SOCIAL SECURITY

MEMORANDUM

Date: February 11, 2004 Refer To: TCA

To: Representative Jim Kolbe

Representative Charles Stenholm

From: Stephen C. Goss, Chief Actuary 

Alice H. Wade, Deputy Chief Actuary

Chris Chaplain, Actuary

Subject: Estimated OASDI Financial Effects of the “Bipartisan Retirement Security Act” --

INFORMATION

This memorandum provides long-range estimates of the financial effects on the Social Security 

(OASDI) program assuming enactment of the “Bipartisan Retirement Security Act”, which you 

have indicated will be introduced in the near future. Specifications and intent for the provisions 

in the bill were provided by Ed Lorenzen and Trent Wright from your staffs. A description of 

these specifications, reflecting our understanding of the intent of this bill, is given below. All 

estimates are based on the intermediate assumptions of the 2003 Trustees Report, as well as 

additional assumptions described below. The comprehensive proposal described in this 

memorandum would:

• Modify the computation of OASDI benefit levels in several ways,

• Transfer specified amounts from the General Fund of the Treasury to the OASDI Trust

Funds,

• Credit all revenue from taxation of OASDI benefits (including disbursements from individual

accounts (IAs)) to the OASDI Trust Funds,

• Change the indexing of the benefit and contribution base, and

• Establish individual accounts for workers who are under age 55 at the beginning of 2006 by

redirecting a portion of their payroll tax.

Enactment of the comprehensive proposal described in this memorandum would improve the 

long-range OASDI actuarial balance by an estimated 2.05 percent of taxable payroll, changing 

the present-law actuarial deficit of 1.92 percent to a positive actuarial balance of +0.14 percent of 

taxable payroll. The trust fund ratio for the combined OASDI program would increase to a peak 

of 425 percent in 2016, then decline to 192 percent in 2053. After 2053, the trust fund ratio 

would begin to rise, reaching 257 percent at the end of the long-range period, at which time the 

ratio would be rising by about 4 percentage points per year. OASDI Trust Fund levels under this 

proposal are thus projected to be (1) positive throughout the long-range (75-year) period and (2) 

stable or rising as a percentage of the annual cost of the program at the end of the period. Thus, 
2

the proposal meets the criteria for “sustainable solvency” for the foreseeable future.

It should be noted that the actual yield attained on individual accounts would have an effect on 

the financial status of the OASDI Trust Funds, because disbursements from the accounts would 

be taxed, with the proceeds transferred to the trust funds. The sensitivity of the financial status 

to variation in individual account yields would, however, be relatively small, as indicated later. 

The remainder of this memorandum provides the following:

• Description of the provisions of this bill (with modifications to reflect intent) as they would 

affect the Social Security program;

• Assumptions used for estimates provided in this memorandum;

• Description of the expected financial effects of enactment of the bill, reflecting stated intent; 

and

• Tables providing detailed estimates of the financial effects of the bill.

1. Description of the provisions of this bill (modified to reflect stated intent) as they would 

affect the Social Security program

Provision 1a: Redirect 3 percent of the first $10,000 of taxable earnings and 2 percent of the 

remaining taxable earnings to individual accounts

Beginning in 2006, for each worker who is under age 55 at the beginning of 2006, redirect 3 

percent of his/her first $10,000 of taxable earnings and 2 percent of taxable earnings in excess of 

$10,000 to individual accounts. This amount redirected to fund individual accounts is taken from 

the employee's share of the FICA payroll tax. A similar redirection would occur for taxable selfemployment earnings, with 3 percentage points of the first $10,000 of taxable self-employment 

income and 2 percent of taxable self-employment income in excess of $10,000 redirected to 

individual accounts. The $10,000 threshold is increased after 2006 by the increase in the Average 

Wage Index. The Federal Government would collect all redirected amounts in the same manner 

that payroll taxes are collected currently. Accounts would be managed and invested, under the 

direction of the worker, in a federally administered individual security account, similar to the 

government employee Thrift Savings Plan. However, when the balance of an individual's 

federally administered individual security account is at least equal to the minimum deposit 

amount ($7,500 for 2006 and increased by COLA adjustments thereafter), the individual would 

be eligible to designate one of a range of several individual security accounts, still centrally 

managed. For both “tiers,” the central authority would maintain individual account records and 

would combine account transactions in aggregate amounts when dealing with the private 

investment firms. 

This provision taken alone, with the redirection of payroll tax only and without the effect of 

taxation of benefits considered in provision 1b below, would reduce the long-range OASDI 

actuarial balance by an estimated 2.16 percent of taxable payroll.
3

Provision 1b: Disbursements from individual accounts are considered OASDI benefits for 

income tax purposes 

Disbursements to individuals after retirement or to their estates at death from the portion of the 

individual accounts arising from the redirection of the payroll taxes would be considered Social 

Security benefits when determining income taxes. Thus, the revenue from taxing these 

disbursements would be transferred to the OASI Trust Fund. 

This provision would increase the long-range actuarial balance relative to present law because 

revenues from taxation of individual account proceeds would be an additional source of income 

to the Trust Funds, in addition to taxes on OASDI scheduled benefits. Taken alone, this 

provision would increase the long-range OASDI actuarial balance by an estimated 0.09 percent 

of taxable payroll. 

Provision 2: Modification of PIA Formula during 2012-2060

Provision 2 would reduce the upper two factors of the PIA benefit formula (32 and 15) by 2.5

percent per year (multiply by 0.975) for 2012 through 2030. Then, for years 2031-2060, the 90, 

32, and 15 percent factors would all be reduced by 1.5 percent per year (multiply by .985). The 

PIA benefit factors applicable for beneficiaries newly eligible in 2060 and later would be 57.2, 

12.6, and 5.9 percent, respectively. This provision would not apply to disabled worker 

beneficiaries. 

Adjustment to benefits for disabled workers or retired workers with disability periods

The intent of this provision is to limit in two ways the amount of benefit reductions that would 

apply to workers who have had periods of disability. First, because the annuity derived from a 

disabled worker's individual account is first payable at disability conversion age, no reduction 

due to this provision would apply to benefits received as a disabled worker. Second, once the 

disabled worker reaches disability conversion age, the reduction due to this provision would be 

limited, reflecting only the portion of potential working years (years from age 22 through age 61) 

that the individual was not entitled to a disabled-worker benefit.

For example, a worker who becomes disabled at age 32 and is thereafter continuously receiving 

disability benefits would receive no reduction in his/her benefit level due to this provision until 

disability conversion age (age 67). At conversion, monthly benefits would be paid from the 

individual account, and a portion of the reduction due to the formula factor adjustment would 

begin to apply to the PIA. Of the 40 potential working years, 10 years (ages 22 though 31) were 

years that the worker did not receive a disability-worker benefit. Thus, for this worker, onefourth of the reduction due to the formula factor adjustment would apply to his/her PIA level.
4

This provision, taken alone, would increase the long-range OASDI actuarial balance by an 

estimated 2.24 percent of taxable payroll.

Provision 3: Reduce the COLA by 0.22 percentage point

This provision would base the present-law OASDI annual cost-of-living adjustment (COLA) for 

monthly OASDI benefits on a new CPI-W series that would reflect a superlative formula, of the 

type currently used for the new "chained" CCPI-U. This provision is assumed to reduce the 

annual COLA by an average 0.22 percentage point from the level currently anticipated under the 

assumptions of the 2003 Trustees Report. The reduction would start with the COLA scheduled 

for December 2004 and continue indefinitely thereafter. 

This provision, taken alone, would increase the long-range OASDI actuarial balance by an 

estimated 0.35 percent of taxable payroll.

Provision 4: Transfer revenue from the General Fund to the OASI Trust Fund

This provision provides a transfer to the OASI Trust Fund from the General Fund of the 

Treasury. The amounts would be transferred beginning in 2005 and are specified as an increasing 

percentage of OASDI taxable payroll. These amounts are as follows: 

Calendar 

Year

Percent of 

Taxable Payroll

Calendar 

Year

Percent of 

Taxable Payroll Calendar Years

Percent of 

Taxable Payroll

2005 0.02 2009 0.13 2013-2018 0.33

2006 0.04 2010 0.20 2019-2042 0.39

2007 0.10 2011 0.24 2043-2062 0.47

2008 0.12 2012 0.29 2063+ 0.57

Taken alone, this provision would increase the long-range OASDI actuarial balance by an 

estimated 0.38 percent of taxable payroll.

