SOCIAL SECURITY

February 10, 2016 

The Honorable Shaun Donovan 

Director, Office of Management and Budget

Washington, D.C. 20503 

Dear Director Donovan:

The President’s Fiscal Year 2017 Budget, released yesterday, included a proposal for enhancing 

and modifying the approach taken to adjust benefits for Federal Old-Age and Survivors 

Insurance (OASI) and Federal Disability Insurance (DI) beneficiaries who had earnings that were 

not covered under the Social Security program. Under the intermediate assumptions of the 2015 

Trustees Report, we project that enactment of this proposal would reduce OASDI program cost 

by about $8 billion total through Fiscal Year 2026, and that the long-range actuarial balance for 

the OASDI program would be improved by about 0.08 percent of taxable payroll. Table 1, 

enclosed, provides annual and summarized long-range estimates of the effects of this proposal on 

OASDI actuarial status. We have enjoyed working with your staff in the Income Maintenance 

Branch in the development of this proposal. Many in our office contributed to the development 

of the proposal and the estimates provided here, principally Jacqueline Walsh and Christopher 

Chaplain. 

Two changes related to OASDI beneficiaries with non-covered earnings are included in the FY 

2017 Budget. The first provision would make $70 million available to State and local 

governments to facilitate development of systems to provide SSA with complete records of 

employees who have worked in employment not covered under OASDI, where a vested pension 

(periodic payment) has been earned based on the non-covered earnings. This information will be 

required for all individuals attaining vested status before January 1, 2027, and will include the 

timing and amounts of any periodic or lump-sum payments received based on the non-covered 

earnings: past, present, and expected future. This information will continue to be updated for the 

lifetime of included workers and will assure accurate and full application of the Windfall 

Elimination Provision (WEP) and the Government Pension Offset (GPO) applicable in current 

law for all workers who become eligible for any OASDI benefit prior to January 1, 2027. We 

estimate that additional application of WEP and GPO as a result of this enhanced reporting will 

result in reductions in OASDI benefit payments totaling about $8 billion through FY 2026. 

The second provision would apply to all individuals first becoming eligible for any OASDI 

benefit on or after January 1, 2027. New computations, replacing the former WEP and GPO 

provisions, will apply to worker and auxiliary beneficiaries for the WEP, and to spousal 

FY 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total

(billions)

2015 Trustees Report Intermediate Baseline

$0 $0 $0 $0.4 $1.0 $1.4 $1.5 $1.4 $1.3 $1.2 $8.3

Estimated Reductions in OASDI Benefits from Requiring State and Local Governments to Report Pensions Based on Non-Covered 

Employment Starting 2017 
Page 2 – The Honorable Shaun Donovan 

beneficiaries for the GPO, when the worker or spouse has any non-covered earnings. The 

requirement to be in receipt of a pension based on non-covered earnings will be eliminated along 

with the WEP guarantee and all exemptions. 

WEP Replacement 

The new computation involves three components: (1) a “Super AIME” computed considering all 

earnings in SSA records (both OASDI covered and non-covered) up to the annual taxable 

maximum, (2) a “Super PIA” based on the “Super AIME”, and (3) the standard AIME based 

only on OASDI covered earnings, or “Covered AIME.” The governing PIA for a worker (also 

applicable for his/her auxiliaries) is then calculated as the Covered AIME multiplied by the ratio 

of the Super PIA to the Super AIME. 

The new computation will be effective for all payments on the record of a retired or disabled 

worker beneficiary becoming newly eligible for benefits on or after January 1, 2027. As under 

current law, upon the death of the worker, the governing PIA will revert to the standard PIA 

based solely on covered earnings. 

GPO Replacement

Again, three components are used in the computation: (1) a “Super PIA” computed using both 

OASDI covered and non-covered earnings, (2) a standard PIA (“Covered PIA”) based only on 

OASDI covered earnings, and (3) an age reduction factor. Each component is calculated using 

the beneficiary’s own earnings record, without regard to insured status, as if entitlement to 

worker benefits begins at the same time as application of the offset. If the beneficiary is entitled 

to any benefit on the basis of a disability, the PIAs will be computed as for a disabled worker and 

no age reduction factor will apply. The new offset amount will be the difference between the 

Super PIA and Covered PIA, multiplied by the age reduction factor, if applicable. If the 

beneficiary is dually entitled, the offset will be deducted from the excess benefit payable as a 

spouse. 

