2019 OASDI Trustees Report

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Short-Range Actuarial Estimates
For the short-range period (2019 through 2028), the Trustees measure financial adequacy by comparing projected asset reserves at the beginning of each year to projected program cost for that year under the intermediate set of assumptions. Maintaining a trust fund ratio of 100 percent or more — that is, reserves at the beginning of each year at least equal to projected cost for the year — is a good indication that the trust fund can cover most short-term contingencies. The projected trust fund ratios under the intermediate assumptions for the OASI Trust Fund exceed 100 percent throughout the short-range period. Therefore, OASI satisfies the Trustees’ test of short-range financial adequacy. The DI Trust Fund fails the Trustees’ test of short-range financial adequacy. The Trustees estimate that the DI trust fund ratio was at 65 percent at the beginning of 2019. The projected DI trust fund ratio declines to 56 percent at the beginning of 2022, and then increases to 68 percent by the beginning of 2028. On a combined basis, OASDI also satisfies the Trustees’ test of short-range financial adequacy. Figure II.D1 shows that the trust fund ratio for the combined OASI and DI Trust Funds declines consistently after 2010, but remains above 100 percent throughout the short-range period.
Projected OASDI cost is less than total income in 2019, so that combined trust fund reserves increase during the year. In last year’s report, combined trust fund reserves were projected to decline starting in 2018. For this report, combined reserves are projected to start declining in 2020 and to continue to decline throughout the remainder of the short-range period. The trust fund ratio declines throughout the short-range period, as shown in figure II.D1.
Long-Range Actuarial Estimates
The Trustees use three types of measures to assess the actuarial status of the program over the next 75 years: (1) annual cash-flow measures, including income rates, cost rates, and balances; (2) trust fund ratios; and (3) summary measures such as actuarial balances and open-group unfunded obligations. The Trustees express these measures as percentages of taxable payroll, as percentages of gross domestic product (GDP), or in dollars. The Trustees also present summary measures over the infinite horizon in appendix F. The infinite horizon values provide an additional indication of Social Security’s very-long-run financial condition.
The Trustees also apply a test of long-range close actuarial balance each year. To satisfy the test, a trust fund must meet two conditions: (1) the trust fund satisfies the test of short-range financial adequacy, and (2) the trust fund ratio stays above zero throughout the 75-year projection period, such that benefits would be payable in a timely manner throughout the period. The OASI, DI, and combined OASI and DI Trust Funds all fail the test of long-range close actuarial balance under the intermediate assumptions.
Annual Income Rates, Cost Rates, and Balances
Figure II.D2 illustrates the year-by-year relationship among OASDI income (excluding interest), cost (including scheduled benefits), and expenditures (including payable benefits) for the full 75-year period (2019 through 2093). The figure shows all values as percentages of taxable payroll. Under the intermediate assumptions, demographic factors would by themselves cause the projected cost rate to rise rapidly for the next two decades before leveling off in about 2040. However, the most recent recession temporarily depressed taxable earnings and increased the number of beneficiaries, which in turn sharply, but temporarily, increased the cost rate starting in 2009. From a peak in 2013, the cost rate declined through 2017 under the economic recovery and thereafter returns to a gradually rising trend. The projected income rate is stable at about 13 percent throughout the 75-year period.
Annual OASDI cost has exceeded non-interest income every year beginning with 2010. The Trustees project that cost will continue to exceed non-interest income throughout the 75-year valuation period. Beginning in 2020, cost is projected to exceed total income, and combined OASI and DI Trust Fund reserves diminish until they become depleted in 2035. After trust fund reserve depletion, continuing income is sufficient to support expenditures at a level of 80 percent of program cost for the rest of 2035, declining to 75 percent for 2093. Figure II.D2 depicts OASDI operations as a combined whole. However, under current law, the differences between scheduled and payable benefits would begin at different times for the program’s two trust funds: in 2034 for OASI and in 2052 for DI.
 Figure II.D3 shows the estimated number of covered workers per OASDI beneficiary. Figures II.D2 and II.D3 illustrate the inverse relationship between cost rates and the number of workers per beneficiary. In particular, the projected future increase in the cost rate reflects a projected decline in the number of covered workers per beneficiary. There were about 2.8 workers for every OASDI beneficiary in 2018. This ratio had been stable, remaining between 3.2 and 3.4 from 1974 through 2008, and has declined since then due to the most recent economic recession and the beginning of the demographic shift that will continue to drive this ratio down over the next 20 years. The ratio of workers to beneficiaries will continue to decline due to this demographic shift ,  as workers of lower-birth-rate generations replace workers of the baby-boom generation. The ratio of workers to beneficiaries reaches 2.2 by 2035 when the baby-boom generation will have largely retired, and will generally decline very gradually thereafter due to increasing longevity.
