2023 OASDI Trustees Report

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B. LONG-RANGE ESTIMATES
The Trustees use three types of financial measures to assess the actuarial status of the Social Security trust funds under the financing approach specified in current law: (1) annual cash-flow measures, including income rates, cost rates, and balances; (2) trust fund ratios; and (3) summary measures such as actuarial balances and unfunded obligations.
The difference between the annual income rate and annual cost rate, both expressed as percentages of taxable payroll, is the annual balance. The level and trend of the annual balances at the end of the 75-year projection period are factors used to assess the actuarial status of the program.
The trust fund ratio for a year is the proportion of the year’s projected cost that could be paid with fund reserves available at the beginning of the year. Critical factors considered in assessing actuarial status include: (1) the year of depletion of the fund reserves and the percent of scheduled benefits that is still payable after reserves are depleted, (2) the stability of the trust fund ratio at the end of the long-range period, and (3) the level and year of maximum trust fund ratio.
Solvency at any point in time requires that sufficient financial resources are available to pay all scheduled benefits at that time. Solvency is generally indicated by a positive trust fund ratio. “Sustainable solvency” for the financing of the program under a specified set of assumptions is achieved when the projected trust fund ratio is positive throughout the 75‑year projection period and is either stable or rising at the end of the period.
Total income and cost are summarized over valuation periods that extend through 75 years and over the infinite horizon.1 This section presents several summarized measures, including the actuarial balance and the open- group unfunded obligation. The actuarial balance indicates the size of any surplus or shortfall as a percentage of taxable payroll over the period. The open-group unfunded obligation indicates the size of any shortfall in present-value dollars.
This section also includes additional information that is used to assess the actuarial status of the Social Security program, including: (1) a comparison of the number of beneficiaries to the number of covered workers, (2) the test of long-range close actuarial balance, and (3) the reasons for the change in the actuarial balance from the last report.
1. Annual Income Rates, Cost Rates, and Balances
The concepts of income rate and cost rate, expressed as percentages of taxable payroll, are important in the consideration of the long-range actuarial status of the trust funds. The annual income rate is the ratio of all non-interest income to the OASDI taxable payroll for the year. Non-interest income includes payroll taxes, taxes on scheduled benefits, and any General Fund transfers or reimbursements. The OASDI taxable payroll consists of the total earnings subject to OASDI taxes with some relatively small adjustments.2 The annual cost rate is the ratio of the cost of the program to the taxable payroll for the year. The cost includes scheduled benefits, administrative expenses, net interchange with the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries. For any year, the annual income rate minus the annual cost rate is the annual “balance” for the year.
Table IV.B1 presents a comparison of the estimated annual income rates and cost rates by trust fund and alternative. Table IV.B2 shows the separate components of the annual income rates.
Under the intermediate assumptions, the OASI income rate will increase from 10.95 percent of payroll for 2022 to 11.42 percent of payroll for 2023 and then decrease to 11.08 percent of payroll for 2024. The income rate for 2023 is relatively high because of an estimated large positive adjustment to payroll tax contributions to be made in June 2023. This adjustment is unusually large because payroll tax revenue credited to the trust fund in 2022 was based on estimates that did not anticipate the stronger-than-expected recovery from the pandemic-induced recession. The OASI income rate then generally gradually rises thereafter, reaching 11.57 percent of taxable payroll for 2097. Income from taxation of benefits causes this gradual increase in the OASI income rate for two main reasons: (1) total scheduled benefits are rising faster than payroll; and (2) the ratio of total income tax on benefits to total benefits increases over time for reasons discussed in detail on page 153.
The OASI cost rate rises rapidly from 2022 to about 2040. During this period, the retirement of the baby-boom generation will increase the number of beneficiaries much faster than the number of workers increases, as subsequent lower-birth-rate generations continue to replace the baby-boom generation at working ages. From 2040 to 2046, the cost rate declines because the aging baby-boom generation is gradually replaced at retirement ages by the lower-birth-rate generations that followed. The OASI cost rate then rises from 15.01 percent for 2046 to 16.65 percent for 2078, largely because of the period of reduced birth rates starting with the recession of 2007-09, and then generally declines to 15.82 percent for 2097.
Projections of income rates under the low-cost and high-cost sets of assumptions are similar to those projected for the intermediate assumptions, because income rates are largely a reflection of the payroll tax rates specified in the law, with the changes from taxation of benefits noted above. In contrast, OASI cost rates for the low-cost and high-cost assumptions are significantly different from those projected for the intermediate assumptions. For the low-cost assumptions, the OASI cost rate generally declines from 12.77 percent for 2023 to 12.03 percent for 2053, rises to 12.33 percent for 2070, and then generally declines to 11.06 percent for 2097, at which point the income rate reaches 11.27 percent. For the high-cost assumptions, the OASI cost rate rises from 13.26 percent for 2023 to 24.89 percent for 2088 and then declines gradually to 24.73 percent for 2097, at which point the income rate reaches 12.13 percent.
The pattern of the projected OASI annual balance is important in the analysis of the actuarial status of the program. Under the intermediate assumptions, the annual balance is negative throughout the projection period. The annual deficit increases from 1.15 percent of taxable payroll for 2022 to 1.50 percent for 2023 and to 2.17 percent for 2024. After 2024, the annual deficit continues to rise to 3.59 percent for 2040. It then declines to 3.53 percent of payroll for 2046, rises to 5.03 percent for 2078, and generally declines thereafter, reaching 4.25 percent of taxable payroll for 2097.
Under the low-cost assumptions, the OASI annual deficit increases from 1.41 percent of payroll for 2023 to 1.66 percent for 2024, and then generally declines to 0.72 percent of payroll for 2053. After 2053, the annual deficit rises to 0.99 percent for 2070. After 2070, the OASI annual balance generally improves, turning positive in 2089, and reaching 0.21 percent of payroll for 2097. Under the high-cost assumptions, the OASI annual deficit rises from 1.72 percent for 2023 to 12.76 percent for 2088, and then declines relatively modestly to 12.60 percent for 2097.
Income
rate a
Cost
rateb

