2012 OASDI Trustees Report

C. PROGRAM-SPECIFIC ASSUMPTIONS AND METHODS

The Office of the Chief Actuary at the Social Security Administration uses a set of models to project future income and cost under the OASDI program. These models rely not only on the demographic and economic assumptions described in the previous sections, but also on a number of program-specific assumptions and methods. Values of certain program parameters change from year to year as prescribed by formulas set out in the Social Security Act. These program parameters affect the level of payroll taxes collected and the level of benefits paid. The office uses more complex models to project the numbers of future workers covered under OASDI and the levels of their covered earnings, as well as the numbers of future beneficiaries and the expected levels of their benefits. The following subsections provide descriptions of these program-specific assumptions and methods.

1. Automatically Adjusted Program Parameters

The Social Security Act requires that certain parameters affecting the determination of OASDI benefits and taxes be adjusted annually to reflect changes in particular economic measures. Formulas prescribed in the law, applied to reported statistics, change these program parameters annually. The law bases these automatic adjustments on measured changes in the national average wage index (AWI) and the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI).¹ This section shows values for program parameters adjusted using these indices from the time that these adjustments became effective through 2021. Projected values for future years depend on the economic assumptions described in the preceding section of this report.

Tables V.C1 and V.C2 present the historical and projected values of the CPI-based benefit increases, the AWI series, and the values of many of the wage-indexed program parameters. Each table shows projections under the three alternative sets of economic assumptions. Table V.C1 includes:

•

The annual cost-of-living benefit increase percentages. The automatic cost-of-living adjustment provisions in the Social Security Act specify increases in OASDI benefits based on increases in the CPI. In December 2009 and December 2010, there were no cost-of-living adjustments, and in December 2011 there was a cost-of-living adjustment of 3.6 percent. Under all three sets of economic assumptions, the Trustees project that there will be an annual cost-of-living adjustment in December 2012 and in future years.

•

The annual levels of and percentage increases in the AWI. Under section 215(b)(3) of the Social Security Act, Social Security benefit computations index taxable earnings (for most workers first becoming eligible for benefits in 1979 or later) using the AWI for each year after 1950. This procedure converts a worker’s past earnings to approximately average-wage-indexed equivalent values near the time of his or her benefit eligibility. Other program parameters presented in this section that are subject to the automatic-adjustment provisions also rely on the AWI.

•

The wage-indexed contribution and benefit base. For any year, the contribution and benefit base is the maximum amount of earnings subject to the OASDI payroll tax and creditable toward benefit computation. The Social Security Act defers any increase in the contribution and benefit base if there is no cost-of-living adjustment effective for December of the preceding year. There was no increase in the contribution and benefit base in 2010 and 2011. Increases resumed in 2012.

•

The wage-indexed retirement earnings test exempt amounts. The exempt amounts are the annual amount of earnings below which beneficiaries do not have benefits withheld. A lower exempt amount applies in years before normal retirement age. A higher amount applies for the year in which a beneficiary attains normal retirement age. The retirement earnings test does not apply beginning at normal retirement age. The Social Security Act defers any increase in these exempt amounts if there is no cost-of-living adjustment effective for December of the preceding year. There was no increase in these exempt amounts in 2010 and 2011. Increases resumed in 2012.

 

Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2021 

Calendar year		Cost-of-living benefit increasea (percent)	Average wage index (AWI)  c		Contribution and benefit base c	Retirement earnings test exempt amount
			Amount	Increase (percent)		Under NRAd	At NRAe
Historical data:
	1975	8.0	$8,630.92	7.5	$14,100	$2,520	$2,520
	1976	6.4	9,226.48	6.9	15,300	2,760	2,760
	1977	5.9	9,779.44	6.0	16,500	3,000	3,000
	1978	6.5	10,556.03	7.9	17,700	3,240	4,000
	1979	9.9	11,479.46	8.7	22,900	3,480	4,500
	1980	14.3	12,513.46	9.0	25,900	3,720	5,000
	1981	11.2	13,773.10	10.1	29,700	4,080	5,500
	1982	7.4	14,531.34	5.5	32,400	4,440	6,000
	1983	3.5	15,239.24	4.9	35,700	4,920	6,600
	1984	3.5	16,135.07	5.9	37,800	5,160	6,960
	1985	3.1	16,822.51	4.3	39,600	5,400	7,320
	1986	1.3	17,321.82	3.0	42,000	5,760	7,800
	1987	4.2	18,426.51	6.4	43,800	6,000	8,160
	1988	4.0	19,334.04	4.9	45,000	6,120	8,400
	1989	4.7	20,099.55	4.0	48,000	6,480	8,880
	1990	5.4	21,027.98	4.6	51,300	6,840	9,360
	1991	3.7	21,811.60	3.7	53,400	7,080	9,720
	1992	3.0	22,935.42	5.2	55,500	7,440	10,200
	1993	2.6	23,132.67	.9	57,600	7,680	10,560
	1994	2.8	23,753.53	2.7	60,600	8,040	11,160
	1995	2.6	24,705.66	4.0	61,200	8,160	11,280
	1996	2.9	25,913.90	4.9	62,700	8,280	12,500
	1997	2.1	27,426.00	5.8	65,400	8,640	13,500
	1998	1.3	28,861.44	5.2	68,400	9,120	14,500
	1999	6 2.5	30,469.84	5.6	72,600	9,600	15,500
	2000	3.5	32,154.82	5.5	76,200	10,080	17,000
	2001	2.6	32,921.92	2.4	80,400	10,680	25,000
	2002	1.4	33,252.09	1.0	84,900	11,280	30,000
	2003	2.1	34,064.95	2.4	87,000	11,520	30,720
	2004	2.7	35,648.55	4.6	87,900	11,640	31,080
	2005	4.1	36,952.94	3.7	90,000	12,000	31,800
	2006	3.3	38,651.41	4.6	94,200	12,480	33,240
	2007	2.3	40,405.48	4.5	97,500	12,960	34,440
	2008	5.8	41,334.97	2.3	102,000	13,560	36,120
	2009	.0	40,711.61	-1.5	106,800	14,160	37,680
	2010	.0	41,673.83	2.4	106,800	14,160	37,680
Intermediate:
	2011	g3.6	43,008.96	3.2	7 106,800	g  14,160	g 37,680
	2012	1.8	44,644.06	3.8	g 110,100	g 14,640	g 38,880
	2013	1.9	46,496.20	4.1	113,700	15,120	40,080
	2014	2.1	48,595.38	4.5	117,900	15,600	41,640
	2015	2.1	50,892.59	4.7	123,000	16,320	43,440
	2016	2.2	53,317.30	4.8	128,400	17,040	45,360
	2017	2.5	55,988.97	5.0	134,400	17,880	47,520
	2018	2.6	58,698.31	4.8	141,000	18,720	49,800
	2019	2.8	61,178.72	4.2	147,900	19,680	52,200
	2020	2.8	63,675.71	4.1	155,100	20,520	54,720
	2021	2.8	66,160.67	3.9	161,700	21,480	57,120
Low-cost:
	2011	g3.6	$43,024.67	3.2	g $106,800	g $14,160	g $37,680
	2012	1.6	44,975.10	4.5	g 110,100	g 14,640	g 38,880
	2013	1.2	47,148.54	4.8	113,700	15,120	40,200
	2014	1.3	49,327.53	4.6	118,800	15,720	42,000
	2015	1.4	51,541.31	4.5	124,500	16,560	44,040
	2016	1.5	53,798.61	4.4	130,200	17,280	46,080
	2017	1.6	56,046.67	4.2	136,200	18,120	48,120
	2018	1.7	58,378.15	4.2	142,200	18,840	50,160
	2019	1.8	60,561.85	3.7	148,200	19,680	52,320
	2020	1.8	62,770.53	3.6	154,200	20,520	54,480
	2021	1.8	64,960.49	3.5	159,900	21,240	56,520
High-cost:
	2011	g3.6	43,004.50	3.2	g 106,800	g 14,160	g 37,680
	2012	2.0	44,061.05	2.5	g 110,100	g 14,640	g 38,880
	2013	2.6	45,755.82	3.8	113,700	15,120	40,080
	2014	2.8	47,696.44	4.2	116,400	15,480	41,160
	2015	3.1	50,024.82	4.9	120,900	16,080	42,720
	2016	3.3	52,825.03	5.6	126,000	16,680	44,520
	2017	3.6	55,928.50	5.9	132,300	17,520	46,680
	2018	3.8	59,176.22	5.8	139,500	18,480	49,320
	2019	3.8	62,301.42	5.3	147,900	19,560	52,200
	2020	3.8	65,304.65	4.8	156,300	20,760	55,200
	2021	3.8	68,163.48	4.4	164,700	21,840	58,080

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a

Effective with benefits payable for June in each year 1975-82, and for December in each year after 1982.

b

See table VI.F6 for projected dollar amounts of the AWI beyond 2021.

c

Public Law 95-216 specified amounts for 1979-81. Public Law 101-239 changed the indexing procedure and caused slightly higher bases after 1989.

d

Normal retirement age. See table V.C3 for specific values.

e

In 1955-82, the retirement earnings test did not apply at ages 72 and over. In 1983-99, the test did not apply at ages 70 and over. Beginning in 2000, the test does not apply beginning with the month of normal retirement age attainment. In the year of normal retirement age attainment, the higher exempt amount applies to earnings prior to the month of normal retirement age attainment. Public Law 95-216 specified amounts for 1978-82. Public Law 104‑121 specified amounts for 1996-2002.

f

Originally determined as 2.4 percent. Pursuant to Public Law 106-554, effectively 2.5 percent.

g

Actual amount, as determined under automatic-adjustment provisions.

Table V.C2 shows values for other wage-indexed parameters. The table provides historical values from 1978, when indexing of the amount of earnings required for a quarter of coverage first began, through 2011, and also shows projected values through 2021. These other wage-indexed program parameters are:

•

The bend points in the formula for computing the primary insurance amount (PIA) for workers who reach age 62, become disabled, or die in a given year. As figure V.C1 illustrates, these two bend points define three ranges in a worker’s average indexed monthly earnings (AIME). The formula for the worker’s PIA multiplies a 90, 32, or 15 percent factor by the portion of the worker’s AIME that falls within the three respective ranges, and then adds the resulting products together.

