SOCIAL SECURITY

MEMORANDUM

Date: November 9, 2010 Refer To: TCA

To: Bruce Reed, Marc Goldwein, Meaghan Mann 

Fiscal Commission Staff 

From: Stephen C. Goss, Chief Actuary 

Social Security Administration 

Subject: Co-Chairs’ Proposals for Consideration by the Fiscal Commission: 

 Preliminary Long-Range Estimates of Effect on Social Security 

The attached tables provide preliminary estimates for the two proposals, 1a and 1b, that you have 

identified as being of interest for consideration by the Fiscal Commission. All estimates are 

based on the intermediate assumptions of the 2010 Trustees Report. These estimates provide the 

estimated effects for the 75-year long-range period as a whole, referred to as the change in the 

actuarial balance, and the effect on the annual balance for the 75th year, 2084, which is the 

difference between scheduled tax income and scheduled cost for the program for that year. Both 

estimates are expressed as percentages of taxable payroll for the OASDI program. In addition, 

we are providing estimates of the effect of the proposals on benefits for selected hypothetical 

workers by career-average earnings level and age, relative to both current law scheduled and 

payable benefit levels. 

Proposal 1a includes increase in the earliest eligibility age (EEA) to maintain a 5-year difference 

with the NRA, and proposal 1b holds the EEA 62. For each proposal, a variation is provided 

where the coverage of State and local government employees hires after 2020 is included. In 

each case, long-range sustainable solvency and ultimate positive annual cash flow is projected 

under the intermediate assumption. The margin of solvency is sufficient to allow consideration 

of extending the phase-in period for the PIA formula proposal to be completed after 2050 in each 

case. Likely the extension may be possible for completion in 2060 or even 2070. 

Chris Chaplain, Dan Nickerson, Tiffany Bosley and Alice Wade as well as others contributed 

immensely to producing these estimates in a very short time. We anticipate refinements in the 

provisions and will be ready to develop further estimates. We look forward to working with you 

on these proposals for restoring long-term sustainable solvency for the OASDI program. Please 

let us know if you have any questions on these estimates. 

Stephen C. Goss 

Attachments 
Co-Chairs’ Proposal 1a President’s Fiscal Commission Actuarial Bal 75thYr AnnBal 

a) Maintain the EEA at 5 years less than NRA in the future. Index the 

NRA to Life Expectancy Once the NRA Reaches 67 by the “ratio” 

approach (note: 1 month every 2 years) 

0.41 1.48 

b) Create New Bend Point at 50th Percentile career-average earnings 

level, Reduce PIA Factors to 90/30/10/5 by 2050. Beginning 2017 0.86 2.12 

d) Use Chained-CPI to Calculate all COLAs starting December 2011 0.50 0.70 

e) Beginning in 2017, increase the special minimum benefit by making 

the following changes: (a) A year of coverage is defined as a year in 

which 4 quarters of coverage are earned. (b) At implementation, set 

the PIA for 30 years of coverage equal to 125 percent of the monthly 

poverty level (about $1,128 in 2009). The PIA per year of coverage 

(after the first 10 years) would be $1,128/20 = $56.40. (c) Chain-CPI 

index the poverty level from 2009 to 2017, then index the initial PIA per 

year of coverage by wage growth for successive cohorts, so that the 

special minimum keeps up with the wage-indexed benefit formula. 

Scale work requirements for DIB based on yrs potential work. 

-0.15 -0.26 

f) Provide 5% Benefit Increase Beginning 20 Years After Eligibility and 

Phased over Five Years Phase 82-86 for OAB. Start 2011 for all. 

(For retired workers, age of eligibility would be the EEA – so effectively 

the “bump up” age would be indexed to life expectancy. For disabled 

workers, the eligibility age would be the first year of collection). Increase 

is equal to 1% of PIA of AWI worker per year for five years. 

-0.15 -0.23 

g) Index Taxable Maximum to Have 90% of OASDI Covered Earnings 

below the Maximum Level. Phase in slowly over time (over 35+ years). 

Starting 2012. Subject all earnings above the current-law taxable 

maximum to a new 5% bend point.