a
Income rates include certain reimbursements from the General Fund of the Treasury.

b
Benefit payments scheduled to be paid on January 3 are actually paid on December 31 as required by the statutory provision for early delivery of benefit payments when the normal payment delivery date is a Saturday, Sunday, or legal public holiday. For comparability with the values for historical years and the projections in this report, all trust fund operations and asset reserves reflect the 12 months of benefits scheduled for payment each year.

c
Between 0 and 0.005 percent of taxable payroll.

d
The annual balance is projected to be negative for a temporary period and then become positive before the end of the projection period.

e
The annual balance is projected to be positive throughout the entire 75-year projection period.

Notes:
1. The income rate excludes interest income.
2. Revisions of taxable payroll may change some historical values.
3. Components may not sum to totals because of rounding.
Under the intermediate assumptions, the projected DI cost rate is 1.60 percent for 2023. After 2023, the cost rate fluctuates, reaching 1.59 percent for 2031. Then the DI cost rate increases gradually to 1.96 percent for 2055. Thereafter, the cost rate remains relatively stable, decreasing slowly to 1.84 percent for 2083, and then increasing to 1.93 percent for 2097. The DI income rate increases from 1.79 percent for 2022 to 1.86 percent for 2023, decreases to 1.80 percent for 2024, and is relatively stable thereafter, reaching 1.83 percent for 2097. The annual balance increases from 0.17 percent of payroll for 2022 to 0.26 percent for 2023, decreases to 0.16 percent for 2026 and then increases to 0.23 percent for 2031. After 2031, the annual balance declines and becomes negative for 2044. After 2044, the annual deficit increases to 0.13 percent for 2055, decreases to 0.01 percent for 2083, and then increases to 0.10 percent of payroll for 2097.
Under the low-cost assumptions, the projected DI cost rate declines from 1.57 percent of payroll for 2023 to 1.20 percent for 2035 and then increases to 1.32 percent for 2054. The cost rate then declines through 2082 and increases slowly thereafter, reaching 1.29 percent for 2097. The annual balance is positive throughout the long-range period, reaching 0.53 percent of payroll for 2097. Under the high-cost assumptions, the DI cost rate rises from 1.65 percent of payroll for 2023 to 2.80 percent for 2057 and fluctuates thereafter, reaching 2.75 percent for 2097. The DI annual balance declines from 0.22 percent of payroll for 2023 and becomes negative for 2026, with a 0.03 percent annual deficit for 2026. After 2026, annual deficits increase to 0.96 percent of payroll for 2057 and fluctuate thereafter, reaching 0.90 percent for 2097.
Figure IV.B1 shows the patterns of the historical and projected OASI and DI annual cost rates. The patterns in projected OASI and DI cost rates are described earlier in this chapter. Historical annual OASI cost rates shifted upward starting in 2008 and have remained at relatively high levels since then, primarily due to the changing age distribution of the adult population with the retirement of the baby-boom generation and entry of lower birth-rate generations into working ages. Historical annual DI cost rates rose substantially between 1990 and 2010 in large part due to: (1) aging of the working population as the baby-boom generation moved from ages 25-44 in 1990, where disability prevalence is low, to ages 45-64 in 2010, where disability prevalence is much higher; (2) a substantial increase in the percentage of women insured for DI benefits as a result of increased and more consistent rates of employment; and (3) increased disability incidence rates for women to a level similar to those for men by 2010. As of 2010, these three factors have largely stabilized. Other factors that are not yet fully understood, including the changing nature of work, have caused age-sex-adjusted incidence rates and cost rates to decline from 2010 to 2022. Figure IV.B1 shows only the income rates for alternative II because the variation in income rates by alternative is very small. Income rates generally increase slowly for each of the alternatives over the long-range period. Taxation of benefits, which is a small portion of income, is the main source of the increases in the income rate and the variation among the alternatives.
Table IV.B1 shows the annual balances for OASI, DI, and OASDI. The pattern of the annual balances is important to the analysis of the actuarial status of the Social Security program as a whole. As seen in figure  IV.B1, the magnitude of each of the positive annual balances is the distance between the appropriate cost-rate curve and the income-rate curve above it. The magnitude of each of the annual deficits is the distance between the appropriate cost-rate curve and the income-rate curve below it. Annual balances follow closely the pattern of annual cost rates after 1990 because the payroll tax rate for the OASDI program has not changed and will not under current law, with only small variations in the allocation between DI and OASI except for changes due to the 1994 and the 2016-18 payroll tax rate reallocations.
In the future, the costs of OASI, DI, and the combined OASDI programs as a percentage of taxable payroll are unlikely to fall outside the range encompassed by alternatives I and III because alternatives I and III define a wide range of demographic, economic, and program-specific conditions.
Long-range OASDI cost and income are most often expressed as percentages of taxable payroll. However, cost and income are also presented as shares of gross domestic product (GDP), the value of goods and services produced during the year in the United States. Under alternative II, the OASDI cost increases from about 5.2 percent of GDP for 2023 to about 6.0 percent for 2040. After 2040, OASDI cost as a percentage of GDP declines slightly through 2048, increases to a peak of 6.3 percent for 2076, and thereafter decreases slowly, reaching about 6.0 percent by 2097. Appendix G presents full estimates of income and cost relative to GDP.
Table IV.B2 contains historical and projected annual income rates and their components by trust fund and alternative. The annual income rates consist of the scheduled payroll tax rates, the rates of income from taxation of scheduled benefits, and the rates of income from General Fund reimbursements. Projected income from taxation of benefits increases over time for reasons discussed on page 153.
Taxation of
benefitsa
General Fund Reimburse-mentsb
Totalc

