Session 1d: Updates on Proposed 

Changes and (Current) Financial 

Status of Social Security

S T EPHEN C . G O SS, A S A, MA A A

C HI EF A C TUARY, US S O CIAL S EC URITY A D MINISTRATION

O C TOBER 26, 2020

S O CIETY O F A C T UARIES A NNUAL MEETING

SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
Actuarial Status of the OASI and DI Trust Funds 

Reported on April 22, 2020 by the Board of Trustees

2

SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
What is the Legislative Mandate for the 

Annual Trustees Report?

1. Trust Fund operations of the past year and the next five 

years

2. Actuarial status of the trust funds

◦ This means the ability to meet the cost of scheduled benefits 

with scheduled revenue and trust fund reserves

◦ And the extent to which scheduled revenue would fall short 

under current law, indicating the size of legislative changes that 

will be needed

3

SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
Primary Changes This Year

First, an important caveat! The projections in the 2020 Trustees Report do NOT reflect the 

potential implications of the COVID-19 pandemic, due to (1) the timing of the development of 

assumptions for the report and (2) the timing of the recognition of the pandemic. 

1. DI reserve depletion extended another 13 years, to 2065!

a) Applications and benefit awards remained at historically low levels in 2019

b) Lower ultimate incidence rate

c) Gradual increase to ultimate incidence rate

2. OASI reserve depletion is 2034 – the same as in last year’s report.

3. OASDI reserve depletion is 2035, the same as in last year’s report. Actuarial 

deficit increased by 0.43 percent of payroll versus expected increase of 0.05 

percent from change in valuation period alone. 

4

SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
Solvency: OASDI 

Trust Fund Reserve 

Depletion in 2035 

(same as last year)

Reserve depletion date 

varied from 2029 to 2042 in 

reports over the past 30 

years (1991-2020).

DI Trust Fund – reserve 

depletion in 2065, thirteen 

years later than last year.

Due largely to low recent 

and near-term disability 

applications and awards, and 

an assumed lower ultimate 

disability incidence rate.

5

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065

Calendar Year

Social Security Trust Fund Ratios

Assets as a Percent of Annual Cost

Trustees Report Intermediate Projections

2020 TR DI

2019 TR DI

2020 TR OASI

2019 TR OASI

2020 TR OASDI

2019 TR OASDI

Historical Projected

Tax Rate

Reallocation

SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
OASDI Annual Cost 

and Non-Interest 

Income as Percent 

of Taxable Payroll

Persistent negative annual 

balance starting in 2010.

79 percent of scheduled 

benefits still payable at trust 

fund reserve depletion.

Annual Deficit in 2094: 

4.51 percent of payroll –

0.36 percent larger than last 

year

6

0%

5%

10%

15%

20%

25%

2005 2015 2025 2035 2045 2055 2065 2075 2085 2095

Calendar Year

OASDI Non-Interest Income, Cost and Expenditures 

as Percentages of Taxable Payroll

Cost: Scheduled and 

payable benefits

Cost: Scheduled but not fully 

payable benefits

Non-interest Income Expenditures: Payable benefits = income 

after trust fund depletion in 2035

Payable benefits as percent 

of scheduled benefits:

2020-34: 100%

2035: 79%

2094: 73%

Historical Projected

Cost: Scheduled and 

payable benefits

Cost: Scheduled but not fully 

payable benefits

Non-interest Income Expenditures: Payable benefits = income 

after trust fund depletion in 2035

Payable benefits as percent 

of scheduled benefits:

2020-34: 100%

2035: 79%

2094: 73%

Historical Projected

SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
SUSTAINABILITY: 

Cost as percent 

of GDP

Rises from a 4.2 percent 

average in 1990-2008, 

to about 5.9 percent by 

2038, then declines to 

5.8 percent by 2053, 

and generally increases 

to 5.9 percent by 2094.

7

0%

1%

2%

3%

4%

5%

6%

7%

8%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar Year

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

Historical Projected

Cost

Non-interest Income

SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
Why Cost 

Rises 

Between 2008 

and 2035 as 

Percent of Payroll 

and GDP:

Aging - Change in 

Age Distribution

Mainly due to drop in 

birth rates

8

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Aged Dependency Ratio 2020 TR

Population 65+/(20-64) 

Actual and TR Intermediate

TFR remains at 3.0 after 1964

TFR remains at 3.3 after 1964

Historical Projected

SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
Applications for 

Disability 

Benefits Remain 

Historically Low

At the peak of the last 

economic cycle in 2007, 

applications were low, but 

increased rapidly in the 

recession from 1.5 million in 

2007 to 1.9 million in 2010.

In 2016 through 2020, 

applications have dropped 

below the 2007 level.

