111th Congress, 1st Session – – – – – – – – – – – – – – House Document 111-41

THE 2009 ANNUAL REPORT OF THE BOARD OF 

TRUSTEES OF THE FEDERAL OLD-AGE AND SURVIVORS 

INSURANCE AND FEDERAL DISABILITY INSURANCE 

TRUST FUNDS

COMMUNICATION

FROM

THE BOARD OF TRUSTEES, FEDERAL OLD-AGE AND 

SURVIVORS INSURANCE AND FEDERAL DISABILITY 

INSURANCE TRUST FUNDS

TRANSMITTING

THE 2009 ANNUAL REPORT OF THE BOARD OF TRUSTEES OF THE

FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND FEDERAL

DISABILITY INSURANCE TRUST FUNDS

May 12, 2009.—Referred to the Committee on Ways and Means

 and ordered to be printed

U.S. GOVERNMENT PRINTING OFFICE

49-654 WASHINGTON: 2009
.

.
CONTENTS

(V)

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

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

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

B. TRUST FUND FINANCIAL OPERATIONS IN 2008 . . . . . . . 5

C. ASSUMPTIONS ABOUT THE FUTURE . . . . . . . . . . . . . . . . 7

D. PROJECTIONS OF FUTURE FINANCIAL STATUS . . . . . . . 8

E. CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND

LEGISLATIVE CHANGES IN THE LAST YEAR . . . . . . . . . . 21

A. OPERATIONS OF THE OLD-AGE AND SURVIVORS 

INSURANCE (OASI) AND DISABILITY INSURANCE (DI)

TRUST FUNDS, IN CALENDAR YEAR 2008 . . . . . . . . . . . . 21

1. OASI Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

2. DI Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

3. OASI and DI Trust Funds, Combined . . . . . . . . . . . . . . . . . . 28

B. SOCIAL SECURITY AMENDMENTS SINCE THE

2008 REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

IV. ACTUARIAL ESTIMATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

A. SHORT-RANGE ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . 33

1. Operations of the OASI Trust Fund. . . . . . . . . . . . . . . . . . . . 34

2. Operations of the DI Trust Fund . . . . . . . . . . . . . . . . . . . . . . 37

3. Operations of the Combined OASI and DI Trust Funds . . . . . 40

4. Factors Underlying Changes in 10-Year Trust Fund Ratio

Estimates From the 2008 Report . . . . . . . . . . . . . . . . . . . . . . 42

B. LONG-RANGE ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . . 44

1. Annual Income Rates, Cost Rates, and Balances . . . . . . . . . . 45

2. Comparison of Workers to Beneficiaries. . . . . . . . . . . . . . . . 50

3. Trust Fund Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

4. Summarized Income Rates, Cost Rates, and Balances . . . . . . 57

5. Additional Measures of OASDI Unfunded Obligations . . . . . 61

6. Test of Long-Range Close Actuarial Balance . . . . . . . . . . . . 64

7. Reasons for Change in Actuarial Balance From Last Report . . 68
(VI)

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

A. DEMOGRAPHIC ASSUMPTIONS AND METHODS . . . . . . . 75

1. Fertility Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

2. Mortality Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

3. Immigration Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 79

4. Total Population Estimates. . . . . . . . . . . . . . . . . . . . . . . . . . 84

5. Life Expectancy Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . 86

B. ECONOMIC ASSUMPTIONS AND METHODS . . . . . . . . . . . 90

1. Productivity Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . 91

2. Price Inflation Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . 92

3. Average Earnings Assumptions . . . . . . . . . . . . . . . . . . . . . . 94

4. Assumed Real-Wage Differentials . . . . . . . . . . . . . . . . . . . . 95

5. Labor Force and Unemployment Projections . . . . . . . . . . . . . 98

6. Gross Domestic Product Projections . . . . . . . . . . . . . . . . . . . 100

7. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

C. PROGRAM-SPECIFIC ASSUMPTIONS AND METHODS . . . 105

1. Automatically Adjusted Program Parameters. . . . . . . . . . . . . 105

2. Covered Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

3. Taxable Payroll and Payroll Tax Revenue . . . . . . . . . . . . . . . 113

4. Insured Population. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

5. Old-Age and Survivors Insurance Beneficiaries. . . . . . . . . . . 116

6. Disability Insurance Beneficiaries. . . . . . . . . . . . . . . . . . . . . 122

7. Average Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

8. Benefit Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

9. Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

10. Railroad Retirement Financial Interchange . . . . . . . . . . . . . . 134

11. Military Service Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . 134

12. Income From Taxation of Benefits . . . . . . . . . . . . . . . . . . . . 134
(VII)

VI. APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS. . 136

B. HISTORY OF ACTUARIAL BALANCE ESTIMATES . . . . . . 149

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2018 . . . . . . . . . . . . . . . . . . . . . . 154

D. LONG-RANGE SENSITIVITY ANALYSIS . . . . . . . . . . . . . . 160

1. Total Fertility Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

2. Death Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162

3. Net Immigration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

4. Real-Wage Differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

5. Consumer Price Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

6. Real Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167

7. Disability Incidence Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 168

8. Disability Termination Rates . . . . . . . . . . . . . . . . . . . . . . . . 169

E. STOCHASTIC PROJECTIONS. . . . . . . . . . . . . . . . . . . . . . . . 171

1. Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171

2. Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171

3. Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

F. ESTIMATES FOR OASDI AND HI, SEPARATE AND 

COMBINED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177

1. Estimates as a Percentage of Taxable Payroll. . . . . . . . . . . . . 177

2. Estimates as a Percentage of Gross Domestic Product . . . . . . 182

3. Estimates in Dollars. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187

G. ANALYSIS OF BENEFIT DISBURSEMENTS FROM THE

OASI TRUST FUND WITH RESPECT TO DISABLED 

BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200

H. GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204

LIST OF TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221

LIST OF FIGURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225

INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227

STATEMENT OF ACTUARIAL OPINION. . . . . . . . . . . . . . . 232
.
THE 2009 ANNUAL REPORT OF THE BOARD OF

TRUSTEES OF THE FEDERAL OLD-AGE AND

SURVIVORS INSURANCE AND FEDERAL DISABILITY

INSURANCE TRUST FUNDS

I. INTRODUCTION

The Old-Age, Survivors, and Disability Insurance (OASDI) program in the

United States makes available a basic level of monthly income upon the

attainment of retirement eligibility age, death, or disability by insured workers. The OASDI program consists of two separate parts that pay benefits to

workers and their families—Old-Age and Survivors Insurance (OASI) and

Disability Insurance (DI). Under OASI, monthly benefits are paid to retired

workers and their families and to survivors of deceased workers. Under DI,

monthly benefits are paid to disabled workers and their families. 

The Board of Trustees was established under the Social Security Act to oversee the financial operations of the OASI and DI Trust Funds. The Board is

composed of six members. Four members serve by virtue of their positions

in the Federal Government: the Secretary of the Treasury, who is the Managing Trustee; the Secretary of Labor; the Secretary of Health and Human Services; and the Commissioner of Social Security. The other two positions,

which are currently vacant, are for members of the public, to be appointed by

the President, subject to confirmation by the Senate. The Deputy Commissioner of the Social Security Administration (SSA) is designated as Secretary

of the Board.

The Social Security Act requires that the Board, among other duties, report

annually to the Congress on the actuarial (financial) status of the OASI and

DI Trust Funds. This annual report, for 2009, is the 69th such report.
Overview

2

II. OVERVIEW

A. HIGHLIGHTS

The report’s major findings are summarized below.

In 2008

At the end of 2008, almost 51 million people were receiving benefits:

35 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 9 million disabled workers and dependents

of disabled workers. During the year, an estimated 162 million people had

earnings covered by Social Security and paid payroll taxes. Total benefits

paid in 2008 were $615 billion. Total income was $805 billion, and assets

held in special issue U.S. Treasury securities grew to $2.4 trillion.

Short-Range Results

The OASI Trust Fund and the combined OASI and DI Trust Funds are adequately financed over the next 10 years under the intermediate assumptions.

The DI Trust Fund is expected to remain solvent over the next 10 years, but

does not satisfy the short-range test of financial adequacy because assets are

estimated to fall below 100 percent of annual expenditures by the beginning

of 2014. The combined assets of the OASI and DI Trust Funds are projected

to increase from $2,419 billion at the beginning of 2009, or 354 percent of

annual expenditures, to $3,874 billion at the beginning of 2018, or 338 percent of annual expenditures in that year. Combined assets were projected for

last year’s report to rise to 369 percent of annual expenditures at the beginning of 2009, and 378 percent at the beginning of 2018.

Long-Range Results

Under the intermediate assumptions, OASDI cost will increase more rapidly

than tax income between about 2012 and 2030 because the retirement of the

baby-boom generation will cause the number of beneficiaries to rise much

faster than the labor force. After 2030, increases in life expectancy and the

continued relatively low fertility rates experienced since the baby boom will

generally cause Social Security system costs to increase relative to tax

income, but more slowly. Annual cost will exceed tax income starting in

2016, at which time the annual gap will be covered with cash from redemptions of special obligations of the Treasury that make up the trust fund assets

until these assets are exhausted in 2037. Individually, the DI fund is projected to be exhausted in 2020 and the OASI fund in 2039. For the 75-year

projection period, the actuarial deficit is 2.00 percent of taxable payroll, 0.30

percentage point larger than in last year’s report. The open group unfunded
3

Highlights

obligation for OASDI over the 75-year period is $5.3 trillion in present

value, and is $0.9 trillion more than the measured level of a year ago. In the

absence of any changes in assumptions, methods, and starting values, the

unfunded obligation would have risen to about $4.6 trillion due to the change

in the valuation date.

The OASDI annual cost rate is projected to increase from 12.35 percent of

taxable payroll in 2009, to 16.76 percent in 2030, and to 17.68 percent in

2083, a level that is 4.34 percent of taxable payroll more than the projected

income rate for 2083. For last year’s report, the OASDI cost for 2083 was

estimated at 17.54 percent, or 4.25 percent of payroll more than the annual

income rate for that year. Expressed in relation to the projected gross domestic product (GDP), OASDI cost is estimated to rise from the current level of

4.8 percent of GDP to 6.1 percent in 2030, and then to peak at almost

6.2 percent in 2034. Thereafter, OASDI cost as a percent of GDP is projected

to decline, reaching a level around 5.8 percent for the period 2050 through

2083.

The worsening of the long-range actuarial status of the OASDI program indicated in this report is principally the result of projected lower levels of economic activity that reflect the recent economic downturn and updated data,

and faster reductions in mortality assumed in the longer term. Changes in the

economic assumptions and the mortality assumptions contribute to about the

same degree to the reduction in the program’s actuarial balance.

Conclusion

Under the long-range intermediate assumptions, annual cost will begin to

exceed tax income in 2016 for the combined OASDI Trust Funds. The combined funds are then projected to become exhausted and thus unable to pay

scheduled benefits in full on a timely basis in 2037. The separate DI Trust

Fund, however, is projected to become exhausted in 2020.

For the combined OASDI Trust Funds to remain solvent throughout the 75-

year projection period, the combined payroll tax rate could be increased during the period in a manner equivalent to an immediate and permanent

increase of 2.01 percentage points, benefits could be reduced during the

period in a manner equivalent to an immediate and permanent reduction of

13.3 percent, general revenue transfers equivalent to $5.3 trillion in present

value could be made during the period, or some combination of approaches

could be adopted. Significantly larger changes would be required to maintain

solvency beyond 75 years.
Overview

4

For this year’s intermediate projections, real GDP starts at a lower level than

was assumed last year for 2008, declines through the second quarter of 2009,

levels off in the third quarter, and then begins to grow, reaching the projected

stable, sustainable path by the end of 2015. These revised economic assumptions account for about half of the estimated reduction in the program’s actuarial balance relative to last year’s report. The effect of the recession on the

actuarial balance would be smaller than projected in this report if the recovery were such that economic output substantially overshoots the projected

sustainable path, a phenomenon observed in some past business cycles.

The projected trust fund deficits should be addressed in a timely way so that

necessary changes can be phased in gradually and workers can be given time

to plan for them. Implementing changes sooner will allow their effects to be

spread over more generations. Social Security plays a critical role in the lives

of 52 million beneficiaries and 160 million covered workers and their families in 2009. With informed discussion, creative thinking, and timely legislative action, present and future Congresses and Presidents can ensure that

Social Security continues to protect future generations.
5

Calendar Year 2008 Operations

B. TRUST FUND FINANCIAL OPERATIONS IN 2008

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

the DI and the combined OASDI Trust Funds in calendar year 2008.

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

In 2008, net contributions accounted for 83 percent of total trust fund

income. Net contributions consist of taxes paid by employees, employers and

the self-employed on earnings covered by Social Security. These taxes were

paid on covered earnings up to a specified maximum annual amount, which

was $102,000 in 2008 and is increased each year automatically (to $106,800

in 2009) as the average wage increases. The tax rates scheduled under current law for 2008 and later are shown in table II.B2.

Two percent of OASDI Trust Fund income came from subjecting up to

50 percent of Social Security benefits above specified levels to Federal personal income taxation, and 14 percent of OASDI income came from interest

earned on investment of OASDI Trust Fund reserves. Social Security’s assets

are invested in interest-bearing securities of the U.S. Government. In 2008,

the combined trust fund assets earned interest at an effective annual rate of

5.1 percent. More than 98 percent of expenditures from the combined

Table II.B1.—Summary of 2008 Trust Fund Financial Operations

(In billions)

OASI DI OASDI

Assets at the end of 2007 . . . . . . . . . . . . . . . . . . . . . . $2,023.6 $214.9 $2,238.5

Total income in 2008 . . . . . . . . . . . . . . . . . . . . . . . . . 695.5 109.8 805.3

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . 574.6 97.6 672.1

Taxation of benefits . . . . . . . . . . . . . . . . . . . . . . . . 15.6 1.3 16.9

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.3 11.0 116.3

Total expenditures in 2008. . . . . . . . . . . . . . . . . . . . . 516.2 109.0 625.1

Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . 509.3 106.0 615.3

Railroad Retirement financial interchange . . . . . . 3.6 .4 4.0

Administrative expenses . . . . . . . . . . . . . . . . . . . . 3.2 2.5 5.7

Net increase in assets in 2008 . . . . . . . . . . . . . . . . . . 179.3 .9 180.2

Assets at the end of 2008 . . . . . . . . . . . . . . . . . . . . . . 2,202.9 215.8 2,418.7

Table II.B2.—Tax Rates for 2008 and Later

OASI DI OASDI

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

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

6

OASDI Trust Funds in 2008 went to pay retirement, survivor, and disability

benefits totaling $615.3 billion. The financial interchange with the Railroad

Retirement program resulted in a payment of $4.0 billion from the combined

OASDI Trust Funds, or about 0.6 percent of total expenditures. The administrative expenses of the Social Security program were $5.7 billion, or about

0.9 percent of total expenditures.

Assets of the trust funds provide a reserve to pay benefits whenever total program cost exceeds income. Trust fund assets increased by $180.2 billion in

2008 because income to each fund exceeded expenditures. At the end of

2008, the combined assets of the OASI and the DI Trust Funds were

354 percent of estimated expenditures for 2009, down from an actual level of

358 percent at the end of 2007.
7

Future Assumptions

C. ASSUMPTIONS ABOUT THE FUTURE

Future income and expenditures of the OASI and DI Trust Funds will depend

on many factors, including the size and characteristics of the population

receiving benefits, the level of monthly benefit amounts, the size of the

workforce, and the level of workers’ earnings. These factors will depend in

turn on future birth rates, death rates, immigration, marriage and divorce

rates, retirement-age patterns, disability incidence and termination rates,

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

other demographic, economic, and program-specific factors.

The intermediate demographic and economic assumptions shown in table

II.C1 reflect the Trustees’ best estimates of future experience, and therefore

most of the figures in this overview depict only the outcomes under the intermediate assumptions. Any projection of the future is, of course, uncertain.

For this reason, alternatives I (low-cost) and III (high-cost) are included to

provide a range of possible future experience. The assumptions for these two

alternatives are also shown in table II.C1, and their implications are highlighted in a separate section, beginning on page 14, on the uncertainty of the

projections.

Assumptions are reexamined each year in light of recent experience and new

information. This annual review helps to ensure that the assumptions provide

the Trustees’ best estimate of future possibilities.

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

for the Long-Range (75-year) Projection Period

a Ultimate values are assumed to be reached within 25 years. See chapter V for details, including historical

values and projected values prior to reaching the ultimate.

Ultimate assumptions Intermediate Low-cost High-cost

Total fertility rate (children per woman) . . . . . . . . . . . 2.0 2.3 1.7

Average annual percentage reduction in total age-sexadjusted death rates from 2033 to 2083. . . . . . . . . . .77 .35 1.24

Average annual net immigration (in thousands) over 

the period 2009-83. . . . . . . . . . . . . . . . . . . . . . . . . . 1,065 1,370 785

Annual percentage change in:

Productivity (total U.S. economy) . . . . . . . . . . . . . . 1.7 2.0 1.4

Average wage in covered employment. . . . . . . . . . . 3.9 3.5 4.3

Consumer Price Index (CPI). . . . . . . . . . . . . . . . . . . 2.8 1.8 3.8

Real-wage differential (percent). . . . . . . . . . . . . . . . . . 1.1 1.7 .5

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

Annual trust fund real interest rate (percent) . . . . . . . . 2.9 3.6 2.1
Overview

8

D. PROJECTIONS OF FUTURE FINANCIAL STATUS

Short-Range Actuarial Estimates

For the short range (2009-2018), the Trustees measure financial adequacy by

comparing projected assets at the beginning of each year to projected program cost for that year under the intermediate set of assumptions. Having a

trust fund ratio of 100 percent or more—that is, assets at the beginning of

each year at least equal to projected cost for the year—is considered a good

indication of a trust fund’s ability to cover most short-term contingencies.

The projected trust fund ratios for OASI alone, and for OASI and DI combined, under the intermediate assumptions exceed 100 percent throughout

the short-range period and therefore OASI and OASDI satisfy the Trustees’

short-term test of financial adequacy. Considering the DI program alone,

however, its trust fund ratio is projected to fall below the 100 percent level

by the beginning of 2014. Thus, DI fails to satisfy the Trustees’ short-term

test of financial adequacy. Figure II.D1 below shows that the trust fund ratios

for the combined OASI and DI Trust Funds reach a peak level in 2012 and

begin declining thereafter.

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

[Assets as a percentage of annual expenditures]

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Calendar year

Historical Estimated

"Minimum" level for short-term financial adequacy
9

Future Financial Status

Long-Range Actuarial Estimates

The actuarial status of the program over the next 75 years is measured in

terms of annual cost and income as a percentage of taxable payroll, trust fund

ratios, the actuarial balance (also as a percentage of taxable payroll), and the

open group unfunded obligation (expressed in present-value dollars and as

percentages of taxable payroll and gross domestic product (GDP)). Considering Social Security’s annual cost and income as a percentage of the total U.S.

economic output or GDP provides an additional important perspective. 

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

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

over the full 75-year period. Under the intermediate assumptions, the OASDI

cost rate is projected to increase rapidly and first exceed the income rate in

2016, producing cash-flow deficits thereafter. Redemption of trust fund

assets will allow continuation of full benefit payments on a timely basis until

2037, when the trust funds are projected to become exhausted. This redemption process will require a flow of cash from the General Fund of the Treasury. Pressures on the Federal Budget will thus emerge well before 2037.

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

to flow into the fund. Present tax rates are projected to be sufficient to pay

76 percent of scheduled benefits after trust fund exhaustion in 2037 and

74 percent of scheduled benefits in 2083.

 Figure II.D2.—OASDI Income and Cost Rates Under Intermediate Assumptions

[As a percentage of taxable payroll]

0%

5%

10%

15%

20%

25%

2005 2015 2025 2035 2045 2055 2065 2075 2085

Calendar year

Cost: Scheduled and 

payable benefits

Income

Payable benefits as percent

of scheduled benefits:

2009-36: 100%

2037: 76%

2083: 74%

Cost: Scheduled but not 

fully payable benefits

Expenditures: Income = payable 

benefits starting in the year the trust 

funds are exhausted (2037)
Overview

10

Social Security’s cost rate is projected to rise rapidly from about 2012

through 2030 because the retirement of the baby-boom generation will cause

the number of beneficiaries to rise much faster than the labor force. Thereafter, the cost rate is estimated to rise at a slower rate for about 5 years and

then to remain fairly stable for the next 25 years. Continued reductions in

death rates and maintaining birth rates at levels well below those from the

baby-boom era and before will cause a continued increase in the average age

of the population and will raise the cost rate from 16.7 percent of taxable

payroll in 2060 to 17.7 percent by 2083 under the intermediate assumptions.

After 2083, the increase in the average age of the population is likely to continue and to increase the gap between OASDI cost and income rates.

The estimated number of workers per beneficiary is shown in figure II.D3.

There were about 3.2 workers for every OASDI beneficiary in 2008. This

ratio has been extremely stable, remaining between 3.2 and 3.4 since 1974.

However, the baby-boom generation will have largely retired by 2030, and

the ratio of workers to beneficiaries is projected to be only 2.2 at that time.

Thereafter, the number of workers per beneficiary will slowly decline, and

the OASDI cost rate will continue to increase, largely due to projected reductions in mortality.

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

0

1

2

3

4

1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Historical Estimated
11

Future Financial Status

The maximum projected trust fund ratios for the OASI, DI, and combined

funds appear in table II.D1. The year in which the maximum projected trust

fund ratio is attained and the year in which the assets are projected to be

exhausted are shown as well.

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

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

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

over the valuation period. This single number summarizes the adequacy of

program financing for the period. When the actuarial balance is negative, the

actuarial deficit can be interpreted as the percentage that could be added to

the current-law income rate for each of the next 75 years, or subtracted from

the cost rate for each year, to bring the funds into actuarial balance. Because

the effects of future changes are unlikely to follow this pattern, this measure

should be viewed only as providing a rough indication of the amount of

change that is needed over the 75-year period as a whole. In this report, the

actuarial balance under the intermediate assumptions is a deficit of

2.00 percent of taxable payroll for the combined OASI and DI Trust Funds.

The actuarial deficit was 1.70 percent in the 2008 report and has been in the

range of 1.70 percent to 2.07 percent for the last 10 reports. The actuarial

deficit increases relative to the level estimated in last year’s report primarily

because of revised economic data through 2008, the significant near-term

effects of the current economic recession, and the longer-term effects of

lower ultimate mortality rates.

Another way to illustrate the financial shortfall of the OASDI system is to

examine the cumulative value of income less cost, in present value. Figure

II.D4 shows the present value of cumulative OASDI income less cost

through the next 75 years. The balance of the combined trust funds peaks at

$2.6 trillion in 2016 (in present value) and then turns downward. This cumulative amount continues to be positive, indicating trust fund assets, or

reserves, through 2036. However, after 2036 this cumulative amount

becomes negative, indicating a net unfunded obligation. Through the end of

2083, the combined funds have a present-value unfunded obligation of

$5.3 trillion. This unfunded obligation represents 1.9 percent of future taxable payroll and 0.7 percent of future GDP through the end of the 75-year

Table II.D1.—Projected Maximum Trust Fund Ratios Attained and

Trust Fund Exhaustion Dates Under the Intermediate Assumptions

OASI DI OASDI

Maximum trust fund ratio (percent). . . . . . . . . . . . . . 422 179 369

Year attained. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 2009 2012

Year of trust fund exhaustion. . . . . . . . . . . . . . . . . . . 2039 2020 2037
Overview

12

projection period. The 0.1 percentage point difference between the unfunded

obligation as a share of taxable payroll (1.9 percent) and the actuarial balance (2.0 percent) reflects the additional requirement of an ending trust fund

balance equal to 1 year’s cost for the actuarial balance calculation.

Still another important way to look at Social Security’s future is to view its

annual cost and tax income as a share of U.S. economic output. Figure II.D5

shows that Social Security’s cost as a percentage of GDP is projected to grow

from 4.8 percent in 2009 to 6.1 percent in 2030, and then to peak at almost

6.2 percent in 2034. Thereafter, OASDI cost as a percent of GDP is projected

to decline reaching a level around 5.8 percent for the period 2050 through

2083. However, Social Security’s scheduled tax revenue is projected to

decline from its current level of about 5.0 percent of GDP, reaching about

4.4 percent by 2083. Income from payroll taxes declines generally in relation

to GDP in the future because an increasing share of employee compensation

is assumed to be provided in fringe benefits, making wages a shrinking share

of GDP. 

 Figure II.D4.—Cumulative OASDI Income Less Cost, Based on Present Law Tax Rates 

and Scheduled Benefits

[Present value as of January 1, 2009, in trillions]

-$6

-$5

-$4

-$3

-$2

-$1

$0

$1

$2

$3

2008 2023 2038 2053 2068 2083

Ending year of valuation period

Unfunded obligation

(negative)

Trust fund assets

(positive)

2037
13

Future Financial Status

Figures II.D2, II.D4, and II.D5 show that the program’s financial condition is

worsening at the end of the period. Overemphasis on summary measures for

a 75-year period can lead to incorrect perceptions and to policy prescriptions

that do not achieve sustainable solvency. Thus, careful consideration of the

trends in annual deficits and unfunded obligations toward the end of the 75-

year period is important. In addition, summary measures for a time period

that extends to the infinite horizon are included in this report. These measures provide an additional indication of Social Security’s very long-run

financial condition, but are subject to much greater uncertainty. These calculations show that extending the horizon beyond 75 years increases the

unfunded obligation. Over the infinite horizon, the shortfall (unfunded obligation) is $15.1 trillion in present value, or 3.4 percent of future taxable payroll and 1.2 percent of future GDP. These calculations of the shortfall

indicate that much larger changes may be required to achieve solvency

beyond the 75-year period as compared to changes needed to balance 75-

year period summary measures. The measured unfunded obligation over the

infinite horizon is increased from $13.6 trillion in last year’s report. In the

absence of any changes in assumptions, methods, and starting values, the

unfunded obligation over the infinite horizon would have risen to

$14.3 trillion due to the change in the valuation date. The additional increase

in the unfunded obligation over the infinite horizon is largely the result of the

changes in near-term economic and ultimate mortality assumptions.

 Figure II.D5.—OASDI Cost and Scheduled Tax Revenue as a Percentage of GDP

0%

2%

4%

6%

8%

10%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Historical Estimated

Cost

Scheduled Tax Revenue
Overview

14

Expressed as percentages of taxable payroll and of GDP, the measured

unfunded obligation over the infinite horizon increased from 3.2 percent and

1.1 percent, respectively, in last year’s report.

Uncertainty of the Projections

Significant uncertainty surrounds the intermediate assumptions. The Trustees

utilize several methods to help illustrate that uncertainty. One approach is the

use of low-cost (alternative I) and high-cost (alternative III) assumptions.

Figure II.D6 shows the projected trust fund ratios for the combined OASI

and DI Trust Funds under the intermediate, low-cost, and high-cost assumptions. The low-cost alternative reflects a set of assumptions that improves the

projected financial status of the trust funds relative to the financial status

under the intermediate set of assumptions. The low-cost alternative includes

a higher ultimate total fertility rate, slower improvement in mortality, a

higher real-wage differential, and lower unemployment. The high-cost alternative, in contrast, includes a lower ultimate total fertility rate, more rapid

improvement in mortality, a lower real-wage differential, and higher unemployment. These alternatives are not intended to suggest that all parameters

would be likely to differ from the intermediate values in the same direction,

but are intended to illustrate the effect of scenarios that are, on balance, very

favorable or unfavorable for the program’s financial status. The actual outcome for future costs is unlikely to be as extreme as either of the outcomes

portrayed by the low- and high-cost projections. The method for constructing

these low- and high-cost projections does not provide an estimate of the

probability that actual experience will lie within or outside the range they

define.
15

Future Financial Status

This report also provides long-range sensitivity analysis for the OASDI program, varying one parameter at a time, in Appendix D. These estimates provide further illustrations of the uncertainty surrounding projections into the

future, but do not provide any measure of the probability that future outcomes will fall within or outside the ranges shown.

A third approach that measures uncertainty uses stochastic simulations to

develop a range of projections and does provide estimates of the probability

that future outcomes will fall within or outside a given range. The results of

the stochastic simulations, discussed in more detail in Appendix E, suggest

that trust fund exhaustion is highly probable sometime during the 75-year

period (see figure II.D7). Further, the stochastic results suggest that outcomes as good as the low-cost alternative or as bad as the high-cost alternative are unlikely. However, the relationship between the stochastic results

and the low- and high-cost alternatives may change as the methodology for

the stochastic simulations is further developed. As noted in Appendix E,

future improvements and refinements are expected to be more likely to

expand rather than reduce the indicated range of uncertainty.

 Figure II.D6.—Long-Range OASDI Trust Fund Ratios Under Alternative Assumptions

[Assets as a percentage of annual cost]

0%

100%

200%

300%

400%

500%

600%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Historical Estimated

III

II

I
Overview

16

Changes From Last Year’s Report

The long-range OASDI actuarial deficit of 2.00 percent of taxable payroll for

this year’s report is larger than the deficit of 1.70 percent of taxable payroll

shown in last year’s report under intermediate assumptions. Changes in nearterm economic growth and ultimate mortality assumptions, as well as

changes in starting values, are the main reasons for the increase in the deficit.

For this year’s intermediate projections, real GDP growth starts at a lower

level than was assumed last year for 2008 and then declines through the second quarter of 2009. The recovery from the recession brings economic activity to the projected stable, sustainable path by the end of 2015. These revised

economic assumptions account for about half of the estimated reduction in

the program’s actuarial balance relative to last year’s report. The effect of the

recession on the actuarial balance would be smaller than projected in this

report if the recovery were such that economic output substantially overshoots the projected sustainable path, a phenomenon observed in some past

business cycles. For a detailed description of the specific changes identified

in table II.D2 below, see section IV.B7 on page 68.

 Figure II.D7.—Annual Trust Fund Ratios

0%

100%

200%

300%

400%

500%

2009 2024 2039 2054 2069 2084

Projection year

50%

97.5%

2.5%

90%

10%
17

Future Financial Status

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

The open group unfunded obligation over the 75-year projection period has

increased from $4.3 trillion (present discounted value as of January 1, 2008)

to $5.3 trillion (present discounted value as of January 1, 2009). The measured unfunded obligation would be expected to increase by about

$0.3 trillion due to advancing the valuation date by 1 year and including the

additional year 2083. Changes in methods, revisions in assumptions, and

updated data further increased the measured unfunded obligation by about

$0.7 trillion.

Figure II.D8 shows that this year’s projections of annual balances (noninterest income minus cost) are lower than those in last year’s report throughout

the 75-year projection period.

Table II.D2.—Reasons for Change in the 75-Year Actuarial Balance

Under Intermediate Assumptions

[As a percentage of taxable payroll]

Item OASI DI OASDI

Shown in last year's report:

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01 1.93 13.94

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.46 2.17 15.63

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.46 -.24 -1.70

Changes in actuarial balance due to changes in:

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

Valuation perioda . . . . . . . . . . . . . . . . . . . . . . . . . . . .

a In changing from the valuation period of last year’s report, which was 2008-82, to the valuation period of

this report, 2009-83, the relatively large negative annual balance for 2083 is included. This change in the

valuation period results in a larger long-range actuarial deficit. The fund balance at the end of 2008, i.e., at

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

-.04 -.01 -.05

Demographic data and assumptions. . . . . . . . . . . . . . -.11 .00 -.11

Economic data and assumptions. . . . . . . . . . . . . . . . . -.13 -.02 -.15

Disability assumptions . . . . . . . . . . . . . . . . . . . . . . . . -.01 -.01 -.01

Methods and programmatic data . . . . . . . . . . . . . . . . +.07 -.04 +.03

Total change in actuarial balance . . . . . . . . . . . . . . . . . . -.22 -.08 -.30

Shown in this report:

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.68 -.32 -2.00

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.08 1.93 14.02

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.76 2.25 16.02
Overview

18

 Figure II.D8.—OASDI Annual Balances: 2008 and 2009 Trustees Reports

[As a percentage of taxable payroll under the intermediate assumptions]

-6%

-4%

-2%

0%

2%

4%

2005 2015 2025 2035 2045 2055 2065 2075 2085

Calendar year

2008 Report

2009 Report
19

Conclusion

E. CONCLUSION

Under current law, the cost of Social Security will soon begin to increase

faster than the program’s income because of the aging of the baby-boom generation, expected continuing low fertility (compared to the baby-boom

period), and increasing life expectancy. Based on the Trustees’ best estimate,

program cost will exceed tax revenues starting in 2016 and throughout the

remainder of the 75-year projection period. Social Security’s combined trust

funds are projected to allow full payment of scheduled benefits until they

become exhausted in 2037. At that time, annual tax income to the trust funds

is projected to equal about 76 percent of program costs. By 2083, annual tax

income is projected to be about 74 percent as large as the annual cost of the

OASDI program.

Separately, the OASI and DI funds are projected to have sufficient funds to

pay full benefits on time until 2039 and 2020, respectively. The fact that the

DI fund is projected to become exhausted in 2020 means that some action

will likely need to be taken in the next 10 years. At a minimum, a reallocation of the payroll tax rate between OASI and DI would be necessary, as was

done in 1994.

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

combined trust funds is 2.00 percent of taxable payroll—0.30 percentage

point greater than the 1.70 percent deficit projected in last year’s report. This

deficit indicates that solvency of the combined OASDI Trust Funds for the

next 75 years could be restored under the intermediate assumptions if

increases were made equivalent to immediately and permanently increasing

the Social Security payroll tax from its current level of 12.40 percent (for

employees and employers combined) to 14.41 percent. Alternatively,

changes could be made that are equivalent to reducing all current and future

benefits by about 13.3 percent. Other ways of reducing the deficit include

making transfers from general revenues or adopting some combination of

approaches.

If no substantial action is taken until the combined trust funds become

exhausted in 2037, then changes necessary to make Social Security solvent

over the next 75 years will be concentrated on fewer years and fewer cohorts: 

 • For example, payroll taxes could be raised to finance scheduled benefits

fully in every year starting in 2037. In this case, the payroll tax would

be increased to about 16.26 percent at the point of trust fund exhaustion

in 2037 and continue rising to about 16.74 percent in 2083.
Overview

20

 • Similarly, benefits could be reduced to the level that is payable with

scheduled tax rates in each year beginning in 2037. Under this scenario,

benefits would be reduced 24 percent at the point of trust fund exhaustion in 2037, with reductions reaching 26 percent in 2083.

Either of these examples would eliminate the shortfall for the 75-year period

as a whole by specifically eliminating annual deficits after trust fund exhaustion. Because of the increasing average age of the population (due to

expected improvement in life expectancy and continued low birth rates),

Social Security’s annual cost will very likely continue to grow faster than

scheduled tax revenues after 2083. As a result, ensuring solvency of the system beyond 2083 would likely require further changes beyond those

expected to be needed for 2083.

The projected trust fund deficits should be addressed in a timely way to

allow for a gradual phasing in of the necessary changes and to provide

advance notice to workers. Making adjustments sooner will allow them to be

spread over more generations. In 2009, Social Security plays a critical role in

the lives of 52 million beneficiaries and 160 million covered workers and

their families. With informed discussion, creative thinking, and timely legislative action, present and future Congresses and Presidents can ensure that

Social Security continues to protect future generations.

For further information related to the contents of this report, see the following websites. 

 • www.socialsecurity.gov/OACT/TR/TR09/index.html

 • www.cms.hhs.gov/ReportsTrustFunds/

 • www.treas.gov/offices/economic-policy/social_security.html
21

Calendar Year 2008 Operations

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND

LEGISLATIVE CHANGES IN THE LAST YEAR

A. OPERATIONS OF THE OLD-AGE AND SURVIVORS INSURANCE

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

CALENDAR YEAR 2008

Detailed information on the operations of the OASI and DI Trust Funds1 during calendar year 2008 is presented in this section. Appendix F provides projections for calendar years 2009 through 2085.

1. OASI Trust Fund

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

Survivors Insurance Trust Fund in calendar year 2008, and of the assets of

the fund at the beginning and end of the calendar year, is presented in table

III.A1. As shown in the table, total trust fund receipts in 2008 amounted to

$695.5 billion, while disbursements totaled $516.2 billion, resulting in an

increase in trust fund assets during 2008 of $179.3 billion. Details of the various components of trust fund income and disbursements are discussed in the

following paragraphs.

Included in total receipts during calendar year 2008 were $576.7 billion in

employment tax contributions. These contributions were partially offset by

transfers totaling $2.1 billion to the general fund for the estimated amount of

refunds to employees who worked for more than one employer during a year

and paid contributions on total earnings in excess of the contribution and

benefit base. 

Net contributions thus amounted to $574.6 billion in 2008, an increase of 2.4

percent over the corresponding amount in 2007. This increase in OASI tax

contributions is due to increased earnings and the increase in the contribution

and benefit base. (Table VI.A1 shows the tax rates and contribution and benefit bases in effect for past years.)

Income based on taxation of benefits amounted to $15.6 billion in 2008.

About 99 percent of this income represents amounts credited to the trust

funds, on an estimated basis, generally in advance of the actual receipt of

taxes by the Treasury. The remaining 1 percent of the total income from taxation of benefits represents amounts withheld from the benefits paid to nonresident aliens.

 1 Data on trust fund operations are available on the Social Security website at

www.socialsecurity.gov/OACT/ProgData/fundsQuery.html.
Financial Operations & Legislative Changes

22

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

Special payments are made to uninsured persons who meet certain requirements. The costs associated with providing such payments are largely reimbursed from the General Fund of the Treasury. Accordingly, a transfer of

about $6 thousand was made in 2008, reflecting costs incurred in fiscal year

2007. 

The OASI Trust Fund was credited with interest netting $105.3 billion,

which consisted of: (1) interest earned on the investments of the trust fund;

Table III.A1.—Operations of the OASI Trust Fund, Calendar Year 2008

[In millions]

Total assets, December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,023,616

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $576,659

Payments from the General Fund of the Treasury for contributions subject to 

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2,104

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574,555

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 146

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,420

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,566

Reimbursement from the general fund for costs of payments

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

a

a Between -$0.5 and $0.5 million.

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,333

Interest adjustmentsb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Includes (1) interest on transfers between the trust fund and the general fund account for the Supplemental

Security Income program due to adjustments in the allocation of administrative expenses, (2) interest arising

from the revised allocation of administrative expenses among the trust funds, and (3) interest on certain reimbursements to the trust fund.

7

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 105,340

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,462

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 509,056

Transfer to the DI Trust Fund to correct a trust fund allocation error made on payments to certain dually entitled disabled beneficiaries . . . . . . . . . . . . . . . . . . . . 339

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -62

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 4

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 509,337

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . 3,632

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,543

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 716

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

Miscellaneous reimbursements from the general fund c . . . . . . . . . . . . . . . . . . . . .

c Reimbursements for costs incurred in performing certain legislatively mandated activities not directly

related to administering the OASI program.

-35

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,223

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 516,192

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,270

Total assets, December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,202,886
23

Calendar Year 2008 Operations

(2) interest on transfers between the trust fund and the general fund account

for the Supplemental Security Income program due to adjustments in the

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

allocation of administrative expenses among the trust funds; and (4) interest

on certain reimbursements to the trust fund. The remaining $370 thousand of

receipts consisted of gifts received under the provisions authorizing the

deposit of money gifts or bequests in the trust funds. 

Of the $516.2 billion in total OASI disbursements, $509.3 billion was for net

benefit payments, including the reimbursable costs of vocational rehabilitation services.1 As described in last year’s report, in 2007 there was a transfer

of $5.6 billion from the OASI Trust Fund to the DI Trust Fund to correct a

long-standing, but small, error in the allocation between the trust funds of the

cost for certain benefit payments. The error related to payments to certain

dually-entitled disabled adult children that had been made entirely from the

DI Trust Fund, even though a portion should have been paid from the OASI

Trust Fund. In 2008, a relatively small ($0.3 billion) transfer was made to

correct the estimated effect of this error in fiscal year 2008. Excluding the

$0.3 billion interfund transfer due to the trust fund allocation error, net benefit payments would have been $509.0 billion. This adjusted amount represents an increase of 4.8 percent over the corresponding adjusted amount

($485.8 billion) in calendar year 2007. This increase is due primarily to: (1)

an increase in the total number of beneficiaries and (2) an increase in the

average benefit amount. The increase in the average benefit amount in 2008

was due in large part to the automatic cost-of-living benefit increase of 2.3

percent, which became effective for December 2007 under the automaticadjustment provisions in section 215(i) of the Social Security Act.

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

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

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

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

$3.6 billion to the Social Security Equivalent Benefit Account from the

OASI Trust Fund was required in June 2008. 

The remaining $3.2 billion of disbursements from the OASI Trust Fund represented net administrative expenses. The expenses of administering the

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

 1 Vocational rehabilitation services are furnished to disabled widow(er) beneficiaries and to those children

of retired or deceased workers who were receiving benefits on the basis of disabilities that began before age

22. Reimbursement from the trust funds for the costs of vocational rehabilitation services is made only in

those cases where the services contributed to the successful rehabilitation of the beneficiary.
Financial Operations & Legislative Changes

24

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

basis of provisional estimates. Similarly, the expenses allocated for administering the Supplemental Security Income program are charged directly to the

General Fund of the Treasury on a provisional basis. Periodically, as actual

experience develops and is analyzed, adjustments to the allocations of

administrative expenses for prior periods are effected by interfund transfers

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

the Supplemental Security Income program, with appropriate interest adjustments. As described earlier, the interest adjustments arising from the reallocation of administrative expenses are recorded in the trust fund accounting

under investment income. 

In 2008, 79 percent of OASI net administrative expenses represented the cost

of administering the program. Such costs are charged to the trust fund by the

Social Security Administration ($2.5 billion in 2008). In addition, the

Department of the Treasury charges directly to the trust fund certain

expenses ($0.7 billion in 2008) that it incurs in helping to administer the

OASI program. In addition a relatively small adjustment ($586 thousand in

2008) to administrative expenses is an offset representing income from the

sale of excess supplies and equipment.

Finally, certain net reimbursements are made from the General Fund of the

Treasury for administrative costs incurred by the Social Security Administration in performing certain legislatively mandated activities that are not

directly related to the OASI program. These reimbursements include the

costs associated with union activities related to administering the OASI program and providing information to participants in certain pension plans.

Such reimbursements totaled $35 million in 2008.

The assets of the OASI Trust Fund at the end of calendar year 2008 totaled

$2,202.9 billion, consisting of $2,203.4 billion in U.S. Government obligations and, as an offset, an extension of credit amounting to $0.5 billion

against securities to be redeemed within the following few days. The effective annual rate of interest earned by the assets of the OASI Trust Fund during calendar year 2008 was 5.1 percent, as compared to 5.2 percent earned

during calendar year 2007. Table VI.A5, presented in appendix A, shows a

detailed listing of OASI Trust Fund holdings by type of security, interest rate,

and year of maturity at the end of each year 2007 and 2008.

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

the United States Government, as required by law. Those currently held by

the OASI Trust Fund are special issues (i.e., securities sold only to the trust

funds). These are of two types: short-term certificates of indebtedness and

long-term bonds. The certificates of indebtedness are issued on a daily basis

for the investment of receipts not required to meet current expenditures, and
25

Calendar Year 2008 Operations

they mature on the next June 30 following the date of issue. Special-issue

bonds, on the other hand, are normally acquired only when special issues of

either type mature on June 30. The amount of bonds acquired on June 30 is

equal to the amount of special issues maturing, plus accrued interest, less

amounts required to meet expenditures on that day.

Section 201(d) of the Social Security Act provides that the obligations issued

for purchase by the OASI and DI Trust Funds shall have maturities fixed

with due regard for the needs of the funds. The usual practice has been to

spread the holdings of special issues, as of each June 30, so that the amounts

maturing in each of the next 15 years are approximately equal. Accordingly,

the amounts and maturity dates of the OASI special-issue bonds purchased

on June 30, 2008, with an interest rate of 4 percent, were selected so that the

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

the 15-year period 2009-23. The amount of bonds purchased on June 30,

2008, is shown in table III.A7.

2. DI Trust Fund

A statement of the income and disbursements of the Federal Disability Insurance Trust Fund in calendar year 2008, and of the assets of the fund at the

beginning and end of the calendar year, is presented in table III.A2.
Financial Operations & Legislative Changes

26

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

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

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

Net contributions amounted to $97.6 billion, an increase of 2.4 percent from

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

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

the change in contributions to the OASI Trust Fund. 

Of the $109.0 billion in total disbursements, $106.0 billion was for net benefit payments. Excluding the $0.3 billion interfund transfer due to the trust

fund allocation error, net benefit payments would have been $106.3 billion.

This adjusted amount represents an increase of 7.3 percent over the correTable III.A2.—Operations of the DI Trust Fund, Calendar Year 2008

[In millions]

Total assets, December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $214,884

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $97,924

Payments from the General Fund of the Treasury for contributions subject to 

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -357

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,566

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 4

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,309

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,313

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,957

Interest adjustmentsa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 10,961

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,840

Disbursements:

Benefit payments:

Monthly benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,301

Transfer from the OASI Trust Fund to correct a trust fund allocation error made 

on payments to certain dually entitled disabled beneficiaries . . . . . . . . . . . . . . . -339

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -30

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 75

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,007

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . 418

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,368

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

Miscellaneous reimbursements from the general fundb. . . . . . . . . . . . . . . . . . . . . . 26

Total administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,526

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,951

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 889

Total assets, December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,773

a Includes (1) interest on transfers between the trust fund and the general fund account for the Supplemental

Security Income program due to adjustments in the allocation of administrative expenses, (2) interest arising

from the revised allocation of administrative expenses among the trust funds, and (3) interest on certain

reimbursements to the trust fund.

b Reimbursements for costs incurred in performing certain legislatively mandated activities not directly

related to administering the DI program.
27

Calendar Year 2008 Operations

sponding amount in calendar year 2007. This increase in DI benefit payments was due to the same factors that resulted in the net increase in benefit

payments from the OASI Trust Fund. However, the number of persons

receiving benefits from the DI Trust Fund increased more rapidly in 2008

than the number receiving benefits from the OASI Trust Fund largely due to

a) the current ages of the baby-boom generation, b) the recent increase in the

normal retirement age (NRA), and c) the special administrative action,

undertaken by SSA beginning in 2001, to identify and award benefits from

the DI Trust Fund to a substantial number of current and former recipients of

SSI benefits whose disability-insured status under the DI program was not

previously recognized. Total DI disbursements, which started to exceed noninterest income in 2005, continue to exceed such income in 2008. However,

as in 2005 through 2007, total DI income (including interest) in 2008

exceeds total disbursements.

The assets of the DI Trust Fund at the end of calendar year 2008 totaled

$215.8 billion, consisting of $215.8 billion in U.S. Government obligations

and, as an offset, an extension of credit amounting to $37 million against

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

annual rate of interest earned by the assets of the DI Trust Fund during calendar year 2008 was 5.2 percent, as compared to 5.3 percent earned during calendar year 2007. Table VI.A6, presented in appendix A, shows a detailed

listing of DI Trust Fund holdings by type of security, interest rate, and year

of maturity at the end of each year 2007 and 2008. 
Financial Operations & Legislative Changes

28

3. OASI and DI Trust Funds, Combined

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

and DI Trust Funds, on a combined basis, is presented in table III.A3. The

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

tables III.A1 and III.A2. For a discussion of the nature of these income and

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

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

To provide a context for estimates of future trust fund income and expenditures provided later in this report, table III.A4 compares past estimates of

Table III.A3.—Operations of the Combined OASI and DI Trust Funds, 

Calendar Year 2008

[In millions]

Total assets, December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,238,500

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $674,583

Payments from the General Fund of the Treasury for contributions subject to

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2,461

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672,122

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 150

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,729

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,879

Reimbursement from the general fund for costs of payments

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

a

a Between -$0.5 and $0.5 million.

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116,290

Interest adjustmentsb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Includes (1) interest on transfers between the trust funds and the general fund account for the Supplemental

Security Income program due to adjustments in the allocation of administrative expenses, (2) interest arising

from the revised allocation of administrative expenses among the trust funds, and (3) interest on certain

reimbursements to the trust funds.

11

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 116,301

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 805,302

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 615,357

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -92

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 79

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615,344

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . 4,050

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,910

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 849

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

Miscellaneous reimbursements from the general fundc. . . . . . . . . . . . . . . . . . . . . .

c Reimbursements for costs incurred in performing certain legislatively mandated activities not directly

related to administering the OASI and DI programs.

-10

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,749

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625,143

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,159

Total assets, December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,418,658
29

Calendar Year 2008 Operations

contributions and benefit payments for calendar year 2008, as shown in the

2004-08 Annual Reports, with the corresponding actual amounts in 2008.1

l

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

legislation or other administrative initiatives that were unanticipated at the

time the earlier estimates were completed can contribute to such differences.

At the end of calendar year 2008, about 50.9 million persons were receiving

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

41.6 million and 9.3 million were receiving monthly benefits from the OASI

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

 1 Estimated amounts used to calculate percentage differences are before rounding to amounts shown in the

annual reports.

Table III.A4.—Comparison of Actual Calendar Year 2008 Trust Fund Operations

With Estimates Made in Prior Reports a

[Amounts in billions]

a The estimates shown are based on the intermediate assumptions.

Net contributions b

b “Actual” contributions for 2008 reflect adjustments for prior calendar years (see Appendix A on page 138

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

estimated basis.

Net benefit payments

Amount

Difference

from actual

(percent) Amount

Difference

from actual

(percent)

OASI Trust Fund:

Estimate in 2004 report . . . . . . . . . . . . . . $581.8 1.3 $486.2 -4.5

Estimate in 2005 report . . . . . . . . . . . . . . 582.6 1.4 494.8 -2.8

Estimate in 2006 report . . . . . . . . . . . . . . 590.4 2.8 506.3 -.5

Estimate in 2007 report . . . . . . . . . . . . . . 589.1 2.5 504.5 -.9

Estimate in 2008 report . . . . . . . . . . . . . . 583.1 1.5 508.8 c

c Between -0.05 and 0.05 percent.

Actual amount . . . . . . . . . . . . . . . . . . . . . 574.6 — d 509.0

d Excludes interfund transfer to correct a trust fund allocation error made on payments to certain disabled

beneficiaries. The transfer amounted to $0.3 billion from OASI to DI.

—

DI Trust Fund:

Estimate in 2004 report . . . . . . . . . . . . . . 98.8 1.3 98.8 -7.1

Estimate in 2005 report . . . . . . . . . . . . . . 98.9 1.4 101.3 -4.8

Estimate in 2006 report . . . . . . . . . . . . . . 100.3 2.8 104.5 -1.8

Estimate in 2007 report . . . . . . . . . . . . . . 100.0 2.5 103.4 -2.8

Estimate in 2008 report . . . . . . . . . . . . . . 99.0 1.5 104.9 -1.3

Actual amount . . . . . . . . . . . . . . . . . . . . . 97.6 — d 106.3 —

OASI and DI Trust Funds, combined:

Estimate in 2004 report . . . . . . . . . . . . . . 680.6 1.3 585.0 -4.9

Estimate in 2005 report . . . . . . . . . . . . . . 681.5 1.4 596.1 -3.1

Estimate in 2006 report . . . . . . . . . . . . . . 690.6 2.8 610.7 -.7

Estimate in 2007 report . . . . . . . . . . . . . . 689.2 2.5 607.9 -1.2

Estimate in 2008 report . . . . . . . . . . . . . . 682.1 1.5 613.7 -.3

Actual amount . . . . . . . . . . . . . . . . . . . . . 672.1 — 615.3 —
Financial Operations & Legislative Changes

30

receiving benefits from the OASI and DI Trust Funds grew by 1.7 percent

and 4.0 percent, respectively, during the calendar year. The estimated distributions of benefit payments in calendar years 2007 and 2008, by type of beneficiary, are shown in table III.A5 for each trust fund separately.

Note: Benefits are monthly benefits and lump-sum death payments. Totals do not necessarily equal the sums

of rounded components.

Net administrative expenses charged to the OASI and DI Trust Funds in calendar year 2008 totaled $5.7 billion. This amount represented 0.9 percent of

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

are shown in table III.A6 for each of the last 5 years.

Table III.A5.—Distribution of Benefit Payments by Type of Beneficiary or Payment, 

Calendar Years 2007 and 2008

[Amounts in millions]

Calendar year 2007 Calendar year 2008

Amount

Percentage

of total Amount

Percentage

of total

Total OASDI benefit payments . . . . . . . . . . $584,966 100.0 $615,357 100.0

OASI benefit payments . . . . . . . . . . . . . . 485,881 83.1 509,056 82.7

DI benefit payments . . . . . . . . . . . . . . . . . 99,086 16.9 106,301 17.3

OASI benefit payments, total. . . . . . . . . . . . 485,881 100.0 509,056 100.0

Monthly benefits:

Retired workers and auxiliaries . . . . . . 389,124 80.1 409,503 80.4

Retired workers . . . . . . . . . . . . . . . . 364,278 75.0 383,999 75.4

Spouses . . . . . . . . . . . . . . . . . . . . . . . 21,571 4.4 22,022 4.3

Children . . . . . . . . . . . . . . . . . . . . . . 3,274 .7 3,482 .7

Survivors of deceased workers. . . . . . . 96,554 19.9 99,348 19.5

Aged widows and widowers. . . . . . . 76,619 15.8 78,747 15.5

Disabled widows and widowers . . . . 1,853 .4 1,945 .4

Parents . . . . . . . . . . . . . . . . . . . . . . . 24 a

a Less than 0.05 percent.

23 a

Children . . . . . . . . . . . . . . . . . . . . . . 16,486 3.4 17,041 3.3

Widowed mothers and fathers 

caring for child beneficiaries . . . . 1,573 .3 1,592 .3

Uninsured persons generally aged 72 

before 1968 . . . . . . . . . . . . . . . . . . . b

b Less than $0.5 million.

a ba

Lump-sum death payments . . . . . . . . . . . 203 a 205 a

DI benefit payments, total . . . . . . . . . . . . . . 99,086 100.0 106,301 100.0

Disabled workers . . . . . . . . . . . . . . . . . 91,314 92.2 98,104 92.3

Spouses. . . . . . . . . . . . . . . . . . . . . . . . . 520 .5 534 .5

Children . . . . . . . . . . . . . . . . . . . . . . . . 7,251 7.3 7,664 7.2
31

Calendar Year 2008 Operations

Changes in the invested assets of the OASI and DI funds between the end of

2007 and the end of 2008 are a result of the acquisition and disposition of

securities during calendar year 2008. Table III.A7 presents these investment

transactions for each trust fund separately and combined.

Note: All investments are shown at par value.

Table III.A6.—Administrative Expenses as a Percentage of Contribution Income and of 

Total Expenditures, Calendar Years 2004-08

Calendar year 

OASI Trust Fund DI Trust Fund

OASI and DI

Trust Funds,

combined

Contribution

income

Total

expenditures

Contribution

income

Total

expenditures

Contribution

income

Total

expenditures

2004 . . . . . . . . . . . 0.5 0.6 2.7 2.7 0.8 0.9

2005 . . . . . . . . . . . .6 .7 2.7 2.6 .9 1.0

2006 . . . . . . . . . . . .6 .7 2.6 2.5 .9 1.0

2007 . . . . . . . . . . . .5 .6 2.6 2.5 .8 .9

2008 . . . . . . . . . . . .6 .6 2.6 2.3 .9 .9

Table III.A7.—Trust Fund Investment Transactions, Calendar Year 2008

[In millions]

OASI

Trust Fund

DI

Trust Fund

OASI and DI

Trust Funds,

combined

Invested assets, December 31, 2007 . . . . . . . . $2,024,392 $215,046 $2,239,438

Acquisitions:

Special issues:

Certificates of indebtedness . . . . . . . . . . . 649,913 105,211 755,124

Bondsa . . . . . . . . . . . . . . . . . . . . . . . . . . .

a Amounts shown were purchased on June 30, 2008. The interest rate on such purchases was 4 percent.

311,736 23,392 335,127

Total acquisitions . . . . . . . . . . . . . . . . . . . 961,648 128,603 1,090,251

Dispositions:

Special issues:

Certificates of indebtedness . . . . . . . . . . . 676,619 108,192 784,811

Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,017 19,647 125,665

Total dispositions . . . . . . . . . . . . . . . . . . . 782,636 127,839 910,476

Net increase in invested assets . . . . . . . . . . . . . 179,012 764 179,776

Invested assets, December 31, 2008 . . . . . . . . 2,203,404 215,810 2,419,213
Financial Operations & Legislative Changes

32

B. SOCIAL SECURITY AMENDMENTS SINCE THE 2008 REPORT

Since the 2008 Annual Report was transmitted to Congress on March 25,

2008, one law was enacted that had a direct financial effect on the OASDI

program. The Food, Conservation, and Energy Act of 2008, Public Law 110-

246, was enacted on June 18, 2008. It included provisions to exclude conservation reserve program payments from self-employment income for purposes of the Self-Employment Contributions Act (SECA) for individuals

who are receiving Social Security retirement or disability benefits and to

transfer funds from the General Fund of the Treasury to the OASI and DI

Trust Funds for fiscal years 2009 through 2017 to ensure that the assets of

the trust funds are not reduced as a result of enactment of this Act. Another

provision increases the amount of net earnings from self-employment that

can be declared for SECA tax purposes and thus credited to individuals who

file under the optional method of reporting self-employment earnings. These

provisions are estimated to have negligible financial effects on the OASDI

program.

The Congress has also enacted legislation to stabilize the banking system and

to stimulate the economy. The Emergency Economic Stabilization Act of

2008 (Public Law 110-343, enacted on October 3, 2008) allows the government to purchase troubled assets and stocks to strengthen financial institutions. The American Recovery and Reinvestment Act of 2009 (Public Law

111-5, enacted on February 17, 2009) includes some reductions in personal

income taxes and increases in government expenditures. These policies are

expected to affect the speed and timing of the economic recovery from the

current recession.
33

Short-Range Estimates

IV. ACTUARIAL ESTIMATES

This chapter presents actuarial estimates of the future financial condition of

the Social Security program. These estimates include projected income and

cost of the OASI and DI Trust Funds, in dollars over the next 10 years and as

a percentage of taxable payroll or in present-value dollars over the full

75-year period, along with a discussion of a variety of measures of the adequacy of current program financing. In this report we carefully distinguish

between (1) the cost (or obligations) of the program, which includes, for the

future, all benefits scheduled under current law, and (2) expenditures (disbursements or outgo), which include actual payments for the past and only

the portion of the cost of the program that is projected to be payable with the

financing provisions in current law.

As described in the Overview section of this report, these estimates depend

upon a broad set of demographic, economic, and programmatic factors.

Since assumptions related to these factors are subject to uncertainty, the estimates presented in this section are prepared under three sets of assumptions,

to show a range of possible outcomes. The intermediate set of assumptions,

designated as alternative II, reflects the Trustees’ best estimate of future

experience; the low-cost alternative I is more optimistic and the high-cost

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

The intermediate estimates are shown first in the tables in this report, followed by the low-cost and high-cost estimates. These sets of assumptions,

along with actuarial methods used to produce the estimates, are described in

chapter V. In this chapter, the estimates and measures of trust fund financial

adequacy for the short range (2009-18) are presented first, followed by estimates and measures of actuarial status for the long range (2009-83) and for

the infinite future. As an additional illustration of uncertainty, estimated

probability distributions of certain measures are presented in Appendix E.

A. SHORT-RANGE ESTIMATES

Financial adequacy, or solvency, of the trust funds reflects the ability to pay

scheduled benefits in full on a timely basis and is generally assessed using

the “trust fund ratio,” which is defined as the assets at the beginning of a year

expressed as a percentage of the projected cost for the year. Thus, the trust

fund ratio represents the proportion of a year’s cost that can be paid with the

funds available at the beginning of the year. A trust fund ratio of 100 percent

of annual program cost is generally assumed to provide a reasonable “contingency reserve.” During periods when trust fund income exceeds disbursements, the excess is held in the trust funds. To the extent that trust fund assets

exceed 100 percent of annual cost, the excess is dedicated to advance fund a

portion of the Social Security program’s future financial obligations. During

periods when trust fund disbursements exceed income, as might happen during an economic recession, trust fund assets are used to meet the shortfall. In

the event of recurring shortfalls for an extended period, the trust funds can
Actuarial Estimates

34

allow time for the development, enactment, and implementation of legislation to restore financial stability to the program.

The short-range test of financial adequacy is applicable to the OASI and DI

Trust Funds individually and on a combined basis. The requirements of this

test are as follows: If the estimated trust fund ratio is at least 100 percent at

the beginning of the projection period, then it must be projected to remain at

or above 100 percent throughout the 10-year projection period. Alternatively,

if the ratio is initially less than 100 percent, then it must be projected to reach

a level of at least 100 percent within 5 years (and not be depleted at any time

during this period) and to remain at or above 100 percent throughout the

remainder of the 10-year period. In addition, the fund’s estimated assets at

the beginning of each month of the 10-year period must be sufficient to cover

that month’s disbursements. This test is applied on the basis of the intermediate estimates. Failure to meet this test by either trust fund is an indication that

solvency of the program over the next 10 years is in question and that legislative action is needed to improve the short-range financial adequacy of the

program.

1. Operations of the OASI Trust Fund

This subsection presents estimates of the operations and financial status of

the OASI Trust Fund for the period 2009-18, based on the assumptions

described in chapter V. No changes are assumed to occur in the present statutory provisions and regulations under which the OASDI program operates.1

These estimates are shown in table IV.A1 and indicate that the assets of the

OASI Trust Fund would continue to increase rapidly throughout the next 10

years under all three sets of assumptions. Also, based on the intermediate

assumptions, the assets of the OASI Trust Fund would continue to exceed

100 percent of annual expenditures by a large amount through the end of

2018. Consequently, the OASI Trust Fund satisfies the test of short-range

financial adequacy by a wide margin. The estimates in table IV.A1 also indicate that the short-range test would be satisfied even under the high-cost

assumptions (see figure IV.A1 for graphical illustration of these results).

The increases in estimated income shown in table IV.A1 under each set of

assumptions reflect increases in estimated OASDI taxable earnings and

growth in interest earnings on the invested assets of the trust fund. For each

alternative, employment is assumed to decrease in 2009 and, for alternative

III only, in 2010. Thereafter, employment is assumed to increase in every

year through 2018 for each alternative. The number of persons with taxable

 1 The estimates shown in this subsection reflect 12 months of benefit payments in each year of the shortrange projection period. In practice, the actual payment dates have at times been shifted over calendar year

boundaries as a result of the statutory requirement that benefit checks be delivered early when the normal

check delivery date is a Saturday, Sunday, or legal public holiday. The annual benefit figures are shown as if

those benefit checks were delivered on the usual date.
35

Short-Range Estimates

earnings would increase on the basis of alternatives I, II, and III from

162 million during calendar year 2008 to about 177 million, 174 million, and

171 million, respectively, in 2018. The total annual amount of taxable earnings is projected to increase in every year through 2018 for each alternative.

Total earnings increase from $5,511 billion in 2008 to $8,319 billion,

$8,329 billion, and $8,710 billion, in 2018, on the basis of alternatives I, II,

and III, respectively.1 These increases in taxable earnings are due primarily

to (1) projected increases in employment levels as the working age population increases, (2) increases in average earnings in covered employment

(reflecting both real growth and price inflation), and (3) increases in the contribution and benefit base during the period 2009-18 under the automaticadjustment provisions.

Growth in interest earnings represents a significant component of the overall

increase in trust fund income during this period. Although interest rates payable on trust fund investments are assumed to temporarily decline from current levels, the continuing rapid increase in OASI assets will result in a

corresponding net increase in interest income. By 2018, interest income to

the OASI Trust Fund is projected to be about 18 percent of total trust fund

income on the basis of the intermediate assumptions, as compared to

15 percent in 2008.

 1 Note that the pattern, by alternative, of these nominal amounts of total taxable earnings is not what might

be expected, but the reverse, because of the varying inflation assumptions embedded in the respective estimates.

 Figure IV.A1.—Short-Range OASI and DI Trust Fund Ratios

[Assets as a percentage of annual cost]

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Calendar year

OASI

DI

Historical Estimated

"Minimum" level for short-term financial adequacy

I

II

III

I

II

III
Actuarial Estimates

36

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

Table IV.A1.—Operations of the OASI Trust Fund, Calendar Years 2004-18a

[Dollar amounts in billions]

a A detailed description of the components of income and cost, along with complete historical values, is presented in Appendix A.

Calendar

year

Income Cost Assets

Totalb

b “Total Income” column includes transfers made between the OASI Trust Fund and the General Fund of the

Treasury that are not included in the separate components of income shown. These transfers consist of payments for (1) the cost of noncontributory wage credits for military service before 1957, and (2) the cost of

benefits to certain uninsured persons who attained age 72 before 1968. In December 2005, $350 million was

transferred from the OASI Trust Fund to the General Fund of the Treasury for the cost of pre-1957 military

service wage credits. After 2008 such transfers are estimated to be less than $500,000 in each year.

Net

contributions

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioc

c The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets at

the end of the prior year shown in the “Amount at end of year” column) as a percentage of cost for the year.

Historical data:

2004 . . $566.3 $472.8 $14.6 $79.0 $421.0 $415.0 $2.4 $3.6 $145.3 $1,500.6 322

2005 . . 604.3 506.9 13.8 84.0 441.9 435.4 3.0 3.6 162.4 1,663.0 340

2006 . . 642.2 534.8 15.6 91.8 461.0 454.5 3.0 3.5 181.3 1,844.3 361

2007 . . 675.0 560.9 17.2 97.0 495.7 489.1 3.1 3.6 179.3 2,023.6 372

2008 . . 695.5 574.6 15.6 105.3 516.2 509.3 3.2 3.6 179.3 2,202.9 392

Intermediate:

2009 . . 708.5 579.0 21.7 107.8 561.8 554.7 3.6 3.6 146.7 2,349.6 392

2010 . . 733.9 599.4 23.9 110.6 581.2 573.8 3.5 3.8 152.7 2,502.2 404

2011 . . 771.8 628.9 25.2 117.7 602.0 594.5 3.6 3.8 169.8 2,672.1 416

2012 . . 822.4 667.4 26.8 128.3 633.9 626.3 3.7 3.9 188.6 2,860.6 422

2013 . . 874.2 702.8 30.1 141.3 678.8 671.2 3.7 3.9 195.3 3,056.0 421

2014 . . 924.7 737.2 32.6 154.8 729.6 721.8 3.8 4.1 195.0 3,251.0 419

2015 . . 975.4 772.8 35.7 166.9 783.4 775.3 3.9 4.3 192.0 3,443.0 415

2016 . . 1,024.0 806.6 38.8 178.6 839.8 831.5 3.9 4.4 184.1 3,627.2 410

2017 . . 1,074.6 841.9 42.1 190.6 900.6 891.8 4.0 4.8 174.0 3,801.1 403

2018 . . 1,126.0 878.2 44.9 202.9 965.5 956.3 4.1 5.0 160.5 3,961.6 394

Low-cost:

2009 . . 712.3 582.1 21.7 108.4 561.6 554.5 3.6 3.6 150.7 2,353.6 392

2010 . . 745.4 609.7 23.8 111.8 580.8 573.4 3.5 3.8 164.6 2,518.2 405

2011 . . 781.3 638.1 25.2 118.0 601.2 593.7 3.6 3.8 180.1 2,698.3 419

2012 . . 823.0 669.4 26.4 127.3 624.0 616.5 3.6 3.9 199.0 2,897.3 432

2013 . . 880.4 711.8 29.2 139.4 659.6 652.1 3.7 3.8 220.9 3,118.2 439

2014 . . 927.1 743.9 31.4 151.8 701.9 694.3 3.7 3.9 225.3 3,343.4 444

2015 . . 973.6 776.3 34.0 163.2 746.4 738.5 3.8 4.1 227.2 3,570.6 448

2016 . . 1,020.7 808.6 36.6 175.5 792.6 784.7 3.8 4.1 228.1 3,798.7 450

2017 . . 1,070.8 842.1 39.4 189.3 842.4 834.0 3.9 4.4 228.5 4,027.2 451

2018 . . 1,122.8 877.3 41.7 203.9 895.0 886.5 4.0 4.6 227.8 4,254.9 450

High-cost:

2009 . . 707.9 578.0 21.8 108.2 562.1 555.0 3.6 3.6 145.8 2,348.7 392

2010 . . 730.4 594.8 23.9 111.7 581.9 574.5 3.5 3.8 148.5 2,497.2 404

2011 . . 772.1 628.0 25.3 118.8 604.5 597.0 3.6 3.8 167.6 2,664.8 413

2012 . . 809.7 653.9 27.2 128.5 644.8 637.2 3.6 3.9 165.0 2,829.8 413

2013 . . 863.5 688.9 31.2 143.5 702.8 695.0 3.8 4.0 160.7 2,990.4 403

2014 . . 937.5 736.8 34.8 165.9 778.7 770.5 3.9 4.3 158.7 3,149.2 384

2015 . . 1,006.9 786.1 39.1 181.7 858.2 849.4 4.1 4.7 148.8 3,297.9 367

2016 . . 1,068.8 832.6 43.2 193.0 935.9 926.7 4.2 5.0 132.9 3,430.8 352

2017 . . 1,127.1 876.9 47.4 202.7 1,013.9 1,004.1 4.3 5.5 113.1 3,544.0 338

2018 . . 1,179.8 918.0 51.0 210.8 1,096.5 1,086.2 4.4 5.9 83.3 3,627.3 323
37

Short-Range Estimates

Rising expenditures during 2009-18 reflect automatic benefit increases as

well as the upward trend in the number of beneficiaries and in the average

monthly earnings underlying benefits payable by the program. The growth in

the number of beneficiaries in the past and the expected growth in the future

result both from the increase in the aged population and from the increase in

the proportion of the population that is eligible for benefits.

The estimates under all three sets of assumptions shown in table IV.A1 indicate that income to the OASI Trust Fund would substantially exceed expenditures in every year of the short-range projection period, and assets are

therefore estimated to increase substantially.

The portion of the OASI Trust Fund that is not needed to meet day-to-day

expenditures is used to purchase financial securities, generally special public-debt obligations of the U.S. Government. The cash used to make these

purchases flows to the General Fund of the Treasury and is used to meet various Federal outlays or to reduce the amount of publicly-held Federal debt.

Interest on these securities is credited to the trust fund and, when the securities mature, they are reinvested in new securities if not immediately needed

to pay program costs. When securities are redeemed prior to maturity in

order to pay program costs, general fund revenues flow to the trust fund.

Thus, the investment operations of the trust fund result in various credits and

cash flows between the trust fund and the General Fund of the Treasury.

2. Operations of the DI Trust Fund

The estimated operations and financial status of the DI Trust Fund during

calendar years 2009-18 under the three sets of assumptions are shown in

table IV.A2, together with values for actual experience during 2004-08.

Income is generally projected to increase steadily under each alternative,

reflecting most of the same factors described previously in connection with

the OASI Trust Fund. DI Trust Fund assets are projected to begin to decrease

in 2009 under each alternative. Under the low-cost assumptions, assets

would begin to increase again after reaching a low point in 2012. Under the

intermediate assumptions, assets would continue to decline through 2018.

Under the high-cost assumptions, DI assets would decline steadily until

exhaustion in 2016.

Cost is estimated to increase in part due to increases in average benefit levels

resulting from (1) automatic benefit increases and (2) projected increases in

the amounts of average monthly earnings on which benefits are based. In

addition, under all three sets of assumptions, the number of DI beneficiaries

in current-payment status is projected to continue increasing throughout the

short-range projection period. Over the period 2008-18, the projected annual

average growth rate in the number of DI worker beneficiaries is roughly 0.9,

2.3, and 3.5 percent under alternatives I, II, and III, respectively. Growth is
Actuarial Estimates

38

largely attributable to the gradual progression of the baby-boom generation

through ages 50 to normal retirement age, at which ages higher rates of disability incidence are experienced. The estimates under all three sets of

assumptions anticipate additional growth in the numbers of DI worker beneficiaries due to a projected sharp, but temporary, increase in incidence rates

to levels comparable to some of the highest ever experienced under the DI

program. These increases are projected to result from the current economic

recession. The projected higher levels of disability incidence are expected to

subside as the economy recovers, and to return to levels comparable to those

projected in last year’s report.1

The proportion of DI beneficiaries whose benefits terminate in a given year

has also fluctuated in the past. Over the last 20 years, the rates of benefit termination due to death or conversion to retirement benefits (at attainment of

normal retirement age) have declined very gradually. This trend is attributable, in part, to the lower average age of new beneficiaries. Declines in mortality for the general population have also led to improved mortality

experience among the DI disabled-worker beneficiaries. In addition, conversions to old-age benefits were at a temporarily reduced level for years 2003

through 2008 due to the gradual increase in the normal retirement age. The

termination rate due to recovery has been much more volatile. Currently, the

proportion of disabled beneficiaries whose benefits cease because of their

recovery from disability is very low in comparison to levels experienced

throughout the 1970s and early 1980s. Projected rates of recovery terminations in this year’s report are temporarily elevated in years 2011-14 due to

increased funding for the purpose of reducing the backlog of continuing disability reviews (CDRs) conducted by SSA. Following this temporary

increase in CDRs, recovery termination rates are projected to return to levels

consistent with (1) projected levels of work terminations and (2) the assumption that terminations for medical improvement will be consistent with continued timely completion of CDRs after 2014. The overall proportion of

disabled workers leaving the DI rolls (reflecting all causes) is projected to

return to higher levels in 2009 when the gradual increase in the normal retirement age temporarily ceases.