0.67 0.90 

h) Allow Retirees to Collect up to Half their Benefits at Age 62, with the 

other half available independently starting at EEA. Actuarial reduction 

or delayed retirement increment applies to each half separately based 

on starting age. The retirement earnings test would apply for benefits 

payable before EEA. Also, the PIA for the portion of the benefit starting 

at age 62 would be computed with the PIA formula appropriate for the 

year of attaining 62 (with indexing of earnings for AIME to 2 years 

earlier). 

Negligible Negligible 

Total preliminary estimates for above provisions with interaction 2.03 4.43 

i) Cover all newly hired state and local workers after 2020. (Please 

model with interactions if added into the package above). 0.16 -0.12 

Grand total preliminary estimates for all above provisions with 

interaction 2.22 4.43 

OCACT/SSA 

November 9, 2010 
Co-Chairs’ Proposal 1b (no EEA Change) President’s Fiscal Commission Actuarial Bal 75thYr AnnBal 

a) Index the NRA to Life Expectancy Once the NRA Reaches 67 by the 

“ratio” approach (note: 1 month every 2 years) 0.41 1.52 

b) Create New Bend Point at 50th Percentile career-average earnings 

level, Reduce PIA Factors to 90/30/10/5 by 2050. Beginning 2017 0.86 2.12 

d) Use Chained-CPI to Calculate all COLAs starting December 2011 0.50 0.70 

e) Beginning in 2017, increase the special minimum benefit by making 

the following changes: (a) A year of coverage is defined as a year in 

which 4 quarters of coverage are earned. (b) At implementation, set 

the PIA for 30 years of coverage equal to 125 percent of the monthly 

poverty level (about $1,128 in 2009). The PIA per year of coverage 

(after the first 10 years) would be $1,128/20 = $56.40. (c) Chain-CPI 

index the poverty level from 2009 to 2017, then index the initial PIA per 

year of coverage by wage growth for successive cohorts, so that the 

special minimum keeps up with the wage-indexed benefit formula. 

Scale work requirements for DIB based on yrs potential work. 

-0.15 -0.26 

f) Provide 5% Benefit Increase Beginning 20 Years After Eligibility and 

Phased over Five Years Phase 82-86 for OAB. Start 2011 for all. 

(For retired workers, age of eligibility would be the EEA – so effectively 

the “bump up” age would be indexed to life expectancy. For disabled 

workers, the eligibility age would be the first year of collection). Increase 

is equal to 1% of PIA of AWI worker per year for five years. 

-0.15 -0.23 

g) Index Taxable Maximum to Have 90% of OASDI Covered Earnings 

below the Maximum Level. Phase in slowly over time (over 35+ years). 

Starting 2012. Subject all earnings above the current-law taxable 

maximum to a new 5% bend point.

0.67 0.90 

h) Allow Retirees to Collect up to Half their Benefits at Age 62, with the 

other half available independently starting at EEA. Actuarial reduction 

or delayed retirement increment applies to each half separately based 

on starting age. The retirement earnings test would apply for benefits 

payable before EEA. Also, the PIA for the portion of the benefit starting 

at age 62 would be computed with the PIA formula appropriate for the 

year of attaining 62 (with indexing of earnings for AIME to 2 years 

earlier). 

Negligible Negligible 

Total preliminary estimates for above provisions with interaction 2.02 4.43 

i) Cover all newly hired state and local workers after 2020. (Please 

model with interactions if added into the package above). 0.16 -0.12 

Grand total preliminary estimates for all above provisions with 

interaction 2.21 4.43 

OCACT/SSA 

November 9, 2010 
Year Longevity

Attain Index NRA Reduced Benefit Minimum

Age 65 (Wage Indexed (Constant 1 Mth/ 2 Yrs3 COLA4 Formula5 Benefit6 Total Scheduled Payable

2010 Dollars) 2010 Dollars)

 

