1997 OASDI Trustees Report

Long-range estimates are subject to much uncertainty and should not be considered precise forecasts. Instead they should be considered as indicative of the general trend and range of costs that could reasonably be expected to occur. The emphasis in this appendix on combined operations, while significant, should not obscure the analysis of the financial status of the individual trust funds, which are legally separate and cannot be commingled. In addition, the factors which determine the costs of the OASI, DI, and HI programs differ substantially.

As with the OASI and DI Trust Funds, income to the HI Trust Fund comes primarily from contributions paid by employees, employers, and self-employed persons. The combined OASDI and HI contribution rate for employees and their employers is often referred to as the FICA tax, because it is authorized by the Federal Insurance Contributions Act. Contribution rates for the OASDI and HI programs are shown in table III.A1.

Table III.A1.­ Contribution Rates for the OASDI and HI Programs [In percent]
Calendar years	Employees and employers, each				Self employed
	OASDI	HI	Combined		OASDI	HI	Combined
1966	3.85	0.35	4.20		5.80	0.35	6.15
1967	3.90	.50	4.40		5.90	.50	6.40
1968	3.80	.60	4.40		5.80	.60	6.40
1969-70	4.20	.60	4.80		6.30	.60	6.90
1971-72	4.60	.60	5.20		6.90	.60	7.50
1973	4.85	1.00	5.85		7.00	1.00	8.00
1974-77	4.95	.90	5.85		7.00	.90	7.90
1978	5.05	1.00	6.05		7.10	1.00	8.10
1979-80	5.08	1.05	6.13		7.05	1.05	8.10
1981	5.35	1.30	6.65		8.00	1.30	9.30
1982-83	5.40	1.30	6.70		8.05	1.30	9.35
1984 1/	5.70	1.30	7.00		11.40	2.60	14.00
1985	5.70	1.35	7.05		11.40	2.70	14.10
1986-87	5.70	1.45	7.15		11.40	2.90	14.30
1988-89	6.06	1.45	7.51		12.12	2.90	15.02
1990 and later	6.20	1.45	7.65		12.40	2.90	15.30
1 See footnote 1 under table II.B1 in the section entitled "Description of the Trust Funds" for a description of tax credits allowed against the combined OASDI and HI taxes on net earnings from self-employment in 1984-89.

Table III.A2 shows estimated annual income rates and cost rates for the OASDI program, the HI program, and the combined OASDI and HI programs, based on the low cost, intermediate, and high cost sets of assumptions (alternatives I, II, and III) described earlier in this report. These annual rates are intended to indicate the cash-flow operation of the programs. Therefore, income rates exclude interest earned on trust fund assets and cost rates exclude the cost of accumulating or maintaining target trust fund balances. Table III.A2 also shows the difference between income rates and cost rates, called balances. Estimates shown for the combined trust funds are theoretical because no authority currently exists for transferring assets from one trust fund to another.

Under all three sets of assumptions, combined OASDI and HI cost rates are projected to rise above current levels, with the sharpest increase occurring during the period 2010-30. Under the high cost set of assumptions, alternative III, annual deficits are projected to occur beginning in 1998, and to continue for the remainder of the 75-year projection period. Cost rates are projected to rise to over three times their current level by the end of the projection period. Under the intermediate assumptions, alternative II, annual deficits begin in the year 2000, with cost rates doubling by the end of the projection period. Under the low cost assumptions, alternative I, cost rates are projected to increase by about 33 percent, with annual deficits beginning by the year 2015.