 1 Historical and projected patterns of disability incidence rates are described in greater detail in section

V.C.6.
39

Short-Range Estimates

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

Table IV.A2.—Operations of the DI Trust Fund, Calendar Years 2004-18a

[Dollar amounts in billions]

a A detailed description of the components of income and cost, along with complete historical values, is presented in Appendix A.

Calendar

year

Income Cost Assets

Totalb

b “Total Income” column includes transfers made between the DI Trust Fund and the General Fund of the

Treasury that are not included in the separate components of income shown. These transfers consist of payments for the cost of noncontributory wage credits for military service before 1957. In particular, a transfer

was made in December 2007 in the amount of $7.7 million from the General Fund of the Treasury to the DI

Trust Fund. After 2008 such transfers are estimated to be less than $500,000 in each year.

Net

contributions

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioc

c The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets at

the end of the prior year shown in the “Amount at end of year” column) as a percentage of cost for the year.

Historical data:

2004 . . $91.4 $80.3 $1.1 $10.0 $80.6 $78.2 $2.2 $0.2 $10.8 $186.2 218

2005 . . 97.4 86.1 1.1 10.3 88.0 85.4 2.3 .3 9.4 195.6 212

2006 . . 102.6 90.8 1.2 10.6 94.5 91.7 2.3 .4 8.2 203.8 207

2007 . . 109.9 95.2 1.4 13.2 98.8 95.9 2.5 .4 11.1 214.9 206

2008 . . 109.8 97.6 1.3 11.0 109.0 106.0 2.5 .4 .9 215.8 197

Intermediate:

2009 . . 110.9 98.3 2.2 10.4 120.7 117.7 2.5 .4 -9.8 206.0 179

2010 . . 113.9 101.8 2.6 9.5 128.1 125.0 2.6 .5 -14.3 191.7 161

2011 . . 118.2 106.8 2.7 8.7 133.1 129.8 2.7 .6 -15.0 176.7 144

2012 . . 124.1 113.3 2.9 7.9 138.6 135.1 2.9 .5 -14.5 162.2 128

2013 . . 129.7 119.3 3.3 7.1 143.9 140.2 3.1 .5 -14.2 148.1 113

2014 . . 135.0 125.2 3.5 6.3 150.6 146.8 3.3 .5 -15.6 132.5 98

2015 . . 140.5 131.2 3.8 5.4 157.8 153.8 3.5 .5 -17.4 115.1 84

2016 . . 145.6 137.0 4.1 4.6 165.5 161.3 3.7 .5 -19.9 95.2 70

2017 . . 151.1 143.0 4.4 3.7 173.6 169.2 3.9 .5 -22.5 72.7 55

2018 . . 156.5 149.1 4.7 2.6 182.0 177.4 4.1 .5 -25.5 47.2 40

Low-cost:

2009 . . 111.5 98.8 2.2 10.4 118.5 115.5 2.5 .4 -7.0 208.8 182

2010 . . 115.8 103.5 2.5 9.8 123.6 120.5 2.6 .5 -7.8 201.0 169

2011 . . 120.3 108.4 2.6 9.4 126.4 123.1 2.7 .6 -6.2 194.8 159

2012 . . 125.4 113.7 2.7 9.1 128.0 124.5 2.9 .5 -2.6 192.2 152

2013 . . 132.9 120.9 2.9 9.1 129.5 125.9 3.1 .5 3.4 195.7 148

2014 . . 138.8 126.3 3.1 9.3 132.7 128.9 3.3 .5 6.1 201.7 147

2015 . . 144.7 131.8 3.3 9.6 136.6 132.7 3.5 .5 8.1 209.8 148

2016 . . 150.9 137.3 3.5 10.1 141.0 136.9 3.6 .5 9.9 219.7 149

2017 . . 157.5 143.0 3.7 10.8 145.4 141.2 3.8 .4 12.1 231.8 151

2018 . . 164.6 149.0 3.9 11.7 149.9 145.5 4.0 .4 14.6 246.4 155

High-cost:

2009 . . 110.7 98.1 2.2 10.3 122.9 119.9 2.5 .4 -12.2 203.6 176

2010 . . 113.0 101.0 2.7 9.3 132.5 129.4 2.6 .5 -19.5 184.1 154

2011 . . 117.6 106.6 2.8 8.2 139.6 136.3 2.7 .6 -21.9 162.2 132

2012 . . 121.1 111.0 3.1 6.9 149.0 145.5 2.9 .5 -27.9 134.3 109

2013 . . 125.8 117.0 3.7 5.2 160.4 156.7 3.2 .5 -34.6 99.7 84

2014 . . 132.7 125.1 4.1 3.5 175.3 171.3 3.5 .6 -42.6 57.1 57

2015 . . 139.4 133.5 4.6 1.4 189.9 185.6 3.7 .6 -50.4 6.7 30

2016 . . d

d Under the high-cost assumptions, the DI Trust Fund is projected to be exhausted in 2016. Therefore, certain

trust fund operation values for 2016 to 2018 are not meaningful under present law and are not shown in this

table.

141.4 5.0 d 202.6 198.0 4.0 .6 d d 3

2017 . . d 148.9 5.5 d 214.5 209.7 4.2 .6 d dd

2018 . . d 155.9 5.9 d 227.3 222.3 4.4 .6 d dd
Actuarial Estimates

40

At the beginning of calendar year 2008, the assets of the DI Trust Fund represented 197 percent of annual expenditures. During 2008, DI expenditures

continued to exceed noninterest income. Although total DI income exceeded

DI expenditures by $0.9 billion, the trust fund ratio for the beginning of 2009

still decreased, to about 179 percent. Under the intermediate set of assumptions, expenditures are estimated to exceed total income from 2009 through

2018. The projected expenditures in excess of income result in a decline in

the projected trust fund ratio to 40 percent by the beginning of 2018.

Under the low-cost assumptions, the trust fund ratio would decrease to a low

of 147 percent at the beginning of 2014, before increasing to 155 percent at

the beginning of 2018. Under the high-cost assumptions, the assets of the DI

Trust Fund would decline steadily, dipping below the level of 1 year’s expenditures during 2012, and becoming completely depleted in 2016.

Assets of the DI Trust Fund were greater than 1 year’s expenditures at the

beginning of 2009. By the beginning of 2014, however, the trust fund ratio is

projected to decline to 98 percent. Accordingly, the DI Trust Fund does not

satisfy the Trustees’ short-range test of financial adequacy under both the

intermediate and high-cost assumptions. However, under the low-cost

assumptions the DI Trust Fund does meet the short-range test of financial

adequacy, because assets remain above 1 year’s expenditures through the end

of the short-range period, as described above (see also figure IV.A1).

3. Operations of the Combined OASI and DI Trust Funds

The estimated operations and status of the OASI and DI Trust Funds, combined, during calendar years 2009-18 on the basis of the three alternatives,

are shown in table IV.A3, together with figures on actual experience in

2004-08. Because income and cost for the OASI Trust Fund represent over

80 percent of the corresponding amounts for the combined OASI and DI

Trust Funds, the operations of the OASI Trust Fund tend to dominate the

combined operations of the two funds. Consequently, based on the strength

of the OASI Trust Fund over the next 10 years, the combined OASI and DI

Trust Funds meet the requirements of the short-range test of financial adequacy under all three alternative sets of assumptions.

While combining the operations of the OASI and DI Trust Funds permits an

assessment of the short-range test for the two programs on a combined basis,

in practice assets from one trust fund cannot be shared with another trust

fund without legislative changes to the Social Security Act. For example,

under the high-cost scenario, table IV.A2 shows that the DI Trust Fund

becomes exhausted in 2016. The value of the combined OASI and DI Trust

Funds in that year shown in table IV.A3 shows that OASI assets could be

made available to pay DI benefits through 2018, but only with legislation to

permit this action.
41

Short-Range Estimates

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

Table IV.A3.—Operations of the Combined OASI and DI Trust Funds,

Calendar Years 2004-18 a

[Dollar amounts in billions]

a A detailed description of the components of income and cost, along with complete historical values, is presented in Appendix A.

Calendar

year

Income Cost Assets

Totalb

b “Total Income” column includes transfers made between the OASI and DI Trust Funds and the General

Fund of the Treasury that are not included in the separate components of income shown. These transfers consist of payments for (1) the cost of noncontributory wage credits for military service before 1957, and (2) the

cost of benefits to certain uninsured persons who attained age 72 before 1968.

Net

contributions

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioc

c The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets at

the end of the prior year shown in the “Amount at end of year” column) as a percentage of cost for the year.

Historical data:

2004 . . $657.7 $553.0 $15.7 $89.0 $501.6 $493.3 $4.5 $3.8 $156.1 $1,686.8 305

2005 . . 701.8 592.9 14.9 94.3 529.9 520.7 5.3 3.9 171.8 1,858.7 318

2006 . . 744.9 625.6 16.9 102.4 555.4 546.2 5.3 3.8 189.5 2,048.1 335

2007 . . 784.9 656.1 18.6 110.2 594.5 584.9 5.5 4.0 190.4 2,238.5 345

2008 . . 805.3 672.1 16.9 116.3 625.1 615.3 5.7 4.1 180.2 2,418.7 358

Intermediate:

2009 . . 819.4 677.3 24.0 118.1 682.5 672.4 6.1 4.0 136.9 2,555.5 354

2010 . . 847.7 701.2 26.4 120.1 709.3 698.8 6.2 4.3 138.4 2,693.9 360

2011 . . 890.0 735.7 27.9 126.4 735.1 724.4 6.4 4.4 154.8 2,848.8 366

2012 . . 946.5 780.7 29.7 136.1 772.4 761.4 6.6 4.4 174.1 3,022.9 369

2013 . . 1,003.9 822.1 33.4 148.4 822.7 811.4 6.9 4.4 181.2 3,204.0 367

2014 . . 1,059.7 862.4 36.2 161.1 880.2 868.5 7.1 4.6 179.4 3,383.5 364

2015 . . 1,115.9 904.0 39.5 172.4 941.2 929.0 7.4 4.8 174.6 3,558.1 359

2016 . . 1,169.6 943.6 42.9 183.1 1,005.3 992.8 7.7 4.9 164.3 3,722.4 354

2017 . . 1,225.7 984.8 46.6 194.3 1,074.3 1,061.0 8.0 5.3 151.4 3,873.8 347

2018 . . 1,282.5 1,027.3 49.7 205.5 1,147.5 1,133.8 8.3 5.5 135.0 4,008.8 338

Low-cost:

2009 . . 823.8 681.0 23.9 118.9 680.1 670.0 6.1 4.0 143.7 2,562.4 356

2010 . . 861.2 713.2 26.3 121.6 704.4 693.9 6.2 4.3 156.8 2,719.1 364

2011 . . 901.5 746.4 27.7 127.4 727.6 716.8 6.4 4.4 173.9 2,893.1 374

2012 . . 948.4 783.0 29.0 136.4 752.0 741.0 6.6 4.4 196.5 3,089.5 385

2013 . . 1,013.3 832.7 32.2 148.4 789.0 777.9 6.8 4.4 224.3 3,313.8 392

2014 . . 1,065.9 870.3 34.5 161.1 834.6 823.2 7.0 4.4 231.3 3,545.2 397

2015 . . 1,118.3 908.2 37.3 172.9 883.0 871.2 7.2 4.5 235.3 3,780.5 401

2016 . . 1,171.5 945.9 40.1 185.6 933.6 921.5 7.5 4.6 238.0 4,018.4 405

2017 . . 1,228.3 985.1 43.1 200.2 987.8 975.2 7.7 4.8 240.5 4,259.0 407

2018 . . 1,287.4 1,026.2 45.5 215.6 1,045.0 1,032.0 8.0 5.0 242.4 4,501.3 408

High-cost:

2009 . . 818.6 676.1 24.0 118.5 685.0 674.9 6.1 4.0 133.7 2,552.3 353

2010 . . 843.4 695.8 26.5 121.0 714.4 703.9 6.2 4.4 129.0 2,681.3 357

2011 . . 889.7 734.7 28.1 126.9 744.0 733.3 6.3 4.4 145.7 2,827.0 360

2012 . . 930.8 765.0 30.4 135.4 793.7 782.7 6.6 4.5 137.0 2,964.0 356

2013 . . 989.3 805.8 34.8 148.7 863.3 851.7 7.0 4.6 126.1 3,090.1 343

2014 . . 1,070.2 861.9 38.9 169.4 954.0 941.8 7.4 4.8 116.2 3,206.3 324

2015 . . 1,146.4 919.6 43.7 183.1 1,048.1 1,035.0 7.8 5.2 98.3 3,304.6 306

2016 . . 1,213.8 973.9 48.2 191.7 1,138.4 1,124.7 8.2 5.5 75.4 3,380.0 290

2017 . . 1,276.4 1,025.8 52.9 197.7 1,228.4 1,213.8 8.5 6.1 48.0 3,428.0 275

2018 . . 1,332.5 1,073.9 57.0 201.7 1,323.8 1,308.4 8.9 6.4 8.8 3,436.8 259
Actuarial Estimates

42

4. Factors Underlying Changes in 10-Year Trust Fund Ratio Estimates

From the 2008 Report

The factors underlying the changes in the intermediate estimates for the

OASI, DI and the combined funds from last year’s annual report to this

report are analyzed in table IV.A4. In the 2008 Annual Report, the trust fund

ratio for OASI was estimated to reach 438 percent at the beginning of

2017—the tenth projection year from that report. If there had been no

changes to the projections, the estimated ratio at the beginning of 2018

would be 7 percentage points lower than at the beginning of 2017, or

431 percent. There were changes, however, to reflect the latest actual data, as

well as adjustments to the assumptions for future years and the projection

methods. The resulting ratio shown in this report for the tenth projection year

(2018) is 394 percent. The net effect of changes in demographic assumptions

over the short-range period resulted in a reduction in the tenth-year trust fund

ratio of 2 percentage points. The cumulative net effects of changes in economic data and assumptions resulted in a reduction in the trust fund ratio of

26 percentage points by the beginning of 2018. The change due to economic

assumptions reflects the effects of the economic recession that started in

December 2007 on revenue and benefit levels. There were several relatively

minor changes in the short-range projection methodology since the 2008

report. The changes included improvements in the methods for estimating

the numbers of beneficiaries and average benefit amounts at the end of each

quarter, given numbers and average amounts at the end of each calendar year.

The combined effect of the various methodological improvements was to

increase the ending trust fund ratio by about 2 percentage points. Finally, a

decrease in the 2018 trust fund ratio of 12 percentage points resulted from

the combined effects of incorporating recent programmatic data including

the further correction of the trust fund allocation error described in section

III.A.

Corresponding estimates of the factors underlying the changes in the financial projections for the DI Trust Fund, and for the OASI and DI Trust Funds

combined, are also shown in table IV.A4. The largest effects on the DI trust

fund ratio at the beginning of 2018 are due to the revised economic assumptions and updates for programmatic data and assumptions. In particular, temporary increases in disability incidence rates related to the current recession

make up about 20 percentage points of the 31 percentage point reduction

attributable to programmatic assumptions. The change in the valuation

period accounts for the remainder of the total change in the DI trust fund

ratio.
43

Short-Range Estimates

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

Table IV.A4.—Reasons for Change in Trust Fund Ratios at the Beginning 

of the Tenth Year of Projection

[In percent]

Item

OASI

Trust Fund

DI

Trust Fund

OASI and DI

Trust Funds,

combined

Trust fund ratio shown in last year’s report for calendar year 2017 438 107 385

Change in trust fund ratio due to changes in: 

Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

a The effects of enactment of the Food, Conservation, and Energy Act of 2008; the Emergency Economic

Stabilization Act of 2008; and the American Recovery and Reinvestment Act of 2009 on economic growth

are reflected in the short-term economic assumptions used for this report.

a a

Valuation period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7 -12 -7

Demographic data and assumptions. . . . . . . . . . . . . . . . . . . . -2 b

b Change in trust fund ratio of less than 0.5 percentage point.

-2

Economic data and assumptions. . . . . . . . . . . . . . . . . . . . . . . -26 -25 -26

Programmatic data and assumptions . . . . . . . . . . . . . . . . . . . -12 -31 -14

Projection methods and data. . . . . . . . . . . . . . . . . . . . . . . . . . 2 b 2

Total change in trust fund ratio . . . . . . . . . . . . . . . . . . . . . . . . . -44 -67 -47

Trust fund ratio shown in this report for calendar year 2018. . . . . 394 40 338
Actuarial Estimates

44

B. LONG-RANGE ESTIMATES

Three types of financial measures are useful in assessing the actuarial status

of the Social Security trust funds under the financing approach specified in

current law: (1) annual cash-flow measures, including income and cost rates,

and balances; (2) trust fund ratios; and (3) summary measures like actuarial

balances and unfunded obligations. The first long-range estimates presented

are the series of projected annual balances (or net cash flow), which are the

differences between the projected annual income rates and annual cost rates

(expressed as percentages of the taxable payroll). In assessing the financial

condition of the program, particular attention should be paid to the level of

the annual balances at the end of the long-range period and the time at which

the annual balances may change from positive to negative values. 

The next measure discussed is the pattern of projected trust fund ratios. The

trust fund ratio represents the proportion of a year’s projected cost that could

be paid with the funds available at the beginning of the year. Particular attention should be paid to the level and year of maximum trust fund ratio, to the

year of exhaustion of the funds, and to the stability of the trust fund ratio in

cases where the ratio remains positive at the end of the long-range period.

When a program has positive trust fund ratios throughout the 75-year projection period and these ratios are stable or rising at the end of the period, the

program financing is said to achieve sustainable solvency.

The final measures discussed in this section summarize the total income and

cost over valuation periods that extend through 75 years, and to the infinite

horizon. These measures indicate whether projected income will be adequate

for the period as a whole. The first such measure, actuarial balance, indicates

the size of any surplus or shortfall as a percentage of the taxable payroll over

the period. The second, open group unfunded obligation, indicates the size of

any shortfall in present-value dollars. This section also includes a comparison of covered workers to beneficiaries, a generational decomposition of the

infinite future unfunded obligation, the test of long-range close actuarial balance, and the reasons for change in the actuarial balance from the last report.

If the 75-year actuarial balance is zero (or positive), then the trust fund ratio

at the end of the period will be at 100 percent (or greater), and financing for

the program is considered to be adequate for the 75-year period as a whole.

Financial adequacy, or solvency, for each year is determined by whether the

trust fund asset level is positive throughout the year. Whether or not financial

adequacy is stable in the sense that it is likely to continue for subsequent 75-

year periods in succeeding reports is also important when considering the

actuarial status of the program. One indication of this stability, or sustainable

solvency, is the behavior of the trust fund ratio at the end of the projection
45

Long-Range Estimates

period. If trust fund ratios for the last several years of the long-range period

are positive and are at a constant or rising level, then it is likely that subsequent Trustees Reports will also show projections of financial adequacy

(assuming no changes in demographic and economic assumptions, or the

law). The actuarial balance and the open group unfunded obligation for the

infinite future provide additional measures of the financial status of the program for the very long range.

1. Annual Income Rates, Cost Rates, and Balances

Basic to the consideration of the long-range actuarial status of the trust funds

are the concepts of income rate and cost rate, each of which is expressed as a

percentage of taxable payroll. Other measures of the cash flow of the program are shown in Appendix F. The annual income rate is the sum of the tax

contribution rate and the ratio of income from taxation of benefits to the

OASDI taxable payroll for the year. The OASDI taxable payroll consists of

the total earnings that are subject to OASDI taxes, with some relatively small

adjustments.1

The annual cost rate is the ratio of the cost of the program to the taxable payroll for the year. The cost is defined to include scheduled benefit payments,

administrative expenses, net transfers from the trust funds to the Railroad

Retirement program under the financial-interchange provisions, and payments for vocational rehabilitation services for disabled beneficiaries. For

any year, the income rate minus the cost rate is referred to as the balance for

the year.2

Table IV.B1 presents a comparison of the estimated annual income rates and

cost rates by trust fund and alternative. Detailed long-range projections of

trust fund operations, in current dollar amounts, are shown in table VI.F8.

The projections for OASI under the intermediate assumptions show the

income rate rising due to the gradually increasing effect of the taxation of

benefits. The projected income from the taxation of benefits, expressed as a

percentage of taxable payroll, is expected to increase for two reasons. First,

benefits are rising faster than payroll. Second, the benefit-taxation threshold

amounts are not indexed, so that an increasing share of beneficiaries will be

paying tax on their benefits. The pattern of the cost rate is much different.

The cost rate rises in 2009 and 2010 due to the projected economic recession,

 1 Adjustments are made to include deemed wage credits based on military service for 1983-2001, and to

reflect the lower effective tax rates (as compared to the combined employee-employer rate) that apply to

multiple-employer “excess wages,” and that did apply, before 1984, to net earnings from self-employment

and, before 1988, to income from tips.

 2 In this context, the term balance does not represent the assets of the trust funds, which are sometimes

referred to as the balance in the trust funds.
Actuarial Estimates

46

and then comes back down through 2012 due to the recovery. From about

2012 to 2030, the cost rate rises rapidly because the retirement of the babyboom generation will cause the number of beneficiaries to rise much faster

than the labor force. After 2030, the cost rate remains fairly stable for about

30 years because the number of workers and beneficiaries are projected to

rise at the same rate. Thereafter, the cost rate rises slowly, reflecting projected reductions in death rates and continued relatively low birth rates. The

cost rate reaches 15.35 percent of taxable payroll for 2083. By comparison,

the income rate reaches 11.48 percent of taxable payroll for 2083.

Projected income rates under the low-cost and high-cost sets of assumptions

are very similar to those projected for the intermediate assumptions because

they are largely a reflection of the tax rates specified in the law. OASI cost

rates for the low-cost and high-cost assumptions differ significantly from

those projected for the intermediate assumptions. For the low-cost assumptions, the cost rate decreases from 2010 through 2013, then rises, until it

peaks in 2033 at a level of 13.01 percent of payroll. The cost rate then generally declines gradually, reaching a level of 10.92 percent of payroll for 2083

(at which point the income rate reaches 11.22 percent). For the high-cost

assumptions, the cost rate rises from 2011 through the end of the 75-year

period. It rises at a relatively fast pace between 2011 and 2030 because of the

aging of the baby-boom generation. Subsequently, the projected cost rate

continues rising and reaches 22.41 percent of payroll for 2083 (at which

point the income rate reaches 11.88 percent).

The pattern of the projected OASI annual balance is important in the analysis

of the financial condition of the program. Under the intermediate assumptions, the annual balance is positive for 8 years (through 2016) and is negative thereafter. This annual deficit rises rapidly, reaching 2 percent of taxable

payroll by 2024, and continues rising generally thereafter, to a level of

3.87 percent of taxable payroll for 2083.

Under the low-cost assumptions, the projected OASI annual balance is positive for 11 years (through 2019) and then becomes negative, with the annual

deficit peaking at 1.74 percent of taxable payroll for 2033. Then, the annual

deficit declines until 2065, when the OASI annual balance becomes positive,

reaching a surplus of 0.30 percent of payroll in 2083. Under the high-cost

assumptions, in contrast, the OASI balance is projected to be positive for

only 5 years (through 2013) and to be negative thereafter, with a deficit of

2.19 percent for 2020, 6.30 percent for 2050, and 10.53 percent of payroll for

2083.
47

Long-Range Estimates

Table IV.B1.—Annual Income Rates, Cost Rates, and Balances,

Calendar Years 1990-2085

[As a percentage of taxable payroll]

Calendar 

year

OASI DI OASDI

Income

ratea Cost

rate Balance

Income

ratea Costrate Balance

Income

ratea Costrate Balance

Historical data:

1990. . . . . 11.32 9.66 1.66 1.17 1.09 0.09 12.49 10.74 1.75

1991. . . . . 11.44 10.15 1.29 1.21 1.18 .03 12.65 11.33 1.32

1992. . . . . 11.43 10.27 1.16 1.21 1.27 -.06 12.64 11.54 1.10

1993. . . . . 11.40 10.37 1.03 1.21 1.35 -.14 12.61 11.73 .88

1994. . . . . 10.70 10.22 .48 1.89 1.40 .49 12.59 11.62 .97

1995. . . . . 10.70 10.22 .48 1.88 1.44 .44 12.59 11.67 .92

1996. . . . . 10.73 10.06 .68 1.89 1.48 .41 12.62 11.54 1.09

1997. . . . . 10.93 9.83 1.09 1.71 1.44 .28 12.64 11.27 1.37

1998. . . . . 10.96 9.45 1.51 1.72 1.42 .30 12.68 10.87 1.81

1999. . . . . 10.99 9.10 1.90 1.72 1.42 .30 12.71 10.51 2.19

2000. . . . . 10.89 8.98 1.91 1.80 1.42 .37 12.69 10.40 2.29

2001. . . . . 10.89 9.08 1.81 1.82 1.48 .34 12.71 10.56 2.15

2002. . . . . 10.91 9.29 1.62 1.82 1.60 .22 12.74 10.90 1.84

2003. . . . . 10.89 9.35 1.54 1.82 1.68 .14 12.71 11.04 1.67

2004. . . . . 10.92 9.28 1.64 1.82 1.78 .05 12.75 11.06 1.69

2005. . . . . 10.88 9.31 1.58 1.82 1.85 -.03 12.71 11.16 1.55

2006. . . . . 10.91 9.17 1.75 1.82 1.88 -.05 12.74 11.04 1.69

2007. . . . . 10.93 9.44 1.49 1.83 1.88 -.05 12.75 11.32 1.43

2008. . . . . 10.88 9.40 1.49 1.82 1.98 -.16 12.71 11.38 1.33

Intermediate:

2009. . . . . 10.99 10.17 .83 1.84 2.18 -.34 12.83 12.35 .48

2010. . . . . 11.02 10.24 .78 1.85 2.26 -.41 12.87 12.50 .37

2011 . . . . . 11.02 10.13 .89 1.85 2.24 -.40 12.87 12.37 .50

2012. . . . . 11.02 10.04 .98 1.85 2.20 -.35 12.87 12.24 .63

2013. . . . . 11.05 10.21 .84 1.85 2.17 -.32 12.90 12.38 .52

2014. . . . . 11.07 10.46 .61 1.85 2.16 -.31 12.92 12.62 .30

2015. . . . . 11.09 10.72 .37 1.85 2.16 -.31 12.94 12.88 .06

2016. . . . . 11.11 11.01 .10 1.85 2.17 -.32 12.96 13.18 -.22

2017. . . . . 11.13 11.31 -.18 1.86 2.18 -.32 12.98 13.49 -.51

2018. . . . . 11.14 11.63 -.49 1.86 2.19 -.34 13.00 13.83 -.83

2020. . . . . 11.18 12.29 -1.10 1.86 2.21 -.35 13.04 14.50 -1.46

2025. . . . . 11.27 13.57 -2.30 1.86 2.29 -.43 13.13 15.86 -2.73

2030. . . . . 11.34 14.52 -3.18 1.86 2.24 -.38 13.20 16.76 -3.56

2035. . . . . 11.38 14.92 -3.55 1.86 2.18 -.32 13.24 17.10 -3.86

2040. . . . . 11.39 14.83 -3.44 1.86 2.16 -.30 13.25 16.99 -3.74

2045. . . . . 11.39 14.55 -3.16 1.86 2.20 -.34 13.25 16.75 -3.50

2050. . . . . 11.39 14.37 -2.98 1.86 2.24 -.37 13.25 16.61 -3.36

2055. . . . . 11.39 14.35 -2.96 1.86 2.27 -.40 13.26 16.62 -3.36

2060. . . . . 11.41 14.46 -3.06 1.86 2.26 -.40 13.27 16.73 -3.45

2065. . . . . 11.42 14.58 -3.16 1.86 2.27 -.41 13.28 16.86 -3.57

2070. . . . . 11.43 14.75 -3.32 1.87 2.30 -.43 13.30 17.05 -3.75

2075. . . . . 11.45 14.96 -3.51 1.87 2.32 -.45 13.32 17.27 -3.96

2080. . . . . 11.47 15.19 -3.73 1.87 2.33 -.46 13.33 17.53 -4.19

2085. . . . . 11.48 15.44 -3.96 1.87 2.34 -.47 13.35 17.78 -4.43

First year balance becomes

negative and remains negative

through 2085 . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . 2016

Low-cost:

2009. . . . . 10.99 10.07 .92 1.84 2.12 -.29 12.83 12.19 .64

2010. . . . . 11.01 10.10 .91 1.84 2.15 -.31 12.86 12.25 .61

2011 . . . . . 11.02 9.97 1.05 1.84 2.10 -.25 12.86 12.07 .79

2012. . . . . 11.02 9.87 1.15 1.84 2.02 -.18 12.86 11.90 .96

2013. . . . . 11.03 9.78 1.25 1.84 1.92 -.08 12.88 11.70 1.17

2014. . . . . 11.05 9.98 1.07 1.84 1.89 -.04 12.89 11.86 1.03

2015. . . . . 11.06 10.16 .90 1.84 1.86 -.02 12.91 12.03 .88

2016. . . . . 11.08 10.37 .71 1.85 1.84 b 12.92 12.21 .71

2017. . . . . 11.09 10.58 .51 1.85 1.83 .02 12.94 12.41 .53

2018. . . . . 11.10 10.80 .30 1.85 1.81 .04 12.95 12.61 .34
Actuarial Estimates

48

Notes:

1. The income rate excludes interest income and certain transfers from the General Fund of the Treasury.

2. Some historical values are subject to change due to revisions of taxable payroll.

3. Totals do not necessarily equal the sums of rounded components.

Low-cost (cont.):

2020. . . . . 11.14 11.30 -0.16 1.85 1.79 0.06 12.98 13.09 -0.11

2025. . . . . 11.20 12.25 -1.04 1.85 1.80 .05 13.05 14.04 -1.00

2030. . . . . 11.25 12.88 -1.63 1.85 1.71 .14 13.10 14.59 -1.49

2035. . . . . 11.27 12.98 -1.71 1.84 1.61 .23 13.12 14.60 -1.48

2040. . . . . 11.27 12.64 -1.37 1.84 1.57 .28 13.11 14.20 -1.09

2045. . . . . 11.25 12.15 -.90 1.84 1.57 .28 13.09 13.71 -.62

2050. . . . . 11.24 11.77 -.53 1.84 1.56 .28 13.08 13.34 -.25

2055. . . . . 11.23 11.54 -.30 1.84 1.56 .29 13.08 13.10 -.02

2060. . . . . 11.23 11.40 -.17 1.84 1.54 .31 13.08 12.93 .14

2065. . . . . 11.23 11.23 b 1.84 1.53 .31 13.07 12.76 .32

2070. . . . . 11.22 11.06 .16 1.84 1.53 .31 13.07 12.60 .47

2075. . . . . 11.22 10.94 .28 1.84 1.55 .30 13.06 12.49 .58

2080. . . . . 11.22 10.90 .32 1.84 1.56 .28 13.06 12.46 .60

2085. . . . . 11.22 10.94 .28 1.84 1.57 .27 13.07 12.51 .55

First year balance becomes

negative and remains negative

through 2085 . . . . . . . . . . . . . . c . . . . . . . . . . . . . . . . c . . . . . . . . . . . . . . . . c

High-cost:

2009. . . . . 10.99 10.20 .79 1.84 2.23 -.39 12.84 12.43 .41

2010. . . . . 11.02 10.32 .70 1.85 2.35 -.50 12.87 12.67 .20

2011 . . . . . 11.03 10.18 .85 1.85 2.35 -.50 12.87 12.53 .34

2012. . . . . 11.04 10.44 .60 1.85 2.41 -.56 12.89 12.85 .04

2013. . . . . 11.08 10.78 .30 1.86 2.46 -.60 12.93 13.24 -.30

2014. . . . . 11.10 11.17 -.07 1.86 2.51 -.66 12.96 13.68 -.72

2015. . . . . 11.13 11.53 -.41 1.86 2.55 -.69 12.99 14.09 -1.10

2016. . . . . 11.15 11.88 -.73 1.86 2.57 -.71 13.01 14.45 -1.44

2017. . . . . 11.17 12.22 -1.05 1.87 2.59 -.72 13.04 14.81 -1.77

2018. . . . . 11.19 12.64 -1.45 1.87 2.62 -.75 13.06 15.25 -2.20

2020. . . . . 11.24 13.43 -2.19 1.87 2.68 -.81 13.11 16.10 -2.99

2025. . . . . 11.35 15.07 -3.73 1.88 2.83 -.96 13.22 17.91 -4.68

2030. . . . . 11.44 16.41 -4.97 1.88 2.81 -.94 13.32 19.23 -5.91

2035. . . . . 11.51 17.26 -5.75 1.88 2.80 -.92 13.38 20.06 -6.67

2040. . . . . 11.54 17.60 -6.05 1.88 2.82 -.94 13.42 20.42 -7.00

2045. . . . . 11.56 17.69 -6.13 1.88 2.93 -1.05 13.45 20.62 -7.17

2050. . . . . 11.59 17.89 -6.30 1.89 3.03 -1.14 13.47 20.91 -7.44

2055. . . . . 11.62 18.25 -6.63 1.89 3.12 -1.23 13.50 21.37 -7.86

2060. . . . . 11.66 18.81 -7.16 1.89 3.16 -1.27 13.55 21.97 -8.43

2065. . . . . 11.70 19.45 -7.75 1.89 3.21 -1.32 13.59 22.66 -9.07

2070. . . . . 11.75 20.22 -8.47 1.89 3.27 -1.37 13.64 23.49 -9.85

2075. . . . . 11.80 21.09 -9.29 1.89 3.29 -1.39 13.70 24.38 -10.69

2080. . . . . 11.85 21.94 -10.09 1.89 3.29 -1.40 13.75 25.23 -11.49

2085. . . . . 11.90 22.69 -10.79 1.89 3.28 -1.39 13.79 25.97 -12.17

First year balance becomes

negative and remains negative

through 2085 . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . 2013

a Historical income rates are modified to include adjustments to the lump-sum payments received in 1983

from the General Fund of the Treasury for the cost of noncontributory wage credits for military service in

1940-56.

b Between -0.005 and 0.005 percent of taxable payroll.

c The annual balance is projected to be negative for a temporary period, returning to positive levels before

the end of the projection period.

Table IV.B1.—Annual Income Rates, Cost Rates, and Balances,

Calendar Years 1990-2085 (Cont.)

[As a percentage of taxable payroll]

Calendar 

year

OASI DI OASDI

Income

ratea Cost

rate Balance

Income

ratea Costrate Balance

Income

ratea Costrate Balance
49

Long-Range Estimates

Under the intermediate assumptions, the cost rate for DI fluctuates between

2.15 and 2.30 percent of taxable payroll from 2009 to 2034, generally

increasing thereafter to 2.34 percent for 2083. The income rate increases

only very slightly from 1.84 percent of taxable payroll for 2009 to

1.87 percent for 2083. The annual deficit is about 0.34 percent in 2009 and

reaches 0.47 percent for 2083.

Under the low-cost assumptions, the DI cost rate peaks at 2.15 percent of

payroll for 2010, then generally declines slowly thereafter, reaching

1.57 percent for 2083. The annual balance is negative for the first 7 years and

is positive throughout the remainder of the long-range period. For the highcost assumptions, DI cost rises much more, reaching 3.29 percent for 2083.

The annual deficit is about 0.39 percent in 2009 and reaches 1.39 percent for

2083.

Figure IV.B1 shows in graphical form the patterns of the OASI and DI

annual income rates and cost rates. The income rates shown here are only for

alternative II in order to simplify the graphical presentation because, as

shown in table IV.B1, the variation in the income rates by alternative is very

small. Income rates increase generally, but at a slow rate for each of the alternatives over the long-range period. Both increases in the income rate and

variation among the alternatives result from the relatively small component

of income from taxation of benefits. Increases in income from taxation of

benefits reflect increases in the total amount of benefits paid and the fact that

an increasing share of individual benefits will be subject to taxation because

benefit taxation threshold amounts are not indexed.

The patterns of the annual balances for OASI and DI can be inferred from

figure IV.B1. For each alternative, the magnitude of each of the positive balances, as a percentage of taxable payroll, is represented by the distance

between the appropriate cost-rate curve and the income-rate curve above it.

The magnitude of each of the deficits is represented by the distance between

the appropriate cost-rate curve and the income-rate curve below it.

In the future, the cost of OASI, DI and the combined OASDI programs as a

percentage of taxable payroll will not necessarily be within the range encompassed by alternatives I and III. Nonetheless, because alternatives I and III

define a reasonably wide range of demographic and economic conditions, the

resulting estimates delineate a reasonable range for consideration of potential

future program costs.
Actuarial Estimates

50

Thus far in this section, the cost and income of the OASDI program have

been discussed with reference to their size relative to taxable payroll, which

is the base from which most of the income is derived for the OASDI program. Also of interest are estimates of income and cost expressed as shares

of gross domestic product (GDP), the value of goods and services produced

during the year in the United States. Under alternative II, OASDI cost generally rises from about 4.8 percent of GDP currently to 6.1 percent in 2030,

and then peaks at almost 6.2 percent in 2034. Thereafter, OASDI cost as a

percent of GDP is projected to decline, reaching a level around 5.8 percent

for the period 2050 through 2083. Full estimates of income and cost are presented on this basis in Appendix VI.F.2 beginning on page 182.

2. Comparison of Workers to Beneficiaries

The estimated OASDI cost rate is expected to rise rapidly between 2012 and

2030 primarily because the number of beneficiaries is expected to rise substantially more rapidly than the number of covered workers as the babyboom generation retires. This occurs largely because of the swings in fertility

rates over time. Because the baby-boom generation had low fertility rates relative to their parents, and those low fertility rates are expected to persist, the

ratio of beneficiaries to workers is expected to rise rapidly, reaching a permanently higher level after the baby-boom generation retires. After 2030, the

 Figure IV.B1.—Long-Range OASI and DI Annual Income Rates and Cost Rates

[As a percentage of taxable payroll]

0%

5%

10%

15%

20%

25%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Alternative II Income rates

OASI cost rates

DI cost rates

Historical Estimated

OASI

DI III

II

I

III

II

I
51

Long-Range Estimates

ratio of beneficiaries to workers rises slowly due to increasing longevity. A

comparison of the numbers of covered workers and beneficiaries is shown in

table IV.B2.

Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2085

Calendar year

Covered

workersa

(in thousands)

Beneficiariesb (in thousands) Covered

workers per

OASDI

beneficiary

OASDI

beneficiaries

per 100

covered

OASI DI OASDI workers

Historical data:

1945 . . . . . . . . . 46,390 1,106 — 1,106 41.9 2

1950 . . . . . . . . . 48,280 2,930 — 2,930 16.5 6

1955 . . . . . . . . . 64,975 7,564 — 7,564 8.6 12

1960 . . . . . . . . . 72,293 13,740 522 14,262 5.1 20

1965 . . . . . . . . . 80,437 18,509 1,648 20,157 4.0 25

1970 . . . . . . . . . 92,788 22,618 2,568 25,186 3.7 27

1975 . . . . . . . . . 100,189 26,998 4,125 31,123 3.2 31

1980 . . . . . . . . . 112,653 30,384 4,734 35,117 3.2 31

1985 . . . . . . . . . 120,245 32,763 3,874 36,636 3.3 30

1990 . . . . . . . . . 133,070 35,255 4,204 39,459 3.4 30

1995 . . . . . . . . . 140,878 37,364 5,731 43,096 3.3 31

2000 . . . . . . . . . 154,699 38,556 6,606 45,162 3.4 29

2001 . . . . . . . . . 155,020 38,888 6,780 45,668 3.4 29

2002 . . . . . . . . . 154,420 39,117 7,060 46,176 3.3 30

2003 . . . . . . . . . 154,600 39,315 7,438 46,753 3.3 30

2004 . . . . . . . . . 156,404 39,558 7,810 47,368 3.3 30

2005 . . . . . . . . . 158,814 39,961 8,172 48,133 3.3 30

2006 . . . . . . . . . 161,474 40,435 8,428 48,863 3.3 30

2007 . . . . . . . . . 163,042 40,863 8,739 49,603 3.3 30

2008 . . . . . . . . . 162,370 41,355 9,065 50,420 3.2 31

Intermediate:

2009 . . . . . . . . . 160,133 42,204 9,476 51,680 3.1 32

2010 . . . . . . . . . 160,144 43,157 9,931 53,089 3.0 33

2015 . . . . . . . . . 171,132 49,673 10,983 60,656 2.8 35

2020 . . . . . . . . . 175,452 57,534 11,606 69,139 2.5 39

2025 . . . . . . . . . 179,250 65,121 12,349 77,470 2.3 43

2030 . . . . . . . . . 183,106 71,872 12,495 84,367 2.2 46

2035 . . . . . . . . . 187,414 76,555 12,613 89,168 2.1 48

2040 . . . . . . . . . 192,205 78,959 12,917 91,876 2.1 48

2045 . . . . . . . . . 197,188 80,387 13,500 93,887 2.1 48

2050 . . . . . . . . . 202,058 82,128 14,028 96,156 2.1 48

2055 . . . . . . . . . 206,843 84,536 14,534 99,070 2.1 48

2060 . . . . . . . . . 211,792 87,503 14,880 102,383 2.1 48

2065 . . . . . . . . . 216,705 90,492 15,312 105,804 2.0 49

2070 . . . . . . . . . 221,627 93,768 15,808 109,576 2.0 49

2075 . . . . . . . . . 226,528 97,221 16,274 113,495 2.0 50

2080 . . . . . . . . . 231,221 100,771 16,719 117,491 2.0 51

2085 . . . . . . . . . 235,851 104,471 17,123 121,594 1.9 52
Actuarial Estimates

52

Notes: 

1. The number of beneficiaries does not include uninsured individuals who receive benefits under Section

228 of the Social Security Act. Costs are reimbursed from the General Fund of the Treasury for most of

these individuals.

2. Historical covered worker data are subject to revision.

3. Totals do not necessarily equal the sums of rounded components.

The impact of the demographic shifts under the three alternatives on the

OASDI cost rates is readily seen by considering the projected number of

OASDI beneficiaries per 100 covered workers. As compared to the 2008

level of 31 beneficiaries per 100 covered workers, this ratio is estimated to

rise to 46 by 2030 and 48 by 2035 under intermediate assumptions, as the

growth in beneficiaries greatly exceeds the growth in workers. By 2085, this

ratio rises significantly under all three alternatives, reaching 39 under the

low-cost assumptions, 52 under the intermediate assumptions, and 69 under

Low-cost:

2009 . . . . . . . . . 160,945 42,204 9,411 51,615 3.1 32

2010 . . . . . . . . . 161,586 43,157 9,716 52,873 3.1 33

2015 . . . . . . . . . 174,038 49,582 9,959 59,541 2.9 34

2020 . . . . . . . . . 179,300 57,109 10,583 67,692 2.6 38

2025 . . . . . . . . . 183,802 64,213 10,713 74,926 2.5 41

2030 . . . . . . . . . 188,439 70,265 10,423 80,688 2.3 43

2035 . . . . . . . . . 194,188 74,169 10,268 84,437 2.3 43

2040 . . . . . . . . . 201,230 75,788 10,384 86,172 2.3 43

2045 . . . . . . . . . 209,187 76,567 10,787 87,354 2.4 42

2050 . . . . . . . . . 217,717 77,811 11,197 89,008 2.4 41

2055 . . . . . . . . . 226,755 79,859 11,633 91,492 2.5 40

2060 . . . . . . . . . 236,321 82,455 12,016 94,471 2.5 40

2065 . . . . . . . . . 246,625 84,999 12,526 97,526 2.5 40

2070 . . . . . . . . . 257,666 87,698 13,150 100,847 2.6 39

2075 . . . . . . . . . 269,257 90,640 13,840 104,480 2.6 39

2080 . . . . . . . . . 281,162 94,175 14,574 108,749 2.6 39

2085 . . . . . . . . . 293,286 98,492 15,289 113,781 2.6 39

High-cost:

2009 . . . . . . . . . 159,518 42,206 9,540 51,745 3.1 32

2010 . . . . . . . . . 159,048 43,165 10,135 53,300 3.0 34

2015 . . . . . . . . . 166,774 49,799 12,150 61,949 2.7 37

2020 . . . . . . . . . 171,957 58,085 12,595 70,680 2.4 41

2025 . . . . . . . . . 175,143 66,295 13,936 80,231 2.2 46

2030 . . . . . . . . . 178,320 73,824 14,500 88,324 2.0 50

2035 . . . . . . . . . 181,265 79,470 14,858 94,329 1.9 52

2040 . . . . . . . . . 183,937 82,872 15,302 98,174 1.9 53

2045 . . . . . . . . . 186,134 85,136 16,010 101,146 1.8 54

2050 . . . . . . . . . 187,554 87,493 16,599 104,092 1.8 56

2055 . . . . . . . . . 188,540 90,319 17,114 107,433 1.8 57

2060 . . . . . . . . . 189,241 93,680 17,334 111,014 1.7 59

2065 . . . . . . . . . 189,515 97,060 17,563 114,623 1.7 60

2070 . . . . . . . . . 189,286 100,813 17,776 118,589 1.6 63

2075 . . . . . . . . . 188,701 104,720 17,807 122,528 1.5 65

2080 . . . . . . . . . 187,722 108,250 17,727 125,977 1.5 67

2085 . . . . . . . . . 186,603 111,196 17,602 128,798 1.4 69

a Workers who are paid at some time during the year for employment on which OASDI taxes are due.

b Beneficiaries with monthly benefits in current-payment status as of June 30.

Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2085 (Cont.)

Calendar year

Covered

workersa

(in thousands)

Beneficiariesb (in thousands) Covered

workers per

OASDI

beneficiary

OASDI

beneficiaries

per 100

covered

OASI DI OASDI workers
53

Long-Range Estimates

the high-cost assumptions. The significance of these numbers can be seen by

comparing figure IV.B1 to figure IV.B2.

For each alternative, the shape of the curve in figure IV.B2, which shows

beneficiaries per 100 covered workers, is strikingly similar to that of the corresponding cost-rate curve in figure IV.B1, thereby emphasizing the extent to

which the cost of the OASDI program as a percentage of taxable payroll is

determined by the age distribution of the population. Because the cost rate is

basically the product of the number of beneficiaries and their average benefit, divided by the product of the number of covered workers and their average taxable earnings (and because average benefits rise at about the same

rate as average earnings), it is to be expected that the pattern of the annual

cost rates is similar to that of the annual ratios of beneficiaries to workers.

Table IV.B2 also shows the number of covered workers per OASDI beneficiary, which was about 3.2 in 2008. This ratio declines under all three alternatives because it is the inverse of the ratio of beneficiaries to workers.

3. Trust Fund Ratios

Trust fund ratios are useful indicators of the adequacy of the financial

resources of the Social Security program at any point in time. For any year in

which the projected trust fund ratio is positive (i.e., the trust fund holds

assets at the beginning of the year), but is not positive for the following year,

 Figure IV.B2.—Number of OASDI Beneficiaries Per 100 Covered Workers

0

10

20

30

40

50

60

70

80

90

100

1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Historical Estimated

III

II

I
Actuarial Estimates

54

the trust fund is projected to become exhausted during the year. Under

present law, the OASI and DI Trust Funds do not have the authority to borrow. Therefore, exhaustion of the assets in either fund during a year would

mean there are no longer sufficient assets in the fund to cover the full amount

of benefits scheduled for the year under present law.

The trust fund ratio also serves an additional important purpose in assessing

the actuarial status of the program. When the financing is adequate for the

timely payment of full benefits throughout the long-range period, the stability of the trust fund ratio toward the end of the period indicates the likelihood

that this projected adequacy will continue for subsequent Trustees Reports. If

the trust fund ratio toward the end of the period is level (or increasing), then

projected adequacy for the long-range period is likely to continue for subsequent reports. Under these conditions, the program financing is said to

achieve sustainable solvency.

Table IV.B3 shows, by alternative, the estimated trust fund ratios (without

regard to advance tax transfers that would be effected after the end of the

10-year, short-range period) for the separate and combined OASI and DI

Trust Funds. Also shown in this table is the year in which a fund is estimated

to become exhausted, reflecting the effect of the provision for advance tax

transfers.

Based on the intermediate assumptions, the OASI trust fund ratio rises from

392 percent at the beginning of 2009, reaching a peak of 422 percent at the

beginning of 2012. This increase in the OASI trust fund ratio results from the

fact that the annual income rate exceeds the annual cost rate for several years

(see table IV.B1). Thereafter, the OASI trust fund ratio declines steadily, with

the OASI Trust Fund becoming exhausted in 2039. The DI trust fund ratio

has been declining steadily since 2003, and is estimated to continue to

decline from 179 percent at the beginning of 2009 until the trust fund

becomes exhausted in 2020.

The trust fund ratio for the combined OASI and DI Trust Funds under the

intermediate assumptions rises from 354 percent for 2009 to a peak of

369 percent at the beginning of 2012. Thereafter, the ratio declines, with the

combined funds becoming exhausted in 2037. In last year’s report, the peak

trust fund ratio for the combined funds was estimated to be 395 percent for

2014 and the year of exhaustion was estimated to be 2041.

The trust fund ratio for the OASDI program under the intermediate assumptions first declines in 2013. This occurs because the increase in trust fund

assets during 2012, which reflects interest income and a small excess of noninterest income over cost, occurs at a slower rate than does the increase in the

annual cost of the program between 2012 and 2013. After 2012, the dollar
55

Long-Range Estimates

amount of assets is projected to continue to rise through the beginning of

2024 because interest income more than offsets the shortfall in noninterest

income.

Beginning in 2016, the OASDI program under the intermediate assumptions

is projected to experience increasingly large cash-flow shortfalls that will

require the trust funds to redeem special public-debt obligations of the General Fund of the Treasury. This will differ from the experience of recent years

when the trust funds have been net lenders to the General Fund of the Treasury. The change in the cash flow between the trust funds and the general

fund is expected to have important public policy and economic implications

that go well beyond the operation of the OASDI program itself.

Based on the low-cost assumptions, the trust fund ratio for the DI program

increases from 2014 through the end of the long-range projection period,

reaching the extremely high level of 1,683 percent for 2084. At the end of

the long-range period, the DI trust fund ratio is rising by 33 percentage

points per year. For the OASI program, the trust fund ratio rises to a peak of

451 percent for 2017, drops to a low of 261 percent for 2052, and rises thereafter to a level of 389 percent for 2084. At the end of the period, the OASI

trust fund ratio is rising by 6 percentage points per year. For the OASDI program, the trust fund ratio peaks at 408 percent for 2018, falls to 301 percent

for 2044, and increases thereafter, reaching 552 percent for 2084. Because

the trust fund ratios are large and increasing at the end of the long-range

period, subsequent Trustees Reports are likely to contain projections of adequate long-range financing of the OASI, the DI, and the combined OASI and

DI programs under the low-cost assumptions. Thus, under the low-cost

assumptions, each program would achieve sustainable solvency.

In contrast, under the high-cost assumptions, the OASI trust fund ratio is

estimated to peak at 413 percent for 2012, thereafter declining to fund

exhaustion by the end of 2031. The DI trust fund ratio is estimated to decline

from 176 percent for 2009 to fund exhaustion by the end of 2016. The combined OASDI trust fund ratio is estimated to rise to a peak of 360 percent for

2011, declining thereafter to fund exhaustion by the end of 2029.

Thus, because large ultimate cost rates are projected under all but the lowcost assumptions, it is likely that income will eventually need to be

increased, and/or program costs will need to be reduced in order to prevent

the trust funds from becoming exhausted.

Even under the high-cost assumptions, however, the combined OASI and DI

funds on hand plus their estimated future income would be able to cover their

combined cost for 20 years into the future (until 2029). Under the intermediate assumptions the combined starting funds plus estimated future income
Actuarial Estimates

56

would be able to cover cost for about 28 years into the future (until 2037).

The program would be able to cover cost for the foreseeable future under the

more optimistic low-cost assumptions. In the 2008 report, the combined trust

funds were projected to become exhausted in 2031 under the high-cost

assumptions and in 2041 under the intermediate assumptions.

.

Note: See definition of trust fund ratio on page 219. The combined ratios shown for years after the DI fund is

estimated to be exhausted are theoretical and are shown for informational purposes only.

An illustration of the trust fund ratios for the separate OASI and DI Trust

Funds is shown in figure IV.B3 for each of the alternative sets of assumptions. A graphical illustration of the trust fund ratios for the combined trust

funds is shown in figure II.D6 on page 15.

Table IV.B3.—Trust Fund Ratios, Calendar Years 2009-85

[In percent]

Calendar

year

Intermediate Low-cost High-cost

OASI DI OASDI OASI DI OASDI OASI DI OASDI

2009 . . . . . . . . . . . . . 392 179 354 392 182 356 392 176 353

2010 . . . . . . . . . . . . . 404 161 360 405 169 364 404 154 357

2011 . . . . . . . . . . . . . 416 144 366 419 159 374 413 132 360

2012 . . . . . . . . . . . . . 422 128 369 432 152 385 413 109 356

2013 . . . . . . . . . . . . . 421 113 367 439 148 392 403 84 343

2014 . . . . . . . . . . . . . 419 98 364 444 147 397 384 57 324

2015 . . . . . . . . . . . . . 415 84 359 448 148 401 367 30 306

2016 . . . . . . . . . . . . . 410 70 354 450 149 405 352 3 290

2017 . . . . . . . . . . . . . 403 55 347 451 151 407 338 a 275

2018 . . . . . . . . . . . . . 394 40 338 450 155 408 323 a 259

2020 . . . . . . . . . . . . . 370 9 315 442 164 404 288 a 222

2025 . . . . . . . . . . . . . 298 a 244 413 189 385 179 a 108

2030 . . . . . . . . . . . . . 204 a

a The trust fund is estimated to be exhausted by the beginning of this year. The last line of the table shows the

specific year of trust fund exhaustion.

153 370 234 354 44 a a

2035 . . . . . . . . . . . . . 98 a 50 325 321 325 aaa

2040 . . . . . . . . . . . . . aaa 290 432 306 aaa

2045 . . . . . . . . . . . . . aaa 270 545 301 aaa

2050 . . . . . . . . . . . . . aaa 262 665 309 aaa

2055 . . . . . . . . . . . . . aaa 263 794 326 aaa

2060 . . . . . . . . . . . . . aaa 269 943 349 aaa

2065 . . . . . . . . . . . . . aaa 282 1,099 380 aaa

2070 . . . . . . . . . . . . . aaa 303 1,252 419 aaa

2075 . . . . . . . . . . . . . aaa 332 1,404 464 aaa

2080 . . . . . . . . . . . . . aaa 364 1,556 513 aaa

2085 . . . . . . . . . . . . . aaa 395 1,716 561 aaa

Trust fund is estimated to become

exhausted in. . . . . 2039 2020 2037 b

b The trust fund is not estimated to be exhausted within the projection period.

b b 2031 2016 2029
57

Long-Range Estimates

4. Summarized Income Rates, Cost Rates, and Balances

Summarized income and cost rates, along with their components, are presented in table IV.B4 for 25-year, 50-year, and 75-year valuation periods.

Income rates reflect the scheduled payroll tax rates and the projected income

from the taxation of scheduled benefits expressed as a percentage of taxable

payroll. The current combined payroll tax rate of 12.4 percent is scheduled to

remain unchanged in the future. In contrast, the projected income from taxation of benefits, expressed as a percentage of taxable payroll, is expected to

generally increase throughout the long-range period for two reasons. First,

benefits are rising faster than payroll. Second, the benefit-taxation threshold

amounts are not indexed, so that an increasing share of beneficiaries will be

paying tax on their benefits. Summarized income rates also include the starting trust fund balance. Summarized cost rates include the cost of reaching a

target trust fund of 100 percent of annual cost at the end of the period in

addition to the cost included in the annual cost rates.

It may be noted that the payroll tax income expressed as a percentage of taxable payroll, as shown in table IV.B4, is slightly smaller than the actual tax

rates in effect for each period. This difference results from the fact that all

OASDI income and cost dollar amounts presented in this report are computed on a cash basis, i.e., amounts are attributed to the year in which they

are intended to be received by, or expended from, the fund, while taxable

 Figure IV.B3.—Long-Range OASI and DI Trust Fund Ratios

[Assets as a percentage of annual expenditures]

0%

200%

400%

600%

800%

1,000%

1,200%

1,400%

1,600%

1,800%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

OASI

DI

Historical Estimated

III II

I

I

II III
Actuarial Estimates

58

payroll is attributed to the year in which earnings are paid. Because earnings

are paid to workers before the corresponding payroll taxes are credited to the

funds, payroll tax income for a particular year reflects a combination of the

taxable payrolls from that year and from prior years, when payroll was

smaller. Dividing payroll tax income by taxable payroll for a particular year,

or period of years, will thus generally result in an income rate that is slightly

less than the applicable tax rate for the period.

Summarized values for the full 75-year period are useful in analyzing the

long-range adequacy of financing for the program over the period as a whole

under present law and under proposed modifications to the law.

Table IV.B4 shows summarized rates for valuation periods of the first 25, the

first 50, and the entire 75 years of the long-range projection period, including

the funds on hand at the start of the period and the cost of accumulating a target trust fund balance equal to 100 percent of the following year’s annual

cost by the end of the period. The actuarial balance for each of these three

valuation periods is equal to the difference between the summarized income

rate and the summarized cost rate for the corresponding period. An actuarial

balance of zero for any period would indicate that estimated cost for the

period could be met, on average, with a remaining trust fund balance at the

end of the period equal to 100 percent of the following year’s cost. A negative actuarial balance indicates that, over the period, the present value of

income to the program plus the existing trust fund falls short of the present

value of the cost of the program plus the cost of reaching a target trust fund

balance of 1 year’s cost by the end of the period. This negative balance, combined with a falling trust fund ratio, signals the likelihood of continuing

cash-flow deficits, implying that the current-law level of financing is not sustainable.

The values in table IV.B4 show that the combined OASDI program is

expected to operate with a positive actuarial balance over the 25-year valuation period under only the low-cost assumptions. For the 25-year valuation

period the summarized values indicate actuarial balances of 1.18 percent of

taxable payroll under the low-cost assumptions, -0.17 percent under the

intermediate assumptions, and -1.81 percent under the high-cost assumptions. Thus, the program is more than adequately financed for the 25-year

valuation period under only the low-cost projections. For the 50-year valuation period the OASDI program would have a positive actuarial balance of

0.48 percent under the low-cost assumptions, but would have deficits of

1.51 percent under the intermediate assumptions and 4.05 percent under the

high-cost assumptions. Thus, the program is more than adequately financed

for the 50-year valuation period under only the low-cost set of assumptions.
59

Long-Range Estimates

For the entire 75-year valuation period, the combined OASDI program

would once again have actuarial deficits except under the low-cost set of

assumptions. The actuarial balance for this long-range valuation period is

projected to be 0.50 percent of taxable payroll under the low-cost assumptions, -2.00 percent under the intermediate assumptions, and -5.32 percent

under the high-cost assumptions.

Assuming the Trustees’ intermediate assumptions are realized, the deficit of

2.00 percent of payroll indicates that financial adequacy of the program for

the next 75 years could be restored if the Social Security payroll tax rate

were increased for current and future earnings from 12.40 percent (combined

employee-employer shares) to 14.41 percent. Alternatively, all current and

future benefits could be reduced by 13.3 percent (or there could be some

combination of tax increases and benefit reductions). Changes of this magnitude would be sufficient to maintain trust fund solvency over the 75-year

projection period under the intermediate assumptions.

However, large annual deficits projected under current law for the end of the

long-range period, which exceed 4 percent of payroll under the intermediate

assumptions (see table IV.B1), indicate that the annual cost will very likely

continue to exceed tax revenues after 2083. As a result, ensuring continued

adequate financing would eventually require larger changes than those

needed to maintain solvency for the 75-year period. For the infinite future,

the actuarial deficit is estimated to be 3.4 percent of taxable payroll under the

intermediate assumptions. This means that the projected infinite horizon

shortfall could be eliminated with an immediate increase in the combined

payroll tax rate from 12.4 percent to about 15.8 percent. This shortfall could

also be eliminated if all current and future benefits were immediately

reduced by 21.1 percent.

As may be concluded from table IV.B4, the financial condition of the DI program is substantially weaker than that of the OASI program for the first

25 years. Summarized over the full 75-year period, however, long-range deficits for the OASI and DI programs under intermediate assumptions are more

similar when measured relative to the level of program costs.
Actuarial Estimates

60

.

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

Table IV.B5 presents the components and the calculation of the long-range

(75-year) actuarial balance under the intermediate assumptions. The present

value of future cost less future tax income over the long-range period, minus

the amount of trust fund assets at the beginning of the projection period,

amounts to $5.3 trillion for the OASDI program. This amount is referred to

as the 75-year “open group unfunded obligation.” The actuarial deficit (i.e.,

the negative of the actuarial balance) combines this unfunded obligation with

the present value of the “ending target trust fund,” and expresses the total as

a percentage of the present value of the taxable payroll for the period. The

Table IV.B4.—Components of Summarized Income Rates and Cost Rates, 

Calendar Years 2009-83

[As a percentage of taxable payroll]

Valuation period

Summarized income rate Summarized cost rate

Actuarial

balance

Payroll

tax

Taxation

of

benefits

Beginning

fund

balance Total Cost

Ending

target

fund Total

OASI:

Intermediate:

2009-33. . . . . 10.59 0.58 1.77 12.94 12.31 0.52 12.84 0.10

2009-58. . . . . 10.59 .67 1.02 12.28 13.29 .21 13.50 -1.22

2009-83. . . . . 10.59 .71 .78 12.08 13.64 .12 13.76 -1.68

Low-cost:

2009-33. . . . . 10.59 .54 1.75 12.87 11.35 .46 11.81 1.07

2009-58. . . . . 10.59 .59 1.00 12.18 11.71 .17 11.89 .29

2009-83. . . . . 10.59 .60 .75 11.94 11.56 .10 11.66 .28

High-cost:

2009-33. . . . . 10.59 .64 1.75 12.98 13.46 .61 14.08 -1.10

2009-58. . . . . 10.59 .78 1.00 12.37 15.30 .27 15.57 -3.20

2009-83. . . . . 10.59 .87 .78 12.23 16.44 .17 16.60 -4.37

DI:

Intermediate:

2009-33. . . . . 1.80 .06 .17 2.03 2.22 .08 2.30 -.27

2009-58. . . . . 1.80 .06 .10 1.96 2.22 .03 2.25 -.29

2009-83. . . . . 1.80 .06 .08 1.93 2.23 .02 2.25 -.32

Low-cost:

2009-33. . . . . 1.80 .05 .17 2.01 1.84 .06 1.90 .11

2009-58. . . . . 1.80 .04 .10 1.94 1.73 .02 1.75 .19

2009-83. . . . . 1.80 .04 .07 1.92 1.68 .01 1.69 .22

High-cost:

2009-33. . . . . 1.80 .07 .17 2.04 2.65 .10 2.75 -.71

2009-58. . . . . 1.80 .07 .10 1.97 2.77 .05 2.82 -.85

2009-83. . . . . 1.80 .08 .08 1.95 2.88 .02 2.90 -.95

OASDI:

Intermediate:

2009-33. . . . . 12.39 .64 1.94 14.96 14.54 .60 15.14 -.17

2009-58. . . . . 12.39 .73 1.12 14.24 15.50 .24 15.75 -1.51

2009-83. . . . . 12.39 .77 .86 14.02 15.88 .14 16.02 -2.00

Low-cost:

2009-33. . . . . 12.39 .58 1.92 14.89 13.19 .51 13.71 1.18

2009-58. . . . . 12.39 .63 1.10 14.12 13.44 .20 13.64 .48

2009-83. . . . . 12.39 .64 .82 13.86 13.24 .11 13.35 .50

High-cost:

2009-33. . . . . 12.38 .71 1.92 15.02 16.11 .71 16.83 -1.81

2009-58. . . . . 12.39 .85 1.10 14.34 18.07 .32 18.39 -4.05

2009-83. . . . . 12.39 .94 .85 14.18 19.32 .19 19.51 -5.32
61

Long-Range Estimates

present value of future tax income minus cost, plus starting trust fund assets,

minus the present value of the ending target trust fund amounts to

-$5.7 trillion for the OASDI program. The actuarial balance—this amount

expressed as a percentage of taxable payroll for the period—is therefore

-2.00 percent.

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

5. Additional Measures of OASDI Unfunded Obligations

As shown in the previous section, a negative actuarial balance (or an actuarial deficit) provides one measure of the unfunded obligation of the program

over a period of time. Two additional measures of OASDI unfunded obligations under the intermediate assumptions are presented below.

a. Open Group Unfunded Obligations

Consistent with practice since 1965, this report focuses on the 75-year period

(from 2009 to 2083 for this report) for the evaluation of the long-run financial status of the OASDI program on an open group basis (i.e., including

taxes and cost for past, current and future participants through the year

2083). Table IV.B6, in its second line, shows that the present value of the

open group unfunded obligation for the program over that period is

$5.3 trillion. The open group measure indicates the adequacy of financing

over the period as a whole for a program financed on a pay-as-you-go basis.

On this basis, payroll taxes and scheduled benefits of all participants are

included through 2083.

Table IV.B5.—Components of 75-Year Actuarial Balance

Under Intermediate Assumptions

Item OASI DI OASDI

Present value as of January 1, 2009 (in billions):

A. Payroll tax revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,955 $5,087 $35,041

B. Taxation of benefits revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,006 169 2,175

C. Tax income (A + B). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,961 5,256 37,217

D. Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,574 6,320 44,894

E. Cost minus tax income (D - C) . . . . . . . . . . . . . . . . . . . . . . . . . 6,613 1,064 7,677

F. Trust fund assets at start of period. . . . . . . . . . . . . . . . . . . . . . . 2,203 216 2,419

G. Open group unfunded obligation (E - F) . . . . . . . . . . . . . . . . . . 4,410 848 5,258

H. Ending target trust funda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

a The calculation of the actuarial balance includes the cost of accumulating a target trust fund balance equal

to 100 percent of annual cost by the end of the period.

349 53 402

I. Income minus cost, plus assets at start of period, minus

ending target trust fund (C - D + F - H = - G - H). . . . . . . . . . . -4,759 -901 -5,660

J. Taxable payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282,781 282,781 282,781

Percent of taxable payroll:

Actuarial balance (100 × I ÷ J). . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.68 -.32 -2.00
Actuarial Estimates

62

Table IV.B6 also presents the 75-year unfunded obligation as percentages of

future OASDI taxable payroll and gross domestic product (GDP) through

2083. The 75-year unfunded obligation as a percentage of taxable payroll is

less than the actuarial deficit, because it excludes the ending target trust fund

value (see table IV.B5).

However, there are limitations on what can be conveyed using summarized

measures alone. For example, overemphasis on summary measures (such as

the actuarial balance and open group unfunded obligation) for the 75-year

period can lead to incorrect perceptions and policies that fail to address

financial sustainability for the more distant future. This can be addressed by

considering the trend in trust fund ratios toward the end of the period (see

“sustainable solvency” at the beginning of section IV.B).

Another limitation of the 75-year summary measure is that continued, and

possibly increasing, annual shortfalls after 75 years are not taken into

account. In order to address this limitation, this section presents estimates of

unfunded obligations that extend to the infinite horizon. The extension

assumes that the current-law OASDI program and the demographic and most

economic trends used for the 75-year projection continue indefinitely. The

one exception is that the ultimate assumed real-wage differential for the

long-range period of 1.1 percent is increased to 1.2 percent, phased in over

the 10-year period 2084 to 2093. This change essentially maintains consistency with the assumed reduction in the growth of health care expenditures

after 2083. (See the Medicare Trustees Report.) The values in table IV.B6

indicate that extending the calculations beyond 2083 adds $9.9 ($15.1 - $5.3)

trillion in present value to the amount of the unfunded obligation estimated

through 2083. That is, over the infinite horizon, the OASDI open group

unfunded obligation is projected to be $15.1 trillion. The $9.9 trillion increment reflects a significant financing gap projected for OASDI for years after

2083. Of course, the degree of uncertainty associated with estimates beyond

2083 is substantial.

In last year’s report the unfunded obligation over the infinite horizon was

reported as $13.6 trillion in present value as of January 1, 2008. The change

to the later valuation date (January 1, 2009), taken alone, would increase the

measured deficit by about $0.7 trillion. In addition, the net effects of changes

in data, methods, and other assumptions increased the infinite horizon

unfunded obligation by approximately $0.8 trillion. The main changes affecting the infinite horizon unfunded obligation for this report are near-term economic and disability assumptions reflecting the current economic recession,

updated starting economic values, and lower ultimate mortality rates for ages

65-84. See section IV.B.7 for details regarding changes in data, methods, and

assumptions.
63

Long-Range Estimates

As noted in the previous section, the $15.1 trillion infinite future open group

unfunded obligation may also be expressed as a percentage of the taxable

payroll over that period. This actuarial deficit for the infinite future is

3.4 percent of taxable payroll under the intermediate assumptions, about

0.2 percentage point higher than in last year’s report. This unfunded obligation can also be expressed as a percentage of GDP over the infinite future

and is 1.2 percent on that basis, about 0.1 percentage point higher than in last

year’s report. These relative measures of the unfunded obligation over the

infinite future express its magnitude in relation to the resources that are

potentially available to finance the shortfall.

Notes:

1. The present values of future taxable payroll for 2009-83 and for 2009 through the infinite horizon are

$282.8 trillion and $442.3 trillion, respectively.

2. The present values of GDP for 2009-83 and for 2009 through the infinite horizon are $788.4 trillion and

$1,309.0 trillion, respectively. Present values of GDP shown in the Medicare Trustees Report differ slightly

due to the use of interest discount rates that are specific to each program’s trust fund holdings.

b. Unfunded Obligations for Past, Current, and Future Participants

The future unfunded obligation of the OASDI program may also be viewed

from a generational perspective. This perspective is generally associated

with assessment of the financial condition of a program that is intended or

required to be financed on a fully-advance-funded basis. However, analysis

from this perspective can also provide insights into the implications of payas-you-go financing, the basis that has been used for the OASDI program.

The first line of table IV.B7 shows that the present value of future cost less

future taxes over the next 100 years for all current participants equals

$18.7 trillion. For this purpose, current participants are defined as individuals

who attain age 15 or older in 2009. Subtracting the current value of the trust

fund (the accumulated value of past OASDI taxes less cost) gives a closed

group (excluding all future participants) unfunded obligation of

$16.3 trillion. This value represents the shortfall of lifetime contributions for

all past and current participants relative to the lifetime costs associated with

Table IV.B6.—Unfunded OASDI Obligations for 1935 (Program Inception)

Through the Infinite Horizon

[Present values as of January 1, 2009; dollar amounts in trillions]

Present

value

Expressed as a percentage

of future payroll and GDP

Taxable

payroll GDP

Unfunded obligation for 1935 through the infinite horizona . . . . . 

a Present value of future cost less future taxes, reduced by the amount of trust fund assets at the beginning of

2009. Expressed as percentage of payroll and GDP for the period 2009 through the infinite horizon.

$15.1 3.4 1.2

Unfunded obligation for 1935 through 2083b . . . . . . . . . . . . . . . . 

b Present value of future cost less future taxes through 2083, reduced by the amount of trust fund assets at the

beginning of 2009. Expressed as percentage of payroll and GDP for the period 2009 through 2083.

5.3 1.9 .7
Actuarial Estimates

64

their generations. For a fully-advance-funded program this value would be

equal to zero.

For Social Security benefits to be adequately financed for the infinite future,

the scheduled taxes or benefits of current and future participants in the system must be adjusted to fully offset the shortfall due to past and current participants. Future participants, as a whole, are projected to pay taxes that are

approximately $1.2 trillion more in present value than the cost of providing

benefits they are scheduled to receive over the infinite future.

The remaining long run financing gap that program reforms must ultimately

close for the infinite future is estimated to be $15.1 trillion in present value.

Closing this gap can be achieved by raising additional revenue or reducing

benefits (or some combination) for current and future participants so that the

present value of the additional revenue or reduced benefits for the infinite

future is equivalent to about 3.4 percent of taxable payroll or 1.2 percent of

GDP.

