SOCIAL SECURITY

MEMORANDUM 

Date: June 14, 1999 Refer To: TCC 

To: Harry C. Ballantyne 

Chief Actuary 

From: Stephen C. Goss 

Deputy Chief Actuary 

Subject: Estimated Long-Range OASDI Financial Effect of Proposal by 

Representative John Kasich-INFORMATION 

This memorandum provides the estimated effect on long-range 

OASDI financial status of a proposal developed for 

Representative John Kasich. Specifications for this proposal 

have been provided by Steve Robinson of Representative Kasich’s 

staff. 

This proposal would consist of two parts. The first is a 

gradual, across-the-board reduction in the rate of growth in 

the OASDI benefit level from that scheduled under present law. 

The second is an irrevocable option to accept a further 

reduction in OASDI benefit level in return for having between 

1.0 and 3.5 percent of percent OASDI taxable earnings 

contributed to an individual account. For those who exercise 

the option, contributions to the Personal Savings Accounts 

(PSAs) would be financed by redirecting the appropriate 

percentage of the worker’s OASDI payroll tax from the OASDI 

Trust Funds to the PSA. In order to maintain solvency for the 

OASDI Trust Funds, amounts roughly equal to the present value 

of expected reductions in OASDI benefit payments from the 

option would be loaned from the General Fund of the Treasury to 

the Trust Funds for each year, starting 2000, as long as 

needed. The loans would be repaid with interest at the trustfund special issue bond yield later. 

The first part of the proposal would modify the OASDI benefit 

formula so that benefit levels would tend to rise from one 

generation to the next at the rate of growth in consumer 

prices. Under current law, benefit levels tend to rise at the 

rate of growth in the average wage level from one generation to 
2

the next. Future growth in the average wage level is assumed 

to average 4.2 percent per year for the intermediate 

assumptions of the 1999 Trustees Report. Future growth in 

consumer prices is assumed to average 3.3 percent. 

Benefit levels for those newly eligible in 2050 would be 

expected to be reduced by about 35 percent, and by about 

48 percent for those newly eligible in 2075. Under these 

assumptions, this provision alone would be expected to 

eliminate the currently projected actuarial deficit and restore 

solvency for OASDI for the indefinite future. 

The second part of the proposal would provide an irrevocable 

option to accept a further benefit reduction in return for a 

Government-financed contribution to an individual account for 

workers who will reach age 55 after December 31, 2000. The 

decision of whether or not to exercise this option would, for 

workers in their 40’s up to age 54 in 2000, be complicated. 

Married workers, particularly those with only one earner, would 

be less inclined to exercise the option. Younger workers in 

2000, and later, would be increasingly more inclined to 

exercise the option due to the reduced OASDI benefit levels 

provided in the first part of the proposal. 

If all eligible workers were to exercise the option in 2000 or 

later, at their earliest opportunity, the specified annual 

loans from the Treasury to OASDI program would be needed 

through the year 2045, with repayment expected to begin in the 

year 2060. With the loans, the OASDI Trust Funds would be 

expected to remain solvent throughout the long-range period and 

beyond, under the intermediate assumptions of the 1999 Trustees 

report. While it is not possible to anticipate the level of 

voluntary participation in the second part of the proposal, it 

appears that the OASDI program would be returned to long-range 

solvency under any reasonable pattern of participation. 

 

The balance of this memorandum provides a description and 

analysis of the proposal provisions, and estimates of the longrange financial effects of the proposal on the OASDI program. 

All estimates are based on the intermediate assumptions of the 

1999 Trustees Report. 
3

Summary of Proposal Provisions

Part 1. PIA Formula Change 

The primary insurance amount (PIA) benefit formula determines 

the full, unreduced monthly benefit amount for worker 

beneficiaries. The PIA is subject to actuarial reduction for 

benefit entitlement before reaching the normal retirement age 

(NRA, currently 65) and, for retired worker beneficiaries, a 

delayed retirement credit for postponing benefit entitlement 

until after the NRA. Benefit levels are increased by the 

annual cost-of-living adjustment (COLA) after initial benefit 

eligibility. 

