William Arnone, Chief Executive Officer
William Arnone, Chief Executive Officer
Thanks to support from the Buffin Foundation, one of our Summer 2022 Merton B. Bernstein Interns, Ori Ben-Ari, will undertake a new Social Security communications project.
The goal of this project is to analyze and interpret the findings of the recently released 2022 Report of the Social Security Trustees for key audiences, including Academy Members, the public, the media, federal policy makers, and researchers. It will seek to perceive the financial condition of Social Security in a manner that fully assesses the program’s sustainability.
The 2022 Trustees Report provides an updated look at the operations of the Old-Age, Survivors, and Disability Insurance (OASDI) Trust Funds, including actuarial estimates, assumptions and methods, historical data, and a long-range sensitivity analysis.
This project will produce a policy publication for the Academy that will examine the following:
- History: The historical development of OASDI, including major amendments to the Social Security Act.
- Benefit Structure: The types of benefits provided and the various benefit formulas and eligibility conditions.
- Contributions: The Federal Insurance Contributions Act (FICA) as the principal source of revenue for financing OASDI, including the historical development of the contribution rates and the applicable maximum annual taxable wage base.
- Trust Funds: The purpose and function of the funds as a stabilizing mechanism for the fixed payroll tax structure, including a description of the sources of income and types of expenditures.
- Investments: The special-issue U.S. Treasury securities in which the trust funds are invested, including how the rate of interest on each new issue of these securities is determined.
- Actuarial Assumptions: The financial projection model that is used to assess the actuarial status and financial operations of the trust funds, including key economic, demographic, and program-specific assumptions in the model.
- Revenue Cash Flow: The components of trust funds’ revenues and the development of income rates projected over 25-year, 50-year, and 75-year periods, including the actuarial valuation process for computing discounted present values of future revenue cash flows.
- Expense Cash Flow: The components of trust funds’ expenses and the development of cost rates over 25-year, 50-year, and 75-year periods, including the actuarial valuation process for computing discounted present values of future expense cash flows.
- Financial Stability: How setting the FICA rate at a fixed constant rate over a period of time as a means of achieving stability affects the long-term sustainability of the system.
- Trust Funds’ Solvency: Actuarial metrics for the assessment and monitoring of trust funds’ solvency by comparing expected revenue cash flow against expected outgo for benefits and administrative expenses.
- Financial Sustainability: A description of a dynamic system to assess the trends in solvency as an indicator of long-term sustainability, including the concept of an equilibrium contribution rate that represents the required rate to achieve 100 percent sustainability over various future projection periods.
- Expected Shortfall: The derivation of the expected shortfall in the financing of the Social Security system as the difference between the actuarial value of scheduled benefits plus expenses and the actuarial value of projected revenues, including trust funds’ proceeds, measured over various projection periods.
- Principle of Actuarial Uncertainty: The concept of uncertainty spread in the actuarial metrics for the assessment of sustainability, including the dynamic, stochastic, and secular trend features of sustainability metrics data sets.
- Contributions Equilibrium: The concept of contributions equilibrium that represents the requisite FICA rate necessary to achieve 100 percent sustainability over specific future projection periods and meet all scheduled benefit and administrative expenditures.
- Sensitivity Analysis: The operation of sensitivity analysis tests that measure the effect of making hypothetical small changes in each of the key economic and demographic assumptions.
- Stochastic Projection Methodology: The development of the stochastic projection methodology that recognizes the probabilistic statistical distribution of each of the key variables that comprise the set of economic and demographic assumptions.
- Future System Integrity: The dynamic, stochastic, and secular trend features of the Social Security system necessary to maintain the future integrity of the system, including the need to continuously monitor the financing of the system and make timely parametric adjustments to the factors that influence future revenue and expenditure cash flow streams.
- Potential Parametric Adjustments: Key parameters that might be adjusted to maintain acceptable sustainability levels projected over various future periods.
- Legislative Proposals: Details of various legislative proposals that are designed to improve the sustainability of the system by making various adjustments to benefit and contribution provisions.