2010 648 648

2020 611 717 0.0 -0.9 0.0 35.9 34.7 135 135

2030 579 758 -1.3 -0.9 -0.1 36.0 33.0 133 133

2040 578 852 -4.5 -0.9 -0.2 36.1 28.7 129 164

2050 580 959 -7.7 -0.9 -0.3 36.3 24.4 124 156

2060 580 1,074 -10.1 -0.9 -0.3 36.3 21.1 121 153

2070 580 1,200 -12.5 -0.9 -0.3 36.3 17.9 118 152

2080 580 1,341 -14.9 -0.9 -0.3 36.3 14.6 115 151

2010 848 848

2020 800 938 0.0 -0.9 0.0 3.9 3.0 103 103

2030 758 992 -1.3 -0.9 -0.5 4.4 1.7 102 102

2040 756 1,115 -4.5 -0.9 -1.0 5.0 -1.6 98 125

2050 758 1,255 -7.7 -0.9 -1.5 5.5 -4.9 95 119

2060 759 1,404 -10.1 -0.9 -1.7 5.7 -7.4 93 117

2070 759 1,569 -12.5 -0.9 -1.7 5.7 -9.9 90 116

2080 758 1,754 -14.9 -0.9 -1.7 5.7 -12.4 88 116

2010 1,397 1,397

2020 1,318 1,546 0.0 -0.9 -0.2 0.0 -1.1 99 99

2030 1,248 1,634 -1.3 -0.9 -2.6 0.0 -4.6 95 95

2040 1,245 1,838 -4.5 -0.9 -4.9 0.0 -9.9 90 115

2050 1,249 2,068 -7.7 -0.9 -7.2 0.0 -15.1 85 106

2060 1,251 2,314 -10.1 -0.9 -7.9 0.0 -17.9 82 104

2070 1,251 2,586 -12.5 -0.9 -7.9 0.0 -20.1 80 103

2080 1,249 2,889 -14.9 -0.9 -7.9 0.0 -22.3 78 102

2010 1,851 1,851

2020 1,747 2,048 0.0 -0.9 -0.7 0.0 -1.5 98 98

2030 1,654 2,166 -1.3 -0.9 -7.3 0.0 -9.3 91 91

2040 1,651 2,435 -4.5 -0.9 -14.0 0.0 -18.6 81 104

2050 1,656 2,740 -7.7 -0.9 -20.7 0.0 -27.4 73 91

2060 1,658 3,067 -10.1 -0.9 -22.7 0.0 -31.1 69 87

2070 1,658 3,427 -12.5 -0.9 -22.7 0.0 -32.9 67 86

2080 1,656 3,829 -14.9 -0.9 -22.7 0.0 -34.8 65 86

2010 2,192 2,192

2020 2,126 2,493 0.0 -0.9 -0.9 0.0 -1.8 98 98

2030 2,021 2,646 -1.3 -0.9 -9.9 0.0 -11.9 88 88

2040 2,016 2,974 -4.5 -0.9 -18.9 0.0 -23.3 77 98

2050 2,020 3,343 -7.7 -0.9 -27.9 0.0 -34.0 66 83

2060 2,021 3,738 -10.1 -0.9 -30.6 0.0 -38.1 62 78

2070 2,021 4,177 -12.5 -0.9 -30.6 0.0 -39.8 60 77

2080 2,019 4,668 -14.9 -0.9 -30.6 0.0 -41.5 59 77

1

 Average of highest 35 years of earnings wage indexed to 2010.

2

 After trust fund exhaustion under present law continuing taxes are expected to be enough to pay about three fourths of scheduled benefits.

3

 Index NRA and EEA to Longevity increasing 1 month every 2 years

4

 Starting Dec 2011, compute the COLA using a chained CPI-W, producing 0.3% lower annual COLAs on average.

5

 New Bend Point at 50th Percentile career-average earnings level, Reduced PIA Factors 90/30/10/5 by 2050.

6

 Increase the PIA to a level such that a worker with 30 years of earnings at the minimum wage level would receive an adjusted PIA equal to 125% of

monthly poverty level in 2009, CPI-index from 2009-2017 then wage-indexed. This provision would take full effect for all newly eligible workers in 2017

The EEA increases under this proposal. For these illustrations, we assume the indexing year and the computation period remain as in current law - the

indexing year is the year the worker reaches age 60 and the computation period is 35 years.

All estimates based on the intermediate assumptions of the 2010 Trustees Report.

