2011 OASDI Trustees Report

C. PROGRAM-SPECIFIC ASSUMPTIONS AND METHODS

A set of models is used to project future income and cost under the OASDI program. These models rely not only on the demographic and economic assumptions described in the previous sections, but also on a number of program-specific assumptions and methods. First, certain program parameters are calculated based on formulas described explicitly in the Social Security Act. These program parameters affect the level of payroll taxes collected and the level of benefits paid. The numbers of future workers covered under OASDI and the levels of their covered earnings, as well as the numbers of future beneficiaries and the expected levels of their benefits, are also projected. The following subsections provide descriptions of these program-specific assumptions and methods.

1. Automatically Adjusted Program Parameters

The Social Security Act specifies that certain program parameters affecting the determination of OASDI benefits and taxes must be adjusted annually in order to reflect changes in particular economic measures. The law prescribes specific formulas that, when applied to reported statistics, produce automatic revisions in these program parameters and hence in the benefit and tax computations. The law bases these automatic adjustments on measured changes in the national average wage index (AWI) and the CPI.¹ In this section, values are shown for program parameters that are subject to automatic adjustment, from the time that such adjustments became effective through 2020. Projected values for future years are based on the economic assumptions described in the preceding section of this report.

Tables V.C1 and V.C2 present the historical and projected values of the CPI-based benefit increases, the AWI series, and the values of many of the wage-indexed program parameters. In each table, projections are shown under the three alternative sets of economic assumptions described in the previous section. Table V.C1 includes:

•

The annual percentage increases that have been applied to OASDI benefits under automatic cost-of-living adjustment provisions in the Social Security Act based on increases in the CPI. In December 2009 and December 2010, there were no cost-of-living adjustments. Under all three sets of economic assumptions, cost-of-living adjustments are projected to return for December 2011 and later.

•

The annual levels of and percentage increases in the AWI. Under section 215(b)(3) of the Social Security Act, the AWI for each year after 1950 is used to index the taxable earnings of most workers first becoming eligible for benefits in 1979 or later. This procedure converts a worker’s past earnings to approximately equivalent values near the time of the worker’s benefit eligibility, and these indexed values are used to calculate the worker’s benefit amount. The AWI is also used to adjust most of the other program parameters that are subject to the automatic-adjustment provisions.

•

The wage-indexed contribution and benefit base — the maximum amount of earnings for the specified year subject to the OASDI payroll tax and creditable toward benefit computation. The Social Security Act prohibits an increase in this base if there is no cost-of-living adjustment effective for December of the preceding year.

•

The wage-indexed retirement earnings test exempt amounts — the annual amount of earnings below which beneficiaries are not subject to benefit withholding. A lower exempt amount applies in years before a beneficiary attains normal retirement age (NRA). A higher amount applies for the year in which the beneficiary attains NRA. The retirement test does not apply beginning with the attainment of NRA. The Social Security Act prohibits an increase in these exempt amounts if there is no cost-of-living adjustment effective for December of the preceding year.

 

Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2020 

Calendar year		Cost-of-living benefit increasea (percent)	Average wage index (AWI)  b		Contribution and benefit base c	Retirement earnings test exempt amount
			Amount	Increase (percent)		Under NRAd	At NRAe
Historical data:
	1975	8.0	$8,630.92	7.5	$14,100	$2,520	$2,520
	1976	6.4	9,226.48	6.9	15,300	2,760	2,760
	1977	5.9	9,779.44	6.0	16,500	3,000	3,000
	1978	6.5	10,556.03	7.9	17,700	3,240	4,000
	1979	9.9	11,479.46	8.7	22,900	3,480	4,500
	1980	14.3	12,513.46	9.0	25,900	3,720	5,000
	1981	11.2	13,773.10	10.1	29,700	4,080	5,500
	1982	7.4	14,531.34	5.5	32,400	4,440	6,000
	1983	3.5	15,239.24	4.9	35,700	4,920	6,600
	1984	3.5	16,135.07	5.9	37,800	5,160	6,960
	1985	3.1	16,822.51	4.3	39,600	5,400	7,320
	1986	1.3	17,321.82	3.0	42,000	5,760	7,800
	1987	4.2	18,426.51	6.4	43,800	6,000	8,160
	1988	4.0	19,334.04	4.9	45,000	6,120	8,400
	1989	4.7	20,099.55	4.0	48,000	6,480	8,880
	1990	5.4	21,027.98	4.6	51,300	6,840	9,360
	1991	3.7	21,811.60	3.7	53,400	7,080	9,720
	1992	3.0	22,935.42	5.2	55,500	7,440	10,200
	1993	2.6	23,132.67	.9	57,600	7,680	10,560
	1994	2.8	23,753.53	2.7	60,600	8,040	11,160
	1995	2.6	24,705.66	4.0	61,200	8,160	11,280
	1996	2.9	25,913.90	4.9	62,700	8,280	12,500
	1997	2.1	27,426.00	5.8	65,400	8,640	13,500
	1998	1.3	28,861.44	5.2	68,400	9,120	14,500
	1999	6 2.5	30,469.84	5.6	72,600	9,600	15,500
	2000	3.5	32,154.82	5.5	76,200	10,080	17,000
	2001	2.6	32,921.92	2.4	80,400	10,680	25,000
	2002	1.4	33,252.09	1.0	84,900	11,280	30,000
	2003	2.1	34,064.95	2.4	87,000	11,520	30,720
	2004	2.7	35,648.55	4.6	87,900	11,640	31,080
	2005	4.1	36,952.94	3.7	90,000	12,000	31,800
	2006	3.3	38,651.41	4.6	94,200	12,480	33,240
	2007	2.3	40,405.48	4.5	97,500	12,960	34,440
	2008	5.8	41,334.97	2.3	102,000	13,560	36,120
	2009	.0	40,711.61	-1.5	106,800	14,160	37,680
Intermediate:
	2010	g.0	41,843.71	2.8	g 106,800	g  14,160	g 37,680
	2011	.7	43,517.83	4.0	g 106,800	g 14,160	g 37,680
	2012	1.7	45,435.49	4.4	110,700	14,640	39,000
	2013	1.9	47,489.90	4.5	114,900	15,240	40,560
	2014	2.0	49,462.43	4.2	120,000	15,960	42,360
	2015	2.0	51,398.64	3.9	125,400	16,680	44,280
	2016	2.0	53,430.36	4.0	130,800	17,280	46,200
	2017	2.2	55,551.37	4.0	135,900	18,000	48,000
	2018	2.7	57,969.43	4.4	141,300	18,720	49,800
	2019	2.8	60,406.32	4.2	146,700	19,440	51,840
	2020	2.8	62,760.16	3.9	153,300	20,280	54,120
Low-cost:
	2010	g0 .0	$41,840.52	2.8	g $106,800	g $14,160	g $37,680
	2011	.6	43,599.58	4.2	g 106,800	g 14,160	g 37,680
	2012	1.2	45,522.96	4.4	110,700	14,640	39,000
	2013	1.3	47,535.08	4.4	115,200	15,240	40,680
	2014	1.4	49,370.46	3.9	120,300	15,960	42,480
	2015	1.5	51,143.06	3.6	125,700	16,680	44,400
	2016	1.6	53,057.41	3.7	130,500	17,280	46,080
	2017	1.7	55,112.98	3.9	135,000	17,880	47,760
	2018	1.8	57,323.29	4.0	140,100	18,600	49,560
	2019	1.8	59,503.79	3.8	145,500	19,320	51,360
	2020	1.8	61,577.65	3.5	151,500	20,040	53,520
High-cost:
	2010	g.0	41,836.85	2.8	g 106,800	g 14,160	g 37,680
	2011	1.2	43,363.65	3.6	g 106,800	g 14,160	g 37,680
	2012	2.4	45,401.07	4.7	110,400	14,640	39,000
	2013	2.8	47,667.29	5.0	114,600	15,240	40,440
	2014	3.0	49,918.31	4.7	120,000	15,960	42,360
	2015	3.2	52,343.69	4.9	126,000	16,680	44,520
	2016	3.2	54,993.37	5.1	132,000	17,520	46,560
	2017	3.4	57,690.56	4.9	138,300	18,360	48,840
	2018	3.6	60,485.28	4.8	145,200	19,320	51,360
	2019	3.8	63,329.45	4.7	152,400	20,280	53,880
	2020	3.8	66,140.81	4.4	159,900	21,240	56,400

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a

Effective with benefits payable for June in each year 1975-82, and for December in each year after 1982.

b

See table VI.F6 for projected dollar amounts of the AWI beyond 2020.

c

Amounts for 1979-81 were specified by Public Law 95-216. The bases are slightly higher after 1989 due to changes in the indexing procedure that were required by Public Law 101-239.

d

Normal retirement age. See table V.C3 for specific values.

e

In 1955-82, the retirement earnings test did not apply at ages 72 and over. In 1983-99, the test did not apply at ages 70 and over. Beginning in 2000, it does not apply beginning with the month of attainment of NRA. In the year of attainment of NRA, the higher exempt amount applies to earnings prior to the month of NRA attainment. Amounts for 1978-82 specified by Public Law 95-216; for 1996-2002, Public Law 104‑121.

f

Originally determined as 2.4 percent, but pursuant to Public Law 106-554, is effectively 2.5 percent.

g

Actual amount, as determined under automatic-adjustment provisions.

Values for other wage-indexed parameters are shown in table V.C2. The table provides historical values from 1978, when the amount of earnings required for a quarter of coverage was first indexed, through 2010, and also shows projected amounts through 2020. These other wage-indexed program parameters are:

•

The bend points in the formula for computing the primary insurance amount (PIA) for workers who reach age 62, become disabled, or die in a given year. As illustrated in figure V.C1, these bend points indicate three ranges in a worker’s average indexed monthly earnings (AIME) over which a certain percent factor, 90, 32, or 15 percent, respectively, is applied to determine the worker’s PIA.

