2021 OASDI Trustees Report

skip to main content
Table of Contents Previous Next Tables Figures Index

IV. ACTUARIAL ESTIMATES
This chapter presents actuarial estimates of the future financial condition of the Social Security program. These estimates show the income, cost, and asset reserves or unfunded obligation of the OASI and DI Trust Funds: (1) in dollars over the 10‑year short-range period; and (2) as a percentage of taxable payroll, as a percentage of gross domestic product, and in present-value dollars over the 75‑year long-range period. In addition, the chapter discusses a variety of measures of the adequacy of current program financing. This report distinguishes between: (1) the cost (obligations) of the program, which includes all past and future benefits scheduled under current law; and (2) expenditures, which include actual payments for the past plus only the portion of projected program cost that would be payable with the financing provisions in current law.
This chapter presents the estimates and measures of trust fund financial adequacy for the short-range period (2021 through 2030) first, followed by estimates and measures of actuarial status for the long-range period (2021 through 2095). Summary measures are also provided for trust fund status over the infinite horizon. As described in chapter II of this report, these estimates depend upon a broad set of demographic, economic, and programmatic factors. This chapter presents estimates under three sets of assumptions to show a wide range of possible outcomes, because assumptions related to these factors are subject to uncertainty. The intermediate set of assumptions, designated as alternative II, reflects the Trustees’ best estimate of future experience; the low-cost alternative I is significantly more optimistic and the high-cost alternative III is significantly more pessimistic for the trust funds’ future financial outlook. The tables of this report show the intermediate estimates first, followed by the low-cost and high-cost estimates. Chapter V describes these three sets of assumptions, along with the actuarial methods used to produce the estimates. Appendix D and appendix E present two additional methods to illustrate the uncertainty of the projections. Appendix D presents sensitivity analyses of the effects of variation in individual factors and appendix E presents probability distributions generated by a stochastic model.
A. SHORT-RANGE ESTIMATES
The Trustees consider the trust funds to be solvent at any point in time if the funds can pay scheduled benefits in full on a timely basis. A standard measure for assessing solvency is the “trust fund ratio,” which is the reserves in a fund at the beginning of a year (not including advance tax transfers) expressed as a percentage of the cost during the year. A positive trust fund ratio indicates that the trust fund was solvent at the end of the prior year. The trust fund ratio represents the proportion of a year’s cost which the reserves available at the beginning of that year can cover. The Trustees assume that a trust fund ratio of 100 percent of annual program cost provides a reasonable “contingency reserve.” Maintaining a reasonable contingency reserve is important because the trust funds do not have borrowing authority. After reserves are depleted, the trust funds would be unable to pay scheduled benefits in full on a timely basis if annual revenue were less than annual cost. Unexpected events, such as severe economic recessions, can quickly diminish reserves. In such cases, a reasonable contingency reserve can maintain the ability to pay scheduled benefits while giving lawmakers time to address possible changes to the program.
The test of short-range financial adequacy applies to the OASI and DI Trust Funds individually and combined on a hypothetical basis.1 If the estimated trust fund ratio is at least 100 percent at the beginning of the projection period, the test requires that it remain at or above 100 percent throughout the 10-year period. If the ratio is initially less than 100 percent, then it must reach at least 100 percent within 5 years (without reserve depletion at any time during this period) and then remain at or above 100 percent throughout the remainder of the 10-year period. This test is applied using the estimates based on the intermediate assumptions. If either trust fund fails this test, then program solvency in the next 10 years is in question, and lawmakers should take prompt action to improve short-range financial adequacy.
1. Operations of the OASI Trust Fund
This subsection presents projections, based on the assumptions described in chapter V, of the operations and financial status of the OASI Trust Fund for the period 2021 through 2030. These estimates assume that there are no further changes in the statutory provisions and regulations under which the OASDI program currently operates beyond the changes since last year’s report indicated in section III.B.2
Estimates of the OASI Trust Fund operations presented in table IV.A1 indicate that the asset reserves of the OASI Trust Fund are projected to decrease in years 2021 through 2030 under all three sets of assumptions. Trust fund ratios are similarly projected to decline throughout the 10-year projection period under all three sets of assumptions. Based on the intermediate assumptions, the reserves of the OASI Trust Fund drop below 100 percent of annual cost during 2029, to a trust fund ratio of 85 at the beginning of 2030. Consequently, the OASI Trust Fund fails the test of short-range financial adequacy. See figure IV.A1 for an illustration of these results.
Table IV.A1.—Operations of the OASI Trust Fund, Calendar Years 2016-2030a 
Costb
GF
reim-
burse-
mentsc
Taxa-
tion of
bene-fitsd
Trust
fund
ratio e

a
Appendix A presents a detailed description of the components of income and cost, along with complete historical values.

