 -419 522 682 -159 2,206 2,784 -579

2030. . . . . 2,120 2,808 -687 663 1,001 -338 2,783 3,809 -1,025

2035. . . . . 2,676 3,624 -948 841 1,438 -597 3,517 5,063 -1,546

2040. . . . . 3,370 4,549 -1,178 1,063 2,007 -945 4,433 6,556 -2,123

2045. . . . . 4,232 5,691 -1,459 1,337 2,731 -1,394 5,569 8,422 -2,853

2050. . . . . 5,300 7,161 -1,860 1,679 3,657 -1,978 6,980 10,818 -3,838

2055. . . . . 6,631 9,094 -2,463 2,108 4,880 -2,772 8,739 13,974 -5,235

2060. . . . . 8,295 11,576 -3,281 2,646 6,576 -3,930 10,940 18,151 -7,211

2065. . . . . 10,374 14,705 -4,331 3,319 8,938 -5,619 13,693 23,643 -9,950

2070. . . . . 12,966 18,639 -5,673 4,159 12,172 -8,012 17,125 30,811 -13,685

2075. . . . . 16,190 23,592 -7,402 5,206 16,499 -11,293 21,396 40,091 -18,694

Low Cost:

2001. . . . . 534 438 97 160 139 22 694 576 118

2002. . . . . 565 458 107 170 142 28 735 600 135

2003. . . . . 593 478 115 179 143 36 772 621 151

2004. . . . . 623 500 123 188 148 39 811 648 163

2005. . . . . 654 523 131 197 154 44 852 677 175

2006. . . . . 686 548 138 207 159 48 893 707 186

2007. . . . . 720 575 145 217 165 52 937 740 197

2008. . . . . 753 605 148 228 172 56 981 777 204

2009. . . . . 789 639 150 239 180 60 1,028 819 210

2010. . . . . 826 676 150 251 187 64 1,077 863 214

2015. . . . . 1,034 931 103 314 236 78 1,348 1,167 181

2020. . . . . 1,279 1,297 -18 389 303 86 1,668 1,600 68

2025. . . . . 1,580 1,738 -158 483 395 88 2,064 2,133 -69

2030. . . . . 1,957 2,245 -288 602 521 81 2,559 2,765 -207

2035. . . . . 2,433 2,800 -366 751 687 64 3,184 3,487 -303

2040. . . . . 3,029 3,395 -366 936 903 33 3,965 4,298 -333

2045. . . . . 3,769 4,122 -353 1,166 1,182 -17 4,934 5,304 -370

2050. . . . . 4,684 5,055 -371 1,451 1,558 -108 6,134 6,613 -479

2055. . . . . 5,822 6,272 -450 1,806 2,069 -262 7,628 8,341 -712

2060. . . . . 7,244 7,796 -552 2,252 2,777 -525 9,496 10,573 -1,077

2065. . . . . 9,022 9,660 -638 2,808 3,765 -957 11,830 13,424 -1,594

2070. . . . . 11,236 11,965 -728 3,500 5,116 -1,616 14,737 17,081 -2,344

2075. . . . . 13,983 14,865 -882 4,360 6,919 -2,559 18,342 21,784 -3,441
Appendices

162

Note: Totals do not necessarily equal the sums of rounded components.

High Cost:

2001. . . . . $521 $440 $80 $156 $145 $11 $677 $585 $91

2002. . . . . 538 465 73 162 152 10 700 617 83

2003. . . . . 576 494 82 175 161 14 751 654 96

2004. . . . . 600 533 67 183 173 10 783 707 77

2005. . . . . 630 582 49 193 187 6 823 769 54

2006. . . . . 674 621 52 207 205 2 881 826 55

2007. . . . . 715 663 52 220 224 -4 935 887 48

2008. . . . . 756 711 44 233 244 -11 989 955 33

2009. . . . . 798 766 32 247 266 -20 1,045 1,032 12

2010. . . . . 843 826 17 261 291 -29 1,104 1,116 -12

2015. . . . . 1,097 1,220 -123 341 458 -117 1,438 1,678 -239

2020. . . . . 1,414 1,792 -379 441 738 -297 1,855 2,530 -676

2025. . . . . 1,818 2,564 -746 573 1,208 -635 2,391 3,772 -1,381

2030. . . . . 2,335 3,546 -1,212 742 1,976 -1,234 3,077 5,523 -2,446

2035. . . . . 2,993 4,751 -1,757 959 3,090 -2,131 3,952 7,840 -3,888

2040. . . . . 3,819 6,191 -2,371 1,230 4,581 -3,350 5,050 10,772 -5,722

2045. . . . . 4,844 8,017 -3,173 1,568 6,473 -4,906 6,411 14,490 -8,078

2050. . . . . 6,116 10,395 -4,279 1,989 8,797 -6,808 8,105 19,192 -11,087

2055. . . . . 7,700 13,558 -5,858 2,518 11,788 -9,269 10,219 25,346 -15,127

2060. . . . . 9,680 17,705 -8,025 3,185 15,920 -12,735 12,865 33,625 -20,759

2065. . . . . 12,151 23,081 -10,930 4,022 21,653 -17,631 16,173 44,734 -28,561

2070. . . . . 15,232 29,987 -14,755 5,069 29,481 -24,412 20,301 59,468 -39,167

2075. . . . . 19,069 38,772 -19,704 6,378 39,947 -33,568 25,447 78,719 -53,272

Table VI.E10.—OASDI and HI Annual Income Excluding Interest, Outgo, and

Balance in Current Dollars, Calendar Years 2001-75 (Cont.)

[In billions]

OASDI HI Combined

Calendar

year

Income

excluding

interest Outgo Balance

Income

excluding

interest Outgo Balance

Income

excluding

interest Outgo Balance
163

OASI Expenditures for Disabled

F. ANALYSIS OF BENEFIT DISBURSEMENTS FROM THE OASI 

TRUST FUND WITH RESPECT TO DISABLED BENEFICIARIES

(Required by section 201(c) of the Social Security Act)

Effective January 1957, monthly benefits have been payable from the OASI

Trust Fund to disabled children aged 18 and over of retired and deceased

workers in those cases for which the disability began before age 18. The age

before which disability is required to have begun was subsequently changed

to age 22. Effective February 1968, reduced monthly benefits have been payable from this trust fund to disabled widows and widowers at ages 50 and

over. Effective January 1991, the requirements for the disability of the

widow or widower were made less restrictive.

On December 31, 2000, about 811,000 persons were receiving monthly benefits from the OASI Trust Fund because of their disabilities or the disabilities

of children. This total includes 35,000 mothers and fathers (wives or husbands under age 65 of retired-worker beneficiaries and widows or widowers

of deceased insured workers) who met all other qualifying requirements and

were receiving unreduced benefits solely because they had disabled-child

beneficiaries (or disabled children aged 16 or 17) in their care. Benefits paid

from this trust fund to the persons described above totaled $5,194 million in

calendar year 2000. Table VI.F1 shows these and similar figures for selected

calendar years during 1960-2000, and estimated experience for 2001-10

based on the intermediate set of assumptions.
Appendices

164

Note: Totals do not necessarily equal the sums of rounded components.

Total benefit payments from the OASI Trust Fund with respect to disabled

beneficiaries are estimated to increase from $5,489 million in calendar year

2001 to $8,658 million in calendar year 2010, based on the intermediate

assumptions.

Table VI.F1.—Benefit Disbursements From the OASI Trust Fund 

With Respect to Disabled Beneficiaries

[Beneficiaries in thousands; benefit payments in millions]

Disabled beneficiaries, end of year Amount of benefit payments1

 1 Beginning in 1966, includes payments for vocational rehabilitation services.

Calendar year Total Children2

 2 Also includes certain mothers and fathers (see text).

Widowswidowers3

 3 In 1984 and later years, only disabled widows and widowers aged 50-59 are included because disabled

widows and widowers aged 60-64 would be eligible for the same benefit as a nondisabled aged widow or

widower; therefore, they are not receiving benefits solely because of a disability.