 

Figure V.C1.—Primary-Insurance-Amount Formula for Those Newly Eligible in 2011

[D]

•	The bend points in the formula used in the computation of the maximum total amount of monthly benefits payable based on the earnings record of a retired or deceased worker. This formula is a function of the worker’s PIA, and, as shown in figure V.C2, relies on four intervals and percentages.

 

Figure V.C2.—Maximum-Family-Benefit Formula for Those Newly Eligible in 2011

[D]

•	The amount of earnings required in a year to be credited with a quarter of coverage (QC). The number and timing of QCs earned is used to determine an individual’s insured status — the basic requirement for benefit eligibility under OASDI.

•

The old-law contribution and benefit base — the base that would have been in effect had the 1977 amendments not been enacted. This old-law base is used in determining special-minimum benefits for certain workers who have many years of low earnings in covered employment. Beginning in 1986, the old-law base is also used in the calculation of OASDI benefits for certain workers who are eligible to receive pensions based on noncovered employment. In addition, the old-law base is used for certain purposes under the Railroad Retirement program and the Employee Retirement Income Security Act of 1974.

 

Table V.C2.—Values for Selected Wage-Indexed Program Parameters,
Calendar Years 1978-2020

Calendar year		AIME bend points in PIA formula a			PIA bend points in maximum- family-benefit formula b			Earnings required for a quarter of coverage	Old-law contribution and benefit base c
		First	Second		First	Second	Third
Historical data:
	1978	d	d		d	d	d	5 $250	e $17,700
	1979	e $180	e $1,085		e $230	e $332	e $433	260	18,900
	1980	194	1,171		248	358	467	290	20,400
	1981	211	1,274		270	390	508	310	22,200
	1982	230	1,388		294	425	554	340	24,300
	1983	254	1,528		324	468	610	370	26,700
	1984	267	1,612		342	493	643	390	28,200
	1985	280	1,691		358	517	675	410	29,700
	1986	297	1,790		379	548	714	440	31,500
	1987	310	1,866		396	571	745	460	32,700
	1988	319	1,922		407	588	767	470	33,600
	1989	339	2,044		433	626	816	500	35,700
	1990	356	2,145		455	656	856	520	38,100
	1991	370	2,230		473	682	890	540	39,600
	1992	387	2,333		495	714	931	570	41,400
	1993	401	2,420		513	740	966	590	42,900
	1994	422	2,545		539	779	1,016	620	45,000
	1995	426	2,567		544	785	1,024	630	45,300
	1996	437	2,635		559	806	1,052	640	46,500
	1997	455	2,741		581	839	1,094	670	48,600
	1998	477	2,875		609	880	1,147	700	50,700
	1999	505	3,043		645	931	1,214	740	53,700
	2000	531	3,202		679	980	1,278	780	56,700
	2001	561	3,381		717	1,034	1,349	830	59,700
	2002	592	3,567		756	1,092	1,424	870	63,000
	2003	606	3,653		774	1,118	1,458	890	64,500
	2004	612	3,689		782	1,129	1,472	900	65,100
	2005	627	3,779		801	1,156	1,508	920	66,900
	2006	656	3,955		838	1,210	1,578	970	69,900
	2007	680	4,100		869	1,255	1,636	1,000	72,600
	2008	711	4,288		909	1,312	1,711	1,050	75,900
	2009	744	4,483		950	1,372	1,789	1,090	79,200
	2010	761	4,586		972	1,403	1,830	1,120	79,200
	2011	749	4,517		957	1,382	1,803	1,120	79,200
Intermediate:
	2012	$770	$4,642		$984	$1,421	$1,853	$1,130	$82,200
	2013	801	4,828		1,023	1,477	1,927	1,180	85,500
	2014	836	5,041		1,069	1,542	2,012	1,230	89,100
	2015	874	5,269		1,117	1,612	2,103	1,290	93,300
	2016	910	5,488		1,163	1,679	2,190	1,340	96,900
	2017	946	5,703		1,209	1,745	2,276	1,390	100,800
	2018	983	5,928		1,257	1,814	2,366	1,450	104,700
	2019	1,022	6,163		1,306	1,886	2,460	1,510	108,900
	2020	1,067	6,432		1,363	1,968	2,567	1,570	113,700
Low-cost:
	2012	770	4,642		984	1,420	1,853	1,130	82,200
	2013	802	4,837		1,025	1,480	1,930	1,180	85,500
	2014	838	5,051		1,071	1,545	2,016	1,230	89,400
	2015	875	5,274		1,118	1,614	2,105	1,290	93,300
	2016	909	5,478		1,161	1,676	2,186	1,340	96,900
	2017	941	5,674		1,203	1,736	2,264	1,390	100,200
	2018	977	5,887		1,248	1,801	2,349	1,440	104,100
	2019	1,014	6,115		1,296	1,871	2,440	1,490	108,000
	2020	1,055	6,360		1,348	1,946	2,538	1,550	112,500
High-cost:
	2012	770	4,642		984	1,420	1,852	1,130	82,200
	2013	798	4,811		1,020	1,472	1,920	1,170	85,200
	2014	836	5,037		1,068	1,541	2,010	1,230	89,100
	2015	877	5,289		1,121	1,618	2,111	1,290	93,600
	2016	919	5,538		1,174	1,695	2,210	1,350	97,800
	2017	963	5,807		1,231	1,777	2,318	1,420	102,600
	2018	1,012	6,101		1,293	1,867	2,435	1,490	108,000
	2019	1,062	6,401		1,357	1,959	2,554	1,560	113,100
	2020	1,113	6,711		1,423	2,053	2,678	1,640	118,800