Notes:

1. The present value of future taxable payroll for 2009 through the infinite horizon is $442.3 trillion.

2. The present value of GDP for 2009 through the infinite horizon is $1,309.0 trillion.

3. Totals do not necessarily equal the sums of rounded components.

6. Test of Long-Range Close Actuarial Balance

The test of long-range close actuarial balance applies to a set of 66 separate

valuation periods beginning with the first 10-year period, and including the

periods of the first 11 years, the first 12 years, etc., up through the full

75-year projection period. Under the long-range test, the summarized income

rate and cost rate are calculated for each of these valuation periods. The

long-range test is met if, for each of the 66 valuation periods, the actuarial

balance is not less than zero or is negative by, at most, a specified percentage

of the summarized cost rate for the same time period. The percentage

Table IV.B7.—Present Values of OASDI Cost Less Tax Revenue and Unfunded 

Obligations for Program Participants

[Present values as of January 1, 2009; dollar amounts in trillions]

Present

value

Expressed as a 

percentage of future 

payroll and GDP

Taxable

payroll GDP

Present value of future cost less future taxes for current participants . . . $18.7 4.2 1.4

Less current trust fund

(tax accumulations minus expenditures to date for past and current 

participants). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 .5 .2

Equals unfunded obligation for past and current participantsa . . . . . . . .

a This concept is also referred to as the closed group unfunded obligation.

16.3 3.7 1.2

Plus present value of cost less taxes for future participants 

for the infinite future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.2 -.3 -.1

Equals unfunded obligation for all participants through the infinite

horizon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.1 3.4 1.2
65

Long-Range Estimates

allowed for a negative actuarial balance is 5 percent for the full 75-year

period. For shorter periods, the allowable percentage begins with zero for the

first 10 years and increases uniformly for longer periods, until it reaches the

maximum percentage of 5 percent allowed for the 75-year period. The criterion for meeting the test is less stringent for the longer periods in recognition

of the greater uncertainty associated with estimates for more distant years.

When a negative actuarial balance in excess of the allowable percentage of

the summarized cost rate is projected for one or more of the 66 separate valuation periods, the program fails the test of long-range close actuarial balance.

Being out of close actuarial balance indicates that the program is expected to

experience financial problems in the future and that ways of improving the

financial status of the program should be considered. The sooner the actuarial balance is less than the minimum allowable balance, expressed as a percentage of the summarized cost rate, the more urgent is the need for

corrective action. Necessary changes in program financing or benefit provisions should not be put off until the last possible moment if future beneficiaries and workers are to effectively plan for their retirement.

Table IV.B8 presents a comparison of the estimated actuarial balances with

the minimum allowable balance (or maximum allowable deficit) under the

long-range test, each expressed as a percentage of the summarized cost rate,

based on the intermediate estimates. Values are shown for only 14 of the valuation periods: those of length 10 years, 15 years, and continuing in 5-year

increments through 75 years. However, each of the 66 periods—those of

length 10 years, 11 years, and continuing in 1-year increments through

75 years—is considered for the test. These minimum allowable balances are

calculated to show the limit for each valuation period resulting from the

graduated tolerance scale. The patterns in the estimated balances as a percentage of the summarized cost rates, as well as that for the minimum allowable balance, are presented graphically in figure IV.B4 for the OASI, DI and

combined OASDI programs. Values shown for the 25-year, 50-year, and

75-year valuation periods correspond to those presented in table IV.B4.

For the OASI program, the estimated actuarial balance as a percentage of the

summarized cost rate exceeds the minimum allowable for valuation periods

of length 10 through 27 years under the intermediate estimates. For valuation

periods of length greater than 27 years, the estimated actuarial balance is less

than the minimum allowable. For the full 75-year long-range period the estimated actuarial balance reaches -12.23 percent of the summarized cost rate,

for a shortfall of 7.23 percent from the minimum allowable balance of

-5.0 percent of the summarized cost rate. Thus, although the OASI program

satisfies the test of short-range financial adequacy (as discussed earlier on

page 34), it is not in long-range close actuarial balance.
Actuarial Estimates

66

For the DI program, under the intermediate assumptions, the estimated actuarial balance as a percentage of the summarized cost rate is less than the minimum allowable balance for all 66 valuation periods. For the full 75-year

long-range period the estimated actuarial balance reaches -14.14 percent of

the summarized cost rate, for a shortfall of 9.14 percent from the minimum

allowable balance of -5.0 percent of the summarized cost rate. Thus, the DI

program fails to meet the short-range test of financial adequacy (as discussed

on page 40), and is also not in long-range close actuarial balance.

Financing for the DI program is much less adequate than for the OASI program in satisfying the test for long-range actuarial balance even though longrange actuarial deficits are more comparable over the entire 75-year period.

This difference occurs because much more of the increase in the long-range

cost due to the aging of the baby-boom generation occurs earlier for the DI

program than for the OASI program. As a result, tax rates that are relatively

more adequate for the OASI program during the first 25 years become relatively less adequate later in the long-range period.

For the OASDI program, the estimated actuarial balance as a percentage of

the summarized cost rate exceeds the minimum allowable balance for valuation periods of length 10 through 25 years under the intermediate estimates.

For valuation periods of length greater than 25 years, the estimated actuarial

balance is below the minimum allowable balance. The size of the shortfall

from the minimum allowable balance rises gradually, reaching 7.50 percent

of the summarized cost rate for the full 75-year long-range valuation period.

Thus, although the OASDI program satisfies the short-range test of financial

adequacy, it is out of long-range close actuarial balance.

The OASI and DI programs, both separate and combined, were also found to

be out of close actuarial balance in last year’s report. The estimated deficits

for the OASI, DI, and combined OASDI programs in this report are worse

when compared to those shown in last year’s report for the longer valuation

periods.
67

Long-Range Estimates

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

Table IV.B8.—Comparison of Long-Range Actuarial Balances With the Minimum 

Allowable in the Test for Close Actuarial Balance,

Based on Intermediate Assumptions

Valuation period

Rates

(percentage of taxable payroll)

 Values expressed as a

percentage of cost rate

Summarized

income rate

Summarized

cost rate

Actuarial

balance

Actuarial

balance

Minimum

allowable

actuarial

balance

OASI:

10-year: 2009-18 . . . . . . . 15.16 11.79 3.37 28.62 0.00

15-year: 2009-23 . . . . . . . 13.89 12.07 1.81 15.00 -.38

20-year: 2009-28 . . . . . . . 13.28 12.47 .81 6.53 -.77

25-year: 2009-33 . . . . . . . 12.94 12.84 .10 .80 -1.15

30-year: 2009-38 . . . . . . . 12.72 13.11 -.39 -2.98 -1.54

35-year: 2009-43 . . . . . . . 12.56 13.27 -.72 -5.40 -1.92

40-year: 2009-48 . . . . . . . 12.44 13.38 -.93 -6.99 -2.31

45-year: 2009-53 . . . . . . . 12.35 13.44 -1.09 -8.12 -2.69

50-year: 2009-58 . . . . . . . 12.28 13.50 -1.22 -9.03 -3.08

55-year: 2009-63 . . . . . . . 12.22 13.55 -1.33 -9.80 -3.46

60-year: 2009-68 . . . . . . . 12.18 13.60 -1.43 -10.48 -3.85

65-year: 2009-73 . . . . . . . 12.14 13.65 -1.52 -11.10 -4.23

70-year: 2009-78 . . . . . . . 12.11 13.71 -1.60 -11.68 -4.62

75-year: 2009-83 . . . . . . . 12.08 13.76 -1.68 -12.23 -5.00

DI:

10-year: 2009-18 . . . . . . . 2.25 2.41 -.16 -6.73 .00

15-year: 2009-23 . . . . . . . 2.12 2.35 -.23 -9.59 -.38

20-year: 2009-28 . . . . . . . 2.06 2.33 -.26 -11.35 -.77

25-year: 2009-33 . . . . . . . 2.03 2.30 -.27 -11.90 -1.15

30-year: 2009-38 . . . . . . . 2.00 2.28 -.27 -12.03 -1.54

35-year: 2009-43 . . . . . . . 1.99 2.26 -.28 -12.17 -1.92

40-year: 2009-48 . . . . . . . 1.97 2.25 -.28 -12.43 -2.31

45-year: 2009-53 . . . . . . . 1.96 2.25 -.29 -12.74 -2.69

50-year: 2009-58 . . . . . . . 1.96 2.25 -.29 -13.02 -3.08

55-year: 2009-63 . . . . . . . 1.95 2.25 -.30 -13.26 -3.46

60-year: 2009-68 . . . . . . . 1.95 2.25 -.30 -13.48 -3.85

65-year: 2009-73 . . . . . . . 1.94 2.25 -.31 -13.71 -4.23

70-year: 2009-78 . . . . . . . 1.94 2.25 -.31 -13.94 -4.62

75-year: 2009-83 . . . . . . . 1.93 2.25 -.32 -14.14 -5.00

OASDI:

10-year: 2009-18 . . . . . . . 17.41 14.20 3.21 22.62 .00

15-year: 2009-23 . . . . . . . 16.01 14.42 1.59 11.00 -.38

20-year: 2009-28 . . . . . . . 15.35 14.80 .55 3.72 -.77

25-year: 2009-33 . . . . . . . 14.96 15.14 -.17 -1.13 -1.15

30-year: 2009-38 . . . . . . . 14.72 15.38 -.66 -4.32 -1.54

35-year: 2009-43 . . . . . . . 14.54 15.54 -.99 -6.38 -1.92

40-year: 2009-48 . . . . . . . 14.41 15.63 -1.21 -7.77 -2.31

45-year: 2009-53 . . . . . . . 14.31 15.69 -1.38 -8.78 -2.69

50-year: 2009-58 . . . . . . . 14.24 15.75 -1.51 -9.60 -3.08

55-year: 2009-63 . . . . . . . 14.17 15.80 -1.63 -10.30 -3.46

60-year: 2009-68 . . . . . . . 14.12 15.85 -1.73 -10.91 -3.85

65-year: 2009-73 . . . . . . . 14.08 15.90 -1.82 -11.47 -4.23

70-year: 2009-78 . . . . . . . 14.05 15.96 -1.91 -12.00 -4.62

75-year: 2009-83 . . . . . . . 14.02 16.02 -2.00 -12.50 -5.00
Actuarial Estimates

68

7. Reasons for Change in Actuarial Balance From Last Report

The estimated effects of various changes from last year’s report to this report

on the long-range actuarial balance under the intermediate assumptions are

listed (by category) in table IV.B9.

 Figure IV.B4.—Test of Long-Range Close Actuarial Balance

[Comparison of long-range actuarial balances with the minimum allowable

for close actuarial balance under intermediate assumptions]

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2018 2023 2028 2033 2038 2043 2048 2053 2058 2063 2068 2073 2078 2083

Ending year of valuation period

 Actuarial balance as percentage

 of summarized cost rate

 Minimum allowable actuarial balance

OASI

OASDI

DI
69

Long-Range Estimates

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

Since the last report, one law that affects the financing of the OASDI program, the Food, Conservation, and Energy Act of 2008, was enacted (see

section III.B). The effect of this law is estimated to increase the long-range

OASDI actuarial balance by a negligible amount (less than 0.005 percent of

taxable payroll). In addition, the Congress has enacted legislation to stabilize

the banking system and to stimulate the economy. The Emergency Economic

Stabilization Act of 2008 allows the government to purchase troubled assets

and stocks to strengthen financial institutions. The American Recovery and

Reinvestment Act of 2009 includes some reductions in personal income

taxes and increases in government expenditures. These policies are expected

to affect the speed and timing of the economic recovery from the current

recession. The short-range economic assumptions used for this report reflect

these effects.

In changing from the valuation period of last year’s report, which was 2008-

82, to the valuation period of this report, 2009-83, the relatively large negative annual balance for 2083 is included. This results in a decrease (worsening) in the long-range OASDI actuarial balance of 0.05 percent of taxable

payroll. (Note that the trust fund assets at the end of 2008, i.e., at the beginning of the projection period, are included in the 75-year actuarial balance.

These assets reflect the net financial flows for the program for all past years.

Hence the valuation periods for the 2008 and 2009 Trustees Reports could be

referred to as 1937-2082 and 1937-2083, respectively.)

Table IV.B9.—Reasons for Change in the 75-Year Actuarial Balance

Under Intermediate Assumptions

[As a percentage of taxable payroll]

Item OASI DI OASDI

Shown in last year's report:

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01 1.93 13.94

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.46 2.17 15.63

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.46 -.24 -1.70

Changes in actuarial balance due to changes in:

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

Valuation perioda . . . . . . . . . . . . . . . . . . . . . . . . . . . .

a In changing from the valuation period of last year’s report, which was 2008-82, to the valuation period of

this report, 2009-83, the relatively large negative annual balance for 2083 is included. This results in a larger

long-range actuarial deficit. The fund balance at the end of 2008, i.e., at the beginning of the projection

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

-.04 -.01 -.05

Demographic data and assumptions. . . . . . . . . . . . . . -.11 .00 -.11

Economic data and assumptions. . . . . . . . . . . . . . . . . -.13 -.02 -.15

Disability assumptions . . . . . . . . . . . . . . . . . . . . . . . . -.01 -.01 -.01

Methods and programmatic data . . . . . . . . . . . . . . . . +.07 -.04 +.03

Total change in actuarial balance . . . . . . . . . . . . . . . . . . -.22 -.08 -.30

Shown in this report:

Actuarial balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.68 -.32 -2.00

Income rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.08 1.93 14.02

Cost rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.76 2.25 16.02
Actuarial Estimates

70

Changes in the demographic starting values and assumptions reduce the

long-range OASDI actuarial balance by 0.11 percent of taxable payroll. First,

the source of change contributing most to this reduction is the revision of

ultimate rates of decline in mortality. The most significant of these revisions

are faster ultimate rates of decline in death rates for heart disease and cancer

for ages 65-84. In addition, final mortality data for 2005 result in slightly

lower starting death rates and faster near-term declines in death rates than in

last year’s report. All of the mortality changes result in a decrease in the

long-range OASDI actuarial balance of about 0.12 percent of taxable payroll.

Second, immigration levels for the first several years of the projection period

are assumed to be slightly lower than the levels in last year’s report, reflecting both a lower starting level of immigration and the weaker economy during the recession and recovery period. These lower levels result in a decrease

in the long-range OASDI actuarial balance of about 0.01 percent of taxable

payroll. Third, partially offsetting the effect of the mortality and immigration

changes are higher assumed birth rates during the first 24 years of the projection period. This revision stems from preliminary birth data for 2006 that

indicate higher than expected numbers of births, and results in an increase in

the long-range OASDI actuarial balance of about 0.02 percent of taxable

payroll.

Ultimate economic assumptions are unchanged from those in last year’s

report. However, changes in starting values and in the near-term economic

growth assumptions significantly reduce the long-range OASDI actuarial

balance by about 0.15 percent of taxable payroll. The projections begin with

an economic recession where negative real GDP growth that started in the

third calendar quarter of 2008 is assumed to continue though the second

quarter of 2009. The recovery from the recession is projected to extend

through 2015. During the period of negative real GDP growth and the period

of recovery, unemployment rates are higher than the assumed ultimate level

and higher than projected in last year’s report. Reduced employment during

these periods leads to significantly less payroll taxes, resulting in smaller

trust fund accumulations. For 2017 and later, real GDP is projected to be

about 1.4 percent lower than in the 2008 report, based on recent data and the

effects of the recession. Reduced average benefit levels resulting from the

recession only partly offset the effects on revenue. Based on recent experience, interest rates for new special-issue Treasury bonds are assumed to be

lower through 2012 than in last year’s report.

Several changes in disability assumptions and data are included in this report

and combine to decrease the long-range OASDI actuarial balance by 0.01

percent of taxable payroll. First, disability incidence rates are substantially

higher in the first few years of the projection period as more individuals are

assumed to apply for disability benefits due to the economic recession. These
71

Long-Range Estimates

increased incidence rates reduce the long-range OASDI actuarial balance by

0.02 percent of taxable payroll. Second, the disability incidence rate assumptions are slightly increased to reflect the agency’s decision that certain policies currently applying only in the Boston region (in particular, the policy to

close a disability claimant’s record to new evidence after a determination for

an initial appeal to an administrative law judge) would not be extended to

other regions. This decision reduces the long-range OASDI actuarial balance

by 0.01 percent of taxable payroll. Third, the ultimate disability incidence

rates and the disability-insured population are updated to reflect more recent

historical data and trends (other than the recession), resulting in an improvement in the actuarial balance of 0.02 percent of taxable payroll.

Several methodological improvements and updates of program-specific data

are included in this report. These changes to programmatic data and methods

have largely offsetting effects and combine to increase the long-range

OASDI actuarial balance by 0.03 percent of taxable payroll.

Three significant changes were made in the methods for determining average

benefit amounts for retired-worker and disabled-worker beneficiaries for

projection years 11 through 75. First, the factors used to project growth in

benefit levels after initial entitlement in excess of the COLA (due to additional earnings and lower mortality for higher earners) were updated, reflecting recent data. Second, post-entitlement factors were newly developed and

applied for the following additional beneficiary categories: (1) retiredworker beneficiaries after conversion from disabled-worker status at normal

retirement age; (2) retired-worker beneficiaries over age 95; and (3) disabled-worker beneficiaries. Third, the transitioning of projected average benefit levels, from the end of the 10-year short-range period to the remainder of

the long-range period, was improved. These three changes combined to

increase the projected average benefit level for disabled-worker beneficiaries

and decrease the projected average benefit level for retired-worker beneficiaries over the long-range projection period. As a result, the long-range OASI

actuarial balance decreased by 0.05 percent of taxable payroll, and the longrange DI actuarial balance increased by a similar amount. In total, the combined effects increased the long-range OASDI actuarial balance by 0.01 percent of taxable payroll.

Three additional significant changes were made in the area of methodological improvements and updates of program-specific data. First, the ultimate

projected relationship between benefits and personal income taxes on

OASDI benefits was updated based on new estimates provided by the Office

of Tax Analysis at the Department of the Treasury. The revisions in the estimates of tax revenue increase the long-range OASDI actuarial balance by

0.02 percent of taxable payroll. Second, the methodology for projecting the
Actuarial Estimates

72

financial interchange between the Social Security Administration and the

Railroad Retirement Board (RRB) was improved by using data and projections provided directly from the RRB. The improvement in the methodology

of RRB estimates decreases the long-range OASDI actuarial balance by 0.01

percent of taxable payroll. Third, starting level data and estimates were

revised for retroactive payments to beneficiaries for periods of benefit entitlement prior to award; plus estimates of the effect of the windfall elimination provision for individuals with pensions based on non-OASDI-covered

employment were revised. These final updates, and other improvements

based on more recent historical information, result in an increase in the longrange OASDI actuarial balance of about 0.01 percent of taxable payroll.

If no changes in assumptions or methods were made for this report and actual

experience had met expectations since the last report, the OASDI long-range

actuarial deficit would have increased by 0.05 percent of taxable payroll due

to the change in the valuation period. However, the combined changes made

in data, assumptions, and methods for this report increase the actuarial deficit

by an additional 0.25 percent of taxable payroll. Thus the actuarial deficit

increases from 1.70 percent in last year’s report to 2.00 percent of taxable

payroll in this report.

The effects of changes made in this report can also be illustrated by comparing the annual (cash-flow) balances for this and the prior year’s report. Figure IV.B5 provides this comparison for the combined OASDI program over

the long-range (75-year) projection period.
73

Long-Range Estimates

During the first 10 years of the projection period, the annual balances in this

report are lower than those in last year’s report by about 0.52 percent of taxable payroll, on average. This is mainly due to (1) a lower starting level of

real GDP than was assumed last year for 2008, and (2) the economic recession which is projected to cause a decline in income from payroll taxes and

an increase in the number of disabled-worker beneficiaries. After 2018, the

difference in projected annual balances between the two reports increases

through about 2025 due to the improved method for transitioning projected

average benefit levels from the short-range period to the long-range period.

The effect of generally lower post-entitlement factors then causes the difference to decline, reaching similar annual balances around 2063. Thereafter,

the projected annual balances in this year’s report gradually become lower

than in last year’s report due primarily to the increase in assumed rates of

decline in mortality. By the end of last year’s 75-year projection period

(2082), the difference in the annual balances is 0.09 percent of payroll. The

annual deficit for 2082 is 4.29 percent of taxable payroll in this report compared to 4.20 percent for 2082 in last year’s report.

 Figure IV.B5.—OASDI Annual Balances: 2008 and 2009 Trustees Reports

[As a percentage of taxable payroll under the intermediate assumptions]

-6%

-4%

-2%

0%

2%

4%

2005 2015 2025 2035 2045 2055 2065 2075 2085

Calendar year

2008 Report

2009 Report
Assumptions & Methods

74

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

The future income and cost of the OASDI program will depend on many

demographic, economic, and program-specific factors. Trust fund income

will depend on how these factors affect the size and composition of the

working population and the level and distribution of earnings. Similarly, program cost will depend on how these factors affect the size and composition

of the beneficiary population and the general level of benefits.

Basic assumptions are developed for several of these factors based on analysis of historical trends and conditions, and on expected future conditions.

These factors include fertility, mortality, immigration, marriage, divorce,

productivity, inflation, average earnings, unemployment, retirement, and disability incidence and termination. Other factors are projected using methods

that reflect historical and expected future relationships to the basic assumptions. These include total population, life expectancy, labor force, gross

domestic product, interest rates, and many program-specific factors. It

should be noted that all factors included in any consistent set of assumptions

are interrelated directly or indirectly. It is also important to note that these

interrelationships can and do change over time.

The assumptions and methods used in this report are reexamined each year in

light of recent experience and new information about future conditions, and

are revised if warranted.

Because projections of these factors and their interrelationships are inherently uncertain, a range of estimates is shown in this report on the basis of

three sets of assumptions, designated as intermediate (alternative II), lowcost (alternative I), and high-cost (alternative III). The intermediate set represents the Board’s best estimate of the future course of the population and the

economy. In terms of the net effect on the status of the OASDI program, the

low-cost is more optimistic, and the high-cost is more pessimistic. The lowand high-cost sets of assumptions reflect significant potential changes in the

interrelationship among factors, as well as changes in the values for individual factors. The probability is very low that all the factors and interactions

would differ in the same direction from those expected for long periods of

time. Outcomes with overall long-range cost as low as (or lower than) the

low-cost scenario or as high as (or higher than) the high-cost scenario also

have a very low probability. This report also includes a stochastic projection

that provides a probability distribution of possible future outcomes that is

centered around the intermediate assumptions. These are discussed in

Appendix E.
75

Demographic Assumptions and Methods

Although these three sets of demographic and economic assumptions have

been developed to provide a broad range of possible outcomes, the resulting

estimates should be interpreted with care. The estimates are not intended to

be specific predictions of the future financial status of the OASDI program,

but rather, they are intended to be indicators of the expected trend and a reasonable range of future income and cost, under a variety of plausible demographic and economic conditions.

The values for each of the demographic, economic, and program-specific

factors are assumed to move from recently experienced levels or trends,

toward long-range ultimate values, generally over the next 25 years. Ultimate values or trends reached by the end of the 75-year long-range period are

generally maintained at these levels or trends for extrapolations beyond 75

years. One exception is for real-wage growth, as described in section IV.B.5.

The assumed ultimate values, which are reached within the first 25 years

(and apply thereafter through the end of the 75-year long-range period) for

both the demographic and the economic factors, are intended to represent

average annual experience or growth rates. Actual future values will exhibit

fluctuations or cyclical patterns, as in the past.

The following sections discuss, in abbreviated form, the various assumptions

and methods required to make the estimates of trust fund financial status,

which are the heart of this report.1 There are, of course, many interrelationships among these factors that make a sequential presentation potentially

misleading. Nevertheless, the following sections roughly follow the order

used in building the trust fund estimates presented in chapter IV.

A. DEMOGRAPHIC ASSUMPTIONS AND METHODS

The principal demographic assumptions relating to fertility, mortality, and

net immigration for the three alternatives are shown in table V.A1. The

rationales for selecting these assumptions are discussed in the following

three sections.

 1 Further details about the assumptions, methods, and actuarial estimates are contained in Actuarial Studies

published by the Office of the Chief Actuary, Social Security Administration. A complete list of available

studies may be found on the Social Security website at:

www.socialsecurity.gov/OACT/NOTES/actstud.html. To obtain copies of such studies, or of this report, submit a request via our Internet request form at www.socialsecurity.gov/OACT/request.html; or write to:

Office of the Chief Actuary, 700 Altmeyer Building, 6401 Security Boulevard, Baltimore, MD 21235; or

call 410-965-3000. This entire report, along with supplemental year-by-year tables, may also be found at

www.socialsecurity.gov/OACT/TR/TR09/index.html.
Assumptions & Methods

76

1. Fertility Assumptions

Fertility assumptions are developed for women in the form of birth rates by

single year of age, from 14 to 49. They are applied to the total number of

women in the population at each age, for all marital statuses.

Historically, birth rates in the United States have fluctuated widely. The total

fertility rate1 decreased from 3.31 children per woman at the end of World

War I (1918) to 2.15 during the Great Depression (1936). After 1936, the

total fertility rate rose to 3.68 in 1957 and then fell to 1.74 by 1976. After

1976, the total fertility rate began to rise again, reaching a level of 2.07 for

1990. In the 1990s, the total fertility rate remained fairly stable, around 2.00

children per woman. Since 2000, the total fertility rate has been consistently

above 2.00, and was 2.06 in 2005.

These variations in the total fertility rate resulted from changes in many factors, including social attitudes, economic conditions, and the use of birthcontrol methods. Future total fertility rates may be expected to remain close

to recent levels. Certain population characteristics, such as the higher percentages of women who have never married, of women who are divorced,

and of young women who are in the labor force, are consistent with continued lower total fertility rates than experienced during the baby-boom era

(1946-65). Based on consideration of these factors, ultimate total fertility

rates of 2.30, 2.00 and 1.70 children per woman are assumed for the lowcost, intermediate, and high-cost assumptions, respectively. These assumptions are unchanged from those used in last year’s report.

Based on preliminary data for 2006 and 2007, the total fertility rate is

assumed to reach a level of 2.10 children per woman for both 2006 and 2007

and 2.08 for 2008. These levels are slightly higher than those estimated in

last year’s report for the intermediate assumptions. For all three alternatives,

the total fertility rate is then assumed to follow a gradual trend toward the

selected ultimate level, which is reached in 2033.

2. Mortality Assumptions

For the projections in this year’s report, assumed average percentage reductions in future mortality rates were developed by age-group, sex, and cause

of death. These assumptions were then used to estimate future central death

 1 Defined to be the average number of children that would be born to a woman in her lifetime if she were to

experience the birth rates by age observed in, or assumed for, the selected year, and if she were to survive the

entire childbearing period. A rate of 2.1 would ultimately result in a nearly constant population if net immigration were zero and if death rates were constant.
77

Demographic Assumptions and Methods

rates by age-group, sex, and cause of death. From these estimated central

death rates, resulting probabilities of death by single year of age and sex

were calculated.

Historical death rates (for years 1900-2005) used in developing estimates for

this report were calculated for ages below 65 (and for all ages for years prior

to 1968) using data from the National Center for Health Statistics (NCHS).1

For ages 65 and over, final Medicare data on deaths and enrollments were

used for years 1968 through 2005. Death rates by cause of death at all ages,

for years 1979-2005, were produced by the NCHS. 

The total age-sex-adjusted death rate2 declined at an average rate3 of

1.07 percent per year between 1900 and 2005. Between 1979 and 2005, the

period for which death rates were analyzed by cause, the total age-sexadjusted death rate (for all causes combined) declined at an average rate of

0.82 percent per year.

Death rates have declined substantially in the U.S. since 1900, with rapid

declines over some periods and slow or no improvement over the other periods. Historical death rates generally declined more slowly for older ages than

for the rest of the population. The age-sex-adjusted death rate for ages 65 and

over declined at an average rate of 0.75 percent per year between 1900 and

2005. Between 1982 and 2005 the age-sex-adjusted death rate for these ages

declined at an average annual rate of 0.57 percent.

Reductions in death rates resulted from many factors, including increased

medical knowledge and availability of health-care services, and improvements in sanitation and nutrition. Based on consideration of the expected rate

of future progress in these and other areas, three alternative sets of ultimate

annual percentage reductions in central death rates by age group, sex, and

cause of death are assumed for 2033 and later. The intermediate set, which is

used for alternative II, is considered to be the most likely to occur. The average annual percentage reductions used for alternative I are generally smaller

than those for alternative II, while those used for alternative III are generally

larger. These three sets of ultimate annual percentage reductions differ

slightly from those used in last year’s report. Overall, age-sex-adjusted death

rates are projected to decline slightly faster than in last year’s report. The dif-

 1 These rates reflect NCHS data on deaths and Census estimates of population.

 2 Calculated here as the crude rate that would occur in the enumerated total population, as of April 1, 2000,

if that population were to experience the death rates by age and sex for the selected year.

 3 Average rate of decline is calculated as the annual geometric rate of reduction between the first and last

years of the period.
Assumptions & Methods

78

ferences reflect an assessment of long-term trends based on mortality data

from 1900 through 2005. The most significant changes in the ultimate rates

of reduction in death rates are increases in these rates for heart disease and

cancer between ages 65-84. For these ages and these causes of death,

declines in death rates have consistently exceeded expectations in recent

years.

After 2005, the reductions in central death rates for alternative II are

assumed to change rapidly from the average annual reductions by age group,

sex, and cause of death observed between 1985 and 2005, to the ultimate

annual percentage reductions by age group, sex, and cause of death assumed

for 2033 and later. The reductions in death rates under alternatives I and III

are also assumed to change rapidly to their ultimate levels, but start from levels which are, respectively, 50 or 150 percent of the average annual reductions observed between 1985 and 2005.

Projections of age-sex-adjusted death rates are presented in table V.A1 for

the total population (all ages), for under age 65, and for ages 65 and over.

Under the intermediate assumptions, projected age-sex-adjusted death rates

for the total population are lower than the death rates in last year’s report.

However, for the age group under age 65, projected age-sex-adjusted death

rates are slightly higher than in last year’s report. This change primarily

results from updating starting levels of mortality to reflect the most recent

data. For the age group 65 and over, projected age-sex-adjusted death rates

are lower than in last year’s report. This is primarily due to the increased ultimate rates of decline in mortality that are assumed for ages 65 through 84.

After adjustment for changes in the age-sex distribution of the population,

the resulting total death rates are projected to decline at ultimate average

annual rates of about 0.35 percent, 0.77 percent, and 1.24 percent between

2033 and 2083 for alternatives I, II, and III, respectively. In keeping with the

patterns observed in the historical data, future rates of decline are assumed to

be greater for younger ages than for older ages, but to a substantially lesser

degree than in the past. Accordingly, age-sex-adjusted death rates for ages 65

and over are projected to decline at average annual rates of about

0.32 percent, 0.71 percent, and 1.18 percent between 2033 and 2083 for

alternatives I, II, and III, respectively.

Experts express a wide range of views on the likely rate of future decline in

death rates. For example, the 2007 Technical Panel on Assumptions and

Methods appointed by the Social Security Advisory Board believed that ultimate rates of decline in mortality will be higher than the rates of decline

assumed for the intermediate projections in this report. Others believe that
79

Demographic Assumptions and Methods

biological and social factors may slow future rates of decline in mortality.

Evolving mortality trends and developments in health care and lifestyle will

be closely monitored to determine what further modifications to the assumed

ultimate rates of decline in mortality may be warranted for future reports.

3. Immigration Assumptions

In order to develop projections of the total Social Security area population,

assumptions are made for annual legal immigration, legal emigration, other

immigration, and other emigration. Legal immigration consists of persons

who are granted legal permanent resident (LPR) status. Legal emigration

consists of those legal immigrants and native-born citizens who leave the

Social Security area population. Net legal immigration is then calculated as

the difference between legal immigration and legal emigration. Other immigration consists of immigrants who enter the Social Security area in a given

year and stay to the end of that year without having LPR status, such as

undocumented immigrants and temporary foreign workers and students.

Other emigration consists of other immigrants who leave the Social Security

area population or who adjust their status to LPR. Net other immigration is

then calculated as the difference between other immigration and other emigration. Net immigration refers to the sum of net legal immigration and net

other immigration.

Separate assumptions are developed for the low-cost, intermediate, and highcost scenarios. The low-cost scenario includes higher annual net immigration

and the high-cost scenario includes lower annual net immigration.

Legal immigration increased after World War II to around 300,000 persons

per year and remained around that level until shortly after 1960. With the

Immigration Act of 1965 and other related changes, annual legal immigration increased to about 400,000 and remained fairly stable until 1977.

Between 1977 and 1990, legal immigration once again increased, averaging

about 580,0001 per year. The Immigration Act of 1990, which took effect in

fiscal year 1992, restructured the immigration categories and increased significantly the number of immigrants who may legally enter the United States.

Legal immigration averaged about 790,0001 persons per year during the

period 1992 through 2000. Legal immigration increased to about 900,000 in

2000 and about 1,000,000 in 2001 reflecting primarily an increase in the

number of persons granted LPR status as immediate relatives of U.S. citi-

 1 Excludes those persons who attained legal permanent resident status under the special, one-time provisions of the Immigration Reform and Control Act of 1986.
Assumptions & Methods

80

zens, the only category of legal immigration that is not numerically limited.

However, legal immigration declined to less than 800,000 by 2003 as the

number of pending applications increased. From 2003 to 2006, legal immigration increased, reaching about 1,200,000 for 2005 and 2006. For 2007,

legal immigration decreased to about 1,100,000. Legal immigration in excess

of 1,000,000 reflects the concerted effort in recent years to reduce the backlog of pending applications for LPR status.

For the intermediate alternative, the remaining backlog of pending applications is assumed to be reduced by the end of 2009, and thereafter legal immigration is assumed to average approximately 1,000,000 persons per year. For

alternatives I and III, annual legal immigration is ultimately assumed to be

1,200,000 persons and 800,000 persons, respectively. These are the same

assumptions used in the 2008 report.

The ratios of annual legal emigration to legal immigration are assumed to be

20, 25, and 30 percent for alternatives I, II, and III, respectively. This range

is consistent with the limited historical data for legal emigration from the

Social Security area. These are the same ratios used in the 2008 Trustees

Report. Combining the annual legal immigration and emigration assumptions results in ultimate net legal immigration of 750,000 persons per year

under the intermediate alternative. For the low-cost and high-cost scenarios,

ultimate annual net legal immigration is 960,000 persons and 560,000 persons, respectively.

The number of other immigrants residing in the Social Security area population is estimated to have been about 9.7 million persons as of January 1,

2000, increasing to about 12.8 million persons as of January 1, 2006. This

other-immigrant population is highly mobile and far more likely to leave the

Social Security area than is the native-born or legal-immigrant population.

The average number of persons entering the other-immigrant population in

the period 2000 through 2006 is estimated to have been about 1.5 million per

year. During the same period, the number of other immigrants who left the

Social Security area or adjusted status to become LPRs is estimated to have

averaged about 960,000 per year. Thus, annual net other immigration during

this time period is estimated to have averaged approximately 540,000 persons.

For the intermediate assumptions, annual other immigration is assumed to

continue at the level of 1.5 million persons throughout the projection period.

For the low- and high-cost scenarios, future annual other immigration is

assumed to average 1.8 million persons and 1.2 million persons, respectively.
81

Demographic Assumptions and Methods

Emigration from the other-immigrant population includes those who leave

the Social Security area and those who adjust status to become LPRs. The

annual number of other immigrants who leave the Social Security area is

estimated based on modeled departures, disaggregated into two groups, for

the period 2000-06. The first departing group is set at fixed annual numbers

of departures, by age and sex, which remain constant throughout the projection period. This first group is directly related to the number of other immigrants that are assumed to have recently entered the Social Security area. The

second departing group is calculated by applying a set of annual departure

rates, by age and sex, to the other-immigrant population in the Social Security area. In addition, the annual number of other immigrants who adjust status to become LPRs is assumed to ultimately be 500,000 for the intermediate

assumptions. This level is one third of the annual number of other immigrants assumed to enter the Social Security area. For the low- and high-cost

scenarios, ultimate annual numbers adjusting status to LPR are assumed to

average 600,000 persons and 400,000 persons, respectively.

Under the assumptions and methods described above, the size of the otherimmigrant population is projected to grow substantially. This growth reflects

the excess of annual other immigration over the combined annual numbers of

emigrants and deaths that occur within the other-immigrant population.

Net other immigration decreased from a level averaging over 590,000 per

year in the period 2000 through 2003, to about 465,000 in 2006, reflecting an

increase in the number of other immigrants adjusting to LPR status as a

result of the effort to reduce the backlog of applications for LPR status. By

2010, when the backlog of applications is expected to be eliminated, net

other immigration is projected to be about 440,000 persons per year. After

2010, net other immigration is projected to decline steadily to about 275,000

in 2063 and to remain fairly stable thereafter. The decline in net other immigration is attributable to the increasing number of other immigrants residing

in the Social Security area. This results in an increase in the numbers who

emigrate out of the area based on the rates of departure described above. All

other components of other immigration and emigration are set at fixed levels

after 2010, and thus do not contribute toward any change in net other immigration. The average annual level of net other immigration over the 75-year

projection period is about 315,000 persons. Net other immigration is estimated to average about 410,000 persons per year under the low-cost assumptions and 220,000 persons per year under the high-cost assumptions.

The total level of net immigration (legal and other combined) is estimated to

average 1,065,000 persons per year during the 75-year projection period

under the intermediate assumptions. For the low-cost assumptions, total net
Assumptions & Methods

82

immigration is estimated to average 1,370,000 persons per year. Under the

high-cost assumptions, total net immigration is estimated to average 785,000

persons per year.

Demographers express a wide range of views about the future course of

immigration for the United States. Some, like the 2007 Technical Panel mentioned in the previous section, believe that immigration will increase substantially in the future. Others believe that potential immigrants may be

attracted to other countries or that the U.S. borders could be tightened in the

future.
83

Demographic Assumptions and Methods

Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2085

Calendar year

Total

fertility

ratea

Age-sex-adjusted death rateb

per 100,000, by age Net immigrationc

Total Under 65 65 and over Legald Othere

Historical data:

1940 . . . . . . . . . 2.23 1,779.1 673.0 9,569.0 45,000

1945 . . . . . . . . . 2.42 1,586.6 601.8 8,522.4 55,000

1950 . . . . . . . . . 3.03 1,435.6 499.4 8,028.3 170,000

1955 . . . . . . . . . 3.50 1,334.2 442.8 7,612.2 210,000

1960 . . . . . . . . . 3.61 1,330.9 436.9 7,626.7 200,000

1965 . . . . . . . . . 2.88 1,304.6 430.0 7,464.0 230,000

1970 . . . . . . . . . 2.43 1,224.3 422.6 6,870.7 280,000

1975 . . . . . . . . . 1.77 1,099.0 369.5 6,236.4 295,000

1980 . . . . . . . . . 1.82 1,035.9 331.9 5,993.6 410,000 375,000

1985 . . . . . . . . . 1.83 984.2 303.6 5,777.6 435,000 375,000

1990 . . . . . . . . . 2.07 931.2 289.4 5,451.1 500,000 550,000

1995 . . . . . . . . . 1.98 913.9 277.3 5,397.5 575,000 550,000

1996 . . . . . . . . . 1.98 900.4 266.1 5,367.2 665,000 550,000

1997 . . . . . . . . . 1.97 885.1 253.6 5,332.5 570,000 550,000

1998 . . . . . . . . . 2.00 878.3 246.9 5,325.2 490,000 550,000

1999 . . . . . . . . . 2.01 884.3 245.0 5,386.6 520,000 550,000

2000 . . . . . . . . . 2.05 875.7 243.4 5,328.3 670,000 625,000

2001 . . . . . . . . . 2.03 867.4 243.6 5,260.7 795,000 495,000

2002 . . . . . . . . . 2.02 863.7 242.7 5,236.6 730,000 550,000

2003 . . . . . . . . . 2.05 851.5 241.4 5,148.2 575,000 685,000

2004 . . . . . . . . . 2.06 820.1 235.0 4,940.6 750,000 505,000

2005 . . . . . . . . . 2.06 822.2 236.2 4,949.3 870,000 440,000

2006f . . . . . . . . 2.10 825.4 230.5 5,015.2 910,000 465,000

2007f . . . . . . . . 2.10 820.5 227.6 4,995.5 790,000 480,000

2008f. . . . . . . . . 2.08 815.8 224.9 4,977.4 825,000 410,000

Intermediate: 

2010 . . . . . . . . . 2.08 806.4 219.6 4,939.2 750,000 440,000

2015 . . . . . . . . . 2.06 776.4 207.2 4,785.2 750,000 405,000

2020 . . . . . . . . . 2.04 743.2 195.7 4,599.7 750,000 380,000

2025 . . . . . . . . . 2.03 710.6 184.9 4,412.5 750,000 355,000

2030 . . . . . . . . . 2.01 679.5 174.8 4,233.4 750,000 335,000

2035 . . . . . . . . . 2.00 650.3 165.5 4,064.4 750,000 315,000

2040 . . . . . . . . . 2.00 622.9 156.7 3,906.3 750,000 300,000

2045 . . . . . . . . . 2.00 597.4 148.6 3,758.5 750,000 290,000

2050 . . . . . . . . . 2.00 573.5 140.9 3,620.1 750,000 285,000

2055 . . . . . . . . . 2.00 551.2 133.8 3,490.5 750,000 280,000

2060 . . . . . . . . . 2.00 530.2 127.1 3,368.8 750,000 280,000

2065 . . . . . . . . . 2.00 510.5 120.9 3,254.5 750,000 275,000

2070 . . . . . . . . . 2.00 492.0 115.0 3,147.0 750,000 275,000

2075 . . . . . . . . . 2.00 474.6 109.5 3,045.6 750,000 275,000

2080 . . . . . . . . . 2.00 458.2 104.3 2,950.1 750,000 275,000

2085 . . . . . . . . . 2.00 442.7 99.5 2,859.8 750,000 275,000
Assumptions & Methods

84

4. Total Population Estimates

Combining the above assumptions for future fertility, mortality, and net

immigration with assumptions on marriage and divorce based on data from

the NCHS, projections were made of the population in the Social Security

Low-cost: 

2010 . . . . . . . . . 2.10 817.0 222.9 5,001.1 960,000 635,000

2015 . . . . . . . . . 2.14 810.7 217.7 4,986.4 960,000 560,000

2020 . . . . . . . . . 2.19 798.1 212.4 4,922.9 960,000 510,000

2025 . . . . . . . . . 2.23 783.8 207.2 4,844.2 960,000 470,000

2030 . . . . . . . . . 2.27 769.1 202.1 4,762.3 960,000 440,000

2035 . . . . . . . . . 2.30 754.7 197.2 4,680.7 960,000 410,000

2040 . . . . . . . . . 2.30 740.7 192.5 4,601.2 960,000 390,000

2045 . . . . . . . . . 2.30 727.1 187.9 4,524.3 960,000 375,000

2050 . . . . . . . . . 2.30 714.0 183.5 4,449.7 960,000 365,000

2055 . . . . . . . . . 2.30 701.3 179.3 4,377.5 960,000 355,000

2060 . . . . . . . . . 2.30 689.0 175.2 4,307.5 960,000 350,000

2065 . . . . . . . . . 2.30 677.1 171.2 4,239.6 960,000 350,000

2070 . . . . . . . . . 2.30 665.6 167.4 4,173.8 960,000 345,000

2075 . . . . . . . . . 2.30 654.4 163.7 4,110.0 960,000 345,000

2080 . . . . . . . . . 2.30 643.5 160.1 4,048.1 960,000 345,000

2085 . . . . . . . . . 2.30 633.0 156.7 3,988.0 960,000 345,000

High-cost:

2010 . . . . . . . . . 2.05 795.7 216.3 4,875.9 630,000 200,000

2015 . . . . . . . . . 1.98 740.8 198.0 4,563.2 560,000 255,000

2020 . . . . . . . . . 1.90 685.8 182.0 4,233.6 560,000 250,000

2025 . . . . . . . . . 1.82 634.7 167.7 3,923.8 560,000 240,000

2030 . . . . . . . . . 1.75 588.4 154.7 3,642.6 560,000 230,000

2035 . . . . . . . . . 1.70 546.6 142.9 3,389.7 560,000 220,000

2040 . . . . . . . . . 1.70 509.0 132.2 3,162.9 560,000 210,000

2045 . . . . . . . . . 1.70 475.1 122.3 2,959.4 560,000 210,000

2050 . . . . . . . . . 1.70 444.5 113.4 2,776.3 560,000 205,000

2055 . . . . . . . . . 1.70 416.8 105.2 2,611.0 560,000 205,000

2060 . . . . . . . . . 1.70 391.6 97.7 2,461.4 560,000 210,000

2065 . . . . . . . . . 1.70 368.7 90.8 2,325.7 560,000 210,000

2070 . . . . . . . . . 1.70 347.8 84.5 2,202.1 560,000 210,000

2075 . . . . . . . . . 1.70 328.7 78.7 2,089.2 560,000 210,000

2080 . . . . . . . . . 1.70 311.2 73.4 1,985.9 560,000 210,000

2085 . . . . . . . . . 1.70 295.1 68.5 1,891.0 560,000 210,000

a The total fertility rate for any year is the average number of children who would be born to a woman in her

lifetime if she were to experience the birth rates by age observed in, or assumed for, the selected year, and if

she were to survive the entire childbearing period. The ultimate total fertility rate is assumed to be reached in

2033.

b The age-sex-adjusted death rate is the crude rate that would occur in the enumerated total population as of

April 1, 2000, if that population were to experience the death rates by age and sex observed in, or assumed

for, the selected year.

c Net immigration values are rounded to the nearest 5,000.

d Historical estimates of net legal immigration assume a 25 percent reduction in legal immigration due to

legal emigration. Estimates do not include persons legalized under the Immigration Reform and Control Act

of 1986.

e Net other annual immigration is estimated to have averaged 375,000 persons over the period 1980-89 and

550,000 persons over the period 1990-99.

f Estimated.

Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2085 (Cont.)

Calendar year

Total

fertility

ratea

Age-sex-adjusted death rateb

per 100,000, by age Net immigrationc

Total Under 65 65 and over Legald Othere
85

Demographic Assumptions and Methods

area by age, sex, and marital status as of January 1 of each year 2008 through

2085. The starting Social Security area population for January 1, 2007, is

based on the Census Bureau’s estimate of the residents of the 50 States and

D.C., and U.S. Armed Forces overseas. The base estimate is adjusted for net

census undercount and increased for other U.S. citizens living abroad

(including residents of U.S. territories) and for non-citizens living abroad

who are insured for Social Security benefits. This starting population was

then projected using assumed rates of birth, death, marriage and divorce, and

assumed levels of net immigration.

Table V.A2 shows the historical and projected population as of July 1 by

broad age group, for the three alternatives. Also shown are aged and total

dependency ratios (see table footnotes for definitions).

Table V.A2.—Social Security Area Population as of July 1 and Dependency Ratios,

Calendar Years 1950-2085

Calendar year

Population (in thousands) Dependency ratio

Under 20 20-64

65 and

over Total Ageda Totalb

Historical data:

1950 . . . . . . . . . . . . . . 54,466 92,841 12,811 160,118 0.138 0.725

1960 . . . . . . . . . . . . . . 73,076 99,818 17,278 190,172 .173 .905

1965 . . . . . . . . . . . . . . 80,052 104,805 19,070 203,927 .182 .946

1970 . . . . . . . . . . . . . . 80,864 112,996 20,899 214,759 .185 .901

1975 . . . . . . . . . . . . . . 78,776 122,579 23,254 224,609 .190 .832

1980 . . . . . . . . . . . . . . 74,929 134,110 26,196 235,236 .195 .754

1985 . . . . . . . . . . . . . . 73,401 144,851 29,122 247,374 .201 .708

1990 . . . . . . . . . . . . . . 75,154 153,316 31,981 260,452 .209 .699

1995 . . . . . . . . . . . . . . 79,542 160,871 34,336 274,749 .213 .708

2000 . . . . . . . . . . . . . . 82,662 170,076 35,489 288,227 .209 .695

2005 . . . . . . . . . . . . . . 84,383 180,384 37,415 302,182 .207 .675

2008c . . . . . . . . . . . . . 85,612 186,221 39,179 311,012 .210 .670

Intermediate:

2010 . . . . . . . . . . . . . . 86,141 189,953 40,503 316,597 .213 .667

2015 . . . . . . . . . . . . . . 87,799 196,299 46,550 330,648 .237 .684

2020 . . . . . . . . . . . . . . 90,483 199,981 54,266 344,729 .271 .724

2025 . . . . . . . . . . . . . . 93,174 202,064 63,107 358,344 .312 .773

2030 . . . . . . . . . . . . . . 95,338 204,743 70,832 370,913 .346 .812

2035 . . . . . . . . . . . . . . 97,112 209,532 75,515 382,159 .360 .824

2040 . . . . . . . . . . . . . . 98,759 215,603 78,026 392,388 .362 .820

2045 . . . . . . . . . . . . . . 100,561 221,923 79,526 402,010 .358 .811

2050 . . . . . . . . . . . . . . 102,635 227,201 81,603 411,440 .359 .811

2055 . . . . . . . . . . . . . . 104,878 231,724 84,472 421,074 .365 .817

2060 . . . . . . . . . . . . . . 106,963 235,988 88,190 431,141 .374 .827

2065 . . . . . . . . . . . . . . 108,848 241,118 91,673 441,639 .380 .832

2070 . . . . . . . . . . . . . . 110,673 246,309 95,355 452,337 .387 .836

2075 . . . . . . . . . . . . . . 112,575 251,166 99,258 462,999 .395 .843

2080 . . . . . . . . . . . . . . 114,582 255,759 103,145 473,486 .403 .851

2085 . . . . . . . . . . . . . . 116,625 260,107 107,119 483,851 .412 .860
Assumptions & Methods

86

Notes:

1. Historical data are subject to revision.

2. Totals do not necessarily equal the sums of rounded components.

5. Life Expectancy Estimates

Life expectancy, or average remaining number of years expected prior to

death, is a useful analytical concept. Life expectancy is calculated in two different forms, for two separate purposes.

Low-cost:

2010 . . . . . . . . . . . . . . 86,377 190,351 40,497 317,225 0.213 0.667

2015 . . . . . . . . . . . . . . 89,243 198,006 46,379 333,628 .234 .685

2020 . . . . . . . . . . . . . . 93,876 202,922 53,724 350,522 .265 .727

2025 . . . . . . . . . . . . . . 99,305 206,196 61,975 367,475 .301 .782

2030 . . . . . . . . . . . . . . 104,975 210,075 68,888 383,939 .328 .828

2035 . . . . . . . . . . . . . . 110,505 216,639 72,629 399,773 .335 .845

2040 . . . . . . . . . . . . . . 115,667 225,230 74,195 415,093 .329 .843

2045 . . . . . . . . . . . . . . 120,878 234,751 74,908 430,537 .319 .834

2050 . . . . . . . . . . . . . . 126,451 243,911 76,416 446,779 .313 .832

2055 . . . . . . . . . . . . . . 132,284 253,106 78,867 464,256 .312 .834

2060 . . . . . . . . . . . . . . 138,322 262,595 82,158 483,075 .313 .840

2065 . . . . . . . . . . . . . . 144,371 273,613 85,097 503,081 .311 .839

2070 . . . . . . . . . . . . . . 150,389 285,567 88,068 524,025 .308 .835

2075 . . . . . . . . . . . . . . 156,485 298,092 91,175 545,752 .306 .831

2080 . . . . . . . . . . . . . . 162,792 310,673 94,804 568,268 .305 .829

2085 . . . . . . . . . . . . . . 169,325 323,128 99,209 591,662 .307 .831

High-cost:

2010 . . . . . . . . . . . . . . 85,925 189,590 40,514 316,029 .214 .667

2015 . . . . . . . . . . . . . . 86,425 194,702 46,757 327,884 .240 .684

2020 . . . . . . . . . . . . . . 87,241 197,202 54,920 339,363 .278 .721

2025 . . . . . . . . . . . . . . 87,333 198,138 64,471 349,941 .325 .766

2030 . . . . . . . . . . . . . . 86,195 199,665 73,158 359,018 .366 .798

2035 . . . . . . . . . . . . . . 84,511 202,731 78,955 366,197 .389 .806

2040 . . . . . . . . . . . . . . 83,041 206,360 82,576 371,977 .400 .803

2045 . . . . . . . . . . . . . . 81,981 209,586 85,000 376,567 .406 .797

2050 . . . . . . . . . . . . . . 81,310 211,145 87,718 380,173 .415 .801

2055 . . . . . . . . . . . . . . 80,918 211,257 90,998 383,173 .431 .814

2060 . . . . . . . . . . . . . . 80,193 210,683 95,057 385,933 .451 .832

2065 . . . . . . . . . . . . . . 79,197 210,487 98,942 388,627 .470 .846

2070 . . . . . . . . . . . . . . 78,225 209,710 103,173 391,108 .492 .865

2075 . . . . . . . . . . . . . . 77,459 207,960 107,714 393,133 .518 .890

2080 . . . . . . . . . . . . . . 76,866 205,919 111,691 394,476 .542 .916

2085 . . . . . . . . . . . . . . 76,318 203,812 115,005 395,136 .564 .939

a Ratio of the population at ages 65 and over to the population at ages 20-64.

b Ratio of the population at ages 65 and over and the population under age 20 to the population at ages

20-64.

c Estimated.

Table V.A2.—Social Security Area Population as of July 1 and Dependency Ratios,

Calendar Years 1950-2085 (Cont.)

Calendar year

Population (in thousands) Dependency ratio

Under 20 20-64

65 and

over Total Ageda Totalb
87

Demographic Assumptions and Methods

Period life expectancy is calculated for a given year using the actual or

expected death rates at each age for that year. It is a useful summary statistic

for illustrating the overall level of the death rates experienced in a single

year. It is thus closely related to the age-sex-adjusted death rate that is discussed in section V.A.2. Period life expectancy for a particular year may be

viewed as the expected remaining life at a selected age only if it is assumed

that there is no change in death rates after that year.

Cohort life expectancy truly answers the question “What is the expected

average remaining lifetime for an individual at a selected age in a given

year?” Cohort life expectancy is calculated using death rates not from a single year, but from the series of years in which the individual will actually

reach each succeeding age if he or she survives. Cohort life expectancy is

shown in table V.A4 for those born on January 1 of each calendar year, and

for those attaining age 65 on January 1 of each calendar year.

Tables V.A3 and V.A4 present historical and projected life expectancy calculated on both period and cohort bases. Cohort life expectancy is somewhat

greater than period life expectancy for the same year. This is because death

rates for any given age tend to decline as time passes and the cohort grows

older.
Assumptions & Methods

88

Table V.A3.—Period Life Expectancya

a The period life expectancy at a given age for a given year represents the average number of years of life

remaining if a group of persons at that age were to experience the mortality rates for that year over the course

of their remaining lives.

Calendar

year

Low-cost Intermediate High-cost

At birth At age 65 At birth At age 65 At birth At age 65

Male Female Male Female Male Female Male Female Male Female Male Female

Historical data:

1940 . . . . 61.4 65.7 11.9 13.4

1945 . . . . 62.9 68.4 12.6 14.4

1950 . . . . 65.6 71.1 12.8 15.1

1955 . . . . 66.7 72.8 13.1 15.6

1960 . . . . 66.7 73.2 12.9 15.9

1965 . . . . 66.8 73.8 12.9 16.3

1970 . . . . 67.2 74.9 13.1 17.1

1975 . . . . 68.7 76.6 13.7 18.0

1980 . . . . 69.9 77.5 14.0 18.4

1985 . . . . 71.1 78.2 14.4 18.6

1990 . . . . 71.8 78.9 15.1 19.1

1995 . . . . 72.5 79.1 15.4 19.1

1996 . . . . 73.0 79.2 15.5 19.1

1997 . . . . 73.4 79.4 15.6 19.1

1998 . . . . 73.7 79.4 15.7 19.1

1999 . . . . 73.8 79.3 15.7 19.0

2000 . . . . 74.0 79.4 15.9 19.0

2001 . . . . 74.1 79.5 16.1 19.1

2002 . . . . 74.2 79.5 16.2 19.1

2003 . . . . 74.4 79.6 16.3 19.2

2004 . . . . 74.8 80.0 16.7 19.5

2005 . . . . 74.8 80.0 16.7 19.5

2006b . . . 75.1 79.9 16.7 19.3

2007b . . . 75.2 79.9 16.8 19.3

2008b . . .

b Estimated.

75.4 80.0 16.9 19.3

Projected:

2010 . . . . 75.5 79.9 16.9 19.3 75.7 80.1 17.0 19.4 75.9 80.2 17.1 19.5

2015 . . . . 75.8 80.0 17.1 19.3 76.4 80.5 17.4 19.6 76.9 81.0 17.8 20.0

2020 . . . . 76.1 80.2 17.2 19.4 77.0 81.0 17.8 19.9 77.9 81.8 18.4 20.5

2025 . . . . 76.3 80.4 17.4 19.5 77.6 81.4 18.1 20.2 78.9 82.6 19.0 21.1

2030 . . . . 76.6 80.6 17.5 19.6 78.1 81.9 18.4 20.5 79.8 83.4 19.6 21.7

2035 . . . . 76.8 80.8 17.6 19.7 78.6 82.4 18.7 20.8 80.6 84.2 20.2 22.3

2040 . . . . 77.1 81.0 17.8 19.9 79.2 82.9 19.0 21.1 81.4 84.9 20.7 22.8

2045 . . . . 77.3 81.2 17.9 20.0 79.7 83.3 19.3 21.4 82.2 85.5 21.2 23.3

2050 . . . . 77.6 81.4 18.0 20.1 80.1 83.7 19.6 21.7 82.9 86.2 21.7 23.8

2055 . . . . 77.8 81.6 18.1 20.2 80.6 84.1 19.9 22.0 83.6 86.8 22.2 24.2

2060 . . . . 78.0 81.8 18.3 20.3 81.1 84.5 20.2 22.3 84.3 87.4 22.7 24.7

2065 . . . . 78.3 82.0 18.4 20.5 81.5 84.9 20.5 22.5 84.9 87.9 23.1 25.1

2070 . . . . 78.5 82.2 18.5 20.6 81.9 85.3 20.7 22.8 85.5 88.4 23.5 25.5

2075 . . . . 78.7 82.4 18.6 20.7 82.3 85.6 21.0 23.0 86.1 89.0 23.9 25.9

2080 . . . . 78.9 82.5 18.7 20.8 82.7 86.0 21.2 23.3 86.7 89.4 24.3 26.2

2085 . . . . 79.1 82.7 18.9 20.9 83.1 86.3 21.5 23.5 87.2 89.9 24.7 26.6
89

Demographic Assumptions and Methods

Table V.A4.—Cohort Life Expectancya

a The cohort life expectancy at a given age for a given year represents the average number of years of life

remaining if a group of persons at that age were to experience the mortality rates for the series of years in

which they reach each succeeding age.

Calendar

year

Low-cost Intermediate High-cost

At birthb

b Cohort life expectancy at birth for those born on January 1 of the calendar year is based on a combination

of actual and estimated death rates for birth years 1940 through 2005. For birth years after 2005, these values

are based solely on estimated death rates.

At age 65 c

c Age 65 cohort life expectancy for those attaining age 65 on January 1 of the calendar years before 1975 is

based on actual data. For 1975 through 2005, these values are based on a combination of actual and estimated death rates. After 2005, these values are based solely on estimated death rates.

At birthb At age 65c At birthb At age 65 c

Male Female Male Female Male Female Male Female Male Female Male Female

1940 . . . . 69.6 75.5 12.7 14.7 69.9 75.9 12.7 14.7 70.3 76.3 12.7 14.7

1945 . . . . 71.2 76.9 13.0 15.4 71.7 77.4 13.0 15.4 72.3 78.1 13.0 15.4

1950 . . . . 72.2 77.9 13.1 16.2 72.9 78.7 13.1 16.2 73.8 79.7 13.1 16.2

1955 . . . . 72.7 78.3 13.1 16.7 73.6 79.3 13.1 16.7 74.8 80.6 13.1 16.7

1960 . . . . 73.2 78.6 13.2 17.4 74.4 79.8 13.2 17.4 75.8 81.4 13.2 17.4

1965 . . . . 73.9 78.9 13.5 18.0 75.3 80.4 13.5 18.0 77.0 82.2 13.5 18.0

1970 . . . . 74.8 79.5 13.8 18.5 76.5 81.2 13.8 18.5 78.5 83.3 13.8 18.5

1975 . . . . 75.4 80.0 14.2 18.7 77.4 82.0 14.2 18.7 79.7 84.3 14.2 18.7

1980 . . . . 76.1 80.5 14.7 18.7 78.3 82.7 14.7 18.7 81.0 85.3 14.7 18.7

1985 . . . . 76.6 80.8 15.3 18.8 79.1 83.3 15.3 18.9 82.0 86.1 15.3 18.9

1990 . . . . 77.0 81.2 15.8 19.0 79.7 83.8 15.8 19.1 82.9 86.9 15.9 19.1

1995 . . . . 77.4 81.5 16.3 19.1 80.4 84.4 16.4 19.2 83.9 87.6 16.5 19.4

1996 . . . . 77.5 81.5 16.4 19.1 80.5 84.5 16.5 19.3 84.0 87.8 16.6 19.5

1997 . . . . 77.5 81.6 16.5 19.1 80.6 84.6 16.6 19.3 84.2 87.9 16.8 19.6

1998 . . . . 77.6 81.6 16.6 19.2 80.7 84.6 16.8 19.4 84.3 88.0 16.9 19.7

1999 . . . . 77.7 81.7 16.7 19.2 80.8 84.7 16.9 19.4 84.5 88.2 17.1 19.7

2000 . . . . 77.7 81.7 16.8 19.2 80.9 84.8 17.0 19.5 84.6 88.3 17.2 19.8

2001 . . . . 77.8 81.8 16.8 19.3 81.0 84.9 17.1 19.6 84.8 88.4 17.4 19.9

2002 . . . . 77.8 81.8 16.9 19.3 81.1 85.0 17.2 19.6 84.9 88.5 17.5 20.1

2003 . . . . 77.8 81.8 17.0 19.3 81.2 85.1 17.3 19.7 85.1 88.6 17.7 20.2

2004 . . . . 77.9 81.9 17.0 19.3 81.3 85.1 17.4 19.8 85.2 88.8 17.8 20.3

2005 . . . . 77.9 81.9 17.1 19.4 81.4 85.2 17.5 19.8 85.3 88.9 17.9 20.4

2006 . . . . 78.0 82.0 17.1 19.4 81.5 85.3 17.5 19.9 85.5 89.0 18.1 20.5

2007 . . . . 78.1 82.0 17.2 19.4 81.6 85.4 17.6 19.9 85.6 89.1 18.2 20.6

2008 . . . . 78.1 82.1 17.2 19.4 81.7 85.5 17.7 20.0 85.8 89.2 18.4 20.7

2010 . . . . 78.2 82.1 17.3 19.5 81.9 85.6 17.9 20.1 86.1 89.5 18.6 21.0

2015 . . . . 78.5 82.3 17.4 19.6 82.4 86.0 18.2 20.4 86.8 90.1 19.3 21.6

2020 . . . . 78.7 82.5 17.5 19.7 82.8 86.4 18.6 20.8 87.4 90.6 19.9 22.2

2025 . . . . 78.9 82.7 17.7 19.8 83.2 86.8 18.9 21.1 88.0 91.1 20.5 22.8

2030 . . . . 79.2 82.9 17.8 20.0 83.6 87.1 19.2 21.4 88.6 91.6 21.1 23.3

2035 . . . . 79.4 83.1 17.9 20.1 84.0 87.4 19.5 21.7 89.1 92.1 21.7 23.9

2040 . . . . 79.6 83.3 18.1 20.2 84.4 87.8 19.8 22.0 89.7 92.5 22.2 24.4

2045 . . . . 79.8 83.4 18.2 20.3 84.7 88.1 20.1 22.3 90.2 93.0 22.7 24.9

2050 . . . . 80.0 83.6 18.3 20.5 85.1 88.4 20.4 22.6 90.7 93.4 23.2 25.3

2055 . . . . 80.2 83.8 18.5 20.6 85.4 88.7 20.7 22.8 91.2 93.8 23.7 25.8

2060 . . . . 80.4 83.9 18.6 20.7 85.7 88.9 20.9 23.1 91.6 94.2 24.1 26.2

2065 . . . . 80.6 84.1 18.7 20.8 86.1 89.2 21.2 23.4 92.1 94.6 24.5 26.6

2070 . . . . 80.8 84.3 18.8 20.9 86.4 89.5 21.5 23.6 92.5 95.0 25.0 27.0

2075 . . . . 81.0 84.4 18.9 21.0 86.7 89.7 21.7 23.8 93.0 95.4 25.4 27.4

2080 . . . . 81.1 84.6 19.0 21.1 87.0 90.0 21.9 24.1 93.4 95.8 25.8 27.7

2085 . . . . 81.3 84.7 19.2 21.3 87.2 90.2 22.2 24.3 93.8 96.1 26.1 28.1
Assumptions & Methods

90

B. ECONOMIC ASSUMPTIONS AND METHODS

The basic economic assumptions are embodied in three alternatives that are

designed to provide a reasonable range of effects on Social Security’s financial status. The intermediate assumptions reflect the Trustees’ consensus

expectation of an underlying general trend toward moderate economic

growth throughout the projection period and the expected levels of various

economic parameters. The low-cost assumptions represent a more optimistic

outlook and assume relatively strong economic growth and relatively optimistic levels for other parameters. The high-cost assumptions represent a relatively pessimistic scenario, with weak economic growth, two recessions in

the short-range period and relatively pessimistic levels for other parameters.

For this report, all three sets of assumptions include an extension into the

projection period of the recession that started in December 2007 with lower

productivity in 2009 and unemployment peaking in 2010.

Actual economic data was available through the third quarter of 2008 at the

time the assumptions for this report were set. The data indicated that economic activity peaked in December 20071 with the level of output (GDP)

above the long-term sustainable trend level. Economic growth subsequently

weakened with the level of output reaching the sustainable trend level by the

middle of 2008. The actual growth rate in real GDP was slightly negative for

the third quarter of 2008 and was projected to be significantly negative for

the fourth quarter in all three alternatives. For the intermediate and low-cost

alternatives, the current recession was projected to be followed by a recovery

period with economic growth sufficient to return output to the sustainable

level, but not beyond that level. For the high-cost alternative, the economy is

assumed to experience a second recession before returning only to the sustainable level of output. Under all three sets of assumptions the economy is

assumed to reach and maintain a sustainable, potential trend level of output

by the end of the short-range period. Economic cycles are not included in the

assumptions beyond the first 10 years of the projection period because complete cycles have little effect on the long-range estimates of financial status.

For this year’s intermediate projections, real GDP growth is assumed to

decline through the second quarter of 2009. The recovery from the recession

brings economic activity to the projected stable, sustainable path by the end

of 2015. For 2017 and later, real GDP is projected to be about 1.4 percent

lower than in the 2008 report, based on recent data and the effects of the

 1 Determination of the December 2007 Peak in Economic Activity, Business Cycle Dating Committee,

National Bureau of Economic Research (NBER). Access date March 3, 2009.

http://www.nber.org/cycles/dec2008.html
91

Economic Assumptions and Methods

recession. These revised economic assumptions account for about half of the

estimated reduction in the program’s actuarial balance relative to last year’s

report. The effect of the recession on the actuarial balance would be smaller

than projected in this report if the recovery were such that economic output

substantially overshoots the projected sustainable path, a phenomenon

observed in some past business cycles.

The following sections 1 through 4 present the principal economic assumptions for the three alternatives that are summarized in table V.B1. The subsequent sections 5 through 7 present additional economic factors, summarized

in table V.B2, that are critical to the projections of the future financial status

of the combined OASI and DI Trust Funds.

1. Productivity Assumptions

Total U.S. economy productivity is defined as the ratio of real gross domestic

product (GDP) to hours worked by all workers.1 The rate of change in totaleconomy productivity is a major determinant in the growth of average earnings. For the 40 years from 1967 to 2007, annual increases in total productivity averaged 1.7 percent, the result of average annual increases of 2.0, 1.3,

1.3, and 2.1 percent for the 10-year periods 1967-77, 1977-87, 1987-97, and

1997-2007, respectively. However, it should be noted that this growth rate of

1.7 percent reflects a shift of employment from low (farm) to high (nonfarm)

productivity sectors that is not expected to continue in the future.

Because productivity growth can vary substantially within economic cycles,

it is most useful to consider historical average growth rates for complete economic cycles. The annual increase in total productivity averaged 1.6 percent

over the last five complete economic cycles (measured from peak to peak),

covering the 41-year period from 1966 to 2007. The annual increase in total

productivity averaged 2.2, 1.2, 1.2, 1.6, and 2.0 percent over the economic

cycles 1966-73, 1973-78, 1978-89, 1989-2000, and 2000-07, respectively.

The ultimate annual increases in productivity are assumed to be 2.0, 1.7, and

1.4 percent for the low-cost, intermediate, and high-cost assumptions,

respectively, and are consistent with ultimate annual increases in non-farm

productivity of 2.4, 2.0, and 1.7 percent. These rates of increase are the same

as those used in the 2008 report, and reflect the belief that recent strong

growth in non-farm business productivity, after the relatively poor perfor-

 1 Historical levels of real GDP are from the Bureau of Economic Analysis’ (BEA) National Income and

Product Accounts (NIPA). Historical total hours worked is an unpublished series provided by the Bureau of

Labor Statistics (BLS), and is for all U.S. Armed Forces and civilian employment.
Assumptions & Methods

92

mance from 1973 to 1995, is consistent with future long-term growth that

mirrors the long-term trends of the past.

In the near term for the intermediate assumptions, the negative growth in real

GDP is assumed to continue through the first half of 2009. The quarterly

change in real GDP (on an annual basis) is assumed to be -0.5, -6.0, -4.0, and

-1.5 percent for 2008Q3 (i.e., the third calendar quarter of 2008), 2008Q4,

2009Q1, and 2009Q2, respectively. The total decline in real GDP from

2008Q2 to 2009Q2 is assumed to be 3.0 percent, giving this recession the

largest consecutive quarterly decline in real output since the 1957-58 recession. The economy is assumed to begin recovering in 2010 and reach its fullemployment or sustainable trend level of output in 2015. The annual change

in real GDP is assumed to be 1.1 percent for 2008, -2.2 percent for 2009,

2.4 percent for 2010, and to average about 3.6 percent over the 5-year recovery period from 2010 to 2015. Following this pattern, the annual change in

total-economy productivity is assumed to be 1.8 percent for 2008, 0.3 percent for 2009, 2.8 percent for 2010, and to average about 1.9 percent over the

5-year recovery period from 2010 to 2015. The annual change in total-economy productivity then falls to its assumed ultimate annual rate of 1.7 percent

in 2018 and later.

For the low-cost assumptions, the economy is assumed to experience a

milder recession and a faster recovery. The annual change in total-economy

productivity is assumed to be 1.8, 0.6, 2.9, 2.5, and 2.2 percent for 2008,

2009, 2010, 2011, and 2012, respectively, and to average the assumed ultimate annual rate of 2.0 percent thereafter. For the high-cost assumptions, the

annual change in productivity decreases from 1.7 percent for 2008 to

0.0 percent for 2009. Thereafter, the annual change in productivity varies

with economic cycles until reaching its ultimate growth rate of 1.4 percent

for 2020.

2. Price Inflation Assumptions

Future changes in the Consumer Price Index for Urban Wage Earners and

Clerical Workers (CPI) will directly affect the OASDI program through the

automatic cost-of-living benefit increases. Future changes in the GDP price

index (GDP deflator) affect the nominal levels of GDP, wages, self-employment income, average earnings, and taxable payroll.

Historically, the CPI increased at an average annual rate of 4.6 percent for

the 40 years from 1967 to 2007, the result of average annual increases of 6.1,

6.3, 3.4, and 2.6 percent for the 10-year periods 1967-77, 1977-87, 1987-97,

and 1997-2007, respectively. The GDP deflator increased at an average

annual rate of 4.1 percent from 1967 to 2007, the result of average annual
93

Economic Assumptions and Methods

increases of 6.0, 5.5, 2.7, and 2.3 percent for the same respective 10-year

periods.

The ultimate annual increases in the CPI are assumed to be 1.8, 2.8, and

3.8 percent for the low-cost, intermediate, and high-cost assumptions,

respectively. These rates of increase are the same as those used in the 2008

report, and reflect a belief that future inflationary shocks will likely be offset

by succeeding periods of relatively slow inflation due to persistent international competition, and that future monetary policy will be similar to that of

the last 20 years, with its strong emphasis on holding the growth rate in

prices to relatively low levels.

