2023 OASDI Trustees Report

B. HISTORY OF ACTUARIAL STATUS ESTIMATES

This appendix chronicles the history of the long-range OASDI actuarial balance and the year of combined OASI and DI Trust Fund reserve depletion since 1982 under the intermediate assumptions. The actuarial balance is the principal summary measure of actuarial status for the long-range period as a whole. The year of trust fund reserve depletion is also critical, as it indicates the year by which legislative action would be needed in order to maintain timely payment of scheduled benefits.

The 1983 report was the last report for which the actuarial balance was positive for the OASDI program. The two basic components of actuarial balance are the summarized income rate and the summarized cost rate, both of which are expressed as percentages of taxable payroll over the period. Section IV.B.4 defines the summarized income rate, summarized cost rate, and actuarial balance in detail. For any given period, the actuarial balance includes the difference between the present value of non-interest income for the period and the present value of the cost for the period, each divided by the present value of taxable payroll for all years in the period. The computation of the actuarial balance also includes:

•	In the reports for 1988 and later, the amount of the trust fund asset reserves on hand at the beginning of the valuation period; and

•	In the reports for 1991 and later, the present value of a target trust fund asset reserve equal to 100 percent of the annual cost to be reached and maintained at the end of the valuation period.

Reports of 1973-87 used the average-cost method, a simpler method which approximates the results of the present-value approach for computing the actuarial balance. Under the average-cost method, the sum of the annual cost rates over the 75-year projection period was divided by the total number of years, 75, to obtain the average cost rate per year. A similar computation produced the average income rate. The actuarial balance was the difference between the average income rate and the average cost rate.

When the 1973 report introduced the average-cost method, the financing of the program was more nearly on a pay-as-you-go basis over the long-range. Also, the long-range demographic and economic assumptions in that report produced an annual rate of growth in total taxable payroll which was about the same as the annual rate at which the trust funds earned interest. In either circumstance (i.e., pay-as-you-go financing, where the annual income rate is the same as the annual cost rate, or an annual rate of growth in total taxable payroll equal to the annual interest rate), the average-cost method produces the same result as the present-value method. However, by 1988, neither of these circumstances still existed.

After the 1977 and 1983 Social Security Amendments, projections indicated substantial increases in the trust fund reserves continuing well into the 21st century. These laws changed the program’s financing from essentially pay-as-you-go to partial advance funding through the 75-year period. Also, for the reports from 1973 through 1987, long-range fertility rates and average real wage growth assumptions were gradually reduced, resulting in an annual rate of growth in taxable payroll that was significantly lower than the assumed interest rate by 1987. As a result of the difference between this rate of growth and the assumed interest rate, the results of the average-cost method and the present-value method began to diverge in the reports for 1973 through 1987, and by 1988 they were quite different. While the average-cost method reflected most of the effects of assumed interest rates, it no longer reflected all interest effects. The present-value method, by contrast, accurately reflects the implications of assumed interest rates. As a result, the 1988 report reintroduced the present-value method of calculating the actuarial balance.

A positive actuarial balance indicates that estimated income (plus starting reserves, beginning with the 1988 report) is more than sufficient to meet estimated trust fund obligations (plus the ending target fund, beginning with the 1991 report) for the period as a whole. Even with a positive actuarial balance, it is possible for reserves to become temporarily depleted within the long-range period. An actuarial balance of zero indicates that the estimated income (plus starting reserves, beginning with the 1988 report) exactly matches estimated trust fund obligations (plus the ending target fund, beginning with the 1991 report) for the period as a whole. A negative actuarial balance indicates that estimated income (plus starting reserves, beginning with the 1988 report) is insufficient to meet estimated trust fund obligations (plus the ending target fund, beginning with the 1991 report) for the entire period.