a
Revenue from taxation of benefits is the amount that would be assessed on benefit amounts scheduled in the law.

b
Includes payroll tax revenue forgone under the provisions of Public Laws 111-147, 111-312, 112-78, and 112‑96, and other miscellaneous reimbursements. Also includes transfers of a portion of the proceeds from repayments of loans authorized under Public Law 116-136.

c
Values exclude interest income.

d
Between 0 and 0.005 percent of taxable payroll.

Note: Components may not sum to totals because of rounding.
2. Comparison of Workers to Beneficiaries
Under the intermediate assumptions, the OASDI cost rate will rise rapidly between 2023 and about 2040, primarily because the number of beneficiaries rises much more rapidly than the number of covered workers as the baby-boom generation continues to retire and is replaced at working ages by lower birth-rate generations. The ratio of OASDI beneficiaries to workers is dominated by the OASI program because all workers eventually die or retire, but only a relatively small minority become eligible for benefits under the DI program. The trends described below are primarily due to demographic changes and thus affect the DI program roughly 20 years earlier than the OASI and OASDI programs. The baby-boom generation had lower fertility rates than their parents, and lower fertility rates are expected to persist for all future generations; therefore, the ratio of OASDI beneficiaries to workers will rise rapidly and reach a permanently higher level after all of the baby-boom generation has retired. Due to increasing longevity, the ratio of beneficiaries to workers will generally rise slowly thereafter. Table IV.B3 provides a comparison of the numbers of covered workers and beneficiaries.
Covered
workers a
(in thousands)
Beneficiaries b (in thousands)
OASDIc

a
Workers who are paid at some time during the year for employment on which OASDI taxes are due.

b
Beneficiaries with monthly benefits in current-payment status as of June 30.

c
This column is the sum of OASI and DI beneficiaries. A small number of beneficiaries receive benefits from both funds.