November 9, 2010

(Percents)

Scaled Very Low Earner ($10,771 for 2010 1)

Scaled Low Earner ($19,388 for 2010 1

)

Steady Maximum Earner ($106,800 for 20101

)

Office of the Actuary

Social Security Administration

Scaled Medium Earner ($43,084 for 20101)

Scaled High Earner ($68,934 for 2010 1

)

Fiscal Commission Co-Chairs' Proposal 1a

For Worker Retiring (Stops Working) at age 65 with Indicated Career Earnings Level

Scheduled Benefit Level Percent Change at age 65

Present Law Scheduled Proposal Scheduled Benefit

Monthly Benefits2 Percent of Present Law:

(Percent change)
Year 

Attain

Age 65 Age 65 Age 75 Age 852 Age 95

2010

2020 134.7 130.8 132.1 129.6

2030 133.0 129.1 130.4 127.9

2040 128.7 125.0 126.2 123.8

2050 124.4 120.8 120.8 119.6

2060 121.1 117.6 117.7 116.5

2070 117.9 114.5 114.5 113.4

2080 114.6 111.3 110.3 110.3

2010

2020 103.0 100.0 101.0 99.0

2030 101.7 98.7 99.7 97.8

2040 98.4 95.5 96.5 94.6

2050 95.1 92.3 92.4 91.4

2060 92.6 89.9 90.0 89.1

2070 90.1 87.5 87.5 86.7

2080 87.6 85.1 84.3 84.3

2010

2020 98.9 96.1 97.0 95.1

2030 95.4 92.6 93.5 91.7

2040 90.1 87.5 88.3 86.6

2050 84.9 82.5 82.5 81.7

2060 82.1 79.7 79.7 78.9

2070 79.9 77.6 77.6 76.8

2080 77.7 75.5 74.7 74.7

2010

2020 98.5 95.6 96.6 94.7

2030 90.7 88.1 88.9 87.2

2040 81.4 79.1 79.9 78.3

2050 72.6 70.5 70.5 69.8

2060 68.9 66.9 66.9 66.3

2070 67.1 65.1 65.1 64.5

2080 65.2 63.3 62.7 62.7

2010

2020 98.2 95.4 96.4 94.5

2030 88.1 85.6 86.5 84.8

2040 76.7 74.5 75.3 73.8

2050 66.0 64.1 64.1 63.4

2060 61.9 60.1 60.1 59.5

2070 60.2 58.5 58.5 57.9

2080 58.5 56.9 56.3 56.3

1

 Average of highest 35 years of earnings wage indexed to 2010.

2

 Increase the benefit by 5% beginning 20 years after eligibility and phased in over five years starting in 2011

Note: Starting Dec 2011, compute the COLA using a chained CPI-W, producing 0.3% lower annual COLAs on average. 

Other Changes: Index NRA and EEA to Longevity increasing 1 month every 2 years.

New Bend Point at 50th Percentile career-average earnings level, Reduced PIA Factors 90/30/10/5 by 2050.

Increase the PIA to a level such that a worker with 30 years of earnings at the minimum wage level would receive an adjusted PIA 

equal to 125% of monthly poverty level in 2009, CPI-index from 2009-2017 then wage-indexed. This provision would take full

effect for all newly eligible workers in 2017.

The EEA increases under this proposal. For these illustrations, we assume the indexing year and the computation period remain as 

in current law - the indexing year is the year the worker reaches age 60 and the computation period is 35 years.

All estimates based on the intermediate assumptions of the 2010 Trustees Report.

Steady Maximum Earner ($106,800 for 20101)

Office of the Actuary

Social Security Administration

November 9, 2010

Fiscal Commission Co-Chairs' Proposal 1a

For Worker Retiring (Stops Working) at age 65 with Indicated Career Earnings Level

Proposal Benefit as Percent of Present Law Scheduled

(Percents)

Scaled Very Low Earner ($10,771 for 20101)

Scaled Low Earner ($19,388 for 20101

)

Scaled Medium Earner ($43,084 for 20101

)

Scaled High Earner ($68,934 for 20101

)
Year Longevity

Attain Index NRA Reduced Benefit Minimum

Age 65 (Wage Indexed (Constant 1 Mth/ 2 Yrs3 COLA4 Formula5 Benefit6 Total Scheduled Payable