Table VI.B1 contains the long-range OASDI actuarial balances, summarized income rates, and summarized cost rates for the 1982 report through the current report. The reports presented these values on the basis of the intermediate assumptions, which recent reports refer to as alternative II and reports from 1982 to 1990 referred to as alternative II-B.

Table VI.B1.—Long-Range OASDI Actuarial Balances  and Trust Fund Reserve Depletion Dates as Shown in the Trustees Reports for 1982-2023
under Intermediate Assumptions^a

[As a percentage of taxable payroll]

Year of report	Summarized income rate	Summarized cost rate	Actuarial balanceb	Change from previous yearc	Year of combined trust fund reserve depletion
1982	12.27	14.09	-1.82	d	1983
1983	12.87	12.84	+.02	+1.84	e
1984	12.90	12.95	-.06	-.08	e
1985	12.94	13.35	-.41	-.35	2049
1986	12.96	13.40	-.44	-.03	2051
1987	12.89	13.51	-.62	-.18	2051
1988	12.94	13.52	-.58	+.04	2048
1989	13.02	13.72	-.70	-.13	2046
1990	13.04	13.95	-.91	-.21	2043
1991	13.11	14.19	-1.08	-.17	2041
1992	13.16	14.63	-1.46	-.38	2036
1993	13.21	14.67	-1.46	d	2036
1994	13.24	15.37	-2.13	-.66	2029
1995	13.27	15.44	-2.17	-.04	2030
1996	13.33	15.52	-2.19	-.02	2029
1997	13.37	15.60	-2.23	-.03	2029
1998	13.45	15.64	-2.19	+.04	2032
1999	13.49	15.56	-2.07	+.12	2034
2000	13.51	15.40	-1.89	+.17	2037
2001	13.58	15.44	-1.86	+.03	2038
2002	13.72	15.59	-1.87	-.01	2041
2003	13.78	15.70	-1.92	-.04	2042
2004	13.84	15.73	-1.89	+.03	2042
2005	13.87	15.79	-1.92	-.04	2041
2006	13.88	15.90	-2.02	-.09	2040
2007	13.92	15.87	-1.95	+.06	2041
2008	13.94	15.63	-1.70	+.26	2041
2009	14.02	16.02	-2.00	-.30	2037
2010	14.01	15.93	-1.92	+.08	2037
2011	14.02	16.25	-2.22	-.30	2036
2012	14.02	16.69	-2.67	-.44	2033
2013	13.88	16.60	-2.72	-.05	2033
2014	13.89	16.77	-2.88	-.16	2033
2015	13.86	16.55	-2.68	+.20	2034
2016	13.84	16.50	-2.66	+.02	2034
2017	13.84	16.67	-2.83	-.17	2034
2018	13.84	16.69	-2.84	-.02	2034
2019	13.81	16.60	-2.78	+.06	2035
2020	13.85	17.06	-3.21	-.43	2035
2021	13.78	17.31	-3.54	-.32	2034
2022	13.78	17.20	-3.42	+.12	2035
2023	13.78	17.38	-3.61	-.19	2034

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a

The 1982-90 reports referred to the intermediate assumptions as alternative II-B; the 1991 and later reports refer to the intermediate assumptions as alternative II.

b

The definition and method of calculating the actuarial balance were changed in 1988 and 1991. See text for details.

c

A detailed year-by-year breakdown of the reasons for the changes in the actuarial balance since the 1983 Trustees Report may be found in Actuarial Note 2023.8 at www.ssa.gov/OACT/NOTES/ran8/.

d

Between -0.005 and 0.005 percent of taxable payroll.

e

Not projected to become depleted during the 75-year projection period.

Note: Components may not sum to totals because of rounding.

For several of the years included in the table, significant legislative changes or definitional changes affected the actuarial balance. The Social Security Amendments of 1983 account for the largest single change shown in the table: the actuarial balance of ‑1.82 for the 1982 report improved to +0.02 for the 1983 report. In 1985, the actuarial balance changed largely because of an adjustment made to the method for estimating the age distribution of immigrants.

