Social Security: Selected Findings of the 2024 Annual Report

Social Security: Selected Findings of the 2024 Annual Report

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May 10, 2024
Social Security: Selected Findings of the 2024 Annual Report
According to the 2024 report of the Board of Trustees of
dates under the trustees’ intermediate assumptions, which
the Social Security Trust Funds, the program’s finances are
reflect their best estimates of future experience.
in a similar, albeit marginally better, position in 2024
relative to what they were in 2023. Under intermediate
Table 1. Key Dates Projected for the Social Security
assumptions, the projected combined trust fund asset
Trust Funds in the 2023 and 2024 Trustees Reports
depletion date is 2035 (versus 2034 in last year’s report),
(Under the Trustees’ Intermediate Assumptions)
after which the percentage of benefits payable would be

2023 Report
2024 Report
83% (versus 80% in the 2023 report).

OASI
DI
OASDI OASI
DI
OASDI
Social Security Overview
Cost
exceeds tax 2010 2044
2010
2010 >2098 2010
Social Security is a self-financing program that in 2024
revenues
covers approximately 182 million workers and provides
Cost
monthly cash benefits to over 67 million beneficiaries. It is
exceeds
the federal government’s largest program in terms of both
2021 >2097
2021
2021 >2098 2021
total
the number of people affected (i.e., covered workers and
revenues
beneficiaries) and its finances. Social Security is composed
Trust fund
of Old-Age and Survivors Insurance (OASI) and Disability
reserves
2033 >2097
2034
2033 >2098 2035
Insurance (DI), referred to collectively as OASDI.
depleted
Source: CRS, based on the 2023 and 2024 OASDI trustees reports.
The OASDI program is primarily financed (91.3% of total
revenues in 2023) through a payroll tax applied to Social
In the 2024 report, the trustees project a date of 2033 for
Security–covered earnings up to an annual limit. Some
OASI trust fund reserve depletion. The DI trust fund is not
beneficiaries pay income tax on a portion of their Social
projected to become depleted in the 75-year projection
Security benefits, providing a second source of program
period. As stated, “the DI program continued to have low
financing (3.8% of total revenue in 2023). From 1983 to
levels of disability applications and benefit awards through
2009, the OASDI program collected more in tax revenues
2023. Disability applications have declined substantially
than needed to pay benefits. Excess revenues are held in
since 2010, and the total number of disabled-worker
interest-bearing U.S. Treasury securities, providing a third
beneficiaries in current payment status has been falling
source of funding for the program (5.0% of total revenues
since 2014.” The 2023 and 2022 reports also projected that
in 2023). Monthly benefits are the largest OASDI program
the DI trust fund would not become depleted inside the 75-
cost (99.1% of total costs in 2023). Administrative and
year projection period.
other costs account for the remainder of program costs.
The Trust Funds
In the previous year’s (2023) report, as shown in Table 2,
the trustees projected that the trust funds’ overall balance
Both the OASI and DI programs use a trust fund financing
(i.e., the total amount of accumulated asset reserves) would
mechanism. Monies credited to these trust funds are
decrease. Asset reserves held in the trust funds decreased
earmarked for paying Social Security benefits and certain
less than expected during 2023, owing to larger-than-
administrative costs. Using a trust fund allows the OASI
projected revenues relative to larger-than-projected costs.
and DI programs to track their respective programs’
revenues and costs and to hold any accumulated assets from
Table 2. Financial Operations for the Social Security
years when revenues exceed costs. The OASI Trust Fund
Trust Funds in the 2023 and 2024 Trustees Reports
and DI Trust Fund are legally distinct entities. They are
(In Bil ions; Under the Trustees’ Intermediate Assumptions)
discussed here collectively as the OASDI trust funds.
2023
2023
2024