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a

The formula to compute a PIA is: (1) 90% of AIME below the first bend point; plus (2) 32% of AIME in excess of the first bend point but not in excess of the second; plus (3) 15% of AIME in excess of the second bend point. The bend points pertain to the first year a beneficiary becomes eligible for benefits.

b

The formula to compute a family maximum is: (1) 150% of PIA below the first bend point; plus (2) 272% of PIA in excess of the first bend point but not in excess of the second; plus (3) 134% of PIA in excess of the second bend point but not in excess of the third; plus (4) 175% of PIA in excess of the third bend point.

c

Contribution and benefit base that would have been determined automatically under the law in effect prior to enactment of the Social Security Amendments of 1977. The bases for years after 1989 were increased slightly by changes to the indexing procedure to determine the base, as required by Public Law 101-239.

d

No provision in law for this amount in this year.

e

Amount specified for first year by Social Security Amendments of 1977; amounts for subsequent years subject to automatic-adjustment provisions.

In addition to the program parameters affecting the determination of OASDI benefits that reflect changes in the economy, there are certain legislated changes that have affected, and will affect, benefits. Two such changes are the scheduled increases in the NRA and in the delayed retirement credits. Table V.C3 shows the scheduled changes in these parameters and the resulting effects on benefit levels expressed as a percentage of PIA.

 

Table V.C3.—Legislated Changes in Normal Retirement Age and Delayed Retirement
Credits, for Persons Reaching Age 62 in Each Year 1986 and Later

Year of birth	Year of attainment of age 62	Normal retirement age (NRA)	Credit for each year of delayed retirement after NRA (percent)	Benefit, as a percentage of PIA, beginning at age —
				62	65	66	67	70
1924	1986	65	3	80	100	103	106	115
1925	1987	65	3 1/2	80	100	103 1/2	107	117 1/2
1926	1988	65	3 1/2	80	100	103 1/2	107	117 1/2
1927	1989	65	4	80	100	104	108	120
1928	1990	65	4	80	100	104	108	120
1929	1991	65	4 1/2	80	100	104 1/2	109	122 1/2
1930	1992	65	4 1/2	80	100	104 1/2	109	122 1/2
1931	1993	65	5	80	100	105	110	125
1932	1994	65	5	80	100	105	110	125
1933	1995	65	5 1/2	80	100	105 1/2	111	127 1/2
1934	1996	65	5 1/2	80	100	105 1/2	111	127 1/2
1935	1997	65	6	80	100	106	112	130
1936	1998	65	6	80	100	106	112	130
1937	1999	65	6 1/2	80	100	106 1/2	113	132 1/2
1938	2000	65, 2 mo	6 1/2	79 1/6	98 8/9	105 5/12	111 11/12	131 5/12
1939	2001	65, 4 mo	7	78 1/3	97 7/9	104 2/3	111 2/3	132 2/3
1940	2002	65, 6 mo	7	77 1/2	96 2/3	103 1/2	110 1/2	131 1/2
1941	2003	65, 8 mo	7 1/2	76 2/3	95 5/9	102 1/2	110	132 1/2
1942	2004	65, 10 mo	7 1/2	75 5/6	94 4/9	101 1/4	108 3/4	131 1/4
1943-54	2005-16	66	8	75	93 1/3	100	108	132
1955	2017	66, 2 mo	8	74 1/6	92 2/9	98 8/9	106 2/3	130 2/3
1956	2018	66, 4 mo	8	73 1/3	91 1/9	97 7/9	105 1/3	129 1/3
1957	2019	66, 6 mo	8	72 1/2	90	96 2/3	104	128
1958	2020	66, 8 mo	8	71 2/3	88 8/9	95 5/9	102 2/3	126 2/3
1959	2021	66, 10 mo	8	70 5/6	87 7/9	94 4/9	101 1/3	125 1/3
1960 & later	2022 & later	67	8	70	86 2/3	93 1/3	100	124

2. Covered Employment

Projections of the total labor force and unemployment rate (see Table V.B2) are based on Bureau of Labor Statistics definitions from the Current Population Survey (CPS). These projections represent the average weekly number of employed and unemployed persons, aged 16 and over, in the U.S. in a calendar year. Total covered workers in a year are the persons who have any OASDI covered earnings (subject to the OASDI payroll tax) at any time during the year. Projected covered employment is the sum of age-sex components, each of which is projected as a ratio to the CPS concept of employment.² The projection methodology accounts for changes in the business cycle, changes in non-OASDI covered employment, the increase in coverage of Federal civilian employment as a result of the 1983 Social Security Amendments, and changes in the number and employment status of other immigrants estimated to be residing within the Social Security coverage area.