The PIA formula consists of three brackets which are separated 

by two “bend points”. For beneficiaries newly eligible in 1999 

these bend points are $505 and $3,043. These bend points are 

indexed from year to year by the increase in the Social 

Security average wage indexing series (AWI). A worker’s PIA is 

calculated as 90 percent of the first $505 of career- average 

indexed monthly earnings (AIME), plus 32 percent of any AIME 

amount between $505 and $3,043, and 15 percent of any AIME 

amount in excess of $3,043. Thus, the current-law formula 

results in PIA benefit levels that tend to rise with the 

increase in the AWI from one generation to the next. 

The first provision of this proposal would modify the PIA 

formula so that the level of benefits would tend to rise with 

the growth in consumer prices rather than with the average wage 

(AWI) from one generation to the next. This would be 

accomplished by adjusting the 90, 32, and 15 percent factors to 

remove any real growth in the average wage from the increase in 

benefit levels from one generation to the next. 

Specifically, the PIA factors (90, 32, and 15) would be 

successively reduced each year by the ratio of C to W, where 

 C = (CPI-W for year–2 / CPI-W for year –3) and 

 W = (AWI for year-2 / AWI for year-3). 

These reductions would be computed beginning with the year 

2001, but would be first applied to beneficiaries becoming 

eligible in 2008. For beneficiaries becoming eligible in 2008, 

the PIA would be reduced by the total real growth in the AWI 

from 1998 to 2006. For new eligibles in 2009, the 

PIA would be further reduced by the real growth in the AWI 

between 2006 and 2007. 
4

Under the intermediate assumptions of the 1999 Trustees Report, 

the CPI-W is assumed to increase at an average rate of 3.3 

percent per year, and the AWI by an average of 4.2 percent per 

year. Thus the provision would successively slow the growth in 

benefit levels between generations by about 

0.86 percent per year, on average (1.033/1.042 = 0.9914). The 

first beneficiaries affected, those newly eligible in 2008, 

would have benefits reduced by an expected 6.7 percent, from 

the level anticipated under present law (note that this would 

be lower than the 2008 benefit for a similar worker, one year 

older, who had retired in 2007 and could be referred to as a 

“notch”). The size of the reduction would increase for new 

eligibles in later years. 

Part 2. Voluntary Option for the Personal Security Account 

This provision would provide workers who will reach age 55 

after December 31, 2000 (i.e., those born in 1946 or later) an 

irrevocable option to have Government-financed contributions 

made to a Personal Savings Account (PSA) on their behalf. For 

those who exercise the option, IA contributions would commence 

as early as the year 2000. However, eligible workers could 

decide to opt in at any time after 2000 if they choose. In 

addition, workers who first enter the workforce after 2000 

would have the option to (1) start the PSA immediately, 

(2) delay the start of PSA contributions to a later year, or 

(3) never opt for the PSA. (Note that opting for the PSA has 

specific implications for the level of benefits payable from 

the OASDI program; this is discussed in the next section.) 

Contributions each year would depend on the level of the 

worker’s OASDI taxable earnings for the year. The PSA 

contribution would be equal to 

 3.5% - 2.5% X (Worker’s annual earnings/taxable maximum) 

Thus, for a worker with maximum taxable earnings in 2000, 

projected to be $76,200, the PSA contribution would be 

1 percent of annual earnings, or $762. For a worker with 

earnings at half the taxable maximum, or $38,100, the PSA 

contribution would be 2.25 percent, or $857. The highest 

dollar level of PSA contribution would occur for workers with 

earnings at 70 percent of the taxable maximum, or $53,340. See 

the attached Table 1 for more examples. Of course, the PSA 

contribution would vary throughout each worker’s career as a 
5

percentage of their annual earnings, as their annual earnings 

vary relative to the taxable maximum. 

PSA contributions for each year would be invested collectively 

in a money-market account until individual earnings records are 

reconciled late in the following year. At that point, PSA 

contributions would be credited to individual PSA accounts. 

The nature of PSA accounts would apparently be similar to the 

Federal Government employee Thrift Savings Plan (TSP) in order 

to keep administrative expenses as low as possible. 