For each alternative in the 2008 report, the ultimate annual increase in the

GDP deflator was assumed to be equal to the annual increases in the CPI

minus a 0.4 percentage point price differential. The price differential is based

primarily on methodological differences in the construction of the two indices. For the 2009 report, the ultimate annual increase in the GDP deflator is

assumed to be equal to the annual increases in the CPI minus a 0.3, 0.4, and

0.5 percentage point price differential for the low-cost, intermediate, and

high-cost alternatives, respectively. Varying the ultimate projected price differential across alternatives better recognizes the historical variation in this

concept. Hence, for the 2009 report, the ultimate annual increase in the GDP

deflator is assumed to be 1.5 (1.8 less 0.3), 2.4 (2.8 less 0.4), and 3.3 (3.8 less

0.5) percent for the low-cost, intermediate, and high-cost alternatives,

respectively.

For the intermediate assumptions, the annual change in the CPI is assumed to

decrease from 4.3 percent for 2008 to -1.0 and 1.7 percent for 2009 and

2010, respectively, due to the effects of the recession and a decline in the

price of a barrel of oil in late 2008. The annual change in the CPI is assumed

to gradually increase to 3.1 percent for 2013 as the economy recovers and the

demand for oil increases. The annual change in the CPI is assumed to recede

to its assumed ultimate annual increase of 2.8 percent for 2015 and later.

Because the level of the CPI in 2009Q3 and 2010Q3 is not assumed to be

above the level of the CPI in 2008Q3, the automatic cost-of-living benefit

increase for 2009 and 2010 is projected to be 0.0 percent. The price differential, defined as the percent change in the CPI less the percent change in the

GDP deflator, is estimated to be 2.1 percentage points for 2008 and projected

to be -2.1 percentage points for 2009. This swing in the price differential is

due to the dramatic rise of oil prices for 2008 and the subsequent fall to

lower average prices for 2009. The rise and fall in oil prices affected CPI

much more than the GDP deflator because oil is a much larger share of what

we consume than of what we produce in the U.S. As the economy recovers,
Assumptions & Methods

94

the relative price of oil rises and the price differential is assumed to average

about 0.8 percentage point over the 4-year period from 2010 to 2013. After

the economy returns to full employment, the relative price of oil stabilizes

and the price differential is assumed to fall to its ultimate assumed value of

0.4 percentage point for 2015 and later. 

For the low-cost assumptions, the annual change in the CPI is assumed to

decrease from 4.3 percent for 2008 to -1.2 and 1.3 percent for 2009 and

2010, respectively. Thereafter, the annual change in the CPI is assumed to

gradually increase to 2.1 percent for 2013 and then decrease to its assumed

ultimate annual change of 1.8 percent for 2015. For the high-cost assumptions, the annual change in the CPI is assumed to decrease from 4.3 percent

for 2008 to -0.4 and 2.2 percent for 2009 and 2010, respectively. Thereafter,

the annual change in the CPI is assumed to gradually increase to 6.0 percent

for 2013 and then decrease to its assumed ultimate annual change of 3.8 percent for 2015.

3. Average Earnings Assumptions

The average level of nominal earnings in OASDI covered employment for

each year has a direct effect on the size of the taxable payroll and on the

future level of average benefits. In addition, under the automatic-adjustment

provisions in the law, growth in the average wage in the U.S. economy

directly affects certain parameters used in the OASDI benefit formulas and

additional parameters used for the computation of the contribution and benefit base, the exempt amounts under the retirement earnings test, the amount

of earnings required for a quarter of coverage, and under certain circumstances, the automatic cost-of-living benefit increases.

Average U.S. earnings is defined as the ratio of the sum of total U.S. wage

and salary disbursements and proprietor income to the sum of total U.S. military and total civilian household employment. The growth rate in average

U.S. earnings for any period is equal to the combined growth rates for total

U.S. economy productivity, average hours worked, the ratio of earnings to

compensation (which includes fringe benefits), the ratio of compensation to

GDP, and the GDP deflator. Assumed future growth rates in productivity and

the GDP deflator are discussed in the previous two sections.

The average annual change in average hours worked was -0.2 percent over

the last 40 years, and -0.7, -0.1, 0.3, and -0.4 percent for the 10-year periods

1967-77, 1977-87, 1987-97, and 1997-2007, respectively. The average

annual change in average hours worked was -0.3 percent over the last five

complete economic cycles covering the period from 1966 to 2007. The

annual change in average hours worked averaged -0.7, -0.6, 0.0, 0.1, and
95

Economic Assumptions and Methods

-0.6 percent over the economic cycles 1966-73, 1973-78, 1978-89, 1989-

2000, and 2000-07, respectively.

For the 2009 report, the ultimate annual rates of change for average hours

worked are assumed to be 0.1, 0.0, and -0.1 percent for the low-cost, intermediate, and high-cost assumptions, respectively. These ultimate annual

rates of change for average hours worked are the same as those assumed for

the 2008 report.

The average annual change in the ratio of earnings to compensation was

-0.2 percent from 1967 to 2007. For wage workers, the assumed ultimate

annual rates of change in the ratio of earnings to compensation are -0.1, -0.2,

and -0.3 percent for the low-cost, intermediate, and high-cost assumptions,

respectively. Under the intermediate assumptions, the ratio of wages to

employee compensation is projected to decline from 0.813 for 2008 to 0.695

for 2083. The ratio of compensation to GDP is assumed to be stable.

Thus, the ultimate projected annual growth rate in average U.S. earnings is

about 3.9 percent for the intermediate assumptions. This growth rate reflects

assumed ultimate annual growth rates of about 1.7, -0.2, 0.0, and 2.4 percent

for productivity, the ratio of earnings to compensation, average hours

worked, and the GDP deflator, respectively. Similarly, the ultimate projected

annual growth rate in average nominal U.S. earnings is 3.5 percent for the

low-cost assumptions and 4.3 percent for the high-cost assumptions.

Over long periods of time the average annual growth rates in average U.S.

earnings and average earnings in OASDI covered employment are expected

to be very close to the average annual growth rates in the average wage in

OASDI covered employment (henceforth the “average covered wage”).

Thus, the assumed ultimate annual growth rates in the average covered wage

are 3.5, 3.9, and 4.3 percent for the low-cost, intermediate, and high-cost

assumptions, respectively. For the intermediate assumptions, the annual rate

of change in the average covered wage is assumed to decrease from 3.3 percent for 2008 to 0.7 percent for 2009, following the recession to its low

point. As the economy recovers, the annual rate of change in the average

covered wage is assumed to increase to 3.4 percent in 2010 and to average

about 4.1 percent over the 5-year period from 2011 to 2015. Thereafter, the

annual rate of change in the average covered wage decreases and reaches its

assumed ultimate rate of change of 3.9 percent for 2018.

4. Assumed Real-Wage Differentials

For simplicity, real increases in the average OASDI covered wage have traditionally been expressed in the form of real-wage differentials—i.e., the per-
Assumptions & Methods

96

centage change in the average covered wage minus the percentage change in

the CPI. This differential is closely related to assumed growth rates in average earnings and productivity, which are discussed in the previous sections.

Over the 40-year period, 1968-2007, the real-wage differential averaged

0.8 percentage point, the result of averages of 0.5, 0.7, 0.8, and

1.4 percentage points for the 10-year periods 1968-77, 1978-87, 1988-97,

and 1998-2007, respectively. The assumed ultimate annual average covered

real-wage differentials are 1.7, 1.1, and 0.5 percentage point(s) for the lowcost, intermediate, and high-cost assumptions, respectively.

Based on preliminary data, the real-wage differential is estimated to be

-1.0 percentage point for 2008. For the intermediate assumptions, the

real-wage differential is projected to rise to 1.8 percentage points for 2009,

2010, and 2011. Thereafter, the real-wage differential is projected to average

the assumed ultimate differential of 1.1 percentage points. For the low-cost

assumptions, the real-wage differential is projected to average 2.3 percentage

points for the 2009 to 2011 period, and thereafter to average the assumed

ultimate differential of 1.7 percentage points. For the high-cost assumptions,

the real-wage differential is projected to average 1.4 percentage points for

the 2009 to 2011 period vary with a second recession and recovery over the

2012 to 2018 period, and average the assumed ultimate differential of 0.5

percentage point thereafter.

Table V.B1.—Principal Economic Assumptions

Calendar year 

Annual percentage changea in—

Realwage

differentialb

Productivity

(Total U.S.

economy)

Earnings as

a percent of

compensation

Average

hours

worked

GDP

price

index

Average

annual wage

in covered

employment

Consumer

Price

Index

Historical data:

1960 to 1965. . . . 3.2 -0.2 0.2 1.4 3.2 1.2 2.0

1965 to 1970. . . . 2.0 -.4 -.7 4.1 5.8 4.2 1.6

1970 to 1975. . . . 2.1 -.7 -.9 6.7 6.6 6.8 -.2

1975 to 1980. . . . .9 -.6 -.2 7.3 8.9 8.9 -.1

1980 to 1985. . . . 1.7 -.2 .0 5.2 6.5 5.2 1.3

1985 to 1990. . . . 1.3 .1 -.1 3.2 4.7 3.8 .9

1990 to 1995. . . . 1.1 -.2 .4 2.5 3.6 3.0 .6

1995 to 2000. . . . 2.1 .4 .1 1.7 5.3 2.4 2.9

2000 to 2005. . . . 2.4 -.6 -.8 2.5 2.7 2.5 .2

1998 . . . . . . . . . . 2.0 .2 .7 1.1 6.1 1.3 4.7

1999 . . . . . . . . . . 2.4 .1 .4 1.4 4.9 2.2 2.7

2000 . . . . . . . . . . 2.2 .1 -1.1 2.2 6.1 3.5 2.6

2001 . . . . . . . . . . 2.1 -.3 -1.3 2.4 2.0 2.7 -.7

2002 . . . . . . . . . . 2.9 -1.5 -1.0 1.7 .7 1.4 -.7

2003 . . . . . . . . . . 3.0 -1.0 -1.5 2.1 2.6 2.2 .4

2004 . . . . . . . . . . 2.5 .4 .1 2.9 4.5 2.6 1.9

2005 . . . . . . . . . . 1.4 -.4 -.2 3.3 3.6 3.5 .1

2006 . . . . . . . . . . .9 .4 .0 3.2 4.8 3.2 1.6

2007 . . . . . . . . . . 1.3 .4 -.4 2.7 4.2 2.9 1.3

2008c . . . . . . . . . 1.8 -.2 -.2 2.2 3.3 4.3 -1.0
97

Economic Assumptions and Methods

Intermediate: 

2009 . . . . . . . . . . .3 -.2 -.1 1.1 .7 -1.0 1.8

2010 . . . . . . . . . . 2.8 -.5 .0 1.1 3.4 1.7 1.8

2011 . . . . . . . . . . 2.3 -.2 .0 1.5 4.1 2.3 1.8

2012 . . . . . . . . . . 1.9 -.2 .0 1.9 4.1 2.7 1.4

2013 . . . . . . . . . . 1.9 -.3 .0 2.2 4.2 3.1 1.1

2014 . . . . . . . . . . 1.8 -.3 .0 2.5 4.1 3.1 1.0

2015 . . . . . . . . . . 1.7 -.1 .0 2.4 4.2 2.8 1.4

2016 . . . . . . . . . . 1.6 -.2 .0 2.4 3.7 2.8 .9

2017 . . . . . . . . . . 1.6 -.2 .0 2.4 3.8 2.8 1.0

2018 . . . . . . . . . . 1.7 -.2 .0 2.4 3.9 2.8 1.1

2015 to 2020. . . . 1.6 -.2 .0 2.4 3.8 2.8 1.0

2020 to 2083. . . . 1.7 -.2 .0 2.4 3.9 2.8 1.1

Low-cost: 

2009 . . . . . . . . . . .6 -.2 -.1 1.0 1.3 -1.2 2.5

2010 . . . . . . . . . . 2.9 -.4 .1 .7 3.3 1.3 2.1

2011 . . . . . . . . . . 2.5 -.2 .1 .7 3.8 1.4 2.4

2012 . . . . . . . . . . 2.2 -.2 .1 1.0 3.7 1.7 2.0

2013 . . . . . . . . . . 2.0 -.2 .1 1.3 3.7 2.1 1.6

2014 . . . . . . . . . . 1.8 -.3 .1 1.6 3.3 2.1 1.2

2015 . . . . . . . . . . 1.9 .0 .1 1.5 3.6 1.8 1.8

2016 . . . . . . . . . . 1.9 -.1 .1 1.5 3.4 1.8 1.6

2017 . . . . . . . . . . 2.0 -.1 .1 1.5 3.5 1.8 1.7

2018 . . . . . . . . . . 2.1 -.1 .1 1.5 3.6 1.8 1.8

2015 to 2020. . . . 2.0 -.1 .1 1.5 3.5 1.8 1.7

2020 to 2083. . . . 2.0 -.1 .1 1.5 3.5 1.8 1.7

High-cost: 

2009 . . . . . . . . . . .0 -.1 -.2 1.7 .9 -.4 1.3

2010 . . . . . . . . . . 2.7 -.5 -.1 1.4 3.4 2.2 1.2

2011 . . . . . . . . . . 2.2 -.3 -.1 1.6 4.2 2.5 1.6

2012 . . . . . . . . . . .0 -.4 -.1 3.4 3.0 4.3 -1.3

2013 . . . . . . . . . . 1.8 -.4 -.1 5.0 6.0 6.0 .0

2014 . . . . . . . . . . 2.3 -.5 -.1 5.2 7.1 5.8 1.3

2015 . . . . . . . . . . 1.8 -.2 -.1 4.2 6.1 4.7 1.4

2016 . . . . . . . . . . 1.7 -.3 -.1 3.4 4.9 3.9 1.0

2017 . . . . . . . . . . 1.3 -.3 -.1 3.3 4.3 3.8 .5

2018 . . . . . . . . . . 1.1 -.3 -.1 3.3 4.0 3.8 .2

2015 to 2020. . . . 1.3 -.3 -.1 3.3 4.3 3.8 .5

2020 to 2083. . . . 1.4 -.3 -.1 3.3 4.3 3.8 .5

a For rows with a single year listed, the value is the annual percentage change from the prior year. For rows

with a range of years listed, the value is the compound average annual percentage change.

b For rows with a single year listed, the value is the unrounded annual percentage change in the average

annual wage in covered employment less the unrounded annual percentage change in the Consumer Price

Index. For rows with a range of years listed, the value is the average of unrounded annual values of the differential.

c Historical data are not available for the full year. Estimated values vary slightly by alternative and are

shown for the intermediate alternative.

Table V.B1.—Principal Economic Assumptions (Cont.)

Calendar year 

Annual percentage changea in—

Realwage

differentialb

Productivity

(Total U.S.

economy)

Earnings as

a percent of

compensation

Average

hours

worked

GDP

price

index

Average

annual wage

in covered

employment

Consumer

Price

Index
Assumptions & Methods

98

5. Labor Force and Unemployment Projections

The civilian labor force is projected by age, sex, marital status, and presence

of children. Projections of the labor force participation rates for each subgroup take into account the percentages of the population that are disabled or

in the military, the levels of Social Security retirement benefits, the state of

the economy, and changes in life expectancy. The projections also include a

“cohort effect” that applies differences in participation rates for a cohort at a

specific age (relative to earlier cohorts at the same age) to participation rates

for that cohort at older ages.

The annual rate of growth in the size of the labor force decreased from an

average of about 2.1 percent during the 1970s and 1980s to about 1.1 percent

from 1990 to 2008. Further slowing of labor force growth is projected due to

a substantial slowing of growth in the working age population in the future—

a natural consequence of the baby-boom generation approaching retirement

and the succeeding lower-birth-rate cohorts reaching working age. Under the

intermediate assumptions, the labor force is projected to increase by about

0.7 percent per year, on average, through 2018. Thereafter, the labor force is

projected to increase much more slowly, averaging 0.5 percent over the 2018

to 2050 period, and 0.4 percent over the remainder of the 75-year projection

period.

The ultimate projected labor force participation rates are not basic assumptions. They are derived from a historically-based structural relationship using

demographic and economic assumptions specific to each alternative. However, the participation rates are not highly sensitive to most of the demographic and economic assumptions. Thus, the projected labor force

participation rates vary modestly into the future and across alternatives.

Historically, labor force participation rates have been influenced substantially by trends in demographics and pensions. Between the mid-1960s and

the mid-1980s, labor force participation rates at ages 50 and over declined

for males and were fairly stable for females. These overall declines were

facilitated by the large numbers of workers entering the labor force from the

baby-boom generation, and from the female population in general, during

this period. This increasing supply of labor allowed employers to offer earlyretirement options that were attractive. Between the mid-1980s and about

1995, participation rates roughly stabilized for males and increased for

females. Since 1995, however, participation rates for both sexes at ages 50

and over have generally risen significantly, reflecting a decrease in early-out

options and relatively strong economic growth.

For the future, changes in available benefit levels from Social Security,

increases in the normal retirement age, and the effects of modifying the earn-
99

Economic Assumptions and Methods

ings test are expected to encourage work at older ages. Some of these factors

are modeled directly. However, other factors, like the trend away from private defined-benefit pension plans (that often provided incentives to retire)

toward defined-contribution plans, are expected to provide additional

upward pressure on labor force participation rates. In addition to this shift in

private pensions, the aging of the population is expected to both increase the

demand for workers and, through improved health associated with greater

life expectancy, improve the ability of the older population to work. Longer

life expectancy will also increase the amount of assets that will be needed to

live comfortably through retirement years, thus encouraging workers to stay

employed longer. In order to account for these effects, which are directly or

indirectly related to increases in life expectancy, projected participation rates

for prime age and older males and females are adjusted upward in relation to

assumed increases in life expectancy. For the intermediate projections, this

adjustment for changes related to life expectancy adds about 1.4 percent to

the total labor force by 2083.

For men age 16 and over, the projected age-adjusted labor force participation

rates for 2083 are 72.6, 73.0, and 73.6 percent for the low-cost, intermediate,

and high-cost assumptions, respectively, compared to the 2007 level of

73.2 percent. (Age-adjusted labor force participation rates are adjusted to the

2007 age distribution of the civilian noninstitutional U.S. population.) These

rates reflect the net effect of increases due to assumed improvements in life

expectancy, and decreases due to higher assumed disability prevalence rates

and an increasing proportion of males who are never married. For women

age 16 and over, the projected age-adjusted labor force participation rates for

2083 are 60.3, 60.4, and 60.3 percent, for the low-cost, intermediate, and

high-cost assumptions, respectively, compared to the 2007 level of

59.3 percent. These projections reflect the combination of decreases due to

higher assumed disability prevalence rates, increases due to assumed

improvements in life expectancy, and increases due to assumed changes in

the proportion of females who are separated, widowed, divorced, or never

married.

The unemployment rate presented in table V.B2 is in the most commonly

cited form, the civilian rate. For years through 2018, total rates are presented

without adjustment for the changing age-sex distribution of the population.

For years after 2018, unemployment rates are presented as total age-sexadjusted rates (using the age-sex distribution of the 2007 civilian labor

force). Age-sex-adjusted rates allow for more meaningful comparisons

across longer time periods.
Assumptions & Methods

100

The total unemployment rate reflects the projected levels of unemployment

for various age-sex subgroups of the population. The unemployment rate for

each subgroup is projected based on a specification (consistent with Okun’s

Law) relating changes in the unemployment rate to the changes in the economic cycle, as measured by the ratio of the actual to potential GDP. For

each alternative, the total unemployment rate is projected to move toward the

ultimate assumed rate as the economy moves toward the long-range sustainable growth path.

The ultimate age-sex-adjusted unemployment rate for each alternative is

assumed to be reached by 2018. The ultimate assumed unemployment rates

are 4.5, 5.5, and 6.5 percent for the low-cost, intermediate, and high-cost

assumptions, respectively. These are the same values assumed for the 2008

report.

6. Gross Domestic Product Projections

The real growth rate in gross domestic product (GDP) equals the combined

growth rates for total employment, productivity, and average hours worked.

Total employment is the sum of the U.S. Armed Forces and total civilian

employment, which is based on the projected total civilian labor force and

unemployment rates. For the 40-year period from 1967 to 2007, the average

growth rate in real GDP was 3.0 percent, combining the approximate growth

rates of 1.6, 1.7, and -0.2 percent for its components—total employment,

productivity, and average hours worked, respectively.

For the intermediate assumptions, the average annual growth in real GDP is

projected to be 2.4 percent from 2008 to 2018, a slower rate than the

3.0 percent average observed over the historical 40-year period from 1967 to

2007. This slowdown is primarily due to slower projected growth in total

employment. For the low-cost assumptions, annual growth in real GDP is

projected to average 3.1 percent over the decade ending in 2018. The relatively faster growth is due mostly to higher assumed rates of growth for

employment and worker productivity. For the high-cost assumptions, real

GDP is assumed to fall in the third and fourth quarters of 2008 and in the

first three quarters of 2009, resulting in a total decline in real GDP for these

five quarters of 4.0 percent. After 10 quarters of recovery, a second recession, with a total decline in real GDP of 2.1 percent, is assumed to begin in

the second quarter of 2012 and last two quarters. After the second recession,

a moderate economic recovery is assumed through 2015, with continued

modest economic growth thereafter. For the high-cost assumptions, annual

growth in real GDP is projected to average 1.8 percent for the decade ending

in 2018.
101

Economic Assumptions and Methods

After 2018, no economic cycles are assumed for the three alternatives.

Accordingly, projected rates of growth in real GDP are determined by the

projected full-employment rate of growth for total employment, and the

assumed full-employment rates of growth for total U.S. economy productivity and average hours worked. For the intermediate assumptions, the projected rate of growth for real GDP falls toward the assumed productivity

growth rate because of the projected decline in labor force growth over the

period. At the end of the 75-year projection period, the annual growth in real

GDP is 2.1 percent, due to the assumed ultimate percent changes of about

0.4, 1.7, and 0.0 for total employment, productivity, and average hours

worked, respectively.

7. Interest Rates

The average annual nominal and real interest rates are presented in table

V.B2. The nominal rate is the average of the nominal interest rates for special

U.S. Government obligations issuable to the trust funds in each of the

12 months of the year. Interest for these securities is generally compounded

semiannually. The real interest rate (ex post) is defined to be the annual compound yield rate for investments in these securities divided by the annual rate

of growth in the CPI for the first year after issuance. The real rate shown for

each year reflects the actual realized (historical) or expected (future) annual

real yield on securities issuable in the prior year.

In developing a reasonable range of assumed ultimate future real interest

rates for the three alternatives, historical experience was examined for the 40

years, 1968-2007, and for each of the 10-year subperiods, 1968-77, 1978-87,

1988-97, and 1998-2007. For the 40-year period, the real interest rate averaged 2.8 percent per year. For the four 10-year subperiods, the real interest

rates averaged 0.4, 4.1, 4.2, and 2.6 percent, respectively. The assumed ultimate real interest rates are 3.6 percent, 2.9 percent, and 2.1 percent for the

low-cost, intermediate, and high-cost assumptions, respectively, and are

unchanged from the 2008 report. These ultimate real interest rates, when

combined with the ultimate CPI assumptions of 1.8, 2.8, and 3.8 percent,

yield ultimate nominal interest rates of about 5.4 percent for the low-cost

assumptions, about 5.7 percent for the intermediate assumptions, and about

5.9 percent for the high-cost assumptions. These ultimate nominal rates are

assumed to be reached by the end of the short-range period.

The actual average annual nominal interest rate is 4.7 percent for 2007. The

annual rate of change in the CPI is assumed to be 4.3 percent for 2008.

Hence, the annual real interest rate is 0.4 percent for 2008. For the next 10-

year short-range projection period, nominal interest rates are projected based
Assumptions & Methods

102

on changes in the business cycle and in the CPI. Under the intermediate

assumptions, the nominal interest rate is projected to decline from an actual

value of 3.6 percent for 2008 to 3.0 percent for 2009, reflecting a weak economy along with a negative rate of inflation. Thereafter, the nominal interest

rate rises to the ultimate assumed level of 5.7 percent for 2018. For the lowcost assumptions, the average annual nominal interest rate is assumed to

reach an ultimate level of about 5.4 percent for 2017. For the high-cost

assumptions, it is assumed to peak at 8.6 percent for 2014, and then decline

to an ultimate rate of about 5.9 percent by 2018.
103

Economic Assumptions and Methods

Table V.B2.—Additional Economic Factors

Calendar year 

Average annual

unemployment

ratea

Annual percentage changeb in—

Average annual interest 

rate

Labor

forcec Totalemploymentd RealGDPe Nominalf Realg

Historical data:

1960 to 1965. . . . . . 5.5 1.3 1.6 5.0 4.0 2.5

1965 to 1970. . . . . . 3.9 2.2 2.1 3.4 5.9 1.0

1970 to 1975. . . . . . 6.1 2.5 1.5 2.7 6.7 .0

1975 to 1980. . . . . . 6.8 2.7 2.9 3.7 8.5 -.9

1980 to 1985. . . . . . 8.3 1.5 1.5 3.2 12.1 6.9

1985 to 1990. . . . . . 5.9 1.7 2.0 3.3 8.5 5.1

1990 to 1995. . . . . . 6.6 1.0 .9 2.5 7.0 4.3

1995 to 2000. . . . . . 4.6 1.5 1.8 4.1 6.2 3.9

2000 to 2005. . . . . . 5.4 .9 .7 2.3 4.6 2.4

1998 . . . . . . . . . . . . 4.5 1.0 1.4 4.2 5.6 5.3

1999 . . . . . . . . . . . . 4.2 1.2 1.5 4.4 5.9 3.4

2000 . . . . . . . . . . . . 4.0 2.3 2.5 3.7 6.2 2.4

2001 . . . . . . . . . . . . 4.7 .8 .0 .8 5.2 3.5

2002 . . . . . . . . . . . . 5.8 .8 -.3 1.6 4.9 3.9

2003 . . . . . . . . . . . . 6.0 1.1 1.0 2.5 4.1 2.6

2004 . . . . . . . . . . . . 5.5 .6 1.1 3.6 4.3 1.5

2005 . . . . . . . . . . . . 5.1 1.3 1.7 2.9 4.3 .8

2006 . . . . . . . . . . . . 4.6 1.4 1.8 2.8 4.8 1.1

2007 . . . . . . . . . . . . 4.6 1.1 1.1 2.0 4.7 1.9

2008h . . . . . . . . . . . 5.7 .8 -.4 1.1 3.6 .4

Intermediate: 

2009 . . . . . . . . . . . . 8.2 .3 -2.3 -2.2 3.0 4.7

2010 . . . . . . . . . . . . 8.8 .3 -.4 2.4 4.0 1.3

2011 . . . . . . . . . . . . 7.9 1.0 2.0 4.3 5.0 1.6

2012 . . . . . . . . . . . . 6.8 1.1 2.2 4.2 5.7 2.3

2013 . . . . . . . . . . . . 6.2 1.0 1.7 3.6 6.0 2.6

2014 . . . . . . . . . . . . 5.8 .9 1.2 3.0 6.0 3.0

2015 . . . . . . . . . . . . 5.6 .7 .9 2.7 5.7 3.2

2016 . . . . . . . . . . . . 5.5 .6 .6 2.2 5.6 2.9

2017 . . . . . . . . . . . . 5.5 .6 .6 2.2 5.6 2.8

2018 . . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.8

2020 . . . . . . . . . . . . 5.5 .4 .5 2.1 5.7 2.9

2025 . . . . . . . . . . . . 5.5 .5 .5 2.1 5.7 2.9

2030 . . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2035 . . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2040 . . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2045 . . . . . . . . . . . . 5.5 .5 .5 2.2 5.7 2.9

2050 . . . . . . . . . . . . 5.5 .5 .5 2.1 5.7 2.9

2055 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2060 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2065 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2070 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2075 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2080 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

2085 . . . . . . . . . . . . 5.5 .4 .4 2.1 5.7 2.9

Low-cost: 

2009 . . . . . . . . . . . . 7.8 .5 -1.7 -1.2 3.3 4.9

2010 . . . . . . . . . . . . 8.2 .5 .1 3.1 3.8 2.0

2011 . . . . . . . . . . . . 7.1 1.2 2.4 5.1 4.6 2.4

2012 . . . . . . . . . . . . 5.8 1.3 2.6 5.0 5.2 2.9

2013 . . . . . . . . . . . . 5.0 1.2 2.0 4.2 5.5 3.1

2014 . . . . . . . . . . . . 4.8 1.0 1.2 3.1 5.3 3.4

2015 . . . . . . . . . . . . 4.7 .8 .9 3.0 5.1 3.5

2016 . . . . . . . . . . . . 4.6 .7 .8 2.9 5.3 3.3

2017 . . . . . . . . . . . . 4.5 .7 .7 2.8 5.4 3.5

2018 . . . . . . . . . . . . 4.5 .6 .6 2.8 5.4 3.6
Assumptions & Methods

104

Low-cost: (Cont.)

2020 . . . . . . . . . . . . 4.5 0.6 0.6 2.7 5.4 3.6

2025 . . . . . . . . . . . . 4.5 .5 .5 2.6 5.4 3.6

2030 . . . . . . . . . . . . 4.5 .6 .6 2.7 5.4 3.6

2035 . . . . . . . . . . . . 4.5 .7 .6 2.8 5.4 3.6

2040 . . . . . . . . . . . . 4.5 .7 .7 2.8 5.4 3.6

2045 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2050 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2055 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2060 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2065 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2070 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2075 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2080 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

2085 . . . . . . . . . . . . 4.5 .8 .8 2.9 5.4 3.6

High-cost: 

2009 . . . . . . . . . . . . 8.5 .1 -2.8 -3.0 3.3 4.1

2010 . . . . . . . . . . . . 9.3 .1 -.8 1.8 4.1 1.1

2011 . . . . . . . . . . . . 8.3 .8 1.9 4.1 5.1 1.6

2012 . . . . . . . . . . . . 7.9 .8 1.2 1.1 5.5 .8

2013 . . . . . . . . . . . . 8.5 .4 -.2 1.5 7.6 -.3

2014 . . . . . . . . . . . . 7.9 .6 1.3 3.5 8.6 1.8

2015 . . . . . . . . . . . . 7.3 .7 1.3 3.0 7.3 3.9

2016 . . . . . . . . . . . . 6.9 .6 1.0 2.6 6.5 3.4

2017 . . . . . . . . . . . . 6.6 .6 1.0 2.2 6.2 2.7

2018 . . . . . . . . . . . . 6.5 .5 .6 1.6 5.9 2.4

2020 . . . . . . . . . . . . 6.5 .4 .4 1.6 5.9 2.1

2025 . . . . . . . . . . . . 6.5 .4 .4 1.7 5.9 2.1

2030 . . . . . . . . . . . . 6.5 .4 .4 1.7 5.9 2.1

2035 . . . . . . . . . . . . 6.5 .4 .4 1.7 5.9 2.1

2040 . . . . . . . . . . . . 6.5 .3 .3 1.6 5.9 2.1

2045 . . . . . . . . . . . . 6.5 .2 .2 1.5 5.9 2.1

2050 . . . . . . . . . . . . 6.5 .1 .1 1.4 5.9 2.1

2055 . . . . . . . . . . . . 6.5 .1 .1 1.3 5.9 2.1

2060 . . . . . . . . . . . . 6.5 .0 .0 1.3 5.9 2.1

2065 . . . . . . . . . . . . 6.5 .0 .0 1.3 5.9 2.1

2070 . . . . . . . . . . . . 6.5 -.1 -.1 1.2 5.9 2.1

2075 . . . . . . . . . . . . 6.5 -.1 -.1 1.2 5.9 2.1

2080 . . . . . . . . . . . . 6.5 -.1 -.1 1.2 5.9 2.1

2085 . . . . . . . . . . . . 6.5 -.1 -.1 1.2 5.9 2.1

a The unemployment rates for 2019 and later are adjusted to the age-sex distribution of the civilian labor

force in 2007. All other rates are unadjusted.

b For rows with a single year listed, the value is the annual percentage change from the prior year. For rows

with a range of years listed, the value is the compounded average annual percentage change.

c The U.S. civilian labor force concept is used here.

d Total of civilian and military employment in the U.S. economy.

e The real GDP (gross domestic product) is the value of total output of goods and services in 2000 dollars.

f The average annual nominal interest rate is the average of the nominal interest rates, which, in practice, are

compounded semiannually, for special public-debt obligations issuable to the trust funds in each of the 12

months of the year.

g The average annual real interest rate reflects the realized or expected annual real yield for each year on

securities issuable in the prior year.

h Historical data are not available for the full year. Estimated values vary slightly by alternative and are

shown for the intermediate assumptions.

Table V.B2.—Additional Economic Factors (Cont.)

Calendar year 

Average annual

unemployment

ratea

Annual percentage changeb in—

Average annual interest 

rate

Labor

forcec Total

employmentd RealGDPe Nominalf Realg
105

Program Assumptions and Methods

\

C. PROGRAM-SPECIFIC ASSUMPTIONS AND METHODS

The demographic and economic assumptions and methods described in the

previous sections are used in a set of models to project future income and

cost under the OASDI program. In some cases, the economic assumptions

result in the direct calculation of program parameters as described in the following subsection. These parameters affect the level of payroll taxes collected and the level of benefits paid and are calculated using formulas

described explicitly in the Social Security Act. In other cases, the combination of demographic and economic assumptions are used indirectly to drive

more complicated models that project the numbers of future workers covered

under OASDI and the levels of their covered earnings, and the numbers of

future beneficiaries and the expected levels of their benefits. The following

subsections provide brief descriptions of the derivations of these programspecific factors.

1. Automatically Adjusted Program Parameters

The Social Security Act specifies that certain program parameters affecting

the determination of OASDI benefits and taxes are to be adjusted annually in

a manner that reflects changes in particular economic measures. The law prescribes specific formulas that, when applied to reported statistics, produce

automatic revisions in these program parameters and hence in the benefit and

tax computations. These automatic adjustments are based on measured

changes in the national average wage index (AWI) and the CPI.1 In this section, values are shown for program parameters that are subject to automatic

adjustment, from the time that such adjustments became effective through

2018. Projected values for future years are based on the economic assumptions described in the preceding section of this report.

The following two tables present the historical and projected values of the

CPI-based benefit increases, as well as the AWI series and the values of

many of the wage-indexed program parameters. In each table, the projections

are shown under the three alternative sets of economic assumptions

described in the previous section. Table V.C1 includes:

 • The annual percentage increases that have been applied to OASDI benefits under automatic cost-of-living adjustment provisions in the Social

Security Act, based on increases in the CPI. Under all three sets of eco-

 1 Details of these indexation procedures are published annually in the Federal Register, and are also available on the Social Security website at www.socialsecurity.gov/OACT/COLA/index.html.
Assumptions & Methods

106

nomic assumptions, no cost-of-living adjustment becomes effective for

December of 2009 (and in some later years under the intermediate and

low-cost assumptions). 

 • The annual levels of and percentage increases in the AWI. Under section 215(b)(3) of the Social Security Act, the AWI for each year after

1950 is used to index the taxable earnings of most workers first becoming eligible for benefits in 1979 or later. This procedure converts a

worker’s past earnings to approximately benefit equivalent values near

the time of the worker’s benefit eligibility, and these indexed values are

used to calculate the worker’s benefit amount. The AWI is also used to

adjust most of the other program parameters that are subject to the automatic-adjustment provisions.

 • The wage-indexed contribution and benefit base—the maximum

amount of earnings for the specified year that are subject to the OASDI

payroll tax and creditable toward benefit computation. The Social Security Act prohibits an increase in this base if there is no cost-of-living

adjustment effective for December of the preceding year. 

 • The wage-indexed retirement earnings test exempt amounts—the

annual amount of earnings below which beneficiaries are not subject to

benefit withholding. A lower exempt amount applies in years before a

beneficiary attains normal retirement age (NRA). A higher amount

applies for the year in which the beneficiary attains normal retirement

age. The retirement test does not apply beginning with the attainment of

normal retirement age. The Social Security Act prohibits an increase in

these exempt amounts if there is no cost-of-living adjustment effective

for December of the preceding year.
107

Program Assumptions and Methods

Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and 

Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2018

Calendar year

Cost-of-living

benefit

increasea

(percent)

Average

wage index (AWI) b Contribution

and benefit

base c

Retirement earnings

test exempt amount

Amount

Increase

(percent)

Under

NRAd At NRAe

Historical data:

1975 . . . . . . . . . . . 8.0 $8,630.92 7.5 $14,100 $2,520 $2,520

1976 . . . . . . . . . . . 6.4 9,226.48 6.9 15,300 2,760 2,760

1977 . . . . . . . . . . . 5.9 9,779.44 6.0 16,500 3,000 3,000

1978 . . . . . . . . . . . 6.5 10,556.03 7.9 17,700 3,240 4,000

1979 . . . . . . . . . . . 9.9 11,479.46 8.7 22,900 3,480 4,500

1980 . . . . . . . . . . . 14.3 12,513.46 9.0 25,900 3,720 5,000

1981 . . . . . . . . . . . 11.2 13,773.10 10.1 29,700 4,080 5,500

1982 . . . . . . . . . . . 7.4 14,531.34 5.5 32,400 4,440 6,000

1983 . . . . . . . . . . . 3.5 15,239.24 4.9 35,700 4,920 6,600

1984 . . . . . . . . . . . 3.5 16,135.07 5.9 37,800 5,160 6,960

1985 . . . . . . . . . . . 3.1 16,822.51 4.3 39,600 5,400 7,320

1986 . . . . . . . . . . . 1.3 17,321.82 3.0 42,000 5,760 7,800

1987 . . . . . . . . . . . 4.2 18,426.51 6.4 43,800 6,000 8,160

1988 . . . . . . . . . . . 4.0 19,334.04 4.9 45,000 6,120 8,400

1989 . . . . . . . . . . . 4.7 20,099.55 4.0 48,000 6,480 8,880

1990 . . . . . . . . . . . 5.4 21,027.98 4.6 51,300 6,840 9,360

1991 . . . . . . . . . . . 3.7 21,811.60 3.7 53,400 7,080 9,720

1992 . . . . . . . . . . . 3.0 22,935.42 5.2 55,500 7,440 10,200

1993 . . . . . . . . . . . 2.6 23,132.67 .9 57,600 7,680 10,560

1994 . . . . . . . . . . . 2.8 23,753.53 2.7 60,600 8,040 11,160

1995 . . . . . . . . . . . 2.6 24,705.66 4.0 61,200 8,160 11,280

1996 . . . . . . . . . . . 2.9 25,913.90 4.9 62,700 8,280 12,500

1997 . . . . . . . . . . . 2.1 27,426.00 5.8 65,400 8,640 13,500

1998 . . . . . . . . . . . 1.3 28,861.44 5.2 68,400 9,120 14,500

1999 . . . . . . . . . . . f2.5 30,469.84 5.6 72,600 9,600 15,500

2000 . . . . . . . . . . . 3.5 32,154.82 5.5 76,200 10,080 17,000

2001 . . . . . . . . . . . 2.6 32,921.92 2.4 80,400 10,680 25,000

2002 . . . . . . . . . . . 1.4 33,252.09 1.0 84,900 11,280 30,000

2003 . . . . . . . . . . . 2.1 34,064.95 2.4 87,000 11,520 30,720

2004 . . . . . . . . . . . 2.7 35,648.55 4.6 87,900 11,640 31,080

2005 . . . . . . . . . . . 4.1 36,952.94 3.7 90,000 12,000 31,800

2006 . . . . . . . . . . . 3.3 38,651.41 4.6 94,200 12,480 33,240

2007 . . . . . . . . . . . 2.3 40,405.48 4.5 97,500 12,960 34,440

Intermediate:

2008 . . . . . . . . . . . g5.8 41,679.58 3.2 g102,000 g13,560 g36,120

2009 . . . . . . . . . . . .0 42,041.84 .9 g106,800 g14,160 g37,680

2010 . . . . . . . . . . . .0 43,451.28 3.4 106,800 14,160 37,680

2011 . . . . . . . . . . . 1.4 45,194.92 4.0 106,800 14,160 37,680

2012 . . . . . . . . . . . 2.8 47,013.95 4.0 114,900 15,240 40,560

2013 . . . . . . . . . . . 3.1 48,969.10 4.2 119,400 15,840 42,120

2014 . . . . . . . . . . . 3.0 50,962.45 4.1 124,200 16,440 43,920

2015 . . . . . . . . . . . 2.8 53,085.22 4.2 129,300 17,160 45,720

2016 . . . . . . . . . . . 2.8 55,070.22 3.7 134,700 17,880 47,520

2017 . . . . . . . . . . . 2.8 57,165.32 3.8 140,400 18,600 49,560

2018 . . . . . . . . . . . 2.8 59,362.72 3.8 145,500 19,320 51,360
Assumptions & Methods

108

Values for other wage-indexed parameters are shown in table V.C2. The table

provides historical values from 1978, when the amount of earnings required

for a quarter of coverage was first indexed, through 2009, and also shows

projected amounts through 2018. These other wage-indexed program parameters are:

 • The bend points in the formula for computing the primary insurance

amount (PIA) for workers who reach age 62, become disabled, or die in

a given year. As illustrated in figure V.C1, these bend points indicate

three ranges in a worker’s average indexed monthly earnings (AIME)

over which a certain percent factor, 90, 32, or 15 percent, respectively,

is applied to determine the worker’s PIA.

Low-cost:

2008 . . . . . . . . . . . g5.8 $41,698.13 3.2 g$102,000 g$13,560 g$36,120

2009 . . . . . . . . . . . .0 42,276.96 1.4 g106,800 g14,160 g37,680

2010 . . . . . . . . . . . .0 43,659.88 3.3 106,800 14,160 37,680

2011 . . . . . . . . . . . .0 45,301.16 3.8 106,800 14,160 37,680

2012 . . . . . . . . . . . 1.5 46,961.47 3.7 106,800 14,160 37,680

2013 . . . . . . . . . . . 2.1 48,656.14 3.6 119,700 15,840 42,240

2014 . . . . . . . . . . . 2.0 50,243.82 3.3 124,200 16,440 43,800

2015 . . . . . . . . . . . 1.8 52,029.44 3.6 128,700 17,040 45,360

2016 . . . . . . . . . . . 1.8 53,791.01 3.4 132,900 17,640 46,920

2017 . . . . . . . . . . . 1.8 55,658.55 3.5 137,400 18,240 48,600

2018 . . . . . . . . . . . 1.8 57,642.09 3.6 142,200 18,840 50,160

High-cost:

2008 . . . . . . . . . . . g5.8 41,672.33 3.1 g102,000 g13,560 g36,120

2009 . . . . . . . . . . . .0 42,100.53 1.0 g106,800 g14,160 g37,680

2010 . . . . . . . . . . . .2 43,502.26 3.3 106,800 14,160 37,680

2011 . . . . . . . . . . . 2.6 45,273.05 4.1 111,300 14,760 39,240

2012 . . . . . . . . . . . 4.5 46,607.81 2.9 114,900 15,240 40,560

2013 . . . . . . . . . . . 6.2 49,339.09 5.9 119,700 15,840 42,240

2014 . . . . . . . . . . . 5.7 52,785.62 7.0 123,000 16,320 43,440

2015 . . . . . . . . . . . 4.6 56,005.14 6.1 130,500 17,280 46,080

2016 . . . . . . . . . . . 3.9 58,775.40 4.9 139,500 18,480 49,200

2017 . . . . . . . . . . . 3.8 61,324.49 4.3 147,900 19,680 52,200

2018 . . . . . . . . . . . 3.8 63,781.41 4.0 155,400 20,640 54,840

a Effective with benefits payable for June in each year 1975-82, and for December in each year after 1982.

b See table VI.F6 for projected dollar amounts of the AWI beyond 2018.

c Amounts for 1979-81 were specified by Public Law 95-216. The bases for years after 1989 were increased

slightly by changes to the indexing procedure, as required by Public Law 101-239. 

d Normal retirement age. See table V.C3 for specific values.

e In 1955-82, the retirement earnings test did not apply at ages 72 and over; in 1983-99, the test did not apply

at ages 70 and over; beginning in 2000, it does not apply beginning with the month of attainment of NRA. In

the year of attainment of NRA, the higher exempt amount applies to earnings in the year prior to the month of

NRA attainment. Amounts for 1978-82 specified by Public Law 95-216; for 1996-2002, Public Law 104-121.

f Originally determined as 2.4 percent, but pursuant to Public Law 106-554, is effectively 2.5 percent.

g Actual amount, as determined under automatic-adjustment provisions.

Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and 

Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2018 (Cont.)

Calendar year

Cost-of-living

benefit

increasea

(percent)

Average

wage index (AWI) b Contribution

and benefit

base c

Retirement earnings

test exempt amount

Amount

Increase

(percent)

Under

NRAd At NRAe
109

Program Assumptions and Methods

 • Bend points in the formula used to compute the maximum total amount

of monthly benefits payable on the basis of the earnings of a retired or

deceased worker. This formula is a function of the worker’s PIA, and, as

shown in figure V.C2, relies on four intervals and percentages.

 Figure V.C1.—Primary-Insurance-Amount Formula for Those Newly Eligible in 2009

 Figure V.C2.—Maximum-Family-Benefit Formula for Those Newly Eligible in 2009

32% 

15% 

90% 

$0

$500

$1,000

$1,500

$2,000

$2,500

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000

Average Indexed Monthly Earnings

Primary Insurance Amount .

First

bend point

($744)

Second

bend point

($ 4,483)

134% 175% 

150% 

272% 

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$0 $500 $1,000 $1,500 $2,000 $2,500

Primary Insurance Amount

Maximum family benefit .

Third

bend point

($1,789)

Second

bend point

($1,372)

First

bend point

($950)
Assumptions & Methods

110

 • The amount of earnings required in a year to be credited with a quarter

of coverage (QC). The number and timing of QCs earned is used to

determine an individual’s insured status—the basic requirement for

benefit eligibility under OASDI.

 • The old-law contribution and benefit base—the contribution and benefit

base that would have been in effect in each year after 1977 under the

automatic-adjustment provisions as in effect before the enactment of the

1977 amendments. This old-law base is used in determining specialminimum benefits for certain workers who have many years of low

earnings in covered employment. Beginning in 1986, the old-law base

is also used in the calculation of OASDI benefits for certain workers

who are eligible to receive pensions based on noncovered employment.

In addition, it is used for certain purposes under the Railroad Retirement

program and the Employee Retirement Income Security Act of 1974.

Table V.C2.—Values for Selected Wage-Indexed Program Parameters, 

Calendar Years 1978-2018

Calendar year

AIME bend

points in PIA

formulaa

PIA bend points

in maximumfamily-benefit formulab

Earnings

required for

a quarter of

coverage

Old-law

contribution

and benefit

basec First Second First Second Third

Historical data:

1978 . . . . . . . . . d d d d de $250 e $17,700

1979 . . . . . . . . . e $180 e $1,085 e $230 e $332 e $433 260 18,900

1980 . . . . . . . . . 194 1,171 248 358 467 290 20,400

1981 . . . . . . . . . 211 1,274 270 390 508 310 22,200

1982 . . . . . . . . . 230 1,388 294 425 554 340 24,300

1983 . . . . . . . . . 254 1,528 324 468 610 370 26,700

1984 . . . . . . . . . 267 1,612 342 493 643 390 28,200

1985 . . . . . . . . . 280 1,691 358 517 675 410 29,700

1986 . . . . . . . . . 297 1,790 379 548 714 440 31,500

1987 . . . . . . . . . 310 1,866 396 571 745 460 32,700

1988 . . . . . . . . . 319 1,922 407 588 767 470 33,600

1989 . . . . . . . . . 339 2,044 433 626 816 500 35,700

1990 . . . . . . . . . 356 2,145 455 656 856 520 38,100

1991 . . . . . . . . . 370 2,230 473 682 890 540 39,600

1992 . . . . . . . . . 387 2,333 495 714 931 570 41,400

1993 . . . . . . . . . 401 2,420 513 740 966 590 42,900

1994 . . . . . . . . . 422 2,545 539 779 1,016 620 45,000

1995 . . . . . . . . . 426 2,567 544 785 1,024 630 45,300

1996 . . . . . . . . . 437 2,635 559 806 1,052 640 46,500

1997 . . . . . . . . . 455 2,741 581 839 1,094 670 48,600

1998 . . . . . . . . . 477 2,875 609 880 1,147 700 50,700

1999 . . . . . . . . . 505 3,043 645 931 1,214 740 53,700

2000 . . . . . . . . . 531 3,202 679 980 1,278 780 56,700

2001 . . . . . . . . . 561 3,381 717 1,034 1,349 830 59,700

2002 . . . . . . . . . 592 3,567 756 1,092 1,424 870 63,000

2003 . . . . . . . . . 606 3,653 774 1,118 1,458 890 64,500

2004 . . . . . . . . . 612 3,689 782 1,129 1,472 900 65,100

2005 . . . . . . . . . 627 3,779 801 1,156 1,508 920 66,900

2006 . . . . . . . . . 656 3,955 838 1,210 1,578 970 69,900

2007 . . . . . . . . . 680 4,100 869 1,255 1,636 1,000 72,600

2008 . . . . . . . . . 711 4,288 909 1,312 1,711 1,050 75,900

2009 . . . . . . . . . 744 4,483 950 1,372 1,789 1,090 79,200
111

Program Assumptions and Methods

In addition to the program parameters affecting the determination of OASDI

benefits that reflect changes in the economy, there are certain legislated

changes that have affected, and will affect, benefits. Two such changes are

the scheduled increases in the normal retirement age and in the delayed

retirement credits. Table V.C3 shows the scheduled changes in these parameters and the resulting effects on benefit levels expressed as a percentage of

PIA.

Intermediate:

2010 . . . . . . . . . $767 $4,624 $980 $1,415 $1,845 $1,130 $79,200

2011 . . . . . . . . . 774 4,664 989 1,427 1,861 1,140 79,200

2012 . . . . . . . . . 800 4,821 1,022 1,475 1,924 1,180 85,200

2013 . . . . . . . . . 832 5,014 1,063 1,534 2,001 1,220 88,800

2014 . . . . . . . . . 865 5,216 1,106 1,596 2,082 1,270 92,100

2015 . . . . . . . . . 901 5,433 1,152 1,662 2,168 1,330 96,000

2016 . . . . . . . . . 938 5,654 1,199 1,730 2,256 1,380 99,900

2017 . . . . . . . . . 977 5,890 1,248 1,802 2,350 1,440 104,100

2018 . . . . . . . . . 1,014 6,110 1,295 1,870 2,438 1,490 108,000

Low-cost:

2010 . . . . . . . . . 767 4,626 981 1,416 1,846 1,130 79,200

2011 . . . . . . . . . 778 4,691 994 1,435 1,872 1,150 79,200

2012 . . . . . . . . . 804 4,844 1,027 1,482 1,933 1,180 79,200

2013 . . . . . . . . . 834 5,026 1,065 1,538 2,006 1,230 88,800

2014 . . . . . . . . . 864 5,210 1,104 1,594 2,079 1,270 92,100

2015 . . . . . . . . . 896 5,398 1,144 1,652 2,154 1,320 95,400

2016 . . . . . . . . . 925 5,574 1,182 1,706 2,225 1,360 98,700

2017 . . . . . . . . . 958 5,773 1,224 1,766 2,304 1,410 102,000

2018 . . . . . . . . . 990 5,968 1,265 1,826 2,382 1,460 105,600

High-cost:

2010 . . . . . . . . . 767 4,623 980 1,415 1,845 1,130 79,200

2011 . . . . . . . . . 775 4,671 990 1,429 1,864 1,140 82,500

2012 . . . . . . . . . 801 4,826 1,023 1,477 1,926 1,180 85,500

2013 . . . . . . . . . 833 5,023 1,065 1,537 2,005 1,230 88,800

2014 . . . . . . . . . 858 5,171 1,096 1,582 2,064 1,260 91,500

2015 . . . . . . . . . 908 5,474 1,160 1,675 2,185 1,340 96,900

2016 . . . . . . . . . 972 5,856 1,241 1,792 2,337 1,430 103,500

2017 . . . . . . . . . 1,031 6,214 1,317 1,901 2,480 1,520 109,800

2018 . . . . . . . . . 1,082 6,521 1,382 1,995 2,602 1,590 115,200

a The formula to compute a PIA is (1) 90% of AIME below the first bend point, plus (2) 32% of AIME in

excess of the first bend point but not in excess of the second, plus (3) 15% of AIME in excess of the second

bend point. The bend points pertain to the first year a beneficiary becomes eligible for benefits.

b The formula to compute a family maximum is (1) 150% of PIA below the first bend point, plus (2) 272% of

PIA in excess of the first bend point but not in excess of the second, plus (3) 134% of PIA in excess of the

second bend point but not in excess of the third, plus (4) 175% of PIA in excess of the third bend point.

c Contribution and benefit base that would have been determined automatically under the law in effect prior

to enactment of the Social Security Amendments of 1977. The bases for years after 1989 were increased

slightly by changes to the indexing procedure to determine the base, as required by Public Law 101-239.

d No provision in law for this amount in this year.

e Amount specified for first year by Social Security Amendments of 1977; amounts for subsequent years

subject to automatic-adjustment provisions.

Table V.C2.—Values for Selected Wage-Indexed Program Parameters, 

Calendar Years 1978-2018 (Cont.)

Calendar year

AIME bend

points in PIA

formulaa

PIA bend points

in maximumfamily-benefit formulab

Earnings

required for

a quarter of

coverage

Old-law

contribution

and benefit

basec First Second First Second Third
Assumptions & Methods

112

2. Covered Employment

Projections of the total labor force and unemployment rate are based on

Bureau of Labor Statistics definitions from the Current Population Survey

(CPS), and thus represent the average weekly number of employed and

unemployed persons, aged 16 and over, in the U.S. in a calendar year. Total

covered workers in a year are the number of persons who have any OASDI

covered earnings (earnings subject to the OASDI payroll tax) at any time

during the year. For those aged 16 and over, projected covered employment

is the sum of age-sex components, each of which is projected as a ratio to the

CPS concept of employment. For those under age 16, projected covered

employment is the sum of age-sex components, each of which is projected as

a ratio to the Social Security area population. The projection methodology

accounts for changes in the business cycle, the quarterly pattern of growth in

employment within each year, changes in non-OASDI covered employment,

the increase in coverage of Federal civilian employment as a result of the

1983 Social Security Amendments, and changes in the number and employTable V.C3.—Legislated Changes in Normal Retirement Age and Delayed Retirement

Credits, for Persons Reaching Age 62 in Each Year 1986 and Later

Year of birth

Year of

attainment of

age 62

Normal

retirement

age (NRA)

Credit for each 

year of delayed 

retirement after

NRA (percent)

Benefit, as a percentage of PIA, 

beginning at age —

62 65 66 67 70

1924 . . . . . . . . 1986. . . . . . . . 65 . . . . . . . . 3 80 100 103 106 115

1925 . . . . . . . . 1987. . . . . . . . 65 . . . . . . . . 3 1/2 80 100 103 1/2 107 117 1/2

1926 . . . . . . . . 1988. . . . . . . . 65 . . . . . . . . 3 1/2 80 100 103 1/2 107 117 1/2

1927 . . . . . . . . 1989. . . . . . . . 65 . . . . . . . . 4 80 100 104 108 120

1928 . . . . . . . . 1990. . . . . . . . 65 . . . . . . . . 4 80 100 104 108 120

1929 . . . . . . . . 1991. . . . . . . . 65 . . . . . . . . 4 1/2 80 100 104 1/2 109 122 1/2

1930 . . . . . . . . 1992. . . . . . . . 65 . . . . . . . . 4 1/2 80 100 104 1/2 109 122 1/2

1931 . . . . . . . . 1993. . . . . . . . 65 . . . . . . . . 5 80 100 105 110 125

1932 . . . . . . . . 1994. . . . . . . . 65 . . . . . . . . 5 80 100 105 110 125

1933 . . . . . . . . 1995. . . . . . . . 65 . . . . . . . . 5 1/2 80 100 105 1/2 111 127 1/2

1934 . . . . . . . . 1996. . . . . . . . 65 . . . . . . . . 5 1/2 80 100 105 1/2 111 127 1/2

1935 . . . . . . . . 1997. . . . . . . . 65 . . . . . . . . 6 80 100 106 112 130

1936 . . . . . . . . 1998. . . . . . . . 65 . . . . . . . . 6 80 100 106 112 130

1937 . . . . . . . . 1999. . . . . . . . 65 . . . . . . . . 6 1/2 80 100 106 1/2 113 132 1/2

1938 . . . . . . . . 2000. . . . . . . . 65, 2 mo . . . 6 1/2 79 1/6 98 8/9 105 5/12 111 11/12 131 5/12

1939 . . . . . . . . 2001. . . . . . . . 65, 4 mo . . . 7 78 1/3 97 7/9 104 2/3 111 2/3 132 2/3

1940 . . . . . . . . 2002. . . . . . . . 65, 6 mo . . . 7 77 1/2 96 2/3 103 1/2 110 1/2 131 1/2

1941 . . . . . . . . 2003. . . . . . . . 65, 8 mo . . . 7 1/2 76 2/3 95 5/9 102 1/2 110 132 1/2

1942 . . . . . . . . 2004. . . . . . . . 65, 10 mo . . 7 1/2 75 5/6 94 4/9 101 1/4 108 3/4 131 1/4

1943-54 . . . . . 2005-16 . . . . . 66 . . . . . . . . 8 75 93 1/3 100 108 132

1955 . . . . . . . . 2017. . . . . . . . 66, 2 mo . . . 8 74 1/6 92 2/9 98 8/9 106 2/3 130 2/3

1956 . . . . . . . . 2018. . . . . . . . 66, 4 mo . . . 8 73 1/3 91 1/9 97 7/9 105 1/3 129 1/3

1957 . . . . . . . . 2019. . . . . . . . 66, 6 mo . . . 8 72 1/2 90 96 2/3 104 128

1958 . . . . . . . . 2020. . . . . . . . 66, 8 mo . . . 8 71 2/3 88 8/9 95 5/9 102 2/3 126 2/3

1959 . . . . . . . . 2021. . . . . . . . 66, 10 mo . . 8 70 5/6 87 7/9 94 4/9 101 1/3 125 1/3

1960 & later . . 2022 & later . 67 . . . . . . . . 8 70 86 2/3 93 1/3 100 124
113

Program Assumptions and Methods

ment-status of other immigrants estimated to be residing within the Social

Security coverage area.

Covered-worker rates are defined as the ratio of OASDI covered workers to

the Social Security area population. The age-adjusted coverage rate for males

age 16 and over is projected to be 70.7, 70.1, and 69.7 percent for 2083 for

the low-cost, intermediate, and high-cost assumptions, respectively, compared to the 2007 level of about 71.7 percent. (Age-adjusted covered worker

rates are adjusted to the 2007 age distribution of the Social Security area

population.) For females, the projected age-adjusted coverage rate changes

from its 2007 level of 63.3 percent to 63.8, 63.1, and 62.4 percent for 2083

for the low-cost, intermediate, and high-cost assumptions, respectively.

3. Taxable Payroll and Payroll Tax Revenue

The OASDI taxable payroll is the amount of earnings in a year that, when

multiplied by the combined employee-employer tax rate, yields the total

amount of taxes due from wages and self-employed income in the year. Taxable payroll is used in estimating OASDI income and in determining income

and cost rates and actuarial balances. (See section IV.B.1, Annual Income

Rates, Cost Rates, and Balances, for definitions of these terms.) Taxable payroll is computed from taxable earnings, defined as the sum of wages and selfemployment earnings subject to the Social Security tax. In computing taxable payroll, wages are adjusted to take into account the “excess wages”

earned by workers with multiple jobs whose combined wages exceed the

contribution and benefit base. Also, from 1983 through 2001, taxable payroll

includes deemed wage credits for military service. Prior to 1984, the selfemployed tax rate was less than the combined employee-employer rate, thus

taxable self-employed earnings were weighted to reflect this. Also, prior to

1988, employers were exempt from paying Social Security tax on part of

their employees’ tips; taxable payroll was thus reduced by half of the amount

of tips to take this into account.

The computation of taxable earnings for employees, employers, and the selfemployed is based on total earnings in covered employment. Covered earnings are summed from component sectors of the economy, including private,

State and local, Federal civilian, and military. Covered earnings for each sector are based on the projected growth of U.S. earnings and a factor that

reflects any projected change in coverage (e.g., the increase in coverage in

the Federal civilian sector due to mandatory coverage of newly hired

employees). The level of taxable earnings reflects only the portion of covered earnings that is at or below the contribution and benefit base. The portion of covered earnings that is taxable (i.e., at or below the base) was about
Assumptions & Methods

114

89.5, 86.9, and 82.8 percent for 1983, 1994, and 2000, respectively. This

ratio of taxable earnings to covered earnings rose to about 85.8 for 2002,

then fell to 82.7 for 2007. The average annual rate of change in the ratio was

about -0.3 percent between 1983 and 2007. Most of this decline was due to a

relative increase in wages for high earners.

The ratio is assumed to increase to about 85.2 percent for 2009 for the intermediate assumptions due, in part, to a recession-induced reduction in the relative amount of wages of high earners. The projected taxable earnings ratios

in 2018 are 83.7, 82.9, and 82.1 percent for the low-cost, intermediate, and

high-cost assumptions, respectively. After 2018, the taxable-to-covered earnings ratio is approximately constant.

Payroll tax revenue is computed by applying the scheduled tax rates to taxable wages and self-employment income, taking into account the lag

between the time the tax liability is incurred and taxes are collected. In the

case of wages, employers are required to deposit withholding taxes with the

Treasury on a schedule determined by the amount of tax liability incurred.

(Generally, the higher the amount of liability, the sooner the taxes must be

paid—ranging from the middle of the following month for employers with

few employees to the next banking day after wages are paid for companies

with very large payrolls.) Self-employed workers are required to make estimated tax payments on their earnings four times during the year, as well as

making up any under-estimate on their individual income tax return. The pattern of actual receipts by the Treasury is taken into account when estimating

self-employed tax collections.

4. Insured Population

Eligibility for benefits under the OASDI program requires some minimal

level of work in covered employment. This requirement is established by a

worker’s accumulation of quarters of coverage (QCs). Prior to 1978, one QC

was credited for each calendar quarter in which at least $50 was earned. In

1978, when quarterly reporting of earnings was replaced by annual reporting,

the amount required to earn a QC (up to a maximum of four per year) was set

at $250. Since then, this amount has been adjusted each year according to

changes in the AWI. Its value in 2009 is $1,090.

There are three types of insured status that can be acquired by a worker

under the OASDI program. Each of these statuses is determined by the number and recency of QCs earned. Fully insured status is acquired by any

worker whose total number of QCs is greater than or equal to the number of

years elapsed after the year of attainment of age 21 (but not less than six).
115

Program Assumptions and Methods

Once a worker has accumulated 40 QCs, he or she remains permanently fully

insured. Disability insured status is acquired by any fully insured worker

over age 30 who has accumulated 20 QCs during the 40-quarter period ending with the current quarter; any fully insured worker aged 24-30 who has

accumulated QCs during one-half of the quarters elapsed after the quarter of

attainment of age 21 and up to and including the current quarter; and any

fully insured worker under age 24 who has accumulated six QCs during the

12-quarter period ending with the current quarter. Currently insured status is

acquired by any worker who has accumulated six QCs during the 13-quarter

period ending with the current quarter. Periods of disability are excluded

from the above described QC requirements for insured status (but do not

reduce the minimum of six QCs).

There are many types of benefits payable to workers and their family members under the OASDI program. A worker must be fully insured to be eligible for a primary retirement benefit, and for his or her spouse or children to

be eligible for auxiliary benefits. A deceased worker must have been either

currently insured or fully insured at the time of death for his or her children

(and their mother or father) to be eligible for benefits. If there are no eligible

surviving children, the deceased worker must have been fully insured at the

time of death for his or her surviving spouse to be eligible. A worker must be

disability insured to be eligible for a primary disability benefit, and for his or

her spouse or children to be eligible for auxiliary benefits.

Historical estimates of the fully insured population, as a percentage of the

Social Security area population, are made by age and sex for each birth

cohort beginning with 1900. These percentages are based on 30,000 simulated work histories for each sex and birth cohort, which are constructed

from past coverage rates, median earnings, and amounts required for crediting QCs. These work histories are developed by a model that assumes that

persons who have recently been out of covered employment are likely to

remain out of covered employment. This model is aligned such that the simulated fully insured percentages reproduce fairly closely the fully insured

percentages estimated from the Continuous Work History Sample from 1970

to date. The fully insured population for future years is projected using this

model, reflecting estimated future coverage rates, median earnings, and

amounts required for crediting QCs.

Historical estimates of the disability insured population, as a percentage of

the fully insured population, are made by age and sex for each birth cohort

beginning with 1900. These percentages are based on the same simulated

work histories used to project the fully insured percentages. Additional

adjustments are made to bring the simulated disability insured percentages
Assumptions & Methods

116

into close agreement with those estimated from the Continuous Work History

Sample. The principal adjustment is for periods of disability (which are not

explicitly taken into account in the model). These periods (which reduce the

normally applicable QC requirements) have a negligible effect on fully

insured status at retirement age, but a substantial effect on disability insured

status. The disability insured population for future years is projected using

this model, reflecting projections of the fully insured population.

For the 2009 Trustees Report, projections of the disability insured population

reflect improvements in estimating the historical disability insured population. For historical years, disability insured status is estimated using administrative records of all workers with earnings reported to the Social Security

Administration. The improvements in this process generally resulted in lowering the estimated number of people in the post-1980 Social Security area

population with disability insured status.

Projections of the currently insured population are not made. This is because

the number of beneficiaries who are entitled to benefits based solely on currently insured status has been very small, and is expected to remain small in

the future.

Under this procedure, the percentage of the Social Security area population

aged 62 and over that is fully insured is projected to increase from its estimated level of 81.3 for December 31, 2006, to 90.0, 90.2, and 90.7 for

December 31, 2085, under alternatives I, II, and III, respectively. The percentage for females is projected to increase significantly, while that for males

is projected to decline somewhat. Under alternative II, for example, the percentage for males is projected to decrease slightly during this period from

92.7 to 90.8, while that for females is projected to increase from 72.5 to 89.6.

5. Old-Age and Survivors Insurance Beneficiaries

The number of OASI beneficiaries is projected for each type of benefit separately, by the sex of the worker on whose earnings the benefits are based, and

by the age of the beneficiary. For selected types of benefits, the number of

beneficiaries is also projected by marital status.

For the short-range period, the number of retired-worker beneficiaries is

developed by applying award rates to the aged fully insured population less

those insured persons entitled to retired-worker, disabled-worker, agedwidow(er)’s, or aged-spouse’s benefits, and by applying termination rates to

the number of persons already receiving retired-worker benefits.
117

Program Assumptions and Methods

For the long-range period, the number of retired-worker beneficiaries not

previously converted from disabled-worker beneficiary status is projected as

a percentage of the exposed population, i.e., the aged fully insured population less persons entitled to or converted from disabled-worker benefits and

fully insured persons entitled only to widow(er)’s benefits. For age 62, a linear regression is developed based on the historical relationship between this

percentage and the labor force participation rate. The regression coefficients

are then used to project this percentage based on the projected labor force

participation rate for age 62. The percentage for ages 70 and over is assumed

to be nearly 100, because delayed retirement credits cannot be earned after

age 70. The percentage for each age 63 through 69 is projected based on historical experience with an adjustment for changes in the portion of the primary insurance amount that is payable at each age of entitlement. As the normal retirement age increases, the number of retired-worker beneficiaries not

automatically converted from disabled-worker beneficiary status as a percentage of the exposed population, is gradually adjusted downward.

For the long-range period also, the number of retired-worker beneficiaries

previously converted from disabled-worker beneficiaries is calculated separately in a manner consistent with the calculation of disabled-worker beneficiaries.

The number of aged-spouse beneficiaries (excluding those who are also

receiving a retired-worker benefit) is estimated from the population projected

by age and sex. The benefits of aged-spouse beneficiaries are based on the

earnings records of their husbands or wives, who are referred to as “earners.”

In the short-range period, insured aged-spouse beneficiaries are projected in

conjunction with the retired-worker beneficiaries. Uninsured aged-spouse

beneficiaries are projected by applying award rates to the aged uninsured

male or female population, and by applying termination rates to the population already receiving such benefits.

In the long-range period, aged-spouse beneficiaries are estimated separately

for those married and divorced. The number of married aged-spouse beneficiaries is projected by applying a series of factors to the number of spouses

aged 62 and over in the population. These factors represent the probabilities

that the spouse and the earner meet all of the conditions of eligibility—i.e.,

the probabilities that: (1) the earner is 62 or over; (2) the earner is insured;

(3) the earner is receiving benefits; (4) the spouse is not receiving a benefit

for the care of an entitled child; (5) the spouse is not insured; and (6) the

spouse is not eligible to receive a significant government pension based on

earnings in noncovered employment. To the resulting number of spouses a
Assumptions & Methods

118

projected prevalence rate is applied to calculate the estimated number of

aged-spouse beneficiaries.

The number of divorced aged-spouse beneficiaries is estimated by applying

the same factors to the number of divorced persons aged 62 and over in the

population, with three differences. First, an additional factor is required to

reflect the probability that the person’s former earner spouse is still alive

(otherwise, the person may be entitled to a divorced widow(er)’s benefit).

Second, a factor is required to reflect the probability that the marriage to the

earner spouse was at least 10 years in duration. Third, factor (3) above is not

applied because, effective as of January 1985, a divorced person generally

need not wait to receive benefits until the former earner spouse is receiving

benefits.

The projected numbers of children under age 18, and students aged 18 and

19, who are eligible for benefits as children of retired-worker beneficiaries,

are based on the projected number of children in the population. In the shortrange period, the number of entitled children is developed by applying award

rates to the number of children in the population where both parents are

alive, and by applying termination rates to the number of children already

receiving benefits.

In the long-range period, the number of entitled children is projected separately by sex of the earner parent. The number of entitled children is projected for each age under 18 from the latest beneficiary data by reflecting

changes in the following: the number of children in the population and the

ratio of retired workers aged 62 to 71 to the population aged 20 to 71. For

student beneficiaries, factors are applied to the number of children aged 18

and 19 in the population, representing the probabilities that the parent is

alive, aged 62 or over, insured, and receiving a retired-worker benefit.

Another factor is applied representing the probability that the child is attending a secondary school.

The number of disabled children, aged 18 and over, of retired-worker beneficiaries is projected from the adult population. In the short-range period,

award rates are applied to the population, and termination rates are applied to

the number of disabled children already receiving benefits. In the long-range

period, disabled children are projected in a manner similar to that for student

children with the inclusion of a factor reflecting the probability of being disabled before age 22.

In the short-range period, the number of young-spouses, entitled because

they have a child in their care, is developed by applying award rates to the

number of awards to children of retired workers, where the children are
119

Program Assumptions and Methods

either under age 16 or disabled, and by applying termination rates to the

number of young spouses with a child in care who are already receiving benefits. In the long-range period, young-spouse beneficiaries with a child in

their care who are projected as a proportion of the projected number of child

beneficiaries of retired workers, taking into account projected changes in

average family size.

The number of aged-widow(er) beneficiaries (excluding those who are also

receiving a retired-worker benefit) is projected from the population by age

and sex. In the short-range period, fully insured aged-widow(er) beneficiaries are projected in conjunction with the retired-worker beneficiaries. Uninsured aged-widow(er) beneficiaries are projected by applying award rates to

the aged uninsured male or female population, and by applying termination

rates to the population already receiving such benefits. In the long-range

period, aged-widow(er) beneficiaries are projected by marital status. Four

factors are applied to the number of widow(er)s in the population aged 60

and over. These factors represent the probabilities that: (1) the deceased

earner is fully insured at death; (2) the widow(er) is not receiving a benefit

for the care of an entitled child; (3) the widow(er) is not fully insured; and

(4) the widow(er)’s benefits are not withheld because of receipt of a significant government pension based on earnings in noncovered employment. In

addition, some insured widow(er)s who had not applied for their retiredworker benefits are assumed to receive widow(er)’s benefits. Also, the same

factors are applied to the number of divorced persons aged 60 and over in the

population, with additional factors representing the probability that the person’s former earner spouse is deceased and that the marriage was at least 10

years in duration.

In the short-range period, the number of disabled-widow(er) beneficiaries is

developed by applying award rates to the uninsured male or female population, and by applying termination rates to the population already receiving a

disabled-widow(er) benefit. In the long-range period, the number is projected

for each age 50 up to NRA as percentages of the widowed and divorced populations, adjusted for the insured status of the deceased spouse, the prevalence of disability, and the probability that the disabled spouse is not

receiving another type of benefit.

The projected numbers of children under age 18, and students aged 18 and

19, who are entitled for benefits as survivors of deceased workers, are based

on the projected number of children in the population whose mothers or

fathers are deceased. In the short-range period, the number of entitled children is developed by applying award rates to the number of orphaned chil-
Assumptions & Methods

120

dren, and by applying termination rates to the number of children already

receiving benefits.

In the long-range period, the number of child-survivor beneficiaries is projected in a manner analogous to that for student beneficiaries of retired workers, with the factor representing the probability that the parent is aged 62 or

over replaced by a factor that represents the probability that the parent is

deceased.