Provision 5: Eliminate the hiatus in the currently scheduled increase in normal retirement 

age (NRA)

Under current law, the NRA increases from age 65 by two months a year beginning with 

individuals attaining age 62 in the year 2000, until it reaches 66 for individuals attaining age 62 

in the year 2005. While current law then leaves the NRA at 66 for several years, this provision 

would continue to phase the NRA upwards by two months a year until it reaches 67 for 

individuals reaching age 62 in 2011. The NRA would remain at age 67 for all individuals 

reaching age 62 after 2011. This provision, taken alone, would increase the long-range OASDI 

actuarial balance by an estimated 0.14 percent of taxable payroll.
5

Provision 6: Modify actuarial reduction and increment factors

Under this provision, the early retirement reduction factors and delayed retirement credits would 

be changed in an attempt to reflect the fact that the marginal increase in the full benefit level 

(i.e., the PIA) for earnings after reaching retirement eligibility age is, generally, relatively small. 

(Reduction and increment factors provided under current law are intended to provide actuarially 

equivalent lifetime benefits for a fixed earnings history regardless of the age at which retirement 

benefits start.) This relatively small marginal increase results from both the AIME formula, 

which uses 35 years of earnings, and the weighted PIA benefit formula. Together, these provide 

a larger marginal amount of benefit per dollar of additional earnings for low earners and for 

earnings earned early in a worker's career. This provision is intended to provide a greater 

marginal incentive to work past the retirement earliest eligibility age (EEA). Because the degree 

of this marginal effect depends upon the extent and level of earnings a worker has had in earlier 

years, no absolute adjustment can be provided that would be appropriate for all workers. Rough 

estimates of adjustments to the reduction and increment factors have thus been developed.

The chart below displays the proposed monthly early retirement reductions that would be 

applicable for retired worker beneficiaries for the first 36 months for which benefits are received 

prior to NRA under both current law and the provision. (Different factors apply to aged spouse 

beneficiaries and aged widow beneficiaries.)

 Monthly Reduction in Benefits for Each of First 36 Months of Retirement 

Before NRA

Age 62 in: 2003 2004 2005 2006 2007 2008+

Present Law 20/36% 20/36% 20/36% 20/36% 20/36% 20/36%

Proposal 20/36% 21/36% 22/36% 23/36% 24/36% 25/36%

Similar increases for aged spouse beneficiaries would be applied, increasing the monthly 

reduction for the first 36 months of entitlement before NRA from 25/36 percent under present 

law to 30/36 percent under the provision.

The reductions that are proposed for the fourth and fifth year of benefit entitlement before NRA 

are 12/24% per month (current law reductions are 10/24% per month) for both retired worker 

and aged spouse beneficiaries. The reductions for the fourth and fifth year of entitlement before 

NRA are applicable to all new eligibles who reach age 62 after 2005 and are phased in for those 

newly eligible in 2002 through 2005.

The ultimate percentages of PIA payable for retired workers by age at initial benefit entitlement 

are shown in the table below. 
6

Ultimate Percent of PIA Payable for Retired Worker Beneficiaries by Age at 

Initial Entitlement to Benefits

Age at Initial 

Entitlement:

NRA-5 NRA-4 NRA-3 NRA-2 NRA-1 NRA

Present Law 70% 75% 80% 86.7% 93.3% 100%

Proposal 63% 69% 75% 83.3% 91.7% 100%

The percentage of PIA payable for non-disabled aged widow beneficiaries newly eligible at age 

60 would remain at 71.5 percent. The percentages payable for those newly eligible at ages 

between 60 and the NRA would scale linearly between 71.5 and 100 percent, as under present 

law. 

The delayed retirement credit (DRC) under present law is scheduled to increase to 8% per year 

for workers attaining age 65 after 2007. Under this provision, the DRC would continue to 

increase at the rate of 0.5 percentage point every two years, with the first new increase applied to 

those attaining age 65 in 2010. An ultimate factor of 10 percentage points per year would be 

reached for workers reaching 65 after 2015. The delayed retirement credit applies for those 

months between NRA and age 70 in which no retired worker benefit is received. 

Taken alone, this provision (increasing the early retirement factors and delayed retirement 

credits) would increase the long-range OASDI actuarial balance by an estimated 0.32 percent of 

taxable payroll. 

Provision 7: Adjust the PIA levels to reflect changes in life expectancy for persons newly 

eligible after 2011

Adjust the PIA levels of retired worker beneficiaries newly eligible after 2011 to reflect changes 

in life expectancy at age 62, based on period life tables produced by the Office of the Chief 

Actuary in the Social Security Administration. This provision does not apply to disabled worker 

beneficiaries. In addition, only a portion of the amount of reduction due to this provision would 

apply to the benefits of retired worker beneficiaries who convert from disabled worker 

beneficiary status. 

Adjustment to benefits of retired workers with no disability periods

The intent of this provision is to adjust bene fit levels to reflect actual measured changes in 

longevity. The adjustment would be applied beginning with workers turning age 62 in 2012, the 

first year after the year in which the NRA under this proposal reaches its maximum of 67 years. 

The adjustment would be a ratio of:
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• The life expectancy at age 62 from the period life table for the calendar year 2008 to

• The life expectancy at age 62 from the period life table for the calendar year that is three 

years prior to the year in which the retiree turns age 62.

For example, the benefit of a worker reaching retirement eligibility age, age 62, in 2012 would 

be reduced based on the increase in period life expectancy at age 62 between 2008 and 2009. 

The two years would generally be the two most recent years of complete data. If the life 

expectancy at age 62 increased from 20.20 to 20.27 between 2008 and 2009, then the benefit 

level of the worker would be multiplied by 0.997 (=20.20/20.27), for a reduction of 0.3 percent. 

For a worker retiring at age 62 in 2013, the reduction in benefit level would be based on the 

increase in life expectancy at age 62 between 2008 and 2010. The chart below provides the 

expected life-expectancy adjustment factors and the benefit reduction percentages that would 

apply to selected retired-worker beneficiaries using the intermediate assumptions of the 2003 

Trustees Report.

Life-Expectancy Adjustment Factors Projected to Apply to PIA of Retired Workers with

no Disability

(1) (2) (3) (4)

Year retired worker 

turns age 62

Life expectancy at age 

621 

Life-expectancy 

adjustment factor2

Percent reduction in 

benefit

2011 20.20 NA NA

2012 20.27 0.9970 0.30%

2015 20.46 0.9785 2.15

2020 20.79 0.9630 3.70

2030 21.45 0.9333 6.67

2050 22.67 0.8831 11.69

2070 23.78 0.8419 15.81

1

The life expectancies used for this table are based on projections and are for the year 3 years prior to the 

year the worker turns age 62. Reductions applied would be based on actual data.

2 Calculations are based on life expectancy values expressed in more decimal places than are shown in the 

table. 

This provision would not apply to disabled worker beneficiaries. In addition, only a proportion 

of the amount of reduction due to this provision would apply to the benefits of retired worker 

beneficiaries who convert from disabled worker beneficiary status. The application of this 

provision to the benefits of disabled worker beneficiaries and beneficiaries who convert from 

disabled worker beneficiary status is the same as described under provision 2 in the section 

adjustment to benefits of disabled workers or retired workers with disability periods.

Provision 7, taken alone, would increase the long-range OASDI actuarial balance by an 

estimated 0.59 percent of taxable payroll.
8

Provision 8: Change in calculation of AIME

This provision would apply in determining benefits for retired workers and their dependents and 

for survivors of deceased workers. This provision does not apply in determining benefits for

disabled workers and their dependents.

In calculating the AIME for a retired worker under present law, the highest 35 years of indexed 

earnings are used in determining the numerator of the AIME and a benefit computation period of 

35 years is used in determining the denominator. Under this provision, the following changes 

would be made in the calculation of the AIME for someone newly eligible for retirement benefits 

after 2004.

• The number of years of earnings used in calculating the numerator of the AIME is gradually 

increased, reaching all years for individuals becoming newly eligible in 2013.

• The benefit computation period, used in determining the denominator of the AIME, is 

gradually increased, reaching 40 years (5 additional years), except for the “lower earner” of 

a married couple. Specifically, in the case of a two-earner couple, the benefit computation 

period used in the denominator for the earner with the lower PIA is retained at 35 years.

The chart below indicates the phase-in schedule of the above changes.