Total Children2 Widowswidowers4

 4 In 1983 and prior years, reflects the offsetting effect of lower benefits payable to disabled widows and

widowers who continued to receive benefits after attaining age 60 (62, for disabled widowers, prior to 1973)

as compared to the higher nondisabled widow’s and widower’s benefits that would otherwise be payable. In

1984 and later years, only benefit payments to disabled widows and widowers aged 50-59 are included (see

footnote 3).

Historical data:

1960. . . . . . . . . . . . 117 117 — $59 $59 —

1965. . . . . . . . . . . . 214 214 — 134 134 —

1970. . . . . . . . . . . . 316 281 36 301 260 $41

1975. . . . . . . . . . . . 435 376 58 664 560 104

1980. . . . . . . . . . . . 519 460 59 1,223 1,097 126

1985. . . . . . . . . . . . 594 547 47 2,072 1,885 187

1986. . . . . . . . . . . . 614 565 49 2,219 2,022 197

1987. . . . . . . . . . . . 629 580 49 2,331 2,128 203

1988. . . . . . . . . . . . 640 591 49 2,518 2,307 211

1989. . . . . . . . . . . . 651 602 49 2,680 2,459 221

1990. . . . . . . . . . . . 662 613 49 2,882 2,649 233

1991. . . . . . . . . . . . 687 627 61 3,179 2,875 304

1992. . . . . . . . . . . . 715 643 72 3,459 3,079 380

1993. . . . . . . . . . . . 740 659 81 3,752 3,296 456

1994. . . . . . . . . . . . 758 671 86 3,973 3,481 492

1995. . . . . . . . . . . . 772 681 91 4,202 3,672 531

1996. . . . . . . . . . . . 782 687 94 4,410 3,846 565

1997. . . . . . . . . . . . 789 693 96 4,646 4,050 596

1998. . . . . . . . . . . . 797 698 99 4,838 4,210 627

1999. . . . . . . . . . . . 805 702 102 4,991 4,336 655

2000. . . . . . . . . . . . 811 707 104 5,194 4,514 680

Estimates:

2001. . . . . . . . . . . . 825 717 108 5,489 4,760 729

2002. . . . . . . . . . . . 836 725 112 5,775 4,994 781

2003. . . . . . . . . . . . 847 732 115 6,067 5,235 832

2004. . . . . . . . . . . . 858 739 119 6,389 5,495 894

2005. . . . . . . . . . . . 869 745 123 6,735 5,769 966

2006. . . . . . . . . . . . 877 751 126 7,094 6,060 1,034

2007. . . . . . . . . . . . 884 757 127 7,471 6,373 1,098

2008. . . . . . . . . . . . 890 762 128 7,862 6,704 1,158

2009. . . . . . . . . . . . 894 767 127 8,265 7,054 1,211

2010. . . . . . . . . . . . 898 771 126 8,658 7,400 1,258
165

OASI Expenditures for Disabled

In calendar year 2000, benefit payments (including expenditures for vocational rehabilitation services) with respect to disabled persons from the OASI

Trust Fund and from the DI Trust Fund (including payments from the latter

fund to all children and spouses of disabled-worker beneficiaries) totaled

$60,195 million. Of this amount, $5,194 million or 8.6 percent represented

payments from the OASI Trust Fund. These and similar figures for selected

calendar years during 1960-2000 and estimates for calendar years 2001-10

are presented in table VI.F2.

Note: Totals do not necessarily equal the sums of rounded components.

Table VI.F2.—Benefit Disbursements Under the OASDI Program 

With Respect to Disabled Beneficiaries

[Amounts in millions]

Total1

 1 Beginning in 1966, includes payments for vocational rehabilitation services.

DI Trust

Fund2

 2 Benefit payments to disabled workers and their children and spouses.

OASI Trust Fund

Calendar year Amount3

 3 Benefit payments to disabled children aged 18 and over, to certain mothers and fathers (see text), and to

disabled widows and widowers (see footnote 4, table VI.F1).

Percentage

of total

Historical data:

1960. . . . . . . . . . . . . . . . . . . . . . . . . . $627 $568 $59 9.4

1965. . . . . . . . . . . . . . . . . . . . . . . . . . 1,707 1,573 134 7.9

1970. . . . . . . . . . . . . . . . . . . . . . . . . . 3,386 3,085 301 8.9

1975. . . . . . . . . . . . . . . . . . . . . . . . . . 9,169 8,505 664 7.2

1980. . . . . . . . . . . . . . . . . . . . . . . . . . 16,738 15,515 1,223 7.3

1985. . . . . . . . . . . . . . . . . . . . . . . . . . 20,908 18,836 2,072 9.9

1986. . . . . . . . . . . . . . . . . . . . . . . . . . 22,075 19,856 2,219 10.1

1987. . . . . . . . . . . . . . . . . . . . . . . . . . 22,858 20,527 2,331 10.2

1988. . . . . . . . . . . . . . . . . . . . . . . . . . 24,226 21,708 2,518 10.4

1989. . . . . . . . . . . . . . . . . . . . . . . . . . 25,591 22,911 2,680 10.5

1990. . . . . . . . . . . . . . . . . . . . . . . . . . 27,717 24,835 2,882 10.4

1991. . . . . . . . . . . . . . . . . . . . . . . . . . 30,877 27,698 3,179 10.3

1992. . . . . . . . . . . . . . . . . . . . . . . . . . 34,583 31,124 3,459 10.0

1993. . . . . . . . . . . . . . . . . . . . . . . . . . 38,378 34,626 3,752 9.8

1994. . . . . . . . . . . . . . . . . . . . . . . . . . 41,730 37,757 3,973 9.5

1995. . . . . . . . . . . . . . . . . . . . . . . . . . 45,140 40,937 4,202 9.3

1996. . . . . . . . . . . . . . . . . . . . . . . . . . 48,615 44,205 4,410 9.1

1997. . . . . . . . . . . . . . . . . . . . . . . . . . 50,358 45,712 4,646 9.2

1998. . . . . . . . . . . . . . . . . . . . . . . . . . 53,062 48,224 4,838 9.1

1999. . . . . . . . . . . . . . . . . . . . . . . . . . 56,390 51,399 4,991 8.9

2000. . . . . . . . . . . . . . . . . . . . . . . . . . 60,195 55,001 5,194 8.6

Estimates:

2001. . . . . . . . . . . . . . . . . . . . . . . . . . 64,514 59,025 5,489 8.5

2002. . . . . . . . . . . . . . . . . . . . . . . . . . 69,127 63,352 5,775 8.4

2003. . . . . . . . . . . . . . . . . . . . . . . . . . 74,721 68,654 6,067 8.1

2004. . . . . . . . . . . . . . . . . . . . . . . . . . 81,092 74,703 6,389 7.9

2005. . . . . . . . . . . . . . . . . . . . . . . . . . 88,121 81,387 6,735 7.6

2006. . . . . . . . . . . . . . . . . . . . . . . . . . 95,778 88,684 7,094 7.4

2007. . . . . . . . . . . . . . . . . . . . . . . . . . 103,993 96,522 7,471 7.2

2008. . . . . . . . . . . . . . . . . . . . . . . . . . 112,682 104,819 7,862 7.0

2009. . . . . . . . . . . . . . . . . . . . . . . . . . 121,493 113,228 8,265 6.8

2010. . . . . . . . . . . . . . . . . . . . . . . . . . 130,585 121,927 8,658 6.6
Appendices

166

G. GLOSSARY

Actuarial balance. The difference between the summarized income rate and

the summarized cost rate over a given valuation period.

Actuarial deficit. A negative actuarial balance.

Adjusted gross income—AGI. Amount of income potentially subject to

Federal income taxation, before consideration of exemptions and deductions.

