Trustees Report Extends Estimated Solvency of SSDI Trust Fund to 2032
The 2018 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance (OASI) and Federal Disability Insurance (DI) Trust Funds
was released on June 5, 2018. The 2018 Trustees Report indicates that Social Security is fully solvent until 2034 but faces a moderate long-term shortfall.
The Social Security system’s total cost is projected to exceed its total income (including interest) in 2018 for the first time since 1982. Cost is projected to
remain higher than total income throughout the entire 75-year time period covered by the report. The Trustees project the combined Trust Funds
will be exhausted in 2034, the same year as projected in last year’s report.
However, the Trustees Report finds that the financial health of the DI Trust Fund improved significantly and can now pay full benefits until 2032, four years later than indicated in last year’s report. In addition, the shortfall in 2032 is smaller than it was last year. The 2018 Trustees’ Report finds that if Congress does
nothing, the SSDI program would be able to pay 96% of promised benefits in 2032, compared to 93% of promised benefits in 2028 as stated in last year’s report. The OASI Trust Fund is projected to be able to pay full benefits until late 2034 (a few months sooner than projected in last year’s report, which predicted exhaustion in early 2035), at which point it will be able to pay 77% of promised benefits.
The solvency of the DI Trust Fund has improved primarily due to lower-than-expected recent levels of expenditures. In his testimony at the June 7 House
Ways and Means Social Security Subcommittee hearing regarding the financial status of the Social Security programs, SSA’s Chief Actuary Steve Goss
indicated that the main drivers of the improved financial outlook for the DI Trust Fund were that applications have been steadily declining since
2010 (and had declined to levels even lower than previously projected – see graph on next page), the number of SSDI beneficiaries has been falling
since 2013, and the average monthly benefit for newly awarded disabled workers in 2017 was lower than previously anticipated. The change in average
benefit levels is because a higher percentage of claims are being decided at the ALJ level, and claims awarded at this level tend to have lower monthly
benefits than claims awarded by state agencies. Goss indicated these effects were, however, partially offset by “a faster path back up to the ultimate
assumed disability incidence rates, and increased awards by ALJs from efforts to more rapidly reduce the backlog, and the reduced near-term revenue.”
The Trustees Report tracks the cost of the OASDI program as a percent of total Gross Domestic Product (GDP), as well as the taxable payroll.
Program costs equaled 4.9 percent of GDP in 2017, and the Trustees project these costs will increase to 6.1 percent of GDP by 2038, decline to 5.9
percent of GDP by 2052, and thereafter rise slowly, reaching 6.1 percent by 2092. The projected 75- year actuarial deficit for the OASDI Trust Funds
is 2.84 percent of taxable payroll, up slightly from 2.83 percent projected in last year’s report. This deficit amounts to 1.0 percent of GDP over the 75-year time period (expressed as percentages of program cost, that is 21 percent of program noninterest income, or 17 percent of program cost).
The overall health of the Trust Funds was impacted by a number of factors – some positive and some negative. The factors leading to increased trust fund solvency included the lower than expected SSDI applications and incidence rate (the percentage of insured workers receiving SSDI), increased mortality, and new data modeling about the average monthly benefits for people awarded SSDI at the state agency versus the Projected DI Solvency Extended But OASI Depletion Date Draws Closer
ALJ level. Factors that hastened the depletion of the trust fund included changes to the valuation period (Adding 2092 and dropping 2017 from
the 75-year time frame used for estimates), lower current and projected birth rates, lower estimates of GDP, productivity, and interest rates.
Recent legislative changes, such as the Tax Cuts and Jobs Act and changes to the Affordable Care Act, as well as changes to the DACA program for
immigrants, are estimated to make no net change to the solvency of the trust funds: some aspects of the changes will help the trust funds and some will hurt
it, but these factors essentially cancel each other out.
The combined Trust Fund reserves were $2.9 trillion at the end of 2017. If Congress does not act before 2034, the reserves would be drawn down, and revenue
coming into the Trust Funds would cover about 79 percent of scheduled benefits. Steve Goss indicated that revenue would need to be raised by 33 percent, benefits cut by about 25 percent, or a combination of the two to restore long-term actuarial balance to the OASDI program, the same percentages as last year.
NOSSCR supports achieving long-term solvency through revenue options only with no benefit cuts.