Short-Range Actuarial Projections of the Old-Age, Survivors, and Disability Insurance Program, 2001
Actuarial Study No. 115
Chris Motsiopoulos and Tim Zayatz, A.S.A.
Short-Range Actuarial Projections of the Old-Age, Survivors, and Disability Insurance Program, 2001
Actuarial Study No. 115
Chris Motsiopoulos and Tim Zayatz, A.S.A. |
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The number of insured workers entitled to OASI benefits at the end of each projected year is derived by taking the existing rolls at the start of the year, adding in the numbers of new benefit awards during the year, and subtracting out persons whose benefit status has been terminated during the year. This analysis is done on an age- and gender-specific basis. More detail on the projections of each of these components is described in the following subsections, and presented in tables III.B1-III.B15.
The number of retired workers and insured widow(er)s in force is projected by single year of age from 60 (62 for retired workers) through 94, and 95 or older, at the end of each calendar year, by adding the retired worker and insured widow(er) awards to the number of retired workers and insured widow(er)s in force at the end of the previous calendar year, and applying termination rates. The termination rates are projected based on historical trends and on the projected mortality rates of the aged population (since a large proportion of the aged population receives retired worker or insured widow(er) benefits).
The projected number of benefit awards to retired workers and insured widow(er)s is based on the number of fully insured workers who have not yet become entitled to benefits. The projected number of workers who are fully insured is developed from the general population at the ages of retirement, taking into account the historical relationships among coverage rates, the number who are currently entitled to retired worker, disabled worker, or insured widow(er) benefits, the number who are fully insured, and the general population. Table III.B1 shows the population by age group and sex and table III.B2 shows the number of workers who are fully insured.
Both the male and the female aged populations are projected to continue their growth. The number of fully insured workers shows similar growth, with the number of females over age 60 who are fully insured slightly exceeding the number of such males throughout the projection period.
Tables III.B3, III.B4, and III.B5 show the number of retired workers, insured widow(er)s, and retired and disabled (age 60 and older) workers and insured widow(er)s combined, respectively, in force by age group and sex. The number of retired workers in force is projected to continue growing, with a slight increase in female retirees as a proportion of the total. Table III.B6 relates the number of retired and disabled workers and insured widow(er)s in force to the fully insured population. The figures are less than 100 percent at ages under 70, since many workers delay their retirement beyond the first possible date (age 62 for retired workers or age 60 for insured widow(er)s). The figures are near 100 percent for virtually all ages 70 and above. Percentages occasionally are not exactly 100 percent due to occasional discrepancies in the underlying population and fully insured worker data.
The number of benefit awards to retired workers and insured widow(er)s is calculated at each year of age by applying a rate of retirement to the fully insured population, but only after subtracting the number of workers who are already entitled to an insured benefit. An insured benefit is either a retired worker benefit, a disabled worker benefit, or an insured widow(er) benefit. The projection thus requires that before awards for a given year can be calculated, the number of workers who are currently entitled at the end of the previous year must be projected. Note that "retirement," as used in the following text, refers to a retired-worker or insured-widow(er) award, and not necessarily the end of participation in the labor force.
The rates of retirement are developed by analysis of historical trends, including the effects of changes in the retirement test exempt amounts and the legislated increase in normal retirement age (NRA). However, because of occasional discrepancies in the underlying population and fully insured worker data, the rates of retirement are adjusted at some ages to produce a reasonable number of awards by single year of age. Table III.B7 summarizes the rates of retirement for retired workers and insured widow(er)s combined. The sharp increase in the rate of retirement for ages 65-69 occurring in the year 2000 is due to the elimination of the retirement earnings test, and it is expected to decrease gradually in subsequent years, but remain higher than pre-2000 levels. Rates of retirement for those age 70 and older are not shown because awards to that age group are projected as a percentage of awards at ages 60 through 69.