In the short-range period, the numbers of entitled mother-survivor and fathersurvivor beneficiaries are developed by applying award rates to the number

of awards to child-survivor beneficiaries, where the children are either under

age 16 or disabled, and by applying termination rates to the number of

mother-survivors and father-survivors already receiving benefits. In the longrange period, mother-survivor and father-survivor beneficiaries, assuming

they are not remarried, are estimated from the number of child-survivor beneficiaries, taking into account projected changes in average family size.

The number of parent-survivor beneficiaries is projected based on the historical pattern of the number of such beneficiaries.

Table V.C4 shows the projected number of beneficiaries under the OASI program by type of benefit. Included among the beneficiaries who receive

retired-worker benefits are persons who also receive a residual benefit consisting of the excess of an auxiliary benefit over their retired-worker benefit.

Estimates of the number and amount of such residual payments are made

separately for spouses and widow(er)s.
121

Program Assumptions and Methods

Table V.C4.—OASI Beneficiaries With Benefits in Current-Payment Status 

at the End of Calendar Years 1945-2085

[In thousands]

Calendar year

Retired workers and auxiliaries Survivors

Worker Total a Spouse Child

WidowwidowerMotherfather Child Parent

Historical data:

1945 . . . . . . . . . . 518 159 13 94 121 377 6 1,288

1950 . . . . . . . . . . 1,771 508 46 314 169 653 15 3,477

1955 . . . . . . . . . . 4,474 1,192 122 701 292 1,154 25 7,961

1960 . . . . . . . . . . 8,061 2,269 268 1,544 401 1,577 36 14,157

1965 . . . . . . . . . . 11,101 2,614 461 2,371 472 2,074 35 19,128

1970 . . . . . . . . . . 13,349 2,668 546 3,227 523 2,688 29 23,030

1975 . . . . . . . . . . 16,589 2,867 643 3,888 582 2,919 21 27,509

1980 . . . . . . . . . . 19,564 3,018 639 4,415 563 2,610 15 30,823

1985 . . . . . . . . . . 22,435 3,069 456 4,862 372 1,918 10 33,122

1986 . . . . . . . . . . 22,985 3,086 450 4,927 350 1,878 9 33,685

1987 . . . . . . . . . . 23,444 3,090 439 4,983 329 1,837 8 34,129

1988 . . . . . . . . . . 23,862 3,088 432 5,013 318 1,809 7 34,529

1989 . . . . . . . . . . 24,331 3,095 422 5,057 312 1,782 6 35,004

1990 . . . . . . . . . . 24,841 3,104 421 5,098 304 1,777 6 35,551

1991 . . . . . . . . . . 25,293 3,106 425 5,142 301 1,792 5 36,064

1992 . . . . . . . . . . 25,762 3,115 431 5,187 294 1,808 5 36,603

1993 . . . . . . . . . . 26,109 3,098 436 5,207 289 1,837 5 36,981

1994 . . . . . . . . . . 26,412 3,069 440 5,218 283 1,865 4 37,292

1995 . . . . . . . . . . 26,679 3,027 441 5,213 275 1,884 4 37,522

1996 . . . . . . . . . . 26,905 2,971 442 5,199 242 1,898 4 37,661

1997 . . . . . . . . . . 27,282 2,926 441 5,043 230 1,893 3 37,817

1998 . . . . . . . . . . 27,518 2,866 439 4,981 221 1,884 3 37,911

1999 . . . . . . . . . . 27,784 2,811 442 4,936 212 1,885 3 38,073

2000 . . . . . . . . . . 28,505 2,798 459 4,901 203 1,878 3 38,747

2001 . . . . . . . . . . 28,843 2,742 467 4,828 197 1,890 3 38,969

2002 . . . . . . . . . . 29,195 2,681 477 4,771 194 1,908 2 39,227

2003 . . . . . . . . . . 29,537 2,622 480 4,707 190 1,910 2 39,448

2004 . . . . . . . . . . 29,952 2,569 482 4,643 184 1,901 2 39,733

2005 . . . . . . . . . . 30,461 2,524 488 4,569 178 1,903 2 40,126

2006 . . . . . . . . . . 30,976 2,476 490 4,494 171 1,899 2 40,508

2007 . . . . . . . . . . 31,528 2,431 494 4,436 165 1,892 2 40,947

2008 . . . . . . . . . . 32,274 2,370 525 4,380 160 1,915 2 41,625

Intermediate:

2010 . . . . . . . . . . 34,205 2,373 554 4,308 152 1,919 2 43,513

2015 . . . . . . . . . . 40,935 2,351 643 4,203 142 1,949 1 50,225

2020 . . . . . . . . . . 49,127 2,283 714 4,140 136 1,979 2 58,380

2025 . . . . . . . . . . 56,535 2,308 776 4,142 129 1,942 2 65,833

2030 . . . . . . . . . . 63,013 2,391 819 4,183 125 1,935 2 72,468

2035 . . . . . . . . . . 67,486 2,317 834 4,198 124 1,933 2 76,894

2040 . . . . . . . . . . 69,848 2,209 841 4,163 121 1,920 2 79,104

2045 . . . . . . . . . . 71,450 2,133 850 4,093 118 1,895 2 80,541

2050 . . . . . . . . . . 73,351 2,110 879 3,993 115 1,871 2 82,321

2055 . . . . . . . . . . 75,833 2,216 903 3,901 113 1,854 2 84,819

2060 . . . . . . . . . . 78,757 2,327 926 3,836 111 1,837 2 87,796

2065 . . . . . . . . . . 81,654 2,455 937 3,832 108 1,816 2 90,804

2070 . . . . . . . . . . 84,790 2,571 957 3,889 105 1,793 2 94,107

2075 . . . . . . . . . . 88,099 2,653 980 3,963 103 1,768 2 97,568

2080 . . . . . . . . . . 91,512 2,735 1,004 4,030 100 1,751 2 101,134

2085 . . . . . . . . . . 95,065 2,823 1,031 4,089 98 1,735 2 104,842
Assumptions & Methods

122

Notes: 

1. The number of beneficiaries does not include uninsured individuals who receive benefits under Section

228 of the Social Security Act. Costs are reimbursed from the General Fund of the Treasury for most of

these individuals.

2. Totals do not necessarily equal the sums of rounded components.

6. Disability Insurance Beneficiaries

Benefits are paid from the DI Trust Fund to disabled workers who satisfy the

disability insured requirements, who are unable to engage in substantial gainful activity due to medically determinable physical or mental impairment

severe enough to satisfy the requirements of the program, and who have not

yet attained normal retirement age. Spouses and children of such disabled

Low-cost:

2010 . . . . . . . . . . 34,201 2,374 554 4,308 153 1,921 2 43,512

2015 . . . . . . . . . . 40,804 2,357 648 4,194 145 1,973 1 50,122

2020 . . . . . . . . . . 48,559 2,260 720 4,164 135 2,072 2 57,912

2025 . . . . . . . . . . 55,370 2,275 790 4,195 127 2,106 2 64,865

2030 . . . . . . . . . . 61,016 2,336 848 4,270 122 2,191 2 70,784

2035 . . . . . . . . . . 64,599 2,235 876 4,314 119 2,284 2 74,429

2040 . . . . . . . . . . 66,104 2,093 896 4,285 117 2,363 2 75,861

2045 . . . . . . . . . . 67,008 1,991 919 4,207 117 2,422 2 76,665

2050 . . . . . . . . . . 68,369 1,947 963 4,092 117 2,472 2 77,962

2055 . . . . . . . . . . 70,464 2,015 1,000 3,983 119 2,524 2 80,107

2060 . . . . . . . . . . 72,969 2,088 1,041 3,902 122 2,588 2 82,711

2065 . . . . . . . . . . 75,376 2,158 1,069 3,878 125 2,652 2 85,260

2070 . . . . . . . . . . 77,915 2,203 1,106 3,905 128 2,717 2 87,976

2075 . . . . . . . . . . 80,725 2,221 1,150 3,948 131 2,778 2 90,954

2080 . . . . . . . . . . 84,124 2,262 1,204 4,000 134 2,845 2 94,569

2085 . . . . . . . . . . 88,235 2,339 1,266 4,068 137 2,914 2 98,960

High-cost:

2010 . . . . . . . . . . 34,216 2,373 554 4,309 152 1,917 2 43,523

2015 . . . . . . . . . . 41,099 2,347 639 4,214 140 1,925 1 50,365

2020 . . . . . . . . . . 49,813 2,319 710 4,114 138 1,892 2 58,988

2025 . . . . . . . . . . 57,941 2,358 763 4,087 131 1,791 2 67,072

2030 . . . . . . . . . . 65,318 2,478 789 4,093 125 1,705 2 74,509

2035 . . . . . . . . . . 70,854 2,436 792 4,076 120 1,630 2 79,910

2040 . . . . . . . . . . 74,274 2,352 787 4,032 113 1,554 2 83,114

2045 . . . . . . . . . . 76,736 2,287 781 3,972 106 1,478 2 85,362

2050 . . . . . . . . . . 79,263 2,276 793 3,889 99 1,415 2 87,735

2055 . . . . . . . . . . 82,168 2,399 802 3,812 92 1,365 2 90,640

2060 . . . . . . . . . . 85,504 2,539 808 3,759 86 1,315 2 94,012

2065 . . . . . . . . . . 88,791 2,721 801 3,759 79 1,260 2 97,413

2070 . . . . . . . . . . 92,394 2,907 802 3,821 73 1,206 2 101,206

2075 . . . . . . . . . . 96,126 3,039 805 3,902 67 1,155 2 105,096

2080 . . . . . . . . . . 99,476 3,145 804 3,975 62 1,111 2 108,575

2085 . . . . . . . . . . 102,264 3,240 802 4,023 58 1,071 2 111,459

a Included among the beneficiaries who receive retired-worker benefits are persons who also receive a residual benefit consisting of the excess of an auxiliary benefit over their retired-worker benefit.

Table V.C4.—OASI Beneficiaries With Benefits in Current-Payment Status 

at the End of Calendar Years 1945-2085 (Cont.)

[In thousands]

Calendar year

Retired workers and auxiliaries Survivors

Worker Total a Spouse Child

WidowwidowerMotherfather Child Parent
123

Program Assumptions and Methods

workers may also receive DI benefits provided they satisfy certain criteria,

primarily age requirements.

The number of disabled workers receiving benefits in a given year (i.e., in

current-payment status) is projected using standard actuarial methods that

reflect future new benefit awards, terminations due to death and recovery,

and conversions from disabled-worker to retired-worker beneficiary status

after which benefits are paid from the OASI Trust Fund.

The prevalence of disability results from the likelihood of becoming disabled

(incidence) as well as the likelihood that disability ceases (termination). Disability prevalence is captured by the ratio of the number of disabled-worker

beneficiaries in current-payment status to the disability insured population.

This ratio is referred to as the disability prevalence rate. The balance of this

section describes the methods and assumptions used for projecting the number of disabled-worker beneficiaries. Incidence rates and termination rates

are the key factors in these projections. This section illustrates these rates as

well as the projected beneficiary population and prevalence rates.

a. Disability Incidence

The number of new benefit awards each year divided by the number of individuals who meet insured requirements but are not yet receiving benefits (the

disability exposed population) is referred to as the disability incidence rate.

New awards are projected for each year by applying assumed age-sex-specific disability incidence rates to the projected disability exposed population

by age and sex. Projections of the disability insured population are described

in section V.C.4 of this report.

For the first 10 years of the projection period (through 2018) incidence rates

reflect several factors including: (1) aspects of program administration (such

as efforts to reduce the disability backlog and recent changes to how claims

are adjudicated); (2) assumed future unemployment rates; and (3) underlying

trends in incidence. Notably for this year’s report, all three sets of underlying

economic assumptions include a continuation of the current economic recession, although of varying durations and severity. During the recession, the

projected disability incidence rates are estimated to experience sharp temporary increases above the general trend level. The elevated incidence rates are

assumed to subside as the economy recovers, and to briefly drop below the

general trend level on the assumption that some of the earlier additional

awards will be cases that would have applied in a later year. After 2018, agesex-specific incidence rates are assumed to trend toward the ultimate rates

assumed for the long-range projections and to reach these ultimate rates in

2028. These ultimate age-sex-specific disability incidence rates were
Assumptions & Methods

124

selected based on careful analysis of historical levels and patterns and

expected future conditions, including the impact of scheduled increases in

the normal retirement age.1 The ultimate incidence rates are assumed to represent the likely average rates of incidence for the future.

For the intermediate alternative, the ultimate age-sex-adjusted incidence rate

(adjusted to the disability exposed population for the year 2000) for ages

through 64 is assumed to be 5.3 awards per thousand exposed population.

This level is about 2 percent higher than the average rate for the historical

period 1970 through 2008. The ultimate age-sex-adjusted incidence rates for

the low-cost and high-cost alternatives are assumed to be 4.2 and 6.3 awards

per thousand exposed, or about 19 percent lower and 21 percent higher than

the average for the historical period, respectively. For the 2009 report, the

ultimate assumed age-sex-adjusted incidence rates are essentially the same as

in last year’s report.

Historical incidence rates and assumed incidence rates under the three alternatives are illustrated in figure V.C3. Incidence rates have varied within a

wide range over the past 35 years. This variation is attributed to a variety of

demographic and economic factors, along with the effects of changes due to

legislation and program administration.2 The solid lines in figure V.C3 illustrate values of the incidence rate, age-sex adjusted to the distribution of the

disability exposed population for 2000. Such adjustment facilitates meaningful comparisons over long periods of time by focusing on the likelihood of

becoming disabled, and excluding the effects of a changing distribution of

the population toward ages where disability is inherently more or less likely.

Gross (unadjusted) incidence rates are also shown in figure V.C3 in dashed

lines. Unadjusted rates are influenced by the changing age-sex distribution of

the exposed population over time. The gross incidence rate fell substantially

below the age-sex-adjusted rate between 1975 and 1995 as the baby-boom

generation swelled the size of the younger working-age population, where

disability incidence is low. After 1995, the gross rate rose relative to the

age-sex-adjusted rate, reflecting the aging of the baby-boom generation into

higher ages, where disability incidence increases substantially. After 2023,

the gross incidence rate declines relative to the age-sex-adjusted rate as the

baby-boom generation moves above the normal retirement age (NRA), and is

 1 Incidence rates are adjusted upward to account for additional workers who are expected to file for disability benefits (rather than retirement benefits) in response to greater reductions in retirement benefits as the

NRA rises.

 2 A more detailed discussion of the recent history of the DI program is presented in Actuarial Study 118,

“Social Security Disability Insurance Program Worker Experience,” June 2005. This study can be found at

www.socialsecurity.gov/OACT/NOTES/s2000s.html.
125

Program Assumptions and Methods

replaced at prime disability ages (50 to NRA) by the smaller cohorts born in

the 1970s. As these smaller cohorts age past NRA, by about 2050, the gross

incidence rate returns to a higher relative level under the intermediate

assumptions. Thereafter, the gross rate remains higher, reflecting the persistently higher average age of the working-age population, which is largely

due to lower birth rates since 1965.

b. Disability Termination

Disability benefits may be terminated if a beneficiary dies or recovers from

the disabling condition (as indicated by either medical improvement or

return to work). The termination rate is the ratio of the number of terminations to the average number of disabled-worker beneficiaries during the year.

Termination rates are projected by age, sex, and reason for termination. In

addition, in the long-range period (post-2018) termination rates are also

assumed to vary by duration of entitlement to disabled-worker benefits.

 Figure V.C3.—DI Disability Incidence Rates, 1970-2085

[Awards per thousand disability exposed]

0

1

2

3

4

5

6

7

8

9

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Gross incidence rates

Age-sex-adjusted

incidence rates

I

II

III

Historical Estimated
Assumptions & Methods

126

In the short-range period (through 2018), the age-sex-adjusted death rate

(adjusted to the 2000 disabled-worker population) under the intermediate

assumptions is projected to gradually decline from 27.7 deaths per thousand

beneficiaries in 2008 to about 23.6 per thousand by 2018.1 The age-sexadjusted recovery rate under the intermediate assumptions is assumed to rise

from a relatively low level of 10.5 per thousand beneficiaries in 2008

(reflecting temporarily lower levels of continuing disability reviews) to 11.5

per thousand beneficiaries by 2018. Under low-cost (high-cost) assumptions,

total age-sex-adjusted termination rates due to death and recovery are

assumed to increase (decrease) to levels roughly 10-16 percent higher

(lower) than those under the intermediate assumptions. 

For the long-range period (post-2018), death and recovery rates are projected

relative to rates by age, sex, and duration of entitlement over the base period

1996-2000.2 The ultimate age-sex-adjusted recovery rate for disabled workers is assumed to be about 10.8 per thousand beneficiaries. Ultimate age-sexadjusted recovery rates for low-cost and high-cost alternatives are assumed

to reach about 13.1 and 8.6 recoveries per thousand beneficiaries, respectively. For all three sets of assumptions, the ultimate recovery rates are

reached in the twentieth year of the projection period (2028). In contrast,

death rates by age and sex are assumed to change throughout the long-range

period at the same rate as for death rates in the general population. From the

age-sex- adjusted death rate of 27.7 per thousand beneficiaries in 2008, rates

of 20.3, 11.4, and 7.3 per thousand disabled-worker beneficiaries are projected for 2085 under the low-cost, intermediate, and high-cost assumptions,

respectively.

Figure V.C4 illustrates gross and age-sex-adjusted total termination rates for

disabled-worker beneficiaries for the historical period since 1970, and for the

projection period through 2085. In the near term, between 2011 and 2014,

recovery terminations are projected to be elevated as SSA works down the

current pending backlog of continuing disability reviews. As with incidence

rates, the age-sex-adjusted termination rate provides an illustration of the real

change in the tendency to terminate benefits. The gross rate is influenced by

changes in the age-sex distribution of the beneficiary population. A shift in

 1 Projections are developed separately for the short range (through 2018) and for the long range (after 2018).

While short-range assumptions vary within the 10-year short-range period, the full phase in to the ultimate

assumptions is not achieved until 2028. Death rates differ in this regard as explained in the text.

 2 The termination rate analysis was based on work presented in Actuarial Study 118, “Social Security Disability Insurance Program Worker Experience,” June 2005. This study can be found on the Social Security

website at www.socialsecurity.gov/OACT/NOTES/s2000s.html.
127

Program Assumptions and Methods

the beneficiary population to older ages, as when the baby-boom generation

moves into pre-retirement ages, results in an increase in the gross death termination rate as long as death rates by age and sex are constant or declining.

c. Comparison of Incidence, Termination, and Conversion

Incidence and termination rates are the foundation for development of the

projected levels of disabled-worker beneficiaries in current-payment status

up to the normal retirement age (NRA) at which time beneficiaries are converted to retired-worker status and thereby leave the DI rolls. For all disabled-worker beneficiaries reaching the NRA in a given year, the disability

“conversion” rate is, by definition 100 percent. For beneficiaries at all other

ages this rate is zero. Conversions are simply a transfer of beneficiaries at

NRA from the DI Trust Fund account to the OASI Trust Fund account. After

conversion, recovery from the disabling condition is no longer considered.

Conversions do represent a form of exit from the DI rolls and therefore must

be accounted for in disabled-worker beneficiary totals.

Figure V.C5 compares the historical and projected (intermediate) levels of

incidence, termination, and conversion on both gross and age-sex-adjusted

bases. The rates for incidence and termination (death and recovery) are

described above. The conversion ratio is the number of conversions in a

 Figure V.C4.—DI Disability Termination Rates, 1970-2085

[Terminations per thousand disabled-worker beneficiaries]

0

20

40

60

80

100

120

140

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Gross termination rates

Age-sex-adjusted

termination rates

II

III

I

Historical Estimated
Assumptions & Methods

128

given year (i.e., beneficiaries who reach the NRA) divided by the average

number of disabled-worker beneficiaries at all ages in that year. The ratio is a

constant on an age-sex-adjusted basis, except for the two periods during

which the NRA increases under current law. But on a gross basis, the conversion ratio rises and falls with the changing proportion of all disabled-worker

beneficiaries who attain the NRA in a given year.

Termination rates have declined and are expected to continue to fall, largely

because of declines in death rates. Incidence rates have varied widely and are

assumed for the intermediate projection (on an age-sex-adjusted basis) to

remain near the middle of the high and low extremes experienced since

1970. The gross conversion ratio increases in the future due to aging of the

beneficiary population.

d. DI Beneficiaries and Disability Prevalence Rates

The detailed projections of disabled-worker awards, terminations, and conversions are combined using standard actuarial methods to project the number of disabled workers receiving benefits (i.e., in current-payment status)

over the next 75 years. The projected numbers of disabled workers in current-payment status are presented in table V.C5. The number of disabled

 Figure V.C5.—Comparison of DI Disability Incidence Rates, Termination Rates and 

Conversion Ratios Under Intermediate Assumptions, 1970-2085

[Awards per thousand disability exposed;

terminations and conversions per thousand disabled-worker beneficiaries]

0

1

2

3

4

5

6

7

8

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Incidence rates

0

20

40

60

80

100

120

140

160

Termination rates 

&

Conversion ratios

Gross incidence rates

Age-sex-adjusted incidence rates

Gross conversion ratios

Age-sex-adjusted conversion ratios

Age-sex-adjusted and 

gross termination rates

Historical Estimated
129

Program Assumptions and Methods

workers in current-payment status is projected to grow from 7.4 million at

the end of 2008, to 12.0 million, 13.9 million, and 14.7 million at the end of

2085, under the low-cost, intermediate, and high-cost assumptions, respectively. Of course, much of this growth is a direct result of the growth and

aging of the population described earlier in this chapter. Also shown in table

V.C5 are disability prevalence rates on both gross and age-sex-adjusted

bases. Discussion of auxiliary beneficiary projections appears below.

Table V.C5.—DI Beneficiaries With Benefits in Current-Payment Status at the End of 

Calendar Years 1960-2085

[Beneficiaries in thousands; prevalence rates per thousand disability insured]

Calendar year

Disabledworker

beneficiaries

Auxiliary beneficiaries

Total

beneficiaries

Disability

prevalence rates

Spouse Child Gross

Age-sexadjusted

Historical data:

1960. . . . . . . . . . . . 455 77 155 687

1965. . . . . . . . . . . . 988 193 558 1,739

1970. . . . . . . . . . . . 1,493 283 889 2,665 20 18

1975. . . . . . . . . . . . 2,488 453 1,411 4,351 29 29

1980. . . . . . . . . . . . 2,856 462 1,359 4,677 28 31

1985. . . . . . . . . . . . 2,653 306 945 3,904 24 26

1986. . . . . . . . . . . . 2,725 301 965 3,991 25 27

1987. . . . . . . . . . . . 2,782 291 968 4,041 25 27

1988. . . . . . . . . . . . 2,826 281 963 4,070 25 27

1989. . . . . . . . . . . . 2,891 271 962 4,124 25 27

1990. . . . . . . . . . . . 3,007 266 989 4,261 25 28

1991. . . . . . . . . . . . 3,191 266 1,052 4,509 26 29

1992. . . . . . . . . . . . 3,464 271 1,151 4,886 28 31

1993. . . . . . . . . . . . 3,721 273 1,255 5,249 30 33

1994. . . . . . . . . . . . 3,958 271 1,350 5,579 32 34

1995. . . . . . . . . . . . 4,179 264 1,409 5,852 33 35

1996. . . . . . . . . . . . 4,378 224 1,463 6,065 34 36

1997. . . . . . . . . . . . 4,501 207 1,438 6,146 34 36

1998. . . . . . . . . . . . 4,691 190 1,446 6,327 35 36

1999. . . . . . . . . . . . 4,870 176 1,468 6,514 36 36

2000. . . . . . . . . . . . 5,036 165 1,466 6,667 37 37

2001. . . . . . . . . . . . 5,268 157 1,482 6,907 38 37

2002. . . . . . . . . . . . 5,539 152 1,526 7,217 39 38

2003. . . . . . . . . . . . 5,869 151 1,571 7,590 41 39

2004. . . . . . . . . . . . 6,198 153 1,599 7,950 43 39

2005. . . . . . . . . . . . 6,519 157 1,633 8,309 45 40

2006. . . . . . . . . . . . 6,807 156 1,652 8,615 46 40

2007. . . . . . . . . . . . 7,099 154 1,665 8,918 48 41

2008. . . . . . . . . . . . 7,427 155 1,692 9,273 49 41
Assumptions & Methods

130

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

Intermediate:

2010. . . . . . . . . . . . 8,177 161 1,838 10,176 53 44

2015. . . . . . . . . . . . 8,989 154 1,872 11,015 57 45

2020. . . . . . . . . . . . 9,525 154 1,971 11,650 58 46

2025. . . . . . . . . . . . 10,126 179 2,113 12,418 56 47

2030. . . . . . . . . . . . 10,068 183 2,236 12,487 54 47

2035. . . . . . . . . . . . 10,132 177 2,325 12,634 54 48

2040. . . . . . . . . . . . 10,397 173 2,399 12,969 54 48

2045. . . . . . . . . . . . 10,919 179 2,461 13,559 55 48

2050. . . . . . . . . . . . 11,365 189 2,528 14,081 56 48

2055. . . . . . . . . . . . 11,761 208 2,607 14,576 56 49

2060. . . . . . . . . . . . 12,023 209 2,685 14,917 56 49

2065. . . . . . . . . . . . 12,386 217 2,758 15,360 57 49

2070. . . . . . . . . . . . 12,806 224 2,824 15,855 57 49

2075. . . . . . . . . . . . 13,204 230 2,887 16,321 58 50

2080. . . . . . . . . . . . 13,574 236 2,951 16,762 58 50

2085. . . . . . . . . . . . 13,899 242 3,020 17,161 58 50

Low-cost:

2010. . . . . . . . . . . . 7,955 153 1,770 9,878 52 42

2015. . . . . . . . . . . . 8,125 135 1,677 9,938 51 40

2020. . . . . . . . . . . . 8,620 136 1,808 10,565 50 39

2025. . . . . . . . . . . . 8,703 147 1,875 10,725 47 39

2030. . . . . . . . . . . . 8,288 140 1,955 10,383 44 39

2035. . . . . . . . . . . . 8,110 128 2,030 10,268 42 38

2040. . . . . . . . . . . . 8,186 118 2,111 10,416 41 37

2045. . . . . . . . . . . . 8,515 119 2,196 10,830 41 37

2050. . . . . . . . . . . . 8,826 124 2,289 11,240 41 37

2055. . . . . . . . . . . . 9,139 136 2,398 11,673 40 37

2060. . . . . . . . . . . . 9,400 135 2,525 12,060 40 37

2065. . . . . . . . . . . . 9,786 138 2,660 12,584 40 37

2070. . . . . . . . . . . . 10,276 142 2,795 13,214 40 37

2075. . . . . . . . . . . . 10,837 147 2,929 13,913 40 37

2080. . . . . . . . . . . . 11,428 155 3,065 14,648 41 38

2085. . . . . . . . . . . . 11,991 162 3,206 15,359 41 38

High-cost:

2010. . . . . . . . . . . . 8,387 168 1,902 10,456 55 45

2015. . . . . . . . . . . . 9,982 178 2,107 12,267 63 50

2020. . . . . . . . . . . . 10,403 175 2,125 12,702 67 53

2025. . . . . . . . . . . . 11,519 214 2,327 14,060 66 55

2030. . . . . . . . . . . . 11,825 231 2,466 14,522 65 56

2035. . . . . . . . . . . . 12,132 233 2,533 14,898 66 58

2040. . . . . . . . . . . . 12,574 233 2,560 15,367 68 59

2045. . . . . . . . . . . . 13,268 245 2,566 16,079 70 60

2050. . . . . . . . . . . . 13,815 260 2,582 16,657 72 60

2055. . . . . . . . . . . . 14,251 285 2,614 17,150 74 61

2060. . . . . . . . . . . . 14,445 284 2,624 17,353 75 61

2065. . . . . . . . . . . . 14,679 294 2,615 17,588 77 62

2070. . . . . . . . . . . . 14,890 304 2,593 17,788 78 62

2075. . . . . . . . . . . . 14,927 305 2,570 17,803 78 62

2080. . . . . . . . . . . . 14,857 307 2,553 17,716 79 62

2085. . . . . . . . . . . . 14,737 306 2,544 17,587 79 62

Table V.C5.—DI Beneficiaries With Benefits in Current-Payment Status at the End of 

Calendar Years 1960-2085 (Cont.)

[Beneficiaries in thousands; prevalence rates per thousand disability insured]

Calendar year

Disabledworker

beneficiaries

Auxiliary beneficiaries

Total

beneficiaries

Disability

prevalence rates

Spouse Child Gross

Age-sexadjusted
131

Program Assumptions and Methods

Figure V.C6 illustrates the historical and projected disability prevalence rates

on both a gross basis and on an age-sex-adjusted basis (adjusted to the agesex distribution of the insured population for the year 2000).

Changes in prevalence rates are a direct result of changes in incidence rates

and termination rates. The patterns depicted for these rates in figure V.C5 are

helpful for understanding the trend in prevalence rates. (Annual rates are not

directly comparable and cannot be simply combined because their denominators differ.)

Prevalence rates have increased primarily because: (1) termination rates have

declined; and (2) incidence rates at younger ages have increased relative to

rates at higher ages. Gross prevalence rates have increased more than agesex-adjusted prevalence rates since the baby-boom generation began to move

into the ages 50 through NRA, where incidence rates are relatively high.

With this upward shift in the age distribution of the disabled population,

gross conversions to retired worker status at NRA have naturally increased

as well. In the future, prevalence rates are projected to grow at a slower pace

reflecting assumed stabilization in three factors: the age distribution of the

general population, the age distribution of the disability insured population,

and relative rates of incidence by age. With these factors gradually stabiliz-

 Figure V.C6.—DI Disability Prevalence Rates, 1970-2085

[Rate per thousand disability insured]

0

10

20

30

40

50

60

70

80

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar year

Gross prevalence rates

Age-sex-adjusted

prevalence rates

III

III

II

II

I

I

Historical Estimated
Assumptions & Methods

132

ing, the remaining force influencing prevalence rates is the declining death

termination rate, which is projected to continue to have a small influence

toward higher disability prevalence rates in the future.

As mentioned above in the discussion of incidence and termination rates, the

age-sex-adjusted prevalence rate isolates the changing trend in the true likelihood of receiving benefits for the insured population, free from the effects of

an aging population. For disability prevalence rates, like incidence rates, the

entrance of the baby-boom generation into working ages caused the gross

rate of disability to decline relative to the age-sex-adjusted rate between

1975 and 1995, due to lower disability prevalence rates at younger ages.

Conversely, the gross rate of disability prevalence increases relative to the

age-sex-adjusted rate after 1995 due to the aging of the baby-boom generation into ages with higher disability prevalence rates.

The age-sex-adjusted disability prevalence rate for ages through 64 is projected to grow from 41.3 per thousand disability insured at the end of 2008,

to 50.0 per thousand at the end of 2085 under the intermediate assumptions.

As mentioned above, the growth in prevalence is expected to slow relative to

the historical period.

Under the low-cost and high-cost assumptions, the age-sex-adjusted disability prevalence rate is projected to decrease to 37.7 per thousand and increase

to 62.5 per thousand insured workers at the end of 2085, respectively.

Table V.C5 presents projections of the numbers of auxiliary beneficiaries

paid from the DI Trust Fund. As indicated at the beginning of this subsection, such auxiliary beneficiaries consist of qualifying spouses and children

of disabled workers. In the case of children, the child must be either (1)

under age 18, (2) age 18 or 19 and still a student in high school, or (3) over

age 18 and disabled prior to age 22. In the case of spouses, the spouse must

either be at least age 62, or have, in his or her care, an eligible child beneficiary who is either under age 16 or disabled prior to age 22.

In general, the number of such auxiliary beneficiaries is projected in a manner that is related to the projected number of disabled-worker beneficiaries.

In the short-range period (2009-18), this is accomplished for family members

of disabled-worker beneficiaries by projecting incidence and termination

rates for each category of auxiliary beneficiary. After 2018, the child beneficiaries at ages 18 and under are projected in relation to the projected number

of children in the population, by applying factors representing the probability

that either of their parents is a disabled-worker beneficiary. The remaining

categories of children and spouses are projected in a similar manner.
133

Program Assumptions and Methods

7. Average Benefits

Average benefits are projected by type of benefit based on recent historical

averages, projected average primary insurance amounts (PIAs), and projected ratios of average benefits to average PIAs. Average PIAs are calculated from projected distributions of beneficiaries by duration from year of

initial entitlement, average PIAs at initial entitlement, and increases in PIAs

since the year of initial entitlement, reflecting automatic benefit increases,

recomputations to reflect additional covered earnings, and other factors.

Future average PIAs at initial entitlement are calculated from projected earnings histories, which are developed using a combination of the actual earnings histories associated with a sample of 2004 initial entitlements, and more

recent actual earnings levels by age and sex for covered workers.

For several types of benefits—retired-worker, aged-spouse, and agedwidow(er) benefits—the percentage of the PIA that is payable depends on

the age at initial entitlement to benefits. Projected ratios of average benefits

to average PIAs for these types of benefits are based on projections of age

distributions at initial entitlement.

8. Benefit Payments

For each type of benefit, benefit payments are calculated as the product of a

number of beneficiaries and a corresponding average monthly benefit. In the

short-range period, benefit payments are calculated on a quarterly basis. In

the long-range period, all benefit payments are calculated on an annual basis,

using the number of beneficiaries on December 31. These amounts are

adjusted to include retroactive payments to newly awarded beneficiaries, and

other amounts not reflected in the regular monthly benefit payments.

Lump-sum death payments are calculated as the product of (1) the number of

such payments, which is projected on the basis of the assumed death rates,

the projected fully insured population, and the estimated percentage of the

fully insured population that would qualify for benefits, and (2) the amount

of the lump-sum death payment, which is $255 (not indexed in future years).

9. Administrative Expenses

The projection of administrative expenses through 2018 is based on historical experience and the expected growth in average wages. Additionally, estimates for the first several years of the projection are provided by the Office

of Budget of the Social Security Administration. For years after 2018,

administrative expenses are assumed to increase because of increases in the
Assumptions & Methods

134

number of beneficiaries and increases in the average wage, which will more

than offset assumed improvements in administrative productivity.

10.Railroad Retirement Financial Interchange

Railroad workers are covered under a separate multi-tiered plan, the first tier

being very similar to OASDI coverage. An annual financial interchange

between the Railroad Retirement fund and the OASI and DI funds is made

reflecting the difference between: (1) the amount of OASDI benefits that

would be paid to railroad workers and their families if railroad employment

had been covered under the OASDI program and administrative expenses

associated with these benefits; and (2) the amount of OASDI payroll tax and

income tax that would be received with allowances for interest from railroad

workers.

The effect of the financial interchange with the Railroad Retirement program

is evaluated on the basis of trends similar to those used in estimating the cost

of OASDI benefits. The resulting effect is annual short-range costs of about

$4-5 billion and a long-range summarized cost of 0.04 percent of taxable

payroll to the OASDI program.

11. Military Service Transfers

Beginning in 1966, the OASI and DI Trust Funds were reimbursed annually

for the cost (including administrative expenses) of providing additional benefit payments resulting from noncontributory wage credits for military service

performed prior to 1957. The 1983 amendments modified the reimbursement

mechanism and the timing of the reimbursements, and required a transfer in

1983 to include all future costs attributable to the wage credits. The amendments also require adjustments to that 1983 transfer every fifth year, beginning with 1985, to account for actual data.

12.Income From Taxation of Benefits

Under present law, the OASI and DI Trust Funds are credited with the additional income taxes attributable to the taxation of up to the first 50 percent of

OASI and DI benefit payments. (The remainder of the income taxes attributable to the taxation of up to 85 percent of OASI and DI benefit payments is

credited to the HI Trust Fund.)

For the short-range period, income to the trust funds from such taxation is

estimated by applying the following two factors to total OASI and DI benefit

payments: (1) the percentage of benefit payments (limited to 50 percent) that

is taxable; and (2) the average marginal tax rate applicable to those benefits.
135

Program Assumptions and Methods

For the long-range period, income to the trust funds from such taxation is

estimated by applying projected ratios of taxation of OASI and DI benefits to

total OASI and DI benefit payments. Because the income thresholds used for

benefit taxation are, by law, constant in the future, their values in relation to

future income and benefit levels will decline. Thus, ratios of income from

taxation of benefits to the amount of benefits are projected to increase gradually. Ultimate tax ratios for OASI and DI benefits used in the projection are

based on information from the Office of Tax Analysis (OTA) in the Department of the Treasury, by eliminating the current threshold amounts completely for taxation of Social Security benefits in its tax model. Subsequently,

based on recent Current Population Survey data, the Office of the Chief

Actuary makes a downward adjustment to OTA’s ultimate ratios for relative

changes in the projected 75th year OASDI beneficiary population in the most

recent Trustees Report.
Appendices

136

VI. APPENDICES

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS

The Federal Old-Age and Survivors Insurance (OASI) Trust Fund was established on January 1, 1940 as a separate account in the United States Treasury.

The Federal Disability Insurance (DI) Trust Fund, another separate account

in the United States Treasury, was established on August 1, 1956. All the

financial operations of the OASI and DI programs are handled through these

respective funds. The Board of Trustees is responsible for overseeing the

financial operations of these funds. The following paragraphs describe the

various components of trust fund income and outgo. Following this description, tables VI.A2 and VI.A3 present the historical operations of the separate

trust funds since their inception, and table VI.A4 presents the operations of

the combined trust funds during the period when they have co-existed. 

The primary receipts of these two funds are amounts appropriated to each of

them under permanent authority on the basis of contributions payable by

workers, their employers, and individuals with self-employment income, in

work covered by the OASDI program. All employees, and their employers,

in covered employment are required to pay contributions with respect to their

wages. Employees, and their employers, are also required to pay contributions with respect to cash tips, if the individual’s monthly cash tips amount to

at least $20. All self-employed persons are required to pay contributions with

respect to their covered net earnings from self-employment. In addition to

paying the required employer contributions on the wages of covered Federal

employees, the Federal Government also pays amounts equivalent to the

combined employer and employee contributions that would be paid on

deemed wage credits attributable to military service performed between 1957

and 2001 if such wage credits were covered wages.

In general, an individual’s contributions, or taxes, are computed on wages or

net earnings from self-employment, or both wages and net self-employment

earnings combined, up to a specified maximum annual amount. The contributions are determined first on the wages and then on any net self-employment earnings, such that the total does not exceed the annual maximum

amount. An employee who pays contributions on wages in excess of the

annual maximum amount (because of employment with two or more

employers) is eligible for a refund of the excess employee contributions.

The monthly benefit amount to which an individual (or his or her spouse and

children) may become entitled under the OASDI program is based on the

individual’s taxable earnings during his or her lifetime. For almost all per-
137

History of Trust Fund Operations

sons who first become eligible to receive benefits in 1979 or later, the earnings used in the computation of benefits are indexed to reflect increases in

average wage levels. 

The contribution, or tax, rates applicable under current law in each calendar

year and the allocation of these rates between the OASI and DI Trust Funds

are shown in table VI.A1.1 The maximum amount of earnings on which

OASDI contributions are payable in a year, which is also the maximum

amount of earnings creditable in that year for benefit-computation purposes,

is called the contribution and benefit base. The contribution and benefit base

for each year through 2009 is also shown in table VI.A1.

 1 The contribution rates for the Hospital Insurance (HI) program, and for the OASDI and HI programs combined, are shown in table VI.F1.

Table VI.A1.—Contribution and Benefit Base and Contribution Rates

Calendar years

Contribution

and benefit 

base

Contribution rates (percent)

Employees and employers, each Self-employed

OASDI OASI DI OASDI OASI DI

1937-49 . . . . . . . . . $3,000 1.000 1.000 — — — —

1950. . . . . . . . . . . . 3,000 1.500 1.500 — — — —

1951-53 . . . . . . . . . 3,600 1.500 1.500 — 2.2500 2.2500 —

1954. . . . . . . . . . . . 3,600 2.000 2.000 — 3.0000 3.0000 —

1955-56 . . . . . . . . . 4,200 2.000 2.000 — 3.0000 3.0000 —

1957-58 . . . . . . . . . 4,200 2.250 2.000 0.250 3.3750 3.0000 0.3750

1959. . . . . . . . . . . . 4,800 2.500 2.250 .250 3.7500 3.3750 .3750

1960-61 . . . . . . . . . 4,800 3.000 2.750 .250 4.5000 4.1250 .3750

1962. . . . . . . . . . . . 4,800 3.125 2.875 .250 4.7000 4.3250 .3750

1963-65 . . . . . . . . . 4,800 3.625 3.375 .250 5.4000 5.0250 .3750

1966. . . . . . . . . . . . 6,600 3.850 3.500 .350 5.8000 5.2750 .5250

1967. . . . . . . . . . . . 6,600 3.900 3.550 .350 5.9000 5.3750 .5250

1968. . . . . . . . . . . . 7,800 3.800 3.325 .475 5.8000 5.0875 .7125

1969. . . . . . . . . . . . 7,800 4.200 3.725 .475 6.3000 5.5875 .7125

1970. . . . . . . . . . . . 7,800 4.200 3.650 .550 6.3000 5.4750 .8250

1971. . . . . . . . . . . . 7,800 4.600 4.050 .550 6.9000 6.0750 .8250

1972. . . . . . . . . . . . 9,000 4.600 4.050 .550 6.9000 6.0750 .8250

1973. . . . . . . . . . . . 10,800 4.850 4.300 .550 7.0000 6.2050 .7950

1974. . . . . . . . . . . . 13,200 4.950 4.375 .575 7.0000 6.1850 .8150

1975. . . . . . . . . . . . 14,100 4.950 4.375 .575 7.0000 6.1850 .8150

1976. . . . . . . . . . . . 15,300 4.950 4.375 .575 7.0000 6.1850 .8150

1977. . . . . . . . . . . . 16,500 4.950 4.375 .575 7.0000 6.1850 .8150

1978. . . . . . . . . . . . 17,700 5.050 4.275 .775 7.1000 6.0100 1.0900

1979. . . . . . . . . . . . 22,900 5.080 4.330 .750 7.0500 6.0100 1.0400

1980. . . . . . . . . . . . 25,900 5.080 4.520 .560 7.0500 6.2725 .7775

1981. . . . . . . . . . . . 29,700 5.350 4.700 .650 8.0000 7.0250 .9750

1982. . . . . . . . . . . . 32,400 5.400 4.575 .825 8.0500 6.8125 1.2375

1983. . . . . . . . . . . . 35,700 5.400 4.775 .625 8.0500 7.1125 .9375

1984a . . . . . . . . . . . 37,800 5.700 5.200 .500 11.4000 10.4000 1.0000

1985a . . . . . . . . . . . 39,600 5.700 5.200 .500 11.4000 10.4000 1.0000
Appendices

138

All contributions are collected by the Internal Revenue Service and deposited in the General Fund of the Treasury. The contributions are immediately

and automatically appropriated to the trust funds on an estimated basis. The

exact amount of contributions received is not known initially because the

OASDI and HI contributions and individual income taxes are not separately

identified in collection reports received by the Internal Revenue Service.

Periodic adjustments are subsequently made to the extent that the estimates

are found to differ from the amounts of contributions actually payable as

determined from reported earnings. Adjustments are also made to account

for any refunds to employees (with more than one employer) who paid contributions on wages in excess of the contribution and benefit base. 

Beginning in 1984, up to one-half of an individual’s or couple’s OASDI benefits was subject to Federal income taxation under certain circumstances.

1986a . . . . . . . . . . . $42,000 5.700 5.200 0.500 11.4000 10.4000 1.0000

1987a . . . . . . . . . . . 43,800 5.700 5.200 .500 11.4000 10.4000 1.0000

1988a . . . . . . . . . . . 45,000 6.060 5.530 .530 12.1200 11.0600 1.0600

1989a . . . . . . . . . . . 48,000 6.060 5.530 .530 12.1200 11.0600 1.0600

1990 . . . . . . . . . . . 51,300 6.200 5.600 .600 12.4000 11.2000 1.2000

1991. . . . . . . . . . . . 53,400 6.200 5.600 .600 12.4000 11.2000 1.2000

1992. . . . . . . . . . . . 55,500 6.200 5.600 .600 12.4000 11.2000 1.2000

1993. . . . . . . . . . . . 57,600 6.200 5.600 .600 12.4000 11.2000 1.2000

1994. . . . . . . . . . . . 60,600 6.200 5.260 .940 12.4000 10.5200 1.8800

1995. . . . . . . . . . . . 61,200 6.200 5.260 .940 12.4000 10.5200 1.8800

1996. . . . . . . . . . . . 62,700 6.200 5.260 .940 12.4000 10.5200 1.8800

1997. . . . . . . . . . . . 65,400 6.200 5.350 .850 12.4000 10.7000 1.7000

1998. . . . . . . . . . . . 68,400 6.200 5.350 .850 12.4000 10.7000 1.7000

1999. . . . . . . . . . . . 72,600 6.200 5.350 .850 12.4000 10.7000 1.7000

2000. . . . . . . . . . . . 76,200 6.200 5.300 .900 12.4000 10.6000 1.8000

2001. . . . . . . . . . . . 80,400 6.200 5.300 .900 12.4000 10.6000 1.8000

2002. . . . . . . . . . . . 84,900 6.200 5.300 .900 12.4000 10.6000 1.8000

2003. . . . . . . . . . . . 87,000 6.200 5.300 .900 12.4000 10.6000 1.8000

2004. . . . . . . . . . . . 87,900 6.200 5.300 .900 12.4000 10.6000 1.8000

2005. . . . . . . . . . . . 90,000 6.200 5.300 .900 12.4000 10.6000 1.8000

2006. . . . . . . . . . . . 94,200 6.200 5.300 .900 12.4000 10.6000 1.8000

2007. . . . . . . . . . . . 97,500 6.200 5.300 .900 12.4000 10.6000 1.8000

2008. . . . . . . . . . . . 102,000 6.200 5.300 .900 12.4000 10.6000 1.8000

2009. . . . . . . . . . . . 106,800 6.200 5.300 .900 12.4000 10.6000 1.8000

2010 and later . . . . b 6.200 5.300 .900 12.4000 10.6000 1.8000

a In 1984 only, an immediate credit of 0.3 percent of taxable wages was allowed against the OASDI contributions paid by employees, which resulted in an effective contribution rate of 5.4 percent. The appropriations of

contributions to the trust funds, however, were based on the combined employee-employer rate of 11.4 percent,

as if the credit for employees did not apply. Similar credits of 2.7 percent, 2.3 percent, and 2.0 percent were

allowed against the combined OASDI and Hospital Insurance (HI) contributions on net earnings from selfemployment in 1984, 1985, and 1986-89, respectively. Beginning in 1990, self-employed persons are allowed a

deduction, for purposes of computing their net earnings, equal to half of the combined OASDI and HI contributions that would be payable without regard to the contribution and benefit base. The OASDI contribution rate is

then applied to net earnings after this deduction, but subject to the OASDI base.

b Subject to automatic adjustment based on increases in average wages.

Table VI.A1.—Contribution and Benefit Base and Contribution Rates (Cont.)

Calendar years

Contribution

and benefit 

base

Contribution rates (percent)

Employees and employers, each Self-employed

OASDI OASI DI OASDI OASI DI
139

History of Trust Fund Operations

Effective for taxable years beginning after 1993, the maximum percentage of

benefits subject to taxation was increased from 50 percent to 85 percent. The

proceeds from taxation of up to 50 percent of benefits are credited to the

OASI and DI Trust Funds in advance, on an estimated basis, at the beginning

of each calendar quarter, with no reimbursement to the general fund for interest costs attributable to the advance transfers.1 Subsequent adjustments are

made based on the actual amounts as shown on annual income tax records.

The amounts appropriated from the General Fund of the Treasury are allocated to the OASI and DI Trust Funds on the basis of the income taxes paid

on the benefits from each fund.2

Another source of income to the trust funds is interest received on investments held by the trust funds. That portion of each trust fund that is not

required to meet the current cost of benefits and administration is invested,

on a daily basis, primarily in interest-bearing obligations of the U.S. Government (including special public-debt obligations described below). Investments may also be made in obligations guaranteed as to both principal and

interest by the United States, including certain Federally sponsored agency

obligations that are designated in the laws authorizing their issuance as lawful investments for fiduciary and trust funds under the control and authority

of the United States or any officer of the United States. These obligations

may be acquired on original issue at the issue price or by purchase of outstanding obligations at their market price.

The Social Security Act authorizes the issuance of special public-debt obligations for purchase exclusively by the trust funds. The Act provides that the

interest rate on new special obligations will be the average market yield, as

of the last business day of a month, on all of the outstanding marketable U.S.

obligations that are due or callable more than 4 years in the future. The rate

so calculated is rounded to the nearest one-eighth of one percent and applies

to new issues in the following month. Beginning January 1999, in calculating

the average market yield rate for this purpose, the Treasury incorporates the

yield to the call date when a callable bond’s market price is above par.

Although the special issues cannot be bought or sold in the open market, they

are nonetheless redeemable at any time at par value and thus bear no risk of

fluctuations in principal value due to changes in market yield rates. Just as in

the case of marketable Treasury securities held by the public, all of the

 1 The additional tax revenues resulting from the increase to 85 percent are transferred to the HI Trust Fund.

 2 A special provision applies to benefits paid to nonresident aliens. Under Public Law 103-465, effective for

taxable years beginning after 1994, a flat-rate tax, usually 25.5 percent, is withheld from the benefits before

they are paid and, therefore, remains in the trust funds. From 1984 to 1994 the flat-rate tax that was withheld

was usually 15 percent.
Appendices

140

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

the U.S. Government.

Income is also affected by provisions of the Social Security Act for: (1)

transfers between the General Fund of the Treasury and the OASI and DI

Trust Funds for any adjustments to prior payments for the cost arising from

the granting of noncontributory wage credits for military service prior to

1957, according to periodic determinations; and (2) the receipt of unconditional money gifts or bequests made for the benefit of the trust funds or any

activity financed through the funds.

The primary expenditures of the OASI and DI Trust Funds are for: (1)

OASDI benefit payments, net of any reimbursements from the General Fund

of the Treasury for unnegotiated benefit checks; and (2) expenses incurred by

the Social Security Administration and the Department of the Treasury in

administering the OASDI program and the provisions of the Internal Revenue Code relating to the collection of contributions. Such administrative

expenses include expenditures for construction, rental and lease, or purchase

of office buildings and related facilities for the Social Security Administration. The Social Security Act does not permit expenditures from the OASI

and DI Trust Funds for any purpose not related to the payment of benefits or

administrative costs for the OASDI program. 

The expenditures of the trust funds also include (1) the costs of vocational

rehabilitation services furnished as an additional benefit to disabled persons

receiving cash benefits because of their disabilities where such services contributed to their successful rehabilitation, and (2) net costs resulting from the

provisions of the Railroad Retirement Act which provide for a system of

coordination and financial interchange between the Railroad Retirement program and the Social Security program. Under the latter provisions, transfers

between the Railroad Retirement program’s Social Security Equivalent Benefit Account and the trust funds are made on an annual basis in order to place

each trust fund in the same position in which it would have been if railroad

employment had always been covered under Social Security.

The net worth of facilities and other fixed capital assets is not carried in the

statements of the operations of the trust funds presented in this report. This is

because the value of fixed capital assets is not available in the form of a

financial asset redeemable for the payment of benefits or administrative

expenditures, and therefore is not considered in assessing the actuarial status

of the trust funds.
141

History of Trust Fund Operations

Table VI.A2.— Operations of the OASI Trust Fund, 

Calendar Years 1937-2008

[Dollar amounts in billions]

Calendar

year

Income Expenditures Assets

Totala

Net

contributionsb

Taxation of

benefits

Net

interest c Total

Benefit

paymentsd

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioe

1937 . . $0.8 $0.8 — fff — — $0.8 $0.8 —

1938 . . .4 .4 — fff — — .4 1.1 7,660

1939 . . .6 .6 — fff — — .6 1.7 8,086

1940 . . .4 .3 — f $0.1 f f — .3 2.0 2,781

1941 . . .8 .8 — $0.1 .1 $0.1 f — .7 2.8 1,782

1942 . . 1.1 1.0 — .1 .2 .1 f — .9 3.7 1,737

1943 . . 1.3 1.2 — .1 .2 .2 f — 1.1 4.8 1,891

1944 . . 1.4 1.3 — .1 .2 .2 f — 1.2 6.0 2,025

1945 . . 1.4 1.3 — .1 .3 .3 f — 1.1 7.1 1,975

1946 . . 1.4 1.3 — .2 .4 .4 f — 1.0 8.2 1,704

1947 . . 1.7 1.6 — .2 .5 .5 f — 1.2 9.4 1,592

1948 . . 2.0 1.7 — .3 .6 .6 $0.1 — 1.4 10.7 1,542

1949 . . 1.8 1.7 — .1 .7 .7 .1 — 1.1 11.8 1,487

1950 . . 2.9 2.7 — .3 1.0 1.0 .1 — 1.9 13.7 1,156

1951 . . 3.8 3.4 — .4 2.0 1.9 .1 — 1.8 15.5 698

1952 . . 4.2 3.8 — .4 2.3 2.2 .1 — 1.9 17.4 681

1953 . . 4.4 3.9 — .4 3.1 3.0 .1 — 1.3 18.7 564

1954 . . 5.6 5.2 — .4 3.7 3.7 .1 f 1.9 20.6 500

1955 . . 6.2 5.7 — .5 5.1 5.0 .1 f 1.1 21.7 405

1956 . . 6.7 6.2 — .5 5.8 5.7 .1 f .9 22.5 371

1957 . . 7.4 6.8 — .6 7.5 7.3 .2 f -.1 22.4 300

1958 . . 8.1 7.6 — .6 8.6 8.3 .2 $0.1 -.5 21.9 259

1959 . . 8.6 8.1 — .5 10.3 9.8 .2 .3 -1.7 20.1 212

1960 . . 11.4 10.9 — .5 11.2 10.7 .2 .3 .2 20.3 180

1961 . . 11.8 11.3 — .5 12.4 11.9 .2 .3 -.6 19.7 163

1962 . . 12.6 12.1 — .5 14.0 13.4 .3 .4 -1.4 18.3 141

1963 . . 15.1 14.5 — .5 14.9 14.2 .3 .4 .1 18.5 123

1964 . . 16.3 15.7 — .6 15.6 14.9 .3 .4 .6 19.1 118

1965 . . 16.6 16.0 — .6 17.5 16.7 .3 .4 -.9 18.2 109

1966 . . 21.3 20.6 — .6 19.0 18.3 .3 .4 2.3 20.6 96

1967 . . 24.0 23.1 — .8 20.4 19.5 .4 .5 3.7 24.2 101

1968 . . 25.0 23.7 — .9 23.6 22.6 .5 .4 1.5 25.7 103

1969 . . 29.6 27.9 — 1.2 25.2 24.2 .5 .5 4.4 30.1 102

1970 . . 32.2 30.3 — 1.5 29.8 28.8 .5 .6 2.4 32.5 101

1971 . . 35.9 33.7 — 1.7 34.5 33.4 .5 .6 1.3 33.8 94

1972 . . 40.1 37.8 — 1.8 38.5 37.1 .7 .7 1.5 35.3 88

1973 . . 48.3 46.0 — 1.9 47.2 45.7 .6 .8 1.2 36.5 75

1974 . . 54.7 52.1 — 2.2 53.4 51.6 .9 .9 1.3 37.8 68

1975 . . 59.6 56.8 — 2.4 60.4 58.5 .9 1.0 -.8 37.0 63

1976 . . 66.3 63.4 — 2.3 67.9 65.7 1.0 1.2 -1.6 35.4 54

1977 . . 72.4 69.6 — 2.2 75.3 73.1 1.0 1.2 -2.9 32.5 47

1978 . . 78.1 75.5 — 2.0 83.1 80.4 1.1 1.6 -5.0 27.5 39

1979 . . 90.3 87.9 — 1.8 93.1 90.6 1.1 1.4 -2.9 24.7 30
Appendices

142

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

1980 . . $105.8 $103.5 — $1.8 $107.7 $105.1 $1.2 $1.4 -$1.8 $22.8 23

1981 . . 125.4 122.6 — 2.1 126.7 123.8 1.3 1.6 -1.3 21.5 18

1982 . . 125.2 123.7 — .8 142.1 138.8 1.5 1.8 .6 22.1 15

1983 . . 150.6 138.3 — 6.7 153.0 149.2 1.5 2.3 -2.4 19.7 14

1984 . . 169.3 164.1 $2.8 2.3 161.9 157.8 1.6 2.4 7.4 27.1 20

1985 . . 184.2 177.0 3.2 1.9 171.2 167.2 1.6 2.3 g8.7 35.8 24

1986 . . 197.4 190.7 3.4 3.1 181.0 176.8 1.6 2.6 g3.2 39.1 28

1987 . . 210.7 202.7 3.3 4.7 187.7 183.6 1.5 2.6 23.1 62.1 30

1988 . . 240.8 229.8 3.4 7.6 200.0 195.5 1.8 2.8 40.8 102.9 41

1989 . . 264.7 250.2 2.4 12.0 212.5 208.0 1.7 2.8 52.2 155.1 59

1990 . . 286.7 267.5 4.8 16.4 227.5 223.0 1.6 3.0 59.1 214.2 78

1991 . . 299.3 272.6 5.9 20.8 245.6 240.5 1.8 3.4 53.7 267.8 87

1992 . . 311.2 281.0 5.9 24.3 259.9 254.9 1.8 3.1 51.3 319.2 103

1993 . . 323.3 290.9 5.3 27.0 273.1 267.8 2.0 3.4 50.2 369.3 117

1994 . . 328.3 293.3 5.0 29.9 284.1 279.1 1.6 3.4 44.1 413.5 130

1995 . . 342.8 304.6 5.5 32.8 297.8 291.6 2.1 4.1 45.0 458.5 139

1996 . . 363.7 321.6 6.5 35.7 308.2 302.9 1.8 3.6 55.5 514.0 149

1997 . . 397.2 349.9 7.4 39.8 322.1 316.3 2.1 3.7 75.1 589.1 160

1998 . . 424.8 371.2 9.1 44.5 332.3 326.8 1.9 3.7 92.5 681.6 177

1999 . . 457.0 396.4 10.9 49.8 339.9 334.4 1.8 3.7 117.2 798.8 201

2000 . . 490.5 421.4 11.6 57.5 358.3 352.7 2.1 3.5 132.2 931.0 223

2001 . . 518.1 441.5 11.9 64.7 377.5 372.3 2.0 3.3 140.6 1,071.5 247

2002 . . 539.7 455.2 12.9 71.2 393.7 388.1 2.1 3.5 146.0 1,217.5 272

2003 . . 543.8 456.1 12.5 75.2 406.0 399.8 2.6 3.6 137.8 1,355.3 300

2004 . . 566.3 472.8 14.6 79.0 421.0 415.0 2.4 3.6 145.3 1,500.6 322

2005 . . 604.3 506.9 13.8 84.0 441.9 435.4 3.0 3.6 162.4 1,663.0 340

2006 . . 642.2 534.8 15.6 91.8 461.0 454.5 3.0 3.5 181.3 1,844.3 361

2007 . . 675.0 560.9 17.2 97.0 495.7 489.1 3.1 3.6 179.3 2,023.6 372

2008 . . 695.5 574.6 15.6 105.3 516.2 509.3 3.2 3.6 179.3 2,202.9 392

a Includes payments from the General Fund of the Treasury to the trust funds (1) in 1947-51 and in 1966 and

later, costs of noncontributory wage credits for military service performed before 1957; (2) in 1971-82, costs of

deemed wage credits for military service performed after 1956; and (3) in 1968 and later, costs of benefits to certain uninsured persons who attained age 72 before 1968. Differences in past year total income and sum of individual column amounts are due to these payments. OASI historical payments from the General Fund of the

Treasury may be found on the Internet at www.socialsecurity.gov/OACT/STATS/table4a1.html.

b Beginning in 1983, includes transfers from the General Fund of the Treasury representing contributions that

would have been paid on deemed wage credits for military service in 1957 through 2001, if such credits were

considered to be covered wages.

c Net interest includes net profits or losses on marketable investments. Beginning in 1967, administrative

expenses are charged to the trust fund on an estimated basis, with a final adjustment, including interest, made in

the following fiscal year. The amounts of these interest adjustments are included in net interest. For years prior to

1967, a description of the method of accounting for administrative expenses is contained in the 1970 Annual

Report. Beginning in October 1973, the figures shown include relatively small amounts of gifts to the fund. Net

interest for 1983-86 reflects payments from a borrowing trust fund to a lending trust fund for interest on amounts

owed under the interfund borrowing provisions. During 1983-90, interest paid from the trust fund to the general

fund on advance tax transfers is reflected. The amount shown for 1985 includes an interest adjustment of

$88 million on unnegotiated checks issued before April 1985.

d Beginning in 1966, includes payments for vocational rehabilitation services furnished to disabled persons

receiving benefits because of their disabilities. Beginning in 1983, amounts are reduced by amount of reimbursement for unnegotiated benefit checks.

e The “Trust fund ratio” column represents assets at the beginning of a year as a percentage of expenditures during the year. For 1937 no ratio is shown because no assets existed at the beginning of the year. For years 1984-

90, assets at the beginning of a year include January advance tax transfers. 

f Between -$50 million and $50 million.

g Reflects offset for repayment from the OASI Trust Fund of amounts borrowed from the DI and HI Trust Funds

in 1982. The amount repaid in 1985 was $4.4 billion; in 1986, the amount was $13.2 billion.

Table VI.A2.— Operations of the OASI Trust Fund, 

Calendar Years 1937-2008 (Cont.)

[Dollar amounts in billions]

Calendar

year

Income Expenditures Assets

Totala

Net

contributionsb

Taxation of

benefits

Net

interest c Total

Benefit

paymentsd

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioe
143

History of Trust Fund Operations

Table VI.A3.— Operations of the DI Trust Fund, 

Calendar Years 1957-2008

[Dollar amounts in billions]

Calendar

year

Income Expenditures Assets

Total a

Net

contributionsb

Taxation of

benefits

Net

interest c Total

Benefit

paymentsd

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioe

1957 . . $0.7 $0.7 — f $0.1 $0.1 f — $0.6 $0.6 —

1958 . . 1.0 1.0 — f .3 .2 f — .7 1.4 249

1959 . . .9 .9 — f .5 .5 $0.1 f .4 1.8 284

1960 . . 1.1 1.0 — $0.1 .6 .6 f f .5 2.3 304

1961 . . 1.1 1.0 — .1 1.0 .9 .1 f .1 2.4 239

1962 . . 1.1 1.0 — .1 1.2 1.1 .1 f -.1 2.4 206

1963 . . 1.2 1.1 — .1 1.3 1.2 .1 f -.1 2.2 183

1964 . . 1.2 1.2 — .1 1.4 1.3 .1 f -.2 2.0 159

1965 . . 1.2 1.2 — .1 1.7 1.6 .1 f -.4 1.6 121

1966 . . 2.1 2.0 — .1 1.9 1.8 .1 f .1 1.7 82

1967 . . 2.4 2.3 — .1 2.1 2.0 .1 f .3 2.0 83

1968 . . 3.5 3.3 — .1 2.5 2.3 .1 f 1.0 3.0 83

1969 . . 3.8 3.6 — .2 2.7 2.6 .1 f 1.1 4.1 111

1970 . . 4.8 4.5 — .3 3.3 3.1 .2 f 1.5 5.6 126

1971 . . 5.0 4.6 — .4 4.0 3.8 .2 f 1.0 6.6 140

1972 . . 5.6 5.1 — .4 4.8 4.5 .2 f .8 7.5 140

1973 . . 6.4 5.9 — .5 6.0 5.8 .2 f .5 7.9 125

1974 . . 7.4 6.8 — .5 7.2 7.0 .2 f .2 8.1 110

1975 . . 8.0 7.4 — .5 8.8 8.5 .3 f -.8 7.4 92

1976 . . 8.8 8.2 — .4 10.4 10.1 .3 f -1.6 5.7 71

1977 . . 9.6 9.1 — .3 11.9 11.5 .4 f -2.4 3.4 48

1978 . . 13.8 13.4 — .3 13.0 12.6 .3 f .9 4.2 26

1979 . . 15.6 15.1 — .4 14.2 13.8 .4 f 1.4 5.6 30

1980 . . 13.9 13.3 — .5 15.9 15.5 .4 f -2.0 3.6 35

1981 . . 17.1 16.7 — .2 17.7 17.2 .4 f -.6 3.0 21

1982 . . 22.7 22.0 — .5 18.0 17.4 .6 f -.4 2.7 17

1983 . . 20.7 18.0 — 1.6 18.2 17.5 .6 f 2.5 5.2 15

1984 . . 17.3 15.9 $0.2 1.2 18.5 17.9 .6 f -1.2 4.0 35

1985 . . 19.3 17.2 .2 .9 19.5 18.8 .6 f g2.4 6.3 27

1986 . . 19.4 18.4 .2 .8 20.5 19.9 .6 $0.1 g1.5 7.8 38

1987 . . 20.3 19.7 f .6 21.4 20.5 .8 .1 -1.1 6.7 44

1988 . . 22.7 22.0 .1 .6 22.5 21.7 .7 .1 .2 6.9 38

1989 . . 24.8 24.0 .1 .7 23.8 22.9 .8 .1 1.0 7.9 38

1990 . . 28.8 28.5 .1 .9 25.6 24.8 .7 .1 3.2 11.1 40

1991 . . 30.4 29.1 .2 1.1 28.6 27.7 .8 .1 1.8 12.9 39

1992 . . 31.4 30.1 .2 1.1 32.0 31.1 .8 .1 -.6 12.3 40

1993 . . 32.3 31.2 .3 .8 35.7 34.6 1.0 .1 -3.4 9.0 35

1994 . . 52.8 51.4 .3 1.2 38.9 37.7 1.0 .1 14.0 22.9 23

1995 . . 56.7 54.4 .3 2.2 42.1 40.9 1.1 .1 14.6 37.6 55

1996 . . 60.7 57.3 .4 3.0 45.4 44.2 1.2 f 15.4 52.9 83

1997 . . 60.5 56.0 .5 4.0 47.0 45.7 1.3 .1 13.5 66.4 113

1998 . . 64.4 59.0 .6 4.8 49.9 48.2 1.6 .2 14.4 80.8 133

1999 . . 69.5 63.2 .7 5.7 53.0 51.4 1.5 .1 16.5 97.3 152

2000 . . 77.9 71.1 .7 6.9 56.8 55.0 1.6 .2 21.1 118.5 171

2001 . . 83.9 74.9 .8 8.2 61.4 59.6 1.7 f 22.5 141.0 193

2002 . . 87.4 77.3 .9 9.2 67.9 65.7 2.0 .2 19.5 160.5 208

2003 . . 88.1 77.4 .9 9.7 73.1 70.9 2.0 .2 15.0 175.4 219

2004 . . 91.4 80.3 1.1 10.0 80.6 78.2 2.2 .2 10.8 186.2 218
Appendices

144

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

2005 . . $97.4 $86.1 $1.1 $10.3 $88.0 $85.4 $2.3 $0.3 $9.4 $195.6 212

2006 . . 102.6 90.8 1.2 10.6 94.5 91.7 2.3 .4 8.2 203.8 207

2007 . . 109.9 95.2 1.4 13.2 98.8 95.9 2.5 .4 11.1 214.9 206

2008 . . 109.8 97.6 1.3 11.0 109.0 106.0 2.5 .4 .9 215.8 197

a Includes payments from the General Fund of the Treasury to the trust funds (1) beginning in 1966 and later,

costs of noncontributory wage credits for military service performed before 1957 and (2) in 1971-82, costs of

deemed wage credits for military service performed after 1956. Differences in past year total income and sum of

individual column amounts are due to these payments. DI historical payments from the General Fund of the

Treasury may be found on the Internet at www.socialsecurity.gov/OACT/STATS/table4a2.html.

b Beginning in 1983, includes transfers from the General Fund of the Treasury representing contributions that

would have been paid on deemed wage credits for military service in 1957 through 2001, if such credits were

considered to be covered wages.

c Net interest includes net profits or losses on marketable investments. Beginning in 1967, administrative

expenses are charged to the trust fund on an estimated basis, with a final adjustment, including interest, made in

the following fiscal year. The amounts of these interest adjustments are included in net interest. For years prior to

1967, a description of the method of accounting for administrative expenses is contained in the 1970 Annual

Report. Beginning in July 1974, the figures shown include relatively small amounts of gifts to the fund. Net

interest for 1983-86 reflects payments from a borrowing trust fund to a lending trust fund for interest on amounts

owed under the interfund borrowing provisions. During 1983-90, interest paid from the trust fund to the general

fund on advance tax transfers is reflected. The amount shown for 1985 includes an interest adjustment of

$14.8 million on unnegotiated checks issued before April 1985.

d Beginning in 1966, includes payments for vocational rehabilitation services furnished to disabled persons

receiving benefits because of their disabilities. Beginning in 1983, amounts are reduced by amount of reimbursement for unnegotiated benefit checks.

e The “Trust fund ratio” column represents assets at the beginning of a year as a percentage of expenditures during the year. For 1957 no ratio is shown because no assets existed at the beginning of the year. For years 1984-

90, assets at the beginning of a year include January advance tax transfers.

f Between -$50 million and $50 million.

g Reflects offset for repayment from the OASI Trust Fund of amounts borrowed from the DI Trust Fund in 1982.

An amount of $2.5 billion was repaid in each year 1985 and 1986.

Table VI.A3.— Operations of the DI Trust Fund, 

Calendar Years 1957-2008 (Cont.)

[Dollar amounts in billions]

Calendar

year

Income Expenditures Assets

Total a

Net

contributionsb

Taxation of

benefits

Net

interest c Total

Benefit

paymentsd

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioe
145

History of Trust Fund Operations

Table VI.A4.— Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1957-2008

[Dollar amounts in billions]

Calendar

year

Income Expenditures Assets

Total a

Net

contributionsb

Taxation of

benefits

Net

interestc Total

Benefit

paymentsd

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioe

1957 . . $8.1 $7.5 — $0.6 $7.6 $7.4 $0.2 f $0.5 $23.0 298

1958 9.1 8.5 — .6 8.9 8.6 .2 $0.1 .2 23.2 259

1959 . . 9.5 8.9 — .6 10.8 10.3 .2 .3 -1.3 22.0 215

1960 . . 12.4 11.9 — .6 11.8 11.2 .2 .3 .6 22.6 186

1961 . . 12.9 12.3 — .6 13.4 12.7 .3 .3 -.5 22.2 169

1962 . . 13.7 13.1 — .6 15.2 14.5 .3 .4 -1.5 20.7 146

1963 . . 16.2 15.6 — .6 16.2 15.4 .3 .4 f 20.7 128

1964 . . 17.5 16.8 — .6 17.0 16.2 .4 .4 .5 21.2 122

1965 . . 17.9 17.2 — .7 19.2 18.3 .4 .5 -1.3 19.8 110

1966 . . 23.4 22.6 — .7 20.9 20.1 .4 .5 2.5 22.3 95

1967 . . 26.4 25.4 — .9 22.5 21.4 .5 .5 3.9 26.3 99

1968 . . 28.5 27.0 — 1.0 26.0 25.0 .6 .5 2.5 28.7 101

1969 . . 33.3 31.5 — 1.3 27.9 26.8 .6 .5 5.5 34.2 103

1970 . . 37.0 34.7 — 1.8 33.1 31.9 .6 .6 3.9 38.1 103

1971 . . 40.9 38.3 — 2.0 38.5 37.2 .7 .6 2.4 40.4 99

1972 . . 45.6 42.9 — 2.2 43.3 41.6 .9 .7 2.3 42.8 93

1973 . . 54.8 51.9 — 2.4 53.1 51.5 .8 .8 1.6 44.4 80

1974 . . 62.1 58.9 — 2.7 60.6 58.6 1.1 .9 1.5 45.9 73

1975 . . 67.6 64.3 — 2.9 69.2 67.0 1.2 1.0 -1.5 44.3 66

1976 . . 75.0 71.6 — 2.7 78.2 75.8 1.2 1.2 -3.2 41.1 57

1977 . . 82.0 78.7 — 2.5 87.3 84.7 1.4 1.2 -5.3 35.9 47

1978 . . 91.9 88.9 — 2.3 96.0 93.0 1.4 1.6 -4.1 31.7 37

1979 . . 105.9 103.0 — 2.2 107.3 104.4 1.5 1.5 -1.5 30.3 30

1980 . . 119.7 116.7 — 2.3 123.6 120.6 1.5 1.4 -3.8 26.5 25

1981 . . 142.4 139.4 — 2.2 144.4 141.0 1.7 1.6 -1.9 24.5 18

1982 . . 147.9 145.7 — 1.4 160.1 156.2 2.1 1.8 .2 24.8 15

1983 . . 171.3 156.3 — 8.3 171.2 166.7 2.2 2.3 .1 24.9 14

1984 . . 186.6 180.1 $3.0 3.4 180.4 175.7 2.3 2.4 6.2 31.1 21

1985 . . 203.5 194.1 3.4 2.7 190.6 186.1 2.2 2.4 g11.1 42.2 24

1986 . . 216.8 209.1 3.7 3.9 201.5 196.7 2.2 2.7 g 4.7 46.9 29

1987 . . 231.0 222.4 3.2 5.3 209.1 204.1 2.4 2.6 21.9 68.8 31

1988 . . 263.5 251.8 3.4 8.2 222.5 217.1 2.5 2.9 41.0 109.8 41

1989 . . 289.4 274.2 2.5 12.7 236.2 230.9 2.4 2.9 53.2 163.0 57

1990 . . 315.4 296.1 5.0 17.2 253.1 247.8 2.3 3.0 62.3 225.3 75

1991 . . 329.7 301.7 6.1 21.9 274.2 268.2 2.6 3.5 55.5 280.7 82

1992 . . 342.6 311.1 6.1 25.4 291.9 286.0 2.7 3.2 50.7 331.5 96

1993 . . 355.6 322.1 5.6 27.9 308.8 302.4 3.0 3.4 46.8 378.3 107

1994 . . 381.1 344.7 5.3 31.1 323.0 316.8 2.7 3.5 58.1 436.4 117

1995 . . 399.5 359.0 5.8 35.0 339.8 332.6 3.1 4.1 59.7 496.1 128

1996 . . 424.5 378.9 6.8 38.7 353.6 347.1 3.0 3.6 70.9 567.0 140

1997 . . 457.7 406.0 7.9 43.8 369.1 362.0 3.4 3.7 88.6 655.5 154

1998 . . 489.2 430.2 9.7 49.3 382.3 375.0 3.5 3.8 107.0 762.5 171

1999 . . 526.6 459.6 11.6 55.5 392.9 385.8 3.3 3.8 133.7 896.1 194

2000 . . 568.4 492.5 12.3 64.5 415.1 407.6 3.8 3.7 153.3 1,049.4 216

2001 . . 602.0 516.4 12.7 72.9 438.9 431.9 3.7 3.3 163.1 1,212.5 239

2002 . . 627.1 532.5 13.8 80.4 461.7 453.8 4.2 3.6 165.4 1,378.0 263

2003 . . 631.9 533.5 13.4 84.9 479.1 470.8 4.6 3.7 152.8 1,530.8 288

2004 . . 657.7 553.0 15.7 89.0 501.6 493.3 4.5 3.8 156.1 1,686.8 305
Appendices

146

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

Tables VI.A5 and VI.A6 show the total assets of the OASI Trust Fund and

the DI Trust Fund, respectively, at the end of each of the calendar years 2007

and 2008. These assets are separated by interest rate and year of maturity.