Covered-worker rates are defined as the ratio of OASDI covered workers to the Social Security area population. The age-adjusted coverage rate for males age 16 and over is projected to be 69.7, 69.5, and 68.8 percent for 2085 for the low-cost, intermediate, and high-cost assumptions, respectively, compared to the 2009 level of about 66.8 percent. (Age-adjusted covered worker rates are adjusted to the 2009 age distribution of the Social Security area population.) For females, the projected age-adjusted coverage rate changes from 60.3 percent for 2009 to 63.5, 62.8, and 62.1 percent for 2085 for the low-cost, intermediate, and high-cost assumptions, respectively.

3. Taxable Payroll and Payroll Tax Revenue

The OASDI taxable payroll (see table VI.F6) is the amount of earnings in a year that, when multiplied by the combined employee-employer payroll tax rate, yields the total amount of payroll taxes due from wages and self-employed income in the year. Taxable payroll is used in estimating OASDI income and in determining income and cost rates and actuarial balances. (See section IV.B.1, Annual Income Rates, Cost Rates, and Balances, for definitions of these terms.) Taxable payroll is computed from taxable earnings, defined as the sum of wages and self-employment earnings subject to the Social Security payroll tax. In computing taxable payroll, wages are adjusted to take into account the “excess wages” earned by workers with multiple jobs whose combined wages exceed the contribution and benefit base. In addition, from 1983 through 2001, taxable payroll includes deemed wage credits for military service. Prior to 1984, the self-employment tax rate was less than the combined employee-employer rate; therefore, taxable self-employment earnings are weighted to reflect this difference in payroll tax rate. Also, prior to 1988, employers were exempt from paying Social Security payroll tax on part of their employees’ tips; taxable payroll was thus reduced by half of the amount of tips to take this into account.

The computation of taxable earnings for employees, employers, and the self-employed is based on total earnings in covered employment. Covered earnings are summed from component sectors of the economy, including private, State and local, Federal civilian, and military. Covered earnings for each sector are based on the projected growth of U.S. earnings and a factor that reflects any projected change in coverage (e.g., the increase in coverage in the Federal civilian sector due to mandatory coverage of newly hired employees). The level of taxable earnings reflects only the portion of covered earnings that is at or below the contribution and benefit base. The portion of covered earnings that is taxable (i.e., at or below the base) was about 89.5, 86.8, and 82.8 percent for 1983, 1994, and 2000, respectively. This ratio of taxable earnings to covered earnings rose to about 85.8 percent for 2002, then fell in subsequent years to reach 82.4 percent for 2007. The average annual rate of change in the ratio was about -0.3 percent between 1983 and 2007. Most of this decline was due to a relative increase in wages for high earners.

The ratio rose to 83.5 percent for 2008 and further to 85.2 percent for 2009, largely due to a downturn-induced reduction in the relative amount of wages of high earners. As the economy began to recover, the ratio fell to 84.2 percent for 2010 and is projected to continue to decline until it reaches levels for 2020 of 83.6, 82.9, and 82.1 percent for the low-cost, intermediate, and high-cost assumptions, respectively. After 2020, the taxable-to-covered earnings ratio is approximately constant.

Payroll tax revenue is computed by applying the scheduled tax rates to taxable wages and self-employment income. In addition, the lag between the time the payroll tax liability is incurred and payroll taxes are collected is taken into account. In the case of wages, Federal law requires employers to withhold and deposit payroll taxes with the Treasury on a schedule determined by the amount of payroll tax liability incurred.³ Federal law requires self-employed workers to make estimated payroll tax payments on their earnings four times during the year and to make up any underestimate on their individual income tax return. The pattern of actual receipts by the Treasury is taken into account when estimating self-employed payroll tax collections.

4. Insured Population

Eligibility for worker benefits under the OASDI program requires some minimal level of work in covered employment. A worker satisfies this requirement by his or her accumulation of quarters of coverage (QCs). Prior to 1978, one QC was credited for each calendar quarter in which at least $50 was earned. In 1978, when annual earnings reporting replaced quarterly reporting, the amount required to earn a QC (up to a maximum of four per year) was set at $250. As specified in the law, this amount has been adjusted each year since then according to changes in the AWI. Its value in 2011 is $1,120.