A relatively small percentage of the fully insured workers retire before age 62, when insured widow(er) and not retired worker benefits are first available. Approximately 36 to 38 percent of nonretired insured workers are expected to retire each year at ages 62 to NRA. Most of those retirements occur at age 62, when retired worker benefits are first available. Smaller percentages of the remaining nonretired workers retire at ages 63 to NRA, while most of the remainder retire at NRA (see Normal retirement age in the Glossary for scheduled increases). Tables III.B8 and III.B9 show the results of applying the rates of retirement to the numbers of eligible nonretired and nondisabled workers and splitting the results between retired workers and insured widow(er)s. The elimination of the retirement earnings test produced a sharp increase in the total number of awards to retired workers and insured widow(er)s ages 65-69 in the year 2000. This in turn produced a corresponding decrease in the number of eligible nonretired and nondisabled workers. Therefore, even though the rate of retirement for this age group is still high for the year 2001 (see table III.B7), the total number of awards is sharply lower than the previous year. At normal retirement age, a disabled worker's benefit is converted to a retired worker's benefit. Table III.B8 also includes these conversions. Disability benefit conversions were discussed more thoroughly in Section III.A., and shown in table III.A14.
Benefits to retired workers (and most other beneficiaries) who have not reached NRA, may be withheld if beneficiaries have earnings in excess of the exempt amounts. In addition, benefits at any age may be withheld for other reasons, such as an unknown address or an unconfirmed report of death. Table III.B10 summarizes the number of retired workers with benefits withheld at the end of each year, while table III.B11 shows the number withheld as a percentage of retired workers in force. Tables III.B13 and III.B14 show comparable figures for insured widow(er)s.
As indicated in table III.B11, the number of retired workers with benefits withheld relative to the size of the total number of workers with benefits in force has experienced several drops over the past two decades. These drops have generally been in response to legislation that provided a more generous treatment of earnings for beneficiaries who have attained NRA. In 1983 the maximum age for the application of the earnings test dropped from 72 to 70. In 1990, the rate at which earnings above the exempt amount are withheld from benefits changed from $1 withheld for each $2 of earnings over the exempt amount to $1 for every $3 of such earnings. In 1996, legislation provided for a series of ad hoc increases in the exempt amounts for beneficiaries above NRA. Finally, in 2000, the maximum age for the application of the earnings test was reduced from 70 to NRA. The fraction of retired workers with benefits withheld is projected to gradually increase in the future along with the scheduled increases in the NRA.
The numbers of retired workers and insured widow(er)s in current-payment status at the end of each calendar year, which equals the number in force minus the number withheld, are summarized in tables III.B12 and III.B15.
The total number of retired workers in current-payment status is projected to increase steadily from 28.5 million at the end of 2000 to 34.2 million at the end of 2010. The number of insured widow(er)s in current-payment status decreased sharply in 1997 (table III.B15) as a result of an administrative effort to identify and inform widow(er) beneficiaries who would receive a higher benefit on their own record. The above change is also reflected as a decrease in the number of insured widow(er)s in force (table III.B4) and an increase in the number of insured widow(er)s withheld (table III.B13) in 1997. A corresponding increase in the number of retired workers in current-payment status took place at the same time, even though it is not noticeable due to the relative large magnitude of the number of retired workers. The total number of insured widow(er)s in current-payment status is also projected to increase steadily over the same time period, from 1.7 million to 2.1 million. (Insured widow(er)s will be discussed again in relation to uninsured widow(er)s.)
The total number of retired workers, by sex, at the end of each December were shown in table III.B3 for in force and in table III.B12 for in current-payment status. These end of December numbers are used to project the end of June numbers shown in tables III.B16 and III.B17. The number of retired workers in force and in current-payment status at the end of each semiannual period is projected as a total for each sex. To calculate the number at the end of each June, first the total for each sex is projected, by projecting the relationship of the amount of change occurring in the first 6 months of the year, to the total annual change.
In table III.B17 we see that more than 50 percent of the annual increase in the number of retired workers in current-payment status used to normally occur in the second half of the calendar year. This was a result of more retirees having benefits withheld during the earlier part of the year due to the retirement earnings test. In year 2000 we see a reversal of the above historical trend due to the elimination of the retirement earnings test.
