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The Current Projected Actuarial Status The Current Projected Actuarial Status of the Social Security of the Social Security
Disability Insurance Trust FundDisability Insurance Trust Fund
Presentation by Stephen C. Goss, Chief Actuary, Presentation by Stephen C. Goss, Chief Actuary, Social Security AdministrationSocial Security Administration
Mercatus Center and CRFB DiscussionMercatus Center and CRFB DiscussionRayburn House Office Building B-340Rayburn House Office Building B-340
May 12, 2015May 12, 2015
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Social Security Disability Insurance
155 million workers under age 66 are insured against becoming unable to work
9 million workers now receive DI benefits• 2 million “dependents” - mostly children
Many more protected from loss of insured status• And from lower retirement benefits
Benefits replace 40% to 45% of career earnings on average
• 76% for very-low earner, 27% for steady maximum earner
3
DI cost as percent of GDP has peaked, but scheduled income is too low
DI Cost and Income as Percent of GDP 1975-2090 2013 Trustees Report Intermediate Assumptions
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
2055
2060
2065
2070
2075
2080
2085
2090
Baby Boomers reach ages 45-64
in 2010
Baby Boomers reach ages 25-44
in 1990
DI Cost
DI Income
Note: Recession raised
DI Cost/GDP by 15% for 2010
How DI Compares to other Countries—Disabled Worker Gross Prevalence:
Burkhauser/Daly 2014Note that the US DI program costs 0nly 1/3 as much as Netherlands
55
Rising cost as percent of GDP and Payroll Aging population—increased DI cost 1990-2010,increasing retirement cost now through 2030-35
Age Distribution of the Population Age 25+, 1940 to 2100 (2014TR)
0
10
20
30
40
50
60
70
80
90
100
1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
Perc
en
t o
f P
op
ula
tio
n a
t A
ges 2
5+
25-44
45-64
65-84
85+
Boomers become 25-44
Boomers become 45-64
Boomers
become
65-84
6
Was Rise in Cost Foreseen? Except for Recession, Cost is lower than projected in 1995!
Mature cost took time– disabled under 50 not fully reflected until after 2005
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1995 2000 2005 2010 2015 2020 2025 2030
Actual and Projected Cost of DI as Percent of GDP: 1995TR versus 2013TR
1995TRadj
2013TR
Recession
7
Economic cycles and policy changes fluctuate, and DI incidence rates also vary
Applications have been declining since 2010
0
1
2
3
4
5
6
7
8
9
10
11
12
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Unemployment rate and Disabled worker incidence per thousand exposed
Calendar year
Age-sex-adjusted disabled worker incidence rate
Civilian unemployment rate
Historical Estimated
Recession and SSI
1974
Recession
Recession
Recession
1980 Amendments: PER, CDRs, EPE,
Lowered Family Max
1984 Amendments: Multiple Impairments Medical Improvement
Mental Listings
1996 Amendments: Drug Addiction & Alcohol
CDR Plan 1996-2002
SSI Outreach
1970-74 Large Benefit
Increases
Recession
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Additional disabled worker beneficiaries are a small fraction of reduced employment
Changes in Disabled Worker Beneficiaries and in Covered Workers from 2008 TR to 2013 TR
0
2,000
4,000
6,000
8,000
10,000
12,000
2007 2008 2009 2010 2011 2012 2013
Cha
nge
in T
hous
ands Increase in
DisabledWorkers
Reduction inCoveredWorkers
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Most of the recession effect is from less GDP, not more DI cost
Change in DI Benefit Cost and in GDP Between 2008 TR and 2013 TR
0%2%4%6%8%
10%12%14%16%18%
2010 2011 2012 2013
Increase in DIBenefit Cost
Reduction in GDP
Increase in DIBenefit Cost/GDP
10
When applications go up in a recession, allowance rates go down
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Unemployment Rate
Allowance Rate
Year of Filing Claim
Ultimate Allowance Rate for Disabled-Worker DDS Claims by Filing Date, Versus Unemployment Rate in Year-2
Total Allowance Rate
Unemp Rt in Yr Unemp Rt in Yr-2
Initial DDS Allowance Rate
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So, Adjustments are needed soon: for DI,20% lower cost, or 25% more revenue
Changes for DI alone are not likely to make a big difference for the long run
• Time Limited benefit entitlement?– Coburn proposal would save less than 1/3 of the
projected DI long-term shortfall
• Change the vocational grid ages?– Coburn proposal would save only about 10% of the
long-term DI shortfall
• Offset DI for UI? – Saves only 3% of of LR DI shortfall
• Increase Normal Retirement age?– Increases DI long-term shortfall.
How to Fix Social Security (OASDI)
• First: Help DI soon---reallocate tax rate?
• Second: Address the long-term solvency of the OASDI program; –Raise scheduled revenue by about 33%:
increase revenue from 4.6 to 6.0% of GDP–Reduce scheduled benefits by about 25%:
lower benefits to what 4.6% of GDP will buy–Or some combination of the two
13
Ways to Lower Cost • Lower benefits for retirees—not disabled?
– Increase normal retirement age (lowers OASDI cost, but shifts a greater portion to DI)
– Can exempt long-career low earners
• Lower benefits mainly for high earners?– Reduce PIA above some level– Often combined with increasing PIA below some level,
subject to work year requirements
• Lower benefits mainly for the oldest old?– Reduce the COLA– Increase in COLA also proposed
14
Ways to Increase Revenue • Raise tax on highest earners?
–Increase taxable maximum amount–Some tax on all earnings above the maximum
• Tax employer group health insurance premiums?–Affects only middle class if taxable maximum
remains
• Maintain larger trust fund reserves?–Added interest can lower needed taxes
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For More Information Go To----http://www.ssa.gov/oact/pubs.html
• There you will find—–Current and all prior OASDI Trustees Reports–Detailed single-year tables for recent reports–Our estimates for comprehensive proposals–Our estimates for the individual provisions–Actuarial notes; including replacement rates–Actuarial Studies; including stochastic–Extensive data bases–Congressional testimonies
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