Table III.A2.­ Comparison of Estimated Income Rates and Cost Rates 1/ for OASDI and HI by Alternative, Calendar Years 1997-2070 [As a percentage of taxable payroll 1/]
Calendar year	OASDI				HI				Combined
	Income rate	Cost rate	Balance		Income rate	Cost rate	Balance		Income rate	Cost rate	Balance
Intermediate:
1997	12.63	11.49	1.14		3.01	3.57	-0.56		15.64	15.06	0.58
1998	12.63	11.61	1.02		3.01	3.72	-.71		15.64	15.33	.31
1999	12.64	11.68	.95		3.01	3.84	-.83		15.65	15.53	.12
2000	12.64	11.73	.91		3.02	3.96	-.95		15.65	15.69	-.03
2001	12.65	11.77	.88		3.02	4.08	-1.07		15.67	15.85	-.18
2002	12.66	11.83	.83		3.02	4.20	-1.18		15.68	16.03	-.35
2003	12.66	11.87	.79		3.03	4.32	-1.29		15.69	16.19	-.50
2004	12.67	11.93	.74		3.03	4.43	-1.40		15.70	16.36	-.66
2005	12.67	11.98	.70		3.03	4.53	-1.49		15.71	16.51	-.80
2006	12.68	12.03	.65		3.04	4.63	-1.59		15.72	16.66	-.94
2010	12.73	12.48	.26		3.06	5.08	-2.02		15.79	17.55	-1.76
2015	12.82	13.62	-.80		3.10	5.82	-2.71		15.92	19.44	-3.51
2020	12.92	15.14	-2.22		3.16	6.74	-3.59		16.07	21.88	-5.81
2025	13.01	16.53	-3.51		3.21	7.70	-4.49		16.22	24.23	-8.01
2030	13.09	17.47	-4.38		3.25	8.63	-5.38		16.34	26.10	-9.76
2035	13.14	17.84	-4.70		3.28	9.37	-6.09		16.42	27.21	-10.79
2040	13.16	17.78	-4.61		3.30	9.86	-6.56		16.46	27.64	-11.18
2045	13.18	17.78	-4.60		3.31	10.17	-6.86		16.49	27.95	-11.46
2050	13.21	17.97	-4.76		3.33	10.36	-7.04		16.54	28.33	-11.80
2055	13.25	18.36	-5.11		3.35	10.54	-7.19		16.59	28.89	-12.30
2060	13.28	18.72	-5.45		3.36	10.80	-7.44		16.64	29.53	-12.88
2065	13.30	18.97	-5.67		3.38	11.13	-7.75		16.68	30.10	-13.42
2070	13.32	19.18	-5.86		3.39	11.50	-8.11		16.71	30.68	-13.97
Low Cost:
1997	12.63	11.38	1.24		3.01	3.51	-.50		15.63	14.89	.74
1998	12.63	11.36	1.26		3.01	3.60	-.59		15.63	14.97	.67
1999	12.63	11.30	1.33		3.01	3.67	-.66		15.64	14.97	.67
2000	12.61	11.21	1.40		3.01	3.73	-.72		15.62	14.94	.68
2001	12.64	11.13	1.50		3.01	3.79	-.78		15.65	14.92	.73
2002	12.64	11.05	1.59		3.02	3.84	-.83		15.66	14.90	.76
2003	12.64	10.97	1.68		3.02	3.90	-.88		15.66	14.86	.80
2004	12.65	10.92	1.73		3.02	3.94	-.92		15.67	14.86	.81
2005	12.65	10.86	1.79		3.02	3.97	-.95		15.67	14.84	.84
2006	12.65	10.82	1.84		3.03	4.01	-.98		15.68	14.82	.86
2010	12.69	11.02	1.67		3.04	4.16	-1.11		15.73	15.18	.55
2015	12.76	11.95	.81		3.08	4.43	-1.36		15.84	16.38	-.55
2020	12.84	13.18	-.34		3.12	4.78	-1.66		15.96	17.96	-2.00
2025	12.91	14.20	-1.29		3.16	4.99	-1.83		16.07	19.19	-3.12
2030	12.97	14.73	-1.76		3.19	5.18	-1.99		16.16	19.91	-3.76