Assets grouped with multiple years of maturity are distributed evenly across

those years. Bonds issued to the trust funds in 2008 had an interest rate of 4

percent, compared with an interest rate of 5 percent for bonds issued in 2007. 

2005 . . $701.8 $592.9 $14.9 $94.3 $529.9 $520.7 $5.3 $3.9 $171.8 $1,858.7 318

2006 . . 744.9 625.6 16.9 102.4 555.4 546.2 5.3 3.8 189.5 2,048.1 335

2007 . . 784.9 656.1 18.6 110.2 594.5 584.9 5.5 4.0 190.4 2,238.5 345

2008 . . 805.3 672.1 16.9 116.3 625.1 615.3 5.7 4.0 180.2 2,418.7 358

a Includes payments from the General Fund of the Treasury to the trust funds (1) beginning in 1966 and later,

costs of noncontributory wage credits for military service performed before 1957; (2) in 1971-82, costs of

deemed wage credits for military service performed after 1956; and (3) in 1968 and later, costs of benefits to certain uninsured persons who attained age 72 before 1968. Differences in past year total income and sum of individual column amounts are due to these payments. OASDI historical payments from the General Fund of the

Treasury may be found on the Internet at www.socialsecurity.gov/OACT/STATS/table4a3.html.

b Beginning in 1983, includes transfers from the General Fund of the Treasury representing contributions that

would have been paid on deemed wage credits for military service in 1957 through 2001, if such credits were

considered to be covered wages.

c Net interest includes net profits or losses on marketable investments. Beginning in 1967, administrative

expenses are charged to the trust funds on an estimated basis, with a final adjustment, including interest, made in

the following fiscal year. The amounts of these interest adjustments are included in net interest. For years prior to

1967, a description of the method of accounting for administrative expenses is contained in the 1970 Annual

Report. Beginning in October 1973, the figures shown include relatively small amounts of gifts to the funds. Net

interest for 1983-86 reflects payments from a borrowing trust fund to a lending trust fund for interest on amounts

owed under the interfund borrowing provisions. During 1983-90, interest paid from the trust funds to the general

fund on advance tax transfers is reflected. The amount shown for 1985 includes an interest adjustment of

$102.8 million on unnegotiated checks issued before April 1985.

d Beginning in 1966, includes payments for vocational rehabilitation services furnished to disabled persons

receiving benefits because of their disabilities. Beginning in 1983, amounts are reduced by amount of reimbursement for unnegotiated benefit checks.

e The “Trust fund ratio” column represents assets at the beginning of a year as a percentage of expenditures during the year. For years 1984-90, assets at the beginning of a year include January advance tax transfers.

f Between -$50 million and $50 million.

g Reflects offset for repayment from the OASI Trust Fund of amounts borrowed from the HI Trust Fund in 1982.

The amount repaid in 1985 was $1.8 billion; in 1986, the amount was $10.6 billion.

Table VI.A4.— Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1957-2008 (Cont.)

[Dollar amounts in billions]

Calendar

year

Income Expenditures Assets

Total a

Net

contributionsb

Taxation of

benefits

Net

interestc Total

Benefit

paymentsd

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratioe
147

History of Trust Fund Operations

Note: Amounts of special issues are shown at par value. Special issues are always purchased and redeemed

at par value. Where equal amounts mature in two or more years at a given interest rate, they are grouped. An

undisbursed balance, if negative, represents an extension of credit against securities to be redeemed within

the following few days. 

Table VI.A5.—Assets of the OASI Trust Fund, End of Calendar Years 2007 and 2008

[In thousands]

December 31, 2007 December 31, 2008

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

Certificates of indebtedness:

2.750 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $68,361,774

3.750 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 7,420,648

3.875 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4,440,134

4.000 percent, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $73,768,095 —

4.500 percent, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,114,654 —

5.000 percent, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,046,087 —

Bonds:

3.500 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,513,751 —

3.500 percent, 2010-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,082,506 57,082,506

3.500 percent, 2016-17 . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,027,504 19,027,504

3.500 percent, 2018. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,900,994 86,900,994

4.000 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4,526,627

4.000 percent, 2010-11 . . . . . . . . . . . . . . . . . . . . . . . . . . . — 24,150,384

4.000 percent, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 12,075,193

4.000 percent, 2013-22 . . . . . . . . . . . . . . . . . . . . . . . . . . . — 120,751,920

4.000 percent, 2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 142,682,893

4.125 percent, 2009-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,686,406 115,686,406

4.125 percent, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,585,700 106,585,700

4.625 percent, 2009-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,173,648 64,173,648

4.625 percent, 2016-18 . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,502,989 27,502,989

4.625 percent, 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,068,657 96,068,657

5.000 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,454,234 12,454,234

5.000 percent, 2010-11 . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,908,466 24,908,466

5.000 percent, 2012-21 . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,542,320 124,542,320

5.000 percent, 2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,607,701 130,607,701

5.125 percent, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,567,865 —

5.125 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,567,865 11,567,865

5.125 percent, 2010-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,678,660 115,678,660

5.125 percent, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,567,769 11,567,769

5.125 percent, 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,153,469 118,153,469

5.250 percent, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,235,912 —

5.250 percent, 2009-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,651,384 64,651,384

5.250 percent, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,235,911 9,235,911

5.250 percent, 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,387,242 77,387,242

5.625 percent, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,621,438 —

5.625 percent, 2009-11 . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,864,314 28,864,314

5.625 percent, 2012-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,485,748 38,485,748

5.625 percent, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,151,331 68,151,331

5.875 percent, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,169,273 —

5.875 percent, 2009-12 . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,677,092 24,677,092

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

6.000 percent, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,693,627 —

6.000 percent, 2009-11 . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,080,881 20,080,881

6.000 percent, 2012-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,387,256 13,387,256

6.000 percent, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,952,497 49,952,497

6.250 percent, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,350,034 —

6.500 percent, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,008,650 —

6.500 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,008,650 11,008,650

6.500 percent, 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,320,240 38,320,240

6.500 percent, 2011-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,309,584 34,309,584

6.500 percent, 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,529,893 58,529,893

6.875 percent, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,975,271 —

6.875 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,975,271 3,975,271

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

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

7.000 percent, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,371,480 —

7.000 percent, 2009-10 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,742,960 6,742,960

7.000 percent, 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,114,324 33,114,324

7.250 percent, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,961,557 —

7.250 percent, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,311,591 27,311,591

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,024,391,760 2,203,403,639

Undisbursed balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -776,165 -518,033

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,023,615,595 2,202,885,606
Appendices

148

Note: Amounts of special issues are shown at par value. Special issues are always purchased and redeemed

at par value. Where equal amounts mature in two or more years at a given interest rate, they are grouped. An

undisbursed balance, if negative, represents an extension of credit against securities to be redeemed within

the following few days.

Table VI.A6.—Assets of the DI Trust Fund, End of Calendar Years 2007 and 2008

[In thousands]

December 31, 2007 December 31, 2008

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

Certificates of indebtedness: 

2.750 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . — $7,743,419

4.000 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,467,836 —

4.500 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,256,068 —

Bonds:

3.500 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,115,128 —

3.500 percent, 2010-11 . . . . . . . . . . . . . . . . . . . . . . . . . 2,230,256 2,230,256

3.500 percent, 2012-15 . . . . . . . . . . . . . . . . . . . . . . . . . 4,460,508 4,460,508

3.500 percent, 2016-17 . . . . . . . . . . . . . . . . . . . . . . . . . 2,230,256 2,230,256

3.500 percent, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,378,384 11,378,384

4.000 percent, 2010-16 . . . . . . . . . . . . . . . . . . . . . . . . . — 4,358,004

4.000 percent, 2017-19 . . . . . . . . . . . . . . . . . . . . . . . . . — 1,867,713

4.000 percent, 2020-22 . . . . . . . . . . . . . . . . . . . . . . . . . — 1,867,716

4.000 percent, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . — 14,675,554

4.125 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 677,386 —

4.125 percent, 2010-11 . . . . . . . . . . . . . . . . . . . . . . . . . 1,354,772 1,354,772

4.125 percent, 2012-17 . . . . . . . . . . . . . . . . . . . . . . . . . 4,064,310 4,064,310

4.125 percent, 2018-19 . . . . . . . . . . . . . . . . . . . . . . . . . 1,354,772 1,354,772

4.125 percent, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,911,283 12,911,283

4.625 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 855,497 —

4.625 percent, 2010-11 . . . . . . . . . . . . . . . . . . . . . . . . . 1,710,994 1,710,994

4.625 percent, 2012-15 . . . . . . . . . . . . . . . . . . . . . . . . . 3,421,992 3,421,992

4.625 percent, 2016-18 . . . . . . . . . . . . . . . . . . . . . . . . . 2,566,491 2,566,491

4.625 percent, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,233,881 12,233,881

5.000 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 476,586 —

5.000 percent, 2010-19 . . . . . . . . . . . . . . . . . . . . . . . . . 4,765,860 4,765,860

5.000 percent, 2020-21 . . . . . . . . . . . . . . . . . . . . . . . . . 953,168 953,168

5.000 percent, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,052,982 14,052,982

5.125 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 665,131 —

5.125 percent, 2010-17 . . . . . . . . . . . . . . . . . . . . . . . . . 5,321,048 5,321,048

5.125 percent, 2018-19 . . . . . . . . . . . . . . . . . . . . . . . . . 1,330,260 1,330,260

5.125 percent, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . 665,115 665,115

5.125 percent, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,576,398 13,576,398

5.250 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,363,407 —

5.250 percent, 2010-11 . . . . . . . . . . . . . . . . . . . . . . . . . 2,726,814 2,726,814

5.250 percent, 2012-16 . . . . . . . . . . . . . . . . . . . . . . . . . 6,817,040 6,817,040

5.250 percent, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,263,256 10,263,256

5.625 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 205,332 —

5.625 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,524,968 —

5.625 percent, 2010-13 . . . . . . . . . . . . . . . . . . . . . . . . . 6,099,872 6,099,872

5.625 percent, 2014-15 . . . . . . . . . . . . . . . . . . . . . . . . . 3,049,934 3,049,934

5.625 percent, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,899,848 8,899,848

5.875 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 916,286 —

5.875 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 916,286 —

5.875 percent, 2010-12 . . . . . . . . . . . . . . . . . . . . . . . . . 2,748,858 2,748,858

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

6.000 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,966 —

6.000 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,966 —

6.000 percent, 2010-12 . . . . . . . . . . . . . . . . . . . . . . . . . 2,087,898 2,087,898

6.000 percent, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,967 695,967

6.000 percent, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,057,772 6,057,772

6.500 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,381,228 —

6.500 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,317,108 —

6.500 percent, 2010-13 . . . . . . . . . . . . . . . . . . . . . . . . . 5,268,432 5,268,432

6.500 percent, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,317,109 1,317,109

6.500 percent, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,374,881 7,374,881

6.875 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 265,249 —

6.875 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 265,249 —

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

7.000 percent, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,116,151 —

7.000 percent, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,180,271 2,608,382

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,045,875 215,809,564

Undisbursed balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -161,723 -36,763

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,884,152 215,772,801
149

History of Actuarial Balances

B. HISTORY OF ACTUARIAL BALANCE ESTIMATES

This appendix chronicles the history of the principal summary measure of

long-range actuarial status, namely the actuarial balance, since 1983. The

1983 report was the last report for which the actuarial balance was positive.

Actuarial balance is defined in detail in section IV.B.4 Summarized Income

Rates, Cost Rates, and Balances. Conceptually, the two basic components of

actuarial balance are the summarized income rate and the summarized cost

rate. Both rates are expressed as percentages of taxable payroll. For any

given period, the actuarial balance is the difference between the present

value of tax income for the period, and the present value of the cost for the

period, each divided by the present value of taxable payroll for all years in

the period. Also included in the calculation of the actuarial balance are:

 • The amount of the trust fund balances on hand at the beginning of the

valuation period, as shown in the reports for 1988 and later, and

 • The present value of a target trust fund balance equal to 100 percent of

the amount of annual cost to be reached and maintained by the end of

the valuation period, as shown in the reports for 1991 and later.

It should be noted that the current method of calculating the actuarial balance

based on present values, though used prior to the 1973 Annual Report, was

not used for the annual reports of 1973-87. Instead, a simpler method that

approximates the results of the present-value approach, called the averagecost method, was used during that period. Under the average-cost method,

the sum of the annual cost rates (which are expressed as percentages of taxable payroll) over the 75-year projection period was divided by the total

number of years, 75, to obtain the average cost rate per year. The average

income rate was similarly calculated, and the difference between the average

income rate and the average cost rate was called the actuarial balance.

In 1973, when the average-cost method was first used, the long-range financing of the program was more nearly on a pay-as-you-go basis. Also, based on

the long-range demographic and economic assumptions then being used, the

annual rate of growth in taxable payroll was about the same as the annual

rate at which the trust funds earned interest. In either situation (i.e., pay-asyou-go financing, where the annual income rate is the same as the annual

cost rate, or an annual rate of growth in taxable payroll equal to the annual

interest rate), the average-cost method produces the same result as the

present-value method. However, by 1988, neither of these situations still

existed.
Appendices

150

As a result of legislation enacted in 1977 and in 1983, substantial increases

in the trust funds were estimated to occur well into the 21st century, so that

the program was partially advance funded, rather than being funded on a

pay-as-you-go basis. Also, because of reductions in long-range fertility rates

and average real-wage growth that were assumed in the annual reports over

the period 1973-87, the annual rate of growth in taxable earnings assumed

for the long range became significantly lower than the assumed interest rate.

Therefore, during the period 1973-87, the results of the average-cost method

and the present-value method began to diverge, and by 1988 they were quite

different. While the average-cost method still accounted for most of the

effects of the assumed interest rate, it no longer accounted for all of the interest effects. The present-value method, of course, does account for the full

effect of the assumed interest rates. So, in 1988, the present-value method of

calculating the actuarial balance was reintroduced.

A positive actuarial balance indicates that estimated income is more than sufficient to meet estimated trust fund obligations for the period as a whole. A

negative actuarial balance indicates that estimated income is insufficient to

meet estimated trust fund obligations for the entire period. An actuarial balance of zero indicates that the estimated income exactly matches estimated

trust fund obligations for the period.

Table VI.B1 shows the estimated OASDI actuarial balances, as well as the

summarized income and cost rates, for the annual reports 1982-2008, along

with the estimates for the current report. The values shown are based on the

alternative II assumptions, or alternative II-B for years prior to 1991.
151

History of Actuarial Balances

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

For several of the years included in the table, significant legislative changes

or definitional changes affected the estimated actuarial balance. The Social

Security Amendments of 1983 accounted for the largest single change in

recent history. The actuarial balance of -1.82 for the 1982 report improved to

+0.02 for the 1983 report. In 1985, the estimated actuarial balance changed

largely because of an adjustment made to the method for estimating the age

distribution of immigrants.

Rebenchmarking of the National Income and Product Accounts and changes

in demographic assumptions contributed to the change in the actuarial balance for 1987. Various changes in assumptions and methods for the 1988

report had roughly offsetting effects on the actuarial balance. In 1989 and

Table VI.B1.—Long-Range OASDI Actuarial Balancesa as Shown

in the Trustees Reports for 1982-2009

[As a percentage of taxable payroll]

a Values shown are based on the alternative II assumptions for 1991-2009, and on the alternative II-B

assumptions for 1982-90.

Year of report

Summarized

income rate

Summarized

cost rate

Actuarial

balance

Change from

previous year

1982 . . . . . . . . . . . . . . . . . . . . . . . . . . 12.27 14.09 -1.82 b

1983 . . . . . . . . . . . . . . . . . . . . . . . . . . 12.87 12.84 +.02 +1.84

1984 . . . . . . . . . . . . . . . . . . . . . . . . . . 12.90 12.95 -.06 -.08

1985 . . . . . . . . . . . . . . . . . . . . . . . . . . 12.94 13.35 -.41 -.35

1986 . . . . . . . . . . . . . . . . . . . . . . . . . . 12.96 13.40 -.44 -.03

1987 . . . . . . . . . . . . . . . . . . . . . . . . . . 12.89 13.51 -.62 -.18

1988 . . . . . . . . . . . . . . . . . . . . . . . . . . 12.94 13.52 -.58 +.04

1989 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.02 13.72 -.70 -.13

1990 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.04 13.95 -.91 -.21

1991 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.11 14.19 -1.08 -.17

1992 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.16 14.63 -1.46 -.38

1993 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.21 14.67 -1.46 b

b Between -0.005 and 0.005 percent of taxable payroll.

1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.24 15.37 -2.13 -.66

1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.27 15.44 -2.17 -.04

1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.33 15.52 -2.19 -.02

1997 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.37 15.60 -2.23 -.03

1998 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.45 15.64 -2.19 +.04

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.49 15.56 -2.07 +.12

2000 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.51 15.40 -1.89 +.17

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.58 15.44 -1.86 +.03

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.72 15.59 -1.87 -.01

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.78 15.70 -1.92 -.04

2004 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.84 15.73 -1.89 +.03

2005 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.87 15.79 -1.92 -.04

2006 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.88 15.90 -2.02 -.09

2007 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.92 15.87 -1.95 +.06

2008 . . . . . . . . . . . . . . . . . . . . . . . . . . 13.94 15.63 -1.70 +.26

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . 14.02 16.02 -2.00 -.30
Appendices

152

1990, changes in economic assumptions accounted for most of the changes

in the estimated actuarial balance. 

In 1991, the effect of legislation, changes in economic assumptions, and the

introduction of the cost of reaching and maintaining an ending trust fund target combined to produce the change in the actuarial balance. In 1992,

changes in disability assumptions and the method for projecting average benefit levels accounted for most of the change in the actuarial balance. In 1993,

numerous small changes in assumptions and methods had offsetting effects

on the actuarial balance. In 1994, changes in the real-wage assumptions, disability rates, and the earnings sample used for projecting average benefit levels accounted for most of the change in the actuarial balance. In 1995,

numerous small changes had largely offsetting effects on the actuarial balance, including a substantial reallocation of the payroll tax rate, which

reduced the OASI actuarial balance, but increased the DI actuarial balance.

In 1996, a change in the method of projecting dually-entitled beneficiaries

produced a large increase in the actuarial balance, which almost totally offset

decreases produced by changes in the valuation period and in the demographic and economic assumptions. Various changes in assumptions and

methods for the 1997 report had roughly offsetting effects on the actuarial

balance. In 1998, increases caused by changes in the economic assumptions,

although partially offset by decreases produced by changes in the valuation

period and in the demographic assumptions, accounted for most of the

changes in the estimated actuarial balance. In 1999, increases caused by

changes in the economic assumptions (related to improvements in the CPI by

the Bureau of Labor Statistics) accounted for most of the changes in the estimated actuarial balance. For the 2000 report, changes in the actuarial balance

resulted from changes in economic assumptions and methodology; however,

these increases in the balance were partially offset by reductions caused by

the change in valuation period and changes in demographic assumptions.

For the 2001 report, increases caused by changes in the demographic starting

values, although partially offset by a decrease produced by the change in the

valuation period, accounted for most of the changes in the estimated actuarial

balance. For the 2002 report, the changes in the valuation period and the

demographic assumptions—both decreases in the actuarial balance—were

offset by changes in the economic assumptions, while the increase due to disability assumptions was slightly more than offset by the decrease due to

changes in the projection methods and data. For the 2003 report, the increase

due to the change in program assumptions was more than offset by decreases

due to the change in valuation period and changes in demographic assumptions. For the 2004 report, increases due to changing the method of project-
153

History of Actuarial Balances

ing benefit levels for higher earners more than offset decreases in the

actuarial balance arising from the change in the valuation period and the net

effect of other changes in programmatic data and methods. For the 2005

report, the increase due to changing the method of projecting future average

benefit levels was more than offset by decreases due to changes in the valuation period, updated starting values for the economic assumptions, and other

methodological changes.

In 2006, decreases in the actuarial balance due to the change in the valuation

period, a reduction in the ultimate annual real interest rate, and improvements in calculating mortality for disabled workers, were greater in aggregate than increases in the actuarial balance due to changes in demographic

starting values and the ultimate total fertility rate, as well as other programmatic data and method changes. For the 2007 report, increases in the actuarial balance arising from revised disability incidence rate assumptions,

improvements in average benefit level projections, and changes in near-term

economic projections, more than offset decreases in the balance due to the

valuation period change and updated historical mortality data. For the 2008

report, the large increase in the actuarial balance was primarily due to

changes in immigration methods and assumptions. These changes more than

offset the decreases in the actuarial balance due to the change in the valuation period and the lower starting and ultimate mortality rates.

Changes affecting the actuarial balance shown for the 2009 report are

described in section IV.B.7 Reasons for Change in Actuarial Balance From

Last Report.
Appendices

154

0

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2018

Tables VI.C1, VI.C2, and VI.C3 present detailed operations of the OASI, DI,

and the combined OASI and DI Trust Funds, respectively, for fiscal

year 2008, the most recent fiscal year for which complete actual information

is available. These tables are similar to the calendar year operations tables in

section III.A. Please see that section for a description of the various items of

income and outgo.

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

Table VI.C1.—Operations of the OASI Trust Fund, Fiscal Year 2008

[In millions]

Total assets, September 30, 2007 $1,967,042

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $575,854

Payments from the General Fund of the Treasury for contributions subject to 

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2,104

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573,750

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 146

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,250

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,396

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

a Between -$0.5 and $0.5 million.

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,720

Net Interest adjustmentsb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Includes (1) interest on transfers between the trust fund and the general fund account for the Supplemental

Security Income program due to adjustments in the allocation of administrative expenses, (2) interest arising

from the revised allocation of administrative expenses among the trust funds, and (3) interest on certain reimbursements to the trust fund.

7

Net investment income and interest adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 102,727

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692,873

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502,692

Transfer to the DI Trust Fund to correct a trust fund allocation error made on payments to certain dually entitled disabled beneficiaries . . . . . . . . . . . . . . . . . . . . 339

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -62

Payment for costs of vocational rehabilitation services for disabled beneficiaries 3

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502,973

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . . 3,632

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,597

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 698

Offsetting receipts from sales of supplies, materials, etc. . . . . . . . . . . . . . . . . . . . . a

Miscellaneous reimbursements from the general fund c . . . . . . . . . . . . . . . . . . . . . 

c Reimbursements for costs incurred in performing certain legislatively mandated activities not directly

related to administering the OASI program.

-36

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,259

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 509,864

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183,009

Total assets, September 30, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,150,052
155

Fiscal Year Operations and Projections

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

Table VI.C2.—Operations of the DI Trust Fund, Fiscal Year 2008

[In millions]

Total assets, September 30, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $213,577

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $97,790

Payments from the General Fund of the Treasury for contributions subject to 

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -357

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,432

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 4

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,369

Total income from taxation of benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,373

Reimbursement from the general fund for costs of noncontributory wage credits

for military service before 1957 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,998

Interest adjustmentsa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

a Includes (1) interest on transfers between the trust fund and the general fund account for the Supplemental

Security Income program due to adjustments in the allocation of administrative expenses, (2) interest arising

from the revised allocation of administrative expenses among the trust funds, and (3) interest on certain

reimbursements to the trust fund.

4

Total investment income and interest adjustments. . . . . . . . . . . . . . . . . . . . . . . . 11,003

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,816

Disbursements:

Benefit payments:

Monthly benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,517

Transfer from the OASI Trust Fund to correct a trust fund allocation error made on 

payments to certain dually entitled disabled beneficiaries . . . . . . . . . . . . . . . . . -339

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -30

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 74

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,222

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . . 418

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,364

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

Miscellaneous reimbursements from the general fundb. . . . . . . . . . . . . . . . . . . . . .

b Reimbursements for costs incurred in performing certain legislatively mandated activities not directly

related to administering the DI program.

19

Total administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,513

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,153

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,663

Total assets, September 30, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216,239
Appendices

156

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

Estimates of the operations and status of the OASI, DI and the combined

OASI and DI Trust Funds during fiscal years (12 months ending on

September 30) 2004-18 are presented in tables VI.C4, VI.C5 and VI.C6,

respectively. 

Table VI.C3.—Operations of the Combined OASI and DI Trust Funds, Fiscal Year 2008

[In millions]

Total assets, September 30, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,180,619

Receipts:

Contributions:

Employment taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $673,644

Payments from the General Fund of the Treasury for contributions subject to 

refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2,461

Net contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 671,182

Income based on taxation of benefit payments:

Withheld from benefit payments to nonresident aliens . . . . . . . . . . . . . . . . . . . . . . 150

All other, not subject to withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,619

Total income from taxation of benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,769

Reimbursement from the general fund for costs of noncontributory wage credits

for military service before 1957 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

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

a Between -$0.5 and $0.5 million.

Investment income and interest adjustments:

Interest on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,719

Net Interest adjustmentsb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Includes (1) interest on transfers between the trust funds and the general fund account for the Supplemental

Security Income program due to adjustments in the allocation of administrative expenses, (2) interest arising

from the revised allocation of administrative expenses among the trust funds, and (3) interest on certain reimbursements to the trust fund.

11

Net investment income and interest adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 113,730

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

Total receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 802,689

Disbursements:

Benefit payments:

Monthly benefits and lump-sum death benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607,210

Reimbursement from the general fund for unnegotiated checks . . . . . . . . . . . . . . . -92

Payment for costs of vocational rehabilitation services for disabled beneficiaries . 77

Net benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607,195

Transfer to the Railroad Retirement “Social Security Equivalent Benefit Account” . . 4,050

Administrative expenses:

Costs incurred by:

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,961

Department of the Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 828

Offsetting receipts from sales of supplies, materials, etc. . . . . . . . . . . . . . . . . . . . . a

Miscellaneous reimbursements from the general fundc . . . . . . . . . . . . . . . . . . . . . .

c Reimbursements for costs incurred in performing certain legislatively mandated activities not directly

related to administering the OASI and DI programs.

-17

Net administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,772

Total disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617,017

Net increase in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185,672

Total assets, September 30, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,366,291
157

Fiscal Year Operations and Projections

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

Table VI.C4.—Operations of the OASI Trust Fund in Fiscal Years 2004-18

[Dollar amounts in billions]

Fiscal 

year

Income Cost Assets

Totala

a “Total Income” column includes transfers made between the OASI Trust Fund and the General Fund of the

Treasury that are not included in the separate components of income shown. These transfers consist of payments for (1) the cost of noncontributory wage credits for military service before 1957, and (2) the cost of

benefits to certain uninsured persons who attained age 72 before 1968. In December 2005, $350 million was

transferred from the OASI Trust Fund to the General Fund of the Treasury for the cost of pre-1957 military

service wage credits. After 2007 such transfers are estimated to be less than $500,000 in each year.

Net

contributions

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiob

b The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets at

the end of the prior year shown in the “Amount at end of year” column) as a percentage of cost for the year. 

Historical data:

2004 . . $556.5 $466.8 $13.3 $76.4 $417.1 $411.2 $2.3 $3.6 $139.5 $1,452.6 315

2005 . . 600.0 503.0 15.3 81.7 436.9 430.4 2.9 3.6 163.1 1,615.6 332

2006 . . 632.2 530.0 15.2 87.3 455.6 449.2 2.9 3.5 176.6 1,792.2 355

2007 . . 663.4 553.4 16.7 93.3 488.6 481.8 3.2 3.6 174.8 1,967.0 367

2008 . . 692.9 573.8 16.4 102.7 509.9 503.0 3.3 3.6 183.0 2,150.1 386

Intermediate:

2009 . . 702.3 575.2 19.8 107.2 549.8 542.8 3.4 3.6 152.5 2,302.5 391

2010 . . 724.6 592.5 23.3 108.8 576.3 568.9 3.5 3.8 148.3 2,450.9 400

2011 . . 764.0 625.3 24.8 113.8 596.7 589.3 3.6 3.8 167.3 2,618.1 411

2012 . . 806.6 657.5 26.4 122.7 625.6 618.0 3.6 3.9 181.1 2,799.2 419

2013 . . 859.0 695.2 29.2 134.6 667.3 659.6 3.7 3.9 191.7 2,991.0 420

2014 . . 908.6 728.6 32.0 147.9 716.8 708.9 3.8 4.1 191.8 3,182.8 417

2015 . . 959.3 762.8 34.9 161.6 769.8 761.6 3.8 4.3 189.6 3,372.3 413

2016 . . 1,013.5 802.9 38.0 172.7 825.5 817.1 3.9 4.4 188.1 3,560.4 409

2017 . . 1,059.6 833.9 41.3 184.4 885.3 876.5 4.0 4.8 174.3 3,734.7 402

2018 . . 1,111.3 870.2 44.2 196.9 949.1 940.0 4.1 5.0 162.2 3,896.9 394

Low-cost:

2009 . . 703.8 576.6 19.8 107.4 549.7 542.7 3.4 3.6 154.1 2,304.2 391

2010 . . 736.0 602.8 23.3 109.9 575.9 568.6 3.5 3.8 160.1 2,464.3 400

2011 . . 773.7 634.2 24.8 114.7 596.0 588.6 3.6 3.8 177.7 2,642.0 413

2012 . . 812.1 663.6 26.0 122.4 618.0 610.5 3.6 3.9 194.1 2,836.1 428

2013 . . 861.8 700.2 28.5 133.1 650.4 642.9 3.7 3.8 211.4 3,047.5 436

2014 . . 912.1 735.8 30.8 145.5 691.2 683.6 3.7 3.9 221.0 3,268.5 441

2015 . . 958.0 766.7 33.4 158.0 735.1 727.2 3.8 4.1 223.0 3,491.5 445

2016 . . 1,010.6 805.3 35.9 169.3 780.8 772.9 3.8 4.1 229.8 3,721.3 447

2017 . . 1,055.3 834.7 38.7 181.9 829.8 821.5 3.9 4.4 225.5 3,946.8 448

2018 . . 1,107.5 869.4 41.1 197.0 881.7 873.2 4.0 4.6 225.8 4,172.6 448

High-cost:

2009 . . 702.0 574.8 19.8 107.3 550.0 543.0 3.4 3.6 152.0 2,302.0 391

2010 . . 721.3 588.4 23.3 109.6 576.8 569.5 3.5 3.8 144.4 2,446.5 399

2011 . . 762.1 622.2 24.9 115.0 598.7 591.3 3.6 3.8 163.4 2,609.8 409

2012 . . 801.0 650.3 26.7 124.0 634.3 626.8 3.6 3.9 166.7 2,776.6 411

2013 . . 841.5 677.9 30.2 133.5 688.0 680.2 3.7 4.0 153.5 2,930.1 404

2014 . . 916.7 726.9 33.9 155.9 759.6 751.4 3.9 4.3 157.1 3,087.2 386

2015 . . 985.9 773.2 38.0 174.6 838.1 829.4 4.1 4.7 147.8 3,235.0 368

2016 . . 1,056.1 825.8 42.2 188.1 916.2 907.0 4.2 5.0 139.9 3,374.9 353

2017 . . 1,110.7 867.3 46.3 197.0 994.3 984.5 4.3 5.5 116.4 3,491.3 339

2018 . . 1,166.8 908.5 50.1 208.1 1,075.7 1,065.4 4.4 5.9 91.1 3,582.4 325
Appendices

158

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

Table VI.C5.—Operations of the DI Trust Fund in Fiscal Years 2004-18

[Dollar amounts in billions]

Fiscal 

year

Income Cost Assets

Totala

a “Total Income” column includes transfers made between the DI Trust Fund and the General Fund of the

Treasury that are not included in the separate components of income shown. These transfers consist of payments for the cost of noncontributory wage credits for military service before 1957. In particular, a transfer

was made in December 2007 in the amount of $7.7 million from the General Fund of the Treasury to the DI

Trust Fund. After 2007 such transfers are estimated to be less than $500,000 in each year.

Net

contributions

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiob

b The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets at

the end of the prior year shown in the “Amount at end of year” column) as a percentage of cost for the year. 

Historical data:

2004 . . $90.1 $79.3 $1.0 $9.8 $78.5 $76.2 $2.1 $0.2 $11.6 $182.9 218

2005 . . 96.8 85.4 1.2 10.2 86.4 83.7 2.3 .3 10.4 193.3 212

2006 . . 101.6 90.0 1.2 10.4 92.9 90.1 2.4 .4 8.6 201.9 208

2007 . . 108.4 94.0 1.4 13.1 96.8 94.0 2.4 .4 11.6 213.6 209

2008 . . 109.8 97.4 1.4 11.0 107.2 104.2 2.5 .4 2.7 216.2 199

Intermediate:

2009 . . 110.3 97.7 1.9 10.7 117.6 114.6 2.5 .4 -7.3 209.0 184

2010 . . 113.0 100.6 2.5 10.0 126.3 123.2 2.6 .5 -13.2 195.8 166

2011 . . 117.9 106.2 2.7 9.0 132.0 128.7 2.7 .6 -14.1 181.7 148

2012 . . 122.8 111.7 2.9 8.3 137.4 134.0 2.9 .5 -14.6 167.1 132

2013 . . 128.8 118.1 3.2 7.5 142.8 139.1 3.1 .5 -14.0 153.1 117

2014 . . 133.9 123.7 3.5 6.7 148.9 145.1 3.3 .5 -15.0 138.1 103

2015 . . 139.1 129.5 3.7 5.9 156.0 152.0 3.5 .5 -16.9 121.2 89

2016 . . 145.3 136.3 4.0 5.0 163.5 159.4 3.7 .5 -18.2 103.0 74

2017 . . 150.1 141.6 4.4 4.2 171.6 167.2 3.9 .5 -21.5 81.6 60

2018 . . 155.6 147.8 4.7 3.2 179.9 175.4 4.1 .5 -24.3 57.2 45

Low-cost:

2009 . . 110.6 97.9 1.9 10.7 116.2 113.2 2.5 .4 -5.6 210.6 186

2010 . . 114.9 102.3 2.4 10.1 122.3 119.2 2.6 .5 -7.4 203.2 172

2011 . . 119.8 107.7 2.5 9.6 125.8 122.5 2.7 .6 -6.0 197.2 162

2012 . . 124.5 112.7 2.7 9.2 127.8 124.4 2.9 .5 -3.3 193.9 154

2013 . . 130.8 118.9 2.9 9.0 129.3 125.7 3.1 .5 1.5 195.5 150

2014 . . 137.2 124.9 3.1 9.2 131.8 128.1 3.2 .5 5.4 200.9 148

2015 . . 142.9 130.2 3.2 9.5 135.6 131.7 3.4 .5 7.3 208.2 148

2016 . . 150.1 136.8 3.4 9.9 139.8 135.8 3.6 .5 10.3 218.4 149

2017 . . 155.8 141.7 3.7 10.4 144.3 140.1 3.8 .4 11.5 229.9 151

2018 . . 162.8 147.6 3.8 11.3 148.8 144.5 4.0 .4 13.9 243.9 154

High-cost:

2009 . . 110.3 97.6 2.0 10.7 119.0 116.1 2.5 .4 -8.8 207.5 182

2010 . . 112.3 99.9 2.5 9.9 130.1 127.0 2.6 .5 -17.8 189.7 159

2011 . . 117.2 105.7 2.8 8.7 137.9 134.6 2.7 .6 -20.7 169.0 138

2012 . . 121.1 110.4 3.1 7.6 146.8 143.4 2.9 .5 -25.7 143.3 115

2013 . . 124.7 115.1 3.5 6.1 157.7 154.0 3.1 .5 -32.9 110.4 91

2014 . . 131.8 123.4 4.0 4.4 171.5 167.6 3.4 .6 -39.7 70.6 64

2015 . . 138.3 131.3 4.5 2.5 186.3 182.0 3.7 .6 -48.0 22.6 38

2016 . . c

c Under the high-cost assumptions, the DI Trust Fund is projected to be exhausted in 2016. Therefore, certain trust fund operation values for 2016 to 2018 are not meaningful under present law and are not shown in

this table.

140.2 4.9 c 199.5 195.0 3.9 .6 c c 11

2017 . . c 147.3 5.4 c 211.5 206.8 4.2 .6 c cc

2018 . . c 154.3 5.8 c 224.0 219.1 4.4 .6 c cc
159

Fiscal Year Operations and Projections

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

Table VI.C6.—Operations of the Combined OASI and DI Trust Funds

in Fiscal Years 2004-18

[Dollar amounts in billions]

Fiscal

year

Income Cost Assets

Totala

a “Total Income” column includes transfers made between the OASI and DI Trust Funds and the General

Fund of the Treasury that are not included in the separate components of income shown. These transfers

consist of payments for (1) the cost of noncontributory wage credits for military service before 1957, and (2)

the cost of benefits to certain uninsured persons who attained age 72 before 1968.

Net

contributions

Taxation of

benefits

Net

interest Total

Benefit

payments

Administrative

costs

RRB

interchange

Net

increase

during

year

Amount

at end

of year

Trust

fund

ratiob

b The “Trust fund ratio” column represents assets at the beginning of a year (which are identical to assets at

the end of the prior year shown in the “Amount at end of year” column) as a percentage of cost for the year. 

Historical data:

2004 . . $646.6 $546.1 $14.3 $86.2 $495.5 $487.3 $4.3 $3.8 $151.1 $1,635.4 300

2005 . . 696.8 588.4 16.5 91.8 523.3 514.2 5.2 3.9 173.5 1,808.9 313

2006 . . 733.7 620.0 16.4 97.7 548.5 539.3 5.3 3.8 185.2 1,994.2 330

2007 . . 771.8 647.4 18.0 106.4 585.3 575.8 5.5 4.0 186.5 2,180.6 341

2008 . . 802.7 671.2 17.8 113.7 617.0 607.2 5.8 4.1 185.7 2,366.3 353

Intermediate:

2009 . . 812.6 672.9 21.8 118.0 667.4 657.5 5.9 4.0 145.2 2,511.5 355

2010 . . 837.6 693.2 25.7 118.7 702.5 692.1 6.1 4.3 135.1 2,646.6 358

2011 . . 881.9 731.5 27.5 122.8 728.7 718.0 6.3 4.4 153.2 2,799.8 363

2012 . . 929.4 769.2 29.2 131.0 763.0 752.0 6.5 4.4 166.5 2,966.3 367

2013 . . 987.8 813.2 32.4 142.1 810.0 798.8 6.8 4.4 177.7 3,144.0 366

2014 . . 1,042.5 852.4 35.5 154.7 865.7 854.0 7.1 4.6 176.8 3,320.9 363

2015 . . 1,098.5 892.4 38.7 167.4 925.8 913.6 7.3 4.8 172.7 3,493.6 359

2016 . . 1,158.9 939.2 42.0 177.7 989.0 976.5 7.6 4.9 169.9 3,663.4 353

2017 . . 1,209.7 975.5 45.6 188.6 1,056.9 1,043.7 7.9 5.3 152.8 3,816.2 347

2018 . . 1,266.9 1,017.9 48.9 200.1 1,129.0 1,115.3 8.2 5.5 137.9 3,954.2 338

Low-cost:

2009 . . 814.4 674.5 21.8 118.1 665.8 655.9 5.9 4.0 148.5 2,514.8 355

2010 . . 850.9 705.1 25.7 120.1 698.2 687.7 6.1 4.3 152.7 2,667.5 360

2011 . . 893.5 741.9 27.4 124.3 721.8 711.1 6.3 4.4 171.7 2,839.2 370

2012 . . 936.6 776.3 28.7 131.6 745.8 734.9 6.5 4.4 190.9 3,030.1 381

2013 . . 992.6 819.1 31.4 142.1 779.7 768.6 6.7 4.4 212.9 3,243.0 389

2014 . . 1,049.3 860.7 33.9 154.7 823.0 811.6 6.9 4.4 226.3 3,469.4 394

2015 . . 1,100.9 896.9 36.6 167.5 870.6 858.9 7.2 4.5 230.3 3,699.7 398

2016 . . 1,160.7 942.1 39.3 179.2 920.6 908.6 7.4 4.6 240.1 3,939.7 402

2017 . . 1,211.1 976.4 42.3 192.3 974.1 961.6 7.7 4.8 237.0 4,176.7 404

2018 . . 1,270.2 1,017.0 44.9 208.3 1,030.5 1,017.6 7.9 5.0 239.7 4,416.4 405

High-cost:

2009 . . 812.3 672.4 21.8 118.1 669.1 659.1 5.9 4.0 143.2 2,509.5 354

2010 . . 833.6 688.3 25.9 119.4 707.0 696.5 6.1 4.4 126.6 2,636.1 355

2011 . . 879.3 727.9 27.7 123.7 736.6 725.9 6.3 4.4 142.7 2,778.8 358

2012 . . 922.1 760.7 29.8 131.6 781.1 770.1 6.5 4.5 141.1 2,919.9 356

2013 . . 966.2 793.0 33.7 139.5 845.6 834.2 6.8 4.6 120.6 3,040.5 345

2014 . . 1,048.5 850.3 37.9 160.3 931.1 919.0 7.3 4.8 117.4 3,157.9 327

2015 . . 1,124.2 904.5 42.5 177.1 1,024.4 1,011.4 7.7 5.2 99.8 3,257.6 308

2016 . . 1,201.3 966.0 47.1 188.2 1,115.6 1,102.0 8.1 5.5 85.6 3,343.3 292

2017 . . 1,260.2 1,014.6 51.7 193.8 1,205.8 1,191.3 8.4 6.1 54.4 3,397.6 277

2018 . . 1,319.9 1,062.8 55.9 201.1 1,299.7 1,284.5 8.8 6.4 20.1 3,417.7 261
Appendices

160

D. LONG-RANGE SENSITIVITY ANALYSIS

This appendix presents estimates that illustrate the sensitivity of the longrange actuarial status of the OASDI program to changes in selected individual assumptions. The estimates, based on the three alternative sets of

assumptions (see sections IV.B, V.A, V.B, and V.C), illustrate the effects of

varying all of the principal assumptions simultaneously in order to portray a

generally more optimistic or pessimistic future, in terms of the financial status of the OASDI program. In the sensitivity analysis presented in this

appendix, the intermediate alternative II projection is used as the reference

point, and one assumption at a time is varied within that alternative. The

variation used for each individual assumption reflects the levels used for that

assumption in the low-cost alternative I and high-cost alternative III projections.

Each table in this section shows the effects of changing a particular assumption on the OASDI summarized income rates, summarized cost rates, and

actuarial balances for 25-year, 50-year, and 75-year valuation periods.

Because the annual payroll tax rate is constant for the entire 75-year valuation period, the income rate varies only slightly with changes in assumptions

and, therefore, is not considered in the discussion of the tables. The change

in each of the actuarial balances is approximately equal to the change in the

corresponding cost rate, but in the opposite direction.

1. Total Fertility Rate

Table VI.D1 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

the ultimate total fertility rate. These assumptions are that the ultimate total

fertility rate will be 1.7, 2.0, and 2.3 children per woman as assumed for

alternatives III, II, and I, respectively. The rate is assumed to change gradually from its current level and to reach the various ultimate values in 2033.
161

Long-Range Sensitivity Analysis

For the 25-year period, the cost rate for the three fertility assumptions varies

by only about 0.06 percent of taxable payroll. In contrast, the 75-year cost

rate varies over a wide range, decreasing from 16.41 to 15.66 percent, as the

assumed ultimate total fertility rate increases from 1.7 to 2.3. Similarly,

while the 25-year actuarial balance varies by only 0.05 percent of taxable

payroll, the 75-year actuarial balance varies over a much wider range, from

-2.35 to -1.68 percent.

During the 25-year period, the very slight increases in the working population resulting from increases in fertility are more than offset by decreases in

the female labor force and increases in the number of child beneficiaries.

Hence, the program cost slightly increases with higher fertility. For the

75-year long-range period, however, changes in fertility have a relatively

greater impact on the labor force than on the beneficiary population. As a

result, an increase in fertility significantly reduces the cost rate. Each

increase of 0.1 in the ultimate total fertility rate increases the long-range

actuarial balance by about 0.11 percent of taxable payroll.

Table VI.D1.—Sensitivity to Varying Fertility Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate total fertility ratea b

a The total fertility rate for any year is the average number of children who would be born to a woman in her

lifetime if she were to experience the birth rates by age observed in, or assumed for, the selected year, and if

she were to survive the entire childbearing period. The ultimate total fertility rate is assumed to be reached in

2033.

b Ultimate total fertility rates used for this analysis are 1.7 from the alternative III assumptions, 2.0 from the

alternative II assumptions, and 2.3 from the alternative I assumptions. All other assumptions used for this

analysis are from alternative II.

1.7 2.0 2.3

Summarized income rate:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.96 14.96 14.97

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.25 14.24 14.23

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.06 14.02 13.98

Summarized cost rate:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.11 15.14 15.17

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.84 15.75 15.68

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.41 16.02 15.66

Actuarial balance:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.15 -.17 -.20

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.59 -1.51 -1.45

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.35 -2.00 -1.68

Annual balance for 2083 . . . . . . . . . . . . . . . . . . . . . . . . . . -6.65 -4.34 -2.53

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2037 2037 2037
Appendices

162

2. Death Rates

Table VI.D2 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

future reductions in death rates for the period 2008-83. These assumptions

are the same as those used for alternatives I, II, and III, which are described

in section V.A.2. The age-sex-adjusted death rates decline at average annual

rates of 0.33 percent, 0.79 percent, and 1.32 percent for alternatives I, II, and

III, respectively.

The variation in cost for the 25-year period is less pronounced than the variation for the 75-year period because the decreases in death rates are assumed

to occur gradually. The 25-year cost rate increases from 14.95 percent (for an

average annual death-rate reduction of 0.33 percent) to 15.34 percent (for an

average annual death-rate reduction of 1.32 percent). The 75-year cost rate

increases from 15.34 to 16.75 percent. The actuarial balance decreases from

+0.02 to -0.38 percent for the 25-year period, and from -1.34 to -2.71 percent

for the 75-year period.

Lower death rates cause both the income (through increased taxable payroll)

and the cost of the OASDI program to be higher. The relative increase in

Table VI.D2.—Sensitivity to Varying Death-Rate Assumptions

[As a percentage of taxable payroll]

Valuation period

Average annual death-rate reductiona b

a The average annual death-rate reduction is the average annual geometric rate of decline in the age-sexadjusted death rate between 2008 and 2083. The overall decreases from the age-sex-adjusted death rate in

2008 to the corresponding rate in 2083 are 22 percent, 45 percent, and 63 percent for alternatives I, II, and

III, respectively.

b The average annual death-rate reductions used for this analysis are 0.33 percent from the alternative I

assumptions, 0.79 percent from the alternative II assumptions, and 1.32 percent from the alternative III

assumptions. All other assumptions used for this analysis are from alternative II.

0.33 percent 0.79 percent 1.32 percent

Summarized income rate:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.97 14.96 14.96

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.22 14.24 14.25

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.99 14.02 14.04

Summarized cost rate:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.95 15.14 15.34

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.27 15.75 16.27

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.34 16.02 16.75

Actuarial balance:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +.02 -.17 -.38

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.05 -1.51 -2.01

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.34 -2.00 -2.71

Annual balance for 2083 . . . . . . . . . . . . . . . . . . . . . . . . . . -2.80 -4.34 -5.88

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2039 2037 2035
163

Long-Range Sensitivity Analysis

cost, however, exceeds the relative increase in taxable payroll. For any given

year, reductions in the death rates for people who are age 62 and over (ages

at which death rates are the highest) increase the number of retired-worker

beneficiaries (and, therefore, the amount of retirement benefits paid) without

adding significantly to the number of covered workers (and, therefore, to the

taxable payroll). Although reductions for people at ages 50 to retirement eligibility age do result in significant increases to the taxable payroll, those

increases are not large enough to offset the sum of the additional retirement

benefits mentioned above and the disability benefits paid to additional beneficiaries at these pre-retirement ages, which are ages of high disability incidence. At ages under 50, death rates are so low that even substantial

reductions would not result in significant increases in the numbers of covered workers or beneficiaries. Consequently, if death rates for all ages are

lowered by about the same relative amount, cost increases at a rate greater

than the rate of growth in payroll, thereby resulting in higher cost rates and,

therefore, lower actuarial balances. Each additional 0.1-percentage-point

increase in the average annual rate of decline in the death rate decreases the

long-range actuarial balance by about 0.14 percent of taxable payroll.

3. Net Immigration

Table VI.D3 shows the estimated OASDI income rates, cost rates, and actuarial balances, under alternative II with various assumptions about the magnitude of net immigration. These assumptions are that the annual net

immigration will average, over the long-range period, 785,000 persons,

1,065,000 persons, and 1,370,000 persons as assumed for alternatives III, II,

and I, respectively.
Appendices

164

For all three periods, the cost rate decreases with increasing rates of net

immigration. For the 25-year period, the cost rate decreases from

15.22 percent of taxable payroll (for average annual net immigration of

785,000 persons) to 15.04 percent (for average annual net immigration of

1,370,000 persons). For the 50-year period, it decreases from 15.91 percent

to 15.57 percent, and for the 75-year period, it decreases from 16.25 percent

to 15.79 percent. The actuarial balance increases from -0.22 to -0.12 percent

for the 25-year period, from -1.64 to -1.38 percent for the 50-year period,

and from -2.19 to -1.81 percent for the 75-year period.

The cost rate decreases with an increase in net immigration because immigration occurs at relatively young ages, thereby increasing the numbers of

covered workers earlier than the numbers of beneficiaries. Increasing average annual net immigration by 100,000 persons improves the long-range

actuarial balance by about 0.07 percent of taxable payroll.

4. Real-Wage Differential

Table VI.D4 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

the real-wage differential. These assumptions are that the ultimate real-wage

differential will be 0.5 percentage point, 1.1 percentage points, and 1.7 percentage points as assumed for alternatives III, II, and I, respectively. In each

Table VI.D3.—Sensitivity to Varying Net-Immigration Assumptions

[As a percentage of taxable payroll]

Valuation period

Average annual net immigrationa b

a Net immigration per year is the assumed annual net immigration to the Social Security area, including both

legal and other immigration, averaged over the 75-year projection period.

b The average annual net immigration assumptions used for this analysis are 785,000 from the alternative III

assumptions, 1,065,000 from the alternative II assumptions, and 1,370,000 from the alternative I assumptions. All other assumptions used for this analysis are from alternative II.

785,000 1,065,000 1,370,000

Summarized income rate:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.00 14.96 14.93

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.27 14.24 14.20

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.06 14.02 13.98

Summarized cost rate:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.22 15.14 15.04

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.91 15.75 15.57

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.25 16.02 15.79

Actuarial balance:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.22 -.17 -.12

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.64 -1.51 -1.38

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.19 -2.00 -1.81

Annual balance for 2083 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.91 -4.34 -3.81

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2036 2037 2037
165

Long-Range Sensitivity Analysis

case, the ultimate annual increase in the CPI is assumed to be 2.8 percent (as

assumed for alternative II), yielding ultimate percentage increases in average

annual wages in covered employment of 3.3, 3.9, and 4.5 percent.

For the 25-year period, the cost rate decreases from 15.75 percent (for a realwage differential of 0.5 percentage point) to 14.54 percent (for a differential

of 1.7 percentage points). For the 50-year period, it decreases from 16.66 to

14.86 percent, and for the 75-year period it decreases from 17.02 to

15.03 percent. The actuarial balance increases from -0.64 to +0.29 percent

for the 25-year period, from -2.25 to -0.79 percent for the 50-year period,

and from -2.81 to -1.20 percent for the 75-year period.

The cost rate decreases with increasing real-wage differentials. This is

because higher wages increase taxable payroll immediately, but increase

benefit levels only gradually as new beneficiaries become entitled. In addition, cost-of-living adjustments (COLAs) to benefits are not affected by

changes in wages, but only in prices. Each 0.5-percentage-point increase in

the assumed real-wage differential increases the long-range actuarial balance

by about 0.67 percent of taxable payroll.

Table VI.D4.—Sensitivity to Varying Real-Wage Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate percentage increase in wages-CPIa b

a The first value in each pair is the assumed ultimate annual percentage increase in average wages in covered

employment. The second value is the assumed ultimate annual percentage increase in the Consumer Price

Index. The difference between the two values is the ultimate real-wage differential.

b The ultimate real-wage differentials of 0.5, 1.1, and 1.7 percentage points are the same as in alternatives

III, II, and I, respectively. All other assumptions used for this analysis are from alternative II.

3.3-2.8 3.9-2.8 4.5-2.8

Summarized income rate:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.10 14.96 14.83

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.41 14.24 14.07

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.21 14.02 13.83

Summarized cost rate:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.75 15.14 14.54

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.66 15.75 14.86

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.02 16.02 15.03

Actuarial balance:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.64 -.17 +.29

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.25 -1.51 -.79

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.81 -2.00 -1.20

Annual balance for 2083 . . . . . . . . . . . . . . . . . . . . . . . . . . -6.08 -4.34 -2.82

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2033 2037 2044
Appendices

166

5. Consumer Price Index

Table VI.D5 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

the rate of increase for the Consumer Price Index (CPI). These assumptions

are that the ultimate annual increase in the CPI will be 1.8 percent,

2.8 percent, and 3.8 percent as assumed for alternatives I, II, and III, respectively. In each case, the ultimate real-wage differential is assumed to be

1.1 percentage points (as assumed for alternative II), yielding ultimate percentage increases in average annual wages in covered employment of 2.9,

3.9, and 4.9 percent.

For all three periods, the cost rate decreases with greater assumed rates of

increase in the CPI. For the 25-year period, the cost rate decreases from

15.31 (for CPI increases of 1.8 percent) to 14.97 percent (for CPI increases

of 3.8 percent). For the 50-year period, it decreases from 15.97 to

15.53 percent, and for the 75-year period, it decreases from 16.26 to

15.78 percent. The actuarial balance increases from -0.30 to -0.05 percent for

the 25-year period, from -1.70 to -1.33 percent for the 50-year period, and

from -2.21 to -1.80 percent for the 75-year period.

Table VI.D5.—Sensitivity to Varying CPI-Increase Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate percentage increase in wages-CPIa b

a The first value in each pair is the assumed ultimate annual percentage increase in average wages in covered

employment. The second value is the assumed ultimate annual percentage increase in the Consumer Price

Index. The difference between the two values is the ultimate real-wage differential.

b The ultimate CPI increases of 1.8, 2.8, and 3.8 percent are the same as in alternatives I, II, and III, respectively. The ultimate real-wage differential of 1.1 percentage points is the same as in alternative II. All other

assumptions used for this analysis are also from alternative II.

2.9-1.8 3.9-2.8 4.9-3.8

Summarized income rate:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.01 14.96 14.92

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.27 14.24 14.20

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.05 14.02 13.99

Summarized cost rate:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.31 15.14 14.97

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.97 15.75 15.53

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.26 16.02 15.78

Actuarial balance: 

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.30 -.17 -.05

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.70 -1.51 -1.33

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.21 -2.00 -1.80

Annual balance for 2083 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.64 -4.34 -4.05

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2036 2037 2038
167

Long-Range Sensitivity Analysis

The patterns described above result primarily from the time lag between the

effects of the CPI changes on taxable payroll and on benefit payments. When

assuming a greater rate of increase in the CPI (in combination with a constant real-wage differential), the effect on taxable payroll due to a greater rate

of increase in average wages is experienced immediately, while the effect on

benefits due to a larger COLA is experienced with a lag of about 1 year.

Thus, the higher taxable payrolls have a stronger effect than the higher benefits, thereby resulting in lower cost rates. The effect of each 1.0-percentagepoint increase in the rate of change assumed for the CPI is an increase in the

long-range actuarial balance of about 0.21 percent of taxable payroll.

6. Real Interest Rate

Table VI.D6 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

the annual real interest rate for special public-debt obligations issuable to the

trust funds, which are compounded semiannually. These assumptions are that

the ultimate annual real interest rate will be 2.1 percent, 2.9 percent, and

3.6 percent as assumed for alternatives III, II, and I, respectively. In each

case, the ultimate annual increase in the CPI is assumed to be 2.8 percent (as

assumed for alternative II), resulting in ultimate annual yields of 5.0, 5.8, and

6.5 percent.

Table VI.D6.—Sensitivity to Varying Real-Interest Assumptions

[As a percentage of taxable payroll]

Valuation period

Ultimate annual real interest ratea b

a The ultimate real interest rate is defined to be the effective annual yield on assets held by the trust funds

divided by the annual rate of growth in the CPI.

b The ultimate annual real interest rates used for this analysis are 2.1 percent from the alternative III assumptions, 2.9 percent from the alternative II assumptions, and 3.6 percent from the alternative I assumptions. All

other assumptions used for this analysis are from alternative II.

2.1 percent 2.9 percent 3.6 percent

Summarized income rate:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.85 14.96 15.06

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.10 14.24 14.36

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.86 14.02 14.16

Summarized cost rate:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.28 15.14 15.02

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.95 15.75 15.58

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.27 16.02 15.80

Actuarial balance:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.42 -.17 +.05

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.85 -1.51 -1.21

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2.41 -2.00 -1.64

Annual balance for 2083 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.34 -4.34 -4.34

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2035 2037 2039
Appendices

168

For the 25-year period, the cost rate decreases with increasing real interest

rates, from 15.28 percent (for an ultimate real interest rate of 2.1 percent) to

15.02 percent (for an ultimate real interest rate of 3.6 percent). For the 50-

year period, it decreases from 15.95 to 15.58 percent, and for the 75-year

period, it decreases from 16.27 to 15.80 percent. The actuarial balance

increases from -0.42 to +0.05 percent for the 25-year period, from -1.85 to

-1.21 percent for the 50-year period, and from -2.41 to -1.64 percent for the

75-year period. Each 0.5-percentage-point increase in the assumed real interest rate increases the long-range actuarial balance by about 0.26 percent of

taxable payroll.

7. Disability Incidence Rates

Table VI.D7 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions concerning future disability incidence rates. For all three alternatives, incidence

rates by age and sex are assumed to vary during the early years of the projection period before attaining ultimate levels in 2028. In comparison to the historical period 1970 through 2008, the ultimate age-sex-adjusted incidence

rate is 2 percent higher for alternative II, 19 percent lower for alternative I,

and 21 percent higher for alternative III.

Table VI.D7.—Sensitivity to Varying Disability Incidence Assumptions

[As a percentage of taxable payroll]

Valuation period

Disability incidence rates

based on alternative—

I II III

Summarized income rate:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.96 14.96 14.97

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.23 14.24 14.24

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.01 14.02 14.02

Summarized cost rate:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.96 15.14 15.31

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.50 15.75 15.99

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.74 16.02 16.29

Actuarial balance:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a

a Between -0.005 and 0.005 percent of taxable payroll.

-.17 -.34

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.27 -1.51 -1.75

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.73 -2.00 -2.26

Annual balance for 2083 . . . . . . . . . . . . . . . . . . . . . . . . . . -3.98 -4.34 -4.68

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2038 2037 2035
169

Long-Range Sensitivity Analysis

For the 25-year period, the cost rate increases with increasing disability incidence rates, from 14.96 percent (for the relatively low rates assumed for

alternative I) to 15.31 percent (for the relatively high rates assumed for

alternative III). For the 50-year period, it increases from 15.50 to 15.99 percent, and for the 75-year period, it increases from 15.74 to 16.29 percent.

The actuarial balance decreases from 0.00 to -0.34 percent for the 25-year

period, from -1.27 to -1.75 percent for the 50-year period, and from -1.73 to

-2.26 percent for the 75-year period.

8. Disability Termination Rates

Table VI.D8 shows the estimated OASDI income rates, cost rates, and actuarial balances, on the basis of alternative II with various assumptions about

future disability termination rates. For all three alternatives, death rates are

assumed to decline throughout the long-range period. For alternative II, the

age-sex-adjusted1 death rate is assumed to decline to a level in 2085 that is

about 59 percent lower than the level in 2008. For alternative I, the age-sexadjusted death rate is assumed to decline to a level in 2085 that is about 27

percent lower than the level in 2008. For alternative III, the age-sex-adjusted

death rate is assumed to decline to a level in 2085 that is about 74 percent

lower than the level in 2008.

For all three alternatives, ultimate recovery-termination rates by age, sex,

and duration are assumed to be attained in the twentieth year of the projection period. For alternative II, the age-sex-adjusted1 recovery rate in 2028 is

about 11 recoveries per thousand disabled-worker beneficiaries. For alternative I, the age-sex-adjusted recovery rate in 2028 is about 13 recoveries per

thousand disabled-worker beneficiaries. For alternative III, the age-sexadjusted recovery rate in 2028 is about 9 recoveries per thousand disabledworker beneficiaries.

 1 Age adjusted to the total disabled workers in current-payment status as of the year 2000.
Appendices

170

For the 25-year period, the cost rate increases with decreasing disability termination rates, from 15.09 percent (for the relatively high termination rates

assumed for alternative I) to 15.18 percent (for the relatively low termination

rates assumed for alternative III). For the 50-year period, it increases from

15.69 to 15.80 percent, and for the 75-year period, it increases from 15.95 to

16.07 percent. The actuarial balance decreases from -0.13 to -0.21 percent

for the 25-year period, from -1.45 to -1.56 percent for the 50-year period,

and from -1.93 to -2.05 percent for the 75-year period.

Table VI.D8.—Sensitivity to Varying Disability Termination Assumptions

[As a percentage of taxable payroll]

Valuation period

Disability termination rates

based on alternative—

I II III

Summarized income rate:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.96 14.96 14.97

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.23 14.24 14.24

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.02 14.02 14.02

Summarized cost rate:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.09 15.14 15.18

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.69 15.75 15.80

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.95 16.02 16.07

Actuarial balance:

25-year: 2009-33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.13 -.17 -.21

50-year: 2009-58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.45 -1.51 -1.56

75-year: 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.93 -2.00 -2.05

Annual balance for 2083 . . . . . . . . . . . . . . . . . . . . . . . . . . -4.24 -4.34 -4.40

Year of combined trust fund exhaustion . . . . . . . . . . . . . 2037 2037 2036
171

Stochastic Projections 

E. STOCHASTIC PROJECTIONS

Significant uncertainty surrounds the estimates under the intermediate

assumptions, especially for a period as long as 75 years. This appendix presents a way to illustrate the uncertainty of these estimates. It is intended to

supplement the traditional methods of examining such uncertainty and to

illustrate the potential value of new techniques.

1. Background

The Trustees Report has traditionally shown additional estimates using the

low-cost and high-cost sets of specified assumptions to reflect the presence

of uncertainty. These additional estimates provide a range of possible outcomes for the projections. However, they provide no indication of the probability that actual future experience will be inside or outside the range of these

estimates. This appendix presents the results of a model, based on stochastic

modeling techniques, that estimates a probability distribution of future outcomes of the financial status of the combined OASI and DI Trust Funds.

It should be noted that this model is subject to further development. Future

improvements and refinements are expected to be more likely to expand,

rather than reduce, the indicated range of uncertainty.

2. Methodology

Other sections of this report provide estimates of the financial status of the

combined OASI and DI Trust Funds using a “deterministic” model. For the

deterministic model, certain assumptions are made regarding levels of fertility, changes in mortality, legal and other immigration levels, legal and other

emigration levels, changes in the Consumer Price Index, changes in average

real wages, unemployment rates, trust fund real yield rates, and disability

incidence and recovery rates. In general, each of these variables is assumed

to reach an ultimate value at a specific point during the long-range period

and to maintain that value throughout the remainder of the period. As mentioned above, three deterministic scenarios are developed assuming separate,

specified values for each of these variables. More details about each of these

assumptions can be found in section V.

In contrast, the results of 5,000 independent stochastic simulations are presented in this appendix. Each of the 5,000 simulations is determined by

allowing the above variables to vary throughout the long-range period. The

fluctuation in each variable is projected by using standard time-series modeling, a method designed to help make inferences based on historical data.

Generally, each variable is modeled by an equation that captures a relationship between current and prior years’ values of the variable and introduces
Appendices

172

year-by-year random variation, as reflected in the historical period. For some

variables, the equations additionally reflect relationships with other variables. Parameters for the equations are estimated using historical data for

periods between 20 years and 110 years depending on the nature and quality

of data available. Each time-series equation is designed such that, in the

absence of random variation, the value of the variable would equal the value

assumed under the intermediate set of assumptions. More detail on this

model, and stochastic modeling in general, is available on the Social Security

website.1

For each simulation of the model, values for most of the variables listed

above are determined by using Monte Carlo techniques to randomly assign

the year-by-year variations. The one exception is that net other immigration

is modeled rather than individually modeling other immigration and other

emigration. Each simulation produces an estimate of the financial status of

the combined OASI and DI Trust Funds. Results shown in this appendix

reflect the distribution of results from 5,000 model simulations.

The results from this model should be interpreted with caution and with a full

understanding of the inherent limitations. Results are very sensitive to equation specifications, degrees of interdependence among variables, and the historical periods used for the estimates. For some variables, using the

variations exhibited in a relatively recent historical period may not provide a

realistic representation of the potential variation for the future. In addition,

results would differ if random variations had been applied to additional variables other than those mentioned above (such as labor force participation

rates, retirement rates, marriage rates, and divorce rates). Furthermore, additional variability could result from incorporating statistical approaches that

would more fully model change in the long-range central tendencies of the

variables. The historical period available for most variables is relatively

homogeneous and does not reflect many substantial shifts. The time-series

modeling reflects what occurred in the historical period. As a result, the variation indicated in this appendix should be viewed as the minimum plausible

variation for the future. Substantial shifts, as predicted by many experts and

as seen in prior centuries, are not fully reflected in the current model.

 1 www.socialsecurity.gov/OACT/stochastic/index.html
173

Stochastic Projections 

3. Results

Simulated probability distributions of the annual trust fund ratios for the

combined OASI and DI Trust Funds are shown in figure VI.E1. The two

extreme lines in this figure illustrate the range within which future annual

trust fund ratios are estimated to occur 95 percent of the time (i.e., a 95-percent confidence interval). In other words, actual future trust fund ratios in a

given year would be expected to exceed the upper bound only 2.5 percent of

the time or to fall below the lower bound 2.5 percent of the time. Other lines

in the figure display additional confidence intervals (80-percent, 60-percent,

40-percent, and 20-percent) around future annual trust fund ratios. The

median estimate for each year indicates the trust fund ratio that is projected

by this model to fall exactly in the middle of possible outcomes for that year.

It is important to note that these lines do not represent the results of individual stochastic simulations. Instead, for each given year, they represent the

percentile distribution of trust fund ratios based on all stochastic simulations

for that year.

The median estimate for each year indicates that the assets of the combined

OASI and DI Trust Funds would be exhausted by the end of 2036 with a

probability of 50 percent. This exhaustion date is 1 year earlier than the year

of exhaustion projected under the intermediate assumptions. Figure VI.E1

shows that the 95-percent confidence interval for the trust fund ratio in 2025

ranges from 345 to 127 percent of annual cost. In comparison, the 2025 trust

fund ratios for the low-cost and high-cost alternatives are each outside this

range, at 385 and 108 percent, respectively. By 2083, the range represented

by the low-cost and high-cost projections increases substantially beyond the

boundaries of the 95-percent stochastic confidence interval, as seen from the

values for the open group unfunded obligation in table VI.E1. This increased

variation of the alternatives relative to the stochastic confidence interval is

also seen in the positive trust fund ratio for the low-cost scenario for 2083.
Appendices

174

The probability distribution of the year-by-year OASDI cost rates (i.e., cost

as a percentage of taxable payroll) is shown in figure VI.E2. The range of the

cost rates widens as the projections move further into the future, reflecting

increasing uncertainty. The income rate under the intermediate assumptions

is also included in the figure in order to give some indication of the patterns

of cash flow for the OASDI program. Only this income rate is included

because of the relatively small variation in income rates throughout the projection period. The lines in figure VI.E2 display the median set (50th percentile) of estimated annual cost rates and the 95-percent, 80-percent,

60-percent, 40-percent, and 20-percent confidence intervals expected for

future annual cost rates. It is important to note that these lines do not represent the results of individual stochastic simulations. Instead, for each given

year, they represent the percentile distribution of cost rates based on all stochastic simulations for that year. The projected cost rates for the year 2035

for the low-cost and high-cost alternatives described earlier are 14.60 percent

of payroll and 20.06 percent of payroll, respectively. These are close to the

limits of the 95-percent confidence interval (14.85 and 19.93 percent of payroll), as can be seen in figure VI.E2. By 2083, the cost rates for these alternatives, 12.48 and 25.70 percent of payroll, are still close to the limits of the

95-percent confidence interval (13.29 and 25.05 percent of payroll).

 Figure VI.E1.—Annual Trust Fund Ratios

0%

100%

200%

300%

400%

500%

2009 2024 2039 2054 2069 2084

Projection year

50%

97.5%

2.5%

90%

10%
175

Stochastic Projections 

Table VI.E1 displays long-range actuarial estimates that illustrate uncertainty

for the combined OASDI program using both the deterministic and stochastic approaches. Actuarial estimates included in the table are for the longrange period, 2009-83. Stochastic estimates are shown for the median (50th

percentile) and for the 95-percent and 80-percent confidence intervals. For

comparison, deterministic estimates are shown for the intermediate, lowcost, and high-cost assumptions. Each individual stochastic estimate displayed in the table represents the level at that percentile from the distribution

of the 5,000 simulations. However, for each given percentile, the stochastic

estimates shown for the different long-range actuarial measures are generally

not from the same stochastic simulation.

Median stochastic estimates for the actuarial measures displayed in table

VI.E1 are slightly more pessimistic for the combined OASI and DI Trust

Funds than the deterministic estimates projected under the intermediate

assumptions. The median estimate of the long-range actuarial balance is

-2.16 percent of taxable payroll, about 0.16 percentage point lower than projected under the intermediate assumptions. The median estimate for the first

year cost exceeds tax income is 2014. This is 2 years earlier than projected

under the intermediate assumptions. The median estimate for the year assets

first become exhausted is 2036. This is 1 year earlier than the year projected

under the intermediate assumptions. The median estimate for the annual cost

in the 75th year of the projection period is 17.93 as a percentage of taxable

 Figure VI.E2.—Annual Cost Rates

5%

10%

15%

20%

25%

30%

2009 2024 2039 2054 2069 2084

Projection year

50%

97.5%

2.5%

90%

10%

Income Rate
Appendices

176

payroll and 5.90 as a percentage of GDP. The comparable estimates using the

intermediate assumptions are 17.68 percent of payroll and 5.86 percent of

GDP.