Administrative expenses. Expenses incurred by the Social Security Administration and the Department of the Treasury in administering the OASDI

program and the provisions of the Internal Revenue Code relating to the collection of contributions. Such administrative expenses are paid from the

OASI and DI Trust Funds.

Advance tax transfers. Amounts representing the estimated total OASDI

tax contributions for a given month. From May 1983 through November

1990, such amounts were credited to the OASI and DI Trust Funds at the

beginning of each month. Reimbursements were made from the trust funds to

the general fund of the Treasury for the associated loss of interest. Advance

tax transfers are no longer made unless needed in order to pay benefits.

Alternatives I, II, or III. See “Assumptions.”

Annual balance. The difference between the income rate and the cost rate in

a given year.

Assets. Treasury notes and bonds, other securities guaranteed by the Federal

Government, certain Federally sponsored agency obligations, and cash, held

by the trust funds for investment purposes.

Assumptions. Values relating to future trends in certain key factors which

affect the balance in the trust funds. Demographic assumptions include fertility, mortality, net immigration, marriage, divorce, retirement patterns, disability incidence and termination rates, and changes in the labor force.

Economic assumptions include unemployment, average earnings, inflation,

interest rates, and productivity. Three sets of economic assumptions are presented in this report—

• Alternative I is characterized as a low cost set—it assumes relatively

rapid economic growth, low inflation, and favorable (from the standpoint of program financing) demographic conditions.

• Alternative II is the intermediate set of assumptions, and represents the

Trustees’ best estimates of likely future economic and demographic

conditions.

• Alternative III, characterized as a high cost set, assumes slow economic

growth, more rapid inflation, and financially disadvantageous demographic conditions.

See tables V.A1 and V.B1.
167

Glossary

Automatic cost-of-living benefit increase. The annual increase in benefits,

effective for December, reflecting the increase in the cost of living. The benefit increase equals the percentage increase in the Consumer Price Index for

Urban Wage Earners and Clerical Workers measured from the average over

July, August, and September of the preceding year to the average for the

same 3 months in the current year. If the increase is less than one-tenth of 1

percent, when rounded, there is no automatic increase for the current year;

the increase for the next year would reflect the increase in the cost of living

over a 2-year period. See table V.C1. If the stabilizer provision applies, the

increase may be less than the cost-of-living increase.

Auxiliary benefits. Monthly benefits payable to a spouse or child of a

retired or disabled worker, or to a survivor of a deceased worker.

Average indexed monthly earnings—AIME. The amount of earnings used

in determining the primary insurance amount (PIA) for most workers who

attain age 62, become disabled, or die after 1978. A worker’s actual past

earnings are adjusted by changes in the average wage index, in order to bring

them up to their approximately equivalent value at the time of retirement or

other eligibility for benefits.

Average wage index. The average amount of total wages for each year after

1950, including wages in noncovered employment and wages in covered

employment in excess of the OASDI contribution and benefit base. (See

Title 20, Chapter III, section 404.211(c) of the Code of Federal Regulations

for a more precise definition.) These average wage amounts are used to

index the taxable earnings of most workers first becoming eligible for benefits in 1979 or later, and for automatic adjustments in the contribution and

benefit base, bend points, earnings test exempt amounts, and other wageindexed amounts. See table V.C1.

Award. An administrative determination that an individual is entitled to

receive a specified type of OASDI benefit. Awards can represent not only

new entrants to the benefit rolls but also persons already on the rolls who

become entitled to a different type of benefit. Awards usually result in the

immediate payment of benefits, although payments may be deferred or withheld depending on the individual’s particular circumstances.

Baby boom. The period from the end of World War II through the mid1960s marked by unusually high birth rates.

Bend points. The dollar amounts defining the AIME or PIA brackets in the

benefit formulas. For the bend points for years 1979 and later, see table V.C2.

Beneficiary. A person who has been awarded benefits on the basis of his or

her own or another’s earnings record. The benefits may be either in currentpayment status or withheld.

Benefit award. See “Award.”
Appendices

168

Benefit payments. The amounts disbursed for OASI and DI benefits by the

Department of the Treasury in specified periods.

Benefit termination. See “Termination.”

Best estimate assumptions. See “Assumptions.”

Board of Trustees. A Board established by the Social Security Act to oversee the financial operations of the Federal Old-Age and Survivors Insurance

Trust Fund and the Federal Disability Insurance Trust Fund. The Board is

composed of six members, four of whom serve automatically by virtue of

their positions in the Federal Government: the Secretary of the Treasury, who

is the Managing Trustee, the Secretary of Labor, the Secretary of Health and

Human Services, and the Commissioner of Social Security. The other two

members are appointed by the President and confirmed by the Senate to

serve as public representatives. 

Book value. A bond’s value between its price at purchase and its value at

maturity. Book value is calculated as par value plus unamortized premium, if

purchased at a price above its par value, or less unamortized discount, if purchased below par.

Constant dollars. Amounts adjusted by the CPI to the value of the dollar in

a particular year.

Consumer Price Index—CPI. Relative measure of inflation. In this report,

all references to the CPI relate to the Consumer Price Index for Urban Wage

Earners and Clerical Workers (CPI-W). See table V.B1.

Contribution and benefit base. Annual dollar amount above which earnings in employment covered under the OASDI program are neither taxable

nor creditable for benefit computation purposes. (Also referred to as maximum contribution and benefit base, annual creditable maximum, taxable

maximum, and maximum taxable.) See tables V.C1 and VI.A1. See “HI contribution base.”

Contributions. The amount based on a percent of earnings, up to an annual

maximum, that must be paid by—

• employers and employees on wages from employment under the Federal Insurance Contributions Act,

• the self-employed on net earnings from self-employment under the

Self-Employment Contributions Act, and

• States on the wages of State and local government employees covered

under the Social Security Act through voluntary agreements under section 218 of the Act.

Generally, employers withhold contributions from wages, add an equal

amount of contributions, and pay both on a current basis. Also referred to as

taxes.
169

Glossary

Cost-of-living adjustment. See “Automatic cost-of-living benefit increase.”

Cost rate. The cost rate for a year is the ratio of the cost (also called outgo,

expenditures, or disbursements) of the program to the taxable payroll for the

year. In this context, the outgo is defined to include benefit payments, special

monthly payments to certain uninsured persons who have 3 or more quarters

of coverage (and whose payments are therefore not reimbursable from the

general fund of the Treasury), administrative expenses, net transfers from the

trust funds to the Railroad Retirement program under the financial-interchange provisions, and payments for vocational rehabilitation services for

disabled beneficiaries; it excludes special monthly payments to certain uninsured persons whose payments are reimbursable from the general fund of the

Treasury (as described above), and transfers under the interfund borrowing

provisions.

Covered earnings. Earnings in employment covered by the OASDI program.

Covered employment. All employment and self-employment creditable for

Social Security purposes. Almost every kind of employment and selfemployment is covered under the program. In a few employment situations,

for example, religious orders under a vow of poverty, foreign affiliates of

American employers, or State and local governments, coverage must be

elected by the employer. However, effective July 1991, coverage is mandatory for State and local employees who are not participating in a public

employee retirement system. In a few situations, for example, ministers or

self-employed members of certain religious groups, workers can opt out of

coverage.

Covered worker. A person who has earnings creditable for Social Security

purposes on the basis of services for wages in covered employment and/or on

the basis of income from covered self-employment.

Current-cost financing. See “Pay-as-you-go financing.”

Current dollars. Amounts expressed in nominal dollars with no adjustment

for inflationary changes in the value of the dollar over time.

Current-payment status. Status of a beneficiary to whom a benefit is being

paid for a given month (with or without deductions, provided the deductions

add to less than a full month’s benefit).

Deemed wage credit. See “Military service wage credits.”

Delayed Retirement Credit. Increases the benefit amount for certain individuals who did not receive benefits for months after attainment of the normal retirement age but before age 70. Delayed retirement credit increases

apply for benefits beginning January of the year following the year the individual attains the normal retirement age. See table V.C3.

