Session 10D: 

Updates on the 

Financial Status of Social 

Security and Proposals Presenters: 

Karen Glenn, FSA, EA, MAAA

Deputy Chief Actuary, Social Security Administration

Steve Goss, ASA, MAAA

Chief Actuary, Social Security Administration

October 28, 2021
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3
Outline

• 2021 Social Security Trustees Report: Baseline Projections of Actuarial 

Status of the OASI and DI Trust Funds

• Implications of the COVID-19 Pandemic and Ensuing Recession on 

Social Security

• Possible Solutions to Social Security’s Projected Shortfalls: Legislative 

Proposals

4
2021 Social Security Trustees Report: 

Baseline Projections
6

What is the Legislative Mandate for the Annual 

Report?

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

2. Actuarial status of the trust funds

• This means the ability to meet the cost of scheduled benefits with 

scheduled revenue and trust fund reserves

• And the extent to which scheduled revenue would fall short under 

current law, indicating the size of legislative changes that will be 

needed
7

Why Do These Actuarial Projections Matter?

• Long-term projections provide information to assess solvency and 

changes needed to eliminate shortfalls

• If trust fund reserves were to become depleted:

• Full scheduled benefits could not be paid timely

• NO pressure on the Budget or Federal Debt

• So Congress must act, as it always has

• Straightforward solutions:

• Add revenue and/or lower cost for OASDI

• Comprehensive changes implemented by 2034
8

Solvency: OASI+DI 

Trust Fund Reserve 

Depletion in 2034 

(one year earlier than last year)

Reserve depletion date varied 

from 2029 to 2042 in reports over 

the past 30 years (1992-2021).

DI Trust Fund: reserve depletion in 

2057, eight years earlier than last 

year.

Due largely to less revenue being 

projected for the DI program in the 

near-term. DI program continues 

to have low recent and near-term 

disability applications and awards.

8

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

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

Calendar Year

Social Security Trust Fund Ratios

Assets as a Percent of Annual Cost

Trustees Report Intermediate Projections

2021 TR DI

2020 TR DI

2021 TR OASI

2020 TR OASI

2021 TR OASDI

2020 TR OASDI

Historical Projected

Tax Rate

Reallocation
9

OASDI Annual Cost 

and Non-Interest 

Income as Percent 

of Taxable Payroll

Persistent negative annual cashflow balance starting in 2010.

78 percent of scheduled 

benefits still payable at trust 

fund reserve depletion.

Annual deficit in 2095: 4.34 

percent of payroll: 0.21 percent 

smaller than last year

9

0%

5%

10%

15%

20%

25%

2005 2015 2025 2035 2045 2055 2065 2075 2085 2095

Calendar Year

OASDI Non-Interest Income, Cost and Expenditures 

as Percentages of Taxable Payroll

Cost: Scheduled and 

payable benefits

Cost: Scheduled but not fully 

payable benefits

Non-interest Income Expenditures: Payable benefits = income 

after trust fund depletion in 2034

Payable benefits as percent 

of scheduled benefits:

2020-33: 100%

2034: 78%

2095: 74%

Historical Projected
10

Sustainability: 

Cost as Percent of 

GDP

Rises from a 4.2 percent 

average in 1990-2008, to a 

peak of about 6.2 percent 

for 2077, and then decline 

to 5.9 percent by 2095.

10

0%

1%

2%

3%

4%

5%

6%

7%

8%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar Year

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

Historical Projected

Cost

Non-interest Income
11

Aging: Change in 

Age Distribution

Mainly due to drop in 

birth rates

11

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

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

Aged Dependency Ratio 2021 TR

Population 65+/(20-64) 

Actual and TR Intermediate

TFR remains at 3.0 after 1964

TFR remains at 3.3 after 1964

Historical Projected
12

Changes This Year Due to Pandemic/Recession

The projections in the 2021 Trustees Report include the Trustees’ best 

estimates of the effects of the COVID-19 pandemic and ensuing recession, 

which were not reflected in the 2020 report.

1. Lower employment and earnings in the near term, through 2023

• However, the average wage index increases by about 2.7% for 2020

2. Increased deaths in 2020 through 2023

3. Delays in births and immigration

4. Lower applications for benefits, particularly disability

5. A permanent loss in the level of worker productivity, as in other 

recessions
13

Changes in Timing of Trust Fund Reserve Depletion

Mainly from the pandemic/recession in the first 10 to 20 years

1.OASDI reserve depletion is 2034, one year earlier than last 

year’s report. 

2.OASI reserve depletion is 2033, one year earlier than last year’s 

report.

