I. OVERVIEW
C. HIGHLIGHTS
The more important developments since the 1995 Annual Report was issued
are shown below:
- During calendar year 1995, OASDI benefits amounting to $332.6
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 1995 was 43.4 million.
- In 1995, an estimated 141 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 $399.5
billion in calendar year 1995, and expenditures were $339.8 billion.
The assets of the combined funds, therefore, increased by $59.7 billion,
from $436.4 billion at the end of December 1994 to $496.1 billion at the
end of December 1995.
- Assets at the beginning of the year, as a percentage of expenditures
during the year, increased from 128 percent at the beginning of 1995 to
an estimated 140 percent at the beginning of 1996, for the combined OASI
and DI Trust Funds.
- Interest earnings on the invested assets of the combined OASI and DI
Trust Funds were $35.0 billion in calendar year 1995. This represented
an effective annual interest rate of 7.8 percent, earned by the combined
assets during calendar year 1995. During the same period, the average
interest rate on new securities purchased by the trust funds was 6.9
percent.
- Administrative expenses for the OASDI program were $3.1 billion in
calendar year 1995, or about 0.9 percent of benefit payments in the year.
- An automatic benefit increase of 2.6 percent became effective for
December 1995. The OASDI contribution and benefit base was increased from
$61,200 for 1995, to $62,700 for 1996.
The major findings of this report are summarized below:
- 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 $496.1 billion at the end of calendar year 1995, or 140 percent
of estimated expenditures in 1996, to $1,276 billion, or 221 percent of
annual expenditures, at the beginning of the year 2005, based on the
intermediate assumptions.
- The assets of the OASI Trust Fund are expected to increase rapidly
during the next 10 years, from 148 percent of annual expenditures at
the beginning of 1996 to about 239 percent of annual expenditures at
the beginning of the year 2005, 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 83 percent of annual expenditures
at the beginning of 1996 to 136 percent of annual expenditures at the
beginning of 2002, 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 2002, becoming 127
percent at the beginning of 2005.
- In the short range, 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 $2.87 trillion, in nominal dollars. The assets are then
estimated to decline to $2.83 trillion 2 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 2.19 percent of taxable payroll based on the intermediate assumptions,
slightly larger than the difference of 2.17 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 77 percent 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 1995 Annual Report.
- Income from OASDI payroll taxes will remain at a constant rate of
12.4 percent of taxable payroll. Adding the OASDI income from the
taxation of benefits to the income from payroll taxes currently yields a
total "income rate" of 12.6 percent. This total income rate is estimated
to increase gradually to 13.3 percent of taxable payroll by the end of
the 75-year projection period based on the intermediate assumptions, as
the number of beneficiaries with benefit amounts subject to taxation
rises in the future.
- OASDI expenditures for benefit payments and administrative expenses
currently represent about 11.6 percent of taxable payroll. These
expenditures are estimated to remain below tax revenues until 2012,
based on the intermediate assumptions. 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 18.8
percent under the intermediate assumptions, resulting in an annual
deficit of about 5.5 percent. Annual tax revenue would be sufficient to
cover only 71 percent 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 6.6 percent of
GDP by the end of the 75-year projection period, and the annual deficit
is estimated to be 1.9 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
continuing thereafter, under the intermediate assumptions. 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.
Table of Contents
* Previous Chapter
* Next Chapter
Last Modified: 09:50am, June 11, 1996