 

Figure V.C1.—Primary-Insurance-Amount Formula for Those Newly Eligible in 2012

[D]

•

The bend points in the formula for computing the maximum total amount of monthly benefits payable based on the earnings record of a retired or deceased worker. As figure V.C2 illustrates, these three bend points define four ranges in a worker’s PIA. The formula for the maximum family benefit multiplies a 150, 272, 134, or 175 percent factor by the portion of the worker’s PIA that falls within the four respective ranges, and then adds the resulting products together.

 

Figure V.C2.—Maximum-Family-Benefit Formula for Those Newly Eligible in 2012

[D]

•	The amount of earnings required in a year to earn a quarter of coverage (QC). The number and timing of QCs earned determines an individual’s insured status — the basic requirement for benefit eligibility under OASDI.

•

The old-law contribution and benefit base—the contribution and benefit base that would have been in effect under the law prior to enactment of the 1977 amendments. This old-law base is used in determining special-minimum benefits for certain workers who have many years of low earnings in covered employment. Since 1986, the calculation of OASDI benefits for certain workers who are eligible to receive pensions based on noncovered employment uses the old-law base. In addition, the Railroad Retirement program and the Employee Retirement Income Security Act of 1974 use the old-law base for certain purposes.

 

Table V.C2.—Values for Selected Wage-Indexed Program Parameters,
Calendar Years 1978-2021 

Calendar year		AIME bend points in PIA formula a			PIA bend points in maximum- family-benefit formula b			Earnings required for a quarter of coverage	Old-law contribution and benefit base c
		First	Second		First	Second	Third
Historical data:
	1978	d	d		d	d	d	e $250	e $17,700
	1979	e $180	e $1,085		e $230	e $332	e $433	260	18,900
	1980	194	1,171		248	358	467	290	20,400
	1981	211	1,274		270	390	508	310	22,200
	1982	230	1,388		294	425	554	340	24,300
	1983	254	1,528		324	468	610	370	26,700
	1984	267	1,612		342	493	643	390	28,200
	1985	280	1,691		358	517	675	410	29,700
	1986	297	1,790		379	548	714	440	31,500
	1987	310	1,866		396	571	745	460	32,700
	1988	319	1,922		407	588	767	470	33,600
	1989	339	2,044		433	626	816	500	35,700
	1990	356	2,145		455	656	856	520	38,100
	1991	370	2,230		473	682	890	540	39,600
	1992	387	2,333		495	714	931	570	41,400
	1993	401	2,420		513	740	966	590	42,900
	1994	422	2,545		539	779	1,016	620	45,000
	1995	426	2,567		544	785	1,024	630	45,300
	1996	437	2,635		559	806	1,052	640	46,500
	1997	455	2,741		581	839	1,094	670	48,600
	1998	477	2,875		609	880	1,147	700	50,700
	1999	505	3,043		645	931	1,214	740	53,700
	2000	531	3,202		679	980	1,278	780	56,700
	2001	561	3,381		717	1,034	1,349	830	59,700
	2002	592	3,567		756	1,092	1,424	870	63,000
	2003	606	3,653		774	1,118	1,458	890	64,500
	2004	612	3,689		782	1,129	1,472	900	65,100
	2005	627	3,779		801	1,156	1,508	920	66,900
	2006	656	3,955		838	1,210	1,578	970	69,900
	2007	680	4,100		869	1,255	1,636	1,000	72,600
	2008	711	4,288		909	1,312	1,711	1,050	75,900
	2009	744	4,483		950	1,372	1,789	1,090	79,200
	2010	761	4,586		972	1,403	1,830	1,120	79,200
	2011	749	4,517		957	1,382	1,803	1,120	79,200
	2012	767	4,624		980	1,415	1,845	1,130	81,900
Intermediate:
	2013	792	4,772		1,012	1,460	1,904	1,170	84,300
	2014	822	4,953		1,050	1,516	1,977	1,210	87,600
	2015	856	5,159		1,094	1,578	2,059	1,260	91,200
	2016	894	5,392		1,143	1,650	2,152	1,320	95,400
	2017	937	5,646		1,197	1,728	2,253	1,380	99,900
	2018	981	5,915		1,254	1,810	2,361	1,440	104,700
	2019	1,031	6,212		1,317	1,901	2,479	1,520	109,800
	2020	1,080	6,512		1,381	1,993	2,599	1,590	115,200
	2021	1,126	6,788		1,439	2,077	2,709	1,660	120,000
Low-cost:
	2013	$792	$4,773		$1,012	$1,461	$1,905	$1,170	$84,300
	2014	828	4,990		1,058	1,527	1,991	1,220	88,200
	2015	868	5,231		1,109	1,601	2,088	1,280	92,400
	2016	908	5,473		1,160	1,675	2,184	1,340	96,900
	2017	949	5,718		1,212	1,750	2,282	1,400	101,100
	2018	990	5,969		1,265	1,826	2,382	1,460	105,600
	2019	1,032	6,218		1,318	1,903	2,482	1,520	110,100
	2020	1,075	6,477		1,373	1,982	2,585	1,580	114,600
	2021	1,115	6,719		1,424	2,056	2,681	1,640	118,800
High-cost:
	2013	792	4,771		1,011	1,460	1,904	1,170	84,300
	2014	811	4,888		1,036	1,496	1,951	1,190	86,400
	2015	842	5,076		1,076	1,553	2,026	1,240	89,700
	2016	878	5,292		1,122	1,619	2,112	1,290	93,600
	2017	921	5,550		1,177	1,698	2,215	1,360	98,100
	2018	972	5,861		1,242	1,793	2,339	1,430	103,500
	2019	1,029	6,205		1,315	1,899	2,476	1,520	109,800
	2020	1,089	6,565		1,392	2,009	2,620	1,600	116,100
	2021	1,147	6,912		1,465	2,115	2,758	1,690	122,100

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a

The formula to compute a PIA is: (1) 90% of AIME below the first bend point; plus (2) 32% of AIME in excess of the first bend point but not in excess of the second; plus (3) 15% of AIME in excess of the second bend point. The bend points are determined based on the first year a beneficiary becomes eligible for benefits.

b

The formula to compute a family maximum is: (1) 150% of PIA below the first bend point; plus (2) 272% of PIA in excess of the first bend point but not in excess of the second; plus (3) 134% of PIA in excess of the second bend point but not in excess of the third; plus (4) 175% of PIA in excess of the third bend point.

3c

Contribution and benefit base that would have been in effect under the law prior to enactment of the Social Security Amendments of 1977. Public Law 101-239 changed the indexing procedure and caused slightly higher bases after 1989.

d

No provision in law for this amount in this year.

e

Amount specified by Social Security Amendments of 1977.

In addition to the economic factors that affect the determination of OASDI benefits, there are certain legislated changes that affect current and future benefit amounts. Two such changes are the scheduled increases in the normal retirement age and in the delayed retirement credits. Table V.C3 shows the scheduled changes in these parameters and the resulting effects on benefit levels expressed as a percentage of PIA.

 

Table V.C3.—Legislated Changes in Normal Retirement Age and Delayed Retirement
Credits for Persons Reaching Age 62 in Each Year 1986 and Later

Year of birth	Year of attainment of age 62	Normal retirement age (NRA)	Credit for each year of delayed retirement after NRA (percent)	Benefit, as a percentage of PIA, beginning at age —
				62	65	66	67	70
1924	1986	65	3	80	100	103	106	115
1925	1987	65	3 1/2	80	100	103 1/2	107	117 1/2
1926	1988	65	3 1/2	80	100	103 1/2	107	117 1/2
1927	1989	65	4	80	100	104	108	120
1928	1990	65	4	80	100	104	108	120
1929	1991	65	4 1/2	80	100	104 1/2	109	122 1/2
1930	1992	65	4 1/2	80	100	104 1/2	109	122 1/2
1931	1993	65	5	80	100	105	110	125
1932	1994	65	5	80	100	105	110	125
1933	1995	65	5 1/2	80	100	105 1/2	111	127 1/2
1934	1996	65	5 1/2	80	100	105 1/2	111	127 1/2
1935	1997	65	6	80	100	106	112	130
1936	1998	65	6	80	100	106	112	130
1937	1999	65	6 1/2	80	100	106 1/2	113	132 1/2
1938	2000	65, 2 mo	6 1/2	79 1/6	98 8/9	105 5/12	111 11/12	131 5/12
1939	2001	65, 4 mo	7	78 1/3	97 7/9	104 2/3	111 2/3	132 2/3
1940	2002	65, 6 mo	7	77 1/2	96 2/3	103 1/2	110 1/2	131 1/2
1941	2003	65, 8 mo	7 1/2	76 2/3	95 5/9	102 1/2	110	132 1/2
1942	2004	65, 10 mo	7 1/2	75 5/6	94 4/9	101 1/4	108 3/4	131 1/4
1943-54	2005-16	66	8	75	93 1/3	100	108	132
1955	2017	66, 2 mo	8	74 1/6	92 2/9	98 8/9	106 2/3	130 2/3
1956	2018	66, 4 mo	8	73 1/3	91 1/9	97 7/9	105 1/3	129 1/3
1957	2019	66, 6 mo	8	72 1/2	90	96 2/3	104	128
1958	2020	66, 8 mo	8	71 2/3	88 8/9	95 5/9	102 2/3	126 2/3
1959	2021	66, 10 mo	8	70 5/6	87 7/9	94 4/9	101 1/3	125 1/3
1960 & later	2022 & later	67	8	70	86 2/3	93 1/3	100	124

2. Covered Employment

Projections of the total labor force and unemployment rate (see table V.B2) use Bureau of Labor Statistics definitions from the Current Population Survey (CPS). These projections represent the average weekly number of employed and unemployed persons, aged 16 and over, in the U.S. in a calendar year. The Office of the Chief Actuary defines the total covered workers in a year as the persons who have any OASDI covered earnings (that is, earnings subject to the OASDI payroll tax) at any time during the year. Projected covered employment is the sum of age-sex components, each of which the office projects as a ratio to the CPS definition of employment.^b The projection methodology accounts for changes in the economic cycle, changes in non-OASDI covered employment, the increase in coverage of Federal civilian employment as a result of the 1983 Social Security Amendments, and changes in the number and employment status of other immigrants estimated to be residing within the Social Security coverage area.

The covered-worker rate is the ratio of OASDI covered workers to the Social Security area population. The projected age-adjusted coverage rate³ for males age 16 and over is 70.8, 69.8, and 68.8 percent for 2086 for the low-cost, intermediate, and high-cost assumptions, respectively. These rates are higher than the 2010 level of about 66.4 percent. For females, the projected age-adjusted coverage rate increases from 59.9 percent for 2010 to 63.6, 62.6, and 61.6 percent for 2086 for the low-cost, intermediate, and high-cost assumptions, respectively.