3.DI reserve depletion is 2057, 8 years earlier than last year’s 

report.

• Change is larger for DI because difference between cost and income is smaller and 

more similar in years after 2030
14

Primary Changes This Year: Longer Term

1. Birth rates: change to projecting by “cohort” rather than by year

• Reflects the continuing trend for women having children at older ages

• Lower annual birth rates through 2036, reaching ultimate 2.0 in 2056

2. Employment: Updated labor force model to include latest economic cycle

• Lower labor force and unemployment rate with little net effect

3. Death rates: added dementia as a category and reduced rates of improvement 

for cardiovascular disease

4. Lower revenue from taxation of benefits per recent experience (Treasury OTA)

5. Methods changes, primarily for average benefit levels
15

Changes in OASDI Actuarial Balance in 2021 Report

• Valuation Period - 0.06 percent

• Legislation (restore and maintain the DACA program) - 0.01 percent

• Demographic data, assumptions and methods - 0.01 percent

• New cohort fertility method and higher ultimate fertility rate (roughly offsetting cost effects)

• New dementia cause of death category

• Higher recent and projected near-term mortality due to COVID-19 pandemic

• Economic data, assumptions and methods - 0.09 percent

• Updated labor force projection model and lower ultimate unemployment rate

• Slightly faster real growth in average wage levels

• Lower near-term real interest rates

• Level of productivity and GDP permanently lowered by 1 percent due to recession

• Reduced level of revenue from taxation of benefits

• Other new data and methods improvements - 0.16 percent

Net Changes for All Reasons -0.32 percent
16

Changes in OASDI 

Annual Balance

Annual income rate minus annual 

cost rate.

The trends in the very near term are 

due to the recession and recovery.

The increased annual deficits 

between 2025 and 2090 are mainly 

due to lower birth rates through 

2036, reduced productivity, reduced 

revenue from taxation of benefits, 

and changes in benefit projection 

methods.

The reduction in annual deficits 

after 2080 is largely due attaining 

the ultimate fertility rate in 2056.

16

-6%

-4%

-2%

0%

2%

2015 2025 2035 2045 2055 2065 2075 2085 2095

Calendar Year

OASDI Annual Balances: 2020 and 2021 Trustees Reports

2020 Report

2021 Report
17

Birth Rates by 

Cohort

Has been rising for 

women born since 1951. 

Projected to dip below 

2.0 for women born 

between 1990 and 2006, 

based on low rates since 

2008.

17

Chart 1.4: Historical and Projected Total Fertility Rates by Birth Cohort

https://www.ssa.gov/oact/TR/2021/2021_Long-Range_Demographic_Assumptions.pdf
18

Mortality 

Experience: 

All Ages

Increased mortality in the 

near-term to reflect the 

effects of the COVID-19 

pandemic.

18

700

750

800

850

900

950

1,000

1,050

1,100

1990 1995 2000 2005 2010 2015 2020 2025

Age-Sex-Adjusted Death Rates (per 100,000)

Total, All Ages

2019TR 2020TR 2021TR Actual
19

Ratio of 

Employment to 

Population

Expected to recover fully from 

the brief but steep recession. 

Expected to rise to same overall 

level as in the 2020TR. Under 

the new labor force model, 

difference between men and 

women narrowed somewhat. 

Slightly lower LFPR is offset by 

lower expected average 

unemployment rate, consistent 

with recent experience.

19

0.45

0.50

0.55

0.60

0.65

0.70

0.75

1981 1991 2001 2011 2021 2031 2041 2051 2061 2071 2081 2091

Ratio of Employment to Population 

(16 and older, age-sex-adjusted to 2011 population)

2020 TR

2021 TR

Age-sex-adjusted

Men (age-adjusted)

Women (age-adjusted)

Historical Projected
20

Lower Potential 

GDP in 2021 TR 

Compared to 

2020 TR

Potential GDP is roughly 1 

percent lower than the level in 

the 2020 TR.

Reflects expectation of a 

permanent level shift due to 

effects of the recession on 

total economy labor 

productivity and size of the 

population ages 16+.

20

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029

Potential GDP

(billions of 2012 dollars, intermediate assumptions)

2010 TR

2020 TR

2021 TR

Historical Projected
21

Disability 

Incidence Rate 

Remains 

Historically Low

DI disabled worker incidence 

rate rose sharply in the 2008 

recession, and has declined 

since the peak in 2010 to 

extraordinarily low levels in 

2016 through 2020.