Notes:
1. The number of beneficiaries does not include uninsured individuals who received benefits under section 228 of the Social Security Act. The General Fund of the Treasury reimbursed the trust funds for the costs of most of these individuals.
2. Historical covered worker and beneficiary data are subject to revision.
3. Components may not sum to totals because of rounding.
The effect of the demographic shift under the three alternatives on the OASDI cost rates is clear when one considers the projected number of OASDI beneficiaries per 100 covered workers. Compared to the 2022 level of 36 beneficiaries per 100 covered workers, this ratio is projected to rise to 44 by 2038 under the intermediate assumptions because the growth in beneficiaries greatly exceeds the growth in workers. This projected ratio continues to rise through 2078 and then generally declines, reaching 47 under the intermediate assumptions by 2100. Under the high-cost assumptions, this ratio generally rises to 66 by 2100. Under the low-cost assumptions, this ratio rises to 41 by 2038 and then generally declines, reaching 36 by 2100. Figure IV.B2 shows beneficiaries per 100 covered workers.
For each alternative, the curve in figure IV.B2 is strikingly similar to the corresponding cost-rate curve in figure IV.B1. This similarity emphasizes the extent to which the cost rate is determined by the age distribution of the population. The cost rate is essentially the product of the number of beneficiaries and their average benefit, divided by the product of the number of covered workers and their average taxable earnings. For this reason, the pattern of the annual cost rates is similar to that of the annual ratios of beneficiaries to workers.
Table IV.B3 also shows the number of covered workers per OASDI beneficiary, which was about 2.8 for 2022. Under the intermediate assumptions, this ratio declines generally throughout the long-range period, reaching 2.3 for 2038 and 2.1 by 2100. Under the low-cost assumptions, this ratio declines to 2.4 for 2038, then generally rises to 2.8 by 2100. Under the high-cost assumptions, this ratio generally decreases to 1.5 by 2100.
3. Trust Fund Ratios and Test of Long-Range Close Actuarial Balance
Trust fund ratios are critical indicators of the adequacy of the financial resources of the Social Security program. The trust fund ratio for a year is the amount of asset reserves in a fund at the beginning of a year expressed as a percentage of the cost for the year. Under current law, the OASI and DI Trust Funds do not have the authority to borrow other than in the form of advance tax transfers. If reserves held in either trust fund become depleted during a year, and continuing revenue falls short of the cost of scheduled benefits, then full scheduled benefits would not be payable on a timely basis. For this reason, the trust fund ratio is a critical financial measure.
The trust fund ratio serves an additional important purpose in assessing the actuarial status of the program. If the projected trust fund ratio is positive throughout the period and is either level or increasing at the end of the period, then projected adequacy for the long-range period is likely to continue for subsequent reports. Under these conditions, the program has achieved sustainable solvency.
Table IV.B4 shows the projections of trust fund ratios by alternative, without regard to advance tax transfers that would be effected, for the separate and combined OASI and DI Trust Funds. The table also shows the years of trust fund reserve depletion and the percentage of scheduled benefits that would be payable thereafter, by alternative.
Under the intermediate assumptions, the OASI trust fund ratio is projected to decline from 220 percent at the beginning of 2023 until the trust fund reserves become depleted in 2033 (one year earlier than projected in last year’s report), at which time 77 percent of scheduled benefits would be payable. The change in reserve depletion year to 2033, compared to 2034 in last year’s report, is due primarily to changes in recent economic data and near-term assumptions.
The DI Trust Fund remains solvent throughout the long-range period under the intermediate assumptions, as in last year’s report. The DI trust fund ratio increases from 77 percent at the beginning of 2023 to a peak of 267 percent for 2043. After 2043, the DI trust fund ratio generally declines throughout the remainder of the long-range period, reaching 155 percent for 2098.
Under the intermediate assumptions, the trust fund ratio for the combined OASI and DI Trust Funds declines from 204 percent at the beginning of 2023 until the combined fund reserves become depleted in 2034 (one year earlier than projected in last year’s report), at which time 80 percent of scheduled benefits would be payable.
Under the low-cost assumptions, the trust fund ratio for the DI program increases from 2023 throughout the projection period, from 78 percent at the beginning of 2023 to the extremely high level of 3,574 percent for 2098. For the OASI program, the trust fund ratio declines steadily, from 220 percent for 2023 until the reserves become depleted in 2039, at which time 89 percent of scheduled benefits would be payable. For the combined OASDI program, the trust fund ratio declines from 204 percent for 2023 until the combined fund reserves become depleted in 2067. However, the trust funds would have sufficient income by the end of 2092 to permit full payment of scheduled benefits thereafter and also to pay in arrears the temporary shortfalls between 2067 and 2092. By 2093, trust fund reserves become positive and the trust fund ratio increases thereafter, to a ratio of 36 percent for 2098. Because the DI trust fund ratio is positive throughout the projection period and increasing at the end of the period, under the low-cost assumptions, only the DI program achieves sustainable solvency.
Under the high-cost assumptions, the OASI trust fund ratio declines from 219 percent for 2023 until reserves become depleted in 2031, at which time 70 percent of scheduled benefits would still be payable. The DI trust fund ratio increases from 77 percent for 2023 to 86 percent for 2024, and then declines until the reserves become depleted in 2036. At that time, 85 percent of scheduled benefits would still be payable. The combined OASI and DI trust fund ratio declines from 204 percent for 2023 until reserves become depleted in 2031, at which time 72 percent of scheduled benefits would still be payable.
Trust fund reserve depletion occurs within the 75-year projection period for the OASI Trust Fund under the low-cost, intermediate, and high-cost assumptions, and for the DI Trust Fund under the high-cost assumptions. It is therefore very likely that lawmakers will need to increase income, reduce program costs, or both, in order to maintain solvency for the OASI Trust Fund. The stochastic projections discussed in appendix E suggest that OASI and combined OASI and DI Trust Fund reserve depletion is highly probable before mid-century.
In the 2022 report, the combined trust fund reserves were projected to become depleted in 2031 and 2035 under the high-cost and intermediate assumptions, respectively, and become temporarily depleted between 2069 and 2088 under the low-cost assumptions.
Table IV.B4.—Trust Fund Ratios, Calendar Years 2023-2100a

a
Benefit payments scheduled to be paid on January 3 are actually paid on December 31 as required by the statutory provision for early delivery of benefit payments when the normal payment delivery date is a Saturday, Sunday, or legal public holiday. For comparability with the values for historical years and the projections in this report, all trust fund ratios reflect the 12 months of benefits scheduled for payment each year.

b
Trust fund reserves would be depleted at the beginning of this year.

c
Trust fund reserves would not be depleted within the projection period.

d
Trust fund reserves would be depleted for a temporary period, and return to positive levels before the end of the period.