Part 2. Benefit Reduction for Those Who Opt for the PSA 

For those who opt for the PSA contributions, the level of all 

OASDI benefits that would be payable based on the worker’s 

earnings will be reduced, beyond reductions from part 1 of the 

proposal. The reduction is 1/3 percent for each year starting 

with the year of first PSA contribution and ending with the 

year prior to first benefit entitlement (regardless of the 

number of years for which the worker had earnings). Thus, for 

a worker who opted into the PSA at age 22 and retires at age 

62, benefits would be reduced by 13 1/3 percent 

 Reduction = 1/3% x (62-22) = 13 1/3% 

The reduction for a disabled worker beneficiary would generally 

be smaller, because benefit entitlement generally begins before 

age 62. The average age at benefit entitlement for disabled 

worker beneficiaries is about 49, implying an average reduction 

of 9 percent for those who opt for the PSA starting at age 22. 

For disabled workers who are converted to retired worker status 

at their NRA, the lower reduction computed at disabled worker 

entitlement would continue to apply. Smaller reductions would 

similarly apply to benefits based on the earnings of workers 

who die before attaining eligibility for a retired worker 

benefit (before age 62). 

Part 2. Borrowing from and Repaying the General Fund 

Because PSA contributions would be financed by redirection the 

appropriate portion of each participating worker’s OASDI 

payroll tax to the PSA, income to the OASDI program would be 

substantially reduced for many years before benefit reductions 

under the optional part 2 become large. Under the proposal, 

annual loans to the OASDI Trust Funds from the General Fund of 
6

the Treasury would be made beginning in the year 2000, for as 

long as needed to assure that the projected assets in the 

combined OASDI Trust Funds would never fall below 100 percent 

of the annual cost of the program. 

The amount loaned each year would be 11 percent of the annual 

benefit cost for the year. This is approximately the present 

value of the expected future reductions in OASDI benefit 

payments that would be incurred based on participation in the 

optional part 2 of the proposal for that year. 

Repayment of the loans would commence when the trust fund 

assets are projected to begin rising steadily above 100 percent 

of annual cost. Repayments would be scheduled to maintain the 

trust fund assets at about 100 percent of program annual cost. 

When the loans have been fully repaid, with interest, the OASDI 

payroll tax rates could be reduced. 

Analysis of Incentives to Exercise the Voluntary Option

Because the benefit reduction in part 2 of the proposal 

produces a 1/3 percent reduction in lifetime OASDI benefits for 

every year starting with the election of the PSA up to benefit 

entitlement, workers will consider carefully whether and when 

they should enroll. For young workers, particularly students, 

with very low earnings, it may be financially disadvantageous 

to enroll for the PSA. For example, a 20-year old student with 

$1,000 earnings in 2000 would have $34.67 deposited in his/her 

PSA account, at the cost of a 

1/3-percentage-point reduction in lifetime OASDI benefits. 

Thus, workers may tend to wait to opt into the PSA plan until 

they have entered full-time employment. 

Another group that might consider the option carefully would be 

workers who are in their mid 40’s up to age 54 in 2000. These 

individuals will have fewer years for PSA contributions 

to accumulate enough to offset the benefit reduction. These 

older workers will also already generally know what their 

eventual marital status is likely to be at retirement. For 

those who expect to retire with a spouse who had little or no 

paid employment, the benefit reduction on benefits for both 

spouses, including survivor benefits, is more likely to be 

larger than the potential gain from the PSA, than would be the 

case for a single worker or a 2-earner married couple. 
7

Tables 2a and 2b, attached, provide comparisons of the 

reduction in OASI benefit with the value of an annuity from the 

PSA, assuming investment is half-stock/half-bonds or all bonds, 

respectively. Values in italics compare reductions in benefits 

under the optional Part 2 only with the value of the PSA 

annuity as a percentage of the benefit under the proposal 

reflecting the reductions from the universally-applied Part 1. 

These italicized values represent the comparison relevant to 

choosing whether or not to opt into Part 2 of the proposal. 

The table below provides the approximate ages of married 

individuals in 2000, by earner status, which would be expected 

to be better off NOT opting for Part 2, assuming an expectation 

of a 7 percent real yield on stock and 3 percent on long-term 

U.S. Government bonds. All single workers who expect to remain 

single would be better off opting for Part 2. 