Once the total number of retirees in force or in current-pay at the end of June is projected, the number aged 62-64 is calculated by applying a ratio to the total, where the ratio is projected based on historical trends. The number aged 65 or older is then equal to the total minus those aged 62-64.
The numbers of minor children of retired and deceased workers are related to the non-orphan and orphan populations, respectively. Table III.B18 shows the population under age 18 split into non-orphan and orphan groups, in four age groups (0-4, 5-9, 10-14, and 15-17).
The number of minor children of retired workers in force is projected by single year of age, at the end of each calendar year, by adding the child-minor awards to the number of minor children in force at the end of the previous calendar year, and applying termination rates. Table III.B19 summarizes the number of minor children of retired workers in force by age group.
The projected number of awards to minor children of retired workers is based on the number of non-orphan children. The award rates are shown in table III.B20. The number of awards to minor children of retired workers (shown in table III.B21) is projected to remain relatively stable throughout the projection period.
The derivation of the number of minor children of retired workers in current-payment status from the number in force is shown in tables III.B22 and III.B23.
The number of minor children withheld is projected by single year of age, by applying a projected withheld rate to the number in force. The withheld rates are projected to remain at current levels. The projected number of minor children in current-payment status equals the number in force minus the number withheld.
The number of minor children of retired workers in current-payment status is projected to increase gradually, from 256 thousand at end of 2000 to 278 thousand by the end of 2007 and then decrease slightly to 275 thousand by the end of 2010.
The number of minor children of deceased workers in force is projected by single year of age using methods similar to those used for minor children of retired workers. The number of minor children of deceased workers at the end of each calendar year is computed by adding the surviving child-minor awards to the number of surviving minor children in force at the end of the previous calendar year, and applying termination rates. Table III.B24 shows the projected number of minor children of deceased workers in force, and that number as a percentage of the orphan population.
The projected number of awards to minor children of deceased workers is based on the number of orphans. The award rates, shown in table III.B25, decreased from 1996 through 1998 possibly due to the dependency test for stepchildren. The number of awards to minor children of deceased workers (shown in table III.B26) is projected to level off and then decrease slightly from current levels.
The derivation of the number of minor children of deceased workers in current-payment status from the number in force is shown in tables III.B27 and III.B28. Figures in those tables are projected in a manner similar to that for minor children of retired workers.
The number of minor surviving children in current-payment status is projected to decrease from 1,346 thousand currently to 1,169 thousand by the end of 2010.
The numbers of disabled children of retired and deceased workers are related to the uninsured population aged 18 or older, as shown in table III.B29. The disabled children in force are projected by single year of age, at the end of each calendar year, by adding the disabled-child awards to the number of disabled children in force at the end of the previous calendar year, and applying termination rates. Tables III.B30 and III.B36 show the number of disabled children of retired workers and deceased workers in force, respectively.
The projected numbers of awards to disabled children of retired workers and deceased workers are based on the uninsured population. The award rates to disabled children of retired workers shown in table III.B31, are projected to decrease gradually. The number of awards to disabled children of retired workers (shown in table III.B32) is projected to decrease slightly from current levels. The award rates to disabled children of deceased workers (shown in table III.B37) are projected to remain at recent levels. The number of awards to disabled children of deceased workers (shown in table III.B38) is projected to decrease slightly before leveling off.
The derivations of the numbers of disabled children of retired workers and deceased workers in current-payment status from the numbers in force are shown in tables III.B33, III.B34, and III.B35 (for disabled children of retired workers) and tables III.B39, III.B40, and III.B41 (for disabled children of deceased workers). Figures in those tables are projected in a manner similar to that for minor children of retired workers and deceased workers.
The number of disabled children of retired workers in current-payment status is projected to remain near the present level of 190 thousand through 2010. Disabled children of deceased workers are projected to increase from 480 thousand currently to 550 thousand by the end of 2010.