Note: The definition of trust fund ratio appears in the Glossary. The ratios shown for the combined trust funds for years after reserve depletion of either the DI or OASI Trust Fund are hypothetical.
Since 2013, when the Trustees last modified the test of long-range close actuarial balance, the standard for each trust fund requires meeting two conditions: (1) the test of short-range financial adequacy is satisfied; and (2) the trust fund ratios stay above zero throughout the 75-year projection period, allowing scheduled benefits to be paid in a timely manner throughout the period. Both the long-range test and the short-range test are applied based on the intermediate set of assumptions. As discussed in section IV.A, the DI Trust Fund passes the test of short-range financial adequacy because the trust fund ratio, while below 100 percent at the beginning of the projection period, reaches 100 percent within 5 years and stays above 100 percent throughout the remainder of the 10-year period. The OASI and combined OASI and DI Trust Funds fail the test of short-range financial adequacy because the trust fund ratios drop below 100 percent by the end of the 10‑year period. Under the intermediate assumptions, the OASI Trust Fund reserves become depleted in 2033, DI Trust Fund reserves stay positive throughout the 75-year period, and the combined OASI and DI Trust Fund reserves become depleted in 2034. Therefore, the OASI and combined OASI and DI Trust Funds fail the test of long-range close actuarial balance, and the DI program passes the test of long-range close actuarial balance.
Figure IV.B3 illustrates the trust fund ratios for the separate OASI and DI Trust Funds for each of the alternative sets of assumptions. DI Trust Fund status is more uncertain than OASI Trust Fund status because there is a high degree of uncertainty associated with future disability prevalence. A graph of the trust fund ratios for the combined trust funds appears in figure II.D6.
4. Summarized Income Rates, Summarized Cost Rates, and Actuarial Balances
Summarized values for the full 75-year period are useful in analyzing the program’s long-range actuarial status over the period as a whole, both under current law and under proposed modifications to the law. All annual amounts included in a summarized value are present-value discounted to the valuation date. It is important to note that the actuarial balance indicates the solvency status of the fund only for the very end of the period.
Table IV.B5 presents summarized income rates, summarized cost rates, and actuarial balances for 25-year, 50-year, and 75-year valuation periods. Summarized income rates are the sum of the present value of non-interest income for a period (which includes scheduled payroll taxes, the projected income from the taxation of scheduled benefits, and reimbursements from the General Fund of the Treasury) and the starting trust fund asset reserves, expressed as a percentage of the present value of taxable payroll over the period. Under current law, the total OASDI payroll tax rate will remain at 12.4 percent in the future. In contrast, income from taxation of benefits, expressed as a percentage of taxable payroll, is expected to increase in most years of the long-range period for the reasons discussed on page 153. Summarized cost rates are the sum of the present value of cost for a period (which includes scheduled benefits, administrative expenses, net interchange with the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries) and the present value of the cost of reaching a target trust fund of 100 percent of annual cost at the end of the period, expressed as a percentage of the present value of taxable payroll over the period.
The actuarial balance for a valuation period is equal to the difference between the summarized income rate and the summarized cost rate for the period. An actuarial balance of zero for any period indicates that cost for the period could be met for the period as a whole (but not necessarily at all points within the period), with a remaining trust fund reserve at the end of the period equal to 100 percent of the following year’s cost. A negative actuarial balance for a period indicates that the present value of income to the program plus the existing trust fund is less than the present value of the cost of the program plus the cost of reaching a target trust fund reserve of one year’s cost by the end of the period. Generally, a trust fund is deemed to be adequately financed for a period as a whole if the actuarial balance is zero or positive, meaning that the reserves at the end of the period are at least equal to annual cost. Note that solvency is possible at the end of the period with a small negative actuarial balance where reserves are still positive.3
Table IV.B5 contains summarized rates for the intermediate, low-cost, and high-cost assumptions. The low-cost and high-cost assumptions define a wide range of possibilities. Financial outcomes as good as the low-cost scenario or as bad as the high-cost scenario are unlikely to occur.
For the 25-year valuation period, the OASDI program has an actuarial balance of -0.31 percent of taxable payroll under the low-cost assumptions, ‑2.50 percent under the intermediate assumptions, and -4.89 percent under the high-cost assumptions. These balances indicate that the program is not adequately financed for the 25‑year valuation period under any of these three sets of assumptions.
For the 50‑year valuation period, the OASDI program has actuarial balances of -0.29 percent under the low-cost assumptions, ‑3.24 percent under the intermediate assumptions, and ‑6.97 percent under the high-cost assumptions. These actuarial balances mean that the OASDI program is not adequately financed for the 50‑year valuation period under any of these three sets of assumptions.
For the entire 75-year valuation period, the combined OASDI program has actuarial balances of -0.10 percent of taxable payroll under the low-cost assumptions, ‑3.61 percent under the intermediate assumptions, and ‑8.37 percent under the high-cost assumptions. These balances indicate that the combined OASDI program is not adequately financed for the 75-year valuation period under any of these three sets of assumptions.
Assuming the intermediate assumptions accurately capture future demographic, economic, and program-specific trends, solvency for the program over the next 75 years could be restored using a variety of approaches. For example, revenue could be increased in a manner equivalent to an immediate and permanent increase in the combined Social Security payroll tax rate from 12.40 percent to 15.84 percent (a relative increase of 27.7 percent),4 cost could be reduced in a manner equivalent to an immediate and permanent reduction in scheduled benefits of 21.3 percent, or some combination of approaches could be used.
However, eliminating the actuarial deficit for the next 75-year valuation period requires raising payroll taxes or lowering benefits by more than is required just to achieve solvency, because the actuarial deficit includes the cost of attaining a target trust fund equal to 100 percent of annual program cost by the end of the period. The actuarial deficit could be eliminated for the 75-year period by increasing revenue in a manner equivalent to an immediate and permanent increase in the combined payroll tax from 12.40 percent to 16.01 percent (a relative increase of 29.1 percent),5 reducing cost in a manner equivalent to an immediate reduction in scheduled benefits of 22.1 percent, or some combination of approaches could be used.
Under the intermediate assumptions, the OASDI program has large annual deficits toward the end of the long-range period that reach 4.35 percent of payroll for 2097 (see table IV.B1). These large deficits indicate that annual cost continues to exceed non-interest income after 2097, so continued adequate financing would require larger changes than those needed to maintain solvency for the 75-year period. Over the period extending through the infinite horizon, the actuarial deficit is 4.6 percent of payroll under the intermediate assumptions.
Beginning
asset reservesa

a
Benefit payments scheduled to be paid on January 3 are actually paid on December 31 as required by the statutory provision for early delivery of benefit payments when the normal payment delivery date is a Saturday, Sunday, or legal public holiday. For comparability with the values for historical years and the projections in this report, all trust fund operations and asset reserves reflect the 12 months of benefits scheduled for payment each year.

