SOCIAL SECURITY ADMINISTRATION BALTIMORE, MD 21235-0001


SOCIAL SECURITY
Office of the Chief Actuary

December 8, 2016

The Honorable Sam Johnson
Subcommittee on Social Security
Committee on Ways and Means
United States House of Representatives
Washington, D.C. 20515

Dear Chairman Johnson:

I am writing in response to your request for estimates of the financial effects on Social Security
of H.R. 6489, the Social Security Reform Act of 2016, which you introduced today. The estimates
provided here reflect the intermediate assumptions of the 2016 Trustees Report. This Bill
(hereafter referred to as the proposal) includes fifteen provisions with direct effects on the Social
Security Trust Funds. The estimates and analysis provided here reflect the combined effort of
many in the Office of the Chief Actuary, but most particularly Karen Glenn, Christopher
Chaplain, Daniel Nickerson, Kyle Burkhalter, Michael Clingman, Anna Kirjusina, Katie Sutton,
and Tiffany Bosley.

The enclosed tables provide estimates of the effects of the fifteen provisions on the cost, income,
and combined trust fund reserves for the Old Age, Survivors, and Disability Insurance (OASDI)
program, as well as estimated effects on retired worker benefit levels for selected hypothetical
workers. In addition, tables 1b and 1b.n provide estimates of the federal budget implications of
the fifteen provisions. Assuming enactment of the plan, we estimate that the combined OASI and
DI Trust Funds would be fully solvent (able to pay all scheduled benefits in full on a timely
basis) throughout the 75-year projection period, under the intermediate assumptions of the 2016
Trustees Report. In addition, under this plan the OASDI program would meet the further
conditions for sustainable solvency, because projected combined trust fund reserves would be
growing as a percentage of the annual cost of the program at the end of the long-range period.

While we estimate that the provisions of this proposal would make the combined OASI and DI
Trust Funds solvent throughout the 75-year projection period under the intermediate assumptions
of the 2016 Trustees Report, the two trust funds are separate legal entities. Some modification of
the allocation of the total payroll tax rate between the OASI Trust Fund and the DI Trust Fund
might be necessary to ensure that both trust funds would remain solvent for the next 75 years
under these assumptions.

The proposal includes fifteen basic provisions with direct effects on the OASDI program. The
following list briefly identifies each provision:
Page 2 – The Honorable Sam Johnson


1) For retired worker and disabled worker beneficiaries becoming initially eligible in
January 2023 or later, phase in a new benefit formula (from 2023 to 2032). Replace the
existing two PIA bend points with three new bend points and modified benefit formula
factors.

2) Use an annualized “mini-PIA” formula beginning with retired and disabled worker
beneficiaries becoming newly eligible in 2023, phased in over 10 years. The mini-PIA
calculation would use a single year’s average monthly indexed earnings (mini-AIME)
and primary insurance amount (mini-PIA) for each year with taxable earnings.

3) Replace the current-law Windfall Elimination Provision (WEP) with a new calculation
for most OASI and DI benefits based on covered and non-covered earnings, phased in for
beneficiaries becoming newly eligible in 2023 through 2032.

4) After the normal retirement age (NRA) reaches 67 for those attaining age 62 in 2022,
increase the NRA by 3 months per year starting for those attaining age 62 in 2023 until it
reaches 69 for those attaining age 62 in 2030. Increase the age up to which delayed
retirement credits may be earned from 70 to 72 on the same schedule.

5) Beginning with the December 2018 COLA, provide no COLA for those with modified
adjusted gross income (MAGI) above specific thresholds and compute the COLA using
the chain-weighted version of the CPI-U (C-CPI-U) for all other beneficiaries.

6) For spouses and children of retired workers and disabled workers becoming newly
eligible beginning in 2023 and phased in for 2023 through 2032, limit their auxiliary
benefit to the amount based on one-half of the PIA of a hypothetical worker with earnings
equal to the national average wage index (AWI) each year up to his or her eligibility
year, and who has the same eligibility year as the worker.

7) Beginning in January 2019, require full time school enrollment as a condition of
eligibility for child benefits at age 15 up to 18.

8) Provide a new minimum benefit for workers with more than 10 years of covered earnings
above a specified level, phased in for retired and disabled worker beneficiaries becoming
newly eligible in 2023 through 2032.

9) Beginning in January 2019, eliminate the retirement earnings test for all beneficiaries
under NRA.

