[House Document 118-17]
[From the U.S. Government Publishing Office]


118th Congress, 1st Session - - - - - - - - - - - - House Document 118-17
__________________________________________________________________________
 
 BOARD OF TRUSTEES OF THE FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND 
      FEDERAL DISABILITY INSURANCE TRUST FUNDS NOTIFICATION LETTER

                               __________

                             COMMUNICATION

                                  from

  THE BOARD MEMBERS, THE BOARD OF TRUSTEES OF THE FEDERAL OLD-AGE AND 
    SURVIVORS INSURANCE AND FEDERAL DISABILITY INSURANCE TRUST FUNDS

                              transmitting

 BOARD OF TRUSTEES OF THE FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND 
FEDERAL DISABILITY INSURANCE TRUST FUNDS NOTIFICATION LETTER, PURSUANT 
 TO 42 U.S.C. 910(a); AUG. 14, 1935, CH. 531, TITLE VII, SEC. 709 (AS 
  ADDED BY PUBLIC LAW 98-21, SEC. 143); (97 STAT. 102) AND 42 U.S.C. 
 401(c)(2); AUG. 14, 1935, CH. 531, TITLE II, SEC. 201 (AS AMENDED BY 
          PUBLIC LAW 100-647, SEC. 8005(a)); (102 STAT. 3781)

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


April 3, 2023.--Referred to the Committee on Ways and Means and ordered 
                             to be printed
 BOARD OF TRUSTEES OF THE FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND 
                FEDERAL DISABILITY INSURANCE TRUST FUNDS

                                    Washington, DC, March 31, 2023.
Hon. Kevin McCarthy,
Speaker of the House of Representatives,
Washington, DC.
    Dear Mr. Speaker: In accordance with the requirements of 
section 709 of the Social Security Act, ``Recommendations by 
Board of Trustees to Remedy Inadequate Balances in the Social 
Security Trust Funds,'' we are writing to notify you that we 
project that the asset reserves held in the Federal Old-Age and 
Survivors Insurance (OASI) Trust Fund will become inadequate 
under the meaning of this section within the next 10 years. As 
shown in the 2023 OASDI Trustees Report, which we are issuing 
today and a copy of which is attached the asset reserves 
expressed as a percentage of annual program cost (the balance 
ratio\1\) of the OASI Trust Fund are projected to fall below 20 
percent by the beginning of calendar year 2033 based on our 
intermediate set of economic, demographic, and programmatic 
assumptions. Moreover, we project that the reserves of the OASI 
Trust Fund will be depleted soon afterwards, during 2033, and 
only about 77 percent of benefits scheduled in current law will 
be payable at that time if no legislative action is taken.
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    \1\This ratio is also called a trust fund ratio in the 2023 OASDI 
Trustees Report.
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    Background--Section 709 of the Social Security Act 
specifies:

          If the Board of Trustees . . . determines at any time 
        that the balance ratio of any such Trust Fund for any 
        calendar year may become less than 20 percent, the 
        Board shall promptly submit to each House of the 
        Congress a report setting forth its recommendations for 
        statutory adjustments affecting the receipts and 
        disbursements of such Trust Fund necessary to maintain 
        the balance ratio of such Trust Fund at not less than 
        20 percent, with due regard to the economic conditions 
        which created such inadequacy in the balance ratio and 
        the amount of time necessary to alleviate such 
        inadequacy in a prudent manner. The report shall set 
        forth specifically the extent to which benefits would 
        have to be reduced, taxes . . . would have to be 
        increased, or a combination thereof, in order to obtain 
        the objectives referred to in the preceding sentence.

    The Board believes that issuing a report under this 
section, whenever the balance ratio of a trust fund is expected 
to fall below 20 percent within the next ten years, provides 
reasonable advance notice and time for prudent action to 
alleviate inadequacy in the balance ratio. The annual report 
that the Board submits to the Congress under section 201(c) of 
the Social Security Act (commonly referred to as the Trustees 
Report) provides a more extensive evaluation of the actuarial 
status of the trust funds through the next 75 years.
    The Old-Age and Survivors Insurance Trust Fund--Estimates 
in the 2023 Trustees Report show that although the Disability 
Insurance (DI) Trust Fund and the hypothetical combined OASI 
and DI Trust Funds are adequately financed in the meaning of 
this section (709) through the next 10 years under the 
intermediate assumptions (those representing the Trustees' best 
estimate of future economic and demographic trends), the OASI 
fund alone is not.
    Under the intermediate assumptions of the 2023 Trustees 
Report, the OASI Trust Fund reserves decline throughout the 
projection period, reaching 28 percent of annual cost at the 
beginning of 2032, falling to 7 percent of annual cost by the 
beginning of calendar year 2033, and becoming depleted in the 
first half of 2033. The figure below shows the estimated 
balance ratios for the combined OASI and DI Trust Funds and for 
the OASI Trust Fund up to the date of trust fund reserve 
depletion, and for the DI Trust Fund through 2040. The DI Trust 
Fund reserves are projected to not be depleted in the 75-year 
projection period of the 2023 Trustees Report.