b
Amounts for 2020 and 2021 are adjusted to include in 2021 operations those benefit payments regularly scheduled in the law to be paid on January 3, 2021, which were actually paid on December 31, 2020 as required by the statutory provision for early benefit payments when the normal delivery date is on a weekend or holiday. Such shifts in payments across calendar years have occurred in the past, including in 2016, and will occur periodically in the future whenever January 3rd falls on a Sunday. In order to provide a consistent perspective on trust fund operations over time, all trust fund operations in each year reflect the 12 months of benefits that are regularly scheduled for payment in that year.

c
Includes reimbursements from the General Fund of the Treasury to the OASI Trust Fund for: (1) the cost of payroll tax credits provided to employees in 1984 and self-employed persons in 1984-89 by Public Law 98-21; (2) the cost in 2009-17 of excluding certain self-employment earnings from SECA taxes under Public Law 110-246; and (3) payroll tax revenue forgone under the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.

d
Revenue from taxation of benefits is the amount that would be assessed on benefit amounts scheduled in the law.

e
The “Trust fund ratio” column represents reserves at the beginning of a year (which are identical to reserves at the end of the prior year shown in the “Amount at end of year” column) as a percentage of cost for the year. The trust fund ratio at the beginning of 2031 is projected to be 63 percent for the intermediate, 112 percent for the low-cost, and 15 percent for the high-cost assumptions.

f
Between -$50 million and $50 million.
Note: Components may not sum to totals because of rounding.
 

The estimated income shown in table IV.A1 increases annually after 2021 under each set of assumptions throughout the short-range projection period. The estimated increases in income result primarily from the projected increases in OASDI taxable payroll. Employment increases in years 2021 through 2030 for all three alternatives, with the exception of small decreases in covered employment in 2021 and 2022 for the high-cost alternative: the number of covered workers increases under alternatives I, II, and III from 175 million during calendar year 2020 to about 190 million, 185 million, and 181 million, respectively, in 2030.3 The total annual amount of taxable payroll increases in years 2021 through 2030 for each alternative, with the exception of a small decrease in 2022 for the high-cost alternative. Total taxable payroll increases from $7,705 billion in 2020 to $14,205 billion, $12,021 billion, and $10,245 billion in 2030, on the basis of alternatives I, II, and III, respectively.4 These increases in taxable payroll are due primarily to: (1) projected increases in employment levels as the working-age population increases; (2) trend increases in average earnings in covered employment (reflecting both real growth and price inflation); (3) increases in the contribution and benefit base under the automatic-adjustment provisions; and (4) growth in employment and average earnings.
Interest earnings contribute to the overall projected level of trust fund income during this period. Interest income declines generally at a slow rate under the intermediate assumptions and much faster under the high-cost assumptions, and increases generally under the low-cost assumptions, due to the net effects of changes in reserve levels and the patterns of projected interest rates. Under the intermediate assumptions, interest also declines as a share of total OASI Trust Fund income reaching 3 percent of total trust fund income for 2030, as compared to 8 percent for 2020.
Rising OASI cost from 2020 through 2030 reflects automatic benefit increases as well as the upward trend in the number of beneficiaries and in the average monthly earnings underlying benefits. The steady growth in the number of OASI beneficiaries in the past and the expected future growth result both from the increase in the aged population and from the increase in the proportion of the population that is insured for benefits.
The Treasury invests OASI income in financial securities, generally special public-debt obligations of the U.S. Government. The revenue used to make these purchases flows to the General Fund of the Treasury. The trust fund earns interest on these securities, and the Treasury invests the proceeds from maturing securities in new securities if not immediately needed to pay program costs. Program expenditures require the redemption of trust fund securities, generally prior to maturity, to cover the payments made by the General Fund of the Treasury on behalf of the trust fund.
2. Operations of the DI Trust Fund
Table IV.A2 shows the projected operations and financial status of the DI Trust Fund during calendar years 2021 through 2030 under the three sets of assumptions, together with values for actual experience during 2016 through 2020. Non-interest income for DI was much lower in 2019 and 2020 than in 2016 through 2018, due to the temporary payroll tax rate reallocation from OASI to DI in 2016 through 2018. For 2020, non-interest income was higher than DI cost. Non-interest income generally increases throughout the short-range projection period under each alternative, with the exception of a small decrease in 2021 under all three sets of assumptions, due to most of the same factors described previously for the OASI Trust Fund beginning on page 45.  DI cost grows steadily throughout the period under each alternative, with the exception of small decreases in 2021 for the intermediate and low-cost assumptions. Under the intermediate assumptions, DI reserves decrease in 2021 and then increase through 2030. Under the low-cost assumptions, DI reserves increase through 2030. Under the high-cost assumptions, DI reserves decline until depletion in the fourth quarter of 2027.
Taxa-
tion of
benefitsd

a
The DI Trust Fund reserves become depleted in the fourth quarter of 2027 under the high-cost assumptions. For any period during which reserves would be depleted, scheduled benefits could not be paid in full on a timely basis, income from taxing benefits would be less than would apply to scheduled benefits, and interest on trust fund reserves would be negligible. Appendix A presents a detailed description of the components of income and cost, along with complete historical values.

