Social Security Financing and Status:

Implications of COVID-19 

Steve Goss

Chief Actuary

Social Security Administration

Chicago Actuarial Association

March 17, 2021
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Social Security: Who Pays, Who Benefits

WHO PAYS?

• 95 percent of workers contribute—177 million in 2020

– 12.4% of earnings up to $142,800 in 2021 (6 percent of workers earn more)

– 25% of state and local government employees are not in Social Security

WHO BENEFITS?

• 65 million retirement, survivor, disability beneficiaries in 2020

– 46 million retirees, plus another 3 million of their spouses and children

– Plus 6 million survivors

– Plus 9 million disabled workers and their dependents

• And 156 million workers are insured against disability or death
Scheduled 

Benefit 

Replacement 

Rates Based 

on the 2020 

Trustees 

Report 

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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; 24th percentile)

Medium Earner ($55,642 for 2020; 57th percentile)

High Earner ($89,027 for 2020; 81st 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, 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 ($25,039 for 2020; 24th percentile)

Medium Earner ($55,642 for 2020; 57th percentile)

High Earner ($89,027 for 2020; 81st percentile)

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

Historical Projected
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Social Security Financing

• Basically “pay-as-you-go” 

– Current workers provide for current beneficiaries

– Trust Funds are “contingency reserve” because CANNOT borrow

– Total spending to date cannot exceed income to date

• Current OASDI reserves (excess income) = $2.9 trillion

– Available to augment tax income as needed

• Reserves projected to deplete in 2034* under current law

– Expect Congress to act—as it always has

* Per OCACT update of 2020 Trustees’ baseline (11/24/20)
First, Social Security 

Actuarial Status under 

2020 Trustees Report

DEVELOPED PRIOR TO RECOGNITION OF THE 

PANDEMIC AND RECESSION
Solvency: OASDI 

Trust Fund 

Reserve Depletion 

in 2035 (same as last 

year)

Reserve depletion date 

varied from 2029 to 2042 in 

reports over the past 30 

years (1991-2020).

DI Trust Fund – reserve 

depletion in 2065, thirteen 

years later than last year.

Due largely to low recent 

and near-term disability 

applications and awards, 

and an assumed lower 

ultimate disability 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 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
OASDI Annual 

Cost and NonInterest Income as 

Percent of Taxable 

Payroll

Persistent negative annual 

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 –

0.36 percent larger than last 

year

8

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
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.

9

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
Why Cost Rises 

Between 2008 

and 2035 as 

Percent of Payroll 

and GDP:

Aging - Change in 

Age Distribution

Mainly due to drop in 

birth rates

10

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
COVID-19 Effects on 

Social Security Actuarial 

Status

UPDATE TO 2020 TRUSTEES REPORT : 

“SUBSEQUENT EVENT” FOR AUDIT
For 2020, Subsequent Event Unprecedented 

1) COVID-19 not reflected in the 2020 Trustees Report

– Report issued in April, but assumptions were determined before 

pandemic was declared by the WHO in March

2) OCACT developed modifications to the 2020 TR 

assumptions in September/October per requirement by 

the auditors

3) Reflected experience and expectations at that time

4) Significant effects that caused us to indicate that 

evaluation of “solvency” proposals prior to the 2021 TR 

would be evaluated on the basis of the updated baseline 

https://www.ssa.gov/OACT/solvency/UpdatedBaseline_20201124.pdf

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Characteristics of COVID-19

• Highly communicable

• Transmissible prior to symptoms

– Many never show symptoms

• Immunity after infection may be limited

– Waning in the first 12 months?; implications for “herd immunity”

– Potential for repeated reinfection?

• Death rate overall 0.4% to 1%: proportionate increase across 

ages 25 and over

• Subsequent “compromise” for current generations?

• Increasing mutations—vaccine and therapy? How effective?
Potential Path Going Forward

1918: worst case scenario? Will we do much better in 2021?

• Will we avert a 

substantial 

additional wave in 

2021? If so, we 

may be able to 

return to “normal” 

by the end of the 

year

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Source: The Spanish Flu and the Stock Market: The Pandemic of 1919

by Bryan Taylor | Feb 27, 2020 | Economics, Historical, Insights

Figure 1. Death Rates of the Spanish Flu, June 1918 to May 1919
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Implications of COVID-19 for Changes in OASDI

• Over the long-range period, likely minor

– The pandemic-induced recession may be largely recovered by 2023 

with little permanent effect

– Note that Trustees Reports have incorporated the likelihood of 

periodic negative events

• Specifically, Trustees Report ultimate mortality decline has been assumed to be 

at around 0.73 percent on average; others have persistently assumed 1.0 

percent or higher in the long term with no deceleration

• The Trustees Reports have also assumed long-term unemployment rates will 

be higher on average than “forecasters”, reflecting occasional downturns

• However, there are near-term considerations
2020 Subsequent Event Principal Changes

Births: Lower in 2020 and 2021, with those reductions delayed into 

the following 3 years

Mortality: higher by 12% in 2020, 6% in 2021, and 2% in 2022

No net effect thereafter

Disability Applications: Lower in 2020, with reductions made up in 

following 2 years

Employment reduced in 2020 but full recovered by mid 2023

GDP, productivity, earnings levels lowered permanently by about 1%

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SOLVENCY: OASDI Long-Range Actuarial Deficit Increased by 0.07 Percent of Payroll

o Reserve depletion date varied from 2029 to 2042 in reports over the past 30 years 

o For OASDI and OASI, 2034 and 2033, one year earlier than 2020 Trustees Report

o For DI, 2059, six years earlier than the 2020 Trustees Report

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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 

Both rates higher for update in 2020 ONLY because of lower payroll
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Update on increase in U.S. Deaths in 2020 based on Latest CDC data released 

on March 12 (through deaths in March 6), and Estimated Complete
So: How to Address Shortfalls?

• Congress will need to act by 2034 to either:

– Lower cost by about 25 percent

– Increase revenue by about 33 percent

– Or some combination

– Options?

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Some 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 (Simpson Bowles 2010)

• Lower benefits mainly for high earners?

• Reduce PIA above some level

• Noting that higher earners generally live longer

• Lower benefits mainly for the oldest old?

• Reduce the COLA

• Others say increase it with the CPI-E (based on purchases of consumers 

over age 62)
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Some 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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Finally, Timing for Changes

• Historically, Congress has waited until reserve depletion 

is imminent 

• Given uncertainties, 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 in update due to COVID-19

• The date has varied between 2029 and 2042 over the past 30 years
For More Information Go To

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

• There you will find:

– All OASDI Trustees Reports: 1941-2019

– 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 by OCACT employees

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