Actuarial status of the OASI and DI Trust Funds

This article summarizes the current financial and actuarial status of the old-age, survivors, and disability insurance (OASDI) program, as shown in the 1985 Annual Report of the Board of Trustees. The Trustees note that the combined assets of the OASI and DI programs will be sufficient to pay OASDI benefits on time well into the next century based on all four sets of economic and demographic assumptions. Based on the pessimistic assumptions, the DI program could become unable to pay benefits on time by the end of 1987, but this problem could be prevented by a reallocation of contribution rates between the OASI and DI programs. For the long range--the next 75 years--the Trustees estimate that the OASDI program is in close actuarial balance based on intermediate assumptions--that is, the average annual income rate is estimated to be between 95 percent and 105 percent of the average annual cost rate during that period. The long-range actuarial deficit based on the intermediate (Alternative II-B) assumptions represents about 3 percent of the average annual cost rate for the program.     

Actuarial status of the OASI (old age survivors insurance) and DI (disability insurance) Trust Funds

This article summarizes the current financial condition and actuarial status of the Old-Age, Survivors, and Disability Insurance (OASDI) program, as shown in the 1987 Annual Report of the Board of Trustees. The Trustees note that the assets of the OASI and DI Trust Funds, on a combined basis, will be sufficient to permit the timely payment of OASDI benefits for many years into the future, on the basis of all four sets of assumptions shown in the report. For the next 75 years, the estimates show that the OASDI program, overall, is in close actuarial balance, based on the two intermediate sets of assumptions. The DI program by itself, however, is not in close actuarial balance for the next 75 years. The actuarial deficit for the DI program could be remedied by a small reallocation of the contribution rate from OASI to DI, in such a way that the OASI program would remain in close actuarial balance and OASDI benefits would not be affected. Although the Trustees are not recommending such a reallocation, they note that the financial condition of the DI program will need to be carefully monitored.     

Actuarial status of the OASI and DI Trust Funds

This article presents the summary of the 1988 Annual Report of the Board of Trustees of the Old-Age, Survivors, and Disability Insurance (OASDI) Trust Funds. It summarizes the financial condition and actuarial status of the OASDI program based on the alternative projections. The long-range 75-year estimates indicate that, under the intermediate (II-A and II-B) assumptions, the OASDI program will experience about three decades of positive annual balances, with continuing annual deficits thereafter. The positive balances in the first part of the 75-year projection period nearly offset the later deficits, so that the program, as a whole is in close actuarial balance. Over the long-range projection period, the OASDI program has an actuarial deficit of 0.58 percent of taxable payroll, based on the intermediate alternative II-B assumptions and calculated on a level-financing basis. The DI program by itself, however, is not in close actuarial balance for the next 75 years. The actuarial deficit for the DI program could be remedied by a small reallocation of the contribution rate from OASI to DI, in such a way that the OASI program would remain in close actuarial balance. Although the Trustees are not recommending such a reallocation, they note that the financial condition of the DI program will need to be carefully monitored.     

Actuarial status of the OASI and DI Trust Funds

This article summarizes the current financial condition and actuarial status of the old-age, survivors, and disability insurance (OASDI) program, as shown in the 1986 Annual Report of the Board of Trustees. The Trustees note that the assets of the OASI and DI Trust Funds will be sufficient to permit the timely payment of OASDI benefits for many years into the future, on the basis of all four sets of assumptions shown in the report. For the next 75 years, the estimates show that the OASDI program, overall, is in close actuarial balance, based on the two intermediate sets of assumptions. The DI program by itself, however, is not in close actuarial balance for the next 75 years. The actuarial deficit for the DI program could be remedied by a small reallocation of the contribution rate from OASI to DI, in such a way that the OASI program would remain in close actuarial balance and OASDI benefits would not be affected. Although the Trustees do not at this time recommend such a reallocation, they note that the financial condition of the DI program will need to be carefully monitored for the next several years.     