b
Amounts for 2020 and 2021 are adjusted to include in 2021 operations those benefit payments regularly scheduled in the law to be paid on January 3, 2021, which were actually paid on December 31, 2020 as required by the statutory provision for early benefit payments when the normal delivery date is on a weekend or holiday. Such shifts in payments across calendar years have occurred in the past, including in 2016, and will occur periodically in the future whenever January 3rd falls on a Sunday. In order to provide a consistent perspective on trust fund operations over time, all trust fund operations in each year reflect the 12 months of benefits that are regularly scheduled for payment in that year.

c
Includes reimbursements from the General Fund of the Treasury to the DI Trust Fund for: (1) the cost of payroll tax credits provided to employees in 1984 and self-employed persons in 1984-89 by Public Law 98-21; (2) the cost in 2009-17 of excluding certain self-employment earnings from SECA taxes under Public Law 110‑246; and (3) payroll tax revenue forgone under the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.

d
Revenue from taxation of benefits is the amount that would be assessed on benefit amounts scheduled in the law.

e
The “Trust fund ratio” column represents reserves at the beginning of a year (which are identical to reserves at the end of the prior year shown in the “Amount at end of year” column) as a percentage of cost for the year. The trust fund ratio at the beginning of 2031 is projected to be 86 percent for the intermediate and 265 percent for the low-cost assumptions.

f
Between -$50 million and $50 million.

g
While the fund is depleted, values under current law would reflect permissible expenditures only, which would be less than the cost of scheduled benefits shown in this table.
Note: Components may not sum to totals because of rounding.

For the future, DI cost is projected to increase in part due to increases in average benefit levels resulting from: (1) automatic benefit increases and (2) projected increases in the amounts of average monthly earnings on which benefits are based. Future changes in DI cost also reflect changes in the number of DI beneficiaries in current-payment status. In 2020, the number of DI beneficiaries in current-payment status continued the declining trend of the prior six years. Under the intermediate assumptions, that number of DI beneficiaries is projected to drop further through the end of 2021, then increase through the end of 2026 to a level slightly below 10 million, which it remains near through the rest of the short-range projection period. The rate of increase after 2021 is much slower than was experienced on average from 1990 to 2010, when the population with the highest disability prevalence rates was growing rapidly due to the aging of the baby-boom generation. See section V.C.5 for further details.
At the beginning of calendar year 2021, the reserves of the DI Trust Fund represented 66 percent of estimated annual cost. Under the intermediate assumptions, DI trust fund reserves decrease in 2021 and then increase throughout the rest of the short-range projection period. The trust fund ratio drops to 62 percent of annual cost at the beginning of 2022, then increases throughout the rest of the short-range projection period, reaching 84 percent of annual cost at the beginning of 2030.
Because the reserves of the DI Trust Fund at the beginning of 2021 were less than the estimated annual cost for 2021, and are projected to remain below annual cost throughout the short-range period under the intermediate assumptions, the DI Trust Fund fails the Trustees’ test of short-range financial adequacy.
3. Operations of the Combined OASI and DI Trust Funds
Table IV.A3 shows the projected operations and status of the combined OASI and DI Trust Funds for calendar years 2021 through 2030 under the three alternatives, together with actual experience in 2016 through 2020. Income and cost for the OASI Trust Fund represent over 80 percent of the corresponding amounts for the combined OASI and DI Trust Funds. Therefore, based on the relative strength of the OASI Trust Fund over the next 10 years, the combined OASI and DI Trust Funds would have sufficient financial resources to pay all scheduled benefits through the end of the short-range period, although it is important to note that under current law, one trust fund cannot share financial resources with another trust fund. However, the combined OASI and DI Trust Funds do not satisfy the test of short-range financial adequacy because trust fund reserves drop below 100 percent of annual cost during 2029, to a trust fund ratio of 85 percent at the beginning of 2030.
Table IV.A3.—Operations of the Combined OASI and DI Trust Funds,
Calendar Years 2016-2030a 
GF
reim-
burse-
mentsc
Taxa-
tion
of benefitsd
Trust
fund
ratio e