2035	12.99	14.70	-1.70		3.21	5.32	-2.11		16.20	20.02	-3.81
2040	13.00	14.27	-1.27		3.22	5.40	-2.19		16.22	19.68	-3.46
2045	13.00	13.93	-.93		3.22	5.49	-2.27		16.22	19.43	-3.21
2050	13.01	13.76	-.75		3.23	5.59	-2.37		16.24	19.36	-3.12
2055	13.02	13.75	-.72		3.23	5.68	-2.44		16.26	19.43	-3.17
2060	13.03	13.69	-.66		3.24	5.82	-2.57		16.28	19.51	-3.23
2065	13.04	13.56	-.52		3.24	5.99	-2.75		16.28	19.55	-3.27
2070	13.04	13.46	-.41		3.25	6.20	-2.96		16.29	19.66	-3.37
High Cost:
1997	12.63	11.58	1.05		3.01	3.71	-.70		15.64	15.29	.35
1998	12.64	12.09	.55		3.01	3.98	-.96		15.65	16.07	-.42
1999	12.64	12.04	.60		3.02	4.13	-1.11		15.66	16.17	-.51
2000	12.67	12.24	.44		3.02	4.27	-1.25		15.69	16.51	-.82
2001	12.67	12.96	-.28		3.03	4.57	-1.54		15.70	17.53	-1.83
2002	12.68	13.01	-.33		3.03	4.74	-1.70		15.71	17.75	-2.03
2003	12.69	13.06	-.37		3.04	4.91	-1.88		15.72	17.97	-2.25
2004	12.69	13.14	-.45		3.04	5.11	-2.07		15.73	18.25	-2.52
2005	12.70	13.27	-.57		3.04	5.30	-2.25		15.75	18.57	-2.82
2006	12.71	13.42	-.71		3.05	5.49	-2.44		15.76	18.91	-3.15
2010	12.78	14.12	-1.34		3.08	6.40	-3.31		15.86	20.52	-4.66
2015	12.89	15.49	-2.60		3.14	7.94	-4.80		16.03	23.43	-7.41
2020	13.01	17.38	-4.37		3.20	9.98	-6.78		16.21	27.36	-11.15
2025	13.13	19.25	-6.12		3.27	12.49	-9.22		16.40	31.74	-15.34
2030	13.24	20.79	-7.55		3.33	15.08	-11.75		16.57	35.87	-19.30
2035	13.33	21.81	-8.49		3.37	17.29	-13.92		16.70	39.11	-22.40
2040	13.39	22.44	-9.05		3.41	18.78	-15.37		16.79	41.21	-24.42
2045	13.44	23.15	-9.71		3.44	19.62	-16.18		16.88	42.77	-25.89
2050	13.50	24.07	-10.57		3.47	19.97	-16.50		16.98	44.05	-27.07
2055	13.58	25.29	-11.71		3.52	20.28	-16.76		17.10	45.56	-28.46
2060	13.66	26.55	-12.88		3.56	20.77	-17.20		17.23	47.31	-30.09
2065	13.74	27.68	-13.94		3.60	21.40	-17.80		17.34	49.07	-31.74
2070	13.80	28.71	-14.90		3.64	22.16	-18.52		17.44	50.86	-33.42
1 The taxable payroll for HI is significantly larger than the taxable payroll for OASDI because the HI taxable maximum amount was eliminated beginning 1994, and because HI covers all Federal civilian employees, including those hired before 1984, all State and local government employees hired after April 1, 1986, and railroad employees. Combined OASDI and HI rates are computed as the sum of the separately derived rates for each program. Notes: 1. The income rate excludes interest income and certain transfers from the general fund of the Treasury. 2. Totals do not necessarily equal the sums of rounded components.

