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May not be reproduced without express permission.

Social Security 

Reform Options

Capitol Forum Webinar—August 13, 2020
© 2020 American Academy of Actuaries. All rights reserved.

May not be reproduced without express permission.

6

Stephen C. Goss, MAAA, ASA

Chief Actuary, Social Security Administration

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© 2020 American Academy of Actuaries. All rights reserved.

May not be reproduced without express permission.

7

America’s National Pension, Disability, and 

Survivors’ Insurance Plan

• Monthly benefits started in 1940

• Almost all workers are covered

• Over 65 million beneficiaries

• Fully “portable”—follows you from job to job

• Scheduled benefit levels grow from generation to generation, keeping pace 

with worker earnings levels—”standard of living”

 After first benefit eligibility, benefits grow with CPI—“cost of living”

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Scheduled Benefit 

Replacement Rates 

Based on the 2020 

Trustees Report

Benefit as a percent of career 

average earnings

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 ($25,039 for 2020; 25th percentile)

Medium Earner ($55,642 for 2020; 56th percentile)

High Earner ($89,027 for 2020; 82nd percentile)

Max Earner ($137,700 for 2020; 100th percentile)

Historical Projected

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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

Scheduled Monthly Benefit Levels as Percent of Career-Average 

Earnings by Year of Retirement at age 62

Low Earner ($25,039 for 2020; 25th percentile)

Medium Earner ($55,642 for 2020; 56th percentile)

High Earner ($89,027 for 2020; 82nd percentile)

Max Earner ($137,700 for 2020; 100th percentile)

Historical Projected

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Payable 

Benefits Under 

the Law, After 

Trust Fund 

Reserves Are 

Depleted, 

Would be 

Reduced

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 ($25,039 for 2020; 25th percentile)

Medium Earner ($55,642 for 2020; 56th percentile)

High Earner ($89,027 for 2020; 82nd percentile)

Max Earner ($137,700 for 2020; 100th percentile)

Historical Projected

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Solvency: OASDI 

Trust Fund 

Reserve 

Depletion in 2035

Reserve depletion date 

varied from 2029 to 2042 in 

reports over the past 30 

years (1991-2020)

DI Trust Fund – reserve 

depletion in 2065

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

2020 TR DI

2019 TR DI

2020 TR OASI

2019 TR OASI

2020 TR OASDI

2019 TR OASDI

Historical Projected

Tax Rate

Reallocation 11
OASDI Annual 

Cost and Non-

Interest Income 

as Percent of 

Taxable Payroll

Persistent negative annual 

cash-flow balance starting in 

2010

79 percent of scheduled 

benefits still payable at trust 

fund reserve depletion

Annual deficit in 2094: 4.51 

percent of payroll 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 2035

Payable benefits as percent 

of scheduled benefits:

2020-34: 100%

2035: 79%

2094: 73%

Historical Projected

Cost: Scheduled and 

payable benefits

Cost: Scheduled but not fully 

payable benefits

Non-interest Income Expenditures: Payable benefits = income 

after trust fund depletion in 2035

Payable benefits as percent 

of scheduled benefits:

2020-34: 100%

2035: 79%

2094: 73%

Historical Projected

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SUSTAINABILITY: 

Cost as Percent 

of GDP

Rises from a 4.2 percent 

average in 1990–2008, to 

about 5.9 percent by 2038, 

then declines to 5.8 percent 

by 2053, and generally 

increases to 5.9 percent by 

2094

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

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Why Is Cost 

Rising 

Compared to 

Payroll and 

GDP?

OASDI Beneficiaries per 100 

Workers 0

10

20

30

40

50

60

70

1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar Year

OASDI Beneficiaries per 100 Workers

Historical Projected

14
Because of 

Aging of Our 

Population!

Change in age distribution—

mainly due to drop in birth 

rates

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 2020 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

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May not be reproduced without express permission.

16

The Bottom Line

• Long-term projections provide information to assess solvency and 

changes needed to eliminate shortfalls

• If trust fund reserves were to become depleted:

• Full 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 2035

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May not be reproduced without express permission.

17

How to Eliminate the Social Security Long-Term 

Actuarial Deficit

 Make choices addressing OASDI deficits 2035–2094:

• Raise scheduled revenue after 2034 by about one-third

• Reduce scheduled benefits after 2034 by about one-fourth

• Or some combination of the two

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May not be reproduced without express permission.

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For More Information Go to http://www.ssa.gov/oact/

• There you will find:

• This and all prior OASDI Trustees Reports

• Detailed single-year tables for recent reports

• Our estimates for comprehensive proposals

• Actuarial notes, including replacement rates

• Actuarial studies, including stochastic

• Extensive databases

• Congressional testimonies

• Presentations by OACT employees

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May not be reproduced without express permission.

48

Bottom Line: Effects on Trust Funds Under COVID

 In April, OCACT SSA speculated 15% reduction in earnings and payroll tax for 

one or two years, and then full recovery: Trust Fund reserve depletion 

advanced from early 2035 to mid or early 2034

 Now, consider an illustrative scenario: assume total earnings in 2020 are 

reduced to 10% below the 2020 TR intermediate projection, with full recovery 

to expected earnings in 2021 and thereafter

 This could happen if there is no substantial second wave in the fall, with resulting 

closure of the economy

 Then payroll tax revenue would be reduced by about $100 billion in 2020

 The trust fund reserve depletion date for the combined OASI and DI Trust Funds 

would likely move from early in 2035 to mid-2034

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May not be reproduced without express permission.

49

Bottom Line: Effects on Trust Funds Under COVID

 If, instead, closure due to the pandemic extends through 2021, or if there 

is a permanent reduction in the level of economic activity, then negative 

effects on the actuarial status could be substantially larger

 Trust Fund reserve depletion could be earlier than 2034, and the percent 

of scheduled benefits payable after depletion could be reduced 

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

activity and on demographic factors is as yet unknowable

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Implications of the COVID-19 Pandemic for the US Social Security Program - https://www.ssa.gov/oact/presentations/ocact_20200722.pdf

House Ways and Means Subcommittee on Social Security Hearing on the effects of Covid-19 - https://www.ssa.gov/oact/testimony/HouseWM_20200717.pdf
© 2020 American Academy of Actuaries. All rights reserved.

May not be reproduced without express permission.

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Ways to Lower Cost

• Lower benefits for retirees—not disabled?

• Increase normal retirement age (lowers OASDI 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

• Lower benefits mainly for the oldest old?

• Reduce the COLA

• But some say increase it with the CPI-E (based on purchase of consumers over age 62)

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Source: Social Security Administration Office of the Chief Actuary
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May not be reproduced without express permission.

51

Ways to Increase Revenue

• Raise the 12.4 percent OASDI payroll tax rate?

• Raise tax on highest earners?

• Increase taxable maximum amount

• Some tax on all earnings above the maximum

• Tax employer group health insurance premiums?

• Affects only middle class if taxable maximum remains

• Tax investment income?

• Or potentially a wealth tax?

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Source: Social Security Administration Office of the Chief Actuary