[House Document 118-17]
[From the U.S. Government Publishing Office]
118th Congress, 1st Session - - - - - - - - - - - - House Document 118-17
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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
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2032............................................. $285.2 $199.4 $242.5
2033............................................. 469.0 496.7 482.8
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Total 2032-2033.............................. 754.2 696.1 725.3
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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]