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October 5, 2021
Social Security: Selected Findings of the 2021 Annual Report
According to the recent report of the Board of Trustees of
reflect their best estimate of future economic, demographic,
the Social Security Trust Funds, the program’s finances are
and program-specific factors.
in a similar, albeit marginally worse, position in 2021 to
what they were in 2020. Under intermediate assumptions,
Table 1. Key Dates Projected for the Social Security
the projected combined Trust Fund asset depletion date is
Trust Funds in the 2020 and 2021 Trustees Reports
2034 (versus 2035 in last year’s report), after which the
(under the trustees’ intermediate assumptions)
percentage of benefits payable would be 78% (versus 79%
2020 Report
2021 Report
in 2020).
OASI DI
OASDI OASI
DI OASDI
Social Security Overview
Cost exceeds
noninterest 2010 2041
2010
2010 2040 2010
Social Security is a self-financing program that in 2021
revenues
covers approximately 176 million workers and provides
Cost exceeds
monthly cash benefits to over 65 million beneficiaries. It is
total
2021 2047
2021
2021 2045 2021
the federal government’s largest program in terms of both
revenues
the number of people affected (i.e., covered workers and
Trust fund
beneficiaries) and its finances. Social Security is composed
reserves
2034 2065
2035
2033 2057 2034
of Old-Age and Survivors Insurance (OASI) and Disability
depleted
Insurance (DI), referred to collectively as OASDI.
Source: CRS, based on the 2020 and 2021 OASDI Trustees Report.
The OASDI program is primarily financed (89.6% of total
In the 2021 report, the trustees project a date of 2033 for
revenues in 2020) through a payroll tax applied to Social
OASI Trust Fund reserve depletion and a noticeably
Security–covered earnings up to an annual limit. In
changed date of 2057 for DI Trust Fund reserve depletion.
addition, some beneficiaries pay income tax on a portion of
As stated, “For the third year in a row, there has been
their Social Security benefits, accounting for 3.6% of total
significant change in the DI reserve depletion date because
revenue in 2020. From 1983 to 2009, the OASDI program
the DI reserve depletion date is very sensitive to changes in
collected more in tax revenues than needed to pay benefits.
program cash flows, and there is now less revenue projected
Excess revenues are held in interest-bearing U.S. Treasury
in the near term for the DI program than was expected in
securities, providing a third source of funding for the
last year’s report. Nevertheless, the DI program has
program. In 2020, interest revenues accounted for 6.8% of
continued to have low levels of disability applications and
total revenues. Monthly benefits are the largest OASDI
benefit awards for 2020.”
program cost, accounting for 99.0% of total costs in 2020.
Administrative and other costs accounted for the remainder.
In the previous year’s (2020) report, as shown in Table 2,
The Trust Funds
the trustees projected that the trust funds’ overall balance
(i.e., the total amount of accumulated asset reserves) would
Both the OASI and DI programs use a trust fund financing
increase slightly. Asset reserves held in the trust funds
mechanism. Monies credited to these trust funds are
increased more than expected during 2020 owing to larger-
earmarked for paying Social Security benefits and certain
than-projected revenues and lower-than-projected costs.
administrative costs. Using a trust fund allows OASI and DI
programs to track their respective programs’ revenues and
Table 2. Financial Operations for the Social Security
costs and to hold any accumulated assets from years when
Trust Funds in the 2020 and 2021 Trustees Reports
revenues exceed costs. The OASI Trust Fund and DI Trust
(in bil ions; under the trustees’ intermediate assumptions)
Fund are legally distinct entities; they are discussed here
collectively as the OASDI Trust Funds, or the trust funds.
2020
2020
2021
(projected) (actual) (projected)
A Board of Trustees manages the trust funds. The trustees
Starting Trust Funds’
$2,897.4
$2,897.4
$2,908.3
are required to report to Congress annually on the trust
Reserves
funds’ status and financial operations. In general, the trust
Total Revenue
1,116.4
1,118.1
1,073.8
funds’ solvency—the ability to pay full benefits scheduled
Total Costs
1,112.0
1,107.2
1,151.0
under current law on a timely basis—indicates their status.
Change in Trust Funds’
4.4
10.9
-77.3
If assets held in the trust funds were to be depleted, the
Reserves
OASDI program could pay out in benefits only what it
Ending Trust Funds’
2,901.8
2,908.3
2,831.0
receives in revenues. Table 1 shows the trust funds’ key
Reserves
dates under the trustees’ intermediate assumptions, which
Source: CRS, based on the 2020 and 2021 OASDI Trustees Report.
https://crsreports.congress.gov
link to page 1 link to page 2 Social Security: Selected Findings of the 2021 Annual Report
Since 2010, costs (i.e., scheduled benefits) have exceeded
resulted in the ultimate fertility rate being reached 25 years
noninterest revenue (i.e., tax revenues). In last year’s
later than projected last year, increasing the actuarial
report, the trustees projected that total costs would exceed
deficit. Updates to the civilian labor force model to reflect
total revenues (i.e., tax revenues and interest revenue) in
new economic data lowered projected labor force
2021. The same projection is made in this year’s report
participation rates, worsening the actuarial balance. Updates
(Table 1). If this projection were to be realized, the effect
to the methodology for projecting average benefit levels
would be a decrease in trust fund asset reserves. As such,
and Department of the Treasury tax information that
trust fund asset reserves are predicted to decline from a
indicated future lower levels of revenue from taxation of
peak value of $2.91 trillion in 2021 to $0 in 2034. Upon the
Social Security benefits also contributed, among other
trust funds’ asset reserves depletion, the trustees project that
factors, to the increase in the actuarial deficit.
income from tax revenues would be sufficient to pay
approximately 78% of scheduled benefits for the remainder
Annual Balances
of the projection period (2021-2095) versus 79% in 2020.