10) Eliminate federal income taxation of OASDI benefits that is credited to the OASI and DI
Trust Funds for 2054 and later, phased in from 2045 to 2053.

11) Provide an option to split the 8-percent delayed retirement credit (DRC) to offer a lump
sum benefit at initial entitlement equivalent to 2 of the 8 percent DRC earned, and a 6
percent DRC on subsequent monthly benefits, effective for workers attaining age 62 in
2023 and later.
Page 3 – The Honorable Sam Johnson


12) Beginning in January 2023, provide an addition to monthly benefits for all beneficiaries
who have been eligible for at least 20 years. The additional amount is calculated based
on 5 percent of the PIA for a hypothetical worker with earnings equal to the national
average wage index each year.

13) Beginning in January 2023, for new and current disabled widow(er) beneficiaries,
change the requirement that disability must occur no later than 7 years after the worker’s
death, or after surviving spouse with child-in-care benefits were last payable, to no later
than 10 years.

14) Beginning in January 2023, for new and current disabled surviving spouse beneficiaries,
eliminate the requirement to be age 50 or older for receipt of benefits.

15) Beginning in January 2023, for new and current beneficiaries, waive the two-year
duration of divorce requirement for divorced spouse benefit eligibility in cases where the
worker (former spouse) remarries someone other than the claimant before the two-year
period has elapsed.

The balance of this letter provides a summary of the effects of the fifteen provisions on the
actuarial status of the OASDI program, our understanding of the specifications and intent of each
of the fifteen provisions, and descriptions of our detailed financial estimates for trust fund
operations, benefit levels, and implications for the federal budget. See the “Specification for
Provisions of the Proposal” section of this letter for a more detailed description of these fifteen
provisions.

Summary of Effects of the Proposal on OASDI Actuarial Status

Figure 1 illustrates the projected trust fund ratio through 2090 under present law and assuming
enactment of the proposal. The trust fund ratio is defined as the combined Old-Age and
Survivors Insurance (OASI) and Disability Insurance (DI) Trust Fund reserves expressed as a
percent of annual program cost. Assuming enactment of the proposal, the combined OASI and
DI Trust Funds would be fully solvent throughout the 75-year projection period, under the
intermediate assumptions of the 2016 Trustees Report. In addition, because the projected trust
fund ratio is increasing at the end of the period, the plan meets the conditions for sustainable
solvency. It should be noted, however, that because the projected level of reserves reaches as low
as 10 percent of annual program cost around 2045, unexpected fluctuations in the economy or
other factors affecting program cost or revenue could require additional temporary measures to
maintain solvency through this period.

Page 4 – The Honorable Sam Johnson

Note: Trust Fund Ratio for a given year is the ratio of reserves in the combined OASI and DI Trust Funds at the
beginning of the year to the cost of the program for the year.

Under current law, 79 percent of scheduled benefits are projected to be payable on a timely basis
in 2034 after depletion of the combined trust fund reserves, with the percentage payable
declining to 74 percent for 2090. Under the plan, the OASDI program would be solvent
throughout the 75-year projection period, and would have the ability to pay 100 percent of
scheduled benefits on a timely basis for the foreseeable future.

Enactment of the fifteen provisions of this proposal would change the long-range OASDI
actuarial deficit from 2.66 percent of taxable payroll under current law to a positive actuarial
balance of 0.02 percent of payroll under the proposal.

Figure 2 illustrates annual projected levels of cost, expenditures, and non-interest income as a
percent of the current-law taxable payroll. The projected level of cost reflects the full cost of
scheduled benefits under both current law and the proposal. Under the proposal, projected
expenditures equal the full cost of scheduled benefits throughout the long-range period.

0
50
100
150
200
250
300
350
400
2016 2020
2030
2040
2050
2060
2070
2080
2090
Tr
us
t F
un
d
Ra
tio
Figure 1. Present Law and Proposal OASDI Trust Fund Reserves as Percent of
Annual Cost: 2016 TR Intermediate Assumptions
Present Law Trust Fund Ratio
Proposal
Page 5 – The Honorable Sam Johnson



OASDI program annual cost under the proposal is higher than under current law, starting in
2019. This difference decreases and by 2022, annual cost under the proposal is lower than under
current law. The reduction in cost grows quickly through 2055, reaching over 4 percent of
current-law payroll, and then gradually, reaching about 5.5 percent of current-law payroll for
2090. Beginning in 2019, non-interest income under the proposal is projected to be slightly
higher than under current law through 2022. For 2023 and later, non-interest income under the
proposal is lower than under current law due to reduced and eventual elimination of revenue
from income taxation of benefits, with the difference increasing to 0.9 percent of current-law
payroll for 2090. The annual balance (non-interest income minus program cost) under the
proposal is slightly worse (more negative) than under current law from 2019 through 2021. For
2022 and later, the proposal improves the annual balance.

