Social Security Actuarial Status

Update and Perspective

Society of Actuaries Annual Meeting, Session 136

Steve Goss, Chief Actuary, Social Security Administration 

October 17, 2017
Method for Social Security Financing

1) Payroll tax invested in Trust Funds

Also tax on benefits and interest income

2) Pay-As-You-Go Financing

Maintain contingency reserve because----

No significant borrowing authority

Must warn Congress to act in time

3) Annual Trustees Reports since 1941

Congress has always acted in time

Trust fund reserve depletion is the trigger

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SOLVENCY: OASDI Trust Fund Reserve Depletion 2034 (same as last year)

o Reserve depletion date varied from 2029 to 2042 in reports over the past 25 years (1992-2017) 

o DI Trust Fund — reserve depletion in 2028, five years later than last year

o Due largely to lower recent and near-term disability applications and incidence rate 

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0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Social Security Trust Fund Ratios

Assets as Percent of Annual Cost

Trustees Report Intermediate Projections

OASDI 2017TR

OASI 2017TR

DI 2017TR

OASDI 2016TR

OASI 2016TR

DI 2016TR

Historical

Tax Rate

Reallocation

DI

OASDI

OASI
Changes in Solvency Projections for the DI Trust Fund; 

2008 Recession Offset “New Economy”; Cycles Still Happen

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0

50

100

150

200

250

1990 1995 2000 2005 2010 2015 2020 2025

Reserves as % of Annual Cost

DI Trust Fund Ratio in 1995, 2008, 2016, 2017 Trustees Reports

1995TR

2008TR

2016TR

2017TR

"New Economy" 

irrational 

exuberance

2008 

Recession 

back to 

reality

Tax-Rate 

Reallocation
Big News: Applications for Disability Benefits Still Falling

At the peak of the last economic cycle in 2007, applications were low, but increased 

rapidly in the recession to over 2 million in 2010. In 2016, with the economy still not 

fully recovered, applications were below the 2007 level. 2017 even lower!! 

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1.5

1.6

1.7

1.8

1.9

2.0

2.1

2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025

(millions)

Total Social Security Disability Receipts by Calendar Year:

Historical and Intermediate Assumptions for 2012 through 2017 Trustees Reports 

2012TR

2017TR

2016TR

2015TR

2014TR

2013TR
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Even with the Economy NOT Yet Back to Mid-Cycle

Despite the low unemployment rate (4.8 percent in 2016), 

employment is estimated to be about 2 percent below full employment level

0.95

0.96

0.97

0.98

0.99

1

1.01

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Ratio of Current Employment to Full Employment 

2017 TR 2016 TR
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So... What is the Cash-Flow Shortfall for DI?

DI Annual Cost and Non-Interest Income as Percent of Taxable Payroll 

93% of scheduled benefits still payable at trust fund reserve depletion

0%

1%

2%

3%

4%

5%

2005 2015 2025 2035 2045 2055 2065 2075 2085 2095

Calendar year

Cost: Scheduled and 

payable benefits

Non-interest

Income

Payable benefits as percent

of scheduled benefits:

2016-27: 100%

2028: 93%

2091: 82%

Cost: Scheduled but not 

fully payable benefits

Expenditures: Payable benefits = income 

after trust fund depletion in 2028
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OASDI Annual Cost and Non-Interest Income as Percent of Taxable Payroll 

Persistent Negative Annual Cash-Flow Balance Starting in 2010 

77% of scheduled benefits still payable at trust fund reserve depletion

0%

5%

10%

15%

20%

25%

2005 2015 2025 2035 2045 2055 2065 2075 2085 2095

Calendar year

Cost: Scheduled and 

payable benefits

Non-interest Income

Payable benefits as percent

of scheduled benefits:

2016-33: 100%

2034: 77%

2091: 73%

Cost: Scheduled but not 

fully payable benefits

Expenditures: Payable benefits = income 

after trust fund depletion in 2034
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SUSTAINABILITY: Cost as Percent of GDP 

Rises from a 4.2-percent average in 1990-2008, to about 6.1% by 2037, then 

declines to under 5.9% by 2050, and generally increases to 6.1% by 2091

0%

2%

4%

6%

8%

10%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Non-interest Income

Historical Estimated

Cost
Why? Aging (change in age distribution)

mainly due to drop in birth rates

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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 2017 TR