The 95-percent confidence interval determined by the stochastic modeling

projections can be compared to the range of variation defined by the traditional low-cost and high-cost alternatives. For four of the measures in table

VI.E1 (the actuarial balance, the open group unfunded obligation, the first

year assets become exhausted, and the annual cost in the 75th year of the

projection period expressed as a percentage of payroll), the 95-percent stochastic projection range is narrower than the range defined by the low-cost

and high-cost alternatives. That is, for these measures, the estimates under

the low-cost and high-cost alternatives fall outside the 95-percent confidence

interval determined by the stochastic modeling projections. In contrast, for

one of the measures in the table (the annual cost in the 75th year of the projection period expressed as a percentage of GDP), the 95-percent stochastic

projection range includes the estimates under the low-cost and high-cost

alternatives. For the remaining measure in the table (the first year cost

exceeds tax income), the 95-percent stochastic projection range includes the

estimate under the high-cost alternative, but does not include the low-cost

estimate.

Table VI.E1.—Long-Range Estimates Relating to the Actuarial Status of the Combined 

OASDI Program

[Comparison of deterministic and stochastic results]

Traditional

deterministic model Stochastic model

IntermediateLowCostHighCost

Median

50th

percentile

80-percent

confidence interval

95-percent

confidence interval

10th

percentile

90th

percentile

2.5th

percentile

97.5th

percentile

Actuarial balance . . . . . . -2.00 0.50 -5.32 -2.16 -3.32 -1.07 -3.98 -0.53

Open group unfunded 

obligation (in trillions) $5.3 -$1.8 $14.5 $5.7 $9.3 $2.7 $11.5 $1.2

First year cost exceeds tax 

income. . . . . . . . . . . . . 2016 2020 2013 2014 2010 2017 2009 2019

First year assets become 

exhausteda . . . . . . . . . .

a For some stochastic simulations, the first year in which trust fund assets become exhausted does not indicate a permanent exhaustion of assets.

2037 b

b The fund is not estimated to be exhausted within the projection period.

2029 2036 2032 2043 2030 2052

Annual cost in 75th year 

(percent of taxable

payroll) . . . . . . . . . . . . 17.68 12.48 25.70 17.93 14.64 22.30 13.29 25.05

Annual cost in 75th year 

(percent of GDP). . . . . 5.86 4.48 7.84 5.90 4.71 7.46 4.19 8.42
177

OASDI & HI: Percent of Payroll

F. ESTIMATES FOR OASDI AND HI, SEPARATE AND COMBINED

In this appendix, long-range actuarial estimates for the OASDI and Hospital

Insurance (HI) programs are presented separately and on a combined basis.

These estimates facilitate analysis of the adequacy of the income and assets

of these programs relative to their cost under current law. Estimates for the

Supplementary Medical Insurance (SMI) program are not included in this

appendix because adequate financing is guaranteed in the law, and because

the SMI program is not financed through a payroll tax.

The emphasis in this appendix on combined operations, while significant,

should not obscure the analysis of the financial status of the individual trust

funds, which are legally separate and cannot be commingled. In addition, the

factors which determine the costs of the OASI, DI, and HI programs differ

substantially.

1. Estimates as a Percentage of Taxable Payroll

Comparing and combining cost and income rates for the OASDI and HI programs as percentages of taxable payroll require a note of caution. The taxable payrolls for the HI program are larger than those estimated for the

OASDI program because (1) a larger maximum taxable amount was established for the HI program in 1991, with the maximum being eliminated altogether for the HI program in 1994, (2) a larger proportion of Federal, State,

and local government employees have their wages covered under the HI program, and (3) the earnings of railroad workers are included directly in the HI

taxable payroll but not in the OASDI taxable payroll (railroad contributions

for the equivalent of OASDI benefits are accounted for in a net interchange

that occurs annually between the OASDI and Railroad Retirement programs). As a result, the HI taxable payroll is about 25 percent larger than the

OASDI taxable payroll throughout the long-range period. Nonetheless, combined OASDI and HI rates shown in this section are computed by adding the

separately derived rates for the programs. The resulting combined rates may

be interpreted as those applicable to the taxable payroll in the amount of the

OASDI payroll, with the separate HI rates being additionally applicable to

the excess of the HI payroll over the OASDI payroll.

As with the OASI and DI Trust Funds, income to the HI Trust Fund comes

primarily from contributions paid by employees, employers, and selfemployed persons. The combined OASDI and HI contribution rate for

employees and their employers is often referred to as the FICA tax, because

it is authorized by the Federal Insurance Contributions Act. Contribution

rates for the OASDI and HI programs are shown in table VI.F1.
Appendices

178

Table VI.F2 shows estimated annual income rates and cost rates for the

OASDI program, the HI program, and the combined OASDI and HI programs, based on the low-cost, intermediate, and high-cost sets of assumptions (alternatives I, II, and III) described earlier in this report. These annual

rates are intended to indicate the cash-flow operation of the programs. Therefore, income rates exclude interest earned on trust fund assets. Table VI.F2

also shows the differences between income rates and cost rates, called balances. Estimates shown for the combined trust funds are theoretical because

no authority currently exists for borrowing by or transfers among these trust

funds.

Under all three sets of assumptions, the combined OASDI and HI cost rate is

projected to rise above current levels, with the sharpest increase occurring

during the period 2013-30. For the combined OASDI and HI programs,

under the high-cost set of assumptions, annual deficits are projected to occur

for each year of the 75-year projection period. The cost rate is projected to

rise to over three times its current level by the end of the projection period.

Under the intermediate assumptions, annual deficits occur in 2010, and in

years 2013 through the end of the projection period, with the cost rate nearly

doubling by 2083. Under the low-cost assumptions, the cost rate is projected

to increase by about 16 percent by the end of the period, with annual deficits

beginning in 2019.

Table VI.F1.—Contribution Rates for the OASDI and HI Programs

[In percent]

Calendar years

Employees and employers, each Self employed

OASDI HI Combined OASDI HI Combined

1966 . . . . . . . . . . . . . . 3.85 0.35 4.20 5.80 0.35 6.15

1967 . . . . . . . . . . . . . . 3.90 .50 4.40 5.90 .50 6.40

1968 . . . . . . . . . . . . . . 3.80 .60 4.40 5.80 .60 6.40

1969-70 . . . . . . . . . . . 4.20 .60 4.80 6.30 .60 6.90

1971-72 . . . . . . . . . . . 4.60 .60 5.20 6.90 .60 7.50

1973 . . . . . . . . . . . . . . 4.85 1.00 5.85 7.00 1.00 8.00

1974-77 . . . . . . . . . . . 4.95 .90 5.85 7.00 .90 7.90

1978 . . . . . . . . . . . . . . 5.05 1.00 6.05 7.10 1.00 8.10

1979-80 . . . . . . . . . . . 5.08 1.05 6.13 7.05 1.05 8.10

1981 . . . . . . . . . . . . . . 5.35 1.30 6.65 8.00 1.30 9.30

1982-83 . . . . . . . . . . . 5.40 1.30 6.70 8.05 1.30 9.35

1984a . . . . . . . . . . . . . 

a See footnote a under table VI.A1 in the appendix titled “History of OASI and DI Trust Fund Operations”

for a description of tax credits allowed against the combined OASDI and HI taxes on net earnings from selfemployment in 1984-89.

5.70 1.30 7.00 11.40 2.60 14.00

1985 . . . . . . . . . . . . . . 5.70 1.35 7.05 11.40 2.70 14.10

1986-87 . . . . . . . . . . . 5.70 1.45 7.15 11.40 2.90 14.30

1988-89 . . . . . . . . . . . 6.06 1.45 7.51 12.12 2.90 15.02

1990 and later. . . . . . . 6.20 1.45 7.65 12.40 2.90 15.30
179

OASDI & HI: Percent of Payroll

Table VI.F2.—OASDI and HI Annual Income Rates, Cost Rates, and Balances,

Calendar Years 2009-85

[As a percentage of taxable payrolla]

Calendar year

OASDI HI Combined

Income

rate

Cost

rate Balance

Income

rate

Cost

rate Balance

Income

rate

Cost

rate Balance

Intermediate:

2009 . . . . . . 12.83 12.35 0.48 3.13 3.57 -0.44 15.97 15.93 0.04

2010 . . . . . . 12.87 12.50 .37 3.16 3.57 -.41 16.03 16.07 -.04

2011 . . . . . . 12.87 12.37 .50 3.15 3.59 -.45 16.02 15.97 .05

2012 . . . . . . 12.87 12.24 .63 3.15 3.65 -.50 16.02 15.88 .14

2013 . . . . . . 12.90 12.38 .52 3.17 3.74 -.57 16.07 16.12 -.05

2014 . . . . . . 12.92 12.62 .30 3.18 3.88 -.70 16.10 16.50 -.41

2015 . . . . . . 12.94 12.88 .06 3.19 3.81 -.62 16.13 16.69 -.56

2016 . . . . . . 12.96 13.18 -.22 3.21 3.90 -.69 16.17 17.08 -.91

2017 . . . . . . 12.98 13.49 -.51 3.22 4.00 -.78 16.21 17.50 -1.29

2018 . . . . . . 13.00 13.83 -.83 3.23 4.12 -.88 16.23 17.95 -1.71

2020 . . . . . . 13.04 14.50 -1.46 3.26 4.37 -1.10 16.31 18.87 -2.56

2025 . . . . . . 13.13 15.86 -2.73 3.33 5.13 -1.80 16.46 20.99 -4.53

2030 . . . . . . 13.20 16.76 -3.56 3.38 6.00 -2.62 16.58 22.76 -6.18

2035 . . . . . . 13.24 17.10 -3.86 3.42 6.87 -3.46 16.65 23.97 -7.32

2040 . . . . . . 13.25 16.99 -3.74 3.43 7.64 -4.21 16.68 24.63 -7.95

2045 . . . . . . 13.25 16.75 -3.50 3.44 8.24 -4.81 16.68 24.99 -8.31

2050 . . . . . . 13.25 16.61 -3.36 3.44 8.74 -5.30 16.69 25.34 -8.65

2055 . . . . . . 13.26 16.62 -3.36 3.45 9.20 -5.75 16.71 25.81 -9.10

2060 . . . . . . 13.27 16.73 -3.45 3.46 9.71 -6.24 16.73 26.43 -9.70

2065 . . . . . . 13.28 16.86 -3.57 3.47 10.25 -6.78 16.76 27.11 -10.35

2070 . . . . . . 13.30 17.05 -3.75 3.49 10.81 -7.32 16.78 27.86 -11.07

2075 . . . . . . 13.32 17.27 -3.96 3.50 11.34 -7.84 16.81 28.62 -11.80

2080 . . . . . . 13.33 17.53 -4.19 3.51 11.81 -8.30 16.84 29.34 -12.49

2085 . . . . . . 13.35 17.78 -4.43 3.52 12.24 -8.72 16.87 30.02 -13.15

Low-cost:

2009 . . . . . . 12.83 12.19 .64 3.13 3.44 -.31 15.96 15.63 .33

2010 . . . . . . 12.86 12.25 .61 3.16 3.37 -.22 16.02 15.62 .39

2011 . . . . . . 12.86 12.07 .79 3.14 3.33 -.19 16.00 15.40 .60

2012 . . . . . . 12.86 11.90 .96 3.14 3.32 -.17 16.00 15.21 .79

2013 . . . . . . 12.88 11.70 1.17 3.16 3.34 -.18 16.03 15.04 .99

2014 . . . . . . 12.89 11.86 1.03 3.17 3.42 -.25 16.06 15.28 .78

2015 . . . . . . 12.91 12.03 .88 3.18 3.28 -.10 16.09 15.31 .78

2016 . . . . . . 12.92 12.21 .71 3.19 3.29 -.10 16.11 15.50 .62

2017 . . . . . . 12.94 12.41 .53 3.20 3.31 -.11 16.14 15.71 .43

2018 . . . . . . 12.95 12.61 .34 3.21 3.34 -.13 16.16 15.94 .22

2020 . . . . . . 12.98 13.09 -.11 3.24 3.41 -.17 16.22 16.50 -.28

2025 . . . . . . 13.05 14.04 -1.00 3.29 3.65 -.36 16.34 17.69 -1.35

2030 . . . . . . 13.10 14.59 -1.49 3.33 3.88 -.55 16.42 18.46 -2.04

2035 . . . . . . 13.12 14.60 -1.48 3.34 4.02 -.68 16.46 18.62 -2.16

2040 . . . . . . 13.11 14.20 -1.09 3.35 4.11 -.76 16.46 18.31 -1.85

2045 . . . . . . 13.09 13.71 -.62 3.34 4.16 -.82 16.44 17.87 -1.43

2050 . . . . . . 13.08 13.34 -.25 3.34 4.23 -.89 16.42 17.56 -1.14

2055 . . . . . . 13.08 13.10 -.02 3.34 4.36 -1.02 16.42 17.45 -1.03

2060 . . . . . . 13.08 12.93 .14 3.34 4.58 -1.24 16.42 17.52 -1.10

2065 . . . . . . 13.07 12.76 .32 3.34 4.84 -1.50 16.41 17.60 -1.18

2070 . . . . . . 13.07 12.60 .47 3.34 5.11 -1.77 16.41 17.70 -1.30

2075 . . . . . . 13.06 12.49 .58 3.34 5.36 -2.02 16.40 17.84 -1.44

2080 . . . . . . 13.06 12.46 .60 3.34 5.58 -2.24 16.40 18.04 -1.63

2085 . . . . . . 13.07 12.51 .55 3.35 5.78 -2.43 16.41 18.30 -1.88
Appendices

180

Notes:

1. The income rate excludes interest income and certain transfers from the General Fund of the Treasury.

2. Totals do not necessarily equal the sums of rounded components.

In table VI.F3 values are summarized over the 25-year, 50-year, and 75-year

valuation periods (for which beginning fund balances are included in the

summarized income rates, and the cost of accumulating an ending fund balance equal to 100 percent of annual cost by the end of the period is included

in the summarized cost rates). Estimates shown for the combined trust funds

are theoretical because no authority currently exists for borrowing by or

transfers among these trust funds.

High-cost:

2009 . . . . . . 12.84 12.43 0.41 3.13 3.68 -0.54 15.97 16.11 -0.14

2010 . . . . . . 12.87 12.67 .20 3.16 3.75 -.59 16.04 16.42 -.39

2011 . . . . . . 12.87 12.53 .34 3.15 3.83 -.68 16.02 16.36 -.34

2012 . . . . . . 12.89 12.85 .04 3.16 4.00 -.84 16.05 16.85 -.80

2013 . . . . . . 12.93 13.24 -.30 3.18 4.18 -.99 16.12 17.42 -1.30

2014 . . . . . . 12.96 13.68 -.72 3.20 4.38 -1.18 16.15 18.06 -1.91

2015 . . . . . . 12.99 14.09 -1.10 3.21 4.41 -1.20 16.20 18.50 -2.30

2016 . . . . . . 13.01 14.45 -1.44 3.23 4.60 -1.37 16.24 19.05 -2.81

2017 . . . . . . 13.04 14.81 -1.77 3.25 4.81 -1.56 16.28 19.62 -3.33

2018 . . . . . . 13.06 15.25 -2.20 3.26 5.05 -1.79 16.32 20.30 -3.99

2020 . . . . . . 13.11 16.10 -2.99 3.30 5.56 -2.26 16.41 21.67 -5.26

2025 . . . . . . 13.22 17.91 -4.68 3.38 7.18 -3.80 16.60 25.09 -8.48

2030 . . . . . . 13.32 19.23 -5.91 3.45 9.25 -5.81 16.77 28.48 -11.71

2035 . . . . . . 13.38 20.06 -6.67 3.50 11.67 -8.17 16.88 31.73 -14.84

2040 . . . . . . 13.42 20.42 -7.00 3.53 14.10 -10.56 16.95 34.52 -17.56

2045 . . . . . . 13.45 20.62 -7.17 3.55 16.19 -12.64 17.00 36.81 -19.81

2050 . . . . . . 13.47 20.91 -7.44 3.58 17.90 -14.32 17.05 38.81 -21.76

2055 . . . . . . 13.50 21.37 -7.86 3.60 19.24 -15.64 17.10 40.61 -23.50

2060 . . . . . . 13.55 21.97 -8.43 3.63 20.36 -16.73 17.17 42.34 -25.16

2065 . . . . . . 13.59 22.66 -9.07 3.66 21.51 -17.85 17.25 44.17 -26.92

2070 . . . . . . 13.64 23.49 -9.85 3.70 22.68 -18.99 17.34 46.17 -28.83

2075 . . . . . . 13.70 24.38 -10.69 3.73 23.79 -20.06 17.43 48.18 -30.75

2080 . . . . . . 13.75 25.23 -11.49 3.77 24.78 -21.01 17.52 50.02 -32.50

2085 . . . . . . 13.79 25.97 -12.17 3.80 25.68 -21.88 17.59 51.65 -34.06

a The taxable payroll for HI is significantly larger than the taxable payroll for OASDI because the HI taxable

maximum amount was eliminated beginning in 1994, and because HI covers all Federal civilian employees,

including those hired before 1984, all State and local government employees hired after April 1, 1986, and

railroad employees. Combined OASDI and HI rates are computed as the sum of the separately derived rates

for each program.

Table VI.F2.—OASDI and HI Annual Income Rates, Cost Rates, and Balances,

Calendar Years 2009-85 (Cont.)

[As a percentage of taxable payrolla]

Calendar year

OASDI HI Combined

Income

rate

Cost

rate Balance

Income

rate

Cost

rate Balance

Income

rate

Cost

rate Balance
181

OASDI & HI: Percent of Payroll

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

Under the high-cost assumptions, the combined OASDI and HI system is

projected to experience large actuarial deficits for the 25-year, 50-year, and

75-year valuation periods. Under the intermediate assumptions, actuarial deficits smaller than those for the high-cost assumptions are projected for all

three valuation periods. Under the low-cost assumptions, the combined

OASDI and HI system is projected to have a positive actuarial balance for

the 25-year valuation period, a negligible balance (between -0.005 and 0.005

percent of taxable payroll) for the 50-year valuation period, and a negative

actuarial balance for the 75-year valuation period.

Table VI.F3.—Summarized OASDI and HI Income Rates and Cost Rates for Valuation 

Periods,a Calendar Years 2009-83

[As a percentage of taxable payrollb]

a Income rates include beginning trust fund balances and cost rates include the cost of reaching an ending

fund target equal to 100 percent of annual cost by the end of the period.

b The taxable payroll for HI is significantly larger than the taxable payroll for OASDI because the HI taxable

maximum amount was eliminated beginning 1994, and because HI covers all Federal civilian employees,

including those hired before 1984, all State and local government employees hired after April 1, 1986, and

railroad employees. Combined OASDI and HI rates are computed as the sum of the separately derived rates

for each program.

Valuation

period 

OASDI HI Combined

Income rate Cost

rate

Actuarial

balance

Income rate Cost

rate

Actuarial

balance

Income rate Cost

rate

Actuarial

balance

Intermediate:

25-years:

2009-33 . . . . . . 14.96 15.14 -0.17 3.47 4.88 -1.40 18.43 20.02 -1.58

50-years:

2009-58 . . . . . . 14.24 15.75 -1.51 3.46 6.29 -2.83 17.70 22.04 -4.34

75-years:

2009-83 . . . . . . 14.02 16.02 -2.00 3.46 7.34 -3.88 17.48 23.36 -5.88

Low-cost:

25-years:

2009-33 . . . . . . 14.89 13.71 1.18 3.44 3.67 -.23 18.33 17.38 .95

50-years:

2009-58 . . . . . . 14.12 13.64 .48 3.40 3.88 -.48 17.52 17.52 c

c Between -0.005 and 0.005 percent of taxable payroll.

75-years:

2009-83 . . . . . . 13.86 13.35 .50 3.38 4.19 -.81 17.24 17.54 -.31

High-cost:

25-years:

2009-33 . . . . . . 15.02 16.83 -1.81 3.51 6.58 -3.07 18.53 23.41 -4.88

50-years:

2009-58 . . . . . . 14.34 18.39 -4.05 3.53 10.62 -7.09 17.87 29.01 -11.14

75-years:

2009-83 . . . . . . 14.18 19.51 -5.32 3.57 13.31 -9.74 17.75 32.82 -15.06
Appendices

182

2. Estimates as a Percentage of Gross Domestic Product

This section presents long-range projections of the operations of the combined Old-Age and Survivors Insurance and Disability Insurance (OASI and

DI) Trust Funds and of the Hospital Insurance (HI) Trust Fund expressed as a

percentage of gross domestic product (GDP). While expressing these fund

operations as a percentage of taxable payroll is the most useful approach for

assessing the financial status of the programs (see table IV.B1 and section

IV.B.1), analyzing them as a percentage of GDP provides an additional perspective on these fund operations in relation to the total value of goods and

services produced in the United States.

Table VI.F4 shows estimated income excluding interest, total cost, and the

resulting balance of the combined OASI and DI Trust Funds, of the HI Trust

Fund, and of the combined OASI, DI, and HI Trust Funds, expressed as percentages of GDP on the basis of each of the three alternative sets of assumptions. The estimated GDP on which these percentages are based is also

shown in table VI.F4. For OASDI, income excluding interest consists of payroll-tax contributions, proceeds from taxation of benefits, and various reimbursements from the General Fund of the Treasury. Total cost consists of

benefit payments, administrative expenses, net transfers from the trust funds

to the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries. For HI, income excluding interest

consists of payroll-tax contributions (including contributions from railroad

employment) and proceeds from taxation of OASDI benefits. Total cost consists of outlays (benefits and administrative expenses) for insured beneficiaries. Both the HI income and cost are on an incurred basis.

The OASDI annual balance (income excluding interest, less cost) as a percentage of GDP is projected to be positive on the basis of the low-cost

assumptions until 2020. After 2019, deficits increase to a peak in 2032 and

decrease thereafter. By 2057, the OASDI balance becomes positive, reaching

0.20 percent of GDP in 2083. The OASDI balance is projected to be positive

through 2015 on the basis of the intermediate assumptions and negative

thereafter. Annual deficits increase from 2016 through 2035, decrease from

2036 through 2053, and then increase thereafter. On the basis of the highcost assumptions, the OASDI balance is projected to be positive through

2012, after which time balances become permanently negative, with increasing deficits thereafter. The HI balance is projected to be negative in the first

projection year under all three sets of assumptions, with deficits generally

increasing steadily thereafter, though to different degrees, under each set of

assumptions.
183

OASDI & HI: Percent of GDP

The combined OASDI and HI balance as a percentage of GDP is projected to

be positive through 2018 under the low-cost assumptions, but negative

throughout the projection period under the intermediate and high-cost

assumptions. Between 2013 and about 2035, under all three sets of assumptions, the combined OASDI and HI balance as a percentage of GDP is generally projected to decline (or deficits increase) substantially because the babyboom generation reaches retirement eligibility age during these years. After

2035, annual deficits increase fairly steadily under the intermediate and highcost assumptions, but decrease through 2054 and increase thereafter under

the low-cost assumptions.

By 2083, the combined OASDI and HI balances as percentages of GDP are

projected to range from a deficit of 0.85 percent for the low-cost assumptions

to a deficit of 12.03 percent for the high-cost assumptions. Projected balances differ by a much smaller amount for the tenth year, 2018, ranging from

a positive balance of 0.06 percent for the low-cost assumptions to a deficit of

1.66 percent for the high-cost assumptions.

The summarized long-range (75-year) balance as a percentage of GDP for

the combined OASDI and HI programs varies among the three alternatives,

by a relatively large amount (from a deficit of 0.18 percent, based on the

low-cost assumptions, to a deficit of 6.11 percent, based on the high-cost

assumptions). The 25-year summarized balance varies by a smaller amount

(from a positive balance of 0.34 percent to a deficit of 2.08 percent). Summarized rates are calculated on the present-value basis including the trust fund

balances on January 1, 2009, and the cost of reaching a target trust fund level

equal to 100 percent of the following year’s annual cost at the end of the

period. (See section IV.B.4 for further explanation.)
Appendices

184

Table VI.F4.—OASDI and HI Annual and Summarized Income, Cost, and Balance

as a Percentage of GDP, Calendar Years 2009-85

Calendar year

Percentage of GDP GDP in

dollars

(billions)

OASDI HI Combined

Incomea Cost Balance Incomea Cost Balance Incomea Cost Balance

Intermediate:

2009 . . . . . . 4.98 4.84 0.13 1.50 1.71 -0.21 6.48 6.56 -0.08 $14,088

2010 . . . . . . 4.99 4.86 .13 1.52 1.71 -.19 6.51 6.57 -.07 14,585

2011 . . . . . . 4.95 4.76 .18 1.51 1.72 -.21 6.46 6.49 -.03 15,437

2012 . . . . . . 4.95 4.72 .23 1.51 1.75 -.24 6.46 6.46 -.01 16,382

2013 . . . . . . 4.93 4.74 .19 1.51 1.78 -.27 6.44 6.53 -.08 17,355

2014 . . . . . . 4.90 4.80 .10 1.51 1.85 -.33 6.41 6.65 -.23 18,327

2015 . . . . . . 4.90 4.89 .01 1.52 1.81 -.30 6.41 6.70 -.28 19,267

2016 . . . . . . 4.89 4.99 -.09 1.52 1.85 -.33 6.41 6.83 -.42 20,165

2017 . . . . . . 4.89 5.09 -.20 1.52 1.89 -.37 6.41 6.98 -.57 21,107

2018 . . . . . . 4.88 5.20 -.32 1.52 1.94 -.42 6.40 7.14 -.74 22,087

2020 . . . . . . 4.87 5.42 -.55 1.53 2.05 -.52 6.40 7.47 -1.07 24,158

2025 . . . . . . 4.84 5.85 -1.01 1.54 2.38 -.83 6.38 8.22 -1.85 30,222

2030 . . . . . . 4.80 6.11 -1.30 1.55 2.75 -1.20 6.35 8.85 -2.50 37,818

2035 . . . . . . 4.76 6.16 -1.40 1.55 3.11 -1.57 6.31 9.27 -2.96 47,435

2040 . . . . . . 4.72 6.06 -1.34 1.54 3.43 -1.89 6.26 9.49 -3.23 59,581

2045 . . . . . . 4.68 5.92 -1.25 1.53 3.66 -2.14 6.20 9.58 -3.38 74,801

2050 . . . . . . 4.64 5.82 -1.18 1.52 3.85 -2.33 6.15 9.67 -3.52 93,703

2055 . . . . . . 4.60 5.77 -1.17 1.51 4.02 -2.51 6.11 9.79 -3.69 117,181

2060 . . . . . . 4.57 5.76 -1.20 1.50 4.21 -2.71 6.07 9.97 -3.90 146,547

2065 . . . . . . 4.53 5.76 -1.23 1.49 4.41 -2.91 6.03 10.17 -4.14 183,196

2070 . . . . . . 4.50 5.78 -1.28 1.49 4.61 -3.12 5.99 10.39 -4.40 228,914

2075 . . . . . . 4.47 5.80 -1.34 1.48 4.80 -3.32 5.95 10.60 -4.66 285,852

2080 . . . . . . 4.43 5.84 -1.40 1.47 4.96 -3.48 5.91 10.79 -4.89 356,490

2085 . . . . . . 4.40 5.87 -1.47 1.47 5.09 -3.63 5.87 10.97 -5.10 444,284

Summarized rates: b

25-year:

 2009-33 . . . 5.60 5.67 -.06 1.63 2.28 -.66 7.23 7.95 -.72

50-year:

 2009-58 . . . 5.20 5.75 -.55 1.58 2.88 -1.30 6.78 8.63 -1.85

75-year

 2009-83 . . . 5.03 5.75 -.72 1.56 3.30 -1.74 6.59 9.05 -2.46

Low-cost:

2009 . . . . . . 4.95 4.77 .17 1.50 1.65 -.15 6.45 6.42 .03 14,245

2010 . . . . . . 5.00 4.76 .24 1.51 1.62 -.10 6.51 6.38 .13 14,788

2011 . . . . . . 4.95 4.65 .30 1.51 1.60 -.09 6.45 6.25 .21 15,651

2012 . . . . . . 4.89 4.53 .36 1.51 1.59 -.08 6.40 6.12 .28 16,590

2013 . . . . . . 4.94 4.51 .43 1.51 1.60 -.09 6.45 6.10 .35 17,511

2014 . . . . . . 4.93 4.55 .38 1.51 1.63 -.12 6.44 6.18 .26 18,345

2015 . . . . . . 4.93 4.61 .33 1.51 1.56 -.05 6.44 6.17 .28 19,171

2016 . . . . . . 4.93 4.66 .26 1.51 1.56 -.05 6.44 6.22 .22 20,016

2017 . . . . . . 4.92 4.73 .19 1.52 1.57 -.05 6.44 6.29 .14 20,895

2018 . . . . . . 4.92 4.79 .12 1.52 1.58 -.06 6.43 6.37 .06 21,805

2020 . . . . . . 4.91 4.96 -.05 1.52 1.60 -.08 6.43 6.56 -.13 23,685

2025 . . . . . . 4.88 5.26 -.38 1.53 1.70 -.17 6.42 6.96 -.55 29,056

2030 . . . . . . 4.86 5.42 -.56 1.54 1.79 -.25 6.40 7.21 -.82 35,631

2035 . . . . . . 4.83 5.39 -.55 1.54 1.85 -.31 6.37 7.23 -.87 43,891

2040 . . . . . . 4.80 5.21 -.41 1.53 1.88 -.35 6.33 7.09 -.76 54,322

2045 . . . . . . 4.78 5.01 -.23 1.52 1.89 -.37 6.30 6.91 -.61 67,384

2050 . . . . . . 4.76 4.86 -.10 1.52 1.92 -.40 6.28 6.78 -.50 83,604

2055 . . . . . . 4.74 4.76 -.01 1.51 1.97 -.46 6.26 6.73 -.47 103,762

2060 . . . . . . 4.73 4.69 .04 1.51 2.07 -.56 6.24 6.76 -.52 128,876

2065 . . . . . . 4.72 4.61 .11 1.50 2.18 -.68 6.22 6.79 -.57 160,308

2070 . . . . . . 4.71 4.55 .16 1.50 2.29 -.79 6.21 6.84 -.63 199,610

2075 . . . . . . 4.69 4.49 .20 1.50 2.40 -.90 6.19 6.89 -.70 248,584

2080 . . . . . . 4.68 4.47 .21 1.49 2.49 -1.00 6.18 6.97 -.79 309,329

2085 . . . . . . 4.67 4.48 .19 1.49 2.58 -1.09 6.17 7.06 -.90 384,507
185

OASDI & HI: Percent of GDP

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

The difference between trust fund operations expressed as percentages of

taxable payroll and those expressed as percentages of GDP can be understood by analyzing the estimated ratios of OASDI taxable payroll to GDP,

which are presented in table VI.F5. HI taxable payroll is about 25 percent

larger than the OASDI taxable payroll throughout the long-range period (see

Appendix VI.F.1 for a detailed description of the difference). The cost as a

Low-cost (cont.):

Summarized rates: b

25-year:

 2009-33 . . . 5.64 5.19 0.45 1.62 1.73 -0.11 7.26 6.92 0.34

50-year:

 2009-58 . . . 5.27 5.09 .18 1.58 1.80 -.22 6.85 6.89 -.04

75-year

 2009-83 . . . 5.13 4.94 .19 1.56 1.93 -.37 6.69 6.87 -.18

High-cost:

2009 . . . . . . 4.98 4.87 .11 1.50 1.77 -.26 6.49 6.64 -.15 $14,052

2010 . . . . . . 4.98 4.93 .05 1.52 1.80 -.28 6.50 6.72 -.23 14,505

2011 . . . . . . 4.97 4.85 .12 1.51 1.84 -.33 6.48 6.69 -.21 15,345

2012 . . . . . . 4.96 4.95 .01 1.51 1.91 -.40 6.47 6.86 -.39 16,026

2013 . . . . . . 4.92 5.05 -.13 1.51 1.99 -.47 6.43 7.03 -.60 17,097

2014 . . . . . . 4.84 5.12 -.29 1.51 2.07 -.56 6.35 7.19 -.84 18,616

2015 . . . . . . 4.82 5.25 -.42 1.52 2.08 -.57 6.34 7.33 -.99 19,977

2016 . . . . . . 4.82 5.37 -.55 1.52 2.17 -.65 6.34 7.54 -1.19 21,204

2017 . . . . . . 4.82 5.49 -.67 1.52 2.26 -.73 6.34 7.75 -1.40 22,381

2018 . . . . . . 4.81 5.64 -.82 1.53 2.36 -.84 6.34 8.00 -1.66 23,490

2020 . . . . . . 4.80 5.91 -1.11 1.53 2.59 -1.05 6.34 8.50 -2.16 25,876

2025 . . . . . . 4.77 6.47 -1.70 1.55 3.29 -1.74 6.31 9.75 -3.44 33,026

2030 . . . . . . 4.72 6.83 -2.11 1.55 4.17 -2.62 6.28 11.01 -4.73 42,188

2035 . . . . . . 4.68 7.02 -2.35 1.56 5.19 -3.63 6.23 12.21 -5.98 53,878

2040 . . . . . . 4.62 7.05 -2.42 1.55 6.18 -4.63 6.17 13.23 -7.05 68,666

2045 . . . . . . 4.57 7.02 -2.45 1.54 7.00 -5.46 6.11 14.02 -7.91 87,203

2050 . . . . . . 4.51 7.02 -2.51 1.53 7.63 -6.11 6.04 14.66 -8.62 110,168

2055 . . . . . . 4.46 7.07 -2.61 1.52 8.10 -6.58 5.98 15.17 -9.19 138,676

2060 . . . . . . 4.41 7.17 -2.76 1.51 8.45 -6.95 5.92 15.62 -9.71 174,218

2065 . . . . . . 4.36 7.29 -2.93 1.50 8.81 -7.31 5.86 16.09 -10.23 218,416

2070 . . . . . . 4.32 7.45 -3.13 1.49 9.16 -7.67 5.81 16.60 -10.80 273,193

2075 . . . . . . 4.27 7.62 -3.35 1.49 9.48 -7.99 5.76 17.09 -11.33 341,065

2080 . . . . . . 4.22 7.77 -3.54 1.48 9.73 -8.25 5.70 17.50 -11.79 425,014

2085 . . . . . . 4.18 7.88 -3.70 1.47 9.94 -8.47 5.65 17.82 -12.17 529,364

Summarized rates: b

25-year:

 2009-33 . . . 5.53 6.19 -.67 1.63 3.05 -1.42 7.16 9.24 -2.08

50-year:

 2009-58 . . . 5.10 6.54 -1.44 1.59 4.78 -3.19 6.69 11.32 -4.63

75-year

 2009-83 . . . 4.91 6.75 -1.84 1.57 5.84 -4.27 6.48 12.59 -6.11

a Income for individual years excludes interest on the trust funds. Interest is implicitly reflected in all summarized values.

b Summarized rates are calculated on the present-value basis including the value of the trust funds on

January 1, 2009, and the cost of reaching a target trust fund level equal to 100 percent of annual cost at the end

of the period.

Table VI.F4.—OASDI and HI Annual and Summarized Income, Cost, and Balance

as a Percentage of GDP, Calendar Years 2009-85 (Cont.)

Calendar year

Percentage of GDP GDP in

dollars

(billions)

OASDI HI Combined

Incomea Cost Balance Incomea Cost Balance Incomea Cost Balance
Appendices

186

percentage of GDP is equal to the cost as a percentage of taxable payroll

multiplied by the ratio of taxable payroll to GDP.

Projections of GDP are based on the projected increases in U.S. employment,

labor productivity, average hours worked, and the GDP implicit price deflator. Projections of taxable payroll reflect the projected growth in GDP, along

with assumed changes in the ratio of worker compensation to GDP, the ratio

of earnings to worker compensation, the ratio of OASDI covered earnings to

total earnings, and the ratio of taxable to total covered earnings.

Over the long-range period, projected growth in taxable payroll differs from

projected growth in GDP primarily due to the assumed trend in the ratio of

wages to total employee compensation—i.e., wages plus fringe benefits. The

ratio of earnings to total worker compensation declined at an average annual

rate of 0.23 percent for the 40 years from 1967 to 2007. For the 10-year periods 1967-77, 1977-87, 1987-97, and 1997-2007, the average annual rates of

change were -0.63, -0.19, 0.09 and -0.16 percent, respectively. Ultimate

future annual rates of decline in the ratio of wages to employee compensation are assumed to be 0.1, 0.2, and 0.3 percent for the low-cost, intermediate, and high-cost assumptions, respectively. An additional factor that has

made the overall ratio of taxable payroll to GDP decline in recent years is the

decline in the ratio of taxable wages to covered wages, as a result of the relatively greater increases in wages for persons earning above the contribution

and benefit base. This decline in the taxable ratio is assumed to continue at a

slower pace through 2018, with no further decline thereafter.

Table VI.F5.—Ratio of OASDI Taxable Payroll to GDP, Calendar Years 2009-85 

Calendar year Intermediate Low-cost High-cost

2009 . . . . . . . . . . . . . . . . . . . . . . . . . 0.392 0.392 0.392

2010 . . . . . . . . . . . . . . . . . . . . . . . . . .389 .389 .389

2011 . . . . . . . . . . . . . . . . . . . . . . . . . .385 .385 .387

2012 . . . . . . . . . . . . . . . . . . . . . . . . . .385 .381 .385

2013 . . . . . . . . . . . . . . . . . . . . . . . . . .383 .385 .381

2014 . . . . . . . . . . . . . . . . . . . . . . . . . .381 .384 .375

2015 . . . . . . . . . . . . . . . . . . . . . . . . . .379 .383 .372

2016 . . . . . . . . . . . . . . . . . . . . . . . . . .378 .382 .372

2017 . . . . . . . . . . . . . . . . . . . . . . . . . .377 .381 .371

2018 . . . . . . . . . . . . . . . . . . . . . . . . . .376 .380 .369

2020 . . . . . . . . . . . . . . . . . . . . . . . . . .374 .379 .367

2025 . . . . . . . . . . . . . . . . . . . . . . . . . .369 .375 .361

2030 . . . . . . . . . . . . . . . . . . . . . . . . . .364 .372 .355

2035 . . . . . . . . . . . . . . . . . . . . . . . . . .360 .369 .350

2040 . . . . . . . . . . . . . . . . . . . . . . . . . .357 .367 .345

2045 . . . . . . . . . . . . . . . . . . . . . . . . . .354 .366 .340

2050 . . . . . . . . . . . . . . . . . . . . . . . . . .350 .364 .336

2055 . . . . . . . . . . . . . . . . . . . . . . . . . .347 .363 .331

2060 . . . . . . . . . . . . . . . . . . . . . . . . . .345 .362 .326

2065 . . . . . . . . . . . . . . . . . . . . . . . . . .342 .362 .322

2070 . . . . . . . . . . . . . . . . . . . . . . . . . .339 .361 .317

2075 . . . . . . . . . . . . . . . . . . . . . . . . . .336 .360 .312

2080 . . . . . . . . . . . . . . . . . . . . . . . . . .333 .359 .308

2085 . . . . . . . . . . . . . . . . . . . . . . . . . .330 .358 .303
187

OASDI & HI: Estimates in Dollars

3. Estimates in Dollars

This section presents long-range projections in dollars of the operations of

the combined OASI and DI Trust Funds and in some cases the HI Trust

Fund. Meaningful comparison of current dollar values over long periods of

time can be difficult because of the effect of inflation. Some means of

removing inflation is thus generally desirable. Several economic series or

indices are provided to allow current dollars to be adjusted for changes in

prices, wages, and certain other aspects of economic growth during the projection period.

The selection of a particular index for adjustment of current dollars depends

upon the analyst’s decision as to which index provides the most useful standard for adjusting dollar amounts, over time, to create values that are appropriately comparable. Table VI.F6 presents five such indices for adjustment.

Adjustment of any series of values is accomplished by dividing the value for

each year by the corresponding index values for the year. This adjustment

removes the inflation in the index from the series of values.

One of the most common forms of standardization is based on some measure

of change in the prices of consumer goods. One such price index is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W,

hereafter referred to as CPI), which is published by the Bureau of Labor Statistics, Department of Labor. This is the index used to determine annual

increases in OASDI monthly benefits payable after the year of initial eligibility. The CPI is assumed to increase ultimately at annual rates of 1.8, 2.8, and

3.8 percent for the low-cost, intermediate, and high-cost sets of assumptions,

respectively. Constant-dollar values (those calculated by dividing by the

adjusted CPI in table VI.F6) indicate the relative purchasing power of the

values over time. Constant-dollar values are provided in table VI.F7.

Another type of standardization combines the effects of price inflation and

real-wage growth. The wage index presented here is the national average

wage index, as defined in section 215(i)(1)(G) of the Social Security Act.

This index is used to make annual adjustments to many earnings-related

quantities embodied in the Social Security Act, such as the contribution and

benefit base. The average annual wage is assumed to increase ultimately by

3.5, 3.9, and 4.3 percent under the low-cost, intermediate, and high-cost

assumptions, respectively. Wage-indexed values indicate the level of a series

relative to the standard-of-living of workers over time.

The taxable payroll index adjusts for the effects of changes in the number of

workers and changes in the proportion of earnings that are taxable, as well as
Appendices

188

for the effects of price inflation and real-wage growth. The OASDI taxable

payroll consists of all earnings subject to OASDI taxation, adjusted for the

lower effective tax rate on multiple-employer excess wages. Values adjusted

by dividing by the taxable payroll indicate the percentage of payroll that each

value represents, and thus the extent to which the series of values increases

or decreases as a percent of payroll over time.

The GDP index adjusts for the growth in the aggregate amount of goods and

services produced in the United States. Values adjusted by GDP (see Appendix VI.F.2) indicate their relative share of the total output of the economy.

No explicit assumptions are made about growth in taxable payroll or GDP.

These series are computed reflecting the other more basic demographic and

economic assumptions, as discussed in sections V.A and V.B, respectively.

Discounting at the rate of interest is another way of adjusting current dollars.

The series of interest-rate factors included here is based on the average of the

assumed annual interest rates for special public-debt obligations issuable to

the trust funds for each year. This series is slightly different from the interest

rates used to create summarized values elsewhere in this report, where the

actual yield on currently-held trust fund assets is used for each year. Ultimate

nominal interest rates, which, in practice, are compounded semiannually, are

assumed to be approximately 5.4, 5.7, and 5.9 percent for the low-cost, intermediate, and high-cost assumptions, respectively.
189

OASDI & HI: Estimates in Dollars

Table VI.F6.—Selected Economic Variables, Calendar Years 2008-85

[GDP and taxable payroll in billions]

Calendar year

Adjusted

CPIa Average

wage indexb Taxablepayrollc

Gross

domestic

product

Compound

interest-rate

factord

Intermediate:

2008 . . . . . . . . . . . . . 101.03 $41,679.58 $5,493 $14,260 0.9709

2009 . . . . . . . . . . . . . 100.00 42,041.84 5,525 14,088 1.0000

2010 . . . . . . . . . . . . . 101.65 43,451.28 5,676 14,585 1.0403

2011 . . . . . . . . . . . . . 104.04 45,194.92 5,942 15,437 1.0933

2012 . . . . . . . . . . . . . 106.85 47,013.95 6,312 16,382 1.1561

2013 . . . . . . . . . . . . . 110.13 48,969.10 6,647 17,355 1.2268

2014 . . . . . . . . . . . . . 113.51 50,962.45 6,974 18,327 1.3010

2015 . . . . . . . . . . . . . 116.70 53,085.22 7,310 19,267 1.3760

2016 . . . . . . . . . . . . . 119.97 55,070.22 7,629 20,165 1.4543

2017 . . . . . . . . . . . . . 123.32 57,165.32 7,961 21,107 1.5373

2018 . . . . . . . . . . . . . 126.78 59,362.72 8,298 22,087 1.6263

2020 . . . . . . . . . . . . . 133.98 64,015.44 9,028 24,158 1.8198

2025 . . . . . . . . . . . . . 153.81 77,313.68 11,146 30,222 2.4103

2030 . . . . . . . . . . . . . 176.59 93,515.03 13,779 37,818 3.1923

2035 . . . . . . . . . . . . . 202.73 113,303.44 17,093 47,435 4.2281

2040 . . . . . . . . . . . . . 232.75 137,360.95 21,258 59,581 5.6000

2045 . . . . . . . . . . . . . 267.21 166,519.95 26,445 74,801 7.4171

2050 . . . . . . . . . . . . . 306.78 201,741.66 32,839 93,703 9.8237

2055 . . . . . . . . . . . . . 352.20 244,272.24 40,718 117,181 13.0112

2060 . . . . . . . . . . . . . 404.35 295,727.43 50,492 146,547 17.2330

2065 . . . . . . . . . . . . . 464.22 358,142.06 62,590 183,196 22.8246

2070 . . . . . . . . . . . . . 532.95 433,747.20 77,552 228,914 30.2305

2075 . . . . . . . . . . . . . 611.86 525,251.00 96,025 285,852 40.0395

2080 . . . . . . . . . . . . . 702.45 636,051.02 118,735 356,490 53.0311

2085 . . . . . . . . . . . . . 806.46 770,353.35 146,739 444,284 70.2381

Low-cost:

2008 . . . . . . . . . . . . . 101.21 41,698.13 5,496 14,274 .9681

2009 . . . . . . . . . . . . . 100.00 42,276.96 5,577 14,245 1.0000

2010 . . . . . . . . . . . . . 101.26 43,659.88 5,750 14,788 1.0387

2011 . . . . . . . . . . . . . 102.70 45,301.16 6,029 15,651 1.0870

2012 . . . . . . . . . . . . . 104.45 46,961.47 6,321 16,590 1.1438

2013 . . . . . . . . . . . . . 106.62 48,656.14 6,742 17,511 1.2071

2014 . . . . . . . . . . . . . 108.82 50,243.82 7,036 18,345 1.2713

2015 . . . . . . . . . . . . . 110.79 52,029.44 7,343 19,171 1.3375

2016 . . . . . . . . . . . . . 112.78 53,791.01 7,646 20,016 1.4086

2017 . . . . . . . . . . . . . 114.81 55,658.55 7,962 20,895 1.4853

2018 . . . . . . . . . . . . . 116.88 57,642.09 8,289 21,805 1.5662

2020 . . . . . . . . . . . . . 121.13 61,700.55 8,967 23,685 1.7421

2025 . . . . . . . . . . . . . 132.43 73,074.23 10,892 29,056 2.2731

2030 . . . . . . . . . . . . . 144.78 86,621.69 13,242 35,631 2.9659

2035 . . . . . . . . . . . . . 158.29 102,798.62 16,198 43,891 3.8698

2040 . . . . . . . . . . . . . 173.06 122,108.41 19,941 54,322 5.0492

2045 . . . . . . . . . . . . . 189.20 145,111.83 24,635 67,384 6.5882

2050 . . . . . . . . . . . . . 206.86 172,415.87 30,466 83,604 8.5961

2055 . . . . . . . . . . . . . 226.16 204,880.30 37,708 103,762 11.2160

2060 . . . . . . . . . . . . . 247.26 243,538.16 46,717 128,876 14.6345

2065 . . . . . . . . . . . . . 270.32 289,575.63 57,974 160,308 19.0948

2070 . . . . . . . . . . . . . 295.55 344,303.73 72,021 199,610 24.9145

2075 . . . . . . . . . . . . . 323.12 409,331.60 89,482 248,584 32.5080

2080 . . . . . . . . . . . . . 353.27 486,548.41 111,075 309,329 42.4158

2085 . . . . . . . . . . . . . 386.23 578,362.07 137,741 384,507 55.3433
Appendices

190

Table VI.F7 shows estimated operations of the combined OASI and DI Trust

Funds in constant 2009 dollars (i.e., adjusted by the CPI indexing series as

discussed above). Items included in the table are: income excluding interest,

interest income, total income, total cost, and assets at the end of the year.

Income excluding interest consists of payroll-tax contributions, income from

taxation of benefits, and miscellaneous reimbursements from the General

Fund of the Treasury. Cost consists of benefit payments, administrative

expenses, net transfers from the OASI and DI Trust Funds to the Railroad

Retirement program under the financial-interchange provisions, and payments for vocational rehabilitation services for disabled beneficiaries. These

estimates are based on the low-cost, intermediate, and high-cost sets of

assumptions.

High-cost:

2008 . . . . . . . . . . . . . 100.38 $41,672.33 $5,490 $14,252 0.9677

2009 . . . . . . . . . . . . . 100.00 42,100.53 5,511 14,052 1.0000

2010 . . . . . . . . . . . . . 102.21 43,502.26 5,638 14,505 1.0416

2011 . . . . . . . . . . . . . 104.79 45,273.05 5,938 15,345 1.0952

2012 . . . . . . . . . . . . . 109.29 46,607.81 6,176 16,026 1.1567

2013 . . . . . . . . . . . . . 115.82 49,339.09 6,521 17,097 1.2466

2014 . . . . . . . . . . . . . 122.56 52,785.62 6,972 18,616 1.3564

2015 . . . . . . . . . . . . . 128.31 56,005.14 7,441 19,977 1.4579

2016 . . . . . . . . . . . . . 133.37 58,775.40 7,880 21,204 1.5539

2017 . . . . . . . . . . . . . 138.43 61,324.49 8,297 22,381 1.6510

2018 . . . . . . . . . . . . . 143.70 63,781.41 8,678 23,490 1.7494

2020 . . . . . . . . . . . . . 154.82 69,266.04 9,496 25,876 1.9649

2025 . . . . . . . . . . . . . 186.56 85,325.34 11,925 33,026 2.6270

2030 . . . . . . . . . . . . . 224.81 105,333.13 14,997 42,188 3.5121

2035 . . . . . . . . . . . . . 270.89 130,312.17 18,869 53,878 4.6956

2040 . . . . . . . . . . . . . 326.43 161,272.36 23,706 68,666 6.2777

2045 . . . . . . . . . . . . . 393.34 199,485.10 29,687 87,203 8.3930

2050 . . . . . . . . . . . . . 473.98 246,504.19 36,984 110,168 11.2211

2055 . . . . . . . . . . . . . 571.14 304,157.52 45,902 138,676 15.0020

2060 . . . . . . . . . . . . . 688.23 375,060.42 56,850 174,218 20.0570

2065 . . . . . . . . . . . . . 829.31 462,499.14 70,253 218,416 26.8152

2070 . . . . . . . . . . . . . 999.32 570,425.72 86,602 273,193 35.8506

2075 . . . . . . . . . . . . . 1,204.18 703,463.63 106,544 341,065 47.9305

2080 . . . . . . . . . . . . . 1,451.04 867,652.91 130,823 425,014 64.0807

2085 . . . . . . . . . . . . . 1,748.50 1,070,658.02 160,580 529,364 85.6727

a The adjusted CPI is the CPI-W indexed to calendar year 2009.

b The average wage index is used to automatically adjust the contribution and benefit base and other wageindexed program amounts. (See “Average wage index” in the glossary.)

c Taxable payroll consists of total earnings subject to OASDI contribution rates, adjusted to reflect the lower

effective contribution rates (compared to the combined employee-employer rate) that apply to multipleemployer “excess wages.”

d The compound interest-rate factor is based on the average of the assumed annual interest rates for special

public-debt obligations issuable to the trust funds in the 12 months of the year, under each alternative.

Table VI.F6.—Selected Economic Variables, Calendar Years 2008-85 (Cont.)

[GDP and taxable payroll in billions]

Calendar year

Adjusted

CPIa Averagewage indexb Taxablepayrollc

Gross

domestic

product

Compound

interest-rate

factord
191

OASDI & HI: Estimates in Dollars

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

Table VI.F7.—Operations of the Combined OASI and DI Trust Funds,

in Constant 2009 Dollars,a Calendar Years 2009-85

[In billions]

a The adjustment from current to constant dollars is by the adjusted CPI indexing series shown in table

VI.F6.

Calendar year

Income

excluding

interest

Interest

income

Total

income Cost

Assets at

end of year

Intermediate:

2009 . . . . . . . . . . . . . $701.3 $118.1 $819.4 $682.5 $2,555.5

2010 . . . . . . . . . . . . . 715.8 118.1 833.9 697.8 2,650.1

2011 . . . . . . . . . . . . . 733.9 121.5 855.4 706.6 2,738.2

2012 . . . . . . . . . . . . . 758.5 127.4 885.9 722.9 2,829.1

2013 . . . . . . . . . . . . . 776.8 134.7 911.5 747.0 2,909.2

2014 . . . . . . . . . . . . . 791.6 141.9 933.5 775.5 2,980.7

2015 . . . . . . . . . . . . . 808.5 147.7 956.2 806.6 3,049.0

2016 . . . . . . . . . . . . . 822.3 152.7 974.9 838.0 3,102.9

2017 . . . . . . . . . . . . . 836.3 157.5 993.9 871.1 3,141.2

2018 . . . . . . . . . . . . . 849.5 162.1 1,011.6 905.1 3,162.1

2020 . . . . . . . . . . . . . 877.4 168.0 1,045.4 976.9 3,146.4

2025 . . . . . . . . . . . . . 950.1 157.3 1,107.4 1,149.4 2,757.9

2030 . . . . . . . . . . . . . 1,028.3 109.1 1,137.4 1,307.8 1,833.2

2035b . . . . . . . . . . . .

b Estimates for later years are not shown because the combined OASI and DI Trust Funds are estimated to

become exhausted in 2037 under the intermediate assumptions and in 2029 under the high-cost assumptions.

1,114.4 33.8 1,148.2 1,441.8 429.4

Low-cost: 

2009 . . . . . . . . . . . . . 704.9 118.9 823.8 680.1 2,562.4

2010 . . . . . . . . . . . . . 730.3 120.1 850.5 695.6 2,685.3

2011 . . . . . . . . . . . . . 753.7 124.0 877.8 708.4 2,816.9

2012 . . . . . . . . . . . . . 777.5 130.6 908.0 719.9 2,957.9

2013 . . . . . . . . . . . . . 811.2 139.2 950.4 740.1 3,108.1

2014 . . . . . . . . . . . . . 831.4 148.1 979.5 766.9 3,257.7

2015 . . . . . . . . . . . . . 853.4 156.0 1,009.4 797.0 3,412.3

2016 . . . . . . . . . . . . . 874.2 164.6 1,038.8 827.8 3,563.0

2017 . . . . . . . . . . . . . 895.5 174.3 1,069.9 860.4 3,709.5

2018 . . . . . . . . . . . . . 917.0 184.5 1,101.4 894.1 3,851.3

2020 . . . . . . . . . . . . . 959.7 204.3 1,164.0 969.0 4,109.3

2025 . . . . . . . . . . . . . 1,071.7 241.9 1,313.6 1,155.2 4,602.5

2030 . . . . . . . . . . . . . 1,196.1 256.2 1,452.3 1,334.1 4,847.5

2035 . . . . . . . . . . . . . 1,340.1 262.7 1,602.9 1,493.8 4,962.4

2040 . . . . . . . . . . . . . 1,508.2 271.8 1,780.0 1,636.8 5,145.7

2045 . . . . . . . . . . . . . 1,702.3 293.9 1,996.2 1,785.7 5,589.3

2050 . . . . . . . . . . . . . 1,923.9 332.9 2,256.8 1,964.2 6,360.0

2055 . . . . . . . . . . . . . 2,177.0 391.3 2,568.3 2,183.5 7,498.0

2060 . . . . . . . . . . . . . 2,466.4 469.7 2,936.2 2,443.8 9,018.8

2065 . . . . . . . . . . . . . 2,798.5 573.5 3,372.0 2,735.5 11,033.1

2070 . . . . . . . . . . . . . 3,178.7 710.0 3,888.7 3,069.9 13,682.3

2075 . . . . . . . . . . . . . 3,611.4 886.6 4,498.0 3,457.7 17,101.2

2080 . . . . . . . . . . . . . 4,100.6 1,108.7 5,209.3 3,917.2 21,391.7

2085 . . . . . . . . . . . . . 4,653.0 1,379.3 6,032.2 4,463.1 26,603.1

High-cost:

2009 . . . . . . . . . . . . . 700.1 118.5 818.6 685.0 2,552.3

2010 . . . . . . . . . . . . . 706.8 118.4 825.2 699.0 2,623.4

2011 . . . . . . . . . . . . . 727.9 121.1 849.0 710.0 2,697.7

2012 . . . . . . . . . . . . . 727.8 123.9 851.7 726.3 2,712.1

2013 . . . . . . . . . . . . . 725.8 128.4 854.2 745.3 2,668.0

2014 . . . . . . . . . . . . . 735.0 138.2 873.2 778.4 2,616.0

2015 . . . . . . . . . . . . . 750.7 142.7 893.4 816.8 2,575.4

2016 . . . . . . . . . . . . . 766.4 143.7 910.2 853.6 2,534.4

2017 . . . . . . . . . . . . . 779.3 142.8 922.0 887.4 2,476.3

2018 . . . . . . . . . . . . . 787.0 140.4 927.3 921.2 2,391.7

2020 . . . . . . . . . . . . . 802.5 127.0 929.5 987.7 2,137.4

2025b . . . . . . . . . . . . 843.6 66.3 909.9 1,144.5 1,006.2
Appendices

192

Figure VI.F1 provides a comparison of annual cost with total annual income

(including interest) and annual income excluding interest, for the OASDI

program under intermediate assumptions. All values are expressed in constant dollars, as shown in table VI.F7. The difference between the income

values for each year is equal to the trust fund interest earnings. Thus the figure illustrates the fact that, under intermediate assumptions, combined

OASDI cost will be payable from (1) current tax income alone through 2015,

(2) current tax income plus amounts from the trust funds that are less than

annual interest income for years 2016 through 2023, and (3) current tax

income plus amounts from the trust funds that are greater than annual interest

income for years 2024 through 2036, i.e., through the year preceding the year

of trust fund exhaustion.

Table VI.F8 shows estimated operations of the combined OASI and DI Trust

Funds in current dollars—that is in dollars unadjusted for price inflation.

Items included in the table are: income excluding interest, interest income,

total income, total cost, and assets at the end of the year. These estimates,

based on the low-cost, intermediate, and high-cost sets of demographic and

economic assumptions, are presented to facilitate independent analysis.

 Figure VI.F1.—Estimated OASDI Income and Cost in Constant Dollars,

Based on Intermediate Assumptions

[In billions]

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2005 2010 2015 2020 2025 2030 2035 2040

Calendar year

Cost

Total income

Income excluding interest
193

OASDI & HI: Estimates in Dollars

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

Table VI.F8.—Operations of the Combined OASI and DI Trust Funds, 

in Current Dollars, Calendar Years 2009-85

[In billions]

Calendar year

Income

excluding

interest

Interest

income

Total

income Cost

Assets at

end of year

Intermediate:

2009 . . . . . . . . . . . . . $701.3 $118.1 $819.4 $682.5 $2,555.5

2010 . . . . . . . . . . . . . 727.6 120.1 847.7 709.3 2,693.9

2011 . . . . . . . . . . . . . 763.6 126.4 890.0 735.1 2,848.8

2012 . . . . . . . . . . . . . 810.4 136.1 946.5 772.4 3,022.9

2013 . . . . . . . . . . . . . 855.5 148.4 1,003.9 822.7 3,204.0

2014 . . . . . . . . . . . . . 898.6 161.1 1,059.7 880.2 3,383.5

2015 . . . . . . . . . . . . . 943.5 172.4 1,115.9 941.2 3,558.1

2016 . . . . . . . . . . . . . 986.4 183.1 1,169.6 1,005.3 3,722.4

2017 . . . . . . . . . . . . . 1,031.4 194.3 1,225.7 1,074.3 3,873.8

2018 . . . . . . . . . . . . . 1,077.0 205.5 1,282.5 1,147.5 4,008.8

2020 . . . . . . . . . . . . . 1,175.5 225.1 1,400.6 1,308.8 4,215.4

2025 . . . . . . . . . . . . . 1,461.3 242.0 1,703.3 1,767.9 4,242.0

2030 . . . . . . . . . . . . . 1,815.9 192.7 2,008.6 2,309.3 3,237.2

2035a . . . . . . . . . . . .

a Estimates for later years are not shown because the combined OASI and DI Trust Funds are estimated to

become exhausted in 2037 under the intermediate assumptions and in 2029 under the high-cost assumptions.

2,259.2 68.6 2,327.8 2,922.9 870.5

Low-cost:

2009 . . . . . . . . . . . . . 704.9 118.9 823.8 680.1 2,562.4

2010 . . . . . . . . . . . . . 739.5 121.6 861.2 704.4 2,719.1

2011 . . . . . . . . . . . . . 774.1 127.4 901.5 727.6 2,893.1

2012 . . . . . . . . . . . . . 812.1 136.4 948.4 752.0 3,089.5

2013 . . . . . . . . . . . . . 864.9 148.4 1,013.3 789.0 3,313.8

2014 . . . . . . . . . . . . . 904.8 161.1 1,065.9 834.6 3,545.2

2015 . . . . . . . . . . . . . 945.5 172.9 1,118.3 883.0 3,780.5

2016 . . . . . . . . . . . . . 985.9 185.6 1,171.5 933.6 4,018.4

2017 . . . . . . . . . . . . . 1,028.2 200.2 1,228.3 987.8 4,259.0

2018 . . . . . . . . . . . . . 1,071.8 215.6 1,287.4 1,045.0 4,501.3

2020 . . . . . . . . . . . . . 1,162.4 247.4 1,409.9 1,173.7 4,977.4

2025 . . . . . . . . . . . . . 1,419.3 320.3 1,739.6 1,529.8 6,094.9

2030 . . . . . . . . . . . . . 1,731.7 370.9 2,102.7 1,931.6 7,018.3

2035 . . . . . . . . . . . . . 2,121.3 415.9 2,537.2 2,364.5 7,855.0

2040 . . . . . . . . . . . . . 2,610.1 470.4 3,080.5 2,832.5 8,905.0

2045 . . . . . . . . . . . . . 3,220.9 556.0 3,776.9 3,378.6 10,575.2

2050 . . . . . . . . . . . . . 3,979.6 688.7 4,668.3 4,063.1 13,156.0

2055 . . . . . . . . . . . . . 4,923.3 885.0 5,808.4 4,938.0 16,957.1

2060 . . . . . . . . . . . . . 6,098.4 1,161.5 7,259.9 6,042.5 22,299.4

2065 . . . . . . . . . . . . . 7,565.0 1,550.3 9,115.3 7,394.7 29,825.2

2070 . . . . . . . . . . . . . 9,394.5 2,098.5 11,493.0 9,072.9 40,437.4

2075 . . . . . . . . . . . . . 11,669.2 2,864.7 14,533.9 11,172.5 55,257.2

2080 . . . . . . . . . . . . . 14,486.1 3,916.7 18,402.8 13,838.0 75,569.6

2085 . . . . . . . . . . . . . 17,970.9 5,327.1 23,298.0 17,237.6 102,748.0

High-cost:

2009 . . . . . . . . . . . . . 700.1 118.5 818.6 685.0 2,552.3

2010 . . . . . . . . . . . . . 722.4 121.0 843.4 714.4 2,681.3

2011 . . . . . . . . . . . . . 762.8 126.9 889.7 744.0 2,827.0

2012 . . . . . . . . . . . . . 795.4 135.4 930.8 793.7 2,964.0

2013 . . . . . . . . . . . . . 840.7 148.7 989.3 863.3 3,090.1

2014 . . . . . . . . . . . . . 900.8 169.4 1,070.2 954.0 3,206.3

2015 . . . . . . . . . . . . . 963.3 183.1 1,146.4 1,048.1 3,304.6

2016 . . . . . . . . . . . . . 1,022.2 191.7 1,213.8 1,138.4 3,380.0

2017 . . . . . . . . . . . . . 1,078.8 197.7 1,276.4 1,228.4 3,428.0

2018 . . . . . . . . . . . . . 1,130.8 201.7 1,332.5 1,323.8 3,436.8

2020 . . . . . . . . . . . . . 1,242.5 196.7 1,439.2 1,529.2 3,309.2

2025a . . . . . . . . . . . . 1,573.8 123.7 1,697.5 2,135.2 1,877.3
Appendices

194

Table VI.F9 shows, in current dollars, estimated income (excluding interest)

and estimated total cost (excluding the cost of accumulating target trust fund

balances) of the combined OASI and DI Trust Funds, of the HI Trust Fund,

and of the combined OASI, DI, and HI Trust Funds, based on the low-cost,

intermediate, and high-cost sets of assumptions described earlier in this

report. For OASDI, income excluding interest consists of payroll-tax contributions, proceeds from taxation of OASDI benefits, and miscellaneous transfers from the General Fund of the Treasury. Cost consists of benefit

payments, administrative expenses, net transfers from the trust funds to the

Railroad Retirement program, and payments for vocational rehabilitation

services for disabled beneficiaries. For HI, income excluding interest consists of payroll-tax contributions (including contributions from railroad

employment) and proceeds from the taxation of OASDI benefits. Total cost

consists of outlays (scheduled benefits and administrative expenses) for

insured beneficiaries. Income and cost estimates are shown on a cash basis

for the OASDI program and on an incurred basis for the HI program.

Table VI.F9 also shows the difference between income excluding interest

and cost, which is called the balance. The balance indicates the size of the

difference between tax income and cost.
195

OASDI & HI: Estimates in Dollars

Table VI.F9.—OASDI and HI Annual Income Excluding Interest, Cost, and

Balance in Current Dollars, Calendar Years 2009-85

[In billions]

Calendar

year

OASDI HI Combined

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance

Intermediate:

2009 . . . . . $701 $682 $19 $212 $241 -$30 $913 $924 -$11

2010 . . . . . 728 709 18 221 250 -28 949 959 -10

2011 . . . . . 764 735 28 233 266 -33 997 1,001 -5

2012 . . . . . 810 772 38 247 286 -39 1,058 1,058 -1

2013 . . . . . 855 823 33 262 310 -47 1,118 1,132 -14

2014 . . . . . 899 880 18 277 338 -61 1,176 1,219 -43

2015 . . . . . 944 941 2 292 349 -57 1,236 1,290 -55

2016 . . . . . 986 1,005 -19 306 373 -66 1,293 1,378 -85

2017 . . . . . 1,031 1,074 -43 322 399 -78 1,353 1,474 -121

2018 . . . . . 1,077 1,148 -71 337 429 -92 1,414 1,576 -163

2020 . . . . . 1,175 1,309 -133 370 495 -125 1,545 1,804 -258

2025 . . . . . 1,461 1,768 -307 466 718 -252 1,927 2,486 -558

2030 . . . . . 1,816 2,309 -493 585 1,039 -453 2,401 3,348 -947

2035 . . . . . 2,259 2,923 -664 734 1,476 -743 2,993 4,399 -1,406

2040 . . . . . 2,812 3,612 -800 916 2,041 -1,125 3,728 5,653 -1,925

2045 . . . . . 3,498 4,429 -931 1,142 2,740 -1,598 4,640 7,169 -2,529

2050 . . . . . 4,344 5,453 -1,109 1,421 3,608 -2,187 5,765 9,061 -3,296

2055 . . . . . 5,390 6,765 -1,376 1,767 4,711 -2,943 7,157 11,476 -4,319

2060 . . . . . 6,690 8,445 -1,755 2,200 6,167 -3,967 8,890 14,612 -5,722

2065 . . . . . 8,301 10,551 -2,250 2,737 8,076 -5,339 11,038 18,627 -7,589

2070 . . . . . 10,297 13,222 -2,924 3,403 10,556 -7,152 13,700 23,777 -10,077

2075 . . . . . 12,765 16,587 -3,822 4,231 13,716 -9,485 16,996 30,303 -13,307

2080 . . . . . 15,805 20,808 -5,003 5,252 17,669 -12,417 21,057 38,477 -17,420

2085 . . . . . 19,558 26,096 -6,538 6,516 22,635 -16,119 26,074 48,731 -22,656

Low-cost:

2009 . . . . . 705 680 25 214 235 -21 919 915 4

2010 . . . . . 740 704 35 224 239 -15 963 944 20

2011 . . . . . 774 728 47 236 250 -14 1,010 978 32

2012 . . . . . 812 752 60 250 264 -14 1,062 1,016 46

2013 . . . . . 865 789 76 264 279 -15 1,129 1,068 61

2014 . . . . . 905 835 70 276 299 -22 1,181 1,133 48

2015 . . . . . 945 883 62 290 299 -9 1,235 1,182 53

2016 . . . . . 986 934 52 303 312 -9 1,289 1,246 43

2017 . . . . . 1,028 988 40 317 327 -10 1,345 1,315 30

2018 . . . . . 1,072 1,045 27 331 344 -13 1,403 1,389 14

2020 . . . . . 1,162 1,174 -11 361 380 -19 1,523 1,554 -31

2025 . . . . . 1,419 1,530 -110 445 494 -49 1,864 2,024 -159

2030 . . . . . 1,732 1,932 -200 548 638 -91 2,279 2,570 -290

2035 . . . . . 2,121 2,365 -243 674 811 -137 2,795 3,175 -380

2040 . . . . . 2,610 2,833 -222 831 1,019 -188 3,441 3,852 -411

2045 . . . . . 3,221 3,379 -158 1,025 1,275 -250 4,246 4,654 -408

2050 . . . . . 3,980 4,063 -83 1,267 1,603 -336 5,246 5,666 -419

2055 . . . . . 4,923 4,938 -15 1,568 2,045 -477 6,491 6,983 -492

2060 . . . . . 6,098 6,042 56 1,943 2,666 -722 8,042 8,708 -666

2065 . . . . . 7,565 7,395 170 2,411 3,494 -1,082 9,976 10,888 -912

2070 . . . . . 9,394 9,073 322 2,995 4,577 -1,583 12,389 13,650 -1,261

2075 . . . . . 11,669 11,173 497 3,720 5,967 -2,246 15,390 17,139 -1,749

2080 . . . . . 14,486 13,838 648 4,621 7,714 -3,093 19,107 21,552 -2,444

2085 . . . . . 17,971 17,238 733 5,739 9,913 -4,175 23,710 27,151 -3,441
Appendices

196

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

Table VI.F10 shows projected future benefit amounts payable upon retirement at either the normal retirement age (NRA) or age 65, for workers attaining age 65 in 2009 and subsequent years. Illustrative benefit levels are shown

for workers with four separate pre-retirement earnings patterns. All estimates

are based on the intermediate assumptions in this report. The benefit amounts

are shown in constant 2009 dollars (adjusted to 2009 levels by the CPI indexing series shown in table VI.F6). Benefit amounts are also shown as percentages of the career-average relative earnings level for each case, wage

indexed to the year prior to retirement. These percentages thus represent the

benefit “replacement rate” of the career-average level of earnings.

The normal retirement age was 65 for individuals who reached age 62 before

2000, was then increased to age 66 during the period 2000-05 (at a rate of 2

months per year as workers attained age 62), and is scheduled to increase to

age 67 during the period 2017-22 (also by 2 months per year as workers

attain age 62). Thus, for the illustrative cases shown in table VI.F10, benefit

levels shown for retirement at 65 are lower than the levels shown for retireHigh-cost:

2009 . . . . . $700 $685 $15 $211 $248 -$37 $911 $933 -$22

2010 . . . . . 722 714 8 220 261 -41 942 975 -33

2011 . . . . . 763 744 19 232 282 -50 995 1,026 -32

2012 . . . . . 795 794 2 242 306 -64 1,038 1,100 -62

2013 . . . . . 841 863 -23 259 339 -81 1,099 1,203 -103

2014 . . . . . 901 954 -53 281 385 -104 1,182 1,339 -157

2015 . . . . . 963 1,048 -85 303 416 -113 1,266 1,464 -198

2016 . . . . . 1,022 1,138 -116 322 459 -137 1,345 1,598 -253

2017 . . . . . 1,079 1,228 -150 341 506 -164 1,420 1,734 -314

2018 . . . . . 1,131 1,324 -193 359 555 -197 1,489 1,879 -390

2020 . . . . . 1,242 1,529 -287 397 669 -272 1,639 2,198 -559

2025 . . . . . 1,574 2,135 -561 511 1,085 -574 2,085 3,221 -1,136

2030 . . . . . 1,993 2,883 -890 656 1,760 -1,104 2,649 4,643 -1,994

2035 . . . . . 2,521 3,784 -1,264 838 2,794 -1,956 3,358 6,578 -3,220

2040 . . . . . 3,176 4,841 -1,665 1,063 4,242 -3,179 4,239 9,083 -4,844

2045 . . . . . 3,984 6,121 -2,137 1,340 6,104 -4,765 5,324 12,226 -6,902

2050 . . . . . 4,973 7,735 -2,762 1,680 8,411 -6,731 6,653 16,146 -9,492

2055 . . . . . 6,188 9,808 -3,620 2,101 11,228 -9,127 8,289 21,036 -12,748

2060 . . . . . 7,687 12,491 -4,804 2,625 14,729 -12,104 10,312 27,220 -16,908

2065 . . . . . 9,530 15,919 -6,389 3,274 19,234 -15,960 12,804 35,154 -22,349

2070 . . . . . 11,792 20,340 -8,548 4,077 25,022 -20,945 15,870 45,362 -29,492

2075 . . . . . 14,567 25,977 -11,410 5,070 32,317 -27,247 19,637 58,293 -38,656

2080 . . . . . 17,956 33,012 -15,056 6,289 41,355 -35,066 24,244 74,367 -50,122

2085 . . . . . 22,113 41,700 -19,587 7,788 52,644 -44,856 29,901 94,344 -64,443

Table VI.F9.—OASDI and HI Annual Income Excluding Interest, Cost, and

Balance in Current Dollars, Calendar Years 2009-85 (Cont.)