Rebenchmarking of the National Income and Product Accounts and changes in demographic assumptions contributed to the change in the actuarial balance for 1987. Various changes in assumptions and methods for the 1988 report had roughly offsetting effects on the actuarial balance. In 1989 and 1990, changes in economic assumptions accounted for most of the changes in the actuarial balance.

In 1991, the effect of legislation, changes in economic assumptions, and the introduction of the cost of reaching and maintaining an ending target trust fund level combined to produce the change in the actuarial balance. In 1992, changes in disability assumptions and the method for projecting average benefit levels accounted for most of the change in the actuarial balance. In 1993, numerous small changes in assumptions and methods had offsetting effects on the actuarial balance. In 1994, changes in the real wage assumptions, disability rates, and the earnings sample used for projecting average benefit levels accounted for most of the change in the actuarial balance. In 1995, numerous small changes had largely offsetting effects on the actuarial balance, including a substantial reallocation of the payroll tax rate, which reduced the OASI actuarial balance, but increased the DI actuarial balance.

In 1996, a change in the method of projecting dually-entitled beneficiaries produced a large increase in the actuarial balance, which almost totally offset decreases produced by changes in the valuation period and in the demographic and economic assumptions. Various changes in assumptions and methods for the 1997 report had roughly offsetting effects on the actuarial balance. In 1998, increases caused by changes in the economic assumptions, although partially offset by decreases produced by changes in the valuation period and in the demographic assumptions, accounted for most of the changes in the actuarial balance. In 1999, increases caused by changes in the economic assumptions (related to improvements in the CPI by the Bureau of Labor Statistics) accounted for most of the changes in the actuarial balance. For the 2000 report, changes in economic assumptions and methodology caused increases in the actuarial balance, although reductions in the balance caused by the change in valuation period and changes in demographic assumptions partially offset these increases.

For the 2001 report, increases caused by changes in the demographic starting values, although partially offset by a decrease produced by the change in the valuation period, accounted for most of the changes in the actuarial balance. For the 2002 report, changes in the valuation period and the demographic assumptions—both decreases in the actuarial balance—were offset by changes in the economic assumptions, while an increase due to disability assumptions was slightly more than offset by a decrease due to changes in the projection methods and data. For the 2003 report, an increase due to the change in program assumptions was more than offset by decreases due to the change in valuation period and changes in demographic assumptions. In the 2004 report, increases due to changing the method of projecting benefit levels for higher earners more than offset decreases in the actuarial balance arising from the change in the valuation period and the net effect of other changes in programmatic data and methods. For the 2005 report, an increase due to changing the method of projecting future average benefit levels was more than offset by decreases due to changes in the valuation period, updated starting values for the economic assumptions, and other methodological changes.

In 2006, decreases in the actuarial balance due to the change in the valuation period, a reduction in the ultimate annual real interest rate, and improvements in calculating mortality for disabled workers, were greater in aggregate than increases in the actuarial balance due to changes in demographic starting values and the ultimate total fertility rate, as well as other programmatic data and method changes. For the 2007 report, increases in the actuarial balance arising from revised disability incidence rate assumptions, improvements in average benefit level projections, and changes in near-term economic projections, more than offset decreases in the balance due to the valuation period change and updated historical mortality data. For the 2008 report, the large increase in the actuarial balance was primarily due to changes in immigration projection methods and assumptions. These changes more than offset the decreases in the actuarial balance due to the change in the valuation period and the lower starting and ultimate mortality rates. In 2009, changes in starting values and near-term economic assumptions due to the economic recession, faster ultimate rates of decline in death rates for ages 65-84, and the change in the valuation period accounted for most of the large decrease in the actuarial balance. Legislative changes, in particular the estimated effects of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, were the main reason for the increase in the actuarial balance for the 2010 report. The change in the valuation period partially offset this increase; there were also changes in several assumptions, methods, and recent data which had largely offsetting effects.