It is also useful to consider the projected cost, expenditures, and income for the OASDI program
expressed as a percentage of Gross Domestic Product (GDP). Figure 3 illustrates these levels
under both current law and the proposal.

11
12
13
14
15
16
17
18
19
2016 2020
2030
2040
2050
2060
2070
2080
2090
Pe
rc
en
t o
f P
re
se
nt
-L
aw
Ta
xa
bl
e
Pa
yr
ol
l
Figure 2. Proposal and Present Law Cost, Expenditures, and Non-Interest Income
as Percent of Taxable Payroll: 2016 TR Intermediate Assumptions
Present Law Cost
Present Law Non-Interest Income
Present Law Expenditures
Proposal Cost
Proposal Non-Interest Income
Proposal Expenditures
Page 6 – The Honorable Sam Johnson



Specification for Provisions of the Proposal

1) For retired worker and disabled worker beneficiaries becoming initially eligible in
January 2023 or later, phase in a new benefit formula (from 2023 to 2032). Replace the
existing two PIA bend points with three new bend points and modified benefit formula
factors.

The three new bend points are at 25 percent, 100 percent, and 125 percent of one-twelfth the
AWI from two years prior to initial eligibility. The new PIA factors are 95 percent, 27.5 percent,
5 percent, and 2 percent. During the phase-in, those becoming newly eligible for benefits will
receive an increasing portion of their benefits based on the new formula, from 10 percent based
on the new formula in 2023 to 100 percent based on the new formula for those becoming newly
eligible in 2032 and later. This provision applies to all individuals receiving benefits on the
account of a retired, disabled, or deceased worker. The new PIA formula would result in slightly
higher benefit amounts for workers with average indexed earnings levels below 90 percent of the
AWI, and lower benefit levels for those with higher average indexed earnings. Assuming
enactment of this provision, we estimate that 51 percent of worker beneficiaries would have a
higher PIA than under current law, and 49 percent would have a lower PIA.

4.0
4.5
5.0
5.5
6.0
6.5
2016 2020
2030
2040
2050
2060
2070
2080
2090
Pe
rc
en
t o
f G
DP
Figure 3. Proposal and Present Law Cost, Expenditures, and Non-Interest Income
as Percent of GDP: 2016 TR Intermediate Assumptions
Present Law Cost
Present Law Non-Interest Income
Present Law Expenditures
Proposal Cost
Proposal Non-Interest Income
Proposal Expenditures
Page 7 – The Honorable Sam Johnson

We estimate that enactment of this provision alone would reduce the long-range OASDI
actuarial deficit by 0.85 percent of taxable payroll and would reduce the annual deficit for the
75th projection year (2090) by 1.53 percent of payroll.

2) Use an annualized “mini-PIA” formula beginning with retired and disabled worker
beneficiaries becoming newly eligible in 2023, phased in over 10 years. The mini-PIA
calculation would use a single year’s average monthly indexed earnings (mini-AIME) and
primary insurance amount (mini-PIA) for each year with taxable earnings.

For each year of earnings (indexed as under current law in a monthly equivalent form), for
retired workers compute an individual PIA. Sum these individual PIAs for the 35 highest years
and divide that total amount by 35 to get the PIA under this provision. For disabled and deceased
workers, the number of highest mini-PIA years would equal the number of current-law benefit
computation years. Phase-in over ten years, meaning that in 2023, 90 percent of the benefit
would be based on the old PIA formula and 10 percent on the new mini-PIA formula, shifting by
10 percentage points each year until 100 percent is based on the new mini-PIA formula for
becoming newly eligible in 2032 and later. This provision applies to all individuals receiving
benefits on the account of a retired, disabled, or deceased worker.

We estimate that enactment of this provision alone would reduce the long-range OASDI
actuarial deficit by 0.34 percent of taxable payroll and would reduce the annual deficit for the
75th projection year (2090) by 0.59 percent of payroll.

