2014 OASDI Trustees Report

G. ESTIMATES FOR OASDI AND HI, SEPARATE AND COMBINED

In this appendix, the Trustees present long-range actuarial estimates for the OASDI and Hospital Insurance (HI) programs both separately and on a combined basis. These estimates facilitate analysis of the adequacy of the income and asset reserves of these programs relative to their cost under current law. This appendix does not include estimates for the Supplementary Medical Insurance (SMI) program because adequate financing is guaranteed in the law, and because the SMI program is not financed through a payroll tax. For more information on Medicare estimates, please see the 2014 Medicare Trustees Report.

The information in this appendix on combined operations, while significant, should not obscure the analysis of the financial status of the individual trust funds, which are legally separate and cannot be commingled. In addition, the factors which determine the costs of the OASI, DI, and HI programs differ substantially.¹

1. Estimates as a Percentage of Taxable Payroll

Comparing cost and income rates for the OASDI and HI programs as percentages of taxable payroll requires a note of caution. The taxable payrolls for the HI program are larger than those estimated for the OASDI program because: (1) a larger maximum taxable amount was established for the HI program in 1991, with the maximum eliminated altogether for the HI program in 1994; (2) a larger proportion of Federal, State, and local government employees are covered under the HI program; and (3) the earnings of railroad workers are included directly in the HI taxable payroll but not in the OASDI taxable payroll. (Railroad contributions for the equivalent of OASDI benefits are accounted for in a net interchange that occurs annually between the OASDI and Railroad Retirement programs.) As a result, the HI taxable payroll is about 25 percent larger than the OASDI taxable payroll throughout the long-range period.

As with the OASI and DI Trust Funds, income to the HI Trust Fund comes primarily from contributions paid by employees, employers, and self-employed persons. Table VI.G1 shows the OASDI and HI contribution rates that are authorized in the Federal Insurance Contributions Act.

Table VI.G1.—Payroll Tax Contribution Rates for the OASDI and HI Programs

[In percent]

Calendar years	Employees and employers, combineda			Employees only		Self employedb
	OASDI up to basec	HI all earningsd		HI over limite		OASDI up to base c	HI all earnings d	HI over limit e
1966	7.70	0.70		—		5.80	0.35	—
1967	7.80	1.00		—		5.90	.50	—
1968	7.60	1.20		—		5.80	.60	—
1969-70	8.40	1.20		—		6.30	.60	—
1971-72	9.20	1.20		—		6.90	.60	—
1973	9.70	2.00		—		7.00	1.00	—
1974-77	9.90	1.80		—		7.00	.90	—
1978	10.10	2.00		—		7.10	1.00	—
1979-80	10.16	2.10		—		7.05	1.05	—
1981	10.70	2.60		—		8.00	1.30	—
1982-83	10.80	2.60		—		8.05	1.30	—
1984f	11.40	2.60		—		11.40	2.60	—
1985 f	11.40	2.70		—		11.40	2.70	—
1986-87 f	11.40	2.90		—		11.40	2.90	—
1988-89 f	12.12	2.90		—		12.12	2.90	—
1990-2010g	12.40	2.90		—		12.40	2.90	—
2011-2012 g	10.40	2.90		—		10.40	2.90	—
2013 and later	12.40	2.90		0.90		12.40	2.90	0.90

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a

Except as noted below, the combined employee/employer rate is divided equally between employees and employers.

b

Beginning in 1990, self-employed persons receive a deduction, for purposes of computing their net earnings, equal to half of the combined OASDI and HI contributions that would be payable without regard to the contribution and benefit base. The OASDI contribution rate then applies to net earnings after this deduction, but subject to the OASDI base.

c

The payroll tax on earnings for the OASDI program applies to annual earnings up to a contribution and benefit base indexed to the average wage level. The base is $117,000 for 2014.

d

Prior to 1994, the payroll tax on earnings for the HI program applied to annual earnings up to a contribution base. The HI contribution base was eliminated beginning in 1994.

