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| Actuarial Publications |
Summary of Provisions That Would Change the Social Security ProgramUpdated May 3, 2006 |
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Description of Proposed Provisions:
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Estimates based on the intermediate assumptions of the 2005 Trustees Report
| Change from present law | Results with this provision | |||||
|---|---|---|---|---|---|---|
| Long-range actuarial balance |
Annual balance in 75th year |
Long-range actuarial balance |
Annual balance in 75th year |
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| Category: Cost-of-Living Adjustment | ||||||
| A1 | Beginning December 2006,
reduce cost-of-living adjustment for OASDI benefits by 1
percentage point. graph | table | pdf-graph | pdf-table |
1.49 | 2.30 | -0.44 | -3.41 | |
| A2 | Beginning December 2006,
reduce cost-of-living adjustment for OASDI benefits by 0.5
percentage point. graph | table | pdf-graph | pdf-table |
0.76 | 1.20 | -1.16 | -4.50 | |
| A3 | Beginning December 2006, use the
"superlative" (or "chained") CPI for COLAs, estimated to reduce
the COLA by 0.22 percentage point. graph | table | pdf-graph | pdf-table |
0.34 | 0.54 | -1.58 | -5.16 | |
| Category: Provisions Affecting Level of Monthly Benefits (PIA) | ||||||
| B1 | Increase the number of years used to
calculate benefits for retirees and survivors (but not for
disabled workers) from 35 to 38, phased in 2006-2010. graph | table | pdf-graph | pdf-table |
0.28 | 0.43 | -1.64 | -5.27 | |
| B2 | Increase the number of years used to
calculate benefits for retirees and survivors (but not for
disabled workers) from 35 to 40, phased in 2006-2014. graph | table | pdf-graph | pdf-table |
0.46 | 0.73 | -1.46 | -4.97 | |
| B3 |
For each year from 2006-2036, multiply the 32 and 15 percent
formula factors by 0.987, reducing the factors to 21 percent
and 10 percent respectively, for new eligibles in 2036 and later. graph | table | pdf-graph | pdf-table |
1.60 | 3.29 | -0.32 | -2.41 | |
| B4 | Reduce benefits by
3 percent for those newly eligible for benefits in 2006 and later. graph | table | pdf-graph | pdf-table |
0.37 | 0.54 | -1.56 | -5.16 | |
| B5 | Reduce benefits by
5 percent for those newly eligible for benefits in 2006 and later. graph | table | pdf-graph | pdf-table |
0.61 | 0.90 | -1.31 | -4.80 | |
| B6 |
Beginning with those newly eligible for OASDI benefits in 2012 and
later, reduce PIA formula factors so that benefits grow by
inflation rather than by increases in real wages. graph | table | pdf-graph | pdf-table |
2.38 | 7.85 | 0.45 | 2.14 | |
| B7 | Progressive price indexing of PIA formula
factors beginning with individuals newly eligible for OASDI
benefits in 2012. Create new bend point at the 30th
percentile of earners. Maintain current-law benefits for earners
at the 30th percentile and below and reduce upper 2 formula
factors (32% and 15%) such that maximum worker benefit
grows by inflation rather than the growth in average wages. graph | table | pdf-graph | pdf-table |
1.43 | 4.62 | -0.50 | -1.09 | |
| B8 | Progressive price indexing of PIA
formula factors beginning with individuals newly eligible for
OASDI benefits in 2012. Create new bend point at the 40th
percentile of earners. Maintain current-law benefits for earners
at the 40th percentile and below and reduce upper 2 formula
factors (32% and 15%) such that maximum worker benefit
grows by inflation rather than the growth in average wages. graph | table | pdf-graph | pdf-table |
1.21 | 3.89 | -0.72 | -1.81 | |
| B9 | Progressive price indexing of PIA
formula factors beginning with individuals newly eligible for
OASDI benefits in 2012. Create new bend point at the 50th
percentile of earners. Maintain current-law benefits for earners
at the 50th percentile and below and reduce upper 2 formula
factors (32% and 15%) such that maximum worker benefit
grows by inflation rather than the growth in average wages. graph | table | pdf-graph | pdf-table |
0.97 | 2.92 | -0.96 | -2.78 | |
| B10 | Progressive price indexing of PIA
formula factors beginning with individuals newly eligible for
OASDI benefits in 2012. Create new bend point at the 60th
percentile of earners. Maintain current-law benefits for
earners at the 60th percentile and below and reduce upper
2 formula factors (32% and 15%) such that maximum worker benefit
grows by inflation rather than the growth in average wages. graph | table | pdf-graph | pdf-table |
0.68 | 1.82 | -1.24 | -3,88 | |
| B11 |
Beginning with those newly eligible in 2013, multiply the 90 and 32
PIA factors each year by 0.9925 and 0.982, respectively. Stop
reductions in
2050. Beginning with those newly eligible in 2008, multiply the 15
factor by 0.982. Stop reduction of the 15 factor in 2045. DI will
have present law scheduled benefit and proportional reduction at
conversion to retired worker benefits at normal retirement age,
based on years of disability. graph | table | pdf-graph | pdf-table |
2.08 | 5.78 | 0.15 | 0.08 | |
| B12 |
Progressive price indexing of PIA formula factors beginning with
individuals newly eligible for OASI benefits in 2012. Create new
bend point at the 30th percentile of earners. Maintain current-law
benefits for earners at the 30th percentile and below and reduce
upper 2 formula factors (32% and 15%) such that maximum worker
benefit grows by inflation rather than the growth in average wages.
