1997 OASDI Trustees Report

• During calendar year 1996, OASDI benefits amounting to $347.1 billion were paid to retired and disabled workers and their families, and to survivors of deceased workers.

• The number of persons receiving monthly OASDI benefits at the end of December 1996 was 43.7 million.

• In 1996, an estimated 144 million people worked in jobs covered by the OASDI program and paid OASDI contributions on their earnings.

• Income to the combined OASI and DI Trust Funds amounted to $424.5 billion in calendar year 1996, and expenditures were $353.6 billion. The assets of the combined funds, therefore, increased by $70.9 billion, from $496.1 billion at the end of December 1995 to $567.0 billion at the end of December 1996.

• Assets at the beginning of the year, as a percentage of expenditures during the year, increased from 140 percent at the beginning of 1996 to an estimated 153 percent at the beginning of 1997, for the combined OASI and DI Trust Funds.

• Interest earnings on the invested assets of the combined OASI and DI Trust Funds were $38.7 billion in calendar year 1996. This represented an effective annual interest rate of 7.6 percent, earned by the combined assets during calendar year 1996. During the same period, the average interest rate on new securities purchased by the trust funds was 6.6 percent.

• Administrative expenses for the OASDI program were $3.0 billion in calendar year 1996, or about 0.9 percent of benefit payments in the year.

• An automatic benefit increase of 2.9 percent became effective for December 1996. The OASDI contribution and benefit base was increased from $62,700 for 1996, to $65,400 for 1997.

Short-Range Results

• In the short range (i.e., the next 10 years) the combined assets of the OASI and DI Trust Funds are expected to increase from the current level of $567.0 billion at the end of calendar year 1996, or 153 percent of estimated expenditures in 1997, to $1,459 billion, or 244 percent of annual expenditures, at the beginning of the year 2006, based on the intermediate assumptions.

• The assets of the OASI Trust Fund are expected to increase rapidly during the next 10 years, from 160 percent of annual expenditures at the beginning of 1997 to about 264 percent of annual expenditures at the beginning of the year 2006, based on the intermediate assumptions.

• The assets of the DI Trust Fund are expected to increase rapidly for most of the next 10 years, rising from 108 percent of annual expenditures at the beginning of 1997 to 152 percent of annual expenditures at the beginning of 2003, based on the intermediate assumptions. While the assets of the fund, in nominal dollars, continue to grow during the entire short-range period consisting of the next 10 years, assets relative to annual expenditures begin to decline in 2003, becoming 140 percent at the beginning of 2006.

• The combined OASI and DI Trust Funds, as well as each fund separately, are adequately financed and meet the short-range test for financial adequacy.

• The assets of the combined OASI and DI Trust Funds are expected to continue growing over most of the next 25 years, based on the intermediate assumptions. By the end of 2018, the assets are estimated to reach $2.89 trillion, in nominal dollars. The assets are then estimated to decline to $2.74 trillion 3 years later, at the end of the 25-year period.

• In the long range (i.e., the next 75 years) the difference between the summarized income and cost rates for the OASDI program is a deficit of 2.23 percent of taxable payroll based on the intermediate assumptions, slightly larger than the difference of 2.19 percent in last year's report. The assets of the combined OASI and DI Trust Funds are estimated to be depleted under present law in 2029 based on the intermediate assumptions. At that time, the estimates indicate that annual tax revenues would be sufficient to cover about 3/4 of annual expenditures.

• On a combined basis, the OASDI program is not in "close actuarial balance" over the next 75 years. In addition, the individual OASI and DI Trust Funds are not in close actuarial balance. These results are the same as those shown in the 1996 Annual Report.

• With the retirement of the "baby-boom" generation starting in about 2010, OASDI costs will increase rapidly relative to the taxable earnings of workers. By the end of the 75-year projection period, the OASDI cost rate is estimated to reach 19.2 percent under the intermediate assumptions, resulting in an annual deficit of about 5.9 percent. Annual tax revenue would be sufficient to cover only about 2/3 of annual expenditures at the end of the 75-year period.

• The cost of the OASDI program is estimated to rise from its current level of 4.7 percent of gross domestic product (GDP) to 6.7 percent of GDP by the end of the 75-year projection period, and the annual deficit is estimated to be 2.1 percent of GDP at the end of the 75-year projection period.

• Under the intermediate assumptions, the excess of OASDI tax revenues over expenditures until 2012, together with interest earnings on the trust funds, will result in a rapid accumulation of assets for the combined OASI and DI Trust Funds during this period. However, total income is estimated to fall short of expenditures beginning in 2019 and in each year thereafter. In this circumstance, trust fund assets would be redeemed to cover the difference until the assets are exhausted in 2029.

• The DI Trust Fund is expected to increase until 2007, and then to decline steadily until its assets are exhausted in 2015. Because DI program growth has fluctuated widely in the past, it is essential that the program's future experience be monitored closely and that action be taken to address the DI Trust Fund's actuarial imbalance.

• The assets of the OASI Trust Fund are expected to increase until 2021, and then to decline until they are exhausted in 2031. Because the OASI program is not in close actuarial balance, the long-range deficit of the OASI Trust Fund should be addressed. It is important to address this problem soon to allow time for phasing in any necessary changes and for workers to adjust their retirement plans to take account of those changes. There is ample time to discuss and examine alternative solutions with deliberation and care. The size of the long-range deficit is such that long-range balance could be restored within the framework of the present Social Security structure. The magnitude of the changes in the current program will be minimized if they are enacted soon.

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