3. Insured Population

Eligibility for worker benefits under the OASDI program requires some minimal level of work in covered employment. A worker satisfies this requirement by his or her accumulation of quarters of coverage (QCs). Prior to 1978, a worker earned one QC for each calendar quarter in which he or she earned at least $50. In 1978, when annual earnings reporting replaced quarterly reporting, the amount required to earn a QC (up to a maximum of four per year) was set at $250. As specified in the law, the Social Security Administration has adjusted this amount each year since then according to changes in the AWI. Its value in 2012 is $1,130.

There are three types of insured status that a worker can acquire under the OASDI program. The number and recency of QCs earned determine each status. A worker acquires fully insured status when his or her total number of QCs is greater than or equal to the number of years elapsed after the year of attainment of age 21 (but not less than six). Once a worker has accumulated 40 QCs, he or she remains permanently fully insured. A worker acquires disability insured status if he or she is: (1) a fully insured worker who has accumulated 20 QCs during the 40-quarter period ending with the current quarter; (2) a fully insured worker aged 24-30 who has accumulated QCs during one-half of the quarters elapsed after the quarter of attainment of age 21 and up to and including the current quarter; or (3) a fully insured worker under age 24 who has accumulated six QCs during the 12-quarter period ending with the current quarter. A worker acquires currently insured status when he or she has accumulated six QCs during the 13-quarter period ending with the current quarter. Periods of disability reduce the number of quarters required for insured status, but not below the minimum of six QCs.

There are many types of benefits payable to workers and their family members under the OASDI program. A worker must be fully insured to be eligible for a primary retirement benefit and for his or her spouse or children to be eligible for auxiliary benefits. A deceased worker must have been either currently insured or fully insured at the time of death for his or her children (and their mother or father) to be eligible for benefits. If there are no eligible surviving children, the deceased worker must have been fully insured at the time of death for his or her surviving spouse to be eligible. A worker must be disability insured to be eligible for a primary disability benefit and for his or her spouse or children to be eligible for auxiliary benefits.

The Office of the Chief Actuary estimates the fully insured population, as a percentage of the Social Security area population, by single year of age and sex starting in 1969. The short-range model extrapolates the historical trend in these rates from data in the Continuous Work History Sample. The model uses information on quarters of coverage earned due to employment covered by Social Security derived from tabulations of the Continuous Work History Sample. The model also uses historical administrative data on beneficiaries in force and estimated historical mortality rates. The model combines this information to estimate the proportion of individuals who were alive and fully insured as of the end of each historical year. Using projected mortality rates and covered workers, the model extrapolates these rates into the future and applies them to the historical and projected population to arrive at the fully insured population by age and sex through the end of the short-range period.

The long-range model uses 30,000 simulated work histories for each sex and birth cohort. The model constructs simulated work histories from past coverage rates, median earnings, and amounts required for crediting QCs, and develops them in a manner that replicates historical individual variations in tendency to work. Specifically, persons who have recently been out of covered employment are less likely to be in covered employment. This model produces simulated fully insured percentages close to the fully insured percentages estimated by the short-range model from 1970 to the end of the short-range period.

The Office of the Chief Actuary estimates the disability insured population, as a percentage of the fully insured population, by age and sex starting in 1970. The office bases historical values on a tabulation of the disability insured population from the Continuous Work History Sample and estimates of the fully insured population. The short-range model projects these percentages by using the relationship between the historical percentages and labor force participation rates. The long-range model projects these percentages by using the same simulated work histories used to project the fully insured percentages. The long-range model makes additional adjustments to the model simulations in order to bring the disability insured percentages in the historical and short-range periods into close agreement with those estimated from the Continuous Work History Sample and the short-range model.

The office does not project the currently insured population because the number of beneficiaries who are entitled to benefits based solely on currently insured status has been very small and is likely to remain small in the future.

Using these insured models, the percentage of the Social Security area population aged 62 and over that is fully insured will increase from its estimated level of 82.5 for December 31, 2009, to 89.7, 89.7, and 89.6 for December 31, 2090, under the low-cost, intermediate, and high-cost alternatives, respectively. Over the projection period, the percentage for females increases significantly, while the percentage for males declines somewhat. Under the intermediate assumptions, for example, the percentage for males decreases slightly from 92.4 to 90.7, and the percentage for females increases from 74.7 to 88.8.

4. Old-Age and Survivors Insurance Beneficiaries

The Office of the Chief Actuary projects the number of OASI beneficiaries for each type of benefit separately by the sex of the worker on whose earnings the benefits are based and by the age of the beneficiary. For the long-range period, the office also projects the number of beneficiaries by marital status for selected types of benefits. The office uses two separate models in making these projections. The short-range model makes projections during the first 10 years of the projection period and the long-range model makes projections thereafter.

The short-range model develops the number of retired-worker beneficiaries by applying award rates to the aged fully insured population, excluding those already receiving retired-worker, disabled-worker, aged-widow(er)’s, or aged-spouse’s benefits, and by applying termination rates to the number of retired-worker beneficiaries.

The long-range model projects the number of retired-worker beneficiaries who were not previously converted from disabled-worker beneficiary status as a percentage of the exposed population.⁴ For age 62, the model projects this percentage by using a linear regression based on the historical relationship between this percentage and the labor force participation rate at age 62. The percentage for ages 70 and over is nearly 100 because delayed retirement credits cannot be earned after age 70. The long-range model projects the percentage for each age 63 through 69 based on historical experience with an adjustment for changes in the portion of the primary insurance amount that is payable at each age of entitlement. The model adjusts these percentages for ages 62 through 69 to reflect changes in the normal retirement age.

The long-range model calculates the number of retired-worker beneficiaries previously converted from disabled-worker beneficiary status using an extension of disabled-worker death rates by age, sex, and duration.

The Office of the Chief Actuary estimates the number of aged-spouse beneficiaries, excluding those who are also receiving a retired-worker benefit, from the population projected by age and sex. Benefits of aged-spouse beneficiaries depend on the earnings records of their husbands or wives, who are referred to as “earners.” The short-range model projects insured aged-spouse beneficiaries in conjunction with the retired-worker beneficiaries. This model projects uninsured aged-spouse beneficiaries by applying award rates to the aged uninsured male or female population and by applying termination rates to the population already receiving such benefits.

The long-range model estimates aged-spouse beneficiaries separately for those married and divorced. The model projects the number of married aged-spouse beneficiaries, by age and sex, by applying a series of factors to the number of spouses, aged 62 and over, in the population. These factors are the probabilities that the spouse and the earner meet all of the conditions of eligibility — that is, the probabilities that: (1) the earner is 62 or over; (2) the earner is insured; (3) the earner is receiving benefits; (4) the spouse is not receiving a benefit for the care of an entitled child; (5) the spouse is not insured; and (6) the spouse is not eligible to receive a significant government pension based on earnings in noncovered employment. To calculate the estimated number of aged-spouse beneficiaries, the model applies a projected prevalence rate to the resulting number of spouses.

The long-range model estimates the number of divorced aged-spouse beneficiaries, by age and sex, by applying the same factors to the number of divorced persons aged 62 and over in the population, with three differences. First, the model applies a factor to reflect the probability that the earner (former spouse) is still alive. If the former spouse is not alive, the person may be entitled to a divorced widow(er)’s benefit. Second, the model applies a factor to reflect the probability that the marriage to the former spouse lasted at least 10 years. Third, the model does not apply factor (3) in the previous paragraph because, effective January 1985, a divorced person is generally no longer required to wait for the former spouse to receive benefits.

The Office of the Chief Actuary bases the projected numbers of children under age 18, and students aged 18 and 19, who are eligible for benefits as children of retired-worker beneficiaries, on the projected number of children in the population. The short-range model develops the number of entitled children by applying award rates to the number of children in the population who have two living parents and by applying termination rates to the number of children already receiving benefits.

The long-range model projects separately the number of entitled children by sex of the earner parent. For each age under 18, the model projects the number of entitled children from the latest data by incorporating changes in the number of children in the population and the ratio of retired workers aged 62 through 71 to the population aged 20 through 71. For student beneficiaries, the model multiplies the number of children aged 18 and 19 in the population by the probabilities that: (1) the parent is alive, aged 62 or over, insured, and receiving a retired-worker benefit; and (2) the child is attending high school.

The Office of the Chief Actuary projects the number of disabled children, aged 18 and over, of retired-worker beneficiaries from the adult population. The short-range model applies award rates to the population and applies termination rates to the number of disabled children already receiving benefits. The long-range model projects the number of disabled children in a manner similar to that used for student children except for a factor that reflects the probability of being disabled before age 22.

The short-range model develops the number of spouses of retired workers, who are entitled to spouse benefits because they are caring for a child who is under age 16 or disabled, by applying award rates to the number of awards to children of retired workers and by applying termination rates to the number of young spouses with a child in their care who are already receiving benefits. The long-range model projects the number of young-spouse beneficiaries with a child in their care as a proportion of the number of child beneficiaries of retired workers, including projected changes in average family size.

The Office of the Chief Actuary projects the number of aged-widow(er) beneficiaries, excluding those who are also receiving a retired-worker benefit, from the population by age and sex. The short-range model projects fully insured aged-widow(er) beneficiaries in conjunction with the retired-worker beneficiaries. The model projects the number of uninsured aged-widow(er) beneficiaries by applying award rates to the aged uninsured male or female population and by applying termination rates to the population already receiving such benefits. The long-range model projects uninsured aged-widow(er) beneficiaries by marital status. The model multiplies the number of widow(er)s in the population aged 60 and over by the probabilities that: (1) the deceased earner is fully insured at death; (2) the widow(er) is not receiving a benefit for the care of an entitled child; (3) the widow(er) is not fully insured; and (4) the widow(er)’s benefits are not withheld because of receipt of a significant government pension based on earnings in noncovered employment. In addition, the model applies the same factors to the number of divorced persons aged 60 and over in the population and includes additional factors representing the probability that the person’s former earner spouse has died and that the marriage lasted at least 10 years. The model projects the number of insured aged-widow(er) beneficiaries who are ages 60 through 70 in a manner similar to that for uninsured aged-widow(er) beneficiaries. In addition, the model assumes that some insured widow(er)s who had not applied for their retired-worker benefits will receive widow(er)’s benefits. The model projects insured aged-widow(er) beneficiaries over age 70 by applying termination rates to the population that started receiving such benefits prior to age 70.