Change in Calculation of AIME for Retired Worker

 (assumes the retired worker is not the lower earner of a married couple) 

Newly Eligible in Years: 2005 –

2006

2007 -

2008

2009 –

2010

2011 –

2012

2013+

Present Law

Years in Numerator135 35 35 35 35

Denominator (in years)

2

35 35 35 35 35

Proposal

Years in Numerator137 39 41 43 all

Denominator (in years)

2

36 37 38 39 40

1Years in Numerator: Refers to the number of years of earnings used in calculating the numerator of the 

AIME.

2 Denominator (in years): Refers to the benefit computation period (in years) used in calculating the 

denominator of the AIME.

Under this provision, the number of benefit computation years used for the denominator of the 

AIME for a retired worker turning age 62 after 2012 would be 40. Under current law, the 

number of benefit computation years is determined by subtracting 5 dropout years from the 

number of elapsed years (years age 22 through the year prior to reaching EEA). Under this 
9

proposed provision, the increase in the number of benefit computation years would be 

accomplished by reducing the number of dropout years, ultimately to zero. 

This provision, taken alone, would increase the long-range OASDI actuarial balance by an 

estimated 0.21 percent of taxable payroll.

Provision 9: Credit all revenue from taxation of HI benefits to OASDI by 2019

This provision would redirect revenue collected by the IRS from Federal income taxes payable 

on OASDI benefits, in excess of the tax on 50 percent of such benefits, from the Medicare HI 

trust fund to the OASDI Trust Funds. The provision would redirect 10 percent of this revenue 

for 2010, 20 percent for 2011, ... , and 100 percent for 2019 and later. It should be noted that 

disbursements from individual accounts established under this bill would be included as OASDI 

benefits for the purpose of income taxation. 

Taken alone, this provision would increase the long-range OASDI actuarial balance by an 

estimated 0.41 percent of taxable payroll.

Provision 10: Establish a minimum PIA level

For beneficiaries newly eligible in 2013 and later, establish a minimum PIA amount as described 

below: 

For Retired Workers: The minimum PIA would apply to such retired workers who have at least 

80 quarters of coverage (QCs) (reduced by 2 for each year of disabled-worker entitlement). It 

would equal 0% of the Monthly Applicable Poverty Level (see below for definition) for 

individuals with 40 QCs, 80% of the Monthly Applicable Poverty Level for workers with 80 QCs

(reduced by 2 for each year of disabled-worker entitlement), and 120% of the Monthly

Applicable Poverty Level for workers with at least 160 QCs (reduced by 4 for each year of 

disabled-worker entitlement). The percentage of the Monthly Applicable Poverty Level would be 

prorated between 0% and 80% for individuals with more than 40 QCs but less than 80 QCs. A 

similar proration would occur between 80% and 120% of the Monthly Applicable Poverty Level, 

for workers with more than 80 QCs but less than 160 QCs. These criteria would also apply in 

determining PIA levels used for auxiliary benefits for survivors of workers who died after 

reaching age 62. 

For Disabled Workers and Survivors of Workers Who Die Before Age 62: A minimum PIA 

for disabled worker beneficiaries and for auxiliary benefits for survivors of workers who die 

before age 62 would be similar, except that the quarters-of-coverage requirement would be 

scaled to the number of elapsed years. Thus, the minimum PIA would equal 0% of the Monthly

Applicable Poverty Level (see below for definition) for individuals with QCs less than or equal to 

the number of elapsed years, 80% of the Monthly Applicable Poverty Level for workers with QCs 

equal to twice the number of elapsed years, and 120% of the Monthly Applicable Poverty Level

for workers with QCs equal to or greater than 4 times the number of elapsed years. The 
10

percentage of the Monthly Applicable Poverty Level would be prorated in a fashion similar to 

that of retired workers, for individuals with QCs between the 0% and 80% thresholds, and 

between the 80% and 120% thresholds. Elapsed years are defined as years between attaining age 

22 and the earliest of disability benefit entitlement, death, or age 61.

The minimum PIA is phased in during the years 2009 through 2012. For new eligibles in 2009, 

the percentage of the Monthly Applicable Poverty Level is one-fifth of the fully phased in 

percentage in 2013. This fraction increases by an additional one-fifth for each year during the 

phase in period, reaching four-fifths for 2012.

The Annual Applicable Poverty Level for 2002 is $8,628 (Monthly Applicable Poverty Level

would equal 1/12 of this amount). The Annual Applicable Poverty Level that applies to an 

individual in their year of initial eligibility is determined by increasing the 2002 level by:

1. the COLA for 2002 through the earlier of (1) the year prior to the year of initial benefit 

eligibility and (2) 2012; and

2. increases in the average wage index between 2011 and the second year prior to initial 

benefit eligibility.

Minimum PIA levels would increase by the COLA after benefit eligibility in all cases. 

This provision, taken alone relative to present law, would reduce the long-range OASDI actuarial 

balance by an estimated 0.06 percent of taxable payroll. The incremental effect of this provision, 

after all other provisions in the package are taken into consideration, is a decrease in the longrange OASDI actuarial balance by an estimated 0.50 percent of taxable payroll. 

Provision 11: Gradually increase the benefit and contribution base so that 87 percent of all 

covered earnings is taxable 

Under current law the contribution and benefit base ($87,000 in 2003) is automatically increased 

each year based on increases in the SSA average wage index. The ratio of OASDI effective 

taxable payroll to covered earnings is estimated to be about 84.8 percent in 2003 and is projected 

to be about 83.5 percent in 2013. 

This provision would gradually increase the contribution and benefit base over the period 2004-

2008, so that by the end of this period 87 percent of all covered earnings would be taxable. After 

2008, the contribution and benefit base would be determined so that this level of 87 percent is 

maintained. The actual levels of the base for a given year would be set by looking at actual 

earnings distribution data for two years prior (the most recent data that would be available), 

determining the contribution and benefit base for that year which yields the desired ratio of 

covered earnings that would be taxable, and bringing forward this level 2 years by changes in 

SSA’s average wage index. 

Taken alone, this provision would increase the long-range OASDI actuarial balance by an 

estimated 0.41 percent of taxable payroll. 
11

Provision 12: Redesign the PIA formula

Establish a new bend point in the PIA formula equal to 183.8% of the present-law first bend 

point. PIA formula factors would be initially set at 90, 32, 32, and 15 percent (yielding the same 

benefit as current law). Beginning with new eligibles in 2006, the PIA formula factors would be 

adjusted until reaching factors of 90, 70, 20, and 15 for newly eligible beneficiaries in 2015 and 

later. The yearly adjustments to the formula factors over the 10-year period (2006 through 2015) 

are:

• The second formula factor would be increased each year by 3.8 percentage points; and

• The third formula factor would be decreased each year by 1.2 percentage points.

This provision alone has a negligible effect on the long-range OASDI actuarial balance (i.e., a 

change of less than 0.005 percent of taxable payroll). 

Provision 13: Increased Benefits for Widow(er)s

Under this provision, starting in 2006, all aged surviving spouses (aged 62 or older) would 

receive 75 percent of the benefit that would be received by the couple if both were still alive 

(including all applicable actuarial reductions and delayed retirement credits), if this is higher than 

their current benefit. The benefit provided by this option would be limited to what the survivor 

would receive as a retired worker beneficiary with a PIA equal to the average PIA of all retired 

worker beneficiaries for December of the year prior to becoming eligible for this option. 

Actuarial reduction for this limitation would be computed as if the survivor had begun receiving 

a retired worker benefit on the earliest of the actual ages upon which benefits began as an aged 

spouse, an aged surviving spouse, or a retired worker beneficiary, but not before 62. The 

provision would only apply to those individuals who would qualify for a widow(er)’s benefit 

under Social Security; that is, individuals whose deceased spouses are not fully insured would 

not be eligible for potential increased benefits. 

This provision alone would reduce the long-range OASDI actuarial balance by an estimated 0.08 

percent of taxable payroll. 

Provision 14: Limit Spousal Benefits Based on Maximum Worker Benefits 

Under current law, aged spouses receive a base benefit of 50 percent of the retired worker’s PIA, 

with reductions for age if the spouse becomes entitled to benefits before normal retirement age. 

Under this provision, beginning with all months of benefit eligibility after December 2004, aged 

spouse benefits are limited so that the combined benefit of a married couple does not exceed the 

PIA of a hypothetical single worker who earns the taxable maximum at ages 22 through 61, and 

who has the same eligibility year as the retired worker’s PIA. For the purpose of this estimate, 

we assume that the hypothetical single worker has earnings at the taxable maximum at ages 22 

through 61, and retires at age 62. 
12

Taken alone, this provision would increase the long-range OASDI actuarial balance by an 

estimated 0.16 percent of taxable payroll.

