Top actuaries with the Social Security Administration (SSA) gave Academy members and others their insights on the retirement program’s latest trustees report, including the reasons behind a change in the reserve fund depletion date that would empty Social Security’s coffers a year earlier than previously projected and how the program can be salvaged by Congress.
As part of a webinar sponsored by the Academy, SSA actuaries explained during the April 25 event why the solvency of the Old-Age, Survivors, and Disability Insurance (OASDI) trust funds decreased slightly from last year’s report. Economic estimates made by the agency in advance of the start of 2023 for the trustees report resulted in a change in the actuarial deficit of -0.19% of payroll, they said.
Key Webinar Highlights
- OASDI reserve depletion date moves up one year to 2034.
- Shift is due to net change in actuarial deficit of -0.19% of payroll.
- Top reason for increasing cost relative to payroll and GDP is the drop in birth rates.
- Benefit cuts, tax increases, or a combination of both can sustain OASDI long term.
- In order for any changes to be enacted, Congress must take action.
The trust funds are projected to have sufficient revenue to pay benefits until 2034, one year earlier than estimated in last year’s report. It is the 12th consecutive year that the OASDI depletion date has ranged between 2033 and 2035.
However, something has to change, they said. “Right now, we are 10 or 11 years away from when critical changes will need to be made,” said Karen Glenn, SSA’s deputy chief actuary.
Fueling the pending depletion of OASDI is the lack of workers able to support the growing number of retirees receiving benefits. Birth rates, once greater than three per women of childbearing age, is now at two. “The change in the ratio is really driving the costs of the program,” Glenn said. While some expect the pregnancy rate to continue to fall, SSA believes it will remain steady.
There are other concerns, they said. Growth in the income gap between the nation’s richest and poorest means Social Security is capturing a lower percentage of earned dollars due to the current income cap. In 1983, 90% of U.S. income fell below the taxation income rate. Now, that is only at 82%. And higher death rates for middle-aged workers due to such things as drug abuse and suicide is an area of concern, although those numbers are expected to moderate. But the effect of those suffering from long-haul COVID-19 symptoms remains a wildcard.
So how does this country fix Social Security? The solutions have not changed, said Stephen Goss, SSA’s chief actuary. They involve Congress making benefit cuts, tax hikes, or a combination of both.
“The bottom line is long-term projections provide information to assess solvency and changes needed to eliminate shortfalls,” he said.
Goss and Glenn highlighted different proposals put forth since 2010—the most recent of which is legislation introduced by Senate Health Education, Labor, and Pensions Committee Chairman Bernie Sanders in February.
That bill would increase benefits for everyone; add a new minimum benefit; use the CPI-E rather than the CPI-W to determine yearly benefit increases; raise taxes on those earning above $250,000, with no benefit credit; and add taxes on investment income, similar to the Affordable Care Act approach. SSA’s Office of the Chief Actuary determined the measure would push Social Security’s solvency beyond 75 years.
That said, getting a bipartisan collection of lawmakers to reach consensus on a plan is likely the most viable way to fix the program. “Any solution that is really going to resolve the Social Security shortfall is going to need solutions from both sides,” Glenn said. And given the way Capitol Hill operates, that probably won’t happen until the deadline is imminent, the SSA actuaries stated.
The webinar recording and slides are available free of charge to all Academy members. To access them, log in to your member profile.
