| Table 1A. |
Comparison of OASDI Cost Rates, Income Rates, Annual Balances, and Combined Trust Fund Ratios for Present Law and Advisory Council Options With Reduced CPI* |
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Annual Balances (Tax Income - Cost)/Payroll |
Trust Fund Ratios (Assets/Annual Cost) |
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Present |
MB |
1.6% IA |
5% PSA |
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Present |
|
MB |
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1.6% IA |
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5% PSA |
| Year |
|
Law |
Proposal |
Proposal |
Proposal |
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Law |
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Proposal |
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|
Proposal |
|
Proposal |
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|
(2.3% Int) |
(4.175Int) |
(2.3% Int) |
(2.3% Int) |
|
(2.3% Int) |
|
(4.175Int) |
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|
(2.3% Int) |
|
(2.3% Int) |
| 2000 |
|
0.98% |
1.27% |
1.16% |
-1.95% |
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192% |
|
196% |
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193% |
|
142% |
| 2010 |
|
0.63 |
1.54 |
1.57 |
-0.33 |
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286 |
|
371 |
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341 |
|
120 |
| 2020 |
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-1.78 |
-0.36 |
0.27 |
-0.13 |
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236 |
|
466 |
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413 |
|
121 |
| 2030 |
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-3.79 |
-2.21 |
-0.92 |
-0.35 |
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53 |
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448 |
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385 |
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122 |
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| 2040 |
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-3.88 |
-2.45 |
-0.41 |
-0.42 |
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-- |
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415 |
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384 |
|
121 |
| 2050 |
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-4 |
-1.11 |
-0.18 |
-0.2 |
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-- |
|
424 |
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|
417 |
|
124 |
| 2060 |
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-4.74 |
-1.88 |
-0.53 |
-0.16 |
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-- |
|
448 |
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430 |
|
118 |
| 2070 |
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-5.21 |
-2.35 |
-0.7 |
-0.06 |
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-- |
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452 |
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432 |
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111 |
| 1995-2069 |
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-1.86 |
0.24 |
0.4 |
0.01 |
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Proposal Provisions |
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Annual Cost Rates (Cost/Payroll) |
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Present |
MB |
1.6% IA |
5% PSA |
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1.6 % IA (Individual Account) Proposal |
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| Year |
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Law |
Proposal |
Proposal |
Proposal |
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Increase NRA to 67 (2mos per yr) by 2011, |
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index thereafter, keep EEA at 62. |
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| 2000 |
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11.66% |
11.56% |
11.69% |
11.72% |
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Modify PIA formula : |
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| 2010 |
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12.07 |
11.66 |
11.61 |
10.9 |
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Reduce the 0.32 and 0.15 factors in the formula |
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| 2020 |
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14.65 |
13.93 |
12.91 |
10.28 |
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by 0.5 percent (multiply by 0.995) for 1998-2011, |
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| 2030 |
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16.85 |
15.98 |
14.15 |
10.15 |
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by 1.5 percent (multiply by 0.985) for 2012-2030. |
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Factors for 2030 and later, 0.224 and 0.105 |
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| 2040 |
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17.02 |
16.26 |
13.59 |
9.11 |
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Increase benefit computation years to 38 by 1999. |
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| 2050 |
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17.19 |
16.56 |
13.33 |
8.29 |
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Change benefits for spouses of retired and |
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| 2060 |
|
18 |
17.43 |
13.69 |
8.2 |
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disabled workers to 33% of PIA. |
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| 2070 |
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18.52 |
17.97 |
13.87 |
8.21 |
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Pay Surviving spouse MAX(ownPIA, spousePIA, |
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| 1995-2069 |
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15.12 |
13.8 |
13.03 |
10.11 |
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75 percent of benefits payable to couple alive). |
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Cover new hire State and local after 1997. |
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Annual Income Rates (Tax Income/ Payroll) |
Tax benefits like other contributory pensions. |
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Present |
MB |
1.6% IA |
5% PSA |
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Phase out $25,000/32,000 thresholds. |
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| Year |
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Law |
Proposal |
Proposal |
Proposal |
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1.6% additional employee contribution to IA starts 1998. |
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| 2000 |
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12.64% |
12.85% |
12.85% |
9.77% |
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5% PSA (Personal Security Account) Proposal |
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| 2010 |
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12.7 |
13.17 |
13.17 |
10.58 |
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Increase NRA to 67 (2mos per yr) by 2011, index NRA |
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| 2020 |
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12.87 |
13.56 |
13.18 |
10.15 |
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thereafter, raise EEA up to 65. |
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| 2030 |
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13.06 |
13.76 |
13.23 |
9.79 |
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DI conversion at age 65. |
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Pay DIB the % of PIA for retired worker becoming |
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| 2040 |
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13.14 |
13.81 |
13.18 |
8.7 |
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entitled at age 65, but not less than 70%. |
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| 2050 |
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13.19 |
15.45 |
13.15 |
8.09 |
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Replace PIA formula with : |
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| 2060 |
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13.26 |
15.55 |
13.17 |
8.04 |
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No change for disabled workers up to age 65 or for |
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| 2070 |
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13.3 |
15.62 |
13.18 |
8.15 |
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young survivors. |
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| 1995-2069 |
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13.26 |
14.04 |
13.42 |
10.12 |
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Flat benefit for retired workers under 55 in 1998 |
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($410 for 1996 eligibles, reduced if less than 35 |
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| MB (Maintain Benefits) Proposal |
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years of earnings, and prorated if over 25 in 1998). |
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| Cover new hire State and local after 1997. |
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Past service credits thru 1997, wage-indexed |
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| Increase benefit computation years to 38 by 1999. |
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to year of eligibility, for age 25-54 in 1998. |
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| Tax benefits like other contributory pensions. |
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5% PSA contribution for those under 55 in 1998. |
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| Phase out $25,000/32,000 thresholds. |
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Change benefits for spouses of retired to half of the |
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| Redirect tax on benefits from HI to OASDI, phase 2010-2019. |
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full flat benefit, ultimately. |
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| Invest 40% of assets in equities by 2014, (start in 2000). |
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Pay Surviving spouse MAX(ownPIA, spousePIA, |
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| Increase payroll tax by 0.8 each in 2045. |
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75 percent of benefits payable to couple alive). |
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Cover new hire State and local after 1997. |
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| * Based on intermediate assumptions from the 1995 Trustees Report, except that CPI is assumed to be reduced by 0.1% for the December 1996 COLA and by 0.21% for December 1997 and later COLAs. Nominal interest and wage are unaffected. Real interest rates shown in () do not reflect change in CPI. |
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Benefits subject to tax: 50% of DI after 1997, 100% of flat ben, 50% of past service credits, & 50% of benefits for over 54 in 1998. PSA benefits not taxed. |
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Phase out $25,000/32,000 thresholds. |
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Phase out earnings test at NRA. |
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Raise payroll tax by 0.76 each for 1998-2069. |
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Office of the Actuary / Social Security Administration |
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Redirect 5% of ee pyrl tax to PSA for under 55 in 1998. |
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July 28, 1996 |
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Borrow from Treasury to cover additional transition |
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costs beginning 2002, repay Treasury by 2069. |
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www.socialsecurity.gov