The Office of the Chief Actuary at the Social Security Administration uses a set of models to project future income and cost under the OASDI program. These models rely not only on the demographic and economic assumptions described in the previous sections, but also on a number of program-specific assumptions and methods. Values of many program parameters change from year to year as prescribed by formulas set out in the
Social Security Act. These program parameters affect the level of
payroll taxes collected and the level of benefits paid. The office uses more complex models to project the numbers of future workers covered under OASDI and the levels of their
covered earnings, as well as the numbers of future beneficiaries and the expected levels of their benefits. The following subsections provide descriptions of these program-specific assumptions and methods.
The Social Security Act requires that certain parameters affecting the determination of OASDI benefits and taxes be adjusted annually to reflect changes in particular economic measures. Formulas prescribed in the law, applied to reported statistics, change these program parameters annually. The law bases these automatic adjustments on measured changes in the national
average wage index (AWI) and the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI).
1 This section shows values for program parameters adjusted using these indices from the time that these adjustments became effective through 2030. Projected values for future years depend on the economic assumptions described in the preceding section of this report.
Tables V.C1 and
V.C2 present the historical and projected values of the CPI-based benefit increases, the
AWI series, and the values of many of the wage-indexed program parameters. Each table shows projections under the three alternative sets of assumptions. Table
V.C1 includes:
Table V.C2 shows values for other wage-indexed parameters. The table provides historical values from 1978, when indexing of the amount of earnings required for a quarter of coverage first began, through 2021, and also shows projected values through 2030. These other wage-indexed program parameters are:
Projections of the total U.S. civilian labor force and unemployment rate (see table V.B2) are based on Bureau of Labor Statistics definitions from the Current Population Survey (CPS). These projections represent the average weekly number of employed and unemployed persons, age 16 and over, in the U.S. in a calendar year.
Covered employment for a calendar year is defined as the total number of persons who have any OASDI covered earnings (that is, earnings subject to the OASDI payroll tax) at any time during that year. For those age 16 and over, projected covered employment is the sum of age-sex groups, each reflecting the growth projected for the group’s total U.S employment and average weeks worked per year.
2 For the short-range period, the age-sex-adjusted average weeks worked rises slightly as the age-sex-adjusted unemployment rate declines to its ultimate assumed value of 4.5 percent. After 2030, the average weeks worked for each age-sex group is assumed to remain constant. The projection method also accounts for changes in non-OASDI-covered employment and the increase in coverage of Federal civilian employment as a result of the 1983 Social Security Amendments. It also reflects changes in the number and employment status of other-than-LPR immigrants residing within the Social Security coverage area, such as undocumented immigrants and foreign workers and students with temporary visas.
The covered-worker rate is the ratio of OASDI covered workers to the Social Security area population. For men age 16 and over, the projected age-adjusted covered-worker rates
3 for 2095 are 68.8, 68.8, and 68.6 percent for the low-cost, intermediate, and high-cost assumptions, respectively. For women age 16 and over, the projected age-adjusted covered-worker rates for 2095 are 66.5, 65.9, and 65.1 percent for the low-cost, intermediate, and high-cost assumptions, respectively. For men, the intermediate projected rate for 2095 is lower than the 2019 age-adjusted rate of 70.8 percent primarily due to the projected increase in the portion of the Social Security area population that consists of other-than-LPR immigrants. For women, the intermediate projected rate for 2095 is higher than the 2019 age-adjusted rate of 65.4 percent because the projected increase in the age-adjusted labor force participation rate more than offsets the projected increase in the portion of the population that will be other-than-LPR immigrants.
Eligibility for worker benefits under the OASDI program requires some threshold level of work in covered employment. A worker satisfies this requirement by his or her accumulation of quarters of coverage (QCs). Prior to 1978, a worker earned one QC for each calendar quarter in which he or she earned at least $50. In 1978, when annual earnings reporting replaced quarterly reporting, the amount required to earn a QC (up to a maximum of four per year) was set at $250. As specified in the law, the Social Security Administration has adjusted this amount each year since then according to changes in the
AWI. Its value in 2021 is $1,470.
The long-range fully insured model uses 30,000 simulated work histories for each sex and birth cohort, representing everyone except the other-than-LPR immigrant population.
4 For the other-than-LPR immigrant population, the model generates substantially lower percentages attaining fully insured status. The model constructs simulated work histories using past coverage rates, earnings distributions, and amounts required for crediting QCs, and develops them in a manner that replicates historical individual variations in work patterns. The probability of covered employment in any year is assumed to be higher for those who have worked more consistently in the recent past. Model parameters are selected so that simulated fully insured percentages are consistent with the fully insured percentages estimated by the short-range model for the recent historical period.
The short-range model develops the number of retired-worker beneficiaries by applying
award rates to the aged fully insured population, excluding those already receiving retired-worker, disabled-worker, aged-widow(er), or aged-spouse benefits, and by applying termination rates to the number of
retired-worker beneficiaries.
The long-range model projects the number of retired-worker beneficiaries who were not previously converted from disabled-worker beneficiary status as a percentage of the exposed population.
5 For age 62, the model projects this percentage by using a linear regression based on the historical relationship between this percentage, the employment rate
6 at age 62, and the number of months from age 62 to normal retirement age. The percentage for ages 70 and over is nearly 100 because delayed retirement credits cannot be earned after age 70. The long-range model projects the percentage for each age 63 through 69 based on historical experience with an adjustment for changes in the portion of the primary insurance amount that is payable at each age of entitlement. The model adjusts these percentages for ages 62 through 69 to reflect changes in the normal retirement age.
Table V.C4 shows the projected number of beneficiaries under the OASI program by type of benefit. The retired-worker beneficiary counts include those persons who receive a residual auxiliary benefit in addition to their retired-worker benefit. The office makes estimates of the number and amount of residual payments separately for spouses and widow(er)s.