 Ages of Workers in 2000 Who Would Expect to Be Better Off 

 NOT Opting for Part 2 of the Kasich Proposal

 Expected PSA Portfolio Return 

 All Long-Term Half Stock 

 U.S. Govt Bonds Half Bonds

 2-Ernr 1-Ernr 2-Ernr 1-Ernr 

Low Earners -- 48-54 -- 52-54 

Medium Earners -- 51-54 -- 54 

High Earners -- 45-54 -- 53-54 

Maximum Earners 54 34-54 -- 43-54 

Married 1-earner couples (and 2-earner couples with very low 

career earnings for the lower earner) who are between about 

age 50 and 54 in the year 2000 should be expected not to opt 

into Part 2 of the proposal. The determination of whether to 

opt in will depend on how the couple expects to invest the PSA 

until benefit entitlement, and their level of aversion to risk. 

Workers in their 50’s may still opt for Part 2 if they are 

willing to invest aggressively (more than half in stock) and 

are willing to accept the risk that the market will not perform 

up to expectations. On the other hand, workers in their 40’s 

(or even 30’s with very high earnings) who would invest 

conservatively and prefer a “safer bet” will be more likely to 

decline to participate in Part 2. As the italicized values in 
8

Tables 2a and 2b illustrate, however, all workers in their 20’s 

in the year 2000, and those who enter the workforce after 2000 

would be expected to participate in Part 2. 

The examples presented in Tables 2a and 2b represent workers 

with four different earnings levels, and three different 

marital statuses. Workers with low, medium, and high career 

earnings have lifetime earnings patterns that reflect the 

relative earnings levels by age and the probability of having 

earnings by age for OASDI covered workers in recent years. 

The level of earnings for these examples results in an AIME 

(average indexed monthly earnings) that is equal to that for a 

steady worker with earnings each year equal to: (a) 

the SSA average wage indexing series (AWI) for the medium 

worker, 

(b)45 percent of the AWI for the low worker, and 

(c) 160 percent of the AWI for the high worker. 

The AWI for 1999 is estimated to be $29,732. The steady maximum 

worker is assumed to have earnings equal to the Social Security 

taxable maximum amount ($72,600 for 1999). 

The marital statuses are: 

(1) single, never married, 

(2) married 2-earner couple, meaning both spouses have career 

earnings averages at the same level, and (3) married 1-earner 

couple. All married couples are assumed to be the same age in 

the examples. 

An additional consideration for worker participation in Part 2 

would be when to become entitled to for benefits. Because the 

counting of years for benefit reduction under Part 2 ends with 

the year prior to benefit entitlement, it would generally be 

advantageous to become entitled as soon as possible, at age 62 

for retired worker benefits. The additional PSA contributions 

after age 62 would be unlikely to be sufficient to offset the 

1/3-percentage-point reduction in benefits that would result. 

It is assumed that both PSA contributions and further benefit 

reductions under Part 2 would cease after initial benefit 

entitlement. In this case, workers would be expected to become 

entitled for benefits at their earliest eligibility, by 

stopping or decrease work temporarily, if necessary. 
9

Expected Effects on Total Benefits from OASI and PSA

Tables 2a and 2b also illustrate the expected effects of the 

proposal on total benefit levels. The column labeled 

“Part 1: Reduction in PIA” illustrates the percentage reduction 

in the present-law OASI retirement and survivors benefits for 

workers by age cohort. For those reaching age 65 in 2070, the 

universal reduction from Part 1 would be 

44 percent. 

The column labeled “Total Reduction” illustrates the total 

reduction in OASI benefit from Parts 1 and 2 of the proposal. 

The total reduction would amount to 52 percent of the present 

law benefit for those age 65 in 2070. However, those opting 

for Part 2 will also receive an annuity from the accumulation 

of their PSA. The columns to the right of each table, labeled 

“Value of Annuity ... As a Percentage of Present Law Benefit” 

illustrate the comparable value of the PSA accumulation. 