2010 Dollars) 2010 Dollars)

 

2010 648 648

2020 611 717 0.0 -0.9 0.0 35.9 34.7 135 135

2030 579 758 -1.3 -0.9 -0.1 36.0 33.0 133 133

2040 578 852 -4.5 -0.9 -0.2 36.1 28.7 129 164

2050 580 959 -7.7 -0.9 -0.3 36.3 24.4 124 156

2060 580 1,074 -10.1 -0.9 -0.3 36.3 21.1 121 153

2070 580 1,200 -12.5 -0.9 -0.3 36.3 17.9 118 152

2080 580 1,341 -14.9 -0.9 -0.3 36.3 14.6 115 151

2010 848 848

2020 800 938 0.0 -0.9 0.0 3.9 3.0 103 103

2030 758 992 -1.3 -0.9 -0.5 4.4 1.7 102 102

2040 756 1,115 -4.5 -0.9 -1.0 5.0 -1.6 98 125

2050 758 1,255 -7.7 -0.9 -1.5 5.5 -4.9 95 119

2060 759 1,404 -10.1 -0.9 -1.7 5.7 -7.4 93 117

2070 759 1,569 -12.5 -0.9 -1.7 5.7 -9.9 90 116

2080 758 1,754 -14.9 -0.9 -1.7 5.7 -12.4 88 116

2010 1,397 1,397

2020 1,318 1,546 0.0 -0.9 -0.2 0.0 -1.1 99 99

2030 1,248 1,634 -1.3 -0.9 -2.6 0.0 -4.6 95 95

2040 1,245 1,838 -4.5 -0.9 -4.9 0.0 -9.9 90 115

2050 1,249 2,068 -7.7 -0.9 -7.2 0.0 -15.1 85 106

2060 1,251 2,314 -10.1 -0.9 -7.9 0.0 -17.9 82 104

2070 1,251 2,586 -12.5 -0.9 -7.9 0.0 -20.1 80 103

2080 1,249 2,889 -14.9 -0.9 -7.9 0.0 -22.3 78 102

2010 1,851 1,851

2020 1,747 2,048 0.0 -0.9 -0.7 0.0 -1.5 98 98

2030 1,654 2,166 -1.3 -0.9 -7.3 0.0 -9.3 91 91

2040 1,651 2,435 -4.5 -0.9 -14.0 0.0 -18.6 81 104

2050 1,656 2,740 -7.7 -0.9 -20.7 0.0 -27.4 73 91

2060 1,658 3,067 -10.1 -0.9 -22.7 0.0 -31.1 69 87

2070 1,658 3,427 -12.5 -0.9 -22.7 0.0 -32.9 67 86

2080 1,656 3,829 -14.9 -0.9 -22.7 0.0 -34.8 65 86

2010 2,192 2,192

2020 2,126 2,493 0.0 -0.9 -0.9 0.0 -1.8 98 98

2030 2,021 2,646 -1.3 -0.9 -9.9 0.0 -11.9 88 88

2040 2,016 2,974 -4.5 -0.9 -18.9 0.0 -23.3 77 98

2050 2,020 3,343 -7.7 -0.9 -27.9 0.0 -34.0 66 83

2060 2,021 3,738 -10.1 -0.9 -30.6 0.0 -38.1 62 78

2070 2,021 4,177 -12.5 -0.9 -30.6 0.0 -39.8 60 77

2080 2,019 4,668 -14.9 -0.9 -30.6 0.0 -41.5 59 77

1

 Average of highest 35 years of earnings wage indexed to 2010.

2

 After trust fund exhaustion under present law continuing taxes are expected to be enough to pay about three fourths of scheduled benefits.

3

 Index NRA to Longevity increasing 1 month every 2 years

4

 Starting Dec 2011, compute the COLA using a chained CPI-W, producing 0.3% lower annual COLAs on average.

5

 New Bend Point at 50th Percentile career-average earnings level, Reduced PIA Factors 90/30/10/5 by 2050.