The new offset will apply to benefits paid to a spouse, former spouse, or surviving spouse of an 

insured worker when the spouse is age 62 and older, or is entitled to any benefit on the basis of 

disability. The provision is effective for those attaining 62 or becoming newly eligible for a 

disability benefit on or after January 1, 2027. 

 

We hope these estimates will be helpful. Please let us know if we may provide further assistance.

Sincerely,

 Stephen C. Goss 

Chief Actuary

Enclosure 

 

 
Year Cost Rate

Income

Rate

Annual

Balance Cost Rate

Income

Rate

Annual

Balance

2015 14.13 12.82 -1.31 308 0.00 0.00 0.00

2016 13.88 12.88 -1.00 298 0.00 0.00 0.00

2017 13.89 12.91 -0.98 280 0.00 0.00 0.00

2018 13.97 12.94 -1.03 264 0.00 0.00 0.00

2019 14.09 12.95 -1.14 248 0.00 0.00 0.00

2020 14.22 12.96 -1.26 233 -0.01 0.00 0.01

2021 14.33 12.98 -1.35 219 -0.01 0.00 0.01

2022 14.50 13.01 -1.49 204 -0.02 0.00 0.01

2023 14.71 13.03 -1.68 189 -0.01 0.00 0.01

2024 14.94 13.06 -1.88 173 -0.01 0.00 0.01

2025 15.15 13.08 -2.07 158 -0.01 0.00 0.01

2026 15.35 13.10 -2.26 142 -0.01 0.00 0.01

2027 15.55 13.11 -2.44 127 -0.01 0.00 0.01

2028 15.74 13.13 -2.61 111 -0.01 0.00 0.01

2029 15.91 13.14 -2.77 95 -0.02 0.00 0.02

2030 16.07 13.15 -2.92 78 -0.02 0.00 0.02

2031 16.21 13.16 -3.05 61 -0.03 0.00 0.03

2032 16.33 13.17 -3.16 43 -0.04 0.00 0.04

2033 16.43 13.18 -3.25 24 -0.05 0.00 0.04

2034 16.50 13.19 -3.31 5 -0.05 0.00 0.05

2035 16.56 13.19 -3.36 ---- -0.06 0.00 0.06

2036 16.61 13.20 -3.41 ---- -0.07 0.00 0.06

2037 16.64 13.20 -3.44 ---- -0.07 0.00 0.07

2038 16.65 13.21 -3.44 ---- -0.08 0.00 0.08

2039 16.64 13.21 -3.43 ---- -0.08 0.00 0.08

2040 16.62 13.21 -3.41 ---- -0.09 0.00 0.08

2041 16.59 13.21 -3.38 ---- -0.09 0.00 0.09

2042 16.57 13.21 -3.36 ---- -0.10 0.00 0.09

2043 16.54 13.21 -3.33 ---- -0.10 -0.01 0.10

2044 16.51 13.21 -3.30 ---- -0.10 -0.01 0.10

2045 16.49 13.21 -3.28 ---- -0.11 -0.01 0.10

2046 16.46 13.21 -3.25 ---- -0.11 -0.01 0.11

2047 16.45 13.21 -3.23 ---- -0.11 -0.01 0.11

2048 16.43 13.21 -3.22 ---- -0.12 -0.01 0.11

2049 16.42 13.21 -3.21 ---- -0.12 -0.01 0.11

2050 16.42 13.21 -3.21 ---- -0.12 -0.01 0.11

2051 16.43 13.22 -3.21 ---- -0.12 -0.01 0.12

2052 16.45 13.22 -3.23 ---- -0.13 -0.01 0.12

2053 16.48 13.22 -3.26 ---- -0.13 -0.01 0.12

2054 16.51 13.22 -3.29 ---- -0.13 -0.01 0.12

2055 16.56 13.23 -3.33 ---- -0.13 -0.01 0.12

2056 16.61 13.23 -3.38 ---- -0.13 -0.01 0.13

2057 16.66 13.23 -3.42 ---- -0.13 -0.01 0.13