Tables III.A3 and III.A4 show the estimates of summarized OASDI and HI income rates, cost rates and balances for various time periods, based on all three sets of assumptions. In table III.A3 values are summarized over the three 25-year subperiods (excluding the beginning fund balances and the cost of accumulating ending fund targets). In table III.A4 values are summarized over the 25-year, 50-year, and 75-year valuation periods (for which beginning fund balances are included in the summarized income rates, and the costs of accumulating an ending fund balance equal to 100 percent of annual expenditures by the end of the period are included in the summarized cost rates). Estimates shown for the combined trust funds are theoretical because no authority currently exists for transferring assets from one trust fund to another.

Table III.A3.­ Comparison of Summarized Income Rates and Cost Rates 1/ for 25-Year Subperiods 2/, for OASDI and HI by Alternative, Calendar Years 1997-2071 [As a percentage of taxable payroll 1/]
Subperiod	OASDI				HI				Combined
	Income rate	Cost rate	Balance		Income rate	Cost rate	Balance		Income rate	Cost rate	Balance
Intermediate:
1997-2021	12.72	12.76	-0.04		3.06	5.00	-1.94		15.78	17.76	-1.98
2022-2046	13.08	17.41	-4.33		3.26	8.91	-5.65		16.34	26.32	-9.98
2047-2071	13.24	18.62	-5.38		3.35	10.77	-7.41		16.59	29.39	-12.79
Low Cost:
1997-2021	12.68	11.55	1.13		3.05	4.13	-1.08		15.73	15.68	.05
2022-2046	12.95	14.42	-1.47		3.19	5.23	-2.04		16.14	19.65	-3.51
2047-2071	13.01	13.74	-.73		3.24	5.81	-2.57		16.25	19.55	-3.30
High Cost:
1997-2021	12.77	14.17	-1.41		3.08	6.36	-3.27		15.85	20.53	-4.68
2022-2046	13.26	21.20	-7.95		3.35	15.98	-12.63		16.61	37.18	-20.58
2047-2071	13.61	26.14	-12.52		3.54	20.71	-17.17		17.15	46.85	-29.69
1 The taxable payroll for HI is significantly larger than the taxable payroll for OASDI because the HI taxable maximum amount was eliminated beginning 1994, and because HI covers all Federal civilian employees, including those hired before 1984, all State and local government employees hired after April 1, 1986, and railroad employees. Combined OASDI and HI rates are computed as the sum of the separately derived rates for each program. 2 For 25-year subperiods, income rates do not include beginning trust fund balances and cost rates do not include the cost of reaching ending fund targets. Note: Totals do not necessarily equal the sums of rounded components.

Under the high cost alternative III, the combined OASDI and HI system is projected to experience large deficits during the 25-year, 50-year, and 75-year valuation periods (including beginning trust fund balances and the cost of ending fund targets). Deficits are projected to occur during each 25-year subperiod of the 75-year projection period (excluding beginning trust fund balances and the cost of ending fund targets). Under intermediate alternative II assumptions, deficits of smaller magnitude than those for the high cost alternative III are projected to occur for each of the three 25-year subperiods and for each of the three valuation periods. Under the low cost alternative I, the combined OASDI and HI system is projected to show positive balances for the first 25-year subperiod and the 25-year valuation period. Relatively small deficits are projected for the 50-year and 75-year valuation periods and for the second and third 25-year subperiods.

Table III.A4.­ Comparison of Summarized Income Rates and Cost Rates 1/ for Valuation Periods 2/, for OASDI and HI by Alternative, Calendar Years 1997-2071 [As a percentage of taxable payroll 1/]
Valuation period	OASDI				HI				Combined
	Income rate	Cost rate	Balance		Income rate	Cost rate	Balance		Income rate	Cost rate	Balance
Intermediate:
25-years:
1997-2021	13.62	13.28	0.35		3.06	5.08	-2.02		16.68	18.36	-1.67
50-years:
1997-2046	13.41	14.86	-1.45		3.14	6.64	-3.50		16.55	21.50	-4.95
75-years:
1997-2071	13.37	15.60	-2.23		3.19	7.51	-4.32		16.56	23.11	-6.55
Low Cost:
25-years:
1997-2021	13.57	12.00	1.57		3.05	4.14	-1.09		16.62	16.14	.48
50-years:
1997-2046	13.32	12.89	.42		3.11	4.57	-1.46		16.43	17.46	-1.04
75-years:
1997-2071	13.25	13.03	.21		3.14	4.85	-1.71		16.39	17.88	-1.50
High Cost:
25-years:
1997-2021	13.69	14.78	-1.09		3.08	6.57	-3.49		16.77	21.35	-4.58
50-years:
1997-2046	13.51	17.32	-3.81		3.19	10.55	-7.35		16.70	27.87	-11.16
75-years:
1997-2071	13.53	19.07	-5.54		3.27	12.68	-9.41		16.80	31.75	-14.95
1 The taxable payroll for HI is significantly larger than the taxable payroll for OASDI because the HI taxable maximum amount was eliminated beginning 1994, and because HI covers all Federal civilian employees, including those hired before 1984, all State and local government employees hired after April 1, 1986, and railroad employees. Combined OASDI and HI rates are computed as the sum of the separately derived rates for each program. 2 For valuation periods, beginning trust fund balances are included in the income rates for OASDI but are treated as offsets to the cost rates for HI (to be consistent with the treatment of the beginning fund balance in the HI Trustees Report); cost rates for both programs include an ending fund target equal to 100 percent of annual expenditures by the end of the period. Note: Totals do not necessarily equal the sums of rounded components.