2022 OASDI Trustees Report

II. OVERVIEW

A. HIGHLIGHTS

This section summarizes the report’s major findings.

Readers of this report should note that the data and projections presented include the Trustees’ best estimates of the effects of the COVID-19 pandemic. The pandemic is projected to have continuing significant effects on the OASI and DI programs in the near term, and the future course of the pandemic is uncertain. However, the economic recovery from the brief recession in 2020 has been stronger and faster than assumed in last year’s report. On balance, the projected long-range actuarial status of the OASI and DI Trust Funds has been little changed by the effects of the pandemic and ensuing recession, considering both the effects realized to date and those yet expected. The Trustees will continue to monitor developments and modify the projections in later reports.

In 2021

At the end of 2021, the OASDI program was providing benefit payments¹ to about 65 million people: 50 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 9 million disabled workers and dependents of disabled workers. During the year, an estimated 179 million people had earnings covered by Social Security and paid payroll taxes on those earnings. The total cost of the program in 2021 was $1,145 billion. Total income was $1,088 billion, which consisted of $1,018 billion in non-interest income and $70 billion in interest earnings. Asset reserves held in special issue U.S. Treasury securities declined from $2,908 billion at the beginning of the year to $2,852 billion at the end of the year. The total cost and change in asset reserves shown for 2021 reflect the twelve months of benefits scheduled for payment, and include the benefits scheduled for payment on January 3, 2021, which were actually paid on December 31, 2020 as required by the law.²

Short-Range Results (2022-31)

Under the Trustees’ intermediate assumptions, Social Security’s total cost is projected to be higher than its total income in 2022 and all later years. Total cost began to be higher than total income in 2021. Social Security’s cost has exceeded its non-interest income since 2010.

To illustrate the actuarial status of the Social Security program as a whole, the operations of the OASI and DI Trust Funds are often shown on a combined basis as OASDI. However, by law, the two funds are separate entities and therefore the combined fund operations and reserves are hypothetical. The combined reserves are projected to decrease from $2,852 billion at the beginning of 2022 to $1,251 billion at the end of 2031, the last year of the short-range period.

The reserves of the combined OASI and DI Trust Funds along with projected program income are sufficient to cover projected program cost over the next 10 years under the intermediate assumptions. However, the ratio of reserves to annual cost is projected to decline from 230 percent at the beginning of 2022 to 74 percent at the beginning of 2031. Because this ratio falls below 100 percent by the beginning of the 10th projection year, the combined OASI and DI Trust Funds fail the Trustees’ test of short-range financial adequacy. Considered separately, the OASI Trust Fund fails this test, but the DI Trust Fund satisfies the test. For last year’s report, the Trustees projected that combined reserves would be 231 percent of annual cost at the beginning of 2022 and 66 percent at the beginning of 2031.

Long-Range Results (2022-96)

Under the Trustees’ intermediate assumptions, OASDI cost is projected to exceed total income in 2022, and the dollar level of the hypothetical combined trust fund reserves declines until reserves become depleted in 2035. Figure II.D2 shows the implications of reserve depletion for the combined OASI and DI Trust Funds. Considered separately, the OASI Trust Fund reserves become depleted in 2034, and, for the first time since the 1983 Trustees Report, the DI Trust Fund reserves do not become depleted within the 75-year long-range projection period.³ In last year’s report, the projected reserve depletion years were 2034 for OASDI, 2033 for OASI, and 2057 for DI. The level of DI reserves is very sensitive to changes in program cash flows and interest.

The DI program continues to have low levels of disability applications and benefit awards for 2021. Disability applications have declined substantially since 2010, and the total number of disabled-worker beneficiaries in current payment status has been falling since 2014. For this report, disability applications are assumed to rise gradually from current low levels, resulting in a rise in the age-sex-adjusted disability incidence rate to an ultimate rate of 4.8 per thousand exposed by the end of the short-range projection period. The ultimate disability incidence rate was lowered from the rate of 5.0 per thousand that was assumed in last year’s report.

OASDI cost has been generally increasing much more rapidly than non-interest income since 2008 and is projected to continue to do so through about 2040. In this period, the retirement of the baby-boom generation is increasing the number of beneficiaries much faster than the increase in the number of covered workers, as subsequent lower-birth-rate generations replace the baby-boom generation at working ages. Between about 2040 and 2055, OASDI cost and non-interest income are projected to generally increase at more similar rates as the cost rate (the ratio of program cost to taxable payroll) roughly stabilizes, reflecting the return to birth rates above 2 children per woman between 1990 and 2008. Between 2055 and 2078, OASDI cost is projected to grow significantly faster than income because of the period of historically low birth rates starting with the recession of 2007‑09. From 2078 to 2096, cost is projected to grow somewhat slower than income, as birth rates return to a level of 2 children per woman for 2056 and thereafter.

Over the 75-year long-range period 2022-96, the projected OASDI annual cost rate increases from 14.05 percent of taxable payroll for 2022 to 18.32 percent for 2078, and then decreases to 17.64 percent for 2096. The projected cost rate for 2096 is 4.25 percent of taxable payroll more than the projected income rate (the ratio of non-interest income to taxable payroll) for 2096. For last year’s report, the Trustees estimated the OASDI cost for 2096 at 17.70 percent, or 4.35 percent of payroll more than the annual income rate for that year. Expressed in relation to the projected gross domestic product (GDP), OASDI cost generally rises from 5.0 percent of GDP for 2022 to a peak of about 6.2 percent for 2077, and then declines to 5.9 percent by 2096.

