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 2015 Medicare Trustees Report.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.
Employees and employers, combined1 Self employed2 19846 1990-20107
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.
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 payroll tax rates shown in table VI.G1 and revenue from taxation of OASDI benefits for both the OASDI and HI Trust Funds. For the HI program, the income rates also 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.
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,1 Calendar Years 2015-89
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.
The Trustees project that the OASDI and HI programs 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 OASDI and HI programs have a positive actuarial balance for all three valuation periods, even though annual balances are negative for most of the projection period. Due to the size of the reserves at the beginning of the period, the small negative annual balances still leave a reserve in excess of annual cost at the end of the period.
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