e

Starting with Federal personal income tax returns for tax year 2013, earned income exceeding $200,000 for individual filers and $250,000 for married couples filing jointly is subject to an additional HI tax of 0.9 percent. These income limits are not indexed after 2013.

f

In 1984 only, employees received an immediate credit of 0.3 percent of taxable wages against their OASDI payroll tax contributions. The self-employed received similar credits of 2.7 percent, 2.3 percent, and 2.0 percent against their combined OASDI and Hospital Insurance (HI) contributions on net earnings from self-employment in 1984, 1985, and 1986-89, respectively. The General Fund of the Treasury reimbursed the trust funds for these credits.

g

Public Law 111-147 exempted most employers from paying the employer share of OASDI payroll tax on wages paid during the period March 19, 2010 through December 31, 2010 to certain qualified individuals hired after February 3, 2010. Public Law 111-312, Public Law 112-78, and Public Law 112-96 reduced the OASDI payroll tax rate for 2011 and 2012 by 2 percentage points for employees and for self-employed workers. These laws require that the General Fund of the Treasury reimburse the OASI and DI Trust Funds for these temporary reductions in 2010, 2011, and 2012 payroll tax revenue, in order to “replicate to the extent possible” revenue that would have been received if the combined employee/employer payroll tax rates had remained at 12.4 percent for OASDI (10.6 percent for OASI and 1.8 percent for DI).

Table VI.G2 shows the Trustees’ estimates of annual income rates and cost rates for the OASDI program and the HI program under the low-cost, intermediate, and high-cost sets of assumptions described earlier in this report. The income rates reflect the tax rates shown in table VI.G1. For the HI program, the income rates reflect: (1) the additional 0.9 percent tax on employees for relatively high earnings; and (2) the portion of total payroll to which the 0.9 percent rate applies. Annual income and cost rates indicate the cash-flow operation of the programs. Therefore, income rates exclude interest earned on trust fund asset reserves. Table VI.G2 also shows annual balances, which are the differences between annual income rates and cost rates.

The Trustees project that the OASDI and HI cost rates will rise generally above current levels under the intermediate and high-cost sets of assumptions. The greatest increase occurs during the period 2018-35 under both sets of assumptions for OASDI and under the intermediate assumptions for HI. Under the intermediate assumptions, the OASDI cost rate increases by 30 percent from its current level by 2088, while under the high-cost assumptions, the cost rate increases by 87 percent by 2088. For HI, cost rates increase 64 percent and 238 percent from 2014-88 under the intermediate and high-cost assumptions, respectively. Under the low-cost assumptions, the OASDI and HI cost rates decrease from 2014-88 by 7 percent and 23 percent, respectively.

The Trustees project annual deficits for every year of the projection period under the intermediate and high-cost assumptions for the OASDI program and under the high-cost assumptions for HI. For the HI program intermediate assumptions, the Trustees project a positive annual balance from 2015-21. Under the low-cost assumptions, OASDI annual balances are negative through 2076 and positive thereafter, while HI annual balances are positive throughout the projection period.

Table VI.G2.—OASDI and HI Annual Income Rates, Cost Rates,  and Balances,
Calendar Years 2014-90 

[As a percentage of taxable payroll ^a]

