US SOCIAL SECURITY ADMINISTRATION

SELECTED GOVERNANCE AND FINANCE TOPICS

OFFICE OF THE CHIEF ACTUARY

MEETING WITH MR. TAKAMITSU ISSE

JANUARY 21, 2020
WHAT ARE THE CURRENT EMPLOYEE CONTRIBUTIONS, EMPLOYER 

CONTRIBUTIONS AND HOW ARE THESE DETERMINED?

 For individuals:

 Employees and employers each pay 6.2% of covered earnings for the combined Social Security (OASDI) 

program

 The self-employed pay 12.4% of covered earnings

 On earnings up to $137,700 in 2020; this taxable maximum amount increases with the national average 

wage each year

 Currently, 5.3% of the 6.2% goes to OASI (Old-Age and Survivors Insurance) and 0.9% goes to DI 

(Disability Insurance)

 Separate taxes for the Medicare Hospital Insurance program

2
WHAT IS THE ROLE OF THE BOARD OF TRUSTEES? 

 Who are the Trustees?

 Secretary of the Treasury (managing Trustee)

 Secretary of Health and Human Services

 Secretary of Labor

 Commissioner of Social Security

 2 Public Trustees (although these positions have been vacant since July 2015)

 Responsibilities of the Board of Trustees 

 Manage the OASI and DI trust funds 

 Report to the Congress each year on the operations and actuarial status of the trust funds (annual Trustees Reports)

 Indicate whether the reserves in either trust fund are expected to become too small (Section 709) 

3
A REVIEW OF RECENT ACTUARIAL STUDIES

 Many analyses of recent legislative proposals to change the program at 

https://www.ssa.gov/OACT/solvency/index.html

 Annual brief actuarial notes (https://www.ssa.gov/OACT/NOTES/actnote.html) on various topics, such as:

 Unfunded Obligation and Transition Costs for the OASDI Program

 Unisex Life Expectancies at Birth and Age 65

 Internal Real Rates of Return Under the OASDI Program for Hypothetical Workers

 Death and Disability Life Table for Insured Workers

 Replacement Rates for Hypothetical Retired Workers

 More in-depth actuarial studies (https://www.ssa.gov/OACT/NOTES/actstud.html), such as:

 #124, Mortality by Career-Average Earnings Level by Tiffany Bosley, Michael Morris, and Karen Glenn (April 2018)

 #123, Social Security Disability Insurance Program Worker Experience by Tim Zayatz (August 2015)

4
THE CURRENT AND PROJECTED ACTUARIAL STATUS OF THE OLD 

AGE AND SURVIVORS, AND DISABILITY TRUST FUNDS

 The Social Security (OASDI) program is made up of two legally separate trust funds:

 OASI = Old-Age and Survivors Insurance

 DI = Disability Insurance

 One measure of financial (actuarial) status is the reserve depletion date for each fund – if and when 

each trust fund is projected to deplete its reserves and be unable to pay full scheduled benefits on time, 

under current law

 The trust funds have no borrowing authority

 In the most recent Trustees Report, the reserve depletion dates were:

 OASDI: 2035

 OASI: 2034

 DI: 2052

5
THE CURRENT AND PROJECTED ACTUARIAL STATUS OF THE OLD 

AGE AND SURVIVORS AND DISABILITY TRUST FUNDS (continued)

6 0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

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

Social Security Trust Fund Ratios

Assets as Percent of Annual Cost

Trustees Report Intermediate Projections

OASDI 2019TR

OASI 2019TR

DI 2019TR

OASDI 2018TR

OASI 2018TR

DI 2018TR

Historical

DI

OASDI

OASI

Tax Rate

Reallocation

Estimated
WHAT ARE THE CURRENT ANNUAL EXPENDITURES FOR 

RETIREMENT BENEFITS AND ADMINISTRATIVE COSTS?

 The Office of Finance presentation covered this topic...

7
DO BENEFITS RISE WITH INFLATION, AND IF SO, WHAT STANDARD 

IS USED? 