The short-range model develops the number of disabled-widow(er) beneficiaries by applying award rates to the uninsured male or female population and by applying termination rates to the population already receiving a disabled-widow(er) benefit. The long-range model projects the number for each cohort by age from 50 to normal retirement age as percentages of the widowed and divorced populations, adjusted for the insured status of the deceased spouse, the prevalence of disability, and the probability that the disabled spouse is not receiving another type of benefit.

The Office of the Chief Actuary bases the projected number of children under age 18, and students aged 18 and 19, who are entitled to benefits as survivors of deceased workers, on the number of children in the population whose mothers or fathers are deceased. The short-range model develops the number of entitled children by applying award rates to the number of orphaned children and by applying termination rates to the number of children already receiving benefits.

The long-range model projects the number of child-survivor beneficiaries in a manner similar to that for student beneficiaries of retired workers, except that the model replaces the probability that the parent is aged 62 or over with the probability that the parent is deceased.

The Office of the Chief Actuary projects the number of disabled-child-survivor beneficiaries, aged 18 and over, from the adult population. The short-range model applies award rates to the population and applies termination rates to the number of disabled-child-survivor beneficiaries already receiving benefits. The long-range model projects the number of disabled-child-survivor beneficiaries in a manner similar to that for student-child-survivor beneficiaries, except for including an additional factor to reflect the probability of being disabled before age 22.

The short-range model develops the numbers of entitled mother-survivor and father-survivor beneficiaries by applying award rates to the number of awards to child-survivor beneficiaries, in cases where the children are either under age 16 or disabled, and by applying termination rates to the number of mother-survivors and father-survivors already receiving benefits. The long-range model estimates the numbers of mother-survivor and father-survivor beneficiaries, assuming they are not remarried, from the number of child-survivor beneficiaries.

The Office of the Chief Actuary projects the number of parent-survivor beneficiaries based on the historical pattern of the number of such beneficiaries.

Table shows the projected number of beneficiaries under the OASI program by type of benefit. The retired worker beneficiary counts include those persons who receive a residual auxiliary benefit in addition to their retired-worker benefit. The office makes estimates of the number and amount of residual payments separately for spouses and widow(er)s.

 

Table V.C4.—OASI Beneficiaries With Benefits in Current-Payment Status
at the End of Calendar Years 1945-2090 

[In thousands]

Calendar year		Retired workers and auxiliaries				Survivors				Total
		Workera	Spouse	Child		Widow- widower	Mother- father	Child	Parent
Historical data:
	1945	518	159	13		94	121	377	6	1,288
	1950	1,771	508	46		314	169	653	15	3,477
	1955	4,474	1,192	122		701	292	1,154	25	7,961
	1960	8,061	2,269	268		1,544	401	1,577	36	14,157
	1965	11,101	2,614	461		2,371	472	2,074	35	19,128
	1970	13,349	2,668	546		3,227	523	2,688	29	23,030
	1975	16,589	2,867	643		3,888	582	2,919	21	27,509
	1980	19,564	3,018	639		4,415	563	2,610	15	30,823
	1985	22,435	3,069	456		4,862	372	1,918	10	33,122
	1990	24,841	3,104	421		5,098	304	1,777	6	35,551
	1995	26,679	3,027	441		5,213	275	1,884	4	37,522
	1996	26,905	2,971	442		5,199	242	1,898	4	37,661
	1997	27,282	2,926	441		5,043	230	1,893	3	37,817
	1998	27,518	2,866	439		4,981	221	1,884	3	37,911
	1999	27,784	2,811	442		4,936	212	1,885	3	38,073
	2000	28,505	2,798	459		4,901	203	1,878	3	38,747
	2001	28,843	2,742	467		4,828	197	1,890	3	38,969
	2002	29,195	2,681	477		4,771	194	1,908	2	39,227
	2003	29,537	2,622	480		4,707	190	1,910	2	39,448
	2004	29,952	2,569	482		4,643	184	1,901	2	39,733
	2005	30,461	2,524	488		4,569	178	1,903	2	40,126
	2006	30,976	2,476	490		4,494	171	1,899	2	40,508
	2007	31,528	2,431	494		4,436	165	1,892	2	40,947
	2008	32,274	2,370	525		4,380	160	1,915	2	41,625
	2009	33,514	2,343	561		4,327	160	1,921	2	42,828
	2010	34,593	2,316	580		4,285	159	1,913	2	43,847
	2011	35,600	2,291	594		4,239	158	1,907	2	44,791
Intermediate:
	2012	36,841	2,264	610		4,215	155	1,911	1	45,998
	2015	41,252	2,232	661		4,171	152	1,946	1	50,415
	2020	49,612	2,185	733		4,092	151	2,021	1	58,795
	2025	57,646	2,256	798		3,920	141	2,046	2	66,809
	2030	64,779	2,413	842		3,707	132	2,062	2	73,936
	2035	69,465	2,358	862		3,541	129	2,056	2	78,412
	2040	72,139	2,213	876		3,361	125	2,033	2	80,750
	2045	73,935	2,113	889		3,191	122	2,002	2	82,253
	2050	76,012	2,103	921		3,024	119	1,976	2	84,156
	2055	78,523	2,198	945		2,889	117	1,955	2	86,629
	2060	81,114	2,389	964		2,790	114	1,936	2	89,309
	2065	83,509	2,587	971		2,758	112	1,913	2	91,851
	2070	86,298	2,745	993		2,783	109	1,889	2	94,818
	2075	89,174	2,846	1,012		2,840	107	1,862	2	97,842
	2080	92,125	2,918	1,030		2,906	104	1,836	2	100,919
	2085	95,534	2,974	1,060		2,949	102	1,814	2	104,434
	2090	99,103	3,033	1,086		2,969	99	1,798	2	108,090
Low-cost:
	2012	36,837	2,264	610		4,214	155	1,911	1	45,994
	2015	41,176	2,233	661		4,165	152	1,950	1	50,339
	2020	49,273	2,187	736		4,069	154	2,051	1	58,471
	2025	56,879	2,213	807		3,923	138	2,163	2	66,124
	2030	63,382	2,349	862		3,736	127	2,260	2	72,718
	2035	67,370	2,264	895		3,598	121	2,346	2	76,596
	2040	69,357	2,095	923		3,444	117	2,412	2	78,349
	2045	70,620	1,970	951		3,288	114	2,465	2	79,410
	2050	72,340	1,935	1,003		3,132	114	2,519	2	81,045
	2055	74,636	2,011	1,044		3,003	115	2,569	2	83,381
	2060	77,036	2,164	1,079		2,905	117	2,623	2	85,926
	2065	79,180	2,325	1,100		2,867	120	2,681	2	88,275
	2070	81,611	2,443	1,142		2,883	122	2,742	2	90,945
	2075	84,122	2,490	1,182		2,921	125	2,799	2	93,641
	2080	86,983	2,511	1,223		2,972	127	2,854	2	96,672
	2085	90,818	2,543	1,288		3,015	130	2,914	2	100,708
	2090	95,429	2,589	1,352		3,052	132	2,981	2	105,537
High-cost:
	2012	36,850	2,264	610		4,216	155	1,910	1	46,008
	2015	41,306	2,231	659		4,175	151	1,938	1	50,462
	2020	49,943	2,179	725		4,112	147	1,981	1	59,088
	2025	58,443	2,293	786		3,908	143	1,926	2	67,501
	2030	66,288	2,469	818		3,663	133	1,863	2	75,236
	2035	71,779	2,441	825		3,462	127	1,775	2	80,411
	2040	75,245	2,316	829		3,255	120	1,681	2	83,448
	2045	77,660	2,236	827		3,069	112	1,590	2	85,496
	2050	80,151	2,248	840		2,897	105	1,515	2	87,756
	2055	82,934	2,359	848		2,760	98	1,458	2	90,459
	2060	85,737	2,576	852		2,662	92	1,405	2	93,325
	2065	88,306	2,831	841		2,635	85	1,347	2	96,046
	2070	91,265	3,085	842		2,663	78	1,290	2	99,225
	2075	94,322	3,289	840		2,735	72	1,235	2	102,495
	2080	97,166	3,439	835		2,821	67	1,183	2	105,513
	2085	99,838	3,522	834		2,875	62	1,135	2	108,268
	2090	102,050	3,563	832		2,901	58	1,093	2	110,499

---

a

Retired-worker beneficiaries include persons who also receive a residual benefit consisting of the excess of an auxiliary benefit over their retired-worker benefit.

Notes:
1. The number of beneficiaries does not include uninsured individuals who receive benefits under Section 228 of the Social Security Act. Transfers from the General Fund of the Treasury reimburse the OASI Trust Fund for the cost of most of these individuals.
2. Totals do not necessarily equal the sums of rounded components.

5. Disability Insurance Beneficiaries

The DI Trust Fund pays benefits to disabled workers who: (1) satisfy the disability insured requirements; (2) are unable to engage in substantial gainful activity due to a medically determinable physical or mental impairment severe enough to satisfy the requirements of the program; and (3) have not yet attained normal retirement age. Spouses and children of such disabled workers may also receive DI benefits provided they satisfy certain criteria, primarily age and earnings requirements.

The Office of the Chief Actuary projects the number of disabled-worker beneficiaries in current-payment status (disability prevalence) for each future year. The projections start with the number in current-payment status as of December 2011. Projections of the number of new beneficiaries awarded benefits each year (disability incidence) and the number of beneficiaries leaving the disability rolls each year then determine the number in current-payment status in later years. Beneficiaries leave the rolls due to death and recovery (disability terminations) and due to conversions from disabled-worker to retired-worker beneficiary status, after which the OASI Trust Fund pays benefits. The remainder of this section describes the concepts of disability incidence, termination, and prevalence.

a. Disability Incidence

The disability incidence rate is the ratio of the number of new beneficiaries awarded benefits each year to the number of individuals who meet insured requirements but are not yet receiving benefits (the disability-exposed population⁵). The Office of the Chief Actuary projects the number of newly awarded beneficiaries for each future year by multiplying assumed age-sex-specific disability incidence rates and the projected disability-exposed population by age and sex.

Figure V.C3 illustrates the historical and estimated incidence rates under the three alternatives. Incidence rates have varied substantially during the historical period since 1970 due to a variety of demographic and economic factors, along with changes in legislation and program administration. The solid lines in figure V.C3 show the incidence rate adjusted to the age-sex distribution of the disability-exposed population for 2000. This adjustment allows a comparison of incidence rates over time by focusing on the likelihood of becoming disabled, and by excluding the effects of a changing distribution of the population toward ages where disability is more or less likely.