Financial status of social security program after the Social Security Amendments of 1977

The Social Security Amendments of 1977 resulted in substantial improvement in the current and projected financial condition of the OASDI program. This article reviews the causes of the recent operating deficits, describes the effects of the amendments that most influence the program's financial status, and gives projections of income and expenditures under the new law. The revised benefit formula eliminates the "over-indexing" expected to occur under the old provisions and results in stable earnings-replacement ratios under practically all future economic conditions. About one-half of the long-range actuarial deficit was resolved by this step alone. Increases in the contribution and benefit base, along with tax-rate reallocations and increases, prevent the imminent depletion of the OASI and DI trust funds. Increased income due to the higher wage bases is partially offset in later years, however, by greater benefit payments based on the increases in the coverage of total earnings. Overall, under the new law the OASDI program is projected to be financed adequately for about 50 years but significant operating deficits are expected after that. The financial condition of the hospital insurance program was substantially unchanged by the amendments, however, and the HI trust fund is expected to be exhausted in 1988.     

Actuarial status of the HI (hospital insurance) and SMI (supplementary medical insurance) Trust Funds

This article is adapted from the 1987 Annual Reports of the Medicare Board of Trustees. It presents a summary of the current financial and actuarial status of the Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) Trust Funds. The Board found that the present financing schedule for the HI program is sufficient to ensure the payment of benefits over the next 12-14 years if the intermediate (II-A and II-B) assumptions underlying the estimates are realized. Although steps have been undertaken to reduce the rate of growth in payments to hospitals, the Board urges Congress to take remedial measures to bring future HI program costs and financing into balance. The Board found the SMI program to be actuarially sound but recommends that Congress take action to curtail the rapid growth in that part of Medicare.     

Social Security area population projections: 1987

The following article, first published as Actuarial Study No. 99, describes the population projections that underlie the long-range cost estimates for the Old-Age, Survivors, and Disability Insurance (OASDI) program, which are included in the 1987 Report of the OASDI Board of Trustees. The projections start from a recent estimate of the population in the Social Security Area by age, sex, and martial status and from an estimate of existing marriages by age of husband and age of wife. Three separate projections, denoted Alternatives I, II, and III, are developed by analyzing historical data and making three different sets of assumptions about future net immigration, birth rates, and death rates.     

Stochastic models of the Social Security trust funds

Each year in March, the Board of Trustees of the Social Security trust funds reports on the current and projected financial condition of the Social Security programs. Those programs, which pay monthly benefits to retired workers and their families, to the survivors of deceased workers, and to disabled workers and their families, are financed through the Old-Age, Survivors, and Disability Insurance (OASDI) Trust Funds. In their 2003 report, the Trustees present, for the first time, results from a stochastic model of the combined OASDI trust funds. Stochastic modeling is an important new tool for Social Security policy analysis and offers the promise of valuable new insights into the financial status of the OASDI trust funds and the effects of policy changes. The results presented in this article demonstrate that several stochastic models deliver broadly consistent results even though they use very different approaches and assumptions. However, they also show that the variation in trust fund outcomes differs as the approach and assumptions are varied. Which approach and assumptions are best suited for Social Security policy analysis remains an open question. Further research is needed before the promise of stochastic modeling is fully realized. For example, neither parameter uncertainty nor variability in ultimate assumption values is recognized explicitly in the analyses. Despite this caveat, stochastic modeling results are already shedding new light on the range and distribution of trust fund outcomes that might occur in the future.     

Actuarial status of the HI and SMI Trust Funds

This article is adapted from the 1986 annual reports of the Medicare Board of Trustees. It presents a summary of the current financial and actuarial status of the Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) Trust Funds. The Board found that the present financing schedule for the HI program is barely sufficient to ensure the payment of benefits through the late 1990's if the intermediate (II-A and II-B) assumptions underlying the estimates are realized. Although steps have been undertaken to reduce the rate of growth in payments to hospitals, the Board urges Congress to take remedial measures to bring future HI program costs and financing into balance. The Board found the SMI program to be actuarially sound but recommends that Congress take action to curtail the rapid growth in that part of Medicare.     