Calendar year		OASDI				HI
		Income rate	Cost rate	Balance		Income rate	Cost rateb	Balance
Intermediate:
	2014	12.67	13.95	-1.29		3.29	3.40	-0.11
	2015	12.92	13.97	-1.05		3.31	3.24	.06
	2016	12.89	13.97	-1.08		3.32	3.21	.11
	2017	12.91	13.97	-1.06		3.34	3.20	.14
	2018	12.93	14.02	-1.08		3.36	3.25	.10
	2019	12.95	14.15	-1.20		3.38	3.28	.10
	2020	12.96	14.33	-1.37		3.39	3.34	.05
	2021	12.98	14.50	-1.52		3.41	3.41	c
	2022	13.01	14.74	-1.73		3.43	3.49	-.06
	2023	13.03	15.00	-1.97		3.45	3.56	-.11
	2025	13.07	15.54	-2.47		3.50	3.82	-.33
	2030	13.15	16.60	-3.46		3.59	4.20	-.61
	2035	13.19	17.09	-3.90		3.67	4.55	-.89
	2040	13.20	17.09	-3.89		3.72	4.83	-1.10
	2045	13.20	16.94	-3.74		3.78	5.01	-1.23
	2050	13.20	16.89	-3.69		3.84	5.11	-1.27
	2055	13.21	17.01	-3.80		3.91	5.15	-1.24
	2060	13.23	17.26	-4.03		3.98	5.21	-1.23
	2065	13.25	17.50	-4.25		4.05	5.32	-1.27
	2070	13.26	17.74	-4.48		4.11	5.45	-1.33
	2075	13.27	17.88	-4.61		4.17	5.55	-1.38
	2080	13.27	17.90	-4.63		4.21	5.58	-1.36
	2085	13.28	18.04	-4.76		4.26	5.57	-1.31
	2090	13.30	18.29	-5.00		4.31	5.55	-1.24
Low-cost:
	2014	12.60	13.74	-1.14		3.29	3.28	.01
	2015	12.95	13.46	-.52		3.30	3.03	.27
	2016	12.86	13.25	-.39		3.31	2.94	.37
	2017	12.87	13.10	-.23		3.33	2.87	.46
	2018	12.89	13.05	-.16		3.34	2.86	.48
	2019	12.89	13.06	-.16		3.36	2.83	.53
	2020	12.90	13.11	-.21		3.38	2.82	.55
	2021	12.92	13.17	-.25		3.39	2.83	.56
	2022	12.94	13.26	-.32		3.41	2.83	.57
	2023	12.96	13.37	-.42		3.43	2.84	.59
	2025	12.99	13.67	-.69		3.47	2.93	.54
	2030	13.04	14.20	-1.16		3.58	2.92	.66
	2035	13.06	14.28	-1.22		3.67	2.86	.81
	2040	13.06	13.99	-.94		3.74	2.69	1.05
	2045	13.04	13.65	-.60		3.82	2.57	1.25
	2050	13.04	13.43	-.39		3.89	2.46	1.44
	2055	13.04	13.37	-.33		3.97	2.37	1.59
	2060	13.04	13.38	-.34		4.03	2.36	1.68
	2065	13.04	13.35	-.31		4.09	2.40	1.69
	2070	13.04	13.29	-.25		4.14	2.46	1.67
	2075	13.03	13.12	-.09		4.17	2.51	1.66
	2080	13.02	12.86	.15		4.20	2.53	1.68
	2085	13.01	12.78	.23		4.24	2.53	1.71
	2090	13.02	12.86	.15		4.28	2.55	1.73
High-cost:
	2014	12.75	14.24	-1.48		3.29	3.54	-.25
	2015	12.88	14.60	-1.72		3.32	3.49	-.17
	2016	12.93	14.87	-1.93		3.34	3.53	-.19
	2017	12.96	15.07	-2.11		3.36	3.59	-.23
	2018	12.99	15.30	-2.31		3.38	3.72	-.34
	2019	13.01	15.59	-2.58		3.40	3.83	-.43
	2020	13.03	15.91	-2.88		3.42	3.98	-.56
	2021	13.06	16.19	-3.13		3.44	4.14	-.70
	2022	13.09	16.51	-3.42		3.46	4.32	-.85
	2023	13.12	16.90	-3.79		3.49	4.50	-1.01
	2025	13.17	17.70	-4.54		3.53	5.02	-1.49
	2030	13.27	19.41	-6.15		3.62	6.11	-2.49
	2035	13.33	20.46	-7.13		3.69	7.34	-3.65
	2040	13.37	20.91	-7.54		3.74	8.51	-4.76
	2045	13.39	21.15	-7.76		3.79	9.61	-5.82
	2050	13.41	21.45	-8.04		3.83	10.42	-6.59
	2055	13.44	21.95	-8.50		3.89	10.95	-7.06
	2060	13.48	22.61	-9.13		3.95	11.30	-7.35
	2065	13.53	23.35	-9.82		4.01	11.55	-7.54
	2070	13.57	24.16	-10.59		4.09	11.82	-7.73
	2075	13.62	24.92	-11.30		4.16	12.03	-7.87
	2080	13.65	25.54	-11.88		4.22	12.06	-7.84
	2085	13.69	26.19	-12.50		4.29	12.02	-7.74
	2090	13.73	26.83	-13.10		4.35	12.25	-7.90