2058 16.71 13.24 -3.47 ---- -0.14 -0.01 0.13

2059 16.76 13.24 -3.52 ---- -0.14 -0.01 0.13

2060 16.81 13.25 -3.57 ---- -0.14 -0.01 0.13

2061 16.87 13.25 -3.62 ---- -0.14 -0.01 0.13

2062 16.92 13.25 -3.67 ---- -0.14 -0.01 0.13

2063 16.97 13.26 -3.71 ---- -0.14 -0.01 0.13

2064 17.02 13.26 -3.76 ---- -0.14 -0.01 0.13

2065 17.07 13.26 -3.81 ---- -0.14 -0.01 0.13

2066 17.13 13.27 -3.86 ---- -0.14 -0.01 0.13

2067 17.19 13.27 -3.92 ---- -0.14 -0.01 0.14

2068 17.25 13.27 -3.97 ---- -0.14 -0.01 0.14

2069 17.30 13.28 -4.03 ---- -0.14 -0.01 0.14

2070 17.36 13.28 -4.08 ---- -0.14 -0.01 0.14

2071 17.41 13.28 -4.12 ---- -0.14 -0.01 0.14

2072 17.45 13.29 -4.16 ---- -0.15 -0.01 0.14

2073 17.49 13.29 -4.20 ---- -0.15 -0.01 0.14

2074 17.52 13.29 -4.23 ---- -0.15 -0.01 0.14

2075 17.54 13.29 -4.25 ---- -0.15 -0.01 0.14

2076 17.55 13.29 -4.26 ---- -0.15 -0.01 0.14

2077 17.56 13.29 -4.26 ---- -0.15 -0.01 0.14

2078 17.56 13.30 -4.27 ---- -0.15 -0.01 0.14

2079 17.56 13.30 -4.27 ---- -0.15 -0.01 0.14

2080 17.56 13.30 -4.27 ---- -0.15 -0.01 0.14

2081 17.57 13.30 -4.27 ---- -0.15 -0.01 0.14

2082 17.58 13.30 -4.28 ---- -0.15 -0.01 0.14

2083 17.60 13.30 -4.30 ---- -0.15 -0.01 0.14

2084 17.63 13.30 -4.33 ---- -0.15 -0.01 0.14

2085 17.66 13.30 -4.36 ---- -0.15 -0.01 0.14

2086 17.70 13.30 -4.40 ---- -0.15 -0.01 0.14

2087 17.74 13.31 -4.43 ---- -0.15 -0.01 0.14

2088 17.78 13.31 -4.47 ---- -0.15 -0.01 0.14

2089 17.82 13.31 -4.51 ---- -0.15 -0.01 0.14

2090 17.87 13.31 -4.55 ---- -0.15 -0.01 0.14

Cost Rate Income Rate

Actuarial 

Balance

Change in 

Cost rate

Change in 

Income Rate

Change in 

Actuarial

Balance

16.46% 13.86% -2.60% 2034 -0.09% 0.00% 0.08%

1 Under present law the year of Trust Fund reserve depletion is 2034

Expressed as a percentage of present-law

taxable payroll Trust Fund

Ratio

1-1-year

Expressed as a percentage of present-law

taxable payroll

Table 1 - OASDI Cost Rate, Income Rate, Annual Balance, and Trust Fund Ratio

Proposal Change from Present Law

Replace Current-Law WEP and GPO with PIA Calculation Reflecting Covered Earnings and Total Earnings, Effective for New Eligibles in 2027 and Later. 

Provide Funding to State/Local Governments to Enforce Current-Law WEP and GPO for Individuals Eligible Before 2027.

February 9, 2016

Summarized Rates: OASDI

Year of reserve 

depletion1

Summarized Rates: OASDI

2015 - 2089

Based on Intermediate Assumptions of the 2015 Trustees Report Office of the Chief Actuary

Social Security Administration