The numbers of student children of retired and deceased workers in force (who are nearly all aged 18) are projected by adding the student-child awards to the number of student children in force at the end of the previous calendar year, and applying termination rates. The award rates are projected to remain at nearly the level in the latest data, based on experience since the phase-out of student benefits at ages 19 through 21, which became fully effective in 1985. Tables III.B42 and III.B43 show the projected numbers of student children of retired and deceased workers, respectively.
The number of student children is projected to increase gradually. Note that the number of student children awarded each year is greater than the number in force, implying that virtually the entire student child population is replaced each year.
Tables III.B44 and III.B45 show the semiannual number of children of retired workers in force and in current-payment status, respectively. The number at the end of each December is known from tables shown previously. The excess of the June 30th number over the average of December 31st numbers is calculated for historical years and then projected to remain at the last known level. The semiannual number of children of deceased workers is projected in a similar manner and shown in tables III.B46 and III.B47.
Young wife and young husband beneficiaries are spouses of retired workers who are entitled to a benefit because they are the parents of an eligible child (minor under age 16 or disabled) of a retired worker. Young spouses are projected by sex and single year of age, at the end of each calendar year, by adding the young spouse awards to the number of young spouses in force at the end of the previous calendar year, and applying termination rates. Table III.B48 summarizes the number of young spouses of retired workers in force by age group.
Awards to young wives and young husbands are projected using award rates that relate the number of awards to young spouses to the number of awards to minor children under age 16 and disabled children of retired workers. The award rates (awards per 1,000 eligible child awards) are shown in table III.B49. The number of awards to young spouses (shown in table III.B50) is projected to remain stable throughout the projection period.
The derivation of the number of young spouses of retired workers in current-payment status from the number in force is shown in tables III.B51, III.B52 and III.B53.
The number of young spouses withheld is projected by sex and single year of age, by applying a projected withheld rate to the number in force. The withheld rates are projected to remain at current levels. The projected number of young spouses in current-payment status equals the number in force minus the number withheld.
Mother and father beneficiaries, also referred to as young widows and widowers, are widows or widowers of deceased workers who are entitled to a benefit because they are the parents of an eligible child (minor under age 16 or disabled) of a deceased worker. Mothers and fathers are projected by sex and single year of age, at the end of each calendar year, by adding the young widow(er) awards to the number of young widow(er)s in force at the end of the previous calendar year, and applying termination rates. Table III.B54 summarizes the number of young widow(er)s of deceased workers in force by age group.
Awards to mothers and fathers are projected using award rates that relate the number of awards to young widow(er)s to the number of awards to minor children under age 16 and disabled children of deceased workers. The award rates (awards per 1,000 eligible child awards) are shown in table III.B55. The number of awards to young widow(er)s (shown in table III.B56) is projected to decline gradually during the projection period.
The derivation of the number of young widow(er)s of deceased workers in current-payment status from the number in force is shown in tables III.B57, III.B58 and III.B59.
The number of young widow(er)s withheld is projected by sex and single year of age, by applying a projected withheld rate to the number in force. The withheld rates are projected to remain at current levels. The projected number of young widow(er)s in current-payment status equals the number in force minus the number withheld.
The semiannual numbers of young wives, young husbands, mothers, and fathers are projected using the same method as that used for children of retired or deceased workers. Tables III.B60 and III.B61 show the projected number of young wife and young husband beneficiaries, respectively, and that number as a percentage of the eligible child beneficiaries. Tables III.B62 and III.B63 show the projected number of mother and father beneficiaries, respectively, and that number as a percentage of the eligible child beneficiaries.
The number of young wife beneficiaries with benefits in current-payment status is projected to continue decreasing slightly, from 55.5 thousand currently to 51.6 thousand by the end of 2010. The small number of young husband beneficiaries in current-payment status is projected to increase slightly during the projection period.
The number of mother beneficiaries in current-payment status decreased from 260 thousand at the end of 1995 to 193 thousand at the end of 2000 and is projected to continue decreasing to 153 thousand at the end of 2010. The number of father beneficiaries in current-payment status decreased from 15.2 thousand at the end of 1995 to 9.8 thousand at the end of 2000 and is projected to continue decreasing to 8.5 thousand at the end of 2010.