Demographic assumptions. See “Assumptions.”
Appendices

170

Disability. For Social Security purposes, the inability to engage in substantial gainful activity (see “Substantial gainful activity—SGA”) by reason of

any medically determinable physical or mental impairment that can be

expected to result in death or to last for a continuous period of not less than

12 months. Special rules apply for workers at ages 55 and over whose disability is based on blindness.

The law generally requires that a person be disabled continuously for 5

months before he or she can qualify for a disabled-worker benefit.

Disability incidence rate. The proportion of workers in a given year,

insured for but not receiving disability benefits, who apply for and are

awarded disability benefits.

Disability Insurance (DI) Trust Fund. See “Trust fund.”

Disability termination rate. The proportion of disabled-worker beneficiaries in a given year whose disability benefits terminate as a result of the individual’s recovery, death, or attainment of normal retirement age.

Disabled-worker benefit. A monthly benefit payable to a disabled worker

under normal retirement age and insured for disability. Before November

1960, disability benefits were limited to disabled workers aged 50-64.

Earnings. Unless otherwise qualified, all wages from employment and net

earnings from self-employment, whether or not taxable or covered.

Earnings test. The provision requiring the withholding of benefits if beneficiaries under normal retirement age have earnings in excess of certain

exempt amounts. See table V.C1.

Economic assumptions. See “Assumptions.”

Effective interest rate. See “Interest rate.”

Excess wages. Wages in excess of the contribution and benefit base on

which a worker initially pays taxes (usually as a result of working for more

than one employer during a year). Employee taxes on excess wages are

refunded to affected employees, while the employer taxes are not refunded.

Federal Insurance Contributions Act—FICA. Provision authorizing taxes

on the wages of employed persons to provide for Retirement, Survivors, and

Disability Insurance, and for Hospital Insurance. The tax is paid in equal

amounts by workers and their employers.

Financial interchange. Provisions of the Railroad Retirement Act providing

for transfers between the trust funds and the Social Security Equivalent Benefit Account of the Railroad Retirement program in order to place each trust

fund in the same position it would have been in if railroad employment had

always been covered under Social Security.

Fiscal year. The accounting year of the United States Government. Since

1976, a fiscal year is the 12-month period ending September 30. For exam-
171

Glossary

ple, fiscal year 2001 began October 1, 2000 and will end September 30,

2001.

Full advance funding. A financing scheme where taxes or contributions are

established to match the full cost of future benefits as these costs are incurred

through current service. Such financing methods also provide for amortization over a fixed period of any financial liability that is incurred at the beginning of the program (or subsequent modification) as a result of granting

credit for past service.

General fund of the Treasury. Funds held by the Treasury of the United

States, other than receipts collected for a specific purpose (such as Social

Security) and maintained in a separate account for that purpose.

General fund reimbursements. Transfers from the general fund of the

Treasury to the trust funds for specific purposes defined in the law, such as:

• The costs associated with providing special payments made to uninsured persons who attained age 72 before 1968, and who had fewer than

3 quarters of coverage.

• Payments corresponding to the employee-employer taxes on deemed

wage credits for military personnel.

• Interest on checks which are not negotiated 6 months after the month of

issue. (For checks issued before October, 1989, the principal was

returned to the trust funds as a general fund reimbursement; since that

time, the principal amount is automatically returned to the issuing fund

when the check is uncashed after a year.)

• Administrative expenses incurred as a result of furnishing information

on deferred vested benefits to pension plan participants, as required by

the Employee Retirement Income Security Act of 1974 (Public Law 93-

406).

Gross domestic product—GDP. The total dollar value of all goods and services produced by labor and property located in the United States, regardless

of who supplies the labor or property.

HI contribution base. Annual dollar amount above which earnings in

employment covered under the HI program are not taxable. (Also referred to

as maximum contribution base, taxable maximum, and maximum taxable.)

Beginning in 1994, the HI contribution base was eliminated.

High cost assumptions. See “Assumptions.”

Hospital Insurance (HI) Trust Fund. See “Trust fund.”

Income rate. Ratio of income from tax revenues on a liability basis (payrolltax contributions and income from the taxation of benefits) to the OASDI

taxable payroll for the year.

Inflation. An increase in the volume of money and credit relative to available goods, resulting in an increase in the general price level.
Appendices

172

Insured status. The state or condition of having sufficient quarters of coverage to meet the eligibility requirements for retired-worker or disabled-worker

benefits, or to permit the worker’s spouse and children or survivors to establish eligibility for benefits in the event of his or her disability, retirement, or

death. See “Quarters of coverage.”

Interest. A payment in exchange for the use of money during a specified

period.

Interest rate. Interest rates on new public-debt obligations issuable to Federal trust funds (see “Special public-debt obligation”) are determined

monthly. Such rates are set equal to the average market yield on all outstanding marketable U.S. securities not due to mature for at least 4 years from the

date of the determination. See table V.B1 for historical and assumed future

interest rates on new special-issue securities. The effective interest rate for a

trust fund is the ratio of the interest earned by the fund over a given period of

time to the average level of assets held by the fund during the period. The

effective rate of interest thus represents a measure of the overall average

interest earnings on the fund’s portfolio of assets.

Interfund borrowing. The borrowing of assets by a trust fund (OASI, DI, or

HI) from another of the trust funds when the first fund is in danger of

exhaustion. Interfund borrowing was permitted by the Social Security Act

only during 1982 through 1987; all amounts borrowed were to be repaid

prior to the end of 1989. The only exercise of this authority occurred in 1982,

when the OASI Trust Fund borrowed assets from the DI and HI Trust Funds.

The final repayment of borrowed amounts occurred in 1986.

Intermediate assumptions. See “Assumptions.”

Long range. The next 75 years. Long-range actuarial estimates are made for

this period because it is approximately the maximum remaining lifetime of

current Social Security participants.

Low cost assumptions. See “Assumptions.”

Lump-sum death benefit. A lump sum, generally $255, payable on the

death of a fully or currently insured worker. The lump sum is payable to the

surviving spouse of the worker, under most circumstances, or to the worker’s

children.

Maximum family benefit. The maximum monthly amount that can be paid

on a worker’s earnings record. Whenever the total of the individual monthly

benefits payable to all the beneficiaries entitled on one earnings record

exceeds the maximum, each dependent’s or survivor’s benefit is proportionately reduced to bring the total within the maximum. Benefits payable to

divorced spouses or surviving divorced spouses are not reduced under the

family maximum provision.
173

Glossary

Medicare. A nationwide, Federally administered health insurance program

authorized in 1965 to cover the cost of hospitalization, medical care, and

some related services for most people over age 65, people receiving Social

Security Disability Insurance payments for 2 years, and people with EndStage Renal Disease. Medicare consists of two separate but coordinated programs—Part A (Hospital Insurance, HI) and Part B (Supplementary Medical

Insurance, SMI). All persons entitled to HI are eligible to enroll in the SMI

program on a voluntary basis by paying a monthly premium. Health insurance protection is available to Medicare beneficiaries without regard to

income.

Military service wage credits. Credits recognizing that military personnel

receive wages in kind (such as food and shelter) in addition to their basic pay

and other cash payments. Noncontributory wage credits of $160 were provided for each month of active military service from September 16, 1940,

through December 31, 1956. For years after 1956, the basic pay of military

personnel is covered under the Social Security program on a contributory

basis. In addition to the contributory credits for basic pay, noncontributory

wage credits of $300 were granted for each calendar quarter, from January

1957 through December 1977, in which a person received pay for military

service. In years after 1977, noncontributory wage credits of $100 are

granted for each $300 of military wages, up to a maximum credit of $1,200

per calendar year.

National average wage index. See “Average wage index.”

Non-Accelerating Inflation Rate of Unemployment. The rate of unemployment associated with no upward or downward pressure on the rate of

inflation.

