This year’s Social Security Trustees Report reveals both good and bad news on the current and long-term projected financial status of the program.
According to the Social Security Board of Trustees’ annual report released June 2, the asset reserves of the Old-Age and Survivors Insurance (OASI) Trust Fund is projected to become depleted in 2034—one year later than projected last year. But if Congress does not act before then, there would be sufficient income coming in to pay only 77% of scheduled benefits at that time.
Meanwhile, the Disability Insurance (DI) Trust Fund, which pays disability benefits, is no longer projected to be depleted within the 75-year projection period; by comparison, last year's report projected that it would be able to pay scheduled benefits only until 2057.
In addition, the Hospital Insurance (HI) Trust Fund, or Medicare Part A, which helps pay for services such as inpatient hospital care, will be able to pay scheduled benefits until 2028, two years later than reported last year. At that time, the fund’s reserves will become depleted and continuing total program income will be sufficient to pay 90% of total scheduled benefits.
In what has been an ongoing dilemma, Social Security and Medicare—despite the slight improvements—both face long-term financing shortfalls under currently scheduled benefits and financing. Costs of both programs will grow faster than gross domestic product (GDP) through the mid-2030s primarily due to the rapid aging of the U.S. population, the report warns.
For instance, the combined OASDI cost has been generally increasing much more rapidly than non-interest income since 2008 and is projected to continue to do so through about 2040, the report notes. “In this period, the retirement of the baby-boom generation is increasing the number of beneficiaries much faster than the increase in the number of covered workers, as subsequent lower-birth-rate generations replace the baby-boom generation at working ages,” the trustees write.
COVID Uncertainty
Moreover, the trustees advise that there currently is no consensus among experts on the lasting effects of the COVID-19 pandemic. “We currently assume that the pandemic will have no net effect on our long-range projections. In addition, the assumptions for this report were determined in mid-February 2022. Developments since then have added to the uncertainty regarding the path of the COVID-19 pandemic and the economy in the near term,” the report states.
Other findings from the report include:
- Total income, including interest, to the combined OASI and DI Trust Funds amounted to $1.088 trillion in 2021 ($980.6 billion from net payroll tax contributions, $37.6 billion from taxation of benefits and $70.1 billion in interest).
- In 2021, net payroll tax contributions, which consist of taxes paid by employees, employers and the self-employed, accounted for 90.1% of total trust fund income.
- During 2021, an estimated 179 million people had earnings covered by Social Security and paid payroll taxes.
- Total expenditures from the combined OASI and DI Trust Funds amounted to $1.145 trillion in 2021.
- Social Security paid benefits of $1.133 trillion in calendar year 2021. There were about 65 million beneficiaries at the end of the calendar year.
- The projected actuarial deficit over the 75-year long-range period is 3.42% of taxable payroll—a decrease from the 3.54% projected in last year’s report.
“It is important to strengthen Social Security for future generations,” Kilolo Kijakazi, Acting Commissioner of Social Security said in a statement. “The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually.”
The trustees emphasize that lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare. “Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare,” they emphasize.
The Board of Trustees usually comprises six members with four serving by virtue of their positions with the federal government: Treasury Secretary Janet Yellen; Acting Commissioner of Social Security Kilolo Kijakazi; Health and Human Services Secretary Xavier Becerra; and Labor Secretary Marty Walsh. However, the two public trustee positions have been vacant since 2015.