A team of Academy Members with Social Security economic and actuarial expertise will support the work of the Bernstein Intern. The initial report of this project is planned for issuance at the end of Summer 2022. Auxiliary communications materials, including infographics, will be released with the report.
The Academy is excited about the potential of this project to improve public understanding of the future financial condition of Social Security and provide evidence to be used by Congress and the Administration to explore sound policy options to strengthen it.
Looks like a very comprehensive analysis. If inflation is sustained at above 5%, it is important to see its impact.
That seems excellent to me. It would be nice to also have some discussion of expansion proposals that go beyond what are in the current Congressional bills. One such expansion proposal would be to allow Social Security participants to invest savings or extra contributions into the fund in return for higher old-age benefits.
It would be very helpful if this project could be expanded to include the SSI program. The SSI program has been ignored since it’s inception. Providing a benefit well below the poverty level should not be something NASI does not pay attention to.
Please note the Academy’s recently issued report, Economic Security for the 21st Century, which includes SSI policy options.
1. Increase the monthly SSI benefit to at least the federal poverty level. The current maximum monthly federal benefit is well below the poverty level. One proposal is to increase SSI benefits to the federal poverty level. A level increase in federal SSI benefits and continued annual inflation adjustments—currently achieved using the CPI-W, the price index for urban wage earners and clerical workers—would improve living standards for some of the most financially insecure populations and keep benefits at a relevant level over time.
2. Update the earned and unearned income disregards. In general, SSI benefits phase out as a person’s income from other sources increases above certain thresholds. Currently, SSI recipients can receive a combined total of $85 per month in earned and unearned income without experiencing a reduction in benefits. This proposal would increase both the earned income and unearned income disregards. One proposal is to update both disregards annually with inflation. Another proposal would tie the disregards to a multiple of the minimum wage for a full-time worker. For instance, an allowance of 160 (hours) times the minimum wage per month would allow four weeks of full-time work without benefit reductions.
3. Eliminate or reform the one-third benefit reduction for “in-kind support and maintenance.” Currently, SSI beneficiaries see meager benefits reduced by one-third if they are considered to be receiving help paying for food or shelter. Eliminating this one-third reduction would increase benefits for many of the most financially insecure SSI beneficiaries.
4. Extend the benefit phase-out for earnings to more effectively support beneficiaries attempting to return to work. Currently, for every dollar of earned income above a threshold amount, an SSI recipient loses 50 cents in benefits, a 2:1 ratio. An extended benefit phase-out would change the benefit loss to a 4:1 or 5:1 ratio to encourage and permit work.
5. Eliminate marriage penalties. Currently couples in which both individuals are SSI beneficiaries see benefits reduced by 25 percent if they marry. SSI beneficiaries who marry non-SSI beneficiaries can lose benefits altogether due in large part to the program’s asset limits, which include spousal assets. Eliminating the benefit reduction for married couples receiving SSI and eliminating or increasing asset limits would extend marriage equality to SSI beneficiaries and better assure that the most financially insecure populations have a meaningful, steady stream of income.
6. Extend SSI eligibility to qualifying residents of U.S. territories. Under current law, residents of American Samoa, Guam, Puerto Rico, and the U.S. Virgin Islands are ineligible for SSI, even if they are U.S. citizens or documented U.S. immigrants. Guam, Puerto Rico, and the U.S. Virgin Islands have programs that provide benefits to the same populations, but the benefits are small compared to what SSI would offer. American Samoa has no such programs. This option was proposed in the Build Back Better legislation of 2021.
It would be very helpful to describe the formation of the Trustees Report summary report itself -and the phrasing of the accompanying Press Release. What is the role of career professional staffs (and Political appointees) in ( each) Trustee agency? Is the Report released to all appropriate Congressional Committees; are media briefings held etc ? Several prominent external advocacy /research organization release either own summary and /or sponsor briefings related to the report. To what extent do these organizations contribute to public understanding of the Trustee report etc. ? How is the report portrayed in media -especially media focusing on Financial /Retirement Security? To what extent, if any ,do the annual Trustee reports influence individual decisions related to claiming Social Security benefits , increasing private retirement savings etc .)