21

3.5

4.0

4.5

5.0

5.5

6.0

6.5

1990 1995 2000 2005 2010 2015 2020 2025 2030

DI Age-Sex-Adjusted Incidence Rates:

Historical and Intermediate Assumptions for 2012 through 2021 Trustees Report

2012TR

2013TR

2014TR

2015TR

2016TR

2017TR

Average 1990-2020 5.10

Ultimate Assumption 5.00

2018TR

2019TR

2020TR

2021TR
22

Fewer Disabled 

Worker 

Beneficiaries

Fewer now and in near 

term based on recent 

applications and 

incidence rates.

22

6,000

7,000

8,000

9,000

10,000

11,000

2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028

Calendar Year

Disabled Worker Beneficiaries

In Current Payment Status at End of Year (in thousands)

2008 TR (no recession)

2020 TR

2021 TR
23

Trends in Employment by Occupation

• Employment effects in 

all areas in 2020 

(BLS cpsaat09)

• Will trends of 2010-19 

return, and continue? 
24

Trends in Employment by Occupation

• Employment distribution 

more revealing

• Share for management 

and professional, highly 

paid, increased in 2020

• Will these shifts continue 

with technology, 

automation, and 

increasing education 

levels?

• Might increases in 

infrastructure spending 

change these trends?
25

Adequacy: 

Replacement 

Rates Based on 

the 2021 TR

Source: Annual Recurring Actuarial Note #9 at www.ssa.gov/oact/NOTES/ran9/index.html

0

10

20

30

40

50

60

70

1940 1960 1980 2000 2020 2040 2060 2080

Calendar Year

Scheduled Monthly Benefit Levels as Percent of Career-Average 

Earnings by Year of Retirement at age 65

Low Earner ($26,579 for 2021; 24th percentile)

Medium Earner ($59,065 for 2021; 56th percentile)

High Earner ($94,503 for 2021; 81st percentile)

Max Earner ($142,800 for 2021; 100th percentile)

Historical Projected
26

Payable Benefits 

Under the Law, 

After Trust Fund 

Reserves Are 

Depleted, Are 

Even Lower

Source: Annual Recurring Actuarial Note #9 at www.ssa.gov/oact/NOTES/ran9/index.html

0

10

20

30

40

50

60

70

1940 1960 1980 2000 2020 2040 2060 2080

Calendar Year

PAYABLE Monthly Benefit Levels as Percent of Career-Average Earnings 

by Year of Retirement at age 65

Low Earner ($26,579 for 2021; 24th percentile)

Medium Earner ($59,065 for 2021; 56th percentile)

High Earner ($94,503 for 2021; 81st percentile)

Max Earner ($142,800 for 2021; 100th percentile)

Historical Projected
27

How About at 

Age 62, Where 

Many Start 

Benefits?

Source: Annual Recurring Actuarial Note #9 at www.ssa.gov/oact/NOTES/ran9/index.html

0

10

20

30

40

50

60

70

1960 1980 2000 2020 2040 2060 2080

Calendar Year

PAYABLE Monthly Benefit Levels as Percent of Career-Average Earnings 

by Year of Retirement at age 62

Low Earner ($26,579 for 2021; 24th percentile)

Medium Earner ($59,065 for 2021; 56th percentile)

High Earner ($94,503 for 2021; 81st percentile)

Max Earner ($142,800 for 2021; 100th percentile)

Historical Projected
Implications of the COVID-19 Pandemic 

and Ensuing Recession on Social Security
29

Changes Due to Pandemic/Recession: 

Any Changes Since 2021 TR Assumptions Were Set?

1. Lower employment and earnings in the near term, through 2023

Consistent—so far. Except December 2021 COLA is expected to be closer to 6% than 3.1%.

2. Increased deaths in 2020 through 2023

Consistent for 2020 based on CDC. But actual deaths are higher than we projected for 2021.

3. Delays in births and immigration 

Actual births and immigration look to be higher than we assumed for 2021.

4. Lower applications for benefits, particularly disability

Continuing low so far, but we expect them to rise after the pandemic.

5. A permanent loss in the level of worker productivity, as in other recessions 

Too soon to tell. 
Cases and Deaths Reported Daily to CDC: Reports Lag

Source: https://covid.cdc.gov/covid-data-tracker

30
Death Reporting Lags Date of Death Estimated Complete—PIC Still Rising

31
Reported Total Deaths by Age Group Reported PIC Deaths by Age Group

Earlier vaccinations for 65+ apparent by April 2021

32
Timing of Benefit Applications

33

• There has been speculation that job losses in the COVID-induced recession 

would cause workers to apply for retirement and disability benefits earlier 

than they would have otherwise

• We are not seeing this in the data

• Employment rebounded significantly and quickly after the brief 2020 Q2 

recession 

• Note that earlier benefit start for those with age-reduced benefits actually 

tends to lower longer-term cost
34

• To what extent will the nature and conditions of employment change 

in the future—and to what extent will COVID affect the pre-pandemic 

trends? How about “gig” employment?