The actuarial deficit is 3.42 percent of taxable payroll for the 75-year projection period through 2096, decreased from 3.54 percent of taxable payroll for the 75-year projection period through 2095 in last year’s report. The closely-related open-group unfunded obligation for OASDI is 3.24 percent of taxable payroll over the 75-year projection period through 2096, decreased from 3.35 percent of payroll over the 75-year projection period through 2095 in last year’s report. The open-group unfunded obligation for OASDI is $20.4 trillion in present value over the 75-year projection period through 2096 and is $0.6 trillion more than the measured level of $19.8 trillion over the 75-year projection period through 2095 in last year’s report. The actuarial deficit rounds to 1.2 percent and the unfunded obligation rounds to 1.1 percent of GDP over the 75-year projection period through 2096, compared to 1.2 percent for each over the 75-year projection period through 2095 in last year’s report.

If the assumptions, methods, starting values, and the law had all remained unchanged, the actuarial deficit would have increased to 3.59 percent of taxable payroll, and the unfunded obligation would have risen to 3.41 percent of taxable payroll and $20.6 trillion in present value due to the change in the valuation date and the extension of the valuation period through an additional year, 2096. The actuarial deficit decreased significantly in this year’s report due to favorable recent experience and changes in assumptions described in detail in section IV.B.6 of this report.

To illustrate the magnitude of the 75-year actuarial deficit, consider that for the combined OASI and DI Trust Funds to remain fully solvent throughout the 75-year projection period ending in 2096: (1) revenue would have to increase by an amount equivalent to an immediate and permanent payroll tax rate increase of 3.24 percentage points⁴ to 15.64 percent beginning in January 2022; (2) scheduled benefits would have to be reduced by an amount equivalent to an immediate and permanent reduction of 20.3 percent applied to all current and future beneficiaries effective in January 2022, or 24.1 percent if the reductions were applied only to those who become initially eligible for benefits in 2022 or later; or (3) some combination of these approaches would have to be adopted.

If substantial actions are deferred for several years, the changes necessary to maintain Social Security solvency would be concentrated on fewer years and fewer generations. Significantly larger changes would be necessary if action is deferred until the combined trust fund reserves become depleted in 2035. For example, maintaining 75-year solvency through 2096 with changes that begin in 2035 would require: (1) an increase in revenue by an amount equivalent to a permanent 4.07 percentage point payroll tax rate increase to 16.47 percent starting in 2035, (2) a reduction in scheduled benefits by an amount equivalent to a permanent 24.9 percent reduction in all benefits starting in 2035, or (3) some combination of these approaches.

Conclusion

Under the intermediate assumptions, the projected hypothetical combined OASI and DI Trust Fund asset reserves become depleted and unable to pay scheduled benefits in full on a timely basis in 2035. At the time of depletion of these combined reserves, continuing income to the combined trust funds would be sufficient to pay 80 percent of scheduled benefits. The OASI Trust Fund reserves are projected to become depleted in 2034, at which time OASI income would be sufficient to pay 77 percent of OASI scheduled benefits. DI Trust Fund asset reserves are not projected to become depleted during the 75-year period ending in 2096.

Lawmakers have a broad continuum of policy options that would close or reduce Social Security's long-term financing shortfall. Cost estimates for many such policy options are available at
www.ssa.gov/OACT/solvency/provisions/.

The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them. Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits. Social Security will play a critical role in the lives of 66 million beneficiaries and 182 million covered workers and their families during 2022. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.

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1

The definitions of “benefit payments” and other terms appear in the Glossary.

2

Benefit payments which were scheduled to be paid on January 3, 2021 were actually paid on December 31, 2020 as required by the statutory provision for early delivery of benefit payments when the normal delivery date is a Saturday, Sunday, or public legal holiday. The amount of these payments was approximately $18.7 billion for the OASI Trust Fund and $6.1 billion for the DI Trust Fund. For comparability with the values for historical years and the projections in this report, all trust fund operations and asset reserves reflect the 12 months of benefits scheduled for payment each year.

3

If the OASI Trust Fund reserves were to become depleted in 2034 as is currently projected, the operations of the hypothetical combined OASI and DI Trust Funds would not reflect the aggregated operation of the OASI Trust Fund and the DI Trust Fund because part of the OASI benefits could not be paid without a change in the law. The values shown for the hypothetical combined trust funds assume the law will have been changed to permit the transfer of resources between funds as needed.

4

The 3.24 percentage point increase in the payroll tax rate required to achieve 75-year solvency through 2096 differs somewhat from the 3.42 percent actuarial deficit. This is primarily because the rate increase required to achieve 75-year solvency reflects a zero trust fund reserve at the end of the period in 2096, whereas the 3.42 percent actuarial deficit incorporates an ending trust fund reserve equal to one year’s cost. While such an increase in the payroll tax rate would cause some behavioral changes in earnings and ensuing changes in benefit levels, such changes are not included in these calculations because they are assumed to have roughly offsetting effects on OASDI actuarial status over the 75-year long-range period as a whole.