2. Assumptions used for estimates provided in this memorandum 

As indicated above, estimates provided in this memorandum are based on the intermediate 

assumptions of the 2003 Trustees Report. In addition, the long-term ultimate average annual real 

yield assumed for equities is assumed to be 6.5 percent. An assumed yield on equities is needed 

because income taxes on individual account disbursements are directed to the OASI Trust Fund.

A consensus is forming among economists that equity pricing as indicated by price-to-earnings 

ratios may average somewhat higher in the long-term future than in the long-term past. This is 

consistent with broader access to equity markets and the belief that equities may be viewed as 

somewhat less “risky” in the future than in the past. Equity pricing will vary in the future as in 

the past. Price-to-earnings ratios were very high through 1999, and are now lower. The 

ultimate average real equity yield assumed for estimates in this memorandum is consistent with 

an average ultimate level of equity pricing somewhat above the average level of the past. 

The assumption for an ultimate real equity yield of 7 percent that was used until 2001 was 

developed in 1995 with the 1994-96 Advisory Council. At the time, the Trustees assumption for 

the ultimate average real yield on long-term Treasury bonds was 2.3 percent. Real yields on 

corporate bonds are believed to bear a close relationship to Treasury bond yields of similar 

duration. The 2003 Trustees Report includes the assumption that the ultimate real yield on longterm Treasury bonds will average 3 percent, or 0.7 percentage point higher than in 1995. This 

increase in the assumed bond yield is consistent with a reduction in the perceived risk associated 

with equity investments. 

In order to estimate the income to the OASDI Trust Fund from taxing the disbursements from 

individual accounts, individual accounts are assumed to be managed by a central administrative 

authority, and, for the purpose of these estimates, used to purchase indexed life annuities at 

retirement through this authority. The following assumptions were made:

• During the accumulation period, individual accounts would be, on average, invested 50% in 

equities and 50% in long-term Treasury bonds.

• The charge for annual administrative expenses would average 30 basis points during the 

accumulation period.

• During the disbursement period (after retirement), the net real yield on annuities is assumed 

to be 3 percent annually, net of administrative expenses.

Therefore, during the accumulation period, the assumed annual real yield on individual accounts 

would be 4.45 percent (net of administrative expense), as follows:

(0.5*6.5% + 0.5*3.0% - 0.3%) = 4.45%.
13

3. Estimates of the Financial Effects of Enacting the Bill 

Estimates by Provision

Table A provides a brief listing of the individual provisions of the proposal, including the effect 

of each provision, separately, on the long-range OASDI actuarial balance. 

OASDI Trust Fund Operations: Annual and Summarized

Table 1 shows estimated annual and summarized income rates, cost rates, balances, and trust 

fund ratios under the proposal. In addition, the table shows the general revenue transfers under 

provision 4 of the proposal, expressed as a percentage of taxable payroll. The last two columns 

display the payroll tax rate deposited in the OASDI Trust Funds (net OASDI contribution rate) 

and the amount deposited in individual accounts (IA contribution rate). As shown in the table, 

sustainable solvency is indicated for the foreseeable future, because the Trust Fund ratio is 

steadily rising at the end of the projection period. 

Additional Aggregate Values for Trust Funds and Personal Accounts

Table 1a shows estimated OASDI Trust Fund balances at the end of each year under current law 

and under the proposal. In addition, the "IA/Annuity Assets End Of Year" column shows the 

total individual accounts (personal accounts) at the end of each year. The next two columns show 

annual aggregate contributions to and disbursements from the individual accounts . All of the 

amounts in this table appear on a present value basis as of January 1, 2003.

The estimates of annual dollar flows and accumulations of the personal accounts are based on 

very specific assumptions that all personal account assets are converted to CPI-indexed life 

annuities at retirement (see assumption description in the section describing provision 1b). In 

practice, many individuals would likely annuitize only part of their personal account 

accumulation so estimated annuity assets are overstated to some degree. In addition, if death 

occurs prior to benefit entitlement, the accounts are assumed to be distributed to the estate. Total 

personal account and annuity assets (referred to as "IA/Annuity Assets EOY" in the tables) 

include both the assets of personal accounts held prior to retirement, and the assets held by the 

annuity provider after retirement. If the personal accounts are considered as a part of “Social 

Security”, it is reasonable to combine the amounts of trust fund assets and personal accounts for 

a representation of total system assets. 

Effects on Annual Federal Unified Budget Balances

Table 1b provides a rough estimate of the effects of the proposal on the annual Federal unified 

budget balance for each calendar year through 2078. All amounts in this table appear in constant 

2003 dollars (that is, dollar amounts that are indexed back to 2003 based on the consumer price 

index (CPI)). The first three columns in these tables include sources of changes to the unified 

budget balance, as follows:
14

• Annual aggregate OASDI payroll taxes that are redirected to individual accounts (IAs) --

these amounts result in a reduction to the unified budget balance because the monies leave 

the government and are deposited in personal accounts;

• Estimated annual amounts of OASDI benefit offset based on hypothetical accumulations of

earlier deposits to personal accounts--an increase to the unified budget balance because 

these proceeds reduce Social Security benefit payments (not applicable for this proposal); 

and

• Other changes in OASDI cash flow (as compared to present law) from the other benefit 

provisions (but not from transfers between the General Fund and the Trust Fund, which 

have no unified budget effect).

The last three columns present the aggregate effects on the unified budget:

• Change in the annual unified budget cash flow, which is simply the sum of the sources of 

unified budget balance changes identified above;

• Change in debt held by the public, as of the end of each year, which represents the 

cumulative change in the unified budget cash flows, with interest (at the assumed rates 

earned by the Trust Funds); and

• Change in annual unified budget balance, which includes changes in both unified budget 

cash flow and in interest on the publicly held debt.

These unified-budget estimates are based on the intermediate assumptions of the 2003 Trustees 

Report, including the trust-fund interest assumption, and thus are not consistent with projections 

made by CBO and OMB (which use different assumptions). However, differences in payroll and 

benefit estimates are not large during the first 10 projection years so these values can be viewed 

as very rough approximations of the magnitude of effects on the unified budget balances through 

this period. 

Annual Cash Flows from the OASDI Trust Funds to the General Fund of the Treasury

Table 1c provides estimates of the net cash flow from the OASDI Trust Funds to the General 

Fund of the Treasury. Values in Table 1c are shown as a percent of taxable payroll, in current 

dollars, in present value dollars as of 1/1/2003, and in constant 2003 dollars (discounted to 2003 

with the projected growth in the CPI). For comparison purposes, net cash flow is also shown for 

a theoretical Social Security program where transfers from the General Fund of the Treasury to 

the OASDI Trust Funds are assumed to occur as needed to assure full payment of scheduled 

benefits in 2042 and later. 

Taxable Payroll and General Fund Transfer Information

Table 1d provides taxable payroll in current (nominal) dollars both under the proposal and under 

present law. The table also provides the present value (as of January 1, 2003) of general fund 

transfers under provision 4, described above, on a year-by-year basis and for the 75-year period 

from 2003-2077.
15

Sensitivity analysis

It must be noted that the uncertainties associated with equity investments, bond yields, and 

mortality improvement, as well as with a number of additional variables means that actual 

experience could vary substantially from the estimates provided in this memorandum. In 

particular, there is a potential that long-range ultimate equity yields could average less than the 3 

percent, although this is not very likely. 

If actual real yields on equities held in individual accounts over the next 75 years were to 

average only 3 percent, the same level as assumed for long-term Treasury bonds, this 

comprehensive proposal would still provide for adequate financing for the OASDI program 

through the provisions described above. The long-range OASDI actuarial balance would 

improve by an estimated 2.01 percent of taxable payroll, changing the present-law actuarial 

deficit of 1.92 percent to an actuarial balance of +0.09 percent of taxable payroll. 

