Industry News

On April 22, 2019, the Social Security Board of Trustees released its annual report on the program’s financial and actuarial status.  In 2018, Social Security paid nearly $989 billion in benefit payments to about 63 million beneficiaries.  According to the report, the combined assets of the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds are projected to be depleted in 2035 (one year later than projected last year).  Should this occur, Social Security would be able to pay only 80% of scheduled annual benefits after 2035 through the end of the projection period in 2093.

Furthermore, the OASI Trust Fund is projected to be depleted in 2034 (the same as last year’s estimate) with 77% of benefits payable at that time.  However, the trustees dramatically revised their estimates for the lifespan of the DI Trust Fund.  The DI Trust Fund is projected to be depleted in 2052 (20 years later than projected last year) with 91% of benefits payable.  According to the report, the significant change in the reserve depletion is mainly due to the continuing favorable trends in the disability program.  Since 2010, disability applications have been declining and the amount of disabled-worker beneficiaries receiving payments has been decreasing since 2014. 

In the past year, the asset reserves of the OASI and DI Trust Funds increased by $3 billion totaling $2.895 trillion.  In 2020, the total annual cost of the Social Security program is projected to exceed total annual income for the first time since 1982 and is estimated to remain higher throughout the 75-year projection period.  Therefore, asset reserves are expected to decrease in 2020.  In addition, Social Security’s cost has exceeded its non-interest income since 2010.

As discussed in the report, interest earned on Social Security’s Trust Fund assets will initially be sufficient to cover the shortfall, but, beginning in 2020 (the same year as projected last year), the special issue U.S. Treasury securities held by the trust funds will need to be redeemed to generate sufficient cash to pay benefits.    

The report presents Social Security’s financing shortfall in dollar terms, as well as in percentages of taxable payroll and Gross Domestic Product (GDP).  Social Security’s projected actuarial deficit is $13.9 trillion when measured over the next 75 years.  Expressed in relation to the GDP, the annual cost of Social Security benefits is projected to increase from 4.9% of GDP in 2019 to 5.9% in 2039, decline to 5.8% in 2052, and slowly rise to 6.0% by 2093.  In the 2019 report, changes were made in law, methods, starting values and assumptions which combined to decrease the actuarial deficit by 0.11% of taxable payroll, in addition to other changes affecting Social Security’s financial condition.  The net result slightly reduced the 75-year actuarial deficit from 2.84% of taxable payroll in 2018 to 2.78% in 2019.

In 2018, 176 million individuals had earnings covered by Social Security and paid payroll taxes.  The cost of $6.7 billion to administer the Social Security program was 0.7% of total expenditures and the combined trust fund reserves earned interest of 2.9%.