Note: Components may not sum to totals because of rounding.
5. Open-Group Unfunded Obligation
Consistent with practice since 1965, this report focuses on a 75-year open-group valuation to evaluate the long-range actuarial status of the OASDI program. The open-group valuation includes non-interest income and cost for past, current, and future participants through the year 2097. The open-group unfunded obligation measures the adequacy of financing over the period as a whole for a program financed on a pay-as-you-go basis. On this basis, payroll taxes and scheduled benefits for all participants are included through 2097.
The open-group unfunded obligation increased from $20.4 trillion shown in last year's report to $22.4 trillion in this report. If there had been no changes in starting values, assumptions, laws, or methods for this report, then the open-group unfunded obligation would have increased to $21.2 trillion solely due to the change in the valuation period. This expected increase in the unfunded obligation occurs because: (1) the unfunded obligation is now discounted to January 1, 2023, rather than to January 1, 2022, which tends to increase the unfunded obligation by the annual nominal interest rate; and (2) the unfunded obligation now includes an additional year (2097). However, changes in the law, assumptions, methods, and starting values resulted in a net $1.2 trillion increase in the unfunded obligation.
The 75-year unfunded obligation is equivalent to 3.42 percent of OASDI taxable payroll and 1.2 percent of GDP for 2023-97.6 These percentages were 3.24 and 1.1, respectively, for last year’s report. The 75-year unfunded obligation as a percentage of taxable payroll is less than the actuarial deficit, because the unfunded obligation excludes the cost of having an ending target trust fund value.
The actuarial deficit was 3.42 percent of payroll in last year’s report, and was expected to increase to a deficit of 3.48 percent of payroll solely due to the change in the valuation period. Changes in the law, assumptions, methods, and starting values combined to account for a 0.13 percentage point increase (worsening) in the actuarial deficit to 3.61 percent of payroll. The actuarial deficit is 1.3 percent of GDP in this year’s report, 0.1 percent higher than in last year’s report.
As mentioned above, the open-group unfunded obligation expressed in dollars is higher than it would have been if only the valuation period had been changed. This net increase occurred for a variety of reasons described in the next section, in particular changes in recent economic data and near-term assumptions, and changes in programmatic data and methods.
Table IV.B6 presents the components and the calculation of the long-range (75-year) actuarial balance under the intermediate assumptions. The present value of future cost less future non-interest income over the long-range period, minus the amount of trust fund asset reserves at the beginning of the projection period, is $22.4 trillion for the OASDI program. This amount is the 75-year “open-group unfunded obligation” (see row H). The actuarial deficit (which is the negative of the actuarial balance) combines this unfunded obligation with the present value of the ending target trust fund and expresses the total as a percentage of the present value of the taxable payroll for the period. The present value of future non-interest income minus cost, plus starting trust fund reserves, minus the present value of the ending target trust fund, is ‑$23.6 trillion for the OASDI program.
F. Cost minus non-interest income (E - D)

a
Less than $0.5 billion.

b
The calculation of the actuarial balance includes the cost of accumulating a target trust fund reserve equal to 100 percent of annual cost at the end of the period.

Note: Components may not sum to totals because of rounding.
Consideration of summary measures alone (such as the actuarial balance and open-group unfunded obligation) for a 75-year period can lead to incorrect perceptions and to policy prescriptions that do not achieve sustainable solvency. These concerns can be addressed by considering the trend in trust fund ratios toward the end of the period. (See the discussion of “sustainable solvency” beginning on page 53.)
Another measure of trust fund finances, discussed in appendix F, is the infinite horizon unfunded obligation, which takes account of all annual balances, even those after 75 years. The extension of the time period past 75 years assumes that the current-law OASDI program and the demographic, economic, and program-specific trends used for the 75‑year projection continue indefinitely. This infinite horizon unfunded obligation is estimated to be 4.6 percent of taxable payroll or 1.4 percent of GDP. These percentages were 4.5 and 1.4, respectively, for last year’s report. Of course, the degree of uncertainty associated with estimates increases substantially for years further in the future.
6. Reasons for Change in Actuarial Balance From Last Report
Table IV.B7 shows the effects of changes on the long-range actuarial balance under the intermediate assumptions, by category, between last year’s report and this report.
Valuation period b
-.05
-.01
-.05
-.03
-.03
-.04
-.04
-.08
-.06
-.21
-.19

a
Between -0.005 and 0.005 percent of taxable payroll.

b
The change in the 75-year valuation period from last year’s report to this report means that the 75-year actuarial balance now includes the relatively large negative annual balance for 2097. This change in the valuation period results in a larger long-range actuarial deficit. The actuarial deficit includes the trust fund reserve at the beginning of the projection period.