For the 2011 report, changes in mortality projections, due to new starting values and revised methods, were the most significant of several factors contributing to the increase in the deficit. In 2012, changes in economic assumptions and starting values accounted for about half of the decrease in actuarial balance. Other factors worsening the actuarial balance were the change in valuation period, changes to starting demographic values, changes to ultimate disability incidence assumptions, and methodology changes and data updates. For the 2013 report, the change in valuation period accounted for the entire net change in the actuarial balance. The effects of substantially lower death rates for 2009 than previously projected and the American Taxpayer Relief Act of 2012 (which lowered the Federal marginal income tax rates) were offset by updates of program-specific data and methodology improvements. In 2014, changes in economic data and assumptions accounted for the majority of the net change in the actuarial balance. Other factors worsening the actuarial balance were the change in the valuation period and various methodology improvements and data updates. For the 2015 report, methodological improvements and updates of programmatic data accounted for the majority of the net increase in the actuarial balance. Also increasing the actuarial balance were a lower assumed ultimate average wage differential and changes in near-term economic assumptions. These increases were offset somewhat by the change in the valuation period and updates to historical and near-term projected birth rates.

For the 2016 report, the actuarial balance increased primarily due to the effects of the Bipartisan Budget Act of 2015 and improvements made to immigration methods. The most notable immigration change was a revision to the method for projecting emigration of the never-authorized population to reflect lower rates of emigration for those who have resided here longer. These increases in the actuarial balance were largely offset by the effects of changes in ultimate economic assumptions, including a lower real interest rate and a lower annual increase in the rate of price inflation. In 2017, the change in the valuation period and various methodology improvements accounted for most of the net reduction in the actuarial balance. Other economic factors also contributed to worsening the actuarial balance, including a lower real wage differential assumption and an assumed weaker recovery from the recent recession. These reductions were offset somewhat by lower estimated disability incidence rates over the short-range period. For the 2018 report, incorporating the effects of lower-than-expected birth rates, lower near-term fertility assumptions, and the change in the valuation period decreased the actuarial balance. Offsetting these factors to a large degree were the effects of higher-than-expected death rates and several methods improvements, most notably an update to the sample used to project average benefit levels for newly-entitled worker beneficiaries. For the 2019 report, the actuarial balance increased primarily due to higher-than-expected death rates and lower near-term and ultimate disability incidence rate assumptions. Partially offsetting these factors were the effects of a lower ultimate real interest rate assumption and the change in the valuation period. For the 2020 report, the actuarial balance decreased primarily due to the following factors. First, the repeal of the Affordable Care Act’s excise tax on employer-sponsored group health insurance premiums reduced projected earnings as a share of employee compensation, having a significant negative financial effect on the trust funds. In addition, lower assumed values for the ultimate total fertility rate, the ultimate rate of price inflation, and the ultimate real interest rate, as compared to the rates assumed for the 2019 report, decreased the actuarial balance.

In 2021, the actuarial balance decreased due to the change in the valuation period and three main additional factors. First, economic assumptions were updated to reflect experience during and following the COVID-19 pandemic. In particular, the levels of productivity and potential GDP were assumed to be roughly 1 percent lower beginning with the second quarter of 2020. Second, the data and methodology used for projecting average benefit levels were updated and improved. Third, data and estimates provided by the Office of Tax Analysis at the Department of the Treasury indicated lower near-term and ultimate levels of taxation of benefits.

For the 2022 report, the actuarial balance increased primarily due to a decrease in the assumed ultimate disability incidence rate, incorporating recent economic data, and changes in near-term economic assumptions. In particular, employment, earnings, and GDP following the 2020 recession recovered much faster than had been assumed in the 2021 report. These disability and economic factors were partially offset by the change in the valuation period and updates for recent demographic data.

Section IV.B.6 describes changes affecting the actuarial balance shown for the 2023 report.