Normal retirement age. The age at which a person may first become entitled to unreduced retirement benefits. For persons reaching age 62 before

2000, the normal retirement age is 65. It will increase gradually to 67 for persons reaching that age in 2027 or later, beginning with an increase to 65

years and 2 months for persons reaching age 65 in 2003. See table V.C3.

Old-Age and Survivors Insurance (OASI) Trust Fund. See “Trust fund.”

Old-law base. Amount the contribution and benefit base would have been if

the discretionary increases in the base under the 1977 amendments had not

been enacted. The Social Security Amendments of 1972 provided for automatic annual indexing of the contribution and benefit base. The Social Security Amendments of 1977 provided ad hoc increases to the bases for

1979-81, with subsequent bases updated in accordance with the normal

indexing procedure. See table V.C2.

Par value. The value printed on the face of a bond. For both public and special issues held by the trust funds, par value is also the redemption value at

maturity.
Appendices

174

Partial advance funding. A financing scheme where taxes are scheduled to

provide a substantial accumulation of trust fund assets, thereby generating

additional interest income to the trust funds and reducing the need for payroll

tax increases in periods when costs are relatively high. (Higher general taxes

or additional borrowing may be required, however, to support the payment of

such interest.) While substantial, the trust fund buildup under partial advance

funding is much smaller than it would be with full advance funding.

Pay-as-you-go financing. A financing scheme where taxes are scheduled to

produce just as much income as required to pay current benefits, with trust

fund assets built up only to the extent needed to prevent exhaustion of the

fund by random economic fluctuations.

Payment cycling. Beneficiaries on the rolls before May 1, 1997, are paid on

the third of the month. Persons applying for OASDI benefits after April

1997, however, generally are paid on the second, third, or fourth Wednesday

of the month following the month for which payment is due. The particular

Wednesday payment date is based on the wage earner’s date of birth. For

those born on the first through tenth, the benefit payment day is the second

Wednesday of the month; for those born on the eleventh through the twentieth, the benefit payment day is the third Wednesday of the month; and for

those born after the twentieth of the month, the payment day is the fourth

Wednesday of the month.

Payroll taxes. A tax levied on the gross wages of workers. See tables VI.A1

and VI.E1.

Population in the Social Security area. The population comprised of (i)

residents of the 50 States and the District of Columbia (adjusted for net census undercount); (ii) civilian residents of Puerto Rico, the Virgin Islands,

Guam, American Samoa and the Northern Mariana Islands; (iii) Federal

civilian employees and persons in the Armed Forces abroad and their dependents; (iv) crew members of merchant vessels; and (v) all other U.S. citizens

abroad.

Present value. The equivalent value, at the present time, of a future stream

of payments (either income or expenditures). The present value of a future

stream of payments may be thought of as the lump-sum amount that, if

invested today, together with interest earnings would be just enough to meet

each of the payments as they fell due. At the time of the last payment, the

invested fund would be exactly zero. For example, a home mortgage of

$100,000 represents the present value at 8 percent interest of future monthly

payments of $714.40 for the next 30 years. Present values are widely used in

calculations involving financial transactions over long periods of time to

account for the time value of money (interest) and the changing value of the

dollar (inflation).
175

Glossary

Primary insurance amount—PIA. The monthly amount payable to a

retired worker who begins to receive benefits at normal retirement age or

(generally) to a disabled worker. This amount, which is related to the

worker’s average monthly wage or average indexed monthly earnings, is also

the amount used as a base for computing all types of benefits payable on the

basis of one individual’s earnings record.

Primary-insurance-amount formula. The mathematical formula relating

the PIA to the AIME for workers who attain age 62, become disabled, or die

after 1978. The PIA is equal to the sum of 90 percent of AIME up to the first

bend point, plus 32 percent of AIME above the first bend point up to the second bend point, plus 15 percent of AIME in excess of the second bend point.

Automatic benefit increases are applied beginning with the year of eligibility.

See table V.C2 for historical and assumed future bend points and table V.C1

for historical and assumed future benefit increases.

Quarters of coverage. Basic unit of measurement for determining insured

status. In 2001, a worker receives one quarter of coverage (up to a total of

four) for each $830 of annual covered earnings. The amount of earnings

required for a quarter of coverage is subject to annual automatic increases in

proportion to increases in average wages. For amounts applicable for years

after 1978, see table V.C2. 

Railroad retirement. A Federal insurance program, somewhat similar to

Social Security, designed for workers in the railroad industry. The provisions

of the Railroad Retirement Act provide for a system of coordination and

financial interchange between the Railroad Retirement program and the

Social Security program.

Reallocation of tax rates. An increase in the tax rate payable to either the

OASI or DI Trust Fund, with a corresponding reduction in the rate for the

other fund, so that the total OASDI tax rate is not changed. 

Real-wage differential. The difference between the percentage increases in

(1) the average annual wage in covered employment and (2) the average

annual Consumer Price Index. See table V.B1.

Recession. A period of adverse economic conditions; in particular, two or

more successive calendar quarters of negative growth in gross domestic

product.

Retired-worker benefit. A monthly benefit payable to a fully insured retired

worker aged 62 or older or to a person entitled under the transitionally

insured status provision in the law. Retired-worker benefit data do not

include special age-72 benefits.

Retirement age. The age at which an individual establishes entitlement to

retirement benefits. See “Normal retirement age.”

Retirement earnings test. See “Earnings test.”
Appendices

176

Retirement test. See “Earnings test.”

Self-employment. Operation of a trade or business by an individual or by a

partnership in which an individual is a member.

Self-Employment Contributions Act–SECA. Provision authorizing Social

Security taxes on the net earnings of most self-employed persons.

Short range. The next 10 years. Short-range actuarial estimates are prepared

for this period because of the short-range test of financial adequacy. The

Social Security Act requires estimates for 5 years; estimates are prepared for

an additional 5 years to help clarify trends which are only starting to develop

in the mandated first 5-year period. 

Social Security Act. Provisions of the law governing most operations of the

Social Security program. Original Social Security Act is Public Law 74-271,

enacted August 14, 1935. With subsequent amendments, the Social Security

Act consists of 20 titles, of which four have been repealed. The Old-Age,

Survivors, and Disability Insurance program is authorized by title II of the

Social Security Act. 

Special public-debt obligation. Securities of the United States Government

issued exclusively to the OASI, DI, HI, and SMI Trust Funds and other Federal trust funds. Section 201(d) of the Social Security Act provides that the

public-debt obligations issued for purchase by the OASI and DI Trust Funds

shall have maturities fixed with due regard for the needs of the funds. The

usual practice in the past has been to spread the holdings of special issues, as

of each June 30, so that the amounts maturing in each of the next 15 years

are approximately equal. Special public-debt obligations are redeemable at

par value at any time and carry interest rates determined by law (see “Interest

rate”). See tables III.A2 and III.A4 for a listing of the obligations held by the

OASI and DI Trust Funds, respectively.

Stabilizer provision. Section 215(i)(1)(C) of the Act, which provides that if

the combined assets of the OASI and DI Trust Funds, as a percentage of estimated annual expenditures, fall below a specified level, automatic benefit

increases will be limited to the lower of the increases in wages or prices. The

specified level is 20 percent for benefit increases in 1989 and later.

Statutory blindness. Central visual acuity of 20/200 or less in the better eye

with the use of a correcting lens or tunnel vision of 20o or less.

Substantial gainful activity—SGA. The level of work activity used to

establish disability. A finding of disability requires that a person be unable to

engage in substantial gainful activity. Under current regulations, a person

who is not statutorily blind and is actually earning more than $740 a month

(net of impairment-related work expenses) is ordinarily considered to be

engaging in substantial gainful activity. A person who is statutorily blind (see

“Statutory blindness”) is not considered to be engaging in substantial gainful
177

Glossary

activity, for the purpose of determining a condition of disability, unless the

person’s earnings are more than $1,240 a month in 2001 (net of impairmentrelated work expenses). This amount for the blind is subject to adjustment

each year to reflect increases in average wage levels.