The dashed lines in figure V.C3 represent the gross (unadjusted) incidence rates. The changing age‑sex distribution of the exposed population over time influences these unadjusted rates. The gross incidence rate fell substantially below the age‑sex-adjusted rate between 1975 and 1995 as the baby-boom generation swelled the size of the younger working-age population, where disability incidence is lower than in older populations. After 1995, the gross rate rose faster than the age‑sex-adjusted rate as the baby-boom generation moved into an age range where disability incidence peaks. After 2023, the projected gross incidence rate declines relative to the age-sex-adjusted rate as the baby-boom generation moves above the normal retirement age and the lower-birth-rate cohorts of the 1970s enter prime disability ages (50 to normal retirement age). As these smaller cohorts age beyond normal retirement age, by about 2050, the gross incidence rate returns to a higher relative level under the intermediate assumptions. Thereafter, the gross rate remains higher and reflects the persistently higher average age of the working-age population, which is largely due to lower birth rates since 1965.

For the first 10 years of the projection period (through 2021), incidence rates reflect several factors including: (1) aspects of program administration, such as efforts to reduce the disability backlog and recent changes to how claims are adjudicated; (2) assumed future unemployment rates; and (3) underlying trends in incidence. For this year’s report, all three sets of underlying economic assumptions include a gradual economic recovery with unemployment rates gradually declining to their ultimate sustainable levels. During the period of high unemployment, the projected disability incidence rates are above the general trend level. The elevated incidence rates subside as the economy recovers, and then briefly drop below the general trend level since some of the earlier additional awards would have occurred in a later year. After 2021, age-sex-specific incidence rates trend toward the ultimate rates assumed for the long-range projections and reach these ultimate rates in 2031. These ultimate age-sex-specific disability incidence rates were selected based on careful analysis of historical levels and patterns and expected future conditions, including the impact of scheduled increases in the normal retirement age.⁶ The ultimate incidence rates represent the likely average rates of incidence for the future.

For the intermediate alternative, the Trustees assume that the ultimate age-sex-adjusted incidence rate (adjusted to the disability-exposed population for the year 2000) will be 5.4 awards per thousand exposed, which is higher than in last year’s report by 0.2 awards per thousand exposed. Figure V.C3 illustrates that the estimated ultimate age-sex-adjusted incidence level of 5.4 is only slightly higher than the average rate for the historical period 1970 through 2011. However, a similar comparison using gross incidence rates gives a different result. The estimated ultimate gross incidence rate is significantly greater than the average gross rate over the historical period due to the changing age-sex distribution of the disability-exposed population.

The Trustees assume that the ultimate age-sex-adjusted incidence rates for the low-cost and high-cost alternatives will be 4.4 and 6.5 awards per thousand exposed, or about 15 percent lower and 25 percent higher than the average for the historical period, respectively. Each of these ultimate age-sex-adjusted incidence rates is higher than those in last year’s report by 0.2 awards per thousand exposed.

 

Figure V.C3.—DI Disability Incidence Rates, 1970-2090

[Awards per thousand disability-exposed]

[D]

b. Disability Termination

Beneficiaries stop receiving disability benefits when they die or recover from their disabling condition. The basis for determining recovery can be either medical or vocational. The termination rate is the ratio of the number of terminations to the average number of disabled-worker beneficiaries during the year.

The Office of the Chief Actuary projects termination rates by age, sex, and reason for termination. In addition, the office assumes that termination rates in the long-range period (post-2021) vary by duration of entitlement to disabled-worker benefits.

In the short-range period (through 2021), the projected age-sex-adjusted death rate (adjusted to the 2000 disabled-worker population) under the intermediate assumptions gradually declines from 26.0 deaths per thousand beneficiaries in 2011 to about 21.9 per thousand by 2021. The projected age-sex-adjusted recovery rate under the intermediate assumptions rises from a relatively low level of 9.9 per thousand beneficiaries in 2011 (reflecting temporarily lower levels of continuing disability reviews) to 11.2 per thousand beneficiaries by 2021. Under the low-cost and high-cost assumptions, total age-sex-adjusted termination rates due to death and recovery are roughly 10-15 percent higher or lower, respectively, than under the intermediate assumptions.

For the long-range period (post-2021), the Office of the Chief Actuary projects death and recovery rates by age, sex, and duration of entitlement relative to the average level of rates experienced over the base period 2001-2005. The assumed ultimate age-sex-adjusted recovery rate for disabled workers is about 10.4 per thousand beneficiaries. The assumed ultimate age-sex-adjusted recovery rates for the low-cost and high-cost alternatives are about 12.5 and 8.2 recoveries per thousand beneficiaries, respectively. Recovery rates by age, sex, and duration of entitlement reach ultimate levels in the twentieth year of the projection period (2031) for all three sets of assumptions. In contrast, death rates by age and sex change throughout the long-range period at the same rate as death rates in the general population. From the age-sex-adjusted death rate of 26.0 per thousand beneficiaries in 2011, rates decrease to 17.3, 10.6, and 6.1 per thousand disabled-worker beneficiaries for 2090 under the low-cost, intermediate, and high-cost assumptions, respectively.

Figure V.C4 illustrates gross and age-sex-adjusted total termination rates for disabled-worker beneficiaries for the historical period since 1970, and for the projection period through 2090. In the near term, in 2013 and 2014, projected recovery terminations increase because the Social Security Administration continues to reduce the pending backlog of continuing disability reviews. As with incidence rates, the age-sex-adjusted termination rate illustrates the real change in the tendency to terminate benefits. Changes in the age-sex distribution of the beneficiary population influence the gross rate. A shift in the beneficiary population to older ages, as when the baby-boom generation moves into pre-retirement ages, increases gross death termination rates relative to the age-sex-adjusted rates.

 

Figure V.C4.—DI Disability Termination Rates, 1970-2090

[Terminations per thousand disabled-worker beneficiaries]

[D]

c. Comparison of Incidence, Termination, and Conversion

Incidence and termination rates are the foundation for projecting the number of disabled-worker beneficiaries in current-payment status. At normal retirement age, beneficiaries convert to retired-worker status and leave the DI rolls. Conversions are simply a transfer of beneficiaries at normal retirement age from the DI Trust Fund account to the OASI Trust Fund account. Therefore, the disability “conversion” rate is 100 percent for disabled-worker beneficiaries reaching normal retirement age in a given year and zero at all other ages. After conversion, recovery from the disabling condition is no longer relevant. Conversions represent a form of exit from the DI rolls and therefore the Office of the Chief Actuary excludes them from disabled-worker beneficiary totals.

Figure V.C5 compares the historical and projected (intermediate) levels of incidence, termination, and conversion on both a gross basis and an age-sex-adjusted basis. The conversion ratio is the number of conversions in a given year (that is, beneficiaries who reach normal retirement age) divided by the average number of disabled-worker beneficiaries at all ages in that year. The ratio is constant on an age-sex-adjusted basis, except for the two periods during which normal retirement age increases under current law. On a gross basis, however, the conversion ratio rises and falls with the changing proportion of all disabled-worker beneficiaries who attain normal retirement age in a given year.

Termination rates have declined and the Trustees expect them to continue to decline, largely because of declining death rates. Incidence rates have varied widely, and, on an age-sex-adjusted basis under the intermediate assumptions, the Trustees expect them to remain near the middle of the high and low extremes experienced since 1970. The gross conversion ratio generally increases due to aging of the beneficiary population.

 

Figure V.C5.—Comparison of DI Disability Incidence Rates, Termination Rates and Conversion Ratios Under Intermediate Assumptions, 1970-2090

[Awards per thousand disability-exposed;
terminations and conversions per thousand disabled-worker beneficiaries]

[D]

d. DI Beneficiaries and Disability Prevalence Rates

The Office of the Chief Actuary makes detailed projections of disabled-worker awards, terminations, and conversions and combines these to project the number of disabled workers receiving benefits over the next 75 years. Table V.C5 presents the projected numbers of disabled workers in current-payment status. The number of disabled workers in current-payment status grows from 8.6 million at the end of 2011, to 12.7 million, 14.4 million, and 15.0 million at the end of 2090, under the low-cost, intermediate, and high-cost assumptions, respectively. Of course, much of this growth results from the growth and aging of the population described earlier in this chapter. Table V.C5 also presents projected numbers of auxiliary beneficiaries and disability prevalence rates on both a gross basis and an age-sex-adjusted basis.

 

Table V.C5.—DI Beneficiaries With Benefits in Current-Payment Status
at the End of Calendar Years 1960-2090 

[Beneficiaries in thousands; prevalence rates per thousand persons insured for disability benefits]