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a

The taxable payroll for HI is significantly larger than the taxable payroll for OASDI because the HI taxable maximum amount was eliminated beginning in 1994, and because HI covers all Federal civilian employees, all State and local government employees hired after April 1, 1986, and railroad employees.

b

Estimated costs attributable to insured beneficiaries only, on an incurred basis. The Trustees expect benefits and administrative costs for non-insured persons to be financed through general revenue transfers and premium payments, rather than through payroll taxes.

c

Between 0 and 0.005 percent of taxable payroll.

Notes:
1. The income rate excludes interest income.

2. Totals do not necessarily equal the sums of rounded components.

Table VI.G3 shows summarized values over the 25-year, 50-year, and 75-year valuation periods. For each of those periods, the summarized income rates include beginning trust fund asset reserves, and the summarized cost rates include the cost of accumulating an ending fund reserve equal to 100 percent of annual cost at the end of the period.

Table VI.G3.—Summarized OASDI and HI Income Rates and Cost Rates for Valuation Periods,^a Calendar Years 2014-88

[As a percentage of taxable payroll ^b]

Valuation period			OASDI				HI
			Income rate	Cost rate	Actuarial balance		Income rate	Cost rate	Actuarial balance
Intermediate:
	25-year:
		2014-38	14.75	16.25	-1.50		3.61	4.03	-0.42
	50-year:
		2014-63	14.08	16.50	-2.42		3.71	4.46	-.75
	75-year:
		2014-88	13.89	16.77	-2.88		3.82	4.69	-.87
Low-cost:
	25-year:
		2014-38	14.50	14.30	.21		3.59	2.99	.60
	50-year:
		2014-63	13.85	13.88	-.04		3.73	2.75	.98
	75-year:
		2014-88	13.63	13.63	c		3.84	2.68	1.17
High-cost:
	25-year:
		2014-38	15.01	18.56	-3.55		3.64	5.55	-1.90
	50-year:
		2014-63	14.34	19.74	-5.40		3.72	7.45	-3.72
	75-year:
		2014-88	14.19	20.75	-6.56		3.81	8.34	-4.52

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a

Income rates include beginning trust fund asset reserves and cost rates include the cost of reaching an ending target trust fund equal to 100 percent of annual cost at the end of the period.

b

The taxable payroll for HI is significantly larger than the taxable payroll for OASDI because the HI taxable maximum amount was eliminated beginning 1994, and because HI covers all Federal civilian employees, all State and local government employees hired after April 1, 1986, and railroad employees.

c

Between 0 and 0.005 percent of taxable payroll.

Note: Totals do not necessarily equal the sums of rounded components.

The Trustees project that the OASDI and HI systems will each experience large actuarial deficits for the 25-year, 50-year, and 75-year valuation periods under the high-cost assumptions. Actuarial deficits under the intermediate assumptions are smaller than those for the high-cost assumptions for all three valuation periods. Under the low-cost assumptions, the HI system has a positive actuarial balance for all three valuation periods, while the actuarial balance for the OASDI system is positive for the 25-year period, slightly negative for the 50-year period, and slightly positive for the 75-year period.

 

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1

Note that this year’s low-cost (alternative I) assumptions include a higher (rather than lower as in past years) rate of increase in the CPI than the intermediate (alternative II) assumptions. The high-cost (alternative III) assumptions include a lower (rather than higher as in past years) rate of increase in the CPI. This change has varying effects on the results for the three trust funds.