A Board of Trustees manages the trust funds. The trustees’
(projected) (actual) (projected)
annual reports to Congress on the trust funds’ status and
Starting trust funds’
financial operations include short-range (10-year) and long-
reserves
$2,829.9
$2,829.9
$2,788.5
range (75-year) projections. In general, the trust funds’
Total revenue
1,334.7
1,350.7
1,381.8
solvency—the ability to pay full benefits scheduled under
Total costs
1,387.9
1,392.1
1,482.2
current law on a timely basis—indicates their status. If
Change in trust funds’
-53.2
-41.4
-100.4
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’
2,776.7
2,788.5
2,688.0
receives in revenues. Table 1 shows the trust funds’ key
reserves
Source: CRS, based on the 2023 and 2024 OASDI trustees reports.
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link to page 1 link to page 2 Social Security: Selected Findings of the 2024 Annual Report
Since 2010, total costs (i.e., scheduled benefits and
increase of the employment rate for the working-age
administrative costs) have exceeded noninterest revenue
population. However, changes advantageous to the
(i.e., tax revenues). In 2023, total costs exceeded total
program’s long-range finances were partially offset by a
revenues (i.e., tax revenues and interest revenue). The same
lower assumed ultimate total fertility rate (TFR) that is
projection is made in the 2024 report (Table 1). If this
reached in 2040 versus 2056 in last year’s report.
projection were to be realized, the trust fund asset reserves
Consequently, a lower ultimate TFR contributes to a higher
would continue to decrease. As such, trust fund asset
projected ratio of OASDI beneficiaries per 100 covered
reserves are predicted to decline from their peak value of
workers (i.e., an imbalance between beneficiaries collecting
$2.91 trillion in 2021 to $0 in 2035. Upon the trust funds’
benefits and workers paying into the system). As stated,
asset reserves depletion, the trustees project that income
“The Trustees believe that an incremental lowering of the
from tax revenues would be sufficient to pay approximately
ultimate TFR is warranted, consistent with recent surveys
83% of scheduled benefits in 2035 and decrease to 73% by
of birth expectations and the continued low level of the
2098.
TFR in recent years.”
Projected Long-Range Financial Outlook
As in previous years, a shifting of the 75-year valuation
The 2024 report projects a long-range funding shortfall.
period—from 2023-2097 to 2024-2098—means that a large
The funding shortfall is largely a result of rising costs over
negative annual balance for 2098 is now included in the
the 75-year projection period, primarily due to demographic
actuarial balance. For comparison purposes: “If the
trends. The ratio of OASDI beneficiaries per 100 covered
assumptions, methods, starting values, and the law had all
workers, a common indicator of rising costs, is projected to
remained unchanged from last year, the actuarial deficit
remain the same as that in the 2023 annual report. The 2024
would have increased to 3.67 percent of payroll solely due
report projected an average of 45.5 beneficiaries per 100
to advancing the valuation period by 1 year, from 2023
covered workers over the 75-year projection, the same
through 2097 for last year’s report to 2024 through 2098 for
projection as in last year’s report. The historically high
this year’s report.”
projected ratio of beneficiaries to workers is reflective of
the projected future age distribution and suggests that
What Can Be Done?
program costs (i.e., monthly benefits) are projected to grow
The trustees project that in 11 years Social Security will be
faster than program revenues (i.e., dedicated tax revenues).
unable to pay scheduled benefits in full and on time. To
In 2023, the trustees estimated that costs would exceed
illustrate the magnitude of changes needed to make Social
revenues by 22.7% over the projection period. In 2024, the
Security solvent over the next 75 years, the trustees
trustees estimate that costs will exceed revenues by 22.2%
estimate the hypothetical payroll tax increase or
over the next 75 years.
hypothetical benefit reduction needed to maintain solvency
(Table 3). These hypothetical changes would take
If the total program revenues were to exceed total costs
immediate effect and apply to all current and future
annually, the program would have a surplus; if the total
workers and beneficiaries. The table also shows estimates
program costs were to exceed the total revenues, the
for changes that would be needed at the projected 2035
program would have a deficit. The trustees project the
insolvency date.
program to have a deficit in 2024—just as in the three
previous years—and for all remaining years in the 75-year
Table 3. Hypothetical Measures to Maintain Solvency
projection period.

2023 Report
2024 Report

2023
2034
2024
2035
The actuarial balance, a summarized measure of the annual
Payrol tax increase
surpluses and deficits over the projection period, is one
3.44
4.15
3.33
4.02
(in percentage points)
measure of the Social Security program’s long-range
Scheduled benefit
financial position. When the actuarial balance results in
21.3%
25.2%
20.8%
24.6%
reduction
higher costs than revenues over the projection period, the
Source: CRS, based on the 2023 and 2024 OASDI trustees reports.
program is described as having an actuarial deficit. In
2023, the trustees estimated the long-range actuarial deficit
In the 2024 report, the size of the payroll tax increase and
over the next 75 years to average 3.61% of taxable payroll
benefit reduction needed to maintain solvency are smaller
(i.e., total earnings subject to the OASDI payroll tax with
than estimated in 2023. However, each report shows that
some adjustments). In 2024, the trustees estimated the long-
larger changes—payroll tax increases or benefit cuts—are
range actuarial deficit over the next 75 years to average
needed as the insolvency date approaches. This
3.50% of taxable payroll. This amount represents the
characteristic is attributable to the program’s rising costs.
average increase in the payroll tax over the 75-year
As in many previous reports, the trustees state,
projection period that would be needed for the program to
“Implementing changes sooner rather than later would
pay full scheduled benefits on time and maintain trust fund
allow more generations to share in the needed revenue
reserves equal to one year’s cost.
increases or reductions in scheduled benefits.” That is,
changes implemented sooner would allow workers and
The decrease in the estimated actuarial deficit—0.11% of
beneficiaries more time to change behavior and adjust
taxable payroll—is mainly attributable to an increase in the
expectations.
level of labor productivity and lower assumed disability
incidence rates over the projection period. These two
Barry F. Huston, Analyst in Social Policy
changes, in combination with others, resulted in a projected
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Social Security: Selected Findings of the 2024 Annual Report

IF12663

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