Calendar year		Disabled‑ worker beneficiaries	Auxiliary beneficiaries		Total beneficiaries	Disability prevalence rates
			Spouse	Child		Gross	Age-sex- adjusted
Historical data:
	1960	455	77	155	687	—	—
	1965	988	193	558	1,739	—	—
	1970	1,493	283	889	2,665	20	18
	1975	2,488	453	1,411	4,351	29	29
	1980	2,856	462	1,359	4,677	28	31
	1985	2,653	306	945	3,904	24	26
	1990	3,007	266	989	4,261	25	28
	1995	4,179	264	1,409	5,852	33	35
	1996	4,378	224	1,463	6,065	34	36
	1997	4,501	207	1,438	6,146	34	36
	1998	4,691	190	1,446	6,327	35	36
	1999	4,870	176	1,468	6,514	36	36
	2000	5,036	165	1,466	6,667	37	37
	2001	5,268	157	1,482	6,907	38	37
	2002	5,539	152	1,526	7,217	39	38
	2003	5,869	151	1,571	7,590	41	39
	2004	6,198	153	1,599	7,950	43	39
	2005	6,519	157	1,633	8,309	45	40
	2006	6,807	156	1,652	8,615	46	40
	2007	7,099	154	1,665	8,918	48	41
	2008	7,427	155	1,692	9,273	50	41
	2009	7,788	159	1,749	9,695	52	43
	2010	8,204	161	1,820	10,185	55	44
	2011	8,576	164	1,874	10,614	57	45
Intermediate:
	2012	8,864	164	1,933	10,960	58	46
	2015	9,396	163	2,044	11,602	61	47
	2020	9,683	168	2,086	11,937	62	47
	2025	10,280	180	2,175	12,635	64	47
	2030	10,264	180	2,287	12,731	63	48
	2035	10,385	170	2,368	12,922	62	48
	2040	10,623	165	2,436	13,224	62	48
	2045	11,166	178	2,506	13,850	63	49
	2050	11,539	189	2,579	14,307	64	49
	2055	11,874	208	2,664	14,745	65	49
	2060	12,077	220	2,749	15,046	65	50
	2065	12,485	230	2,831	15,547	65	50
	2070	12,923	236	2,904	16,063	66	50
	2075	13,282	237	2,968	16,488	66	51
	2080	13,734	244	3,035	17,013	67	51
	2085	14,068	250	3,104	17,423	68	51
	2090	14,366	255	3,177	17,797	68	51
Low-cost:
	2012	8,770	163	1,900	10,832	58	45
	2015	8,910	159	1,909	10,977	58	45
	2020	8,697	163	1,873	10,732	55	42
	2025	8,850	151	1,907	10,908	54	40
	2030	8,497	142	1,972	10,611	51	39
	2035	8,364	125	2,042	10,530	49	38
	2040	8,425	115	2,127	10,667	48	38
	2045	8,785	120	2,225	11,130	48	38
	2050	9,052	126	2,328	11,506	48	38
	2055	9,322	137	2,441	11,900	47	38
	2060	9,534	144	2,565	12,243	47	38
	2065	9,939	152	2,706	12,797	47	38
	2070	10,422	156	2,850	13,428	47	38
	2075	10,918	156	2,992	14,066	47	39
	2080	11,569	162	3,135	14,867	47	39
	2085	12,169	169	3,280	15,619	48	39
	2090	12,748	175	3,430	16,353	48	39
High-cost:
	2012	8,958	165	1,966	11,089	59	46
	2015	9,943	167	2,198	12,309	65	50
	2020	10,806	174	2,321	13,301	70	53
	2025	11,790	214	2,447	14,450	74	54
	2030	12,073	223	2,566	14,862	75	57
	2035	12,450	221	2,618	15,289	76	59
	2040	12,876	221	2,635	15,732	78	60
	2045	13,602	243	2,642	16,488	81	60
	2050	14,066	261	2,652	16,978	83	61
	2055	14,431	282	2,686	17,400	85	62
	2060	14,574	299	2,712	17,584	86	62
	2065	14,899	315	2,715	17,930	87	63
	2070	15,181	329	2,700	18,210	89	63
	2075	15,253	330	2,675	18,257	90	63
	2080	15,289	331	2,653	18,273	91	63
	2085	15,157	327	2,639	18,124	91	64
	2090	15,004	324	2,631	17,959	91	64

Note: Totals do not necessarily equal the sums of rounded components.

The disability prevalence rate is the ratio of the number of disabled-worker beneficiaries in current-payment status to the number of persons insured for disability benefits. Figure V.C6 illustrates the historical and projected disability prevalence rates on both a gross basis and on an age-sex-adjusted basis (adjusted to the age-sex distribution of the insured population for the year 2000).

Changes in prevalence rates are a direct result of changes in incidence rates and termination rates. Figure V.C5 depicts patterns for incidence and termination rates, which are helpful for understanding the trend in prevalence rates. Annual incidence and termination rates are not directly comparable or combinable because their denominators differ.

 

Figure V.C6.—DI Disability Prevalence Rates, 1970-2090

[Rate per thousand persons insured for disability benefits]

[D]

Age-sex-adjusted prevalence rates have increased primarily because: (1) termination rates have declined; (2) incidence rates at younger ages have increased relative to rates at older ages; and (3)  incidence rates have increased substantially for women to parity with men. Gross prevalence rates have increased more than age-sex-adjusted prevalence rates ever since the baby-boom generation began to reach ages 50 through normal retirement age, a time of life when disability incidence rates are relatively high. With this upward shift in the age distribution of the disabled population, gross conversions to retired worker status at normal retirement age have naturally increased as well. The Office of the Chief Actuary projects both gross and age-sex adjusted prevalence rates to grow at a slower pace based on assumed stabilization in three factors: (1) the age distribution of the general population; (2) the age distribution of the disability insured population; and (3) relative incidence rates by age and gender. As these factors gradually stabilize, the declining death termination rate continues to have a small influence toward higher disability prevalence rates.

As mentioned above in the discussion of incidence and termination rates, the age-sex-adjusted prevalence rate isolates the changing trend in the true likelihood of receiving benefits for the insured population, without reflecting changes in the age distribution of the population. As with incidence rates, gross disability prevalence rates declined relative to the age-sex-adjusted rate when the baby-boom generation reached working age between 1975 and 1995; this trend reflects the lower disability prevalence rates associated with younger ages. Conversely, the gross rate of disability prevalence has increased relative to the age-sex-adjusted rate after 1995 due to the aging of the baby-boom generation into ages with higher disability prevalence rates.

Under the intermediate assumptions, the projected age-sex-adjusted disability prevalence rate grows from 45.1 per thousand disability insured at the end of 2011 to 51.0 per thousand at the end of 2090. As mentioned above, the Office of the Chief Actuary projects that the growth in prevalence will slow relative to the historical period.

Under the low-cost and high-cost assumptions, the age-sex-adjusted disability prevalence rate decreases to 39.0 per thousand and increases to 63.7 per thousand insured workers at the end of 2090, respectively.

Table V.C5 presents projections of the numbers of auxiliary beneficiaries paid from the DI Trust Fund. As indicated at the beginning of this subsection, auxiliary beneficiaries are qualifying spouses and children of disabled workers. A spouse must either be at least age 62 or have an eligible child beneficiary in his or her care who is either under age 16 or disabled prior to age 22. A child must be: (1) under age 18; (2) age 18 or 19 and still a student in high school; or (3) age 18 or older and disabled prior to age 22.

The projection of the number of auxiliary beneficiaries relies on the projected number of disabled-worker beneficiaries. In the short-range period (2012-21), the Office of the Chief Actuary projects incidence and termination rates for each category of auxiliary beneficiary. After 2021, the office projects child beneficiaries at ages 18 and under in relation to the projected number of children in the population using the probability that either of their parents is a disabled-worker beneficiary. The office projects the remaining categories of children and spouses in a similar manner.

6. Covered and Taxable Earnings, Taxable Payroll, and Payroll Tax Contributions

Covered earnings are the sum of covered wages and covered self-employment net earnings. The Office of the Chief Actuary projects covered wages for component sectors of the economy (i.e., private, State and local, Federal civilian, and military) based on the projected overall growth of sectoral and total wages in the U.S. economy. The projections of covered wages also reflect changes in covered employment due to a relative increase in non-covered undocumented immigrants and to the mandatory coverage of new hires in the Federal civilian sector. The office projects covered self-employment net earnings based on the growth in net proprietors’ income in the U.S. economy.

Taxable earnings are the amount of covered earnings subject to the Social Security payroll tax. Taxable wages for an employee are total covered wages from all wage employment up to the contribution and benefit base. Taxable wages for an employer are the sum of all covered wages paid to each employee up to the base. Employees with multiple jobs whose total wages exceed the base are eligible for a refund of excess taxes withheld; employers are not eligible for a refund on this basis. For self-employed workers with no taxable wages, taxable earnings are the amount of covered self-employment net earnings up to the base. For self-employed workers with taxable wages less than the base, covered self-employment net earnings are taxable up to the difference between the base and their taxable wages. For projection purposes, the Office of the Chief Actuary computes taxable earnings based on a proportion of covered earnings that is at or below the base.

The OASDI taxable payroll (see table VI.F6) is the amount of earnings in a year that, when multiplied by the combined OASDI employee-employer payroll tax rate, yields the total amount of payroll taxes due from wages and self-employment net earnings in the year. The Trustees use taxable payroll to estimate OASDI income and to determine income rates, cost rates, and actuarial balances. (See section IV.B.1 for definitions of these terms.) Taxable payroll derives from taxable earnings, which is the sum of taxable wages and self-employment earnings. In computing taxable payroll, wages take into account the “excess wages” earned by workers with multiple jobs whose combined wages exceed the contribution and benefit base. In addition, from 1983 through 2001, taxable payroll includes deemed wage credits for military service after 1956. Prior to 1984, the self-employment tax rate was less than the combined employee-employer rate; therefore, the Office of the Chief Actuary multiplies taxable self-employment earnings by the ratio of the self-employment rate to the combined employee-employer rate to reflect this difference in payroll tax rate. Also, prior to 1988, employers were exempt from paying Social Security payroll tax on part of their employees’ tips. To take this exemption into account, the office reduces taxable payroll by half of the amount of tips not subject to employer tax.

The ratio of taxable payroll to covered earnings fell from 88.1 percent for 1984 to 82.5 percent for 2000, mostly due to relatively higher increases in wage levels for very high earners. From 2000 to 2010, the taxable payroll ratio varied with the business cycle, rising during economic downturns and falling during recoveries. Specifically, the ratio rose to 85.6 percent for 2002, declined to 82.2 percent for 2007, rose to 84.9 percent for 2009, and was 83.9 percent for 2010.

For the 2011 report, the Trustees assumed a level for the taxable payroll ratio for 2021 of 82.5 percent for the intermediate assumptions, 81.8 percent for the high-cost assumptions (or about 0.75 percentage point lower than the intermediate assumptions), and 83.3 percent for the low-cost assumptions (or about 0.75 percentage point higher than the intermediate assumptions). For the 2012 report, the Trustees assume a level for the taxable payroll ratio for 2021 of 82.5 percent for the intermediate assumptions, 81.0 percent for the high-cost assumptions (or about 1.50 percentage points lower than the intermediate assumptions), and 84.0 percent for the low-cost assumptions (or about 1.50 percentage points higher than the intermediate assumptions). Compared to the 2011 report, the Trustees assume the same level (82.5 percent) for the taxable payroll ratio for 2021 under the intermediate assumptions, but assume levels that have a wider range for the high-cost and low-cost assumptions.

The Office of the Chief Actuary projects payroll tax contributions using the patterns of tax collection required by Federal laws and regulations. The office determines payroll tax liabilities by multiplying the scheduled tax rates for each year by the amount of taxable wages and self-employment net earnings for that year. The office then splits these liabilities into amounts by collection period. For wages, Federal law requires that employers withhold OASDI and HI payroll taxes and Federal individual income taxes from employees’ pay. As an employer’s accumulation of such taxes (including the employer share of payroll taxes) meets certain thresholds, which the Department of the Treasury determines, the employer must deposit these taxes with the U.S. Treasury by a specific day, depending on the amount of money involved⁷. For projection purposes, the office splits the payroll tax contributions related to wages into amounts paid in the same quarter as incurred and in the following quarter. Self-employed workers must make estimated tax payments on their earnings four times during the year and to make up any underestimate on their individual income tax returns. The projection splits the self-employed tax liabilities by collection quarter to reflect this pattern of receipts.