Economic policy, intergenerational equity, and the Social Security Trust Fund buildup

For the next 75 years, the Old-Age, Survivors, and Disability Insurance (OASDI) system is projected to be close to in balance, on average. For approximately the next 40 years, under current projections, the combined OASDI Trust Fund is expected to continually have excesses of income over outgo, creating a buildup that will peak in 2030 at about +12 1/2 trillion (roughly 23 percent of the gross national product). Thereafter, the system is projected to be in annual deficit continually until the trust fund is exhausted in 2051. This article focuses on two fundamental issues that must be understood if the potential economic consequences of this buildup are to be evaluated properly. The first issue deals with the fact that the nature of Federal economic policy during the buildup period will determine the ultimate economic impact of the buildup. The second issue concerns the effect of the buildup, and its disposition, on the Social Security program's treatment of one generation of workers compared with another. If a fund is actually accumulated as projected, part of the retirement benefits of the "baby-boom" generation will, in effect, be self-financed. If, however, that fund is used for other purposes--directly or indirectly--future cohorts of workers will be required to fully finance benefits promised to the baby-boom retirees.     

Actuarial status of the HI and SMI Trust Funds

This article is adapted from a summary of the 1984 annual reports of the Medicare Board of Trustees. It presents the actuarial status of the Hospital Insurance (HI) and the Supplementary Medical Insurance (SMI) Trust Funds. Although the Social Security Amendments of 1983 have made the HI program potentially less vulnerable to excessive rates of growth in the hospital industry by providing the Secretary of Health and Human Services some discretion over the level of payments to hospitals, the Board found the financing schedule for the HI program barely adequate to ensure the payment of benefits through the end of this decade if the assumptions underlying the estimates are realized. The Board found the SMI program to be financially sound, but it noted with concern the rapid growth in the cost of the program and the extent to which general revenues have become SMI's major source of financing. For both HI and SMI, the Board recommends that Congress consider ways to curtail the rapid growth in program costs.     

A note on sampling variance estimates for Social Security program participants from the Survey of Income and Program Participation

The Census Bureau's Survey of Income and Program Participation (SIPP) provides data that can be used to study the characteristics of Old-Age, Survivors, and Disability Insurance (OASDI) and Supplemental Security Income (SSI) program participants. It is important that estimates of sampling errors accompany such studies because the estimates may have large sampling errors due to the small number of sample cases available for specific analyses. The generalized sampling variances provided by the Census Bureau did not identify separately either program's participants and, therefore, do not pertain directly to analyses of these groups. This article describes an approach to the direct computation of sampling variances for OASDI and SSI program participants. The approach uses the pseudo stratum and half-sample codes available in SIPP public use data files. A table of generalized standard errors is constructed for participants of both programs aged 18 or older. Generalized standard errors could not be computed for child beneficiaries under age 18 because of a wide variation of design effects across subpopulation estimates.     

Financing Social Security, 1939-1949: a reexamination of the financing policies of this period

This article examines the financing history of the U.S. Social Security system during the period starting with the amendments of 1939 and concluding with the amendments of 1950. It reviews the program's financing policies during this period, and in particular, a series of tax-rate "freezes" enacted during this time. The tax-rate schedule codified in the Social Security Act of 1935 was prevented from taking full effect during these years and the rates were "frozen" at their 1935 level for 15 years. This article seeks to explain the policy context of these rate freezes and their impact on the program's long-range financial solvency. Two major findings emerge from this research: 1. One of the most basic tests of any policy proposal involving Social Security is the projected impact of that proposal on the program's short-range and long-range financing. It would be virtually impossible to propose any serious policy change without a certification from the Social Security actuaries regarding the potential impact of such change. Although Congress enacted the 1939-1949 rate freezes in eight separate legislative acts, the legislative history contains no useable long-range actuarial estimates to gauge the impact of the rate freezes on program financing. How and why such an anomalous circumstance could arise is explored here. cies and has discovered that throughout the period from 1939 to 1950, the Social Security program was almost certainly rendered out of long-range actuarial balance by the rate freezes. How such a circumstance could arise, without serious policy debate, is then examined by situating the rate-freeze decisions in the larger frame of Social Security policymaking during this period.     

Actuarial status of the HI and SMI Trust Funds

This article is adapted from the Summary of the 1985 Annual Reports of the Medicare Board of Trustees. It presents the actuarial status of the Hospital Insurance (HI) and the Supplementary Medical Insurance (SMI) Trust Funds. Two actions favorably affecting the financial status of the HI Trust Fund have occurred since the publication of the 1984 Reports: (1) Fiscal year 1986 hospital payment rates will continue at the same level as in fiscal year 1985, and (2) the level of the annual increase in the rates that can be granted without specific justification has been reduced. Despite these two actions, the Board found that the present financing schedule is barely sufficient to ensure payment of benefits through the late 1990's if the assumptions underlying the estimates are realized. The Board found the SMI program to be financially sound, but it noted with concern the rapid growth in the cost of the program. For both HI and SMI, the Board recommends that Congress consider ways to curtail the rapid growth in program costs.     