There are three types of insured status that a worker can acquire under the OASDI program. Each status is determined by the number and recency of QCs earned. A worker acquires fully insured status when his or her total number of QCs is greater than or equal to the number of years elapsed after the year of attainment of age 21 (but not less than six). Once a worker has accumulated 40 QCs, he or she remains permanently fully insured. A worker acquires disability-insured status if he or she is: (1) a fully insured worker who has accumulated 20 QCs during the 40-quarter period ending with the current quarter; (2) a fully insured worker aged 24-30 who has accumulated QCs during one-half of the quarters elapsed after the quarter of attainment of age 21 and up to and including the current quarter; or (3) a fully insured worker under age 24 who has accumulated six QCs during the 12-quarter period ending with the current quarter. A worker acquires currently insured status when he or she has accumulated six QCs during the 13-quarter period ending with the current quarter. Periods of disability are excluded from the above described QC requirements for insured status (but do not reduce the minimum of six QCs).

There are many types of benefits payable to workers and their family members under the OASDI program. A worker must be fully insured to be eligible for a primary retirement benefit and for his or her spouse or children to be eligible for auxiliary benefits. A deceased worker must have been either currently insured or fully insured at the time of death for his or her children (and their mother or father) to be eligible for benefits. If there are no eligible surviving children, the deceased worker must have been fully insured at the time of death for his or her surviving spouse to be eligible. A worker must be disability-insured to be eligible for a primary disability benefit and for his or her spouse or children to be eligible for auxiliary benefits.

Estimates of the fully insured population, as a percentage of the Social Security area population, are made by single year of age and sex starting in 1969. The short-range projections are based on an extrapolation of the historical trend in these rates starting with data in the Continuous Work History Sample (CWHS). The model uses information on quarters of coverage earned due to employment covered by Social Security that is derived from tabulations of the CWHS. The model also uses historical administrative data on beneficiaries in force and estimated historical mortality rates. This information is combined to estimate the proportion of individuals who were alive and fully insured as of the end of each historical year. Using projected mortality rates and covered workers, these rates are extrapolated to the future and applied to the historical and projected population to arrive at the fully insured population by age and sex through the end of the short-range period.

The long-range model for projecting the fully insured population as a percentage of the Social Security area population uses 30,000 simulated work histories for each sex and birth cohort. These simulated work histories are constructed from past coverage rates, median earnings, and amounts required for crediting QCs, and are developed in a manner that replicates historical individual variations in tendency to work. Specifically, persons who have recently been out of covered employment are less likely to be in covered employment. This model is designed to produce simulated fully insured percentages that are close to the historical fully insured percentages estimated from the CWHS and the short-range model starting in 1970, and projections from the short-range model through the end of the short-range period.

Estimates of the disability-insured population, as a percentage of the fully insured population, are made by age and sex starting in 1970. Historical values are based on a tabulation of the disability-insured population from the CWHS and estimates of the fully insured population. Through the end of the short-range period, these percentages are projected by modeling the relationship between the historical percentages and labor force participation rates. After the short-range period, these percentages are projected using the same simulated work histories used to project the fully insured percentages in the long-range model. Additional adjustments are made to the long-range model simulation in order to bring the disability-insured percentages in the historical and short-range periods into close agreement with those estimated from the CWHS and the short-range model.

No projections are made of the currently insured population, because the number of beneficiaries who are entitled to benefits based solely on currently insured status has been very small and is expected to remain small in the future.

Using these insured models, the percentage of the Social Security area population aged 62 and over that is fully insured is projected to increase from its estimated level of 82.9 for December 31, 2008, to 89.7, 89.8, and 89.8 for December 31, 2085, under alternatives I, II, and III, respectively. The percentage for females is projected to increase significantly, and the percentage for males is projected to decline somewhat. Under alternative II, for example, the percentage for males is projected to decrease slightly during this period from 93.2 to 90.4, and the percentage for females is projected to increase from 74.8 to 89.2.

5. Old-Age and Survivors Insurance Beneficiaries

The number of OASI beneficiaries is projected for each type of benefit separately by the sex of the worker on whose earnings the benefits are based and by the age of the beneficiary. For the long-range period, the number of beneficiaries is also projected by marital status for selected types of benefits.

For the short-range period, the number of retired-worker beneficiaries is developed by applying award rates to the aged fully insured population reduced by those insured persons entitled to retired-worker, disabled-worker, aged-widow(er)’s, or aged-spouse’s benefits, and by applying termination rates to the number of persons already receiving retired-worker benefits.

For the long-range period, the number of retired-worker beneficiaries in current-payment status who were not previously converted from disabled-worker beneficiary status is projected as a percentage of the exposed population, i.e., the fully insured population age 62 and over reduced by persons entitled to or converted from disabled-worker benefits and fully insured persons entitled only to widow(er)’s benefits. For age 62, a linear regression is developed based on the historical relationship between this percentage and the labor force participation rate. The regression coefficients are then used to project this percentage based on the projected labor force participation rate for age 62. The percentage for ages 70 and over is assumed to be nearly 100, because delayed retirement credits cannot be earned after age 70. The percentage for each age 63 through 69 is projected based on historical experience with an adjustment for changes in the portion of the primary insurance amount that is payable at each age of entitlement. These percentages for ages 62 through 69 are adjusted to reflect changes in the NRA.