Note: Components may not sum to totals because of rounding.
If the law, data, assumptions, and methods had all remained unchanged from last year’s Trustees Report, the long-range OASDI actuarial balance would have decreased (worsened) by 0.05 percent of taxable payroll solely due to the change in the valuation period. However, as described below, projections in this report also reflect new data and changes in law, assumptions, and methods. These changes, including the change in the valuation period, combine to decrease (worsen) the long-range OASDI actuarial balance by 0.19 percentage point, from ‑3.42 percent of taxable payroll in last year’s report to -3.61 percent in this report.
Legislation/Regulation
Changes in law, regulations, and policy have a negligible effect on the long-range OASDI actuarial balance.
Since the last report, there have been a number of notable regulatory and judicial developments related to immigration policy. On August 30, 2022, the Department of Homeland Security (DHS) published a final rule in the Federal Register, establishing regulations to “preserve and fortify” the Deferred Action for Childhood Arrivals (DACA) program in full. On October 5, 2022, the US Court of Appeals for the Fifth Circuit affirmed an earlier district court decision that had declared the DACA policy unlawful. The appeals court returned the case to the district court for further review of the DHS regulation. On October 14, 2022, the district court issued an order extending the pause in implementing the DACA final rule. As a result, DHS is currently prohibited from processing new DACA applications and related employment authorizations.
Changes in DACA policy affect OASDI program operations because those who apply for and receive deferred action status are eligible for work authorization, which leads to additional workers covered by the OASDI program, increased payroll tax revenue, and subsequently increased benefit cost. The estimates presented in last year’s report reflected the assumption that the DACA program would be fully in effect by the middle of 2022, consistent with the Administration’s intent. Because of the court challenges, the estimates presented in this year’s report incorporate an additional one-year delay in the resumption of processing new applications, to the middle of 2023. This one-year delay has a negligible effect on the actuarial balance.
Valuation Period
As mentioned above, changing the 75-year valuation period from 2022 through 2096 for last year’s report to 2023 through 2097 for this report decreases the projected long-range OASDI actuarial balance by 0.05 percent of taxable payroll. This decrease occurs because (1) the annual balances after 2022 are now discounted to January 1, 2023, rather than to January 1, 2022, and (2) the relatively large negative annual balance for 2097 is now included in this year’s 75-year projection period. Note that the actuarial balance calculation includes trust fund reserves at the beginning of the projection period. These reserves reflect the program’s net financial flows for all past years, including 2022, up to the start of the valuation period.
Demographic Data and Assumptions
New demographic data and changes in demographic assumptions combine to decrease (worsen) the long-range OASDI actuarial balance by 0.03 percent of taxable payroll.
The ultimate demographic assumptions are unchanged for this year’s report. However, updates to recent demographic data and near-term assumptions result in significant changes in the long-range actuarial balance.
First, final birth data for calendar year 2021, the base year for the fertility rate projections, indicate a total fertility rate very slightly higher than the rate assumed in last year’s report for 2021. However, incorporating the updated base year data into the regression used to project birth rates during the transition to the ultimate level led to generally slightly lower birth rates during the transition period. This change in assumed birth rates during the transition period decreases the actuarial balance by 0.01 percent of taxable payroll.
Second, updates to near-term mortality assumptions to reflect the effects of the COVID-19 pandemic increase the long-range actuarial balance by 0.02 percent of taxable payroll. Final mortality data are now available for all age groups for calendar year 2020 and for ages 65 and older for 2021. Based on preliminary data available to date, assumed death rates were increased for ages 0 to 64 for 2021 and for ages 0 to 84 for 2022, compared to the rates used for last year’s report. Death rates are assumed to continue to be elevated in 2023 and 2024, above the levels that were assumed in last year’s report. Projected death rates for years after 2024 are assumed to be unchanged from the levels that would have been projected in the absence of the pandemic.
Third, updates to data for the historical population, other-than-lawful permanent resident immigration, and marriage and divorce—including updates related to incorporating 2020 and 2021 data from the American Community Survey—combine to decrease the actuarial balance by 0.04 percent of taxable payroll.
Economic Data and Assumptions
New economic data and changes in economic assumptions, in combination, decrease the long-range OASDI actuarial balance by 0.04 percent of taxable payroll.
One ultimate economic assumption was updated for this year’s report. The annual percentage change in the average OASDI covered wage, adjusted for inflation, is assumed to average 1.14 percentage points over the last 65 years of the 75-year projection period. This is 0.02 percentage point higher than the value assumed for last year’s report. This change in the real wage growth assumption was made because the difference between the growth in earnings and employee compensation has been extraordinarily low across the last three economic cycles and is expected to remain slightly lower in the future than was assumed for last year’s report. This assumption change increases the long-range actuarial balance by 0.03 percent of taxable payroll.
In addition, updates to recent economic data and near-term assumptions result in significant changes in the long-range actuarial balance.
First, in response to recent economic developments, including higher-than-expected inflation rates and lower-than-expected output growth, the Trustees revised the levels of GDP and labor productivity down by about 3.0 percent by 2026 and for all years thereafter. This change decreases the actuarial balance by roughly 0.13 percent of taxable payroll.
Second, while the ultimate real interest rate assumption remains at 2.3 percent for this year’s report, the assumed real interest rates over the first 10 years of the projection period are generally higher than those assumed for last year’s report, consistent with recent experience and expectations. These higher near-term real interest rates increase the actuarial balance by 0.02 percent of payroll.
Other changes to historical data and near-term economic assumptions combine for a net increase in the actuarial balance of about 0.03 percent of taxable payroll.
Disability Data and Assumptions
New disability data and changes in disability assumptions combine to increase the long-range OASDI actuarial balance by 0.01 percent of taxable payroll. This increase is due to the combined effects of actual disability data for 2022 and generally slightly lower assumed incidence rates in the first 10 years of the projection period. The ultimate disability incidence rate assumption remains at 4.8 per thousand exposed for this report.
Methods and Programmatic Data
The projections in this report also reflect several methodological improvements and updates based on new program-specific data. These methodological changes, programmatic data updates, and interactions combine to decrease the long-range OASDI actuarial balance by 0.06 percent of taxable payroll. Descriptions of four significant methodological changes and programmatic data updates follow.
First, the method for projecting the age distributions of lawful permanent resident (LPR) new arrival and adjustment-of-status immigrants was updated, reflecting recent data showing a slightly older population at the time of attaining LPR status than had previously been estimated. These updated age distributions decrease the actuarial balance by 0.02 percent of taxable payroll.
Second, the method for estimating the level of OASDI taxable wages for historical years 2000-21 was improved by adopting a more consistent approach for estimating completed values across various types of wages, including regular wages, farm wages, employer-reported tips, and self-reported wages and tips. Taxable wages are based on tabulations of wages reported to date on IRS Forms 941 (Employer’s Quarterly Federal Tax Return), but because of reporting lags and corrections, the reported amounts are initially incomplete for a given tax year and additional amounts continue to arrive for several subsequent years. This method improvement increases the actuarial balance by 0.01 percent of payroll.
Third, the sample of retired-worker and disabled-worker beneficiaries who have become newly entitled for benefits used in the long-range model for projecting average benefit levels was updated. This model uses a large sample of 10 percent of all newly entitled retired-worker beneficiaries in a recent year. The sample used in last year’s report was for worker beneficiaries newly entitled in 2018, while this year’s report uses the results from worker beneficiaries newly entitled in 2019. This update results in a decrease in the actuarial balance of 0.03 percent of payroll.
The fourth significant change is updating the post-entitlement benefit adjustment factors based on new programmatic data. Post-entitlement factors are used to account for changes in benefit levels, primarily due to differential mortality by benefit level and earnings after initial benefit entitlement. This data update decreases the actuarial balance by 0.03 percent of payroll.
In addition to these four methodological changes and programmatic data updates, changes in starting levels and projected levels of OASI and DI beneficiaries and benefit amounts over the first 10 years of the projection period, updating other programmatic data, other small methodological improvements, and interactions among the various method changes and updates to programmatic experience combine to increase the long-range actuarial balance by 0.01 percent of payroll.
Figure IV.B4 compares the annual balances for this report and the prior year’s report for the combined OASDI program over the long-range (75-year) projection period. The figure illustrates the annual effects of the changes described earlier in this section.
The annual balances in this year’s report are lower (more negative) in all years after 2023, primarily due to the changes in economic factors and methodological improvements described above. For the full 75-year projection period (2023-97), the annual balances average 0.13 percentage point lower in this year’s report. For 2097, the projected annual deficit is 4.35 percent of taxable payroll in this report, compared to 4.26 percent in last year's report.

