2003 OASDI Trustees Report

THE 2003 ANNUAL REPORT OF THE BOARD OF
TRUSTEES OF THE FEDERAL OLD-AGE AND
SURVIVORS INSURANCE AND DISABILITY
INSURANCE TRUST FUNDS

I. INTRODUCTION

The Board of Trustees reports each year on the current and projected financial condition of the Social Security program, which is financed through two separate trust funds. The Old-Age and Survivors Insurance (OASI) Trust Fund pays monthly benefits to retired workers and their families and to survivors of deceased workers. The Disability Insurance (DI) Trust Fund pays monthly benefits to disabled workers and their families.

The report on the current financial status of the funds includes an accounting of the actual income and expenditures for the last year. The projections for future years reflect the Trustees' considered judgment about all the demographic, economic, and program factors that affect income and expenditures. Projections are presented separately for the next 10 years (the short range) and for the next 75 years (the long range). All projections are based on current Social Security law and do not anticipate any future changes that Congress might make.

Because any projection of future experience is uncertain, the Trustees use three alternative sets of assumptions to show a range of possible outcomes. The intermediate set of assumptions, designated as alternative II, reflects the Trustees' best estimate of the trust funds' future financial outlook; the low cost alternative I is more optimistic, and the high cost alternative III more pessimistic. As a further illustration of the uncertainty associated with projections, this report includes a new stochastic, or probabilistic, projection that provides a distribution of possible outcomes around the intermediate case. This new projection is described in some detail in appendix E.

In recent years the Trustees Report has characterized sustainable solvency as maintaining a trust fund balance that is positive and either level or increasing as a percent of the annual cost of the program at the end of the 75-year period. In this report the Trustees provide an additional indicator that measures the degree of solvency over the infinite future.

For this report, demographic, economic, and programmatic factors have been updated with the most recently available information. Compared to the results shown in last year's report, projected annual balances for the Social Security program (income minus costs) are slightly smaller in some years and slightly higher in others. Moving the valuation date from 2002 to 2003 has increased the program's actuarial deficit and unfunded obligation. Overall, however, the projected financial status of the program shows little change.

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