Disabled workers and the indexing of Social Security benefits

We examine how benefit amounts and family income would change in response to changing the Social Security (Old-Age, Survivors, and Disability Insurance, OASDI) benefit indexing scheme. We are interested in a class of reform options designed to gradually slow the growth of benefits across the board. These options include the "price indexing" and "longevity indexing" proposals that have been part of the recent Social Security reform debate in the United States as well as a range of proposals developed in Europe. In this article, we focus on the distributional effects on the disabled. This focus leads to two comparisons. First, we compare disabled-worker beneficiaries to another group that would be affected by the changes, retired-worker beneficiaries. Second, we examine relative changes for particularly vulnerable subgroups of disabled workers. In the empirical analysis, we use two illustrative examples of potential indexing changes: Shifting from wage indexing to price indexing of the initial level of OASDI benefits; and Adjusting the initial benefit level for changes in life expectancy at retirement, that is, longevity indexing. We employ a historical counterfactual simulation to evaluate outcomes that would have resulted from changing the indexing scheme at one particular point in time. The hypothetical implementation period begins with the historical start of the current regime of indexing in 1979 and ends with one of the reference periods of the 1996 Survey of Income and Program Participation (SIPP), a 17-year period. However, we briefly assess the extent to which the results would be applicable to other time horizons. The analysis uses a cross-sectional sample of OASDI beneficiaries from the 1996 SIPP matched to Social Security administrative records. Further, we use total income from the SIPP (as adjusted to correspond to the calculated OASDI benefit amounts) to simulate eligibility for Supplemental Security Income (SSI) and SSI benefit amounts. Our overall findings pertain to three outcomes: (1) effects on OASDI benefits viewed in isolation, (2) the offsetting role of SSI, and (3) the diluting effect of other sources of family income. We find that a broader perspective incorporating all three measures is necessary to obtain an appropriate picture of distributional outcomes. Even though the proposals were designed to have proportional effects, differences between groups--such as disabled and retired workers--can arise from differences in the timing of benefit claiming, mortality, and other factors. Specifically, our cross-sectional estimates suggest that the average change in OASDI benefit levels would be higher for disabled-worker beneficiaries than for retired-worker beneficiaries. These differences are attributable to the fact that a higher proportion of the stock of disabled beneficiaries have been on the Disability Insurance (DI) program rolls for a relatively short period of time and therefore have been affected by the shift in indexing scheme for a longer period of time. These results must be interpreted within the context of the methodology that was used. Further, other methodologies may lead to different results. For example, in previous studies that restricted the sample to a particular birth cohort, a higher proportion of disabled workers than retired workers were observed to have been on the DI program rolls for a relatively long period of time. Longer time on the beneficiary rolls corresponds to less exposure to the new indexing scheme and smaller estimated benefit changes. Thus, the same underlying factor-the timing of benefit claiming-influences both results. When the offsetting role of SSI benefits is also considered, we estimate smaller overall changes, especially for those at the bottom of the income distribution. When OASDI and SSI are considered together, differences in average benefit changes between disabled and retired workers are removed. This is due to a higher rate of SSI program participation among disabled workers than among retired workers. In addition, including SSI substantially reduces the proportion of disabled workers that have large simulated changes in benefit amounts. The estimated effects of changing the indexing scheme are further muted when total family income is considered. This occurs on a roughly equivalent scale for disabled and retired workers. As a result, changing the indexing scheme would produce little change in the status quo differences in poverty status between disabled and retired workers. Finally, we examine the most economically vulnerable subgroups of OASDI beneficiaries. Within the general group of beneficiaries, we find that the most vulnerable would be less affected than average, primarily as a result of the mitigating effect of SSI benefits. Further, within the population of disabled-worker beneficiaries, we examine economically vulnerable subgroups including those in the lowest primary insurance amount quartile, with less than a high school education, with an early onset of disability, or a primary mental impairment. These groups would also be less affected than average.     

