At the end of 2015, the OASDI program was providing benefit payments
1 to about 60 million people: 43 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 11 million disabled workers and dependents of disabled workers. During the year, an estimated 169 million people had earnings covered by Social Security and paid payroll taxes on those earnings. Total expenditures in 2015 were $897 billion. Total income was $920 billion, which consisted of $827 billion in non-interest income and $93 billion in interest earnings. Asset reserves held in special issue U.S. Treasury securities grew from $2,789 billion at the beginning of the year to $2,813 billion at the end of the year. Consistent with practice in prior reports, asset reserves at the end of 2015 reflect the 12 months of benefits scheduled for payment, and exclude from operations shown for 2015 the benefits scheduled for payment on January 3, 2016, which were actually paid on December 31, 2015 as required by the law.
2Under the Trustees’ intermediate assumptions, Social Security’s total income is projected to exceed its total cost through 2019, as it has since 1982. The 2015 surplus of total income relative to cost was $23 billion. However, when interest income is excluded, Social Security’s cost is projected to exceed its non-interest income throughout the projection period, as it has since 2010. The 2015 deficit of non-interest income relative to cost was $70 billion. For 2016, the program is projected to have a total-income surplus of $16 billion, and a non-interest-income deficit of $73 billion.
3 The Trustees project that the asset reserves of the OASI Trust Fund, together with continuing program income, will be adequate to cover program costs over the next 10 years under the intermediate assumptions. However, the projected reserves of the DI Trust Fund increase from 21 percent of annual cost at the beginning of 2016 to 48 percent at the beginning of 2019, largely due to the temporary payroll tax rate reallocation described below, and then decline steadily until the trust fund reserves become depleted in the third quarter of 2023. At the time reserves become depleted, continuing income to the DI Trust Fund would be sufficient to pay 89 percent of scheduled DI benefits. The DI Trust Fund does not satisfy the test of short-range financial adequacy.
4 Figure
II.D3 illustrates the implications of reserve depletion for the DI Trust Fund.
To illustrate the actuarial status of the Social Security program as a whole, the operations of the OASI and DI funds are often shown on a combined basis as OASDI. However, by law, the two funds are separate entities and therefore the combined fund operations and reserves are hypothetical. Importantly, combined trust fund reserves are clearly hypothetical after one fund becomes depleted, because under current law the funds cannot borrow from each other.
5The combined reserves are projected to increase from $2,813 billion at the beginning of 20161 to $2,892 billion at the beginning of 2020. Reserves increase through 2019 because annual cost is less than total income for 2016 through 2019. At the same time, however, the ratio of reserves to cost declines, from 303 percent of annual cost for 2016 to 246 percent for 2020. Beginning in 2020, annual cost exceeds total income, and therefore the combined reserves begin to decline, reaching $2,527 billion at the end of 2025.
Under the Trustees’ intermediate assumptions, projected OASDI cost will exceed total income by increasing amounts starting in 2020, and the dollar level of the combined trust fund reserves declines until reserves become depleted in 2034. Figure II.D2 shows the implications of reserve depletion for the combined OASDI Trust Funds. Considered separately, the DI Trust Fund reserves become depleted in the third quarter of 2023 and the OASI Trust Fund reserves become depleted in 2035. In last year’s report, the projected reserve depletion years were 2034 for OASDI, 2016 for DI, and 2035 for OASI. The change in the depletion date for DI is largely due to the temporary tax rate reallocation enacted in the Bipartisan Budget Act of 2015.
The projected OASDI annual cost rate increases from 14.05 percent of taxable payroll for 2016
7 to 16.61 percent for 2038 and to 17.68 percent for 2090, a level that is 4.35 percent of taxable payroll more than the projected income rate (the ratio of non-interest income to taxable payroll) for 2090. For last year’s report, the Trustees estimated the OASDI cost for 2090 at 18.01 percent, or 4.69 percent of payroll more than the annual income rate for that year. Expressed in relation to the projected gross domestic product (GDP), OASDI cost generally rises from 5.0 percent of GDP for 2016 to about 6.0 percent by 2035, then declines to 5.9 percent by 2050, and then generally increases to 6.1 percent by 2090.
To illustrate the magnitude of the 75-year actuarial deficit, consider that for the combined OASI and DI Trust Funds to remain fully solvent throughout the 75-year projection period: (1) revenues would have to increase by an amount equivalent to an immediate and permanent payroll tax rate increase of 2.58 percentage points
8 to 14.98 percent, (2) scheduled benefits would have to be reduced by an amount equivalent to an immediate and permanent reduction of about 16 percent applied to all current and future beneficiaries, or about 19 percent if the reductions were applied only to those who become initially eligible for benefits in 2016 or later; or (3) some combination of these approaches would have to be adopted.