Summarized balance. The difference between the summarized cost rate and

the summarized income rate, expressed as a percentage of taxable payroll.

Summarized cost rate. The ratio of the present value of expenditures to the

present value of the taxable payroll for the years in a given period. This ratio

can be used as a measure of the relative level of expenditures during the

period in question. For purposes of evaluating the financial adequacy of the

program, the summarized cost rate is adjusted to include the cost of reaching

and maintaining a target trust fund level. Because a trust fund level of about

1 year’s expenditures is considered to be an adequate reserve for unforeseen

contingencies, the targeted trust fund ratio used in determining summarized

cost rates is 100 percent of annual expenditures. Accordingly, the adjusted

summarized cost rate is equal to the ratio of (a) the sum of the present value

of the outgo during the period plus the present value of the targeted ending

trust fund level, to (b) the present value of the taxable payroll during the projection period.

Summarized income rate. The ratio of the present value of tax income to

the present value of taxable payroll for the years in a given period. This ratio

can be used as a measure of the relative level of income during the period in

question. For purposes of evaluating the financial adequacy of the program,

the summarized income rate is adjusted to include assets on hand at the

beginning of the period. Accordingly, the adjusted summarized income rate

equals the ratio of (a) the sum of the trust fund balance at the beginning of

the period plus the present value of the total income from taxes during the

period, to (b) the present value of the taxable payroll for the years in the

period.

Supplemental Security Income—SSI. A Federally administered program

(often with State supplementation) of cash assistance for needy aged, blind,

or disabled persons. SSI is funded through the general fund of the Treasury

and administered by the Social Security Administration.

Supplementary Medical Insurance (SMI) Trust Fund. See “Trust fund.”

Survivor benefit. Benefit payable to a survivor of a deceased worker.

Taxable earnings. Wages and/or self-employment income, in employment

covered by the OASDI and/or HI programs, that is under the applicable

annual maximum taxable limit. For 1994 and later, no maximum taxable

limit applies to the HI program.

Taxable payroll. A weighted average of taxable wages and taxable selfemployment income. When multiplied by the combined employee-employer
Appendices

178

tax rate, it yields the total amount of taxes incurred by employees, employers, and the self-employed for work during the period.

Taxable self-employment income. The maximum amount of net earnings

from self employment by an earner which, when added to any taxable wages,

does not exceed the contribution and benefit base. For HI beginning in 1994,

all of net earnings from self employment.

Taxable wages. See “Taxable earnings.”

Taxation of benefits. During 1984-93, up to one-half of an individual’s or a

couple’s OASDI benefits was potentially subject to Federal income taxation

under certain circumstances. The revenue derived from this provision was

allocated to the OASI and DI Trust Funds on the basis of the income taxes

paid on the benefits from each fund. Beginning in 1994, the maximum portion of OASDI benefits potentially subject to taxation was increased to 85

percent. The additional revenue derived from taxation of benefits in excess

of one-half, up to 85 percent, is allocated to the HI Trust Fund.

Taxes. See “Contributions.”

Termination. Cessation of payment of a specific type of benefit because the

beneficiary is no longer entitled to receive it. For example, benefits might

terminate as a result of the death of the beneficiary, the recovery of a disabled beneficiary, or the attainment of age 18 by a child beneficiary. In some

cases, the individual may become immediately entitled to another type of

benefit (such as the conversion of a disabled-worker beneficiary at normal

retirement age to a retired-worker beneficiary).

Test of Long-Range Close Actuarial Balance. Summarized income

rates and cost rates are calculated for each of 66 valuation periods within the

full 75-year long-range projection period. The first of these periods consists

of the next 10 years. Each succeeding period becomes longer by 1 year, culminating with the period consisting of the next 75 years. The long-range test

is met if, for each of the 66 valuation periods, the actuarial balance is not less

than zero or is negative by, at most, a specified percentage of the summarized

cost rate for the same time period. The percentage allowed for a negative

actuarial balance is 0 percent for the 10-year period, grading uniformly to 5

percent for the full 75-year period. The criterion for meeting the test is less

stringent for the longer periods in recognition of the greater uncertainty associated with estimates for more distant years. The test is applied to OASI and

DI separately, as well as combined, based on the intermediate (alternative II)

set of assumptions.

Test of Short-Range Financial Adequacy. The conditions required to meet

this test are as follows:
179

Glossary

• If the trust fund ratio for a fund exceeds 100 percent at the beginning of

the projection period, then it must be projected to remain at or above

100 percent throughout the 10-year projection period;

• Alternatively, if the fund ratio is initially less than 100 percent, it must

be projected to reach a level of at least 100 percent within 5 years (and

not be depleted at any time during this period) and then remain at or

above 100 percent throughout the remainder of the 10-year period.

These conditions apply to each trust fund separately, as well as to the combined funds, and are evaluated based on the intermediate (alternative II) set

of assumptions.

Total fertility rate. The average number of children who would be born to a

woman in her lifetime if she were to experience the birth rates by age

observed in, or assumed for, a specified year, and if she were to survive the

entire childbearing period.

Trust fund. Separate accounts in the United States Treasury in which are

deposited the taxes received under the Federal Insurance Contributions Act,

the Self-Employment Contributions Act, contributions resulting from coverage of State and local government employees; any sums received under the

financial interchange with the railroad retirement account; voluntary hospital

and medical insurance premiums; and transfers of Federal general revenues.

Funds not withdrawn for current monthly or service benefits, the financial

interchange, and administrative expenses are invested in interest-bearing

Federal securities, as required by law; the interest earned is also deposited in

the trust funds.

• Old-Age and Survivors Insurance (OASI). The trust fund used for

paying monthly benefits to retired-worker (old-age) beneficiaries and

their spouses and children and to survivors of deceased insured workers.

• Disability Insurance (DI). The trust fund used for paying monthly benefits to disabled-worker beneficiaries and their spouses and children and

for providing rehabilitation services to the disabled.

• Hospital Insurance (HI). The trust fund used for paying part of the

costs of inpatient hospital services and related care for aged and disabled individuals who meet the eligibility requirements.

• Supplementary Medical Insurance (SMI). The trust fund used for

paying part of the costs of physician’s services, outpatient hospital services, and other related medical and health services for voluntarily

enrolled aged and disabled individuals.

Trust fund ratio. A measure of the adequacy of the trust fund level. Defined

as the assets at the beginning of the year, including advance tax transfers (if

any), expressed as a percentage of the outgo during the year. The trust fund
Appendices

180

ratio represents the proportion of a year’s outgo which could be paid with the

funds available at the beginning of the year.

Unnegotiated check. A check which has not been cashed 6 months after the

end of the month in which the check was issued. When a check has been outstanding for a year (i) the check is administratively cancelled by the Department of the Treasury and (ii) the issuing trust fund is reimbursed separately

for the amount of the check and interest for the period the check was outstanding. The appropriate trust fund also receives an interest adjustment for

the time the check was outstanding if it is cashed 6-12 months after the

month of issue. If a check is presented for payment after it is administratively

cancelled, a replacement check is issued.

Valuation period. A period of years which is considered as a unit for purposes of calculating the financial status of a trust fund.

Vocational rehabilitation. Services provided to disabled persons to help

enable them to return to gainful employment. Reimbursement from the trust

funds for the costs of such services is made only in those cases where the services contributed to the successful rehabilitation of the beneficiaries.