• Will remote work for many occupations that have been less affected 

by the pandemic persist? Or will these changes diminish over time?

• Will the reductions in productivity and employment in some areas 

recover?

• The degree of longer-term persistent effects on the level of economic 

activity and on demographic factors is as yet unknowable

Effects from Employment and Other Factors: Questions
Possible Solutions to Social Security’s 

Projected Shortfalls: 

Legislative Proposals
36

• Make choices addressing OASDI shortfall 2034-2095:

• Raise scheduled revenue after 2033 by about one-third

• Reduce scheduled benefits after 2033 by about one-fourth

• Or some combination of the two

How to Eliminate the Social Security Long-Term 

Actuarial Deficit
37

• Lower benefits for retirees—not disabled

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

• Can exempt long-career low earners

• Lower benefits mainly for high earners

• Reduce PIA above some level

• Often combined with increasing PIA below some level, subject to work year 

requirements

Ways to Lower Cost
38

• Lower benefits mainly for the oldest old

• Reduce the COLA by using a chained version of the CPI

• Some say instead raise the COLA by using the CPI-E (based on purchases of 

consumers over age 62)

• Increase the number of years used in calculation (currently 35)

• Especially hurts those who haven’t been in the workforce for more than 35 years

Ways to Lower Cost (continued)
39

• Raise tax rate on all earners

• Increasing rate immediately from current 12.4 percent to about 15.6 percent is 

projected to eliminate the long-range shortfall

• Raise tax on highest earners

• Increase taxable maximum amount ($142,800 in 2021) or remove it completely

• Some tax on all earnings above the maximum

Ways to Increase Revenue
40

• Tax employer group health insurance premiums

• Affects only middle class if taxable maximum remains the same

• Tax certain investment income

• Consistent with ACA approach?

• Or potentially a wealth tax?

• Maintain larger trust fund reserves

• Could do this by investing some portion of reserves in equities

• Added interest/yield can lower needed taxes

Ways to Increase Revenue (continued)
41

Many Comprehensive Proposals Scored

Example 1: Representative John Larson (D-CT) and others, September 2019

• Make PIA formula slightly more generous, more “progressive” (shortfall ↑9%)

• Increase the COLA (↑15%) – Based on CPI-E for all beneficiaries; 0.2pp higher on average

– Index designed to better reflect the purchases of the elderly

• Improve the minimum benefit (↑5%)

• Lower taxation of OASDI benefits slightly (↑5%)

• Tax earnings above $400K (not indexed) with small benefit credit (↓69%)

• Increase payroll tax rate gradually from 12.4 percent to 14.8 percent (↓67%)

• Would produce “sustainable solvency” (shortfall ↓114%)

Go to: https://www.ssa.gov/OACT/solvency/LarsonBlumenthalVanHollen_20190918.pdf
42

Many Comprehensive Proposals Scored

Example 2: Former Representative Sam Johnson (R-TX), December 2016

• Make PIA formula less generous but more “progressive” (shortfall ↓32%)

• Change to mini-PIA approach (↓13%)

• Raise the Normal Retirement Age to age 69 soon (8-year phase-in) (↓32%)

• Lower the COLA (↓47%) – Based on chain-weighted CPI for most beneficiaries; 0.3pp lower on average

– No COLA if prior year’s MAGI is above certain thresholds

• Add a new minimum benefit (↑9%)

• Eliminate taxation of OASDI benefits in 2054 and later (↑15%)

• Would produce “sustainable solvency” (shortfall ↓100%)

Go to: https://www.ssa.gov/OACT/solvency/SJohnson_20161208.pdf
43

• Historically, Congress has waited until reserve depletion is imminent 

• Difficult to lower benefits or raise taxes until necessary

• Enacting sooner allows more options, more gradual phase in, and more 

advance notice

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

• OASDI reserve depletion now projected for 2034

• One year sooner due to COVID-19

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

Timing for Changes
44

• There you will find:

• The 2021 and all prior OASDI Trustees Reports

• Detailed single-year tables for recent reports

• Our estimates for comprehensive proposals and individual provisions

• Actuarial notes; including replacement rates

• Actuarial studies; including stochastic

• Extensive databases

• Congressional testimonies

• Presentations by OCACT employees

For More Information Go To 

http://www.ssa.gov/oact/
45

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