9

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 (millions)

Social Security Disabled Worker Receipts at Disability Determination 

Services by Calendar Year: Historical and Intermediate Assumptions 

for 2012 through 2020 Trustees Reports

2012TR

2017TR

2016TR

2015TR

2014TR

2013TR

2018TR

2019TR 2020TR

SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
Disability 

Incidence Rate 

Also Remains 

Historically Low

DI disabled worker incidence 

rate rose sharply in the 

recession, and has declined 

since the peak in 2010 to 

extraordinarily low levels in 

2016 through 2020.

10

3.5

4.0

4.5

5.0

5.5

6.0

6.5

1990 1995 2000 2005 2010 2015 2020 2025 2030

DI Age-Sex-Adjusted Incidence Rates:

Historical and Intermediate Assumptions for 2012 through 2020 Trustees Report

2012TR

2013TR

2014TR

2015TR

2016TR

2017TR

Average 1990-2019 5.15

Ultimate Assumption 5.00

2018TR

2019TR

2020TR

SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
Principal Reasons for Actuarial Balance

Change in 2020 Report from -2.78 to -3.21 percent of payroll

•Valuation Period - 0.05 percent

•Legislation (primarily repeal of the ACA excise tax) - 0.12 percent

•Lower ultimate total fertility rate - 0.11 percent

•Lower recent birth data and lower assumed near-term total fertility rate - 0.04 percent

•Higher recent mortality +0.04 percent

•Immigration assumptions and other data updates - 0.02 percent

•Lower ultimate rate of price inflation (CPI-W) - 0.05 percent

•Higher long-term real-wage differential - 0.01 percent

•Lower ultimate unemployment and labor force participation rates 0.00 percent

•Lower ultimate real interest rate - 0.07 percent

•Starting values and other near-term economic assumptions - 0.04 percent

•Lower ultimate disability incidence rate +0.04 percent

•Lower recent and near-term disability applications and incidence rates +0.01 percent

•Other new data and methods improvements 0.00 percent

Net Changes for All Reasons -0.43 percent

11 SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
How to Eliminate the Social Security LongTerm Actuarial Deficit

Make choices addressing OASDI deficits 2035-2094: 

•Raise scheduled revenue after 2034 by about one-third

•Reduce scheduled benefits after 2034 by about one-fourth

•Or some combination of the two

12 SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
Implications of COVID-19 on Actuarial Status

See also https://www.ssa.gov/oact/presentations/ocact_20200722.pdf

13 SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D 14

Characteristics of COVID-19

• Highly communicable

• Transmissible prior to symptoms

◦ Some never show symptoms

• Immunity after infection appears to be limited

◦ Less than 12 months; implications for “herd immunity”

◦ Potential for repeated reinfection 

• Death rate overall 0.4% to 1%: proportionate increase across ages

• Compromise for survivors?

• Vaccine or therapy? How effective?
Potential Path Going Forward

1918: worst case scenario? Will we do much better in 2020?

Will we avert a substantial second 

wave in the fall? If so, we my be 

able to return to “normal” next 

year

If not...

SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D 15

Source: The Spanish Flu and the Stock Market: The Pandemic of 1919

by Bryan Taylor | Feb 27, 2020 | Economics, Historical, Insights Figure 1. Death Rates of the Spanish Flu, June 1918 to May 1919
Mortality to this point has been significant 

both reported for COVID and otherwise

Deaths are reported to CDC with a lag,

Estimated complete are adjusted

Excess deaths spiked in April, 

and again in July-August

This Fall and Winter are to be determined

Next year?

SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D 16
SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D 17

GDP, Earnings, and Payroll Tax Revenue

•Social Security payroll tax revenue will certainly be lower than 

we projected for 2020—by between 5 and 10 percent

•Neither the employer payroll tax deferral in COVID legislation 

nor the employee payroll tax deferral in the executive order 

affect revenue to the trust funds

•What will effects be beyond 2020?

◦ Substantial economic recovery since the second quarter of 2020 

◦ Main issue is path of pandemic and responses
SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D 18

OASDI Beneficiaries

• There will clearly be competing effects on the size of the beneficiary 

population in the near term

• Decrease in beneficiaries due to increased deaths

• Potential increase in beneficiaries due to additional applications—

assuming recession persists, and recovery is not as abrupt as the 

recession

◦ However, to this point, retirement applications are not above prior expectations, 

and disability applications are substantially lower than prior expectations

•Implications for 2021 and beyond depend on the pandemic and 

responses
SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D 19

Bottom Line: Effects on Trust Funds Under COVID

•In April, we speculated potential 15% reduction in earnings and payroll 

tax for one or two years, and then full recovery: Trust Fund reserve 

depletion advanced from early 2035 to mid or early 2034

• Now, consider an illustrative scenario: assume total earnings in 2020 are 

reduced to 5-10% below the 2020 TR intermediate projection, with 

recovery in 2021 and 2022

◦ This could happen if there is no substantial second wave in the fall, with resulting 

closure of the economy

◦ The trust fund reserve depletion date for the combined OASI and DI Trust Funds would 

likely about 1 year earlier (CBO estimated 1 year earlier in July and September)
SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D 20