6

 Increase the PIA to a level such that a worker with 30 years of earnings at the minimum wage level would receive an adjusted PIA equal to 125% of

monthly poverty level in 2009, CPI-index from 2009-2017 then wage-indexed. This provision would take full effect for all newly eligible workers in 2017

All estimates based on the intermediate assumptions of the 2010 Trustees Report.

Monthly Benefits 2 Percent of Present Law:

Steady Maximum Earner ($106,800 for 20101)

Office of the Actuary

Fiscal Commission Co-Chairs' Proposal 1b

For Worker Retiring (Stops Working) at age 65 with Indicated Career Earnings Level

Scheduled Benefit Level Percent Change at age 65

Present Law Scheduled Proposal Scheduled Benefit

Social Security Administration

November 9, 2010

(Percent change) (Percents)

Scaled Very Low Earner ($10,771 for 20101)

Scaled Low Earner ($19,388 for 20101

)

Scaled Medium Earner ($43,084 for 20101

)

Scaled High Earner ($68,934 for 20101

)
Year 

Attain

Age 65 Age 65 Age 75 Age 852 Age 95

2010

2020 134.7 130.8 132.1 129.6

2030 133.0 129.1 130.4 127.9

2040 128.7 125.0 126.2 123.8

2050 124.4 120.8 122.0 119.6

2060 121.1 117.6 118.8 116.5

2070 117.9 114.5 115.6 113.4

2080 114.6 111.3 112.4 110.3

2010

2020 103.0 100.0 101.0 99.0

2030 101.7 98.7 99.7 97.8

2040 98.4 95.5 96.5 94.6

2050 95.1 92.3 93.3 91.4

2060 92.6 89.9 90.8 89.1

2070 90.1 87.5 88.4 86.7

2080 87.6 85.1 86.0 84.3

2010

2020 98.9 96.1 97.0 95.1

2030 95.4 92.6 93.5 91.7

2040 90.1 87.5 88.3 86.6

2050 84.9 82.5 83.3 81.7

2060 82.1 79.7 80.5 78.9

2070 79.9 77.6 78.4 76.8

2080 77.7 75.5 76.2 74.7

2010

2020 98.5 95.6 96.6 94.7

2030 90.7 88.1 88.9 87.2

2040 81.4 79.1 79.9 78.3

2050 72.6 70.5 71.2 69.8

2060 68.9 66.9 67.6 66.3

2070 67.1 65.1 65.8 64.5

2080 65.2 63.3 64.0 62.7

2010

2020 98.2 95.4 96.4 94.5

2030 88.1 85.6 86.5 84.8

2040 76.7 74.5 75.3 73.8

2050 66.0 64.1 64.7 63.4

2060 61.9 60.1 60.7 59.5

2070 60.2 58.5 59.1 57.9

2080 58.5 56.9 57.4 56.3

1

 Average of highest 35 years of earnings wage indexed to 2010.

2

 Increase the benefit by 5% beginning 20 years after eligibility and phased in over five years starting in 2011

Note: Starting Dec 2011, compute the COLA using a chained CPI-W, producing 0.3% lower annual COLAs on average. 

Other Changes: Index NRA to Longevity increasing 1 month every 2 years.

New Bend Point at 50th Percentile career-average earnings level, Reduced PIA Factors 90/30/10/5 by 2050.

Increase the PIA to a level such that a worker with 30 years of earnings at the minimum wage level would receive an adjusted PIA 

equal to 125% of monthly poverty level in 2009, CPI-index from 2009-2017 then wage-indexed. This provision would take full

effect for all newly eligible workers in 2017.

All estimates based on the intermediate assumptions of the 2010 Trustees Report.

Fiscal Commission Co-Chairs' Proposal 1b

For Worker Retiring (Stops Working) at age 65 with Indicated Career Earnings Level

Proposal Benefit as Percent of Present Law Scheduled

(Percents)

Steady Maximum Earner ($106,800 for 20101)

Office of the Actuary

Social Security Administration

November 9, 2010

Scaled Very Low Earner ($10,771 for 20101)

Scaled Low Earner ($19,388 for 20101

)

Scaled Medium Earner ($43,084 for 20101

)

Scaled High Earner ($68,934 for 20101

)