Educational and economic characteristics of student beneficiaries: black-white differences

This article compares black and white student beneficiaries under the old-age, survivors, and disability insurance (OASDI) program during the 1972-73 school year from the standpoint of differences in economic and educational characteristics. The role that OASDI played in enabling students to continue in school full time is studied. The findings show that relatively more blacks were in the student beneficiary population than in the general student population; they were also overrepresented among students attending high school. Blacks were disadvantaged with respect to the educational attainment of their fathers and in terms of total family income. They also had lower-grade-point averages and those in high school were older than their white counterparts. Black high school students nevertheless planned to continue their education and to attend 4-year colleges in about the same proportion as whites. The total amount of educational income of black students was greater than that of white students, but the members of the latter group received more from loans and miscellaneous sources. Grants were the most important source of educational income for blacks. About half the student beneficiaries said they could continue full time in school without benefits and a third said they could not.     

Actuarial status of the Hospital Insurance and Supplementary Medical Insurance Trust Funds

This article, adapted from a summary of the 1983 Annual Reports of the Medicare Boards of Trustees, presents the present and projected future actuarial status of the Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) Trust Funds following the enactment of the Tax Equity and Fiscal Responsibility Act of 1982 and the Social Security Amendments of 1983. Although the Trustees characterize the outlook for the HI Trust Fund as slightly more optimistic than it was a year earlier, they report that the fund may be exhausted sometime between 1988 and 1996 unless benefits under the HI part of Medicare are reduced or financing is improved. The SMI Trust Fund, which is financed by premiums adjusted each year to reflect actual experience and by general revenue contributions, is characterized as actuarially sound. The Trustees note, however, the growing extent to which general revenue financing is becoming the major source of income for the SMI part of Medicare.     

Adding immigrants to microsimulation models

Forecasts of the financial status of Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) programs and forecasts of the effects of various OASDI policy options on Americans would be improved if information about the earnings and labor force behavior of various population subgroups were included in projection models. Focusing on the projection of immigrant earnings, this article proffers a conceptual basis for incorporating immigration into microsimulation models. Key results from research on immigrant earnings, as described in the first article in this trilogy--"Research on Immigrant Earnings"--are linked to methods for forecasting individual earnings in microsimulation models. The research on immigrant earnings also inspires new methods for forecasting earnings in microsimulation models as well as the projection of immigrant emigration. Forecasting immigrant earnings and emigration is discussed in the context of a "closed system"--that is, forecasts are only made for a given population, which is represented in the base sample of the microsimulation model. The third article in our trilogy--"Incorporating Immigrant Flows into Microsimulation Models"--explores how to project immigrant earnings in the context of an "open system," which includes future immigrants.     

Evaluating the Impacts of an Enhanced Family Self-Sufficiency Program

We conduct an impact analysis of the Denver, Colorado, Housing Authority’s Home Ownership Program (HOP) employing quasi experimental methodologies (i.e., nearest-neighbor matching, inverse probability weighting with regression adjustment) that permit causal inferences of program impacts with substantial confidence. HOP is an unusual, enhanced variant of the Family Self-Sufficiency program that incentivizes and assists participants’ purchase of a home. We analyze whether, compared with the control group, HOP participants exhibited significantly greater earnings growth during the program, enhanced economic security, and rates of home buying. We find that participants with a high intensity of treatment showed significant improvement in all outcomes. Results are robust to model specification and insensitive to omitted variable bias typically found in the social sciences. We conclude that a well-conceived and well-executed public housing authority program aimed at building the financial, human and social assets of low-income households receiving housing assistance can yield substantial benefits to participants.     

Economic self-interest and the vote: Evidence and meaning

The issue of personal economic self-interest — people responding politically to changes in their financial well-being — has been a central focus in the economic voting literature. In a recent article, Kramer (1983) contended that people may be acting in a personally self-interested manner despite findings to the contrary from survey research analyses. In another article, Sears and Lau (1983) argued that findings of economic self-interest from survey data may be artifactual and that self-interested behavior may be even weaker than previously thought. In this paper I review the literature on economic self-interest and attempt to determine to what extent people do act on the basis of their financial well-being and under what conditions this is most likely.