2022 OASDI Trustees Report

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B. LONG-RANGE ESTIMATES
The Trustees use three types of financial measures to assess the actuarial status of the Social Security trust funds under the financing approach specified in current law: (1) annual cash-flow measures, including income rates, cost rates, and balances; (2) trust fund ratios; and (3) summary measures such as actuarial balances and unfunded obligations.
The difference between the annual income rate and annual cost rate, both expressed as percentages of taxable payroll, is the annual balance. The level and trend of the annual balances at the end of the 75-year projection period are factors that the Trustees use to assess the financial condition of the program.
The trust fund ratio for a year is the proportion of the year’s projected cost that could be paid with fund reserves available at the beginning of the year. Critical factors considered by the Trustees in assessing actuarial status include: (1) the level and year of maximum trust fund ratio, (2) the year of depletion of the fund reserves and the percent of scheduled benefits that is still payable after reserves are depleted, and (3) the stability of the trust fund ratio at the end of the long-range period.
Solvency at any point in time requires that sufficient financial resources are available to pay all scheduled benefits at that time. Solvency is generally indicated by a positive trust fund ratio. “Sustainable solvency” for the financing of the program under a specified set of assumptions is achieved when the projected trust fund ratio is positive throughout the 75‑year projection period and is either stable or rising at the end of the period.
The Trustees summarize the total income and cost over valuation periods that extend through 75 years and over the infinite horizon.1 This section presents several summarized measures, including the actuarial balance and the open- group unfunded obligation. The actuarial balance indicates the size of any surplus or shortfall as a percentage of the taxable payroll over the period. The open-group unfunded obligation indicates the size of any shortfall in present-value dollars.
This section also includes additional information that the Trustees use to assess the financial status of the Social Security program, including: (1) a comparison of the number of beneficiaries to the number of covered workers, (2) the test of long-range close actuarial balance, and (3) the reasons for the change in the actuarial balance from the last report.
1. Annual Income Rates, Cost Rates, and Balances
The concepts of income rate and cost rate, expressed as percentages of taxable payroll, are important in the consideration of the long-range actuarial status of the trust funds. The annual income rate is the ratio of all non-interest income to the OASDI taxable payroll for the year. Non-interest income includes payroll taxes, taxes on scheduled benefits, and any General Fund transfers or reimbursements. The OASDI taxable payroll consists of the total earnings subject to OASDI taxes with some relatively small adjustments.2 The annual cost rate is the ratio of the cost of the program to the taxable payroll for the year. The cost includes scheduled benefits, administrative expenses, net interchange with the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries. For any year, the annual income rate minus the annual cost rate is the annual “balance” for the year.
Table IV.B1 presents a comparison of the estimated annual income rates and cost rates by trust fund and alternative. Table IV.B2 shows the separate components of the annual income rates.