For the long-range period, the number of retired-worker beneficiaries previously converted from disabled-worker beneficiary status is calculated using an extension of disabled-worker death rates by age, sex, and duration.

The number of aged-spouse beneficiaries (excluding those who are also receiving a retired-worker benefit) is estimated from the population projected by age and sex. The benefits of aged-spouse beneficiaries are based on the earnings records of their husbands or wives, who are referred to as “earners.” In the short-range period, insured aged-spouse beneficiaries are projected in conjunction with the retired-worker beneficiaries. Uninsured aged-spouse beneficiaries are projected by applying award rates to the aged uninsured male or female population and by applying termination rates to the population already receiving such benefits.

In the long-range period, aged-spouse beneficiaries are estimated separately for those married and divorced. The number of married aged-spouse beneficiaries, by age and sex, is projected by applying a series of factors to the number of spouses aged 62 and over in the population. These factors represent the probabilities that the spouse and the earner meet all of the conditions of eligibility — i.e., the probabilities that: (1) the earner is 62 or over; (2) the earner is insured; (3) the earner is receiving benefits; (4) the spouse is not receiving a benefit for the care of an entitled child; (5) the spouse is not insured; and (6) the spouse is not eligible to receive a significant government pension based on earnings in noncovered employment. To the resulting number of spouses, a projected prevalence rate is applied to calculate the estimated number of aged-spouse beneficiaries.

The number of divorced aged-spouse beneficiaries, by age and sex, is estimated by applying the same factors to the number of divorced persons aged 62 and over in the population, with three differences. First, a factor is applied to reflect the probability that the earner (former spouse) is still alive (otherwise, the person may be entitled to a divorced widow(er)’s benefit). Second, a factor is applied to reflect the probability that the marriage to the former spouse lasted at least 10 years. Third, factor (3) in the previous paragraph is not applied because, effective January 1985, a divorced person is generally no longer required to wait to receive divorced spouse benefits until the earner (former spouse) is receiving benefits.

The projected numbers of children under age 18, and students aged 18 and 19, who are eligible for benefits as children of retired-worker beneficiaries, are based on the projected number of children in the population. In the short-range period, the number of entitled children is developed by applying award rates to the number of children in the population for whom both parents are alive, and by applying termination rates to the number of children already receiving benefits.

In the long-range period, the number of entitled children is projected separately by sex of the earner parent. For each age under 18, the number of entitled children is projected from the latest beneficiary data by incorporating changes in the number of children in the population and the ratio of retired workers aged 62 through 71 to the population aged 20 through 71. For student beneficiaries, factors are applied to the number of children aged 18 and 19 in the population that represent the probabilities that the parent is alive, aged 62 or over, insured, and receiving a retired-worker benefit. Another factor is applied that represents the probability that the child is attending a secondary school.

The number of disabled children, aged 18 and over, of retired-worker beneficiaries is projected from the adult population. In the short-range period, award rates are applied to the population, and termination rates are applied to the number of disabled children already receiving benefits. In the long-range period, the number of disabled children is projected in a manner similar to that used for student children except that a factor that reflects the probability of being disabled before age 22 is included.

In the short-range period, the number of young spouses entitled because they have a child in their care is developed by applying award rates to the number of awards to children of retired workers, in cases where the children are either under age 16 or disabled, and by applying termination rates to the number of young spouses with a child in their care who are already receiving benefits. In the long-range period, the number of young-spouse beneficiaries with a child in their care is projected as a proportion of the number of child beneficiaries of retired workers, including projected changes in average family size.

The number of aged-widow(er) beneficiaries (excluding those who are also receiving a retired-worker benefit) is projected from the population by age and sex. In the short-range period, fully insured aged-widow(er) beneficiaries are projected in conjunction with the retired-worker beneficiaries. The number of uninsured aged-widow(er) beneficiaries is projected by applying award rates to the aged uninsured male or female population, and by applying termination rates to the population already receiving such benefits. In the long-range period, uninsured aged-widow(er) beneficiaries are projected by marital status. Four factors are applied to the number of widow(er)s in the population aged 60 and over. These factors represent the probabilities that: (1) the deceased earner is fully insured at death; (2) the widow(er) is not receiving a benefit for the care of an entitled child; (3) the widow(er) is not fully insured; and (4) the widow(er)’s benefits are not withheld because of receipt of a significant government pension based on earnings in noncovered employment. Also, the same factors are applied to the number of divorced persons aged 60 and over in the population and include additional factors representing the probability that the person’s former earner spouse is deceased and that the marriage lasted at least 10 years. The number of insured aged-widow(er) beneficiaries who are ages 60 to 70 is projected in a manner similar to that for uninsured aged-widow(er) beneficiaries. In addition, some insured widow(er)s who had not applied for their retired-worker benefits are assumed to receive widow(er)’s benefits. Insured aged-widow(er) beneficiaries over age 70 are projected by applying termination rates to the population that started receiving such benefits prior to age 70.