These tables show that very young workers (age 20-30) in 2000 

who never marry, or marry someone with a fairly similar 

lifetime earnings record, may expect to have slightly higher 

retirement benefits if they (1) opt for Part 2, (2) invest 

fairly aggressively (at least half in stock), and 

(3) experience investment yields that at least match 

expectations. Workers will expect to have lower total 

retirement benefits from OASI and PSA if they (1) are older 

than 30 in 2000, (2) reach age 20 after about 2015, (3) retire 

as a member of a 1-earner couple, or a couple with very 

different levels of lifetime earnings, (4) invest 

conservatively, or (5) experience investment yields that fall 

short of expectations. 

As noted earlier, benefit reductions under Part 1 would first 

affect retirees eligible at age 62 in 2008 (age 65 in 2011, 

as in Tables 2a and 2b). This initial effect would be a 

benefit reduction of about 6.7 percent, as compared with no 

reduction for workers eligible in 2007 or earlier. This would 

result in a small notch (lower benefit payments in 2008 for new 

eligibles in 2008 than for similar workers who are 1-year older 

and were eligible in 2007). This small discrepancy would, at 

best be only partially offset by participation in Part 2 by 

those who will reach age 62 in 2008, and would be increased for 

many. 
10

Long-Range OASDI Financial Effects

Part 1 

Enactment of Part 1 of the proposal would progressively reduce 

OASDI benefits from the levels specified under present law. 

The extent of the reduction would allow the OASDI program the 

adequately financed indefinitely under the intermediate 

assumptions of the 1999 Trustees Report. With Part 1 alone 

(assuming no one opted for Part 2) the OASDI actuarial balance 

would be improved by an estimated 2.30 percent of effective 

taxable payroll, to a positive balance of about 0.24 percent of 

payroll. The assets of the combined OASDI trust funds would 

rise to a peak of 383 percent of annual program cost in 2016, 

then decline to a low of 192 percent of annual cost in 2047, 

and rise thereafter (as benefit levels continue to decline 

relative to present law), reaching an estimated 

427 percent of annual cost at the end of the 75-year period. 

See table 4 for details. 

It should be noted that under Part 1 of the proposal the 

financial status of the OASDI program would be considerably 

more sensitive to the level of real wage growth than under 

present law. If the real wage differential falls short of the 

0.9 percentage point assumed for the intermediate projections 

of the 1999 Trustees Report, the growth in benefit levels would 

be reduced to a much smaller extent under Part 1. At the 

extreme, if the real wage differential averaged 

0.0 percentage point (the average wage grows at the same rate 

as the CPI, on average) Part 1 would provide no savings for the 

OASDI program, and the long-range OASDI actuarial deficit would 

be about 3 percent of payroll. 

Part 2 

If, in addition to enactment of Part 1, all eligible workers 

(under 55 on December 31, 2000) opted for Part 2 of the 

proposal, the specified borrowing from the General Fund of the 

Treasury would be required for years 2000 through 2045. This 

borrowing, equal to 11 percent of OASDI benefit cost each year, 

would assure that the combined OASDI Trust Funds would not fall 

below 100 percent of annual cost, under the intermediate 

assumptions of the 1999 Trustees Report. 

With repayment of the loans commencing in 2060, when the trust 

fund assets would otherwise begin to rise above 100 percent of 

annual cost, the OASDI long-range actuarial balance would be 
11

estimated to be 0.00 percent of taxable payroll. The assets of 

the combined OASDI trust funds would rise to a peak of 319 

percent of annual program cost in 2013, then decline to 106 

percent of annual cost in 2060, and stay at about 100 percent 

of annual cost thereafter (as repayment rates are adjusted to 

maintain this trust fund ratio). Repayment to the General Fund 

would be expected to be equal to 0.20 percent of OASDI taxable 

payroll for 2060 to 2064, 0.35 percent of payroll for 2065 to 

2069, and 0.70 percent for 2070 to 2074. The repayment rate 

would continue to grow after 2074 due to the decreasing cost of 

the OASDI program, under the intermediate assumptions of the 

1999 Trustees Report. See table 3 for details of the expected 

financing of OASDI under the proposal. 

However, it is unlikely that all eligible workers would opt for 

Part 2, as suggested in the earlier section of this memorandum, 

“Analysis of Incentives to Exercise the Voluntary Option”. It 

is likely that most workers age 50 to 54 in 2000 and some as 

young as 30 would choose not to participate in Part 2. 