Under the intermediate assumptions, the Trustees project that the OASI income rate will increase from 10.65 percent of payroll for 2021 to 11.00 percent of payroll for 2022 and 11.21 percent of payroll for 2023. The income rate in 2021 is relatively low because an unusually large negative adjustment to payroll tax contributions was made in June 2021 reflecting the excess amounts credited in 2020. The OASI income rate then decreases to 11.14 percent in 2024 and generally gradually rises thereafter, reaching 11.55 percent of taxable payroll for 2096. Income from taxation of benefits causes this gradual increase in the OASI income rate for two main reasons: (1) total scheduled benefits are rising faster than payroll; and (2) the ratio of total income tax on benefits to total benefits increases over time for reasons discussed in detail on page 152.
The OASI cost rate rises rapidly from 20213 to 2038. During this period, the retirement of the baby-boom generation will continue to increase the number of beneficiaries much faster than the number of workers increases, as subsequent lower-birth-rate generations replace the baby-boom generation at working ages. From 2040 to 2046, the cost rate declines because the aging baby-boom generation is gradually replaced at retirement ages by the lower-birth-rate generations that followed. The OASI cost rate then rises from 14.95 percent in 2046 to 16.45 percent in 2078, largely because of the period of reduced birth rates starting with the recession of 2007-09, and then declines to 15.69 percent in 2096.
Projections of income rates under the low-cost and high-cost sets of assumptions are similar to those projected for the intermediate assumptions, because income rates are largely a reflection of the payroll tax rates specified in the law, with the changes from taxation of benefits noted above. In contrast, OASI cost rates for the low-cost and high-cost assumptions are significantly different from those projected for the intermediate assumptions. For the low-cost assumptions, the OASI cost rate rises from 12.28 percent in 2022 until it peaks in 2034 at 12.85 percent of payroll. The cost rate then declines to 12.01 percent for 2055, rises to 12.14 percent for 2070, and then mostly declines to 10.98 percent in 2096, at which point the income rate reaches 11.26 percent. For the high-cost assumptions, the OASI cost rate rises from 12.81 percent in 2022 to 24.67 percent in 2088 and then declines gradually to 24.45 percent in 2096, at which point the income rate reaches 12.10 percent.
The pattern of the projected OASI annual balance is important in the analysis of the financial condition of the program. Under the intermediate assumptions, the annual balance is negative throughout the projection period. The annual deficit decreases from 1.54 percent in 2021 to 1.40 percent in 2022, mainly because of the 2021 adjustment for lower-than-expected payroll tax revenue in 2020 mentioned earlier. After 2022, the annual deficit rises to 3.50 percent for 2040. It then declines to 3.47 percent of payroll for 2046, rises to 4.85 percent for 2078, and declines thereafter, reaching 4.14 percent of taxable payroll for 2096.
Under the low-cost assumptions, the OASI annual deficit decreases from 1.32 percent of payroll for 2022 to 1.17 percent in 2023, and then mostly rises to 1.52 percent of payroll for 2034. After 2034, the annual deficit declines to 0.70 percent of payroll for 2055, and rises to 0.82 percent for 2070. After 2070, the OASI annual balance mostly improves, turning positive in 2088, and reaching 0.27 percent of payroll for 2096. Under the high-cost assumptions, the OASI annual deficit rises from 1.72 percent for 2022 to 12.56 percent for 2088, and then declines relatively modestly to 12.36 percent for 2096.
Income
rate a
Cost
rateb