Population 65+/(20-64) 

Actual and TR Intermediate

TFR remains at 3.0 after 1964

TFR remains at 3.3 after 1964
How About Labor Force Participation

Trustees: Age-sex adjusted labor force participation rate recovers; rises with longevity

Recent Technical Panel: No further recovery; then males drop, females stable

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0.50

0.55

0.60

0.65

0.70

0.75

0.80

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

Labor force participation rate (16 and older, age-sex adjusted to 2011 population)

Age-sex adjusted

Historical Projected

Males (age adjusted)

Females (age adjusted)
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But, Wait—How About Budget Scoring?

How do entitlements affect Federal debt?

Source: Congressional Budget Office, June 2016
Take Note. Budget Scoring Is Inconsistent with 

the Law, and All Past Experience.

• See Actuarial Opinion in the 2017 TR (also 2014, 2015, and 

2016 TR)

1) Reserve redemptions through 2034 just spend the excess 

revenues collected and invested in earlier years.

 This just replaces debt owed to the TF with debt owed to the public

2) If reserves deplete in 2034, the $12.5 trillion unfunded obligation 

through 2091 cannot be paid under the law.

 Budget deems these “expenditures” creating publicly held debt !!!

3) Therefore-----Trust Fund operations have NO direct effect on 

total Federal debt subject to ceiling in any year—

and no net effect on publicly held debt over time.

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So—What If We Projected Federal Debt Consistent 

With the Law? Dramatic difference back in 2015!!!!

0

20

40

60

80

100

120

140

160

180

200

2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Publicly Held Debt as a Percentage of GDP

Projected Federal Debt Held by the Public: CBO Baseline (Assuming OASDI 

& HI Unfunded Obligations Are Paid by Borrowing From the Public) vs. 

Assuming Current Law 

CBO Baseline July 2015

Less OASDI Unfunded Obligations (CBO Dec 2015)

Less OASDI (CBO Dec 2015) and HI (Trustees 2015)

Unfunded Obligations
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But starting 2016, CBO projects the total Federal 

Budget only 30 years!

0

20

40

60

80

100

120

140

160

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045

Debt as Percent of GDP

Projected Federal Debt Held by the Public: CBO Baseline (Assuming OASDI & HI Unfunded 

Obligations Are Paid by Borrowing From the Public) vs. Assuming Current Law 

CBO Baseline July 2016

Less OASDI Unfunded Obligations (2016 Trustees Projections)

Less OASDI&HI Unfunded Obligations (2016 Trustees Projections)
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The Bottom Line

• Long-term projections provide information to assess 

solvency and changes needed to eliminate shortfalls

• If trust fund reserves were to deplete:

– Full benefits cannot be paid timely

– NO pressure on the Budget or Federal Debt

– So Congress must and WILL act, as always

• Straightforward solutions:

– Add revenue and/or lower cost for OASDI

• Comprehensive changes implemented by 2034
How to Fix Social Security Long-Term

Make choices addressing OASDI deficits 2034-2091:

• Raise scheduled revenue after 2033 by about 

33%: increase revenue from 4.6 to 6.1% of GDP

• Reduce scheduled benefits after 2033 by about 

25%: lower benefits from 6.1 to 4.6% of GDP

• Or some combination of the two

• Achieve “sustainable solvency”

–Trust Fund reserves stable or rising as percent of annual 

cost

–This is a new concept since about 1995---- Kerry/Simpson 

and the 1994-96 Advisory Council 

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Questions----------------

• If “aging” is the problem, what to do?

– Index the normal retirement age after it hits 67?? 

• Remember longevity is just a small part of the future aging

– How to address the lower birth rate??

• Fewer children pay more of their earnings?

– Increase payroll tax rate, or

– Tax investment income (like the ACA)

• Elders get lower monthly benefits?

– Reduce the benefit replacement rate below 40% average?

– What implications given the demise of private defined benefit 

pension plans?

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For More Information Go To

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

• There you will find:

– 2017 and all prior OASDI Trustees Reports

– Detailed single-year tables for recent reports

– Our estimates for comprehensive proposals

– Our estimates for the individual provisions

– Actuarial notes; including replacement rates

– Actuarial studies

– Extensive databases

– Congressional testimonies

– Presentations like this

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