Figure II.D3.—Number of Covered Workers Per OASDI Beneficiary
Another important way to look at Social Security’s future is to view its annual cost and non-interest income as a share of U.S. economic output (GDP). As shown in figure II.D4, Social Security’s cost as a percent of GDP is projected to grow from 4.9 percent in 2019 to about 5.9 percent by 2039, then decline to 5.8 percent by 2052, and generally increase thereafter to 6.0 percent by 2093. Social Security’s non-interest income is projected to rise from 4.6 percent of GDP in 2019 to 4.8 percent by 2029. Thereafter, non-interest income as a percent of GDP declines gradually, to about 4.6 percent by 2093, because the Trustees expect the share of employee compensation provided as noncovered fringe benefits to increase gradually.
Trust Fund Ratios
The trust fund ratio is defined as the asset reserves at the beginning of a year expressed as a percentage of the cost during the year. The trust fund ratio thus represents the proportion of a year’s cost which could be paid solely with the reserves at the beginning of the year. Table II.D1 displays the projected maximum trust fund ratios during the long-range period for the OASI, DI, and combined OASI and DI funds. The table also shows the year of maximum projected trust fund ratio during the long-range projection period (2019 through 2093) and the year of trust fund asset reserve depletion. Trust fund ratios for OASI and OASDI are projected to decline from their current levels until reserve depletion. For DI, the trust fund ratio is projected to rise to 91 in 2037, then decline until reserve depletion.
Projected year of trust fund reserve depletion
Summary Measures
The actuarial balance is a summary measure of the program’s financial status through the end of the 75-year valuation period. The actuarial balance measure includes the trust fund asset reserves at the beginning of the period, all cost and income during the valuation period, and the cost of reaching a target trust fund reserve of one year’s cost by the end of the period. Therefore, the actuarial balance is essentially the difference between the present values of income and cost from 1937 through the end of the valuation period. Actuarial balance is expressed as a percentage of the taxable payroll for the 75-year valuation period. A negative actuarial balance is called an actuarial deficit. The actuarial deficit represents the average amount of change in income or cost that is needed throughout the valuation period in order to achieve actuarial balance.
In this report, the actuarial deficit for the combined OASI and DI Trust Funds under the intermediate assumptions is 2.78 percent of taxable payroll. The actuarial deficit was 2.84 percent in the 2018 report. If the assumptions, methods, starting values, and the law had all remained unchanged from last year, the actuarial deficit would have increased to 2.90 percent of payroll solely due to advancing the valuation period by 1 year.
Another way to illustrate the projected financial shortfall of the OASDI program is to examine the cumulative present value of scheduled income less cost. Figure II.D5 shows the present value of cumulative OASDI income less cost from the inception of the program through each of the years from 2018 to 2093. A positive value represents the present value of trust fund reserves at the end of the selected year. A negative value is the unfunded obligation through the selected year. The asset reserves of the combined trust funds were $2.9 trillion at the end of 2018. The combined trust fund reserves decline on a present value basis after 2018, but remain positive through 2034. However, after 2034 this cumulative amount becomes negative, which means that the combined OASI and DI Trust Funds have a net unfunded obligation through each year after 2034. Through the end of 2093, the combined funds have a present-value unfunded obligation of $13.9 trillion. If the assumptions, methods, starting values, and the law had all remained unchanged from last year, the unfunded obligation would have risen to about $13.7 trillion due to the change in the valuation date.
This unfunded obligation represents 2.61 percent of taxable payroll (decreased from 2.68 percent in last year’s report) and 0.9 percent of GDP (decreased from 1.0 percent in last year’s report) for the 75-year valuation period. The unfunded obligation as a share of taxable payroll (2.61 percent) and the actuarial deficit (2.78 percent) are similar measures, but differ because the actuarial deficit includes the cost of having an ending trust fund reserve equal to one year’s cost.
Figures II.D2, II.D4, and II.D5 show that the program’s financial condition is worsening at the end of the projection period. Trends in annual balances and cumulative values toward the end of the 75-year period provide an indication of the program’s ability to maintain solvency beyond 75 years. Consideration of summary measures alone for a 75‑year period can lead to incorrect perceptions and to policy prescriptions that do not achieve sustainable solvency.1