The projected tax contributions also reflect the method used to insure that money transferred to the trust funds is adjusted, over time, to equal the actual liability owed. Because payers generally make tax payments without identifying the separate OASDI contribution amounts, Treasury makes daily transfers of money from the general fund to the trust funds on an initial estimated basis. The Social Security Administration periodically certifies the amounts of wages and self-employment net earnings on which tax contributions are owed for each year, at which time Treasury determines adjustments to appropriations to reconcile tax liabilities with deposits in the trust funds. This process also includes periodic transfers from the trust funds to the general fund for contributions on wages in excess of the contribution and benefit base.

Table V.C6 shows the payroll tax contribution rates applicable under current law in each calendar year and the allocation of these rates between the OASI and DI Trust Funds.⁸ It also shows the contribution and benefit base for each year through 2012.

 

Table V.C6.—Contribution and Benefit Base and Payroll Tax Contribution Rates 

Calendar years	Contribution and benefit base	Payroll tax contribution rates (percent)
		Employees and employers, combineda				Self-employedb
		OASDI	OASI	DI		OASDI	OASI	DI
1937-49	$3,000	2.00	2.00	—		—	—	—
1950	3,000	3.00	3.00	—		—	—	—
1951-53	3,600	3.00	3.00	—		2.2500	2.2500	—
1954	3,600	4.00	4.00	—		3.0000	3.0000	—
1955-56	4,200	4.00	4.00	—		3.0000	3.0000	—
1957-58	4,200	4.50	4.00	0.50		3.3750	3.0000	0.3750
1959	4,800	5.00	4.50	.50		3.7500	3.3750	.3750
1960-61	4,800	6.00	5.50	.50		4.5000	4.1250	.3750
1962	4,800	6.25	5.75	.50		4.7000	4.3250	.3750
1963-65	4,800	7.25	6.75	.50		5.4000	5.0250	.3750
1966	6,600	7.70	7.00	.70		5.8000	5.2750	.5250
1967	6,600	7.80	7.10	.70		5.9000	5.3750	.5250
1968	7,800	7.60	6.65	.95		5.8000	5.0875	.7125
1969	7,800	8.40	7.45	.95		6.3000	5.5875	.7125
1970	7,800	8.40	7.30	1.10		6.3000	5.4750	.8250
1971	7,800	9.20	8.10	1.10		6.9000	6.0750	.8250
1972	9,000	9.20	8.10	1.10		6.9000	6.0750	.8250
1973	10,800	9.70	8.60	1.10		7.0000	6.2050	.7950
1974	13,200	9.90	8.75	1.15		7.0000	6.1850	.8150
1975	14,100	9.90	8.75	1.15		7.0000	6.1850	.8150
1976	15,300	9.90	8.75	1.15		7.0000	6.1850	.8150
1977	16,500	9.90	8.75	1.15		7.0000	6.1850	.8150
1978	17,700	10.10	8.55	1.55		7.1000	6.0100	1.0900
1979	22,900	10.16	8.66	1.50		7.0500	6.0100	1.0400
1980	25,900	10.16	9.04	1.12		7.0500	6.2725	.7775
1981	29,700	10.70	9.40	1.30		8.0000	7.0250	.9750
1982	32,400	10.80	9.15	1.65		8.0500	6.8125	1.2375
1983	35,700	10.80	9.55	1.25		8.0500	7.1125	.9375
1984 c	37,800	11.40	10.40	1.00		11.4000	10.4000	1.0000
1985 c	39,600	11.40	10.40	1.00		11.4000	10.4000	1.0000
1986 c	42,000	11.40	10.40	1.00		11.4000	10.4000	1.0000
1987 c	43,800	11.40	10.40	1.00		11.4000	10.4000	1.0000
1988 c	45,000	12.12	11.06	1.06		12.1200	11.0600	1.0600
1989 c	48,000	12.12	11.06	1.06		12.1200	11.0600	1.0600
1990	51,300	12.40	11.20	1.20		12.4000	11.2000	1.2000
1991	53,400	12.40	11.20	1.20		12.4000	11.2000	1.2000
1992	55,500	12.40	11.20	1.20		12.4000	11.2000	1.2000
1993	57,600	12.40	11.20	1.20		12.4000	11.2000	1.2000
1994	60,600	12.40	10.52	1.88		12.4000	10.5200	1.8800
1995	61,200	12.40	10.52	1.88		12.4000	10.5200	1.8800
1996	62,700	12.40	10.52	1.88		12.4000	10.5200	1.8800
1997	65,400	12.40	10.70	1.70		12.4000	10.7000	1.7000
1998	68,400	12.40	10.70	1.70		12.4000	10.7000	1.7000
1999	72,600	12.40	10.70	1.70		12.4000	10.7000	1.7000
2000	76,200	12.40	10.60	1.80		12.4000	10.6000	1.8000
2001	80,400	12.40	10.60	1.80		12.4000	10.6000	1.8000
2002	84,900	12.40	10.60	1.80		12.4000	10.6000	1.8000
2003	87,000	12.40	10.60	1.80		12.4000	10.6000	1.8000
2004	87,900	12.40	10.60	1.80		12.4000	10.6000	1.8000
2005	90,000	12.40	10.60	1.80		12.4000	10.6000	1.8000
2006	$94,200	12.40	10.60	1.80		12.4000	10.6000	1.8000
2007	97,500	12.40	10.60	1.80		12.4000	10.6000	1.8000
2008	102,000	12.40	10.60	1.80		12.4000	10.6000	1.8000
2009	106,800	12.40	10.60	1.80		12.4000	10.6000	1.8000
2010d	106,800	12.40	10.60	1.80		12.4000	10.6000	1.8000
2011d	106,800	10.40	8.89	1.51		10.4000	8.8900	1.5100
2012d	110,100	10.40	8.89	1.51		10.4000	8.8900	1.5100
2013 and later	e	12.40	10.60	1.80		12.4000	10.6000	1.8000

---

a

Except as noted below, the combined employee/employer rate is divided equally between employees and employers.

b

Beginning in 1990, self-employed persons receive a deduction, for purposes of computing their net earnings, equal to half of the combined OASDI and HI contributions that would be payable without regard to the contribution and benefit base. The OASDI contribution rate then applies to net earnings after this deduction, but subject to the OASDI base.

c

In 1984 only, employees received an immediate credit of 0.3 percent of taxable wages against their OASDI payroll tax contributions. The self-employed received similar credits of 2.7 percent, 2.3 percent, and 2.0 percent against their combined OASDI and Hospital Insurance (HI) contributions on net earnings from self-employment in 1984, 1985, and 1986-89, respectively. The General Fund of the Treasury reimbursed the trust funds for these credits.

d

Public Law 111-147 exempted most employers from paying the employer share of OASDI payroll tax on wages paid during the period March 19, 2010 through December 31, 2010 to certain qualified individuals hired after February 3, 2010. Public Law 111-312 reduced the OASDI payroll tax rate for 2011 by 2 percentage points for employees and for self-employed workers. Public Law 112-96 extended the 2011 rate reduction through 2012. These laws require that the General Fund of the Treasury reimburse the OASI and DI Trust Funds for these temporary reductions in 2010 through 2012 payroll tax revenue, in order to “replicate to the extent possible” revenue that would have been received if the combined employee/employer payroll tax rates had remained at 12.4 percent for OASDI (10.6 percent for OASI and 1.8 percent for DI).

e

Subject to automatic adjustment based on increases in average wages.

7. Income From Taxation of Benefits

Current law credits the OASI and DI Trust Funds with income taxes from the taxation of up to the first 50 percent of OASI and DI benefit payments. (The HI Trust Fund receives the remainder of the income taxes from the taxation of up to 85 percent of OASI and DI benefit payments.)

For the short-range period, the Office of the Chief Actuary estimates the income to the trust funds from taxation of benefits by applying the following two factors to total OASI and DI benefit payments: (1) the percentage of benefit payments (limited to 50 percent) that is taxable; and (2) the average marginal tax rate applicable to those benefits.

For the long-range period, the office estimates the income to the trust funds from taxation of benefits by applying projected ratios of taxation of OASI and DI benefits to total OASI and DI benefit payments. The income thresholds used for benefit taxation are, by law, constant in the future, while income and benefit levels continue to rise. Accordingly, projected ratios of income from taxation of benefits to the amount of benefits increase gradually. Ultimate tax ratios for OASI and DI benefits used in the projection rely on estimates from the Office of Tax Analysis in the Department of the Treasury.

8. Average Benefits

Projections of average benefits for each benefit type depend on recent historical averages, projected average primary insurance amounts (PIAs), and projected ratios of average benefits to average PIAs. Calculations of average PIAs depend on projected distributions of beneficiaries by duration from year of initial entitlement, average PIAs at initial entitlement, and increases in PIAs after initial entitlement. Projected increases in average PIAs after initial entitlement depend on automatic benefit increases, recomputations to reflect additional covered earnings, and other factors. Calculations of future average PIAs at initial entitlement depend on projected earnings histories, which in turn depend on a combination of the actual earnings histories associated with a sample of 2007 initial entitlements and more recent actual earnings levels by age and sex for covered workers.

For retired-worker, aged-spouse, and aged-widow(er) benefits, the percentage of the PIA that is payable depends on the age at initial entitlement to benefits. Projected ratios of average benefits to average PIAs for these types of benefits depend on projections of age distributions at initial entitlement.

9. Benefit Payments

For each type of benefit, benefit payments are the product of the number of beneficiaries and the corresponding average monthly benefit. The short-range model calculates benefit payments on a quarterly basis. The long-range model calculates all benefit payments on an annual basis, using the number of beneficiaries on December 31. Adjustments to these annual benefit payments include retroactive payments to newly awarded beneficiaries and other amounts not reflected in the regular monthly benefit payments.

Lump-sum death payments are the product of: (1) the number of lump-sum death payments projected on the basis of the assumed death rates, the projected fully insured population, and the estimated percentage of the fully insured population that will qualify for benefits; and (2) the amount of the lump-sum death payment, which is $255 (unindexed since 1973).

10. Illustrative Scheduled Benefit Amounts

Table V.C7 shows, under the intermediate assumptions, future benefit amounts payable upon retirement at the normal retirement age and at age 65, for workers attaining age 65 in 2012 and subsequent years. The table shows illustrative benefit amounts for workers with four separate pre-retirement earnings patterns. The benefit amounts in table V.C7 are in CPI-indexed 2012 dollars—that is, adjusted to 2012 levels by the CPI indexing series shown in table VI.F6. Table V.C7 also shows each benefit amount as a percentage of career-average earnings, wage indexed to the year prior to retirement. These percentages are therefore the benefit “replacement rates” for earners with the career-average level of earnings.

