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 trust fund ratio for a year is the proportion of the year’s projected cost that could be paid with funds 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.Summarized measures for any period indicate whether projected income is sufficient, on average, for the whole period. Summarized measures can only indicate the solvency status of a fund for 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 two summarized measures: 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.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 income rate minus the cost rate is the “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.From 2017 to 2035, the cost rate rises rapidly because the retirement of the baby-boom generation will 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 2038 to 2052, the cost rate declines because the aging baby-boom generation is gradually replaced at retirement ages by the historically low-birth-rate generation born between 1966 and 1989. After 2052, the projected OASI cost rate generally rises slowly, reaching 15.57 percent of taxable payroll for 2091, primarily because of projected reductions in death rates at higher ages.

Figure IV.B1 shows the patterns of the historical and projected OASI and DI annual cost rates. 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. After 2010, all of these factors stabilize, and therefore the DI cost rate stabilizes also. Annual OASI cost rates follow a similar pattern to that for DI, but displaced 20 to 25 years later, because the baby-boom generation enters retirement ages 20 to 25 years after entering prime disability ages. 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 relatively small portion of income, is the main source of both the increases in the income rate and the variation among the alternatives. Increases in income from taxation of benefits reflect: (1) increases in the total amount of benefits paid and (2) the increasing share of individual benefits that will be subject to taxation because benefit taxation threshold amounts are not indexed.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 the 2016-2018 payroll tax rate reallocation.

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 4.9 percent of GDP for 2017 to a peak of about 6.1 percent for 2037. After 2037, OASDI cost as a percentage of GDP declines to a low of about 5.9 percent for 2052 and thereafter generally increases slowly, reaching about 6.1 percent by 2091. 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 benefits, and the rates of income from General Fund reimbursements. Projected income from taxation of benefits increases over time for reasons discussed on page 52. Historical General Fund reimbursements include temporary reductions in revenue due to reduced payroll tax rates and certain other miscellaneous items.