B. HISTORY OF ACTUARIAL STATUS ESTIMATESThis appendix chronicles the history of the OASDI actuarial balance and the year of combined OASI and DI Trust Fund reserve depletion since 1982. The actuarial balance is the principal summary measure of long-range actuarial status. The 1983 report was the last report for which the actuarial balance was positive. 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. Section IV.B.4 defines summarized income rate, summarized cost rate, and actuarial balance in detail. For any given period, the actuarial balance is 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:

• When the 1973 report introduced the average-cost method, the long-range financing of the program was more nearly on a pay-as-you-go basis. Also, the long-range demographic and economic assumptions in that report produced an annual rate of growth in taxable payroll which was about the same as the annual rate at which the trust funds earned interest. In either situation (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 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 situations still existed.After the 1977 and 1983 Social Security Amendments, estimates showed substantial increases in the trust funds continuing well into the 21st century. These laws changed the program’s financing from essentially pay-as-you-go to partial advance funding. Also, the reports from 1973 through 1987 phased in reductions in long-range fertility rates and average real-wage growth, which produced an annual rate of growth in long-range taxable earnings which was significantly lower than the assumed interest rate. 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 in the reports for 1973 through 1987 began to diverge, and by 1988 they were quite different. While the average-cost method still accounted for most of the effects of the assumed interest rate, it no longer accounted for all of the interest effects. The present-value method, by contrast, accounts for the full effect of the assumed interest rates. The 1988 report reintroduced the present-value method of calculating the actuarial balance in order to fully reflect the effects of interest.Table VI.B1 contains the estimated 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 prior to 1991 referred to as alternative II-B.

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 2016.8 at www.ssa.gov/OACT/NOTES/ran8/.

Between -0.005 and 0.005 percent of taxable payroll.

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