The normal retirement age was 65 for individuals who reached age 62 before 2000. It increased to age 66 during the period 2000-05, at a rate of 2 months per year as workers attained age 62. Under current law, the normal retirement age will increase to age 67 during the period 2017-22, also by 2 months per year as workers attain age 62. The illustrative benefit amounts shown in table V.C7 for retirees at age 65 are lower than the amounts shown for retirees at normal retirement age because the statute requires actuarial reduction of benefits taken before normal retirement age.

Table V.C7 shows four different pre-retirement earnings patterns. Three of these patterns assume the earnings history of workers with scaled-earnings patternsⁱ and reflect low, medium, and high career-average levels of pre-retirement earnings starting at age 21. The fourth pattern assumes the earnings history of a steady maximum earner. The three scaled-earnings patterns derive from earnings experienced by insured workers during 1991‑2008. These earnings levels differ by age. The career-average level of earnings for each scaled case targets a percent of the national average wage index (AWI). As a result, the benefit amounts shown here are consistent with the levels for “steady-earnings” cases presented in the 2000 and earlier Trustees Reports. Since 2001, the Trustees have used scaled-earnings cases, instead of steady-earnings cases, because they better illustrate the differences in benefit levels under the wide variety of reform proposals considered in recent years.

For the scaled medium earner, the career-average earnings level is about equal to the AWI. For the scaled low and high earners, the career-average earnings level is about 45 percent and 160 percent of the AWI, respectively. The steady maximum earner has earnings at or above the contribution and benefit base for each year starting at age 22 through the year prior to retirement.

 

Table V.C7.—Annual Scheduled Benefit Amounts for Retired Workers
With Various Pre-Retirement Earnings Patterns
Based on Intermediate Assumptions, Calendar Years 2012-90 

Year attain age 65 b			Retirement at normal retirement age				Retirement at age 65
			Age at retirement	CPI-indexed 2012 dollars   c	Percent of earnings		Age at retirement	CPI-indexed 2012 dollarsc	Percent of earnings
Scaled low earnings:d
	2012		66:0	$11,390	57.8		65:0	$10,648	55.0
	2015		66:0	11,327	53.7		65:0	10,582	51.4
	2020		66:2	12,481	53.9		65:0	11,503	50.4
	2025		67:0	13,643	55.5		65:0	11,827	49.2
	2030		67:0	14,347	55.3		65:0	12,436	49.0
	2035		67:0	15,161	55.2		65:0	13,134	48.9
	2040		67:0	16,042	55.1		65:0	13,904	48.9
	2045		67:0	16,988	55.3		65:0	14,722	48.9
	2050		67:0	17,960	55.3		65:0	15,568	49.0
	2055		67:0	18,958	55.4		65:0	16,429	49.0
	2060		67:0	20,001	55.4		65:0	17,335	49.1
	2065		67:0	21,084	55.4		65:0	18,273	49.1
	2070		67:0	22,228	55.4		65:0	19,264	49.1
	2075		67:0	23,428	55.4		65:0	20,304	49.1
	2080		67:0	24,710	55.4		65:0	21,415	49.0
	2085		67:0	26,079	55.3		65:0	22,603	49.0
	2090		67:0	27,551	55.3		65:0	23,877	49.0
Scaled medium earnings:e
	2012		66:0	18,771	42.9		65:0	17,534	40.8
	2015		66:0	18,667	39.8		65:0	17,441	38.1
	2020		66:2	20,575	40.0		65:0	18,966	37.4
	2025		67:0	22,498	41.2		65:0	19,492	36.5
	2030		67:0	23,644	41.0		65:0	20,491	36.3
	2035		67:0	24,987	40.9		65:0	21,652	36.3
	2040		67:0	26,444	40.9		65:0	22,920	36.3
	2045		67:0	27,999	41.0		65:0	24,266	36.3
	2050		67:0	29,603	41.1		65:0	25,655	36.4
	2055		67:0	31,244	41.1		65:0	27,079	36.4
	2060		67:0	32,958	41.1		65:0	28,565	36.4
	2065		67:0	34,745	41.1		65:0	30,113	36.4
	2070		67:0	36,632	41.1		65:0	31,747	36.4
	2075		67:0	38,607	41.1		65:0	33,459	36.4
	2080		67:0	40,719	41.0		65:0	35,289	36.4
	2085		67:0	42,979	41.0		65:0	37,246	36.3
	2090		67:0	45,403	41.0		65:0	39,348	36.3
Scaled high earnings:f
	2012		66:0	24,891	35.5		65:0	23,255	33.8
	2015		66:0	24,745	33.0		65:0	23,124	31.6
	2020		66:2	27,252	33.1		65:0	25,122	30.9
	2025		67:0	29,817	34.1		65:0	25,836	30.2
	2030		67:0	31,337	34.0		65:0	27,159	30.1
	2035		67:0	33,110	33.9		65:0	28,694	30.0
	2040		67:0	35,041	33.9		65:0	30,368	30.0
	2045		67:0	37,101	33.9		65:0	32,155	30.1
	2050		67:0	39,227	34.0		65:0	33,999	30.1
	2055		67:0	41,404	34.0		65:0	35,880	30.1
	2060		67:0	43,675	34.0		65:0	37,854	30.1
	2065		67:0	46,045	34.0		65:0	39,903	30.1
	2070		67:0	48,543	34.1		65:0	42,073	30.1
	2075		67:0	51,160	34.0		65:0	44,339	30.1
	2080		67:0	53,957	34.0		65:0	46,763	30.1
	2085		67:0	56,951	34.0		65:0	49,356	30.1
	2090		67:0	60,163	33.9		65:0	52,139	30.1
Steady maximum earnings: g
	2012		66:0	$29,902	28.7		65:0	$27,762	27.4
	2015		66:0	30,115	26.5		65:0	28,002	25.3
	2020		66:2	33,338	26.5		65:0	30,619	24.7
	2025		67:0	36,667	27.3		65:0	31,545	24.0
	2030		67:0	38,600	27.2		65:0	33,207	23.9
	2035		67:0	40,803	27.1		65:0	35,109	23.9
	2040		67:0	43,148	27.1		65:0	37,128	23.9
	2045		67:0	45,697	27.1		65:0	39,333	23.9
	2050		67:0	48,251	27.2		65:0	41,532	24.0
	2055		67:0	50,820	27.3		65:0	43,747	24.0
	2060		67:0	53,607	27.3		65:0	46,145	24.0
	2065		67:0	56,521	27.3		65:0	48,653	24.0
	2070		67:0	59,582	27.3		65:0	51,290	24.0
	2075		67:0	62,798	27.3		65:0	54,056	24.0
	2080		67:0	66,237	27.3		65:0	57,017	24.0
	2085		67:0	69,911	27.3		65:0	60,179	24.0
	2090		67:0	73,854	27.2		65:0	63,572	24.0

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a

Annual amounts are the total for the 12-month period starting with the month of retirement.

b

Attains age 65 on January 1 of the year.

c

CPI-indexed dollar adjustment uses the adjusted CPI indexing series shown in table VI.F6.

d

Career-average earnings at about 45 percent of the national average wage index (AWI).

e

Career-average earnings at about 100 percent of the AWI.

f

Career-average earnings at about 160 percent of the AWI.

g

Earnings for each year at or above the contribution and benefit base.

11. Administrative Expenses

The projection of administrative expenses through 2021 depends on historical experience and the expected growth in average wages. Additionally, the Office of Budget of the Social Security Administration provides estimates for the first several years of the projection. For years after 2021, projected administrative expenses increase by increases in the number of beneficiaries and increases in the average wage, which more than offset assumed improvements in administrative productivity. Legislative simplification of the Social Security Act could offset these assumed increases.

12. Railroad Retirement Financial Interchange

Federal law covers railroad workers under a separate multi-tiered plan, with a first tier of coverage similar to OASDI coverage. An annual financial interchange between the Railroad Retirement fund and the OASI and DI Trust Funds reflects the difference between: (1) the amount of OASDI benefits that would be paid to railroad workers and their families if railroad employment had been covered under the OASDI program, plus administrative expenses associated with these benefits; and (2) the amount of OASDI payroll tax and income tax that would be received with allowances for interest from railroad workers.

Calculation of the financial interchange with the Railroad Retirement depends on trends similar to those used in estimating the cost of OASDI benefits. The annual short-range cost is about $4-5 billion and the long-range summarized cost is 0.03 percent of taxable payroll.

13. Military Service Transfers

Beginning in 1966, the General Fund of the Treasury reimbursed the OASI and DI Trust Funds annually for the cost (including administrative expenses) of providing additional benefit payments resulting from noncontributory wage credits for military service performed prior to 1957. The 1983 amendments modified the reimbursement mechanism and the timing of the reimbursements, and required a reimbursement in 1983 to include all future costs attributable to the wage credits. The amendments also require adjustments to that 1983 reimbursement every fifth year, beginning with 1985, to account for actual data.

 

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1

The Federal Register publishes details of these indexation procedures annually. Also see
www.socialsecurity.gov/OACT/COLA/index.html.

2

For those under age 16, projected covered employment is the sum of age-sex components, each of which the office projects as a ratio to the Social Security area population.

3

Age-adjusted covered worker rates are adjusted to the 2010 age distribution of the Social Security area population.

4

The exposed population is the fully insured population age 62 and over, excluding persons entitled to or converted from disabled-worker benefits and fully insured persons entitled only to widow(er)’s benefits.

5

The disability-exposed population excludes those receiving benefits, while the disability insured population includes them. Section V.C.3 of this report describes the projection of the disability insured population.

6

Projected incidence rates are adjusted upward to account for additional workers who are expected to file for disability benefits (rather than retirement benefits) in response to reductions in retirement benefits as the normal retirement age rises.

7

Generally, the higher the amount of liability, the sooner the taxes must be paid. For smaller employers, payment is due by the middle of the month following when the liability was incurred. Medium-size employers have three banking days in which to make their deposits. Larger employers must make payment on the next business day after paying their employees.

8

Table VI.F1 shows the payroll tax contribution rates for the Hospital Insurance (HI) program.

9

Actuarial Note Number 2011.3 has more details on scaled-earnings patterns.
See www.socialsecurity.gov/OACT/NOTES/ran3/an2011-3.html.