In the 2021 annual report, the trustees project the annual
balances (i.e., difference between revenues and costs on an
Projected Long-Range Financial Outlook
annual basis) to reflect a larger deficit for most (i.e., 2021-
The 2021 annual report projects a long-range funding
2089) years in the projection period. The trustees attribute
shortfall. The funding shortfall is largely a result of rising
the changes in annual balances to the changes in fertility
costs over the 75-year projection period, primarily due to
methodology and assumptions. Over the 75-year projection
demographic trends. The ratio of OASDI beneficiaries per
period, annual balances are lower than last year’s report by
100 covered workers, a common indicator of rising costs, is
an average of 0.23 percentage point.
projected to remain relatively the same as that in the 2020
annual report. The 2020 report projected an average of 45.4
COVID-19
beneficiaries per 100 covered workers over the 75-year
The 2021 report confined the “significant” pandemic-
projection; the 2021 annual report projects this ratio to be
related effects to the near term; last year’s report did not
45.5 beneficiaries per 100 covered workers. Although the
include potential COVID-19 effects. The 2021 intermediate
projected ratio of beneficiaries to workers remains
assumptions project economic recovery by 2023. By the
relatively the same, program costs are projected to grow
mid-2020s, most demographic factors (i.e., fertility,
faster than program revenues. In 2020, the trustees
mortality, immigration) are assumed to return to the rates
estimated that costs would exceed revenues by 21.7% over
that would have been estimated absent the pandemic.
the projection period. In 2021, the trustees estimate that
costs will exceed revenues by 22.7% over the next 75 years.
What Can Be Done?
The trustees project that in 13 years Social Security will be
If the total program revenues were to exceed total costs
unable to pay scheduled benefits in full and on time. To
annually, the program would have a surplus; if the total
illustrate the magnitude of changes needed to make Social
program costs were to exceed the total revenues, the
Security solvent over the next 75 years, the trustees
program would have a deficit. The trustees project the
estimate the hypothetical payroll tax increase or
program to have a deficit in 2021—the first since 1982—
hypothetical benefit reduction needed to maintain solvency
and for all remaining years in the 75-year projection period.
(Table 3). These hypothetical changes would take
immediate effect and apply to all current and future
The actuarial balance, a summarized measure of the annual
beneficiaries. The table also shows estimates for changes
surpluses and deficits over the projection period, is the
that would be needed at the projected 2034 insolvency date.
Social Security program’s long-range financial position.
When the actuarial balance results in higher costs than
Table 3. Hypothetical Measures to Maintain Solvency
revenues over the projection period, the program is
(in percentage points [pp])
described as having an actuarial deficit. In 2020, the
2020 Report
2021 Report
trustees estimated the long-range actuarial deficit over the
2020
2035
2021
2034
next 75 years to average 3.21% of taxable payroll (i.e., total
Payrol Tax Increase 3.14 pp
4.13 pp 3.36 pp 4.20 pp
earnings subject to the OASDI payroll tax with some
Scheduled Benefit
adjustments). In 2021, the trustees estimated the long-range
Reduction
19%
25%
21%
26%
actuarial deficit over the next 75 years to average 3.54% of
Source: CRS, based on the 2020 and 2021 OASDI Trustees Report.
taxable payroll. This amount represents the average
increase in the payroll tax over the 75-year projection
period that would be needed for the program to pay full
In the 2021 report, the size of the payroll tax increase and
scheduled benefits on time.
benefit reduction needed to maintain solvency are larger
than estimated in 2020. A noted parallel to last year’s report
The change in the estimated actuarial deficit, an increase of
is that as time elapses, the magnitude of the changes needed
0.33% of taxable payroll, is mainly attributable to a change
to maintain Social Security solvency increases. This
in valuation period and to changes in methods and
characteristic is attributable to the program’s rising costs
programmatic data. The shifting of the 75-year valuation
and suggests that the portfolio of legislative options to
period from 2020-2094 to 2021-2095 means that a large
achieve solvency decreases as the trust funds approach the
negative annual balance for 2095 is now included in the
projected depletion date. As in many previous reports, the
actuarial balance. Several factors contributed to changes in
trustees state, “Implementing changes sooner rather than
methods and programmatic data. A new fertility model
later would allow more generations to share in the needed
revenue increases or reductions in scheduled benefits.”
https://crsreports.congress.gov
Social Security: Selected Findings of the 2021 Annual Report
IF11939
Barry F. Huston, Analyst in Social Policy
Disclaimer
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https://crsreports.congress.gov | IF11939 · VERSION 1 · NEW