Stephen C. Goss 

Alice H. Wade

Chris Chaplain

Attachments: 6
Table A--Estimated Long-Range OASDI Financial Effect of the “Bipartisan Retirement Security Act”, 

introduced by Representatives Kolbe and Stenholm

Number Provision

Estimated Change in

Long-Range OASDI

Actuarial Balance

(as a percent of payroll)

1a Beginning in 2006, redirect 3% of first $10,000 in OASDI taxable earnings and 2% of 

earnings above $10,000 up to wage cap to individual accounts for workers under age 55 in 

2006—wage index $10,000 threshold for years after 2006 ................................................................ -2.16

1b Disbursements from individual accounts are considered OASDI benefits for income tax 

purposes................................................................................................................................................................ 0.09

2 Reduce the 32 and 15 percent PIA formula factors by 2.5 percent (multiply by 0.975) for each 

year from 2012 to 2030. Reduce the 90, 32, and 15 percent formula factors by 1.5 percent 

(multiply by 0.985) from 2031-2060. This provision does not apply to disabled worker 

beneficiaries. In addition, only a proportion of t he amount of reduction due to this provision 

would apply to the benefits of retired worker beneficiaries who convert from disabled worker 

beneficiary status................................................................................................................................................. 2.24

3 Reduce the COLA for OASDI benefits by 0.22 percentage point beginning December 2004................................ 0.35

4 Transfer amounts (specified as percentages of taxable payroll) to the OASI Trust Funds from 

the General Fund of the Treasury for years after 2004................................................................................................ 0.38

5 Eliminate the hiatus in the normal retirement age ................................................................................................ 0.14

6 Increase early retirement reduction factors such that, ultimately, the maximum reduction in 

the PIA for a retired worker increases from 30 percent to 37 percent. Increase the delayed 

retirement credits to an ultimate of 10 percent per year................................................................................................ 0.32

7 Starting with new eligibles in 2012, adjust the PIA levels of retired worker beneficiaries to 

reflect changes in life expectancy based on period life expectancy at age 62. This provision 

does not apply to disabled worker beneficiaries. In addition, only a proportion of the amount 

of reduction due to this provision would apply to the benefits of retired worker beneficiaries 

who convert from disabled worker beneficiary................................................................................................ 0.59

8 Increase the benefit computation period by up to 5 additional years for new eligibles by 

adding one year in each year 2005, 2007, 2009, 2011, and 2013. In conjunction with 

increasing the benefit period, phase in including earnings for all years in calculating the 

AIME by adding 2 years every other year. The lower earner of a married couple would have 

the benefit computation period (denominator of AIME computation) retained at 35 years............................. 0.21

9 Credit all revenue from taxation of OASDI benefits to the OASDI Trust Funds by 2019 

(phase revenue from HI to OASDI during the period 2010-2019) ................................................................ 0.41

10 Establish an ultimate minimum PIA level for newly eligible beneficiaries with quarters of 

coverage equal to twice their number of elapsed years (reduced for any years of disabled worker 

entitlement) at 80% of the applicable poverty level. This would phase down linearly to a 

minimum benefit of 0% of poverty level for those with QCs equal to the number of elapsed years 

(reduced for any years of disabled worker entitlement). This minimum PIA level would be fully 

phased in by 2013, and would increase by 2 percentage points of the applicable poverty level for 

each additional year of work up to 120% of the applicable poverty level for newly eligible 

beneficiaries with quarters of coverage equal to four times their number of elapsed years (reduced 

for any years of disabled worker entitlement). For eligibility years up to 2012, CPI-index the 

poverty level. For eligibility years after 2012, the applicable poverty level would be indexed by 

changes in SSA’s average wage index. The minimum PIA is phased in over the period 2009

through 2012 and would be determined from the following formula: Ultimate percentage of 

poverty level * (year – 2008)/5. 

Disabled workers and survivors not yet age 62 would have the same minimum benefit, except 

that the years of work requirement would be scaled to their elapsed years. At conversion, the 

person would receive the same minimum benefit (adjusted for COLAs) with no subsequent 

recomputation of the minimum benefit at NRA ................................................................................................ -0.06 1/
Table A--Estimated Long-Range OASDI Financial Effect of the “Bipartisan Retirement Security Act”, 

introduced by Representatives Kolbe and Stenholm

Number Provision

Estimated Change in

Long-Range OASDI

Actuarial Balance

(as a percent of payroll)

11 Over the period 2004-2008, gradually increase the contribution and benefit base so that by the 

end of the period 87 percent of all covered earnings is taxable. After 2008, maintain this 

level of 87 percent ................................................................................................................................ 0.41

12 Establish a new bend point in the PIA formula equal to 183.8% of the present-law first bend 

point. PIA formula factors would be initially set at 90, 32, 32, and 15 percent (yielding the 

same benefit as current law). Beginning with new eligibles in 2006, the second formula 

factor would be increased each year by 3.8 percentage points, and the third formula factor 

would be decreased each year by 1.2 percentage points, until reaching factors of 90, 70, 20, 

and 15 percent for newly eligible beneficiaries in 2015 and later................................................................ 2/

13 Increase widow(er)’s benefit to 75% of the couple’s benefit, effective for all benefit payments 

in 2006 or later. Does not affect cases where the decedent is not insured (survivor is in a 

widowed state but not eligible for widow(er)’s benefits................................................................................... -0.08

14 Beginning with 2005, limit spousal benefits so that the combined benefits of a married couple 

do not exceed the maximum PIA determined by eligibility year for a single worker retiring at 

age 62. For dually-entitled spouses, the provision can only reduce the excess spousal benefit 

over the worker benefit................................................................................................................................ 0.16

Total for provisions 1 through 14 (including interaction among provisions)................................ 2.05

Notes: All estimates are based on the intermediate assumptions of the 2003 OASDI Trustees Report. 

Totals for individual provisions exclude interaction.

1/ The incremental effect of this provision, after all other provisions in the package are taken into consideration, is a decrease in the long-range 

OASDI actuarial balance of 0.50 percent of taxable payroll.

2/ Decrease in actuarial balance that is negligible (less than 0.005 percent of taxable payroll).

Social Security Administration

Office of the Chief Actuary

February 11, 2004
Table 1--Financial Effects of the "Bipartisan Retirement Security Act" 1/

IA proceeds go to estate if worker dies before entitlement

Ultimate Real Trust Fund Interest Rate 3.00

Ultimate Real IA Yield Rate 4.45 Specified

Ultimate Real Annuity Yield Rate 3.00 General Fund IA

Transfers under Net Contribution

OASDI Provision 4 OASDI Rate

Cost Income Annual TFR (billions of PV $ Payroll Tax (All from

Year Rate Rate 2/ Balance 1-1-yr as of 1/1/03) Rate Trust Funds)

