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:

• 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.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.

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/.

Between -0.005 and 0.005 percent of taxable payroll.

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