In the short-range period, the number of disabled-widow(er) beneficiaries is developed by applying award rates to the uninsured male or female population and by applying termination rates to the population already receiving a disabled-widow(er) benefit. In the long-range period, the number is projected for each age from 50 to NRA as percentages of the widowed and divorced populations, adjusted for the insured status of the deceased spouse, the prevalence of disability, and the probability that the disabled spouse is not receiving another type of benefit.

The projected numbers of children under age 18, and students aged 18 and 19, who are entitled to benefits as survivors of deceased workers, are based on the projected number of children in the population whose mothers or fathers are deceased. In the short-range period, the number of entitled children is developed by applying award rates to the number of orphaned children and by applying termination rates to the number of children already receiving benefits.

In the long-range period, the number of child-survivor beneficiaries is projected in a manner analogous to that for student beneficiaries of retired workers, with the exception that the factor representing the probability that the parent is aged 62 or over is replaced by a factor that represents the probability that the parent is deceased.

The number of disabled-child-survivor beneficiaries, aged 18 and over, is projected from the adult population. In the short-range period, award rates are applied to the population and termination rates are applied to the number of disabled-child-survivor beneficiaries already receiving benefits. In the long-range period, the number of disabled-child-survivor beneficiaries is projected in a manner similar to that for student-child-survivor beneficiaries, with the exception that a factor reflecting the probability of being disabled before age 22 is included.

In the short-range period, the numbers of entitled mother-survivor and father-survivor beneficiaries are developed by applying award rates to the number of awards to child-survivor beneficiaries, in cases where the children are either under age 16 or disabled, and by applying termination rates to the number of mother-survivors and father-survivors already receiving benefits. In the long-range period, the numbers of mother-survivor and father-survivor beneficiaries, assuming they are not remarried, are estimated from the number of child-survivor beneficiaries.

The number of parent-survivor beneficiaries is projected based on the historical pattern of the number of such beneficiaries.

Table V.C4 shows the projected number of beneficiaries under the OASI program by type of benefit. Included among the beneficiaries who receive retired-worker benefits are those persons who receive a residual auxiliary benefit in addition to their retired-worker benefit. Estimates of the number and amount of residual payments are made separately for spouses and widow(er)s.

 

Table V.C4.—OASI Beneficiaries With Benefits in Current-Payment Status
at the End of Calendar Years 1945-2085 

[In thousands]

Calendar year		Retired workers and auxiliaries				Survivors				Total
		Worker1	Spouse	Child		Widow- widower	Mother- father	Child	Parent
Historical data:
	1945	518	159	13		94	121	377	6	1,288
	1950	1,771	508	46		314	169	653	15	3,477
	1955	4,474	1,192	122		701	292	1,154	25	7,961
	1960	8,061	2,269	268		1,544	401	1,577	36	14,157
	1965	11,101	2,614	461		2,371	472	2,074	35	19,128
	1970	13,349	2,668	546		3,227	523	2,688	29	23,030
	1975	16,589	2,867	643		3,888	582	2,919	21	27,509
	1980	19,564	3,018	639		4,415	563	2,610	15	30,823
	1985	22,435	3,069	456		4,862	372	1,918	10	33,122
	1990	24,841	3,104	421		5,098	304	1,777	6	35,551
	1995	26,679	3,027	441		5,213	275	1,884	4	37,522
	1996	26,905	2,971	442		5,199	242	1,898	4	37,661
	1997	27,282	2,926	441		5,043	230	1,893	3	37,817
	1998	27,518	2,866	439		4,981	221	1,884	3	37,911
	1999	27,784	2,811	442		4,936	212	1,885	3	38,073
	2000	28,505	2,798	459		4,901	203	1,878	3	38,747
	2001	28,843	2,742	467		4,828	197	1,890	3	38,969
	2002	29,195	2,681	477		4,771	194	1,908	2	39,227
	2003	29,537	2,622	480		4,707	190	1,910	2	39,448
	2004	29,952	2,569	482		4,643	184	1,901	2	39,733
	2005	30,461	2,524	488		4,569	178	1,903	2	40,126
	2006	30,976	2,476	490		4,494	171	1,899	2	40,508
	2007	31,528	2,431	494		4,436	165	1,892	2	40,947
	2008	32,274	2,370	525		4,380	160	1,915	2	41,625
	2009	33,514	2,343	561		4,327	160	1,921	2	42,828
	2010	34,593	2,316	580		4,285	159	1,913	2	43,847
Intermediate:
	2011	35,705	2,319	596		4,261	156	1,911	2	44,949
	2015	41,446	2,328	676		4,203	152	1,953	1	50,760
	2020	49,860	2,287	755		4,113	151	2,026	1	59,194
	2025	57,784	2,301	821		3,852	139	2,032	2	66,930
	2030	64,549	2,440	851		3,602	129	2,030	2	73,602
	2035	69,256	2,334	867		3,461	128	2,022	2	78,069
	2040	71,903	2,178	881		3,299	125	2,002	2	80,390
	2045	73,707	2,084	894