The number of disabled widow beneficiaries (including disabled surviving divorced wives) with benefits in force (entitled because they are the surviving spouse of an insured worker, and they are disabled) is projected for two age groups-ages 50-59 and 60-64-by applying a percentage to the projected uninsured female population in the applicable age group. The applicable percentages are projected by regression, with an iterative autoregression correction. In addition, the percentages are adjusted by judgment to prevent them from increasing to unreasonably high levels at the end of the projection period. Table III.B64 shows the projected number of disabled widows in force, and that number as a percentage of the uninsured female population, by age group. The number of disabled widows increased substantially beginning in 1991 due to a liberalization in the definition of disability that became effective in that year. The projections indicate that the number of disabled widows in force will show additional growth from the current level of 200 thousand to 239 thousand by the end of 2010.
The number of disabled widows with benefits withheld is projected for the same two age groups as the number in force, by applying a projected withheld rate to the number in force. The withheld rates are projected to remain at current levels, as shown in table III.B65. The projected number of disabled widows in current-payment status equals the number in force minus the number withheld. The total number of disabled widows with benefits in current-payment status is projected to increase from 196 thousand currently to 235 thousand by the end of 2010, as shown in table III.B66.
The number of disabled widower beneficiaries (including disabled surviving divorced husbands) is projected in a manner similar to that used for disabled widows. Table III.B67 shows the projected number of disabled widowers in force, and that number as a percentage of the uninsured male population, by age group.
The derivation of the number of disabled widower beneficiaries in current-payment status from the number in force is shown in tables III.B68 and III.B69.
The number of disabled widowers with benefits in current-payment status is projected to increase gradually from 5.2 thousand currently to 10.1 thousand by the end of 2010.
The number of aged wife and uninsured widow beneficiaries (including divorced wives and surviving uninsured divorced wives) in force, combined, under age 65 is projected by applying a percentage to the uninsured female population aged 60 through 64. The percentage is projected to remain slightly above 32 percent, based on historical trends. The combined number of aged wives and uninsured widows is split into the two types of beneficiaries by applying a percentage to the combined number. Table III.B70 shows the projected number of aged wife and uninsured widow beneficiaries in force under age 65, and that number as a percentage of the uninsured female population. The projected split between aged wives and uninsured widows is also shown.
The number of wives in force aged 62 through 64 is projected to increase, from 318 thousand currently to about 333 thousand by the end of 2010. The number of uninsured widows in force aged 60 through 64 is projected to continue declining gradually, from 118 thousand currently to about 109 thousand by the end of 2010.
The number of aged wife and uninsured widow beneficiaries in force, combined, aged 65 or older is projected by applying a percentage to the uninsured female population aged 65 or older. The combined number of aged wives and uninsured widows is split into the two types of beneficiaries by applying a percentage to the combined number. Table III.B71 shows the projected number of aged wife and uninsured widow beneficiaries in force aged 65 or older, and that number as a percentage of the uninsured female population. The projected split between aged wives and uninsured widows is also shown.
The number of wives aged 65 or older with benefits in force is projected to decrease moderately, from 2,528 thousand currently to about 2,390 thousand by the end of 2010. The number of uninsured widows aged 65 or older in force is also projected to decrease, from 2,964 thousand currently to about 2,658 thousand by the end of 2010.
The derivation of the number of aged wife beneficiaries in current-payment status from the number in force is shown in tables III.B72 and III.B73.
The percentage of aged wives with benefits withheld is projected to increase slightly, due to the effect of the government pension offset provision. The total number of aged wife beneficiaries in current-payment status is projected to decline from about 2,710 thousand currently to about 2,582 thousand by the end of 2010.
The derivation of the number of aged uninsured widows and total aged widows with benefits in current-payment status from the number in force is shown in tables III.B74 and III.B75.