2003 10.89 12.70 1.81 288 0.00 12.40

2004 10.66 12.69 2.03 311 0.00 12.40

2005 10.35 12.71 2.36 339 0.02 12.40

2006 10.24 10.66 0.42 364 0.04 10.41 1.99

2007 10.11 10.78 0.67 373 0.10 10.38 2.02

2008 10.03 10.78 0.75 383 0.12 10.35 2.05

2009 10.07 10.76 0.69 392 0.13 10.32 2.08

2010 10.14 10.84 0.70 400 0.20 10.29 2.11

2011 10.23 10.92 0.69 407 0.24 10.27 2.13

2012 10.35 11.00 0.65 414 0.29 10.25 2.15

2013 10.52 11.07 0.55 419 0.33 10.23 2.17

2014 10.69 11.10 0.41 423 0.33 10.21 2.19

2015 10.88 11.13 0.25 425 0.33 10.20 2.20

2016 11.09 11.17 0.08 425 0.33 10.19 2.21

2017 11.32 11.21 -0.10 424 0.33 10.18 2.22

2018 11.55 11.27 -0.29 421 0.33 10.17 2.23

2019 11.79 11.38 -0.41 416 0.39 10.16 2.24

2020 12.03 11.40 -0.63 411 0.39 10.16 2.24

2021 12.27 11.42 -0.84 404 0.39 10.15 2.25

2022 12.50 11.45 -1.05 396 0.39 10.14 2.26

2023 12.69 11.47 -1.22 388 0.39 10.14 2.26

2024 12.88 11.49 -1.39 379 0.39 10.13 2.27

2025 13.06 11.52 -1.54 369 0.39 10.13 2.27

2026 13.21 11.54 -1.67 359 0.39 10.13 2.27

2027 13.35 11.56 -1.79 349 0.39 10.13 2.27

2028 13.47 11.59 -1.88 338 0.39 10.13 2.27

2029 13.56 11.61 -1.95 327 0.39 10.13 2.27

2030 13.63 11.63 -2.00 317 0.39 10.13 2.27

2031 13.66 11.64 -2.02 306 0.39 10.13 2.27

2032 13.68 11.66 -2.02 296 0.39 10.13 2.27

2033 13.67 11.67 -2.00 286 0.39 10.13 2.27

2034 13.65 11.68 -1.97 276 0.39 10.13 2.27

2035 13.61 11.69 -1.92 267 0.39 10.13 2.27

2036 13.56 11.70 -1.86 259 0.39 10.13 2.27

2037 13.49 11.71 -1.78 250 0.39 10.13 2.27

2038 13.42 11.72 -1.70 242 0.39 10.13 2.27

2039 13.34 11.72 -1.61 235 0.39 10.13 2.27

2040 13.25 11.73 -1.52 228 0.39 10.13 2.27

2041 13.16 11.73 -1.42 222 0.39 10.13 2.27

2042 13.07 11.74 -1.33 216 0.39 10.13 2.27

2043 12.98 11.83 -1.15 211 0.47 10.13 2.27

2044 12.89 11.83 -1.06 207 0.47 10.13 2.27

2045 12.81 11.84 -0.97 204 0.47 10.13 2.27

2046 12.73 11.85 -0.89 201 0.47 10.13 2.27

2047 12.66 11.85 -0.81 198 0.47 10.13 2.27

2048 12.59 11.86 -0.73 196 0.47 10.13 2.27

2049 12.53 11.88 -0.65 195 0.47 10.13 2.27

2050 12.47 11.89 -0.58 194 0.47 10.13 2.27

2051 12.42 11.90 -0.53 193 0.47 10.13 2.27

2052 12.39 11.91 -0.47 193 0.47 10.13 2.27

2053 12.36 11.93 -0.43 192 0.47 10.13 2.27

2054 12.33 11.94 -0.39 193 0.47 10.13 2.27

2055 12.31 11.95 -0.36 193 0.47 10.13 2.27

2056 12.29 11.96 -0.33 194 0.47 10.13 2.27

2057 12.27 11.97 -0.30 194 0.47 10.13 2.27

2058 12.25 11.98 -0.27 196 0.47 10.13 2.27

2059 12.23 11.99 -0.24 197 0.47 10.13 2.27

2060 12.21 12.00 -0.21 199 0.47 10.13 2.27

2061 12.19 12.00 -0.18 200 0.47 10.13 2.27

2062 12.17 12.01 -0.16 203 0.47 10.13 2.27

2063 12.16 12.12 -0.04 205 0.57 10.13 2.27

2064 12.15 12.13 -0.03 208 0.57 10.13 2.27

2065 12.15 12.13 -0.01 211 0.57 10.13 2.27

2066 12.15 12.14 -0.01 215 0.57 10.13 2.27

2067 12.15 12.15 0.00 218 0.57 10.13 2.27

2068 12.15 12.15 0.00 222 0.57 10.13 2.27

2069 12.16 12.16 0.00 225 0.57 10.13 2.27

2070 12.17 12.17 -0.01 229 0.57 10.13 2.27

2071 12.18 12.17 -0.01 232 0.57 10.13 2.27

2072 12.20 12.18 -0.02 236 0.57 10.13 2.27

2073 12.21 12.18 -0.03 239 0.57 10.13 2.27

2074 12.23 12.19 -0.04 243 0.57 10.13 2.27

2075 12.24 12.19 -0.05 246 0.57 10.13 2.27

2076 12.26 12.20 -0.06 250 0.57 10.13 2.27

2077 12.28 12.20 -0.08 253 0.57 10.13 2.27

2078 12.30 12.21 -0.09 257 0.57 10.13 2.27

 Summarized

Cost Income Actuarial Change in

2003 Rate Rate Balance Actuarial Balance

-2077 12.16 12.29 0.14 2.05

Based on Intermediate Assumptions of the 2003 Trustees Report.

1/ All workers under 55 at the beginning of 2006 would invest 3% of taxable earnings up to 

 $10,000 and 2% of earnings greater than $10,000 into individual accounts ($10,000 Office of the Chief Actuary

 wage-indexed after 2006). Social Security Administration

2/ Includes specified general fund transfers (provision 4). February 11, 2004
Table 1a--Trust Fund Asset Comparison and IA Information of the "Bipartisan Retirement Security Act"

IA proceeds go to estate if worker dies before entitlement

Ultimate Real Trust Fund Interest Rate 3.00

Ultimate Real IA Yield Rate 4.45

Ultimate Real Annuity Yield Rate 3.00

Trust Fund Asset Comparison

Present Law Proposal IA Information

Trust Fund Trust Fund IA/Annuity IA IA

Assets, Assets, Assets, Contributions Disbursements

Year End of Year End of Year End of Year in Year in Year 1/

(In Billions of Present Value Dollars as of 1/1/2003)

2003 1,453 1,453 0 0.0 0.0

2004 1,529 1,536 0 0.0 0.0

2005 1,611 1,636 0 0.0 0.0

2006 1,695 1,656 85 84.6 0.0

2007 1,779 1,683 173 86.1 0.0

2008 1,861 1,714 263 87.3 0.0

2009 1,937 1,743 354 87.7 0.0

2010 2,007 1,771 447 87.9 0.0

2011 2,071 1,799 541 87.9 0.0

2012 2,128 1,825 636 87.6 0.0

2013 2,174 1,847 731 87.2 0.8

2014 2,211 1,863 826 86.7 1.5

2015 2,237 1,872 920 86.0 2.4

2016 2,251 1,875 1,013 85.2 3.3

2017 2,254 1,871 1,106 84.3 4.3

2018 2,245 1,860 1,197 83.4 5.4

2019 2,224 1,844 1,287 82.5 6.6

2020 2,191 1,821 1,376 81.4 7.9

2021 2,147 1,791 1,463 80.4 9.2

2022 2,092 1,754 1,549 79.3 10.6

2023 2,027 1,712 1,633 78.3 12.1

2024 1,954 1,664 1,714 77.2 13.7

2025 1,873 1,613 1,794 76.1 15.3

2026 1,785 1,557 1,872 74.9 17.0

2027 1,690 1,499 1,946 73.7 18.8

2028 1,589 1,439 2,019 72.6 20.7

2029 1,483 1,377 2,089 71.5 22.6

2030 1,372 1,315 2,156 70.4 24.6

2031 1,259 1,254 2,221 69.3 26.6

2032 1,144 1,193 2,282 68.2 28.7

2033 1,026 1,133 2,341 67.2 30.8

2034 908 1,076 2,397 66.2 32.9

2035 789 1,021 2,450 65.2 35.1

2036 671 968 2,499 64.2 37.4

2037 552 919 2,546 63.2 39.7

2038 435 872 2,589 62.3 42.0

2039 319 828 2,629 61.3 44.3

2040 204 788 2,665 60.3 46.6

2041 91 750 2,698 59.4 49.0

2042 ---- 716 2,728 58.5 51.4

2043 ---- 687 2,753 57.6 53.8

2044 ---- 660 2,776 56.7 56.2

2045 ---- 636 2,794 55.7 58.6

2046 ---- 615 2,809 54.9 61.1

2047 ---- 595 2,820 54.0 63.4

2048 ---- 578 2,828 53.1 65.7

2049 ---- 563 2,831 52.2 68.3

2050 ---- 550 2,831 51.4 70.8

2051 ---- 538 2,826 50.5 73.2

2052 ---- 528 2,818 49.7 75.5

2053 ---- 518 2,807 48.9 77.6

2054 ---- 510 2,792 48.1 78.9

2055 ---- 502 2,776 47.3 80.1

2056 ---- 496 2,757 46.5 81.1

2057 ---- 490 2,736 45.8 82.1

2058 ---- 484 2,712 45.0 82.8

2059 ---- 480 2,687 44.3 83.5

2060 ---- 475 2,661 43.6 84.0

2061 ---- 472 2,633 42.9 84.4

2062 ---- 469 2,603 42.2 84.7

2063 ---- 468 2,572 41.5 84.9

2064 ---- 468 2,540 40.8 84.9

2065 ---- 467 2,509 40.1 84.9

2066 ---- 467 2,477 39.5 84.7

2067 ---- 467 2,444 38.8 84.4

2068 ---- 467 2,411 38.2 84.0

2069 ---- 467 2,377 37.6 83.6

2070 ---- 467 2,342 36.9 83.0

2071 ---- 467 2,308 36.3 82.4

2072 ---- 466 2,273 35.7 81.7

2073 ---- 466 2,238 35.1 80.9

2074 ---- 465 2,203 34.5 80.1

2075 ---- 464 2,168 34.0 79.2

2076 ---- 463 2,133 33.4 78.3

2077 ---- 462 2,098 32.8 77.3

Based on Intermediate Assumptions of the 2003 Trustees Report. Office of the Chief Actuary