1
See appendix F.

2
Adjustments include adding deemed wage credits based on military service for 1983-2001 and reflecting the lower effective tax rates (as compared to the combined employee-employer rate) that apply to multiple-employer “excess wages.” Lower rates also applied to net earnings from self-employment before 1984 and to income from tips before 1988.

3
A program is solvent over any period for which the trust fund maintains a positive level of asset reserves. In contrast, the actuarial balance for a period includes the cost of having a target fund equal to 100 percent of the following year’s cost at the end of the period. Therefore, if a program ends the period with reserves that are positive but not sufficient to cover the following year’s costs, it will be solvent at the end of the period and yet still have a small negative actuarial balance for that period.

4
The 3.44 percentage point increase in the payroll tax rate required to achieve 75-year solvency differs somewhat from the 3.61 percent actuarial deficit. This is primarily because the rate increase required to achieve 75-year solvency reflects a zero trust fund reserve at the end of the period, whereas the 3.61 percent actuarial deficit incorporates an ending trust fund reserve equal to one year’s cost. While such an increase in the payroll tax rate would cause some behavioral changes in earnings and ensuing changes in benefit levels, such changes are not included in these calculations because they are assumed to have roughly offsetting effects on OASDI actuarial status over the 75-year long-range period as a whole.

5
The calculation of the payroll tax rate increase required to eliminate the actuarial deficit also does not include the effects of behavioral changes, because they are assumed to have roughly offsetting effects.

6
The present value of taxable payroll for 2023-97 is $655.0 trillion. The present value of GDP for 2023-97 is $1,865.3 trillion. In last year’s report, the present value of taxable payroll for 2022-96 was $631.6 trillion and the present value of GDP was $1,817.7 trillion.


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