3) Replace the current-law Windfall Elimination Provision (WEP) with a new calculation for
most OASI and DI benefits based on covered and non-covered earnings, phased in for
beneficiaries becoming newly eligible in 2023 through 2032.

For this new approach, compute a PIA based on all past earnings (covered and non-covered), and
multiply by the “non-covered earnings ratio.” This ratio is equal to the current-law concept of the
average indexed monthly earnings computed without non-covered earnings divided by a
modified average indexed monthly earnings that includes both covered and non-covered earnings
in our records. Another way to describe the new approach is that beneficiaries will receive a
benefit that reflects the replacement rate applicable for a worker with the same career earnings,
where all earnings had been covered.

In the context of this overall proposal, the new approach under this provision would be applied
for each individual year of earnings in order to compute modified mini-PIA amounts.

We estimate that enactment of this provision alone would reduce the long-range OASDI
actuarial deficit by 0.03 percent of taxable payroll and would reduce the annual deficit for the
75th projection year (2090) by 0.05 percent of payroll.

4) After the normal retirement age (NRA) reaches 67 for those attaining age 62 in 2022,
increase the NRA by 3 months per year starting for those attaining age 62 in 2023 until it
reaches 69 for those attaining age 62 in 2030. Increase the age up to which delayed
retirement credits may be earned from 70 to 72 on the same schedule.

Page 8 – The Honorable Sam Johnson

As the NRA is increased, the potential number of years of early entitlement (prior to NRA) for
retired worker, aged spouse, and aged widow(er) benefits will increase, ultimately by 2 years.
For retired worker and aged spouse benefits, the additional reduction to monthly benefits for
early entitlement between 5 and 7 years will be at the rate of 4.5 percentage points per year (9/24
percentage point per month). For aged widow(er) benefits, the reduction of 28.5 percent will be
retained for new entitlement at age 60 (as well as for disabled widow(er) benefits), and will be
phased linearly as under current law to no reduction for age when newly entitled at NRA or
above. The earliest eligibility age (EEA) for worker, spouse, and widow(er)’s benefits is
unchanged.

In addition to increasing the NRA, increase the age up to which delayed retirement credits may
be earned from 70 to 72 on the same schedule. Increase the widow(er) NRA in the same manner.

We estimate that enactment of this provision alone would reduce the long-range OASDI
actuarial deficit by 0.84 percent of taxable payroll and would reduce the annual deficit for the
75th projection year (2090) by 1.33 percent of payroll.

5) Beginning with the December 2018 COLA, provide no COLA for those with modified
adjusted gross income (MAGI) above specific thresholds and compute the COLA using the
chain-weighted version of the CPI-U (C-CPI-U) for all other beneficiaries.

For single/head-of-household/married-filing-separate taxpayers with MAGI below $85,000 and
for joint filers with MAGI below $170,000 for the prior tax year, use the chain-weighted version
of the Consumer Price Index for All Urban Consumers (C-CPI-U) to calculate the cost-of-living
adjustment (COLA), beginning with the December 2018 COLA. For those beneficiaries whose
MAGI is above $85,000 ($170,000 if filed jointly) for the prior tax year, provide no COLA.
Index the eligibility income threshold amounts to the CPI-U after December 2018. These
thresholds are the Medicare Income Related Monthly Adjustment Amount (IRMAA) and are
indexed in the same way.

We estimate that enactment of this provision alone would reduce the long-range OASDI
actuarial deficit by 1.25 percent of taxable payroll and would reduce the annual deficit for the
75th projection year (2090) by 2.31 percent of payroll.

6) For spouses and children of retired workers and disabled workers becoming newly
eligible beginning in 2023 and phased in for 2023 through 2032, limit their auxiliary benefit
to the amount based on one-half of the PIA of a hypothetical worker with earnings equal to
the national average wage index (AWI) each year up to his or her eligibility year, and who
has the same eligibility year as the worker.

For retired workers, the PIA is calculated as of age 62 and is increased by COLAs thereafter. For
disabled workers, the PIA is calculated as of the year of benefit eligibility and is increased by
COLAs thereafter.

We estimate that enactment of this provision alone would reduce the long-range OASDI
actuarial deficit by 0.07 percent of taxable payroll and would reduce the annual deficit for the
75th projection year (2090) by 0.11 percent of payroll.
Page 9