II. ACTUARIAL ANALYSIS

A. SOCIAL SECURITY AMENDMENTS SINCE THE 1995 REPORT

Since the 1995 Annual Report was transmitted to the Congress on April 3, 1995, one law affecting the OASDI program in a significant way has been enacted. The Senior Citizens' Right to Work Act of 1996 (Title I of Public Law 104-121, enacted into law on March 29, 1996) included a number of provisions affecting the OASDI program. The more important provisions, from an actuarial standpoint, are described in the following paragraphs.

• The annual amount of earnings exempted under the retirement earnings test is gradually increased to $30,000 by 2002 for beneficiaries under age 70 who have reached the normal retirement age, which is currently age 65. Under prior law, the annual exempt amount for such beneficiaries was $11,520 for 1996. Under the new law, the exempt amount is $12,500 for 1996, and that amount increases by $1,000 each year through 1999. For the years 2000-02, the new exempt amounts are $17,000, $25,000, and $30,000, respectively. After 2002, annual indexing of the exempt amount by average wages will be resumed, starting from the $30,000 amount for 2002.
• Under prior law, the amount of earnings that constitutes substantial gainful activity, in any given year, for persons who are statutorily blind was defined to be the same as the retirement test exempt amount, in that year, for beneficiaries between the normal retirement age and age 70. However, under the new law, the substantial gainful activity amount for statutorily blind persons will be equal to the retirement test exempt amount that would have applied under prior law to beneficiaries between the normal retirement age and age 70.
• Eligibility to disability insurance benefits is prohibited for individuals whose drug addiction and/or alcoholism is a contributing factor material to the finding of disability. This provision applies to individuals who file for benefits on or after the date of enactment (March 29, 1996) and to individuals whose claims are finally adjudicated on or after the date of enactment. The provision also becomes effective for current beneficiaries on January 1, 1997, after notification within 90 days following enactment. New medical determinations must be completed by January 1, 1997, for current beneficiaries who are affected and who request a determination within 120 days after the date of enactment.
• Additional funds are authorized for fiscal years 1996 through 2002 for the purpose of conducting continuing disability reviews of disability insurance beneficiaries by increasing the amount of funds available for appropriations under the discretionary spending cap on administrative expenses. The funds made available under this provision are to be used, to the greatest extent practicable, to maximize the combined savings to the OASDI, Supplementary Security Income, Medicare, and Medicaid programs. The estimates in this report are based on the assumption that the authorized funds will be appropriated.
• Under prior law, a stepchild was deemed to be dependent on a stepparent if the child were living with the stepparent or were receiving at least one-half support from the stepparent. The new law is more restrictive in that it requires a stepchild to be receiving at least one-half support from the stepparent, whether or not the child is living with the stepparent. This provision is effective for benefits of individuals who become entitled after June 1996. Also, if the natural parent and the stepparent of an entitled child divorce, benefits to the stepchild based on the work record of the stepparent would terminate the month after the month in which the divorce becomes final. This provision is effective for final divorces occurring after June 1996.

The actuarial estimates shown in this report reflect the anticipated effects of these changes, which are based in part on the assumptions noted above concerning funds authorized for continuing disability reviews.

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