The percentage of aged uninsured widows with benefits withheld is also projected to increase slightly, due largely to the effect of the government pension offset provision. The total number of aged widow beneficiaries, both insured and uninsured, in current-payment status is projected to decrease gradually from 4,663 thousand currently to about 4,594 thousand during 2006 and then increase again to nearly 4,667 thousand by the end of 2010.
The combined number of aged husband and uninsured widower beneficiaries (including divorced husbands and surviving uninsured divorced husbands) under age 65, and 65 or older, is projected in a manner similar to that used for aged wives and uninsured widows. Tables III.B76 and III.B77 show the projected number of aged husband and uninsured widower beneficiaries in force under age 65 and aged 65 or older, respectively, and that number as a percentage of the male uninsured population.
The combined number of aged husbands in force under age 65 and aged uninsured widowers in force under age 65 is projected to remain stable for several years and then increase during the latter portion of the projection period. The combined number of aged husbands age 65 or older and aged uninsured widowers aged 65 or older in force is projected to decline during the projection period. The combined number of aged husbands in force aged 62 through 64 and aged 65 or older is projected to reach 2.8 thousand and 84.8 thousand, respectively, by the end of 2010; the number of aged uninsured widowers aged 60 through 64 and 65 or older is projected to reach 1.9 thousand and 27.1 thousand, respectively, by the end of 2010.
The derivation of the number of aged husbands with benefits in current-payment status from the number in force is shown in tables III.B78 and III.B79.
The percentage of aged husbands with benefits withheld is projected to remain slightly over 67.0 percent. The total number of aged husband beneficiaries in current-payment status is projected to decrease gradually, from 32.3 thousand currently to 28.8 thousand by the end of 2010.
The derivation of the number of aged uninsured widowers and total aged widowers with benefits in current-payment status from the number in force is shown in tables III.B80 and III.B81.
The percentage of aged uninsured widowers with benefits withheld is also projected to decrease slightly, from 60 percent to about 59 percent overall. The total number of aged widowers with benefits in current-payment status is projected to increase steadily, from 36.8 thousand to over 48.0 thousand by the end of 2010.
The number of parent beneficiaries with benefits in force (entitled because they are the parents of a deceased insured worker, and they are not insured on their own earnings record) is projected by applying a factor to the number of parent beneficiaries receiving benefits 6 months prior. This approach has been used because the number of awards to parent beneficiaries has been low relative to the number of terminations. Table III.B82 shows the projected numbers of parent beneficiaries in force, and the ratio of each number to the corresponding number from 6 months earlier. It also shows the number of parent beneficiaries withheld and in current-payment status.
The number of parent beneficiaries in current-payment status is projected to continue declining, from 2.7 thousand currently to 1.5 thousand by the end of 2010. The rate of decline is projected to slow as the number of parents reaches low levels and the number of awards approaches the number of terminations.
The number of special age-72 beneficiaries (including special wife beneficiaries) is projected in a manner similar to that for parent beneficiaries. Since this is virtually a closed group, the ratios of succeeding numbers of beneficiaries are survival rates. Table III.B83 shows the projected number of special age-72 beneficiaries in force, and the ratio of each number to the corresponding number from 6 months earlier. It also shows the numbers of special age-72 beneficiaries withheld and in current-payment status.
The number of special age-72 beneficiaries in current-payment status is projected to continue declining rapidly, from fewer than 150 currently to fewer than 50 by the end of 2001, at which time the remaining beneficiaries will all be over 101 years old.
Table III.B84 summarizes the numbers of all of the projected OASDI beneficiaries in current-payment status.
The total number of OASDI beneficiaries in current-payment status is projected to increase from nearly 45.4 million at the end of 2000 to nearly 53.5 million by the end of 2010. From 1990 to 2000, the number of disabled workers and auxiliaries increased by 56 percent. From 2000 to 2010, the number is projected to increase by about 39 percent, from about 6.7 million to 9.2 million. The number of OASI beneficiaries increased by nearly 9 percent from 1990 to 2000. The number is projected to increase by 14 percent, from 38.7 million to about 44.2 million, during the projection period.
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List of Studies
December 26, 2001