1/ Excludes proceeds to workers' estates in the case of death before benefit entitlement. Social Security Administration

February 11, 2004
Table 1b--IA Contributions, Offsets to OASDI Trust Funds from IAs, and Budget Effects for the "Bipartisan Retirement Security Act"

IA proceeds go to estate if worker dies before entitlement

Ultimate Real Trust Fund Interest Rate 3.00

Ultimate Real IA Yield Rate 4.45

Ultimate Real Annuity Yield Rate 3.00

Change Change in Change in

Contributions to Offset to Other Changes in Annual Debt Held Annual

IA by Federal OASI Benefits in OASDI Unified Budget by Public Unified Budget

Year Government 1/ from IAs 2/ Cash Flow Cash Flow (end of year) Balance

(In Billions of Constant 2003 Dollars)

2004 0.0 0.0 7.4 7.4 -7.6 7.6

2005 0.0 0.0 18.8 18.8 -27.3 19.9

2006 96.4 0.0 21.5 -74.8 48.9 -75.5

2007 101.1 0.0 29.9 -71.2 123.9 -76.4

2008 105.8 0.0 38.6 -67.2 197.0 -76.8

2009 109.6 0.0 43.0 -66.6 271.8 -80.5

2010 113.3 0.0 47.6 -65.7 348.0 -84.1

2011 116.7 0.0 52.8 -64.0 424.6 -86.8

2012 120.0 0.0 58.0 -62.0 501.5 -89.3

2013 123.1 0.0 63.1 -59.9 578.6 -91.7

2014 126.0 0.0 68.9 -57.2 655.1 -93.4

2015 128.8 0.0 74.8 -54.1 730.7 -94.6

2016 131.5 0.0 81.2 -50.3 804.5 -95.1

2017 134.1 0.0 88.2 -45.8 875.9 -94.8

2018 136.6 0.0 95.7 -40.8 944.2 -93.8

2019 139.1 0.0 103.3 -35.7 1,009.3 -92.6

2020 141.5 0.0 111.9 -29.5 1,070.0 -90.1

2021 143.9 0.0 121.2 -22.7 1,125.5 -86.6

2022 146.2 0.0 130.2 -16.0 1,175.7 -83.0

2023 148.6 0.0 139.4 -9.2 1,220.5 -79.0

2024 150.9 0.0 149.0 -1.9 1,259.1 -74.1

2025 153.2 0.0 158.9 5.7 1,291.0 -68.6

2026 155.3 0.0 169.1 13.8 1,315.5 -62.1

2027 157.5 0.0 180.1 22.6 1,331.7 -54.5

2028 159.7 0.0 191.6 32.0 1,338.7 -45.8

2029 162.0 0.0 203.6 41.6 1,336.0 -36.3

2030 164.3 0.0 215.8 51.5 1,323.0 -25.9

2031 166.6 0.0 228.5 61.9 1,298.9 -14.5

2032 169.0 0.0 241.5 72.5 1,263.2 -2.1

2033 171.4 0.0 254.7 83.3 1,215.3 11.1

2034 173.9 0.0 268.1 94.2 1,154.8 25.1

2035 176.4 0.0 281.5 105.1 1,081.1 40.0

2036 178.9 0.0 294.8 115.9 994.2 55.5

2037 181.5 0.0 308.2 126.7 893.5 71.7

2038 184.1 0.0 321.7 137.6 778.6 88.9

2039 186.7 0.0 335.4 148.6 648.8 107.1

2040 189.3 0.0 349.3 159.9 503.5 126.4

2041 192.0 0.0 363.8 171.8 341.7 147.2

2042 194.7 0.0 378.7 184.0 162.4 169.3

2043 197.3 0.0 394.1 196.7 -35.3 193.0

2044 200.0 0.0 409.9 209.9 -252.6 218.2

2045 202.8 0.0 426.2 223.4 -490.3 245.1

2046 205.5 0.0 443.1 237.6 -749.7 273.8

2047 208.2 0.0 460.4 252.2 -1,031.9 304.0

2048 211.0 0.0 477.9 266.9 -1,337.8 335.9

2049 213.8 0.0 495.8 282.0 -1,668.4 369.6

2050 216.6 0.0 513.9 297.3 -2,024.6 404.8

2051 219.5 0.0 532.0 312.5 -2,407.2 441.6

2052 222.3 0.0 550.1 327.8 -2,817.1 480.0

2053 225.3 0.0 568.1 342.9 -3,254.7 519.7

2054 228.2 0.0 585.8 357.6 -3,720.7 560.8

2055 231.2 0.0 603.4 372.2 -4,215.7 603.3

2056 234.3 0.0 620.8 386.6 -4,740.3 647.4

2057 237.4 0.0 638.2 400.8 -5,295.4 693.1

2058 240.5 0.0 655.2 414.7 -5,881.3 740.2

2059 243.7 0.0 672.0 428.3 -6,498.9 788.9

2060 246.9 0.0 688.7 441.8 -7,148.9 839.3

2061 250.2 0.0 705.5 455.3 -7,832.3 891.6

2062 253.5 0.0 722.3 468.8 -8,550.2 946.0

2063 256.8 0.0 739.3 482.5 -9,303.6 1,002.5

2064 260.2 0.0 756.1 495.9 -10,093.5 1,060.9

2065 263.6 0.0 773.0 509.4 -10,921.0 1,121.5

2066 267.1 0.0 790.0 522.9 -11,787.3 1,184.3

2067 270.6 0.0 807.0 536.5 -12,693.5 1,249.5

2068 274.1 0.0 824.3 550.2 -13,641.0 1,317.2

2069 277.6 0.0 841.3 563.7 -14,630.8 1,387.1

2070 281.2 0.0 858.7 577.5 -15,664.5 1,459.9

2071 284.9 0.0 876.2 591.3 -16,743.5 1,535.2

2072 288.5 0.0 893.6 605.1 -17,869.1 1,613.3

2073 292.2 0.0 911.1 618.9 -19,042.6 1,694.0

2074 296.0 0.0 928.7 632.7 -20,265.6 1,777.6

2075 299.8 0.0 946.3 646.5 -21,539.5 1,864.1

2076 303.6 0.0 963.9 660.4 -22,865.8 1,953.7

2077 307.5 0.0 981.6 674.2 -24,246.2 2,046.4

2078 311.4 0.0 999.5 688.1 -25,682.3 2,142.3

1/ Contributions are redirections from OASDI payroll taxes. Office of the Chief Actuary

2/ Offsets to OASI benefits based on IA proceeds do not occur under this proposal. Social Security Administration

Based on Intermediate Assumptions of the 2003 Trustees Report. Revised February 25, 2004
Table 1c--Cash Flow from the OASDI Trust Funds to the General Fund of the Treasury--the "Bipartisan Retirement Security 

Act" vs Theoretical OASDI

IA proceeds go to estate if worker dies before entitlement

Ultimate Real Trust Fund Interest Rate 3.00

Ultimate Real IA Yield Rate 4.45

Ultimate Real Annuity Yield Rate 3.00

Estimate for Modified Present Law with

Estimate for Proposal Borrowing to Pay Scheduled Benefits

Net Amount of Cash Flow from the OASDI Net Amount of Cash Flow from the OASDI

Trust Funds to the General Fund of the Trust Funds to the General Fund of the

Treasury During the Year Treasury During the Year

% of (billions of dollars) % of (billions of dollars)

Year payroll Current $ PV as of 1/1/03 Constant 2003 $ payroll Current $ PV as of 1/1/03 Constant 2003 $

