Social Security: Selected Findings of the 2023 Annual Report

Social Security: Selected Findings of the 2023 Annual Report

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April 5, 2023
Social Security: Selected Findings of the 2023 Annual Report
According to the 2023 report of the Board of Trustees of
Table 1. Key Dates Projected for the Social Security
the Social Security Trust Funds, the program’s finances are
Trust Funds in the 2022 and 2023 Trustees Reports
in a similar, albeit marginally worse, position in 2023
(Under the Trustees’ Intermediate Assumptions)
relative to what they were in 2022. Under intermediate

2022 Report
2023 Report
assumptions, the projected combined trust fund asset

OASI
DI
OASDI OASI
DI
OASDI
depletion date is 2034 (versus 2035 in last year’s report),
Cost
after which the percentage of benefits payable would be
exceeds tax 2010 2044
2010
2010 2044
2010
80% (the same as in the 2022 report).
revenues
Social Security Overview
Cost
exceeds
Social Security is a self-financing program that in 2023
total
2021 2090
2021
2021 >2097 2021
covers approximately 183 million workers and provides
revenues
monthly cash benefits to over 66 million beneficiaries. It is
Trust fund
the federal government’s largest program in terms of both
reserves
2034 >2096
2035
2033 >2097 2034
the number of people affected (i.e., covered workers and
depleted
beneficiaries) and its finances. Social Security is composed
Source: CRS, based on the 2022 and 2023 OASDI trustees report.
of Old-Age and Survivors Insurance (OASI) and Disability
Insurance (DI), referred to collectively as OASDI.
In the 2023 report, the trustees project a date of 2033 for
OASI trust fund reserve depletion. The DI trust fund is not
The OASDI program is primarily financed (90.6% of total
projected to become depleted in the 75-year projection
revenues in 2022) through a payroll tax applied to Social
period. As stated, “the DI program continued to have low
Security–covered earnings up to an annual limit. Some
levels of disability applications and benefit awards for
beneficiaries pay income tax on a portion of their Social
2022. Disability applications have declined substantially
Security benefits (4.0% of total revenue in 2022). From
since 2010, and the total number of disabled-worker
1983 to 2009, the OASDI program collected more in tax
beneficiaries in current payment status has been falling
revenues than needed to pay benefits. Excess revenues are
since 2014.” Prior to the 2023 report, the 2022 report was
held in interest-bearing U.S. Treasury securities, providing
the first since 1983 in which the DI trust fund was not
a third source of funding for the program (5.4% of total
projected to become depleted inside the 75-year projection
revenues in 2022). Monthly benefits are the largest OASDI
period.
program cost (99.0% of total costs in 2022). Administrative
and other costs accounted for the remainder.
In the previous year’s (2022) 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
decrease. Asset reserves held in the trust funds decreased
mechanism. Monies credited to these trust funds are
less than expected during 2022 owing to larger-than-
earmarked for paying Social Security benefits and certain
projected revenues relative to larger-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 2022 and 2023 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.
2022
2022
2023