Year of exhaustion. The year in which a trust fund would become unable to

pay benefits when due because the assets of the fund were exhausted.
List of Tables

181

II. OVERVIEW

II.B1 Summary of 2000 Trust Fund Financial Operations . . . . . . . . . 3

II.B2 Tax Rates for 2000 and Later . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

II.B3 Trust Fund Results in 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

II.C1 Ultimate Values of Key Economic and Demographic

Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

II.D1 Abbreviated Operations of the Combined OASI and DI Trust

Funds, Calendar Years 2000-10 . . . . . . . . . . . . . . . . . . . . . . . . . 8

II.D2 Projected Maximum Trust Fund Ratios Achieved and Trust

Fund Exhaustion Dates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

II.D3 Relationship Between OASDI Expenditures and Tax Income

at the Time of Exhaustion of the Combined Funds and at the

End of the 75-Year Projection Period Under Intermediate 

Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

II.D4 Reasons for Change in the 75-Year Actuarial Balance Under 

Intermediate Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND 

LEGISLATIVE CHANGES IN THE LAST YEAR

III.A1 Operations of the OASI Trust Fund, Fiscal Year 2000. . . . . . . . 16

III.A2 Assets of the OASI Trust Fund, End of Fiscal Years 1999-2000 19

III.A3 Operations of the DI Trust Fund, Fiscal Year 2000 . . . . . . . . . . 21

III.A4 Assets of the DI Trust Fund, End of Fiscal Years 1999-2000 . . 23

III.A5 Operations of the Combined OASI and DI Trust Funds, 

Fiscal Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

III.A6 Comparison of Actual Fiscal Year 2000 Trust Fund Operations

With Estimates Made in Prior Reports . . . . . . . . . . . . . . . . . . . . 26

III.A7 Distribution of Benefit Payments by Type of Beneficiary or 

Payment, Fiscal Years 1999-2000 . . . . . . . . . . . . . . . . . . . . . . . 27

III.A8 Administrative Expenses as a Percentage of Contribution

Income and of Total Expenditures, Fiscal Years 1996-2000 . . . 27

III.A9 Trust Fund Investment Transactions, Fiscal Year 2000 . . . . . . . 28

IV. ACTUARIAL ESTIMATES

IV.A1 Operations of the OASI Trust Fund, Calendar Years 1996-2010 33

IV.A2 Operations of the DI Trust Fund, Calendar Years 1996-2010 . . 37

IV.A3 Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1996-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

IV.A4 Reasons for Change in Trust Fund Ratios at the Beginning 

of the Tenth Year of Projection. . . . . . . . . . . . . . . . . . . . . . . . . . 40
List of Tables

182

IV.B1 Estimated Annual Income Rates and Cost Rates, 

Calendar Years 1990-2075 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

IV.B2 Covered Workers and Beneficiaries, Calendar Years 1945-2075 48

IV.B3 Estimated Trust Fund Ratios, Calendar Years 2001-75 . . . . . . . 53

IV.B4 Summarized Income Rates and Cost Rates for 25-Year

Subperiods, Calendar Years 2001-75 . . . . . . . . . . . . . . . . . . . . . 55

IV.B5 Summarized Income Rates and Cost Rates for Valuation

Periods, Calendar Years 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . 56

IV.B6 Comparison of Estimated Long-Range Actuarial Balances

With the Minimum Allowable in the Test for Close Actuarial 

Balance, Based on Intermediate Assumptions . . . . . . . . . . . . . . 60

IV.B7 Components of Annual Income Rates, Calendar Years 2001-75 62

IV.B8 Components of Summarized Income Rates and Cost Rates, 

Calendar Years 2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

IV.B9 Reasons for Change in the 75-Year Actuarial Balance

Under Intermediate Assumptions . . . . . . . . . . . . . . . . . . . . . . . . 65

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

V.A1 Principal Demographic Assumptions, Calendar Years

1940-2075. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

V.A2 Social Security Area Population as of July 1 and Dependency 

Ratios, Calendar Years 1950-2075 . . . . . . . . . . . . . . . . . . . . . . . 75

V.A3 Period Life Expectancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

V.A4 Cohort Life Expectancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

V.B1 Principal Economic Assumptions. . . . . . . . . . . . . . . . . . . . . . . . 83

V.B2 Additional Economic Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

V.C1 Cost-of-Living Benefit Increases, Average Wage Index, 

Contribution and Benefit Bases, and Retirement Earnings Test 

Exempt Amounts, 1975-2010. . . . . . . . . . . . . . . . . . . . . . . . . . . 91

V.C2 Selected Wage-Indexed Program Amounts, 

Calendar Years 1978-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

V.C3 Legislated Changes in Normal Retirement Age and Delayed 

Retirement Credits, for Persons Reaching Age 62 in Each

Year 1986 and Later . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

V.C4 OASI Beneficiaries With Benefits in Current-Payment Status 

at the End of Calendar Years 1945-2075 . . . . . . . . . . . . . . . . . . 103

V.C5 Long-Range Ultimate Disabled Worker Age-Sex Adjusted 

Incidence Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

V.C6 DI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1960-2075 . . . . . . . . . . . . . . . . . . 110
List of Tables

183

VI. APPENDICES

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS

VI.A1 Contribution and Benefit Base and Contribution Rates . . . . . . . 115

VI.A2 Historical Operations of the OASI Trust Fund, 

Calendar Years 1937-2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

VI.A3 Historical Operations of the DI Trust Fund, 

Calendar Years 1957-2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

VI.A4 Historical Operations of the Combined OASI and DI Trust

Funds, Calendar Years 1957-2000 . . . . . . . . . . . . . . . . . . . . . . . 123

B. HISTORY OF ACTUARIAL BALANCE ESTIMATES

VI.B1 Long-Range OASDI Actuarial Balances as Shown 

in the Trustees Reports for 1983-2001 . . . . . . . . . . . . . . . . . . . . 127

C. FISCAL YEAR PROJECTIONS THROUGH 2010

VI.C1 Operations of the OASI Trust Fund in Fiscal Years 1996-2010. 129

VI.C2 Operations of the DI Trust Fund in Fiscal Years 1996-2010 . . . 130

VI.C3 Operations of the Combined OASI and DI Trust Funds

in Fiscal Years 1996-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

D. LONG-RANGE SENSITIVITY ANALYSIS

VI.D1 Sensitivity to Varying Fertility Assumptions . . . . . . . . . . . . . . . 133

VI.D2 Sensitivity to Varying Death-Rate Assumptions . . . . . . . . . . . . 134

VI.D3 Sensitivity to Varying Net-Immigration Assumptions . . . . . . . . 135

VI.D4 Sensitivity to Varying Real-Wage Assumptions. . . . . . . . . . . . . 136

VI.D5 Sensitivity to Varying CPI-Increase Assumptions . . . . . . . . . . . 137

VI.D6 Sensitivity to Varying Real-Interest Assumptions . . . . . . . . . . . 139

VI.D7 Sensitivity to Varying Disability Incidence Assumptions . . . . . 140

VI.D8 Sensitivity to Varying Disability Termination Assumptions . . . 141

E. ESTIMATES FOR OASDI AND HI, SEPARATE AND COMBINED

VI.E1 Contribution Rates for the OASDI and HI Programs. . . . . . . . . 143

VI.E2 Estimated OASDI and HI Annual Income Rates, Cost Rates, 

and Balances, Calendar Years 2001-75 . . . . . . . . . . . . . . . . . . . 144

VI.E3 Summarized OASDI and HI Income Rates, Cost Rates, and 

Balances for 25-Year Subperiods, Calendar Years 2001-75 . . . 146

VI.E4 Summarized OASDI and HI Income Rates and Cost Rates for 

Valuation Periods, Calendar Years 2001-75 . . . . . . . . . . . . . . . . 147

VI.E5 OASDI and HI Annual and Summarized Income, Outgo, and 

Balance as a Percentage of GDP, Calendar Years 2001-75 . . . . 150
List of Tables