[In billions]

Calendar

year

OASDI HI Combined

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance

Income

excluding

interest Cost Balance
197

OASDI & HI: Estimates in Dollars

ment at NRA, primarily because of the actuarial reduction for “early” (preNRA) retirement.

Four different pre-retirement earnings patterns are represented in table

VI.F10. Three of these cases are for workers with scaled-earnings patterns,1

reflecting low, medium, and high career-average levels of pre-retirement

earnings starting at age 21. The fourth case is the steady maximum earner.

The three scaled-earnings cases have earnings patterns that reflect differences by age in the probability of work and in average earnings levels experienced by insured workers during the period 1991-2005. The general, careeraverage level of earnings for the scaled cases is set relative to the national

average wage index (AWI) so that benefit levels are consistent with levels

for “steady-earnings” cases that were shown in the 2000 and earlier Trustees

Reports. For the scaled medium earner, the general, career-average earnings

level is about equal to the AWI. For the scaled low and high earners, the general, career-average earnings level is set at about 45 percent and 160 percent

of the AWI, respectively. The steady maximum earner is assumed to have

earnings at (or above) the contribution and benefit base for each year prior to

retirement starting at age 22.

As noted above, the scaled-earnings cases were constructed so that their

career-average earnings levels are consistent with those of the corresponding

steady low, average, and high earners that were illustrated in the 2000 and

earlier Trustees Reports. As a result, values in this table for benefits under

the present-law Social Security benefit formula are essentially comparable to

those in earlier reports. Scaled-earnings cases are now being used instead of

steady-earnings cases because they more accurately illustrate the differences

in benefit levels under the wide variety of reform proposals considered in

recent years.

 1 More details are provided on scaled-earnings patterns in the Social Security Administration Actuarial Note

Number 2008.3, located at the following internet address:

www.socialsecurity.gov/OACT/NOTES/ran3/an2008-3.html.
Appendices

198

Table VI.F10.—Annual Scheduled Benefit Amountsa for Retired Workers

With Various Pre-Retirement Earnings Patterns

Based on Intermediate Assumptions, Calendar Years 2009-85 

Year attain age 65b

Retirement at normal retirement age Retirement at age 65

Age at

retirement

Constant

2009

dollars c Percent ofearnings

Age at

retirement

Constant

2009

dollarsc Percent ofearnings

 Scaled low earnings:d

2009 . . . . . . . . . . . 66:0 $10,683 57.4 65:0 $10,128 54.0

2010 . . . . . . . . . . . 66:0 10,485 55.8 65:0 9,999 53.7

2015 . . . . . . . . . . . 66:0 11,099 55.7 65:0 10,358 52.7

2020 . . . . . . . . . . . 66:2 11,747 56.1 65:0 10,835 52.3

2025 . . . . . . . . . . . 67:0 12,343 55.5 65:0 10,697 49.1

2030 . . . . . . . . . . . 67:0 12,987 55.4 65:0 11,252 49.1

2035 . . . . . . . . . . . 67:0 13,681 55.3 65:0 11,859 49.0

2040 . . . . . . . . . . . 67:0 14,441 55.3 65:0 12,511 49.0

2045 . . . . . . . . . . . 67:0 15,249 55.3 65:0 13,216 49.0

2050 . . . . . . . . . . . 67:0 16,105 55.4 65:0 13,954 49.0

2055 . . . . . . . . . . . 67:0 16,995 55.4 65:0 14,726 49.0

2060 . . . . . . . . . . . 67:0 17,922 55.4 65:0 15,534 49.0

2065 . . . . . . . . . . . 67:0 18,901 55.4 65:0 16,381 49.0

2070 . . . . . . . . . . . 67:0 19,938 55.4 65:0 17,281 49.0

2075 . . . . . . . . . . . 67:0 21,035 55.4 65:0 18,229 49.0

2080 . . . . . . . . . . . 67:0 22,186 55.4 65:0 19,229 49.0

2085 . . . . . . . . . . . 67:0 23,402 55.4 65:0 20,282 49.0

Scaled medium earnings:e

2009 . . . . . . . . . . . 66:0 17,601 42.6 65:0 16,692 40.0

2010 . . . . . . . . . . . 66:0 17,275 41.4 65:0 16,480 39.8

2015 . . . . . . . . . . . 66:0 18,288 41.3 65:0 17,069 39.1

2020 . . . . . . . . . . . 66:2 19,362 41.6 65:0 17,857 38.8

2025 . . . . . . . . . . . 67:0 20,342 41.2 65:0 17,626 36.4

2030 . . . . . . . . . . . 67:0 21,399 41.1 65:0 18,547 36.4

2035 . . . . . . . . . . . 67:0 22,546 41.0 65:0 19,537 36.3

2040 . . . . . . . . . . . 67:0 23,795 41.0 65:0 20,624 36.3

2045 . . . . . . . . . . . 67:0 25,130 41.0 65:0 21,777 36.3

2050 . . . . . . . . . . . 67:0 26,534 41.0 65:0 22,996 36.3

2055 . . . . . . . . . . . 67:0 28,002 41.1 65:0 24,268 36.4

2060 . . . . . . . . . . . 67:0 29,533 41.1 65:0 25,594 36.4

2065 . . . . . . . . . . . 67:0 31,143 41.1 65:0 26,991 36.4

2070 . . . . . . . . . . . 67:0 32,854 41.1 65:0 28,473 36.4

2075 . . . . . . . . . . . 67:0 34,659 41.1 65:0 30,038 36.4

2080 . . . . . . . . . . . 67:0 36,557 41.1 65:0 31,682 36.4

2085 . . . . . . . . . . . 67:0 38,560 41.1 65:0 33,418 36.4

Scaled high earnings:f

2009 . . . . . . . . . . . 66:0 23,326 35.3 65:0 22,128 33.2

2010 . . . . . . . . . . . 66:0 22,899 34.3 65:0 21,851 33.0

2015 . . . . . . . . . . . 66:0 24,244 34.2 65:0 22,624 32.4

2020 . . . . . . . . . . . 66:2 25,667 34.5 65:0 23,674 32.2

2025 . . . . . . . . . . . 67:0 26,957 34.1 65:0 23,366 30.2

2030 . . . . . . . . . . . 67:0 28,366 34.1 65:0 24,582 30.1

2035 . . . . . . . . . . . 67:0 29,884 34.0 65:0 25,903 30.1

2040 . . . . . . . . . . . 67:0 31,541 34.0 65:0 27,337 30.1

2045 . . . . . . . . . . . 67:0 33,309 34.0 65:0 28,866 30.1

2050 . . . . . . . . . . . 67:0 35,172 34.0 65:0 30,480 30.1

2055 . . . . . . . . . . . 67:0 37,115 34.0 65:0 32,167 30.1

2060 . . . . . . . . . . . 67:0 39,143 34.0 65:0 33,926 30.1

2065 . . . . . . . . . . . 67:0 41,279 34.0 65:0 35,775 30.1

2070 . . . . . . . . . . . 67:0 43,545 34.0 65:0 37,739 30.1

2075 . . . . . . . . . . . 67:0 45,937 34.0 65:0 39,812 30.1

2080 . . . . . . . . . . . 67:0 48,453 34.0 65:0 41,992 30.1

2085 . . . . . . . . . . . 67:0 51,108 34.0 65:0 44,293 30.1
199

OASDI & HI: Estimates in Dollars

Steady maximum earnings:g

2009 . . . . . . . . . . . 66:0 $27,694 29.0 65:0 $26,064 27.4

2010 . . . . . . . . . . . 66:0 27,322 28.1 65:0 25,864 27.1

2015 . . . . . . . . . . . 66:0 29,477 27.6 65:0 27,355 26.0

2020 . . . . . . . . . . . 66:2 31,352 27.6 65:0 28,809 25.7

2025 . . . . . . . . . . . 67:0 33,150 27.3 65:0 28,511 24.0

2030 . . . . . . . . . . . 67:0 34,921 27.3 65:0 30,052 24.0

2035 . . . . . . . . . . . 67:0 36,806 27.2 65:0 31,681 23.9

2040 . . . . . . . . . . . 67:0 38,812 27.2 65:0 33,404 23.9

2045 . . . . . . . . . . . 67:0 40,989 27.2 65:0 35,285 23.9

2050 . . . . . . . . . . . 67:0 43,223 27.3 65:0 37,208 24.0

2055 . . . . . . . . . . . 67:0 45,585 27.3 65:0 39,240 24.0

2060 . . . . . . . . . . . 67:0 48,077 27.3 65:0 41,386 24.0

2065 . . . . . . . . . . . 67:0 50,694 27.3 65:0 43,638 24.0

2070 . . . . . . . . . . . 67:0 53,471 27.3 65:0 46,029 24.0

2075 . . . . . . . . . . . 67:0 56,406 27.3 65:0 48,556 24.0

2080 . . . . . . . . . . . 67:0 59,497 27.3 65:0 51,216 24.0

2085 . . . . . . . . . . . 67:0 62,756 27.3 65:0 54,022 24.0

a Annual scheduled benefit amounts are the total for the 12-month period starting with the month of

retirement.

b Assumed to attain age 65 in January of the year.

c The adjustment for constant dollars is made using the adjusted CPI indexing series shown in table VI.F6.

d Career-average earnings at about 45 percent of the national average wage index (AWI).

e Career-average earnings at about 100 percent of the AWI.

f Career-average earnings at about 160 percent of the AWI.

g Earnings for each year equal to the contribution and benefit base.

Table VI.F10.—Annual Scheduled Benefit Amountsa for Retired Workers

With Various Pre-Retirement Earnings Patterns

Based on Intermediate Assumptions, Calendar Years 2009-85 (Cont.) 

Year attain age 65b

Retirement at normal retirement age Retirement at age 65

Age at

retirement

Constant

2009

dollars c Percent of

earnings

Age at

retirement

Constant

2009

dollarsc Percent ofearnings
Appendices

200

G. ANALYSIS OF BENEFIT DISBURSEMENTS FROM THE OASI 

TRUST FUND WITH RESPECT TO DISABLED BENEFICIARIES

(Required by section 201(c) of the Social Security Act)

Effective January 1957, monthly benefits have been payable from the OASI

Trust Fund to disabled children aged 18 and over of retired and deceased

workers in those cases for which the disability began before age 18. The age

before which disability is required to have begun was subsequently changed

to age 22. Effective February 1968, reduced monthly benefits have been payable from this trust fund to disabled widows and widowers at ages 50 and

over. Effective January 1991, the requirements for the disability of the

widow or widower were made less restrictive.

On December 31, 2008, about 922,000 persons were receiving monthly benefits from the OASI Trust Fund because of their disabilities or the disabilities

of children. This total includes 26,000 mothers and fathers (wives or husbands under age 65 of retired-worker beneficiaries and widows or widowers

of deceased insured workers) who met all other qualifying requirements and

were receiving unreduced benefits solely because they had disabled-child

beneficiaries (or disabled children aged 16 or 17) in their care. Benefits paid

from this trust fund to the persons described above totaled $7,796 million in

calendar year 2008. Table VI.G1 shows these and similar figures for selected

calendar years during 1960-2008, and estimated experience for 2009-18

based on the intermediate set of assumptions.
201

OASI Expenditures for Disabled

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

Table VI.G1.—Benefit Disbursements From the OASI Trust Fund

With Respect to Disabled Beneficiaries

[Beneficiaries in thousands; benefit payments in millions]

Calendar year

Disabled beneficiaries, end of year Amount of benefit paymentsa

a Beginning in 1966, includes payments for vocational rehabilitation services.

Total Children b

b Also includes certain mothers and fathers (see text).

Widowswidowers c

c In 1984 and later years, only disabled widows and widowers aged 50-59 are included because disabled

widows and widowers aged 60-64 would be eligible for the same benefit as a nondisabled aged widow or

widower; therefore, they are not receiving benefits solely because of a disability.

Total Childrenb Widowswidowers d

d In 1983 and prior years, reflects the offsetting effect of lower benefits payable to disabled widows and widowers who continued to receive benefits after attaining age 60 (62, for disabled widowers, prior to 1973) as

compared to the higher nondisabled widow's and widower's benefits that would otherwise be payable. In

1984 and later years, only benefit payments to disabled widows and widowers aged 50-59 are included (see

footnote c).

Historical data:

1960 . . . . . . . . . 117 117 — $59 $59 —

1965 . . . . . . . . . 214 214 — 134 134 —

1970 . . . . . . . . . 316 281 36 301 260 $41

1975 . . . . . . . . . 435 376 58 664 560 104

1980 . . . . . . . . . 519 460 59 1,223 1,097 126

1985 . . . . . . . . . 594 547 47 2,072 1,885 187

1986 . . . . . . . . . 614 565 49 2,219 2,022 197

1987 . . . . . . . . . 629 580 49 2,331 2,128 203

1988 . . . . . . . . . 640 591 48 2,518 2,307 211

1989 . . . . . . . . . 651 602 49 2,680 2,459 221

1990 . . . . . . . . . 662 613 49 2,882 2,649 233

1991 . . . . . . . . . 687 627 61 3,179 2,875 304

1992 . . . . . . . . . 715 643 72 3,459 3,079 380

1993 . . . . . . . . . 740 659 81 3,752 3,296 456

1994 . . . . . . . . . 758 671 86 3,973 3,481 492

1995 . . . . . . . . . 772 681 91 4,202 3,672 531

1996 . . . . . . . . . 782 687 94 4,410 3,846 565

1997 . . . . . . . . . 789 693 96 4,646 4,050 596

1998 . . . . . . . . . 797 698 99 4,838 4,210 627

1999 . . . . . . . . . 805 702 102 4,991 4,336 655

2000 . . . . . . . . . 811 707 104 5,203 4,523 680

2001 . . . . . . . . . 817 712 105 5,520 4,802 718

2002 . . . . . . . . . 823 717 106 5,773 5,024 749

2003 . . . . . . . . . 827 722 105 5,747 4,980 764

2004 . . . . . . . . . 828 723 105 5,947 5,164 781

2005 . . . . . . . . . 836 728 108 6,291 5,389 843

2006 . . . . . . . . . 840 732 108 6,741 5,852 885

2007 . . . . . . . . . 851 744 107 7,298 6,418 878

2008 . . . . . . . . . 922 813 109 7,796 6,878 915

Estimates under the intermediate assumptions:

2009 . . . . . . . . . 955 846 110 8,439 7,478 957

2010 . . . . . . . . . 971 861 110 8,676 7,707 964

2011 . . . . . . . . . 986 876 110 8,907 7,929 969

2012 . . . . . . . . . 1,000 891 109 9,253 8,256 985

2013 . . . . . . . . . 1,014 906 108 9,732 8,703 1,013

2014 . . . . . . . . . 1,026 920 106 10,241 9,189 1,032

2015 . . . . . . . . . 1,037 933 104 10,759 9,686 1,050

2016 . . . . . . . . . 1,047 945 101 11,267 10,184 1,058

2017 . . . . . . . . . 1,056 957 98 11,790 10,697 1,068

2018 . . . . . . . . . 1,064 969 96 12,335 11,230 1,079
Appendices

202

Total benefit payments from the OASI Trust Fund with respect to disabled

beneficiaries are estimated to increase from $8,439 million in calendar year

2009 to $12,335 million in calendar year 2018, based on the intermediate

assumptions.

In calendar year 2008, benefit payments (including expenditures for vocational rehabilitation services) with respect to disabled persons from the OASI

Trust Fund and from the DI Trust Fund (including payments from the latter

fund to all children and spouses of disabled-worker beneficiaries) totaled

$114,173 million. Of this amount, $7,796 million or 6.8 percent represented

payments from the OASI Trust Fund. These and similar figures for selected

calendar years during 1960-2008 and estimates for calendar years 2009-18

are presented in table VI.G2.

Table VI.G2.—Benefit Disbursements Under the OASDI Program

With Respect to Disabled Beneficiaries

[Amounts in millions]

Calendar year Total a DI Trust Fund b

OASI Trust Fund

Amount c Percentage of total

Historical data:

1960 . . . . . . . . . $627 $568 $59 9.4

1965 . . . . . . . . . 1,707 1,573 134 7.9

1970 . . . . . . . . . 3,386 3,085 301 8.9

1975 . . . . . . . . . 9,169 8,505 664 7.2

1980 . . . . . . . . . 16,738 15,515 1,223 7.3

1985 . . . . . . . . . 20,908 18,836 2,072 9.9

1990 . . . . . . . . . 27,717 24,835 2,882 10.4

1991 . . . . . . . . . 30,877 27,698 3,179 10.3

1992 . . . . . . . . . 34,583 31,124 3,459 10.0

1993 . . . . . . . . . 38,378 34,626 3,752 9.8

1994 . . . . . . . . . 41,730 37,757 3,973 9.5

1995 . . . . . . . . . 45,140 40,937 4,202 9.3

1996 . . . . . . . . . 48,615 44,205 4,410 9.1

1997 . . . . . . . . . 50,358 45,712 4,646 9.2

1998 . . . . . . . . . 53,062 48,224 4,838 9.1

1999 . . . . . . . . . 56,390 51,399 4,991 8.9

2000 . . . . . . . . . 60,204 55,001 5,203 8.6

2001 . . . . . . . . . 65,157 59,637 5,520 8.5

2002 . . . . . . . . . 71,493 65,721 5,773 8.1

2003 . . . . . . . . . 76,699 70,952 5,747 7.5

2004 . . . . . . . . . 84,199 78,251 5,947 7.1

2005 . . . . . . . . . 91,677 85,386 6,291 6.9

2006 . . . . . . . . . 99,186 d 92,446 6,741 6.8

2007 . . . . . . . . . 106,444 e 99,147 7,298 6.9

2008 . . . . . . . . . 114,173 e106,376 7,796 6.8
203

OASI Expenditures for Disabled

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

Estimates under the intermediate assumptions:

2009 . . . . . . . . . $126,183 $117,744 $8,439 6.7

2010 . . . . . . . . . 133,718 125,042 8,676 6.5

2011 . . . . . . . . . 138,777 129,871 8,907 6.4

2012 . . . . . . . . . 144,384 135,131 9,253 6.4

2013 . . . . . . . . . 149,991 140,260 9,732 6.5

2014 . . . . . . . . . 157,037 146,796 10,241 6.5

2015 . . . . . . . . . 164,559 153,800 10,759 6.5

2016 . . . . . . . . . 172,582 161,315 11,267 6.5

2017 . . . . . . . . . 181,027 169,237 11,790 6.5

2018 . . . . . . . . . 189,786 177,451 12,335 6.5

a Beginning in 1966, includes payments for vocational rehabilitation services.

b Benefit payments to disabled workers and their children and spouses.

c Benefit payments to disabled children aged 18 and over, to certain mothers and fathers (see text), and to

disabled widows and widowers (see footnote d, table VI.G1).

d Excludes reimbursement of $0.7 billion for excess amounts of voluntary income tax withholding in 1999-

2005.

e Excludes interfund transfers to correct a trust fund allocation error made on payments to certain disabled

beneficiaries. These transfers amounted to $3.3 billion in 2007 and $0.3 billion in 2008 from OASI to DI.

Table VI.G2.—Benefit Disbursements Under the OASDI Program

With Respect to Disabled Beneficiaries (Cont.)

[Amounts in millions]

Calendar year Total a DI Trust Fund b

OASI Trust Fund

Amount c Percentage of total
Appendices

204

H. GLOSSARY

Actuarial balance. The difference between the summarized income rate and

the summarized cost rate over a given valuation period.

Actuarial deficit. A negative actuarial balance.

Administrative expenses. Expenses incurred by the Social Security Administration and the Department of the Treasury in administering the OASDI

program and the provisions of the Internal Revenue Code relating to the collection of contributions. Such administrative expenses are paid from the

OASI and DI Trust Funds.

Advance tax transfers. Amounts representing the estimated total OASDI

tax contributions for a given month. From May 1983 through November

1990, such amounts were credited to the OASI and DI Trust Funds at the

beginning of each month. Reimbursements were made from the trust funds to

the General Fund of the Treasury for the associated loss of interest. Advance

tax transfers are no longer made unless needed in order to pay benefits.

Alternatives I, II, or III. See “Assumptions.”

Annual balance. The difference between the income rate and the cost rate in

a given year.

Assets. Treasury notes and bonds, other securities guaranteed by the Federal

Government, certain Federally sponsored agency obligations, and cash, held

by the trust funds for investment purposes.

Assumptions. Values relating to future trends in certain key factors that

affect the balance in the trust funds. Demographic assumptions include fertility, mortality, net immigration, marriage, and divorce. Economic assumptions include unemployment rates, average earnings, inflation, interest rates,

and productivity. Program-specific assumptions include retirement patterns,

and disability incidence and termination rates. Three sets of demographic,

economic, and program-specific assumptions are presented in this report—

 • Alternative II is the intermediate set of assumptions, and represents the

Trustees’ best estimates of likely future demographic, economic, and

program-specific conditions.

 • Alternative I is characterized as a low-cost set—it assumes relatively

rapid economic growth, low inflation, and favorable (from the standpoint of program financing) demographic and program-specific conditions.

 • Alternative III is characterized as a high-cost set—it assumes relatively

slow economic growth, high inflation, and unfavorable (from the standpoint of program financing) demographic and program-specific conditions.

See tables V.A1, V.B1, and V.B2.
205

Glossary

Automatic cost-of-living benefit increase. The annual increase in benefits,

effective for December, reflecting the increase in the cost of living. The benefit increase equals the percentage increase in the Consumer Price Index for

Urban Wage Earners and Clerical Workers (CPI-W) measured from the average over July, August, and September of the preceding year to the average

for the same 3 months in the current year. If the increase is less than onetenth of 1 percent, when rounded, there is no automatic increase for the current year; the increase for the next year would reflect the net increase in the

CPI over a 2-year period. See table V.C1.

Auxiliary benefits. Monthly benefits payable to a spouse or child of a

retired or disabled worker, or to a survivor of a deceased worker.

Average indexed monthly earnings—AIME. The amount of earnings used

in determining the primary insurance amount (PIA) for most workers who

attain age 62, become disabled, or die after 1978. A worker’s actual past

earnings are adjusted by changes in the average wage index, in order to bring

them up to their approximately equivalent value at the time of retirement or

other eligibility for benefits.

Average wage index—AWI. The average amount of total wages for each

year after 1950, including wages in noncovered employment and wages in

covered employment in excess of the OASDI contribution and benefit base.

(See Title 20, Chapter III, section 404.211(c) of the Code of Federal Regulations for a more precise definition.) These average wage amounts are used to

index the taxable earnings of most workers first becoming eligible for benefits in 1979 or later, and for automatic adjustments in the contribution and

benefit base, bend points, earnings test exempt amounts, and other wageindexed amounts. See table V.C1.

Award. An administrative determination that an individual is entitled to

receive a specified type of OASDI benefit. Awards can represent not only

new entrants to the benefit rolls but also persons already on the rolls who

become entitled to a different type of benefit. Awards usually result in the

immediate payment of benefits, although payments may be deferred or withheld depending on the individual’s particular circumstances.

Baby boom. The period from the end of World War II through the mid1960s marked by unusually high birth rates.

Bend points. The dollar amounts defining the AIME or PIA brackets in the

benefit formulas. For the bend points for years 1979 and later, see table V.C2.

Beneficiary. A person who has been awarded benefits on the basis of his or

her own or another’s earnings record. The benefits may be either in currentpayment status or withheld.

Benefit award. See “Award.”
Appendices

206

Benefit payments. The amounts disbursed for OASI and DI benefits by the

Department of the Treasury in specified periods.

Benefit termination. See “Termination.”

Best estimate assumptions. See “Assumptions.”

Board of Trustees. A Board established by the Social Security Act to oversee the financial operations of the Federal Old-Age and Survivors Insurance

Trust Fund and the Federal Disability Insurance Trust Fund. The Board is

composed of six members, four of whom serve automatically by virtue of

their positions in the Federal Government: the Secretary of the Treasury, who

is the Managing Trustee, the Secretary of Labor, the Secretary of Health and

Human Services, and the Commissioner of Social Security. The other two

members are appointed by the President to serve as public representatives.

Cash flow. The cash flow for the OASI and DI Trust Funds is defined generally as actual or projected revenue and costs reflecting the levels of tax rates

and benefits scheduled in the law. Net cash flow is the difference between tax

revenue and cost on this basis.

Closed group unfunded obligation. This measure is computed like the

open group unfunded obligation except that individuals under the age of 15

(or not yet born) are excluded. In other words, only persons who attain age

15 or older during the first year of the projection period are included in the

calculations.

Constant dollars. Amounts adjusted by the CPI to the value of the dollar in

a particular year.

Consumer Price Index—CPI. An official measure of inflation in consumer

prices. In this report, all references to the CPI relate to the Consumer Price

Index for Urban Wage Earners and Clerical Workers (CPI-W). Historical values for the CPI-W are published by the Bureau of Labor Statistics, Department of Labor.

Contribution and benefit base. Annual dollar amount above which earnings in employment covered under the OASDI program are neither taxable

nor creditable for benefit-computation purposes. (Also referred to as maximum contribution and benefit base, annual creditable maximum, taxable

maximum, and maximum taxable.) See tables V.C1 and VI.A1. See “HI contribution base.”

Contributions. The amount based on a percent of earnings, up to an annual

maximum, that must be paid by—

 • employers and employees on wages from employment under the Federal Insurance Contributions Act,

 • the self-employed on net earnings from self-employment under the

Self-Employment Contributions Act, and
207

Glossary

 • States on the wages of State and local government employees covered

under the Social Security Act through voluntary agreements under section 218 of the Act.

Generally, employers withhold contributions from wages, add an equal

amount of contributions, and pay both on a current basis. Also referred to as

taxes.

Cost. The cost for a year is defined to include scheduled benefit payments,

administrative expenses, net transfers from the trust funds to the Railroad

Retirement program under the financial-interchange provisions, and payments for vocational rehabilitation services for disabled beneficiaries; it

excludes transfers under the interfund borrowing provisions.

Cost-of-living adjustment. See “Automatic cost-of-living benefit increase.”

Cost rate. The cost rate for a year is the ratio of the cost of the program to

the taxable payroll for the year.

Covered earnings. Earnings in employment covered by the OASDI program.

Covered employment. All employment for which earnings are creditable

for Social Security purposes. Almost all employment is covered under the

program. Some exceptions are:

 • State and local government employees whose employer has not elected

to be covered under Social Security and who are participating in an

employer-provided pension plan.

 • Current Federal civilian workers hired before 1984 who have not

elected to be covered.

 • Self-employed workers earning less than $400 in a calendar year.

Covered worker. A person who has earnings creditable for Social Security

purposes on the basis of services for wages in covered employment and/or on

the basis of income from covered self-employment.

Creditable earnings. Wage or self-employment earnings posted to a

worker’s earnings record, upon which eligibility for and amount of benefits

on that worker’s record is based. The maximum amount of creditable earnings for each worker in a calendar year is determined by the contribution and

benefit base.

Current-cost financing. See “Pay-as-you-go financing.”

Current dollars. Amounts expressed in nominal dollars with no adjustment

for inflationary changes in the value of the dollar over time.

Current-payment status. Status of a beneficiary to whom a benefit is being

paid for a given month (with or without deductions, provided the deductions

add to less than a full month’s benefit).

Deemed wage credit. See “Military service wage credits.”
Appendices

208

Delayed retirement credits. Increases the benefit amount for certain individuals who did not receive benefits for months after attainment of the normal retirement age but before age 70. Delayed retirement credits are

applicable for January benefits of the year following the year they are earned

or for the month of attainment of age 70, whichever comes first. See table

V.C3.

Demographic assumptions. See “Assumptions.”

Deterministic model. A model with specified assumptions for and relationships among variables. Under such a model, any specified set of assumptions

determines a single outcome directly reflecting the specifications.

Disability. For Social Security purposes, the inability to engage in substantial gainful activity (see “Substantial gainful activity—SGA”) by reason of

any medically determinable physical or mental impairment that can be

expected to result in death or to last for a continuous period of not less than

12 months. Special rules apply for workers at ages 55 and over whose disability is based on blindness.

The law generally requires that a person be disabled continuously for 5

months before he or she can qualify for a disabled-worker benefit.

Disability conversion ratio. For a given year, the ratio of the number of disability conversions to the average number of disabled-worker beneficiaries

during the year.

Disability conversion. Upon attainment of normal retirement age, a disabled-worker beneficiary is automatically converted to retired-worker status.

Disability incidence rate. The proportion of workers in a given year,

insured for but not receiving disability benefits, who apply for and are

awarded disability benefits.

Disability Insurance (DI) Trust Fund. See “Trust fund.”

Disability prevalence rate. The proportion of persons insured for disability

benefits who are disabled-worker beneficiaries in current-payment status.

Disability termination rate. The proportion of disabled-worker beneficiaries in a given year whose disability benefits terminate as a result of the individual’s recovery or death.

Disabled-worker benefit. A monthly benefit payable to a disabled worker

under normal retirement age and insured for disability. Before November

1960, disability benefits were limited to disabled workers aged 50-64.

Disbursements. Actual expenditures (outgo) made or expected to be made

under current law, including benefits paid or payable, administrative

expenses, net transfers from the trust funds to the Railroad Retirement program under the financial-interchange provisions, and payments for vocational rehabilitation services for disabled beneficiaries; it excludes transfers

under the interfund borrowing provisions.
209

Glossary

Earnings. Unless otherwise qualified, all wages from employment and net

earnings from self-employment, whether or not taxable or covered.

Earnings test. The provision requiring the withholding of benefits if beneficiaries under normal retirement age have earnings in excess of certain

exempt amounts. See table V.C1.

Economic assumptions. See “Assumptions.”

Effective interest rate. See “Interest rate.”

Excess wages. Wages in excess of the contribution and benefit base on

which a worker initially pays taxes (usually as a result of working for more

than one employer during a year). Employee taxes on excess wages are

refundable to affected employees, while the employer taxes are not refundable.

Expenditures. See “Disbursements.”

Federal Insurance Contributions Act—FICA. Provision authorizing taxes

on the wages of employed persons to provide for Retirement, Survivors, and

Disability Insurance, and for Hospital Insurance. The tax is paid in equal

amounts by workers and their employers.

Financial interchange. Provisions of the Railroad Retirement Act providing

for transfers between the trust funds and the Social Security Equivalent Benefit Account of the Railroad Retirement program in order to place each trust

fund in the same position it would have been in if railroad employment had

always been covered under Social Security.

Fiscal year. The accounting year of the United States Government. Since

1976, a fiscal year is the 12-month period ending September 30. For example, fiscal year 2009 began October 1, 2008, and will end September 30,

2009.

Full advance funding. A financing scheme where taxes or contributions are

established to match the full cost of future benefits as these costs are incurred

through current service. Such financing methods also provide for amortization over a fixed period of any financial liability that is incurred at the beginning of the program (or subsequent modification) as a result of granting

credit for past service.

General Fund of the Treasury. Funds held by the Treasury of the United

States, other than receipts collected for a specific purpose (such as Social

Security) and maintained in a separate account for that purpose.

General fund reimbursements. Transfers from the General Fund of the

Treasury to the trust funds for specific purposes defined in the law, such as:

 • Payments corresponding to the employee-employer taxes on deemed

wage credits for military personnel.
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210

 • Interest on checks which are not negotiated 6 months after the month of

issue. (For checks issued before October, 1989, the principal was

returned to the trust funds as a general fund reimbursement; since that

time, the principal amount is automatically returned to the issuing fund

when the check is uncashed after a year.)

 • Administrative expenses incurred as a result of furnishing information

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

the Employee Retirement Income Security Act of 1974 (Public Law 93-

406).

Gross domestic product—GDP. The total dollar value of all goods and services produced by labor and property located in the United States, regardless

of who supplies the labor or property.

HI contribution base. Annual dollar amount above which earnings in

employment covered under the HI program are not taxable. (Also referred to

as maximum contribution base, taxable maximum, and maximum taxable.)

Beginning in 1994, the HI contribution base was eliminated.

High-cost assumptions. See “Assumptions.”

Hospital Insurance (HI) Trust Fund. See “Trust fund.”

Immigration. See “Legal immigration” and “Other immigration.”

Income. Income for a given year is the sum of tax revenues on a liability

basis (payroll-tax contributions and income from the taxation of scheduled

benefits) and interest credited to the trust funds.

Income rate. Ratio of income from tax revenues on a liability basis (payrolltax contributions and income from the taxation of scheduled benefits) to the

OASDI taxable payroll for the year.

Inflation. An increase in the volume of money and credit relative to available goods, resulting in an increase in the general price level.

Insured status. The state or condition of having sufficient quarters of coverage to meet the eligibility requirements for retired-worker or disabled-worker

benefits, or to permit the worker’s spouse and children or survivors to establish eligibility for benefits in the event of his or her disability, retirement, or

death. See “Quarters of coverage.”

Interest. A payment in exchange for the use of money during a specified

period.

Interest rate. Interest rates on new public-debt obligations issuable to Federal trust funds (see “Special public-debt obligation”) are determined

monthly. Such rates are set equal to the average market yield on all outstanding marketable U.S. securities not due or callable until after 4 years from the

date the rate is determined. See table V.B2 for historical and assumed future

interest rates on new special-issue securities. The effective interest rate for a

trust fund is the ratio of the interest earned by the fund over a given period of
211

Glossary

time to the average level of assets held by the fund during the period. The

effective rate of interest thus represents a measure of the overall average

interest earnings on the fund’s portfolio of assets.

Interfund borrowing. The borrowing of assets by a trust fund (OASI, DI, or

HI) from another of the trust funds when the first fund is in danger of

exhaustion. Interfund borrowing was permitted by the Social Security Act

only during 1982 through 1987; all amounts borrowed were to be repaid

prior to the end of 1989. The only exercise of this authority occurred in 1982,

when the OASI Trust Fund borrowed assets from the DI and HI Trust Funds.

The final repayment of borrowed amounts occurred in 1986.

Intermediate assumptions. See “Assumptions.”

Legal emigration. Legal emigration for a given year consists of those legal

permanent residents and native-born citizens who leave the Social Security

area during the year.

Legal immigration. Consistent with the definition used by the Department

of Homeland Security, legal immigration for a given year consists of foreignborn individuals who are granted legal permanent residence status during the

year.

Life expectancy. Average remaining number of years expected prior to

death. Period life expectancy is calculated for a given year using the actual or

expected death rates at each age for that year. Cohort life expectancy, sometimes referred to as generational life expectancy, is calculated for individuals

at a specific age in a given year using actual or expected death rates from the

years in which the individuals would actually reach each succeeding age if

he or she survives.

Long range. The next 75 years. Long-range actuarial estimates are made for

this period because it is approximately the maximum remaining lifetime of

current Social Security participants.

Low-cost assumptions. See “Assumptions.”

Lump-sum death benefit. A lump sum, generally $255, payable on the

death of a fully or currently insured worker. The lump sum is payable to the

surviving spouse of the worker, under most circumstances, or to the worker’s

children.

Maximum family benefit. The maximum monthly amount that can be paid

on a worker’s earnings record. Whenever the total of the individual monthly

benefits payable to all the beneficiaries entitled on one earnings record

exceeds the maximum, each dependent’s or survivor’s benefit is proportionately reduced to bring the total within the maximum. Benefits payable to

divorced spouses or surviving divorced spouses are not reduced under the

family maximum provision.
Appendices

212

Medicare. A nationwide, Federally administered health insurance program

authorized in 1965 to cover the cost of hospitalization, medical care, and

some related services for most people age 65 and over. In 1972, coverage

was extended to people receiving Social Security Disability Insurance payments for 2 years, and people with End-Stage Renal Disease. In 2006, prescription drug coverage was also added. Medicare consists of two separate

but coordinated programs—Hospital Insurance (HI, Part A) and Supplementary Medical Insurance (SMI). The SMI program is composed of three separate accounts—the Part B Account, the Part D Account, and the Transitional

Assistance Account. Almost all persons who are aged 65 and over or disabled and who are entitled to HI are eligible to enroll in Part B and Part D on

a voluntary basis by paying monthly premiums. Health insurance protection

is available to Medicare beneficiaries without regard to income.

Military service wage credits. Credits recognizing that military personnel

receive wages in kind (such as food and shelter) in addition to their basic pay

and other cash payments. Noncontributory wage credits of $160 were provided for each month of active military service from September 16, 1940,

through December 31, 1956. For years after 1956, the basic pay of military

personnel is covered under the Social Security program on a contributory

basis. In addition to the contributory credits for basic pay, noncontributory

wage credits of $300 were granted for each calendar quarter, from January

1957 through December 1977, in which a person received pay for military

service. Noncontributory wage credits of $100 were granted for each $300 of

military wages, up to a maximum credit of $1,200 per calendar year, from

January 1978 through December 2001.

National average wage index—AWI. See “Average wage index—AWI.”

Normal retirement age. The age at which a person may first become entitled to retirement benefits without reduction based on age. For persons reaching age 62 before 2000, the normal retirement age is 65. It will increase

gradually to 67 for persons reaching that age in 2027 or later, beginning with

an increase to 65 years and 2 months for persons reaching age 65 in 2003.

See table V.C3.

Old-Age and Survivors Insurance (OASI) Trust Fund. See “Trust fund.”

Old-law base. Amount the contribution and benefit base would have been if

the discretionary increases in the base under the 1977 amendments had not

been enacted. The Social Security Amendments of 1972 provided for automatic annual indexing of the contribution and benefit base. The Social Security Amendments of 1977 provided ad hoc increases to the bases for

1979-81, with subsequent bases updated in accordance with the normal

indexing procedure. See table V.C2.

Open group unfunded obligation. This measure is computed as the excess

of the present value of the projected cost of the program over a specified
213

Glossary

time period (for example the next 75 years or the infinite future) over the

sum of (1) the value of trust fund assets at the beginning of the period and (2)

the present value of the projected tax income of the program, assuming

scheduled tax rates and benefit levels.

Other emigration. Other emigration for a given year consists of individuals

from the other-immigrant population who leave the Social Security area during the year or who adjust status to become legal permanent residents during

the year.

Other immigration. Other immigration for a given year consists of individuals who enter the Social Security area and stay 6 months or more but without legal permanent residence status, such as undocumented immigrants and

temporary workers and students.

Outgo. See “Disbursements.”

Par value. The value printed on the face of a bond. For both public and special issues held by the trust funds, par value is also the redemption value at

maturity.

Partial advance funding. A financing scheme where taxes are scheduled to

provide a substantial accumulation of trust fund assets, thereby generating

additional interest income to the trust funds and reducing the need for payroll

tax increases in periods when costs are relatively high. (Higher general taxes

or additional borrowing may be required, however, to support the payment of

such interest.) While substantial, the trust fund buildup under partial advance

funding is much smaller than it would be with full advance funding.

Pay-as-you-go financing. A financing scheme where taxes are scheduled to

produce just as much income as required to pay current benefits, with trust

fund assets built up only to the extent needed to prevent exhaustion of the

fund by random economic fluctuations.

Payment cycling. Beneficiaries on the rolls before May 1, 1997, are paid on

the third of the month. Persons applying for OASDI benefits after April

1997, however, generally are paid on the second, third, or fourth Wednesday

of the month following the month for which payment is due. The particular

Wednesday payment date is based on the earner’s date of birth. For those

born on the first through tenth, the benefit payment day is the second

Wednesday of the month; for those born on the eleventh through the twentieth, the benefit payment day is the third Wednesday of the month; and for

those born after the twentieth of the month, the payment day is the fourth

Wednesday of the month.

Payroll taxes. A tax levied on the gross wages of workers. See tables VI.A1

and VI.F1.

Population in the Social Security area. See “Social Security area population.”
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214

Present value. The equivalent value, at the present time, of a future stream

of payments (either income or cost). The present value of a future stream of

payments may be thought of as the lump-sum amount that, if invested today,

together with interest earnings would be just enough to meet each of the payments as they fell due. Present values are widely used in calculations involving financial transactions over long periods of time to account for the time

value of money (interest). For the purpose of present-value calculations for

this report, values are discounted by the effective yield on trust fund assets.

Primary insurance amount—PIA. The monthly amount payable to a

retired worker who begins to receive benefits at normal retirement age or

(generally) to a disabled worker. This amount, which is related to the

worker’s average monthly wage or average indexed monthly earnings, is also

the amount used as a base for computing all types of benefits payable on the

basis of one individual’s earnings record.

Primary-insurance-amount formula. The mathematical formula relating

the PIA to the AIME for workers who attain age 62, become disabled, or die

after 1978. The PIA is equal to the sum of 90 percent of AIME up to the first

bend point, plus 32 percent of AIME above the first bend point up to the second bend point, plus 15 percent of AIME in excess of the second bend point.

Automatic benefit increases are applied beginning with the year of eligibility.

See table V.C2 for historical and assumed future bend points and table V.C1

for historical and assumed future benefit increases.

Quarters of coverage. Basic unit of measurement for determining insured

status. In 2009, a worker receives one quarter of coverage (up to a total of

four) for each $1,090 of annual covered earnings. The amount of earnings

required for a quarter of coverage is subject to annual automatic increases in

proportion to increases in average wages. For amounts applicable for years

after 1978, see table V.C2. 

Railroad retirement. A Federal insurance program, somewhat similar to

Social Security, designed for workers in the railroad industry. The provisions

of the Railroad Retirement Act provide for a system of coordination and

financial interchange between the Railroad Retirement program and the

Social Security program.

Reallocation of tax rates. An increase in the tax rate payable to either the

OASI or DI Trust Fund, with a corresponding reduction in the rate for the

other fund, so that the total OASDI tax rate is not changed. 

Real-wage differential. The difference between the percentage increases in

(1) the average annual wage in covered employment and (2) the average

annual Consumer Price Index. See table V.B1.

Recession. A period of adverse economic conditions; in particular, two or

more successive calendar quarters of negative growth in gross domestic

product.
215

Glossary

Retired-worker benefit. A monthly benefit payable to a fully insured retired

worker aged 62 or older or to a person entitled under the transitionally

insured status provision in the law.

Retirement earnings test. See “Earnings test.”

Retirement eligibility age. The age (62) at which a fully insured individual

first becomes eligible to receive retired-worker benefits.

Retirement test. See “Earnings test.”

Self-employment. Operation of a trade or business by an individual or by a

partnership in which an individual is a member.

Self-Employment Contributions Act–SECA. Provision authorizing Social

Security taxes on the net earnings of most self-employed persons.

Short range. The next 10 years. Short-range actuarial estimates are prepared

for this period because of the short-range test of financial adequacy. The

Social Security Act requires estimates for 5 years; estimates are prepared for

an additional 5 years to help clarify trends which are only starting to develop

in the mandated first 5-year period. 

Social Security Act. Provisions of the law governing most operations of the

Social Security program. Original Social Security Act is Public Law 74-271,

enacted August 14, 1935. With subsequent amendments, the Social Security

Act consists of 20 titles, of which four have been repealed. The Old-Age,

Survivors, and Disability Insurance program is authorized by title II of the

Social Security Act.

Social Security area population. The population comprised of (i) residents

of the 50 States and the District of Columbia (adjusted for net census undercount); (ii) civilian residents of Puerto Rico, the Virgin Islands, Guam,

American Samoa and the Northern Mariana Islands; (iii) Federal civilian

employees and persons in the U.S. Armed Forces abroad and their dependents; (iv) crew members of merchant vessels; and (v) all other U.S. citizens

abroad.

Solvency. A program is solvent at a point in time if it is able to pay scheduled benefits when due with scheduled financing. For example, the OASDI

program is considered solvent over any period for which the trust funds

maintain a positive balance throughout the period.

Special public-debt obligation. Securities of the United States Government

issued exclusively to the OASI, DI, HI, and SMI Trust Funds and other Federal trust funds. Section 201(d) of the Social Security Act provides that the

public-debt obligations issued for purchase by the OASI and DI Trust Funds

shall have maturities fixed with due regard for the needs of the funds. The

usual practice has been to spread the holdings of special issues, as of each

June 30, so that the amounts maturing in each of the next 15 years are

approximately equal. Special public-debt obligations are redeemable at par
Appendices

216

value at any time and carry interest rates determined by law (see “Interest

rate”). See tables VI.A5 and VI.A6 for a listing of the obligations held by the

OASI and DI Trust Funds, respectively.

Statutory blindness. Central visual acuity of 20/200 or less in the better eye

with the use of a correcting lens or tunnel vision of 20o or less.

Stochastic model. A model used for projecting a probability distribution of

potential outcomes. Such models allow for random variation in one or more

variables through time. The random variation is generally based on fluctuations observed in historical data for a selected period. Distributions of potential outcomes are derived from a large number of simulations, each of which

reflects random variation in the variable(s).

Substantial gainful activity—SGA. The level of work activity used to

establish disability. A finding of disability requires that a person be unable to

engage in substantial gainful activity. A person who is earning more than a

certain monthly amount (net of impairment-related work expenses) is ordinarily considered to be engaging in SGA. The amount of monthly earnings

considered as SGA depends on the nature of a person’s disability. The Social

Security Act specifies a higher SGA amount for statutorily blind individuals;

Federal regulations specify a lower SGA amount for non-blind individuals.

Both SGA amounts increase with increases in the national average wage

index.

Summarized balance. The difference between the summarized cost rate and

the summarized income rate, expressed as a percentage of taxable payroll.

Summarized cost rate. The ratio of the present value of cost to the present

value of the taxable payroll for the years in a given period, expressed as a

percentage. This percentage can be used as a measure of the relative level of

cost during the period in question. For purposes of evaluating the financial

adequacy of the program, the summarized cost rate is adjusted to include the

cost of reaching and maintaining a target trust fund level. Because a trust

fund level of about 1 year’s cost is considered to be an adequate reserve for

unforeseen contingencies, the targeted trust fund ratio used in determining

summarized cost rates is 100 percent of annual cost. Accordingly, the

adjusted summarized cost rate is equal to the ratio of (a) the sum of the

present value of the cost during the period plus the present value of the targeted ending trust fund level, to (b) the present value of the taxable payroll

during the projection period.

Summarized income rate. The ratio of the present value of scheduled tax

income to the present value of taxable payroll for the years in a given period,

expressed as a percentage. This percentage can be used as a measure of the

relative level of income during the period in question. For purposes of evaluating the financial adequacy of the program, the summarized income rate is

adjusted to include assets on hand at the beginning of the period. Accord-
217

Glossary

ingly, the adjusted summarized income rate equals the ratio of (a) the sum of

the trust fund balance at the beginning of the period plus the present value of

the total income from taxes during the period, to (b) the present value of the

taxable payroll for the years in the period.

Supplemental Security Income—SSI. A Federally administered program

(often with State supplementation) of cash assistance for needy aged, blind,

or disabled persons. SSI is funded through the General Fund of the Treasury

and administered by the Social Security Administration.

Supplementary Medical Insurance (SMI) Trust Fund. See “Trust fund.”

Survivor benefit. Benefit payable to a survivor of a deceased worker.

Sustainable solvency. Sustainable solvency for the financing of the program

is achieved when the program has positive trust fund ratios throughout the

75-year projection period and these ratios are stable or rising at the end of the

period.

Taxable earnings. Wages and/or self-employment income, in employment

covered by the OASDI and/or HI programs, that is under the applicable

annual maximum taxable limit. For 1994 and later, no maximum taxable

limit applies to the HI program.

Taxable payroll. A weighted average of taxable wages and taxable selfemployment income. When multiplied by the combined employee-employer

tax rate, it yields the total amount of taxes incurred by employees, employers, and the self-employed for work during the period.

Taxable self-employment income. The maximum amount of net earnings

from self-employment by an earner which, when added to any taxable

wages, does not exceed the contribution and benefit base. For HI beginning

in 1994, all of net earnings from self-employment.

Taxable wages. See “Taxable earnings.”

Taxation of benefits. During 1984-93, up to one-half of an individual’s or a

couple’s OASDI benefits was potentially subject to Federal income taxation

under certain circumstances. The revenue derived from this provision was

allocated to the OASI and DI Trust Funds on the basis of the income taxes

paid on the benefits from each fund. Beginning in 1994, the maximum portion of OASDI benefits potentially subject to taxation was increased to

85 percent. The additional revenue derived from taxation of benefits in

excess of one-half, up to 85 percent, is allocated to the HI Trust Fund.

Taxes. See “Contributions.”

Termination. Cessation of payment of a specific type of benefit because the

beneficiary is no longer entitled to receive it. For example, benefits might

terminate as a result of the death of the beneficiary, the recovery of a disabled beneficiary, or the attainment of age 18 by a child beneficiary. In some

cases, the individual may become immediately entitled to another type of
Appendices

218

benefit (such as the conversion of a disabled-worker beneficiary at normal

retirement age to a retired-worker beneficiary).

Test of long-range close actuarial balance. Summarized income rates and

cost rates are calculated for each of 66 valuation periods within the full 75-

year long-range projection period. The first of these periods consists of the

next 10 years. Each succeeding period becomes longer by 1 year, culminating with the period consisting of the next 75 years. The long-range test is met

if, for each of the 66 valuation periods, the actuarial balance is not less than

zero or is negative by, at most, a specified percentage of the summarized cost

rate for the same time period. The percentage allowed for a negative actuarial balance is 0 percent for the 10-year period, grading uniformly to 5 percent

for the full 75-year period. The criterion for meeting the test is less stringent

for the longer periods in recognition of the greater uncertainty associated

with estimates for more distant years. The test is applied to OASI and DI

separately, as well as combined, based on the intermediate set of assumptions.

Test of short-range financial adequacy. The conditions required to meet

this test are as follows:

 • If the trust fund ratio for a fund exceeds 100 percent at the beginning of

the projection period, then it must be projected to remain at or above

100 percent throughout the 10-year projection period;

 • Alternatively, if the fund ratio is initially less than 100 percent, it must

be projected to reach a level of at least 100 percent within 5 years (and

not be depleted at any time during this period) and then remain at or

above 100 percent throughout the remainder of the 10-year period. In

addition, the fund’s estimated assets at the beginning of each month of

the 10-year period must be sufficient to cover that month’s disbursements.

These conditions apply to each trust fund separately, as well as to the combined funds, and are evaluated based on the intermediate set of assumptions.

Total fertility rate. The average number of children that would be born to a

woman in her lifetime if she were to experience the birth rates by age

observed in, or assumed for, a specified year, and if she were to survive the

entire childbearing period.

Trust fund. Separate accounts in the United States Treasury in which are

deposited the taxes received under the Federal Insurance Contributions Act

and the Self-Employment Contributions Act, as well as taxes resulting from

coverage of State and local government employees; any sums received under

the financial interchange with the railroad retirement account; voluntary hospital and medical insurance premiums; and transfers of Federal general revenues. Funds not withdrawn for current monthly or service benefits, the
219

Glossary

financial interchange, and administrative expenses are invested in interestbearing Federal securities, as required by law; the interest earned is also

deposited in the trust funds.

 • Old-Age and Survivors Insurance (OASI). The trust fund used for

paying monthly benefits to retired-worker (old-age) beneficiaries and

their spouses and children and to survivors of deceased insured workers.

 • Disability Insurance (DI). The trust fund used for paying monthly benefits to disabled-worker beneficiaries and their spouses and children and

for providing rehabilitation services to the disabled.

 • Hospital Insurance (HI). The trust fund used for paying part of the

costs of inpatient hospital services and related care for aged and disabled individuals who meet the eligibility requirements. Also known as

Medicare Part A.

 • Supplementary Medical Insurance (SMI). The Medicare trust fund

composed of the Part B Account, the Part D Account, and the Transitional Assistance Account. The Part B Account pays for a portion of the

costs of physicians’ services, outpatient hospital services, and other

related medical and health services for voluntarily enrolled aged and

disabled individuals. The Part D Account pays private plans to provide

prescription drug coverage, beginning in 2006. The Transitional Assistance Account paid for transitional assistance under the prescription

drug card program in 2004 and 2005.

Trust fund ratio. A measure of the adequacy of the trust fund level. Defined

as the assets at the beginning of a year, including advance tax transfers (if

any), expressed as a percentage of the cost during the year. The trust fund

ratio represents the proportion of a year’s cost which could be paid with the

funds available at the beginning of a year.

Unfunded obligation. See “Open group unfunded obligation” and “Closed

group unfunded obligation”.

Unnegotiated check. A check which has not been cashed 6 months after the

end of the month in which the check was issued. When a check has been outstanding for a year (i) the check is administratively cancelled by the Department of the Treasury and (ii) the issuing trust fund is reimbursed separately

for the amount of the check and interest for the period the check was outstanding. The appropriate trust fund also receives an interest adjustment for

the time the check was outstanding if it is cashed 6-12 months after the

month of issue. If a check is presented for payment after it is administratively

cancelled, a replacement check is issued.

Valuation period. A period of years which is considered as a unit for purposes of calculating the financial status of a trust fund.
Appendices

220

Vocational rehabilitation. Services provided to disabled persons to help

enable them to return to gainful employment. Reimbursement from the trust

funds for the costs of such services is made only in those cases where the services contributed to the successful rehabilitation of the beneficiaries.

Year of exhaustion. The year in which a trust fund would become unable to

pay benefits when due because the assets of the fund were exhausted.
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221

II. OVERVIEW

II.B1 Summary of 2008 Trust Fund Financial Operations . . . . . . . . 5

II.B2 Tax Rates for 2008 and Later . . . . . . . . . . . . . . . . . . . . . . . . 5

II.C1 Ultimate Values of Key Demographic and Economic

Assumptions for the Long-Range (75-year) Projection

Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

II.D1 Projected Maximum Trust Fund Ratios Attained and

Trust Fund Exhaustion Dates Under the Intermediate

Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

II.D2 Reasons for Change in the 75-Year Actuarial Balance

Under Intermediate Assumptions . . . . . . . . . . . . . . . . . . . . . 17

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND

LEGISLATIVE CHANGES IN THE LAST YEAR

III.A1 Operations of the OASI Trust Fund, Calendar Year 2008 . . . . 22

III.A2 Operations of the DI Trust Fund, Calendar Year 2008 . . . . . . . 26

III.A3 Operations of the Combined OASI and DI Trust Funds, 

Calendar Year 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

III.A4 Comparison of Actual Calendar Year 2008 Trust Fund

Operations With Estimates Made in Prior Reports . . . . . . . . . 29

III.A5 Distribution of Benefit Payments by Type of Beneficiary or 

Payment, Calendar Years 2007 and 2008 . . . . . . . . . . . . . . . . 30

III.A6 Administrative Expenses as a Percentage of Contribution

Income and of Total Expenditures,

Calendar Years 2004-08 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

III.A7 Trust Fund Investment Transactions, Calendar Year 2008 . . . . 31

IV. ACTUARIAL ESTIMATES

IV.A1 Operations of the OASI Trust Fund, Calendar Years 2004-18 . 36

IV.A2 Operations of the DI Trust Fund, Calendar Years 2004-18 . . . 39

IV.A3 Operations of the Combined OASI and DI Trust Funds,

Calendar Years 2004-18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

IV.A4 Reasons for Change in Trust Fund Ratios at the Beginning

of the Tenth Year of Projection . . . . . . . . . . . . . . . . . . . . . . . 43

IV.B1 Annual Income Rates, Cost Rates, and Balances,

Calendar Years 1990-2085 . . . . . . . . . . . . . . . . . . . . . . . . . . 47

IV.B2 Covered Workers and Beneficiaries, Calendar Years 1945-2085 51
List of Tables

222

IV.B3 Trust Fund Ratios, Calendar Years 2009-85 . . . . . . . . . . . . . . 56

IV.B4 Components of Summarized Income Rates and Cost Rates, 

Calendar Years 2009-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

IV.B5 Components of 75-Year Actuarial Balance

Under Intermediate Assumptions . . . . . . . . . . . . . . . . . . . . . 61

IV.B6 Unfunded OASDI Obligations for 1935 (Program Inception)

Through the Infinite Horizon . . . . . . . . . . . . . . . . . . . . . . . . 63

IV.B7 Present Values of OASDI Cost Less Tax Revenue and

Unfunded Obligations for Program Participants . . . . . . . . . . . 64

IV.B8 Comparison of Long-Range Actuarial Balances With the

Minimum Allowable in the Test for Close Actuarial Balance,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 67

IV.B9 Reasons for Change in the 75-Year Actuarial Balance

Under Intermediate Assumptions . . . . . . . . . . . . . . . . . . . . . 69

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

V.A1 Principal Demographic Assumptions,

Calendar Years 1940-2085 . . . . . . . . . . . . . . . . . . . . . . . . . . 83

V.A2 Social Security Area Population as of July 1 and

Dependency Ratios, Calendar Years 1950-2085 . . . . . . . . . . . 85

V.A3 Period Life Expectancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

V.A4 Cohort Life Expectancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

V.B1 Principal Economic Assumptions . . . . . . . . . . . . . . . . . . . . . 96

V.B2 Additional Economic Factors . . . . . . . . . . . . . . . . . . . . . . . . 103

V.C1 Cost-of-Living Benefit Increases, Average Wage Index, 

Contribution and Benefit Bases, and Retirement Earnings

Test Exempt Amounts, 1975-2018 . . . . . . . . . . . . . . . . . . . . 107

V.C2 Values for Selected Wage-Indexed Program Parameters, 

Calendar Years 1978-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . 110

V.C3 Legislated Changes in Normal Retirement Age and Delayed 

Retirement Credits, for Persons Reaching Age 62 in

Each Year 1986 and Later. . . . . . . . . . . . . . . . . . . . . . . . . . . 112

V.C4 OASI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1945-2085 . . . . . . . . . . . . . . . . 121

V.C5 DI Beneficiaries With Benefits in Current-Payment Status

at the End of Calendar Years 1960-2085 . . . . . . . . . . . . . . . . 129
List of Tables

223

VI. APPENDICES

A. HISTORY OF OASI AND DI TRUST FUND OPERATIONS

VI.A1 Contribution and Benefit Base and Contribution Rates . . . . . . 137

VI.A2 Operations of the OASI Trust Fund, 

Calendar Years 1937-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . 141

VI.A3 Operations of the DI Trust Fund, 

Calendar Years 1957-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . 143

VI.A4 Operations of the Combined OASI and DI Trust Funds,

Calendar Years 1957-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . 145

VI.A5 Assets of the OASI Trust Fund, End of Calendar Years

2007 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

VI.A6 Assets of the DI Trust Fund, End of Calendar Years

2007 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

B. HISTORY OF ACTUARIAL BALANCE ESTIMATES

VI.B1 Long-Range OASDI Actuarial Balances as Shown

in the Trustees Reports for 1982-2009 . . . . . . . . . . . . . . . . . . 151

C. FISCAL YEAR HISTORICAL DATA AND

PROJECTIONS THROUGH 2018

VI.C1 Operations of the OASI Trust Fund, Fiscal Year 2008. . . . . . . 154

VI.C2 Operations of the DI Trust Fund, Fiscal Year 2008 . . . . . . . . . 155

VI.C3 Operations of the Combined OASI and DI Trust Funds,

Fiscal Year 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

VI.C4 Operations of the OASI Trust Fund in Fiscal Years 2004-18 . . 157

VI.C5 Operations of the DI Trust Fund in Fiscal Years 2004-18 . . . . 158

VI.C6 Operations of the Combined OASI and DI Trust Funds in

Fiscal Years 2004-18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159

D. LONG-RANGE SENSITIVITY ANALYSIS

VI.D1 Sensitivity to Varying Fertility Assumptions . . . . . . . . . . . . . 161

VI.D2 Sensitivity to Varying Death-Rate Assumptions . . . . . . . . . . . 162

VI.D3 Sensitivity to Varying Net-Immigration Assumptions . . . . . . . 164

VI.D4 Sensitivity to Varying Real-Wage Assumptions . . . . . . . . . . . 165

VI.D5 Sensitivity to Varying CPI-Increase Assumptions. . . . . . . . . . 166

VI.D6 Sensitivity to Varying Real-Interest Assumptions . . . . . . . . . . 167

VI.D7 Sensitivity to Varying Disability Incidence Assumptions. . . . . 168

VI.D8 Sensitivity to Varying Disability Termination Assumptions. . . 170
List of Tables

224

E. STOCHASTIC PROJECTIONS

VI.E1 Long-Range Estimates Relating to the Actuarial Status of the 

Combined OASDI Program . . . . . . . . . . . . . . . . . . . . . . . . . 176

F. ESTIMATES FOR OASDI AND HI,

SEPARATE AND COMBINED

VI.F1 Contribution Rates for the OASDI and HI Programs. . . . . . . . 178

VI.F2 OASDI and HI Annual Income Rates, Cost Rates,

and Balances, Calendar Years 2009-85 . . . . . . . . . . . . . . . . . 179

VI.F3 Summarized OASDI and HI Income Rates and Cost Rates for 

Valuation Periods, Calendar Years 2009-83 . . . . . . . . . . . . . . 181

VI.F4 OASDI and HI Annual and Summarized Income, Cost, and

Balance as a Percentage of GDP, Calendar Years 2009-85 . . . 184

VI.F5 Ratio of OASDI Taxable Payroll to GDP,

Calendar Years 2009-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186

VI.F6 Selected Economic Variables, Calendar Years 2008-85 . . . . . . 189

VI.F7 Operations of the Combined OASI and DI Trust Funds,

in Constant 2009 Dollars, Calendar Years 2009-85 . . . . . . . . . 191

VI.F8 Operations of the Combined OASI and DI Trust Funds, 

in Current Dollars, Calendar Years 2009-85 . . . . . . . . . . . . . . 193

VI.F9 OASDI and HI Annual Income Excluding Interest, Cost, and

Balance in Current Dollars, Calendar Years 2009-85 . . . . . . . 195

VI.F10 Annual Scheduled Benefit Amounts for Retired Workers

With Various Pre-Retirement Earnings Patterns

Based on Intermediate Assumptions,

Calendar Years 2009-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198

G. ANALYSIS OF BENEFIT DISBURSEMENTS

FROM THE OASI TRUST FUND WITH

RESPECT TO DISABLED BENEFICIARIES

VI.G1 Benefit Disbursements From the OASI Trust Fund

With Respect to Disabled Beneficiaries . . . . . . . . . . . . . . . . . 201

VI.G2 Benefit Disbursements Under the OASDI Program

With Respect to Disabled Beneficiaries . . . . . . . . . . . . . . . . . 202
List of Figures

225

II. OVERVIEW

II.D1 Short-Range OASDI Trust Fund Ratios . . . . . . . . . . . . . . . . . 8

II.D2 OASDI Income and Cost Rates Under Intermediate

Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

II.D3 Number of Covered Workers Per OASDI Beneficiary. . . . . . . 10

II.D4 Cumulative OASDI Income Less Cost, Based on

Present Law Tax Rates and Scheduled Benefits . . . . . . . . . . . 12

II.D5 OASDI Cost and Scheduled Tax Revenue as a

Percentage of GDP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

II.D6 Long-Range OASDI Trust Fund Ratios Under

Alternative Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

II.D7 Annual Trust Fund Ratios. . . . . . . . . . . . . . . . . . . . . . . . . . . 16

II.D8 OASDI Annual Balances: 2008 and 2009 Trustees Reports. . . 18

IV. ACTUARIAL ESTIMATES

IV.A1 Short-Range OASI and DI Trust Fund Ratios. . . . . . . . . . . . . 35

IV.B1 Long-Range OASI and DI Annual Income Rates and

Cost Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

IV.B2 Number of OASDI Beneficiaries Per 100 Covered Workers . . 53

IV.B3 Long-Range OASI and DI Trust Fund Ratios. . . . . . . . . . . . . 57

IV.B4 Test of Long-Range Close Actuarial Balance . . . . . . . . . . . . . 68

IV.B5 OASDI Annual Balances: 2008 and 2009 Trustees Reports. . . 73

V. ASSUMPTIONS AND METHODS UNDERLYING

ACTUARIAL ESTIMATES

V.C1 Primary-Insurance-Amount Formula for Those

Newly Eligible in 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

V.C2 Maximum-Family-Benefit Formula for Those

Newly Eligible in 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

V.C3 DI Disability Incidence Rates, 1970-2085 . . . . . . . . . . . . . . . 125

V.C4 DI Disability Termination Rates, 1970-2085 . . . . . . . . . . . . . 127

V.C5 Comparison of DI Disability Incidence Rates,

Termination Rates and Conversion Ratios Under

Intermediate Assumptions, 1970-2085. . . . . . . . . . . . . . . . . . 128

V.C6 DI Disability Prevalence Rates, 1970-2085 . . . . . . . . . . . . . . 131
List of Figures

226

VI. APPENDICES

VI.E1 Annual Trust Fund Ratios. . . . . . . . . . . . . . . . . . . . . . . . . . . 174

VI.E2 Annual Cost Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

VI.F1 Estimated OASDI Income and Cost in Constant Dollars,

Based on Intermediate Assumptions . . . . . . . . . . . . . . . . . . . 192
227

Index

A

Actuarial balance 9, 11, 44, 113, 149, 160

Actuarial balance, long-range test 67

Actuarial deficit 2, 11, 19, 59, 181

Actuarial estimates, LR 44

Actuarial estimates, SR 33

Adjusted program amounts 105

Administrative expenses 5, 30, 45, 133, 140, 154, 182, 190

Advance tax transfers 54, 142

Amendments 32

Annual balance 17, 44, 69

Assets 2, 5, 8, 24, 33, 45, 140, 154, 167, 177, 188

Assumptions 2, 8, 45, 74, 90, 105, 149, 160, 178, 182, 187, 200

Automatic cost-of-living benefit increase 5, 37, 92, 105

Auxiliary benefits 115

Average benefits 133

Average earnings assumptions 94

Average indexed monthly earnings (AIME) 108

Average wage index 105, 187

Award 116

B

Baby-boom generation 2, 19, 38, 46, 50, 98, 124, 132, 183

Bend points 108

Beneficiaries, DI 122

Beneficiary 10, 37, 50, 74, 106, 152, 161, 182, 190, 200

Beneficiary, OASI 116

Benefit payments 5, 9, 34, 45, 133, 140, 154, 167, 182, 190, 202

Benefit termination 7, 38

Best estimate 7, 19, 33, 74

Board of Trustees 33, 90, 136

C

Close actuarial balance 44, 64

Closed group unfunded obligation 63, 64, 206

Constant dollars 192

Consumer Price Index 92, 166, 187, 205

Contribution and benefit base 35, 94, 106, 137, 187, 205

Contributions 5, 136, 154, 177, 182, 190, 204

Cost rate 3, 9, 45, 113, 177

Cost-of-living adjustment 105

Covered earnings 5, 105, 186

Covered employment 7, 35, 94, 112, 136, 165

Covered worker 52, 112, 163
Index

228

Creditable earnings 207

Current dollars 187

Current-payment status 37, 123, 127, 128, 129, 205

D

Deemed wage credit 45, 113

Delayed retirement credit 111

Demographic assumptions 7, 17, 33, 45, 75, 98, 105, 149, 188, 204

Deterministic model 171, 176, 208

DI beneficiaries 122

Disability 136, 163, 200

Disability conversion ratio 127

Disability incidence rate 74, 123, 125, 163, 168, 204

Disability Insurance Trust Fund 206

Disability prevalence rate 123, 129, 131, 132

Disability termination rate 169

Disabled-worker benefit 125, 208

Disbursements 21, 22, 23, 26, 28, 33, 154, 155, 156, 201, 202

E

Earnings 2, 5, 34, 45, 94, 106, 136, 150, 177, 186, 187, 204

Earnings test 94, 106, 205

Economic assumptions 7, 17, 33, 42, 45, 90, 98, 105, 149, 188, 204

Excess wages 45, 113, 188

Expenditures 2, 5, 7, 25, 31, 33, 37, 40, 140, 141, 143, 145, 208

F

Federal Insurance Contributions Act 177, 206

Fertility assumptions 76

Financial interchange 5, 134, 140

Fiscal year 79, 142, 154

Full advance funding 209

G

General Fund of the Treasury 36, 37, 138, 182, 190, 204

General fund reimbursement 209

Gross domestic product 3, 50, 74, 91, 182

Gross domestic product projections 100

H

High-cost assumptions 7, 14, 34, 46, 74, 90, 126, 160, 178, 182, 187, 204

Hospital Insurance program 137, 177, 212

Hospital Insurance Trust Fund 182
229

Index

I

Immigration 7, 74, 75, 79, 83, 163, 171, 204, 210

Immigration assumptions 79

Income rate 3, 9, 45, 177

Inflation 7, 74, 92, 187, 204

Inflation assumptions 92

Insured population 7, 114

Insured status 110

Interest 34, 101, 139, 149, 154, 178, 182, 188, 204

Interest rate 35, 74, 149, 167, 188, 204

Interest rate projections 101

Interfund borrowing 142, 207

Intermediate assumptions 33, 35, 37, 46, 74, 126, 160, 178, 182, 187, 191,

192, 193, 200, 204

L

Labor force projections 98

Legal immigration 79, 84, 211

Life expectancy 2, 19, 74, 87, 98, 211

Life expectancy estimates 86

Long range 9, 44, 75, 90, 117, 149, 177, 182, 187

Low-cost assumptions 7, 14, 46, 74, 126, 160, 178, 187, 204

Lump-sum death payment 133

M

Medicare 77, 212

Military service 36, 45, 94, 113, 134, 136, 209

N

National average wage index 105, 187

Normal retirement age 106, 122, 196, 208

O

OASI beneficiaries 116

Old-Age and Survivors Insurance Trust Fund 136, 206

Old-law base 110

Open group unfunded obligation 2, 9, 17, 44, 60, 61, 176, 206, 212

Other immigration 79, 164, 213
Index

230

P

Par value 139

Partial advance funding 213

Pay-as-you-go financing 149

Payroll taxes 2, 19, 58, 59, 105, 113, 152, 160, 177, 190

Population estimates 84

Population in the Social Security area 35, 53, 84, 98, 112, 164

Present value 149

Primary insurance amount (PIA) 108

Productivity assumptions 91

Q

Quarters of coverage 114

R

Railroad Retirement 45, 110, 134, 140, 154, 177, 182, 190, 207

Reallocation of tax rates 214

Real-wage differential 95, 164

Recession 33, 90

Retired-worker benefit 116, 163, 200

Retirement age 38, 106, 196, 208

Retirement earnings test 94, 106

Retirement eligibility age 1, 163, 183

S

Self-employment 45, 92, 113, 136, 178, 206

Self-Employment Contributions Act 32, 206, 215

Sensitivity analysis 160

Short range 8, 33, 54, 90, 116

Social Security Act 105, 139, 187, 200, 206

Social Security amendments 32

Solvency 13, 34, 44, 215

Special public-debt obligation 37, 104, 139, 167, 188

Stochastic projections 171

Substantial gainful activity 122, 208

Summarized balance 183

Summarized income and cost rates 58, 149, 160, 180, 204

Supplemental Security Income 154

Supplementary Medical Insurance program 177, 212

Survivor benefit 2, 6, 120, 205
231

Index

T

Taxable earnings 34, 53, 106, 136, 150, 186, 205

Taxable payroll 2, 9, 19, 45, 92, 113, 149, 161, 177, 182, 187, 207

Taxable self-employment income 136, 217

Taxable wages 114, 138, 217

Taxation of benefits 5, 45, 134, 182, 190, 210

Taxes 5, 105, 136, 178, 207

Termination 38, 74

Termination rate 7, 38, 116, 169, 204

Test of short-range financial adequacy 34, 65, 215

Total fertility rate 76, 160

Trust fund financial operations 5, 21, 34, 136

Trust fund ratio 8, 33, 44, 53, 142, 157, 219

U

Unemployment projections 98

Unfunded obligation 2, 9, 11, 13, 17, 44, 60, 61, 64, 176, 206, 212, 219

Unnegotiated check 142, 154

V

Valuation period 11, 44, 149, 160, 180, 204

Vocational rehabilitation 45, 140, 155, 182, 190, 202, 207

Y

Year of exhaustion 9, 11, 19, 44, 56
232

STATEMENT OF ACTUARIAL OPINION

It is my opinion that (1) the techniques and methodology used herein to evaluate the financial and actuarial status of the Federal Old-Age and Survivors

Insurance and Disability Insurance Trust Funds are based upon sound principles of actuarial practice and are generally accepted within the actuarial profession; and (2) the assumptions used and the resulting actuarial estimates

are, individually and in the aggregate, reasonable for the purpose of evaluating the financial and actuarial status of the trust funds, taking into consideration the past experience and future expectations for the population, the

economy, and the program.

Stephen C. Goss,

Associate of the Society of Actuaries,

Member of the American Academy of Actuaries,

Chief Actuary, Social Security Administration