Bottom Line: Effects on Trust Funds Under COVID

•If, instead, a fall/winter return to closure due to the pandemic extends 

through 2021, and possibly beyond, then negative effects on the actuarial 

status could be substantially larger

• Trust Fund reserve depletion could be earlier than 2034, and the percent 

of scheduled benefits payable after depletion could be reduced 

• The Bipartisan Policy Center speculated possible substantial reduction in 

GDP and earnings for 9 to 10 years, with OASDI combined trust fund 

reserve depletion 6 years earlier (2029)

◦ Even this is in the range of Trustees Report projections over the last 30 years
Update on Proposed Changes for Social Security

Implications of COVID-19

Available Options to Restore Actuarial Balance

21 SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D 22

Implications of COVID-19 for Changes in OASDI

• Over the long-range period, likely minor

◦ The pandemic-induced recession may be brief with little permanent effect

◦ Note that Trustees Reports have incorporated the likelihood of periodic negative 

events

◦ Specifically, Trustees Report ultimate mortality decline has been assumed to be at around 0.73 

percent on average. Others have persistently assumed 1.0 percent or higher in the long term 

with no deceleration. 

◦ The Trustees Reports have also assumed long-term unemployment rates will be higher than 

“forecasters”

• However, there are near-term considerations
SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D 23

Average Wage Index (AWI): “Notch” and “Boost”

• The AWI declined in 2009 by 1.5%, and may decline by more for 2020

• If the AWI declines for 2020 by say 5%, then ALL beneficiaries becoming 

newly eligible in 2022 (retirees, disabled, survivors) would have benefits 

permanently lower than those who became eligible a year earlier (notch)

• But for those becoming eligible after 2022 who had earnings in 2020, the 

indexed value of their 2020 earnings will be increased (boost)

• The net effect on actuarial status is small

• However, two bills have been introduced to address this possibility for the 

2020 AWI, and for the possibility of declines in the future; see testimony at 

https://www.ssa.gov/oact/testimony/HouseWM_20200717.pdf
SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D 24

Currently-Proposed Comprehensive Changes for OASDI

•Currently, only the Social Security 2100 Act is introduced

• Increase payroll tax rate and gradually eliminate the taxable maximum

• Some benefit enhancements

•In addition, bipartisan support for changing the Windfall 

Elimination Provision

•Comprehensive changes proposed by Sam Johnson have not 

been reintroduced since he passed away
25

Some Ways to Lower Cost

• Lower benefits for retirees – not disabled?

• Increase normal retirement age (lowers OASDI cost, but increases DI cost)

• Can exempt long-career low earners (Simpson Bowles 2010)

• Lower benefits mainly for high earners?

• Reduce PIA above some level

• Noting that higher earners generally live longer

• Lower benefits mainly for the oldest old?

• Reduce the COLA

• Others say increase it with the CPI-E (based on purchases of consumers over age 62)

SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
26

Some Ways to Increase Revenue

• Raise the 12.4 percent OASDI payroll tax rate?

• Raise tax on highest earners?

• Increase taxable maximum amount

• Some tax on all earnings above the maximum

• Tax employer group health insurance premiums?

• Affects only middle class if taxable maximum remains

• Tax investment income?

• Or potentially a wealth tax?

SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
27

Finally, Timing for Changes

• Historically, Congress has waited until reserve depletion is 

imminent 

• Given uncertainties, difficult to lower benefits or raise taxes until necessary

• Enacting “sooner” allows more options, more gradual phase in, 

and more advance notice

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

• OASDI reserve depletion now projected for 2035

• COVID-19 will make depletion sooner

• The date has varied between 2029 and 2042 over the past 30 years

SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D
For More Information Go to 

http://www.ssa.gov/oact/

• There you will find:

• This and all prior OASDI Trustees Reports

• Detailed single-year tables for recent reports

• Our estimates for comprehensive proposals

• Actuarial notes; including replacement rates

• Actuarial studies; including stochastic

• Extensive databases

• Congressional testimonies

• Presentations by OCACT employees

28 SOCIETY OF ACTUARIES ANNUAL MEETING 2020 SESSION 1D