184

VI.E6 Ratio of OASDI Taxable Payroll to GDP, Calendar Years

2001-75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152

VI.E7 Selected Economic Variables, Calendar Years 2000-75. . . . . . . 155

VI.E8 Operations of the Combined OASI and DI Trust Funds, 

in Constant 2001 Dollars, Calendar Years 2001-75 . . . . . . . . . . 157

VI.E9 Operations of the Combined OASI and DI Trust Funds, 

in Current Dollars, Calendar Years 2001-75 . . . . . . . . . . . . . . . 159

VI.E10 OASDI and HI Annual Income Excluding Interest, Outgo, and

Balance in Current Dollars, Calendar Years 2001-75. . . . . . . . . 161

F. ANALYSIS OF BENEFIT DISBURSEMENTS FROM THE OASI TRUST 

FUND WITH RESPECT TO DISABLED BENEFICIARIES

VI.F1 Benefit Disbursements From the OASI Trust Fund 

With Respect to Disabled Beneficiaries . . . . . . . . . . . . . . . . . . . 164

VI.F2 Benefit Disbursements Under the OASDI Program 

With Respect to Disabled Beneficiaries . . . . . . . . . . . . . . . . . . . 165
List of Figures

185

II. OVERVIEW

II.D1 Short-Range OASDI Trust Fund Ratios . . . . . . . . . . . . . . . . . . . 7

II.D2 Long-Range OASDI Annual Income Rate and Cost Rates . . . . 9

II.D3 Number of Covered Workers Per OASDI Beneficiary. . . . . . . . 10

II.D4 Long-Range OASDI Trust Fund Ratios . . . . . . . . . . . . . . . . . . . 11

II.D5 OASDI Cost as a Percentage of GDP. . . . . . . . . . . . . . . . . . . . . 13

IV. ACTUARIAL ESTIMATES

IV.A1 Short-Range OASI and DI Trust Fund Ratios . . . . . . . . . . . . . . 32

IV.B1 Long-Range OASI and DI Annual Income Rates and Cost Rates 47

IV.B2 Number of OASDI Beneficiaries Per 100 Covered Workers . . . 50

IV.B3 Long-Range OASI and DI Trust Fund Ratios . . . . . . . . . . . . . . 54

IV.B4 Long-Range Test of Close Actuarial Balance . . . . . . . . . . . . . . 61

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

V.C1 Primary-Insurance-Amount Formula for the 2001 Cohort. . . . . 93

V.C2 Maximum-Family-Benefit Formula for the 2001 Cohort. . . . . . 93

V.C3 DI Disabled Worker Incidence Rates, 1970-2010 . . . . . . . . . . . 106

VI. APPENDICES

VI.E1 Estimated OASDI Income and Outgo in Constant Dollars,

Based on Alternative II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
Index

186

A

Actuarial balance 8, 125, 132

Actuarial deficit 12, 56

Administrative expenses 17, 42, 112, 118, 148, 156

Advance tax transfers 35, 120

Annual balance 12, 65

Assets 3, 15, 30, 118, 129, 130, 131, 142, 154

Assumptions 1, 5, 26, 125, 132, 143, 148, 153, 163

Automatic cost-of-living benefit increase 17, 80

Auxiliary benefits 98

Average indexed monthly earnings (AIME) 93

Average wage index 90, 153

Award 99

B

Baby-boom generation 85, 149

Bend points 93

Beneficiary 29, 49, 68, 133

Benefit payments 3, 17, 31, 34, 156, 164

Benefit termination 36

Best estimate 1, 30, 68

Board of Trustees 1, 114

Book value 19

C

Constant dollars 157, 158

Consumer Price Index 6, 80, 136, 137, 153, 167

Contribution and benefit base 3, 15, 32, 115, 153, 167

Contributions 15, 41, 114, 142, 148, 156, 166

Cost rate 8, 41, 125, 132, 143, 166

Covered earnings 97, 152

Covered employment 6, 32, 97, 114, 136

Covered worker 97, 134

Current dollars 153

Current-payment status 35, 167

D

Deemed wage credit 15, 114, 148, 154

Delayed retirement credit 96

Demographic assumptions 1, 6, 40, 69, 125, 154, 166

Disability 1, 4, 20, 35, 98, 114, 135, 148, 163, 166

Disability incidence rate 35, 105, 139
187

Index

Disability Insurance Trust Fund 20, 114, 168

Disability termination rate 140

Disabled-worker benefit 170

E

Earnings 3, 15, 31, 114, 126, 142, 152, 153, 166

Earnings test 81, 167

Economic assumptions 12, 40, 65, 90, 166

Excess wages 42, 154

F

Federal Insurance Contributions Act 142, 168

Financial interchange 3, 17, 112, 118

Fiscal year 72, 120, 129

G

General fund of the Treasury 15, 34, 113, 116, 145, 148, 156, 166, 169

Gross domestic product 8, 68, 148

H

High cost assumptions 31, 68, 153

Hospital Insurance Trust Fund 3

I

Income rate 8, 41, 125, 132, 142, 166

Inflation 5, 68, 153, 166

Insured status 94

Interest 3, 16, 17, 31, 117, 125, 138, 143, 148, 154, 166

Interest rate 32, 117, 125, 138, 154, 166

Interfund borrowing 120, 169

Intermediate assumptions 7, 32, 68, 126, 143, 157, 158, 164

L

Long range 1, 5, 30, 126

Low cost assumptions 35, 68, 143

Lump-sum death payment 27, 112

M

Maximum family benefit 93

Medicare 3, 18, 70

Military service 15, 42, 114, 145, 148, 154
Index

188

N

National average wage index 90

Normal retirement age 29, 36, 91, 169

O

Old-Age and Survivors Insurance Trust Fund 15, 114, 168

Old-law base 94

P

Par value 19, 117, 168

Pay-as-you-go financing 125

Payment cycling 31

Payroll taxes 3, 62, 90

Population in the Social Security Area 74

Present value 125

Primary insurance amount (PIA) 93

Q

Quarters of coverage 17, 42, 99, 169

R

Railroad Retirement 3, 16, 17, 42, 94, 118, 142, 148, 156, 169

Real-wage differential 6, 82, 136

Recession 9, 30, 79

Retired-worker benefit 100

Retirement age 5, 29, 36, 91, 135, 149, 169

Retirement earnings test 29, 91

S

Self-employment 42, 114, 143, 168

Self-Employment Contributions Act 168

Short range 1, 7, 30

Social Security Act 17, 35, 90, 117, 153, 163, 168

Special public-debt obligation 34, 89, 117, 138, 154

Stabilizer provision 167

Substantial gainful activity 170

Summarized balance 149

Summarized cost rate 133, 145, 166

Summarized income rate 125, 132, 145, 166

Supplemental Security Income 17

Survivor benefit 1, 4, 40, 167
189

Index

T

Taxable earnings 31, 115, 126, 152

Taxable payroll 8, 42, 80, 125, 133, 142, 148, 153, 169

Taxable self-employment income 114, 177

Taxable wages 116, 177

Taxation of benefits 3, 8, 16, 41, 113, 148, 156, 171

Taxes 3, 15, 35, 90, 114, 143, 168

Termination 5, 36, 68, 140, 166

Termination rate 100

Test of short-range financial adequacy 31

Total fertility rate 6, 69, 132

Trust fund ratio 7, 30, 177

U

Unnegotiated check 16, 120

V

Valuation period 12, 40, 125, 132, 145, 166

Vocational rehabilitation 42, 118, 148, 156, 164, 165, 169

Y

Year of exhaustion 11, 41
190

STATEMENT OF ACTUARIAL OPINION

It is my opinion that (1) the techniques and methodology used herein to evaluate the financial and actuarial status of the Federal Old-Age and Survivors

Insurance and Disability Insurance Trust Funds are based upon sound principles of actuarial practice and are generally accepted within the actuarial profession; and (2) the assumptions used and the resulting actuarial estimates

are, individually and in the aggregate, reasonable for the purpose of evaluating the financial and actuarial status of the trust funds, taking into consideration the past experience and future expectations for the population, the

economy, and the program.

Stephen C. Goss,

Associate of the Society of Actuaries,

Member of the American Academy of Actuaries,

Chief Actuary, Social Security Administration