 Across generations, benefits are indexed by average wage growth; after eligibility for each generation by prices

 As Office of Finance mentioned, the Cost of Living Adjustment (COLA) is currently based on the Consumer Price 

Index for Urban Wage Earners and Clerical Workers (CPI-W)

 However – some policymakers have proposed changing the inflation measure for the COLA

 One possibility would be to use the chain-weighted CPI (C-CPI-U)

 Reflecting the degree to which consumers will buy more of goods and services with prices that are rising slower

 OCACT estimates C-CPI-U would reduce the annual COLA by 0.3 percentage point, on average

 By age 85, benefits would be about 6.5% lower

 Another possibility would be to use the CPI for the elderly (CPI-E)

 Basket of goods and services for those age 62+; medical care and housing are given greater weight

 OCACT estimates CPI-E would increase the annual COLA by 0.2 percentage point, on average

 By age 85, benefits would be about 4.6% higher 8
WHAT IS OR ARE THE PENSIONABLE AGES? IS THERE A RANGE OF 

PENSIONABLE AGES TIED TO BENEFITS?

 Workers may choose to begin receiving their 

retirement benefit as early as age 62, with an actuarial 

reduction

 The normal (sometimes called “full”) retirement age 

(NRA) is increasing from age 65 to 67

 For individuals age 62 in 2019, the NRA is 66 and 6 

months; will be 67 for those age 62 in 2022 and later

 Workers may choose to begin receiving their benefit 

after NRA, with a delayed retirement credit up to age 

70 (but no additional credit for delay beyond age 70)

9

Normal Retirement Age

Year of birth Age

1937 and prior 65

1938 65 and 2 months

1939 65 and 4 months

1940 65 and 6 months

1941 65 and 8 months

1942 65 and 10 months

1943-54 66

1955 66 and 2 months

1956 66 and 4 months

1957 66 and 6 months

1958 66 and 8 months

1959 66 and 10 months

1960 and later 67
WHAT IS OR ARE THE PENSIONABLE AGES? IS THERE A RANGE OF 

PENSIONABLE AGES TIED TO BENEFITS?

 In the case of early retirement, a benefit is 

reduced 5/9 of one percent for each 

month before normal retirement age, up 

to 36 months. If the number of months 

exceeds 36, then the benefit is further 

reduced 5/12 of one percent per month.

 Delayed retirement credits increase a 

retiree's benefits. The table shows the 

delayed retirement credit by year of birth. 

10

Year of birth Credit per year

1917-24 3.00%

1925-26 3.50%

1927-28 4.00%

1929-30 4.50%

1931-32 5.00%

1933-34 5.50%

1935-36 6.00%

1937-38 6.50%

1939-40 7.00%

1941-42 7.50%

1943 and later 8.00%

Delayed retirement credit
ARE BENEFITS UNDER SSA TAXED BY FEDERAL AND STATE 

GOVERNMENTS?

 OASDI benefits are subject to Federal income tax:

 Up to 50% of benefits are taxable if Modified Adjusted Gross Income (MAGI) exceeds $25,000 

(individual tax filer) or $32,000 (married filing jointly)

 This revenue accrues to the OASI and DI Trust Funds

 Up to 85% of benefits are taxable if MAGI exceeds $34,000 (individual tax filer) or $44,000 

(married filing jointly)

 This revenue for taxing beyond 50% of benefits accrues to Medicare Hospital Insurance Trust Fund

 13 of 50 US states apply income tax for at least a portion of Social Security benefits

11
WHAT MEASURES ARE TAKEN TO ADDRESS THE INCREASING 

LONGEVITY OF RETIREES UNDER THESE SYSTEMS? 

 Normal Retirement Age (NRA) was 65 from 1940 through 1999, and will increase to 

67 by 2022

 No further change in the NRA is scheduled in current law, but this might change

 Under current law, as beneficiaries live further beyond their initial eligibility age, their 

benefits rise only with price inflation, while average earnings levels (which provide the 

annual taxes to finance the program) rise with average earnings

 Average earnings tend to rise on the order of 1.2 percent per year faster than price 

inflation

12
IS THE SSA EXPLORING OR USING ARTIFICIAL INTELLIGENCE?

 Administering the Social Security program (in general) is a matter of maintaining earnings 

records and applying benefit formulas under the law when workers or their dependents 

become eligible for benefits.

 However, determinations of disability are more complex and less structured, so there are 

opportunities for pattern recognition and association of information in assessing impairment 

levels. Ultimately, the determination criteria must be transparent and readily explainable.

 Similarly, for making projections of cost, income, and actuarial status, methods and 

assumptions must be transparent and readily explainable.

 Where AI might be useful in the future is in assessing possible changes in program 

requirements and projection methods. But in each case, the actual requirements and 

methods used at any time must be transparent and readily explainable. 13