Any lack of participation by older workers in 2000 would tend 

to have a small negative effect on OASDI financial status as 

compared with universal participation. The present value of 

the potential further benefit reduction of Part 2 for these 

workers would generally be greater than the potential payrolltax carveout. Thus, nonparticipation of these older workers 

would reduce the General Fund loan by more than the payroll-tax 

carveout over the next 2 decades. In addition, some part-time 

employment early in career would likely not be included in Part 

2 benefit reduction because workers might choose to opt into 

the plan only after becoming employed on a full-time basis. 

Even with the likely reduction in Part 2 participation, the 

OASDI program would be expected to be adequately financed 

indefinitely. The net effects of selective nonparticipation 

would be small and would be accommodated by extending the 

period of annual loans. If necessary, the size of loans could 

be increased above 11 percent of taxable payroll. 

 

As described under financial effects of Part 1 alone, above, 

the OASDI program would be very sensitive to the real wage 

differential under this proposal. 

 

 Stephen C. Goss 

Attachments
Table 1. PSA (Kasich) Contribution for Workers in 2000

Level of PSA

Annual Contribution PSA

OASDI as a Contribution

Taxable Percentage in Dollar

Earnings of Earnings Amount

$1,000 3.47% $34.67

5,000 3.34% 166.80

10,000 3.17% 317.19

20,000 2.84% 568.77

30,000 2.52% 754.72

40,000 2.19% 875.07

50,000 1.86% 929.79

60,000 1.53% 918.90

70,000 1.20% 842.39

76,200 (taxable maximum) 1.00% 762.00

13,784 (Low = 45% of AWI 3.05% 420.09

30,630 (Average = AWI) 2.50% 764.24

38,100 (1/2 taxable maximum) 2.25% 857.25

49,008 (High = 160% of AWI 1.89% 927.29

53,340 (MaxContrib=0.7xTMax) 1.75% 933.45

OCACT/SSA

 June 9, 1999
Table 2a. Comparison of Potential PSA annuities with OASI Benefit Reduction for Kasich Proposal

 For Worker Opting in 2000 (Age 21 if later) and Investing Half Stock/Half U.S. Bonds until Annuitization at Benefit Entitlemen

 Assume 0.1 % Annual Administartive Expense on PSA Account Balances Earnings Scale for Low, Mediu

Age At Percentage Reduction in OASDI Benefit Value of Annuity from PSA Contributions for Steady W

Year Opting Part 1: Part 2:

Entitled into Reduction Reduction Total As a Percentage of Part 1. Benefit As a Percen

at Age 65 PSA in PIA for PSA Reduction Married Married 

Single 2-Earner 1-Earner Sing

Low Earners--Career-Average $13,380 for 1999

2011 54 6.7 3.7 10.1 5.3 5.0 3.3 5

2020 45 13.8 6.7 19.5 14.4 13.3 9.0 12

2030 35 20.9 10.0 28.8 32.4 30.1 20.3 252040 25 27.5 13.3 37.2 56.2 52.3 35.3 402050 21 33.5 14.7 43.3 67.9 63.2 42.7 452060 21 39.0 14.7 48.0 74.1 69.0 46.6 452070 21 44.1 14.7 52.3 80.8 75.2 50.8 45

Medium Earners--Career-Average $29,732 for 1999

2011 54 6.7 3.7 10.1 6.0 5.5 3.7 5

2020 45 13.8 6.7 19.5 15.4 14.3 9.6 13

2030 35 20.9 10.0 28.8 34.2 31.7 21.4 272040 25 27.5 13.3 37.2 60.3 56.1 37.9 432050 21 33.5 14.7 43.3 73.9 68.8 46.4 492060 21 39.0 14.7 48.0 80.6 75.0 50.6 492070 21 44.1 14.7 52.3 87.9 81.8 55.2 49

High Earners--Career-Average $47,572 for 1999

2011 54 6.7 3.7 10.1 5.6 5.2 3.5 5

2020 45 13.8 6.7 19.5 13.3 12.4 8.3 11

2030 35 20.9 10.0 28.8 28.9 26.8 18.1 222040 25 27.5 13.3 37.2 52.7 49.0 33.1 382050 21 33.5 14.7 43.3 66.2 61.6 41.6 442060 21 39.0 14.7 48.0 72.2 67.2 45.4 442070 21 44.1 14.7 52.3 78.8 73.3 49.5 44