2003 1.8 79 77 79 1.8 79 77 79

2004 2.0 94 86 92 1.9 87 79 85

2005 2.3 116 100 110 2.0 96 83 91

2006 0.4 20 16 19 2.1 105 86 97

2007 0.6 32 24 29 2.1 111 85 100

2008 0.6 37 27 32 2.0 114 82 99

2009 0.6 35 24 30 1.9 114 77 96

2010 0.5 31 20 26 1.8 112 71 92

2011 0.4 28 17 22 1.6 108 65 86

2012 0.3 20 11 15 1.4 100 57 78

2013 0.1 8 4 6 1.2 88 47 66

2014 -0.1 -5 -3 -4 1.0 74 37 54

2015 -0.3 -21 -10 -15 0.7 56 26 39

2016 -0.5 -41 -18 -28 0.4 33 15 23

2017 -0.7 -62 -26 -42 0.1 7 3 5

2018 -0.9 -86 -34 -56 -0.3 -23 -9 -15

2019 -1.1 -113 -42 -71 -0.6 -55 -21 -35

2020 -1.4 -141 -50 -86 -0.9 -92 -32 -56

2021 -1.6 -172 -57 -102 -1.3 -133 -44 -79

2022 -1.8 -204 -64 -118 -1.6 -176 -55 -101

2023 -2.0 -235 -69 -131 -1.9 -218 -64 -122

2024 -2.2 -267 -74 -145 -2.2 -263 -73 -143

2025 -2.3 -299 -78 -158 -2.5 -310 -81 -163

2026 -2.5 -331 -82 -170 -2.8 -358 -88 -183

2027 -2.6 -363 -85 -181 -3.1 -409 -95 -203

2028 -2.7 -395 -87 -190 -3.3 -461 -101 -222

2029 -2.8 -425 -88 -199 -3.5 -513 -106 -240

2030 -2.8 -452 -88 -206 -3.7 -565 -110 -257

2031 -2.9 -477 -88 -211 -3.9 -617 -113 -272

2032 -2.9 -499 -86 -214 -4.0 -668 -116 -286

2033 -2.9 -519 -85 -216 -4.1 -719 -117 -299

2034 -2.8 -537 -82 -217 -4.2 -769 -118 -311

2035 -2.8 -551 -80 -216 -4.3 -819 -119 -321

2036 -2.7 -564 -77 -215 -4.4 -868 -119 -330

2037 -2.7 -575 -74 -212 -4.4 -917 -118 -339

2038 -2.6 -583 -71 -209 -4.5 -965 -117 -346

2039 -2.5 -588 -67 -205 -4.5 -1,014 -116 -353

2040 -2.4 -592 -64 -200 -4.5 -1,064 -115 -360

2041 -2.3 -594 -60 -195 -4.5 -1,116 -113 -366

2042 -2.2 -595 -57 -190 -4.5 -1,171 -112 -373

2043 -2.1 -595 -54 -184 -4.6 -1,229 -111 -380

2044 -2.0 -594 -51 -179 -4.6 -1,292 -110 -388

2045 -1.9 -594 -48 -173 -4.6 -1,359 -109 -397

2046 -1.9 -594 -45 -168 -4.7 -1,432 -108 -406

2047 -1.8 -594 -42 -163 -4.7 -1,510 -108 -415

2048 -1.7 -594 -40 -159 -4.8 -1,592 -107 -425

2049 -1.6 -594 -38 -154 -4.8 -1,680 -106 -436

2050 -1.6 -595 -36 -150 -4.9 -1,775 -106 -447

2051 -1.5 -600 -34 -147 -5.0 -1,877 -106 -459

2052 -1.5 -608 -32 -144 -5.0 -1,988 -105 -472

2053 -1.4 -617 -31 -142 -5.1 -2,104 -105 -485

2054 -1.4 -629 -30 -141 -5.2 -2,226 -105 -498

2055 -1.4 -642 -29 -139 -5.2 -2,355 -105 -511

2056 -1.3 -657 -27 -138 -5.3 -2,489 -104 -525

2057 -1.3 -672 -27 -138 -5.4 -2,629 -104 -538

2058 -1.3 -688 -26 -137 -5.4 -2,773 -103 -551

2059 -1.3 -704 -25 -136 -5.5 -2,922 -102 -564

2060 -1.2 -721 -24 -135 -5.5 -3,077 -102 -576

2061 -1.2 -737 -23 -134 -5.6 -3,239 -101 -589

2062 -1.2 -756 -22 -133 -5.6 -3,409 -100 -602

2063 -1.2 -778 -22 -133 -5.7 -3,590 -99 -615

2064 -1.2 -803 -21 -134 -5.7 -3,781 -99 -629

2065 -1.2 -831 -20 -134 -5.8 -3,982 -98 -643

2066 -1.1 -863 -20 -135 -5.8 -4,194 -97 -658

2067 -1.1 -900 -20 -137 -5.9 -4,420 -97 -673

2068 -1.1 -939 -19 -139 -6.0 -4,658 -96 -689

2069 -1.2 -984 -19 -141 -6.0 -4,908 -95 -705

2070 -1.2 -1,032 -19 -144 -6.1 -5,173 -95 -721

2071 -1.2 -1,083 -19 -147 -6.1 -5,450 -94 -737

2072 -1.2 -1,139 -19 -150 -6.2 -5,743 -93 -754

2073 -1.2 -1,200 -18 -153 -6.3 -6,049 -93 -771

2074 -1.2 -1,265 -18 -157 -6.3 -6,371 -92 -789

2075 -1.2 -1,334 -18 -160 -6.4 -6,709 -91 -806

2076 -1.2 -1,408 -18 -164 -6.4 -7,063 -91 -824

2077 -1.2 -1,487 -18 -168 -6.5 -7,433 -90 -842

2078 -1.3 -1,569 -18 -173 -6.6 -7,822 -89 -860

Total 2003-2077 -2,407 -4,910

Based on Intermediate Assumptions of the 2003 Trustees Report. Office of the Chief Actuary

Social Security Administration

February 11, 2004
Table 1d--Taxable Payroll Information and Amounts of Specified General Fund Transfers for the 

"Bipartisan Retirement Security Act"

IA proceeds go to estate if worker dies before entitlement

Ultimate Real Trust Fund Interest Rate 3.00

Ultimate Real IA Yield Rate 4.45

Ultimate Real Annuity Yield Rate 3.00 Specified

General Fund

Transfers under

OASDI Taxable Payroll Provision 4

(in billions of current dollars) (billions of PV $

Year Proposal Present Law as of 1/1/03)

2003 4,387 4,387 0

2004 4,654 4,612 0

2005 4,941 4,866 1

2006 5,245 5,140 2

2007 5,579 5,418 4

2008 5,921 5,702 5

2009 6,230 5,994 6

2010 6,547 6,294 8

2011 6,875 6,601 10

2012 7,208 6,911 12

2013 7,551 7,239 13

2014 7,904 7,575 13

2015 8,268 7,923 13

2016 8,644 8,282 13

2017 9,036 8,656 13

2018 9,442 9,045 12

2019 9,868 9,453 14

2020 10,310 9,876 14

2021 10,771 10,318 14

2022 11,249 10,777 14

2023 11,748 11,255 13

2024 12,267 11,753 13

2025 12,809 12,272 13

2026 13,376 12,815 13

2027 13,969 13,383 13

2028 14,590 13,978 12

2029 15,241 14,601 12

2030 15,921 15,253 12

2031 16,634 15,935 12

2032 17,380 16,649 12

2033 18,159 17,395 12

2034 18,973 18,174 11

2035 19,822 18,987 11

2036 20,710 19,837 11

2037 21,638 20,725 11

2038 22,605 21,651 11

2039 23,615 22,617 11

2040 24,665 23,622 10

2041 25,761 24,670 10

2042 26,903 25,763 10

2043 28,092 26,900 12

2044 29,333 28,086 12

2045 30,623 29,320 11

2046 31,965 30,603 11

2047 33,365 31,940 11

2048 34,823 33,334 11

2049 36,343 34,786 11

2050 37,928 36,302 11

2051 39,578 37,878 10

2052 41,301 39,524 10

2053 43,098 41,241 10

2054 44,974 43,034 10

2055 46,933 44,906 10

2056 48,978 46,860 10

2057 51,116 48,903 9

2058 53,348 51,036 9

2059 55,676 53,261 9

2060 58,106 55,582 9

2061 60,640 58,004 9

2062 63,284 60,530 9

2063 66,045 63,167 10

2064 68,920 65,913 10

2065 71,918 68,778 10

2066 75,045 71,766 10

2067 78,306 74,879 10

2068 81,707 78,127 10

2069 85,251 81,512 9

2070 88,944 85,037 9

2071 92,794 88,712 9

2072 96,808 92,545 9

2073 100,994 96,540 9

2074 105,357 100,705 9

2075 109,905 105,046 8

2076 114,648 109,573 8

2077 119,597 114,296 8

2078 124,756 119,220

Total, 2003-2077 757

Based on Intermediate Assumptions of the 2003 Trustees Report. Office of the Chief Actuary

Social Security Administration

February 11, 2004