Disability benefits are not affected by the proposal. Disabled
worker beneficiaries, upon attaining normal retirement age, would
be subject to a proportional reduction in benefits based on the
worker's years of disability. graph | table | pdf-graph | pdf-table |
1.21 | 3.97 | -0.71 | -1.73 | |
| B13 |
For OASI beneficiaries becoming eligible for benefits in 2018 and
later, multiply the PIA factors by the ratio of life expectancy at
67 for 2013 to the life expectancy at age 67 for the 4th year prior
to the year of benefit eligibility. Unisex life expectancies, based
on period life tables, would be used as projected by SSA's Office
of the Chief Actuary. Disability benefits are not affected by the
proposal. Disabled worker beneficiaries, upon attaining normal
retirement age, would be subject to a proportional reduction in
benefits based on the worker's years of disability.
graph | table | pdf-graph | pdf-table |
0.45 | 1.77 | -1.48 | -3.93 | |
| Category: Provisions Affecting Retirement Age | ||||||
| C1 | Eliminate the hiatus in the normal
retirement age (speed up the increase to age 67). graph | table | pdf-graph | pdf-table |
0.14 | 0.00 | -1.78 | -5.70 | |
| C2 | Eliminate the hiatus in the normal
retirement age (speed up the increase to age 67) and then index
the normal retirement age (by 1 month every 2 years)
until the NRA reaches age 68. graph | table | pdf-graph | pdf-table |
0.52 | 0.76 | -1.40 | -4.94 | |
| C3 | Eliminate the hiatus in the normal
retirement age (speed up the increase to age 67) and then index
the normal retirement age (by 1 month every 2 years)
until the NRA reaches age 70. graph | table | pdf-graph | pdf-table |
0.69 | 1.61 | -1.24 | -4.09 | |
| C4 |
Eliminate the hiatus in the normal retirement age (speed up the
increase to age 67) and then increase the NRA 2 months per year until
the NRA reaches age 68. graph | table | pdf-graph | pdf-table |
0.62 | 0.76 | -1.30 | -4.94 | |
| C5 |
Shorten the hiatus in the normal retirement age (speed up the
increase to age 67). That is, increase the NRA by 2 months per year
for those attaining age 62 in 2012 through 2017, five years earlier
than in current law, which would increase the NRA 2 months per year
for those reaching age 62 in 2017 through 2022. graph | table | pdf-graph | pdf-table |
0.07 | 0.00 | -1.86 | -5.70 | |
| Category: Provisions Affecting Payroll Tax Rates | ||||||
| D1 | Raise payroll tax rates (for employees
and employers combined) by 2.0 percentage points in 2006 and later. graph | table | pdf-graph | pdf-table |
1.96 | 2.00 | 0.04 | -3.70 | |
| D2 | Raise payroll tax rates (for employees
and employers combined) by 2.1 percentage points in 2020 (to 14.5%
combined) and by an additional 2.1 percentage points in 2050 (to
16.6% combined). graph | table | pdf-graph | pdf-table |
1.98 | 4.21 | 0.05 | -1.49 | |
| Category: Provisions Affecting OASDI Contribution and Benefit Base | ||||||
| E1 | Beginning in 2006, make all earnings
subject to the payroll tax (but retain the current-law taxable
maximum for benefit calculations). graph | table | pdf-graph | pdf-table |
2.21 | 2.89 | 0.28 | -2.81 | |
| E2 | Beginning in 2006, make all earnings
subject to the payroll tax and credit them for benefit purposes. graph | table | pdf-graph | pdf-table |
1.82 | 2.06 | -0.10 | -3.64 | |
| E3 |
Determine the level of the contribution and benefit base such that
90 percent of the earnings would be subject to the payroll tax
(phased in 2006-2015). All earnings subject to the payroll tax
would be used in determining benefits. graph | table | pdf-graph | pdf-table |
0.83 | 0.96 | -1.09 | -4.74 | |
| E4 |
Make 90 percent of the earnings subject to the payroll tax (phased in
2008-2017), but retain the current-law taxable maximum for
benefit purposes. This estimate considers all self-employed
earnings in computing the percentage of earnings subject to
the payroll tax. graph | table | pdf-graph | pdf-table |
1.00 | 1.47 | -0.93 | -4.23 | |
| Category: Provisions Affecting Coverage of Employment | ||||||
| F1 | Cover newly hired State and local
government employees beginning in 2006. graph | table | pdf-graph | pdf-table |
0.22 | 0.01 | -1.71 | -5.70 | |
| Category: Provisions Affecting Trust Fund Investment in Equities | ||||||
| G1 | Invest 40 percent of the Trust Funds in
equities (phased in 2006-2020), assuming
an ultimate 6.5 percent real rate of return on equities. graph | table | pdf-graph | pdf-table |
0.88 | 0.00 | -1.04 | -5.70 | |
| G2 | Invest 40 percent of the Trust Funds in
equities (phased in 2006-2020), assuming
an ultimate 5.5 percent real rate of return on equities. graph | table | pdf-graph | pdf-table |
0.64 | 0.00 | -1.29 | -5.70 | |
| G3 |
Invest 40 percent of the Trust Funds in equities (phased in
2006-2020), assuming an ultimate 3 percent real rate of return on
equities, the same as the assumed ultimate yield on the
special-issue Social Security trust fund bonds. graph | table | pdf-graph | pdf-table |
0.00 | 0.00 | -1.92 | -5.70 | |
| Category: Provisions Affecting Taxation of Benefits | ||||||
| H1 | Tax Social Security benefits in a
manner similar to private pension income beginning in 2006.
Phase out the lower-income thresholds during 2006-2015. graph | table | pdf-graph | pdf-table |
0.33 | 0.27 | -1.60 | -5.43 | |
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