Steady Maximum Earners--$72,600 for 1999

2011 54 6.7 3.7 10.1 4.5 4.1 2.8 4

2020 45 13.8 6.7 19.5 10.2 9.5 6.4 82030 35 20.9 10.0 28.8 21.9 20.4 13.8 17

2040 25 27.5 13.3 37.2 39.9 37.1 25.1 282050 21 33.5 14.7 43.3 51.9 48.3 32.6 342060 21 39.0 14.7 48.0 56.6 52.7 35.6 342070 21 44.1 14.7 52.3 61.8 57.5 38.8 34

Based on intermediate assumptions of the 1999 Trustees Report, and assumed 7% real stock yield Assume 3% net real annuity yield (CPI-indexed; Unisex single or Joint and 2/3 Survivor) OCACT/S
Table 2b. Comparison of Potential PSA annuities with OASI Benefit Reduction for Kasich Proposal

 For Worker Opting in 2000 (Age 21 if later) and Investing ALL U.S. Bonds until Annuitization at Benefit Entitlement 

 Assume 0.1 % Annual Administartive Expense on PSA Account Balances Earnings Scale for Low, Mediu

Age At Percentage Reduction in OASDI Benefit Value of Annuity from PSA Contributions for Steady W

Year Opting Part 1: Part 2:

Entitled into Reduction Reduction Total As a Percentage of Part 1. Benefit As a Percen

at Age 65 PSA in PIA for PSA Reduction Married Married 

Single 2-Earner 1-Earner Sing

Low Earners--Career-Average $13,380 for 1999

2011 54 6.7 3.7 10.1 4.7 4.3 2.9 4

2020 45 13.8 6.7 19.5 11.4 10.6 7.1 92030 35 20.9 10.0 28.8 22.9 21.3 14.4 18

2040 25 27.5 13.3 37.2 35.5 33.1 22.3 252050 21 33.5 14.7 43.3 41.5 38.7 26.1 272060 21 39.0 14.7 48.0 45.3 42.2 28.5 272070 21 44.1 14.7 52.3 49.4 46.0 31.1 27

Medium Earners--Career-Average $29,732 for 1999

2011 54 6.7 3.7 10.1 5.2 4.8 3.3 4

2020 45 13.8 6.7 19.5 12.3 11.4 7.7 10

2030 35 20.9 10.0 28.8 24.3 22.6 15.2 192040 25 27.5 13.3 37.2 38.1 35.4 23.9 272050 21 33.5 14.7 43.3 45.0 41.9 28.3 292060 21 39.0 14.7 48.0 49.1 45.7 30.8 292070 21 44.1 14.7 52.3 53.5 49.8 33.6 29

High Earners--Career-Average $47,572 for 1999

2011 54 6.7 3.7 10.1 4.9 4.6 3.1 4

2020 45 13.8 6.7 19.5 10.8 10.0 6.7 92030 35 20.9 10.0 28.8 20.7 19.2 13.0 16

2040 25 27.5 13.3 37.2 33.2 30.9 20.9 242050 21 33.5 14.7 43.3 40.0 37.2 25.1 262060 21 39.0 14.7 48.0 43.6 40.6 27.4 262070 21 44.1 14.7 52.3 47.6 44.3 29.9 26

Steady Maximum Earners--$72,600 for 1999

2011 54 6.7 3.7 10.1 3.9 3.7 2.5 3

2020 45 13.8 6.7 19.5 8.3 7.7 5.2 7

2030 35 20.9 10.0 28.8 15.7 14.6 9.9 12

2040 25 27.5 13.3 37.2 25.2 23.4 15.8 182050 21 33.5 14.7 43.3 31.1 29.0 19.6 202060 21 39.0 14.7 48.0 33.9 31.6 21.3 202070 21 44.1 14.7 52.3 37.0 34.4 23.3 20

Based on intermediate assumptions of the 1999 Trustees Report, and assumed 7% real stock yield Assume 3% net real annuity yield (CPI-indexed; Unisex single or Joint and 2/3 Survivor) OCACT/S