a
Income rates include certain reimbursements from the General Fund of the Treasury.

b
Benefit payments scheduled to be paid on January 3 are actually paid on December 31 as required by the statutory provision for early delivery of benefit payments when the normal payment delivery date is a Saturday, Sunday, or legal public holiday. For comparability with the values for historical years and the projections in this report, all trust fund operations and asset reserves reflect the 12 months of benefits scheduled for payment each year.

c
Between 0 and 0.005 percent of taxable payroll.

d
The annual balance is projected to be negative for a temporary period and then return to positive levels before the end of the projection period.

e
The annual balance is projected to be positive throughout the entire 75-year projection period.

Notes:
1. The income rate excludes interest income.
2. Revisions of taxable payroll may change some historical values.
3. Components may not sum to totals because of rounding.
Under the intermediate assumptions, the projected DI cost rate declines from 1.73 percent for 2021 to 1.66 percent for 2022 due primarily to changes in assumed near-term disability incidence rates. After 2022, the cost rate fluctuates, reaching 1.62 percent for 2031. Then the DI cost rate increases gradually to 1.98 percent for 2055. Thereafter, the cost rate remains relatively stable, decreasing slowly to 1.86 percent for 2083, and then increasing to 1.95 percent for 2096. The DI income rate in 2021 is relatively low, mainly from the decline in payroll tax contributions in 2021 reflecting the adjustment from lower-than-expected 2020 payroll tax contributions mentioned earlier. The DI income rate increases from 1.74 percent for 2021 to 1.83 percent for 2023, and is relatively stable thereafter, reaching 1.84 percent for 2096. The annual balance is between 0 and 0.005 percent of payroll in 2021, increases to 0.19 percent in 2024, and then fluctuates through 2032. After 2032, the annual balance declines and becomes negative in 2044. After 2044, the annual deficit increases to 0.14 percent in 2055, decreases to 0.03 percent in 2083, and then increases to 0.12 percent of payroll for 2096.
Under the low-cost assumptions, the projected DI cost rate declines from 1.63 percent of payroll for 2022 to 1.21 percent for 2035 and then increases to 1.34 percent for 2053. The cost rate then declines through 2081 and increases slowly thereafter, reaching 1.31 percent for 2096. The annual balance is positive throughout the long-range period, reaching 0.52 percent of payroll for 2096. Under the high-cost assumptions, the DI cost rate rises from 1.72 percent of payroll in 2022 to 2.85 percent in 2057 and fluctuates thereafter, reaching 2.79 percent for 2096. The DI annual balance declines from 0.09 percent of payroll in 2022 and becomes negative in 2025, with a 0.04 percent annual deficit in 2025. After 2025, annual deficits increase to 1.00 percent of payroll in 2057 and fluctuate thereafter, reaching 0.94 percent for 2096.
Figure IV.B1 shows the patterns of the historical and projected OASI and DI annual cost rates. The patterns in projected OASI and DI cost rates are described earlier in this chapter. Historical annual OASI cost rates shifted upward starting in 2008 and have remained at relatively high levels since then, primarily due to the retirement of the baby-boom generation. Historical annual DI cost rates rose substantially between 1990 and 2010 in large part due to: (1) aging of the working population as the baby-boom generation moved from ages 25-44 in 1990, where disability prevalence is low, to ages 45-64 in 2010, where disability prevalence is much higher; (2) a substantial increase in the percentage of women insured for DI benefits as a result of increased and more consistent rates of employment; and (3) increased disability incidence rates for women to a level similar to those for men by 2010. As of 2010, these three factors have largely stabilized. Other factors that are not yet fully understood, including the changing nature of work, have caused age-sex-adjusted incidence rates and cost rates to decline from 2010 to 2021. Figure IV.B1 shows only the income rates for alternative II because the variation in income rates by alternative is very small. Income rates generally increase slowly for each of the alternatives over the long-range period. Taxation of benefits, which is a small portion of income, is the main source of the increases in the income rate and the variation among the alternatives.
Table IV.B1 shows the annual balances for OASI, DI, and OASDI. The pattern of the annual balances is important to the analysis of the financial condition of the Social Security program as a whole. As seen in figure  IV.B1, the magnitude of each of the positive balances is the distance between the appropriate cost-rate curve and the income-rate curve above it. The magnitude of each of the deficits is the distance between the appropriate cost-rate curve and the income-rate curve below it. Annual balances follow closely the pattern of annual cost rates after 1990 because the payroll tax rate does not change for the OASDI program, with only small variations in the allocation between DI and OASI except for changes due to the 1994 and the 2016 through 2018 payroll tax rate reallocations.
In the future, the costs of OASI, DI, and the combined OASDI programs as a percentage of taxable payroll are unlikely to fall outside the range encompassed by alternatives I and III because alternatives I and III define a wide range of demographic and economic conditions.
Long-range OASDI cost and income are most often expressed as percentages of taxable payroll. However, the Trustees also present cost and income as shares of gross domestic product (GDP), the value of goods and services produced during the year in the United States. Under alternative II, the Trustees project OASDI cost to increase from about 5.0 percent of GDP for 2022 to about 6.0 percent for 2039. After 2039, OASDI cost as a percentage of GDP declines slightly through 2049, increases to a peak of 6.2 percent for 2077, and thereafter decreases slowly, reaching about 5.9 percent by 2096. Appendix G presents full estimates of income and cost relative to GDP.
Table IV.B2 contains historical and projected annual income rates and their components by trust fund and alternative. The annual income rates consist of the scheduled payroll tax rates, the rates of income from taxation of scheduled benefits, and the rates of income from General Fund reimbursements. Projected income from taxation of benefits increases over time for reasons discussed on page 152.
Taxation of
benefitsa
General Fund Reimbursementsb
Totalc