Description of Proposed Provisions:
Provisions Affecting Trust Fund Investment in Equities
Estimates based on the intermediate assumptions of
the 2018 Trustees Report
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Change from current law [percent of payroll] |
Shortfall eliminated | |||||
---|---|---|---|---|---|---|
Long-range actuarial balance |
Annual balance in 75th year |
Long-range actuarial balance |
Annual balance in 75th year |
|||
Current law shortfall in long-range actuarial balance is 2.84 percent of payroll and in annual balance for the 75th year is 4.32 percent of payroll. | ||||||
G1 |
Invest 40 percent of the OASI and DI Trust Fund reserves in equities (phased in
2019-2033), assuming an ultimate 6.2 percent annual real rate of return
on equities.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
0.51* | 0.00 | * | 0% | |
G2 |
Invest 40 percent of the OASI and DI Trust Fund reserves in equities (phased in
2019-2033), assuming an ultimate 5.2 percent annual real rate of return on
equities.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
0.38* | 0.00 | * | 0% | |
G3 |
Invest 40 percent of the OASI and DI Trust Fund reserves in equities (phased in
2019-2033), assuming an ultimate 2.7 percent annual real rate of return on
equities. Thus, the ultimate rate of return on equities is the same as that
assumed for Trust Fund bonds.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
0.00* | 0.00 | * | 0% | |
G4 |
Invest 15 percent of the OASI and DI Trust Fund reserves in equities (phased in
2019-2028), assuming an ultimate 6.2 percent annual real rate of return
on equities.
graph | table | pdf-graph | pdf-table | memo (AARP) |
0.21* | 0.00 | * | 0% | |
G5 |
Invest 15 percent of the OASI and DI Trust Fund reserves in equities (phased in
2019-2028), assuming an ultimate 2.7 percent annual real rate of return on
equities. Thus, the ultimate rate of return on equities is the same as that
assumed for Trust Fund bonds.
graph | table | pdf-graph | pdf-table | memo (AARP) |
0.00* | 0.00 | * | 0% | |
G6 |
Invest 25 percent of the OASI and DI Trust Fund reserves in equities (phased in
2021-2030), assuming an ultimate 6.2 percent annual real rate of return
on equities.
graph | table | pdf-graph | pdf-table | memo (Larson 2014) |
0.33* | 0.00 | * | 0% | |
G7 |
Invest 25 percent of the OASI and DI Trust Fund reserves in equities (phased in
2021-2030), assuming an ultimate 2.7 percent annual real rate of return on
equities. Thus, the ultimate rate of return on equities is the same as that
assumed for Trust Fund bonds.
graph | table | pdf-graph | pdf-table | memo (Larson 2014) |
0.00* | 0.00 | * | 0% | |
* A change in the investment of trust fund reserves to include some equities affects the size of all summarized measures because increased "present-value" discounting reduces the weight on values for more distant future years. As a result, the magnitude of the current-law actuarial balance and the summarized effects of most proposals is reduced. Therefore, the size of the change in the long-range actuarial balance indicated here cannot be interpreted directly as a reduction in the shortfall. The actual reduction in the shortfall from equity investment depends on the amount of reserves that are available for investment throughout the period. For example, if provisions to change revenue or scheduled benefits resulted in a purely pay-as-you-go system (reserves just above zero throughout the period), then investment in equities would have no effect on the actuarial balance. |