    Maintaining a Balance Ratio of at Least 20 Percent--The 
following table shows annual amounts of change necessary for 
each year within the next 10 years where a change would be 
required to keep the OASI balance ratio from dropping below 20 
percent. Because the OASI balance ratio first falls below 20 
percent for the beginning of calendar year 2033, by 2032 
changes would be required. For calendar years 2032 and 2033, 
the table shows the amounts of: (1) additional payroll tax 
revenue alone, (2) benefit cost reductions alone, and (3) a 
combination of equal amounts of payroll tax revenue increases 
and benefit cost reductions needed to meet this goal Additional 
changes in OASI revenue and/or benefit cost would be required 
in subsequent years in increasing amounts in order to maintain 
an OASI balance ratio of at least 20 percent beyond calendar 
year 2033.
    The additional payroll tax revenue amounts required for 
2032 and 2033 to meet the 20-percent minimum OASI balance ratio 
differ from the required reductions in benefit cost for that 
year, particularly in 2032, the first-year change would be 
needed. In order to maintain a balance ratio of 20 percent for 
2033 with only payroll tax increases, the entire improvement of 
the balance ratio must be accomplished through payroll tax 
change in 2032. However, maintaining a balance ratio of 20 
percent for 2033 with only benefit cost reductions is 
accomplished with both the reduced benefit cost in 2032, which 
increases the trust fund reserves at the start of 2033 (the 
numerator of the 2033 balance ratio), and the reduced benefit 
cost in 2033 (the denominator of the 2033 balance ratio). As a 
result, the amount of benefit cost reduction needed in the 
first year is less than the amount of additional payroll tax 
needed in that first year. Increases in payroll tax and 
reductions in benefit cost are much closer in 2033 (and would 
continue to be close in subsequent years). Under the combined 
approach, roughly one-half of the change required would be made 
through additional payroll tax revenue and one-half would be 
implemented through benefit cost reductions.

CHANGES REQUIRED IN 2032 AND 2033 TO PREVENT THE OASI BALANCE RATIO FROM DECLINING BELOW 20 PERCENT THROUGH 2033
                         UNDER THE INTERMEDIATE ASSUMPTIONS OF THE 2023 TRUSTEES REPORT
                                                  [In billions]
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                                                                                             Total amounts of
                                                       Additional                         additional payroll tax
                  Calendar year                       payroll tax        Benefit cost      revenue and benefit
                                                      revenue only      reduction only   cost reductions under a
                                                                                            combined approach
----------------------------------------------------------------------------------------------------------------
2032.............................................             $285.2             $199.4                   $242.5
2033.............................................              469.0              496.7                    482.8
                                                  --------------------------------------------------------------
    Total 2032-2033..............................              754.2              696.1                    725.3
----------------------------------------------------------------------------------------------------------------

    Recommendation--Based on the intermediate projections in 
the 2023 Trustees Report, the OASI Trust Fund reserves will 
fall below 20 percent of annual cost by the beginning of 
calendar year 2033 and will become depleted in 2033 in the 
absence of legislation to address this imbalance between 
scheduled benefits and revenue.
    Lawmakers need to take prompt action to strengthen the 
actuarial status of the OASI Trust Fund. Lawmakers could choose 
(1) to increase revenues to the OASI Trust Fund, (2) to reduce 
cost through modification of the OASI program benefit levels or 
eligibility requirements, or (3) to use a combination of 
methods to strengthen the financial condition of the OASI Trust 
Fund. Such actions could apply only to the OASI program 
benefits and revenue or might have effects also on the DI 
program.
    The Board recommends that lawmakers enact timely 
legislation to make necessary adjustments for the OASI program.
            Respectfully,
                                   Janet Yellen,
                                           Secretary of the Treasury, 
                                               and Managing Trustee of 
                                               the Trust Funds.
                                   Xavier Becerra,
                                           Secretary of Health and 
                                               Human Services, and 
                                               Trustee.
                                   Vacant,
                                           Public Trustee.
                                   Julie A. Su,
                                           Acting Secretary of Labor, 
                                               and Trustee.
                                   Kilolo Kijakazi,
                                           Acting Commissioner of 
                                               Social Security, and 
                                               Trustee.
                                   Vacant,
                                           Public Trustee.
                                   Scott L. Frey,
                                           Chief of Staff, Social 
                                               Security Administration, 
                                               and Acting Secretary, 
                                               Board of Trustees.

                                     [all]