(projected) (actual) (projected)
A Board of Trustees manages the trust funds. The trustees’
Starting trust funds’
annual reports to Congress on the trust funds’ status and
reserves
$2,852.0
$2,852.0
$2,829.9
financial operations include short-range (10-year) and long-
Total revenue
1,195.8
1,221.8
1,334.7
range (75-year) projections. In general, the trust funds’
Total costs
1,242.7
1,243.9
1,387.9
solvency—the ability to pay full benefits scheduled under
Change in trust funds’
-46.8
-22.1
-53.2
current law on a timely basis—indicates their status. If
reserves
assets held in the trust funds were to be depleted, the
Ending trust funds’
2,805.2
2,829.9
2,776.7
OASDI program could pay out in benefits only what it
reserves
receives in revenues. Table 1 shows the trust funds’ key
Source: CRS, based on the 2022 and 2023 OASDI trustees report.
dates under the trustees’ intermediate assumptions, which
reflect their best estimate of future experience.
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Since 2010, total costs (i.e., scheduled benefits) have
years thereafter. This shift was made as the Trustees
exceeded noninterest revenue (i.e., tax revenues). In 2022,
lowered the levels of GDP and total economy labor
total costs exceeded total revenues (i.e., tax revenues and
productivity in response to recent economic developments,
interest revenue). The same projection is made in the 2023
including higher-than-expected inflation rates and lower-
report (Table 1). If this projection were to be realized, the
than-expected output growth.” As in previous years, a
trust fund asset reserves would continue to decrease. As
shifting of the 75-year valuation period—from 2022-2096
such, trust fund asset reserves are predicted to decline from
to 2023-2097—means that a large negative annual balance
their peak value of $2.91 trillion in 2021 to $0 in 2034.
for 2097 is now included in the actuarial balance.
Upon the trust funds’ asset reserves depletion, the trustees
project that income from tax revenues would be sufficient
Annual Balances
to pay approximately 80% of scheduled benefits in 2034
In the 2023 report, the trustees project the annual balances
and decrease to 74% by 2097.
(i.e., difference between revenues and costs on an annual
basis) to reflect a higher deficit for all years from 2024
Projected Long-Range Financial Outlook
through 2097. That is, for all years after 2023, the trustees
The 2023 report projects a long-range funding shortfall.
project larger annual cash-flow deficits than were projected
The funding shortfall is largely a result of rising costs over
in last year’s report.
the 75-year projection period, primarily due to demographic
trends. The ratio of OASDI beneficiaries per 100 covered
COVID-19 and International Events
workers, a common indicator of rising costs, is projected to
The 2023 report acknowledged the lack of consensus on the
remain relatively the same as that in the 2022 annual report.
lasting effects of the COVID-19 pandemic on the program’s
The 2022 report projected an average of 45.4 beneficiaries
long-term trends. However, although the trustees do not
per 100 covered workers over the 75-year projection; the
foresee changes in long-term ultimate assumptions, “the
2023 report projects this ratio to be 45.5 beneficiaries per
Trustees assume that the pandemic and other evolving
100 covered workers. Consistent projections in the ratio of
international events, like the war in Ukraine, will have
beneficiaries to workers (i.e., future age distribution)
consequential effects on the future structure of the economy
suggests program costs are projected to grow faster than
and the level of productivity.”
program revenues. In 2022, the trustees estimated that costs
would exceed revenues by 22.0% over the projection
What Can Be Done?
period. In 2023, the trustees estimate that costs will exceed
The trustees project that in 11 years Social Security will be
revenues by 22.7% over the next 75 years.
unable to pay scheduled benefits in full and on time. To
illustrate the magnitude of changes needed to make Social
If the total program revenues were to exceed total costs
Security solvent over the next 75 years, the trustees
annually, the program would have a surplus; if the total
estimate the hypothetical payroll tax increase or
program costs were to exceed the total revenues, the
hypothetical benefit reduction needed to maintain solvency
program would have a deficit. The trustees project the
(Table 3). These hypothetical changes would take
program to have a deficit in 2023—just as in 2021 and
immediate effect and apply to all current and future
2022—and for all remaining years in the 75-year projection
beneficiaries. The table also shows estimates for changes
period.
that would be needed at the projected 2034 insolvency date.
The actuarial balance, a summarized measure of the annual
Table 3. Hypothetical Measures to Maintain Solvency
surpluses and deficits over the projection period, is one

2022 Report
2023 Report
measure of the Social Security program’s long-range

2022
2035
2023
2034
financial position. When the actuarial balance results in
Payrol tax increase
higher costs than revenues over the projection period, the
(in percentage points
3.24 pp 4.07 pp 3.44 pp 4.15 pp
program is described as having an actuarial deficit. In
[pp])
2022, the trustees estimated the long-range actuarial deficit
Scheduled benefit
over the next 75 years to average 3.42% of taxable payroll
reduction
20%
25%
21%
25%
(i.e., total earnings subject to the OASDI payroll tax with
Source: CRS, based on the 2022 and 2023 OASDI trustees report.
some adjustments). In 2023, the trustees estimated the long-
range actuarial deficit over the next 75 years to average
In the 2023 report, the size of the payroll tax increase and
3.61% of taxable payroll. This amount represents the
benefit reduction needed to maintain solvency are larger
average increase in the payroll tax over the 75-year
than estimated in 2022. A noted parallel to last year’s report
projection period that would be needed for the program to
is that as time elapses, the magnitude of the changes needed
pay full scheduled benefits on time.
to maintain Social Security solvency increases. This
characteristic is attributable to the program’s rising costs
The change in the estimated actuarial deficit, a decrease of
and suggests that the portfolio of legislative options to
0.19% of taxable payroll, is mainly attributable to a change
achieve solvency decreases as the trust funds approach the
in the assumptions for the levels of productivity and Gross
projected depletion date. As in many previous reports, the
Domestic Product (GDP) in the near term period. The
trustees state, “Implementing changes sooner rather than
trustees state: “For this year’s report, the Trustees assume
later would allow more generations to share in the needed
that the level of potential GDP was about 0.9 percent lower
revenue increases or reductions in scheduled benefits.”
than the level estimated in last year’s report for 2020,
widening to about 3.0 percent lower by 2026 and for all
Barry F. Huston, Analyst Social Policy
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Social Security: Selected Findings of the 2023 Annual Report

IF12375

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