Appendix F presents summary measures over the infinite horizon. The infinite horizon values provide an additional indication of Social Security’s financial condition for the period beginning with the inception of the program and extending indefinitely into the future, but results are subject to much greater uncertainty. Extending the horizon beyond 75 years increases the measured unfunded obligation. Through the infinite horizon, the unfunded obligation, or shortfall, is equivalent to 4.1 percent of future taxable payroll or 1.4 percent of future GDP.
Uncertainty of the Projections
Significant uncertainty surrounds the intermediate assumptions. The Trustees use several methods to help illustrate that uncertainty.
A first approach uses alternative scenarios reflecting low-cost (alternative I) and high-cost (alternative III) sets of assumptions. Figure II.D6 shows the projected trust fund ratios for the combined OASI and DI Trust Funds under the intermediate, low-cost, and high-cost assumptions. The figure indicates that the combined trust funds are projected to become depleted in 2035 under the intermediate alternative, remain above 100 percent of annual cost throughout the projection period under the low-cost alternative, and become depleted in 2030 under the high-cost alternative. The low-cost alternative includes a higher ultimate total fertility rate, slower improvement in mortality, a higher real-wage differential, a higher ultimate real interest rate, a higher ultimate annual change in the CPI, and a lower unemployment rate. The high-cost alternative, in contrast, includes a lower ultimate total fertility rate, more rapid improvement in mortality, a lower real-wage differential, a lower ultimate real interest rate, a lower ultimate annual change in the CPI, and a higher unemployment rate. These alternatives are not intended to suggest that all parameters would be likely to differ from the intermediate values in the specified directions, but are intended to illustrate the effect of clearly defined scenarios that are, on balance, very favorable or unfavorable for the program’s financial status. Actual future costs are unlikely to be as extreme as those portrayed by the low-cost or high-cost projections. The method for constructing the low-cost and high-cost projections does not lend itself to estimating the probability that actual experience will lie within or outside the range they define.
Appendix D of this report presents long-range sensitivity analysis for the OASDI program. By varying one parameter at a time, sensitivity analysis provides a second approach for illustrating the uncertainty surrounding projections into the future.
A third approach uses 5,000 independently generated stochastic simulations that reflect randomly assigned annual values for most of the key parameters. These simulations produce a distribution of projected outcomes and corresponding probabilities that future outcomes will fall within or outside a given range. The results of the stochastic simulations, discussed in more detail in appendix E, suggest that trust fund reserve depletion (i.e., the point at which the trust fund ratio reaches zero) is very likely by mid-century. In particular, figure II.D7 suggests that based on these stochastic simulations, trust fund asset reserves will become depleted between 2031 and 2044 with a 95‑percent confidence.
The stochastic results suggest that trust fund ratios as high as the low-cost alternative are very unlikely. However, the relationship between the stochastic results and the low-cost and high-cost alternatives may change as the methodology for the stochastic simulations is further developed. As noted in appendix E, future improvements and refinements are expected to be more likely to expand than to reduce the indicated range of uncertainty.
Changes From Last Year’s Report
The projected long-range OASDI actuarial deficit decreased from 2.84 percent of taxable payroll for last year’s report to 2.78 percent of taxable payroll for this year’s report. The change in the 75-year projection period alone would have increased the actuarial deficit to 2.90 percent. Changes in law, methods, starting values, and assumptions combined to decrease the actuarial deficit by 0.11 percent of taxable payroll. For a detailed description of the specific changes identified in table II.D2, see section IV.B.6.
Valuation period a

The change in the 75-year valuation period from last year’s report to this report means that the 75-year actuarial balance now includes the relatively large negative annual balance for 2093. This change in the valuation period results in a larger long-range actuarial deficit. The actuarial deficit includes the trust fund reserve at the beginning of the projection period.

Note: Totals do not necessarily equal the sums of rounded components.
Figure II.D8 compares this year’s projections of annual balances (non-interest income minus cost) to those in last year’s report. The annual balances in this year’s report are higher (less negative) throughout the 75-year projection period. For the full 75-year projection period, the annual balances average 0.18 percentage point higher. See page 78 for details.

Sustainable solvency for the financing of the program under a specified set of assumptions has been achieved when the projected trust fund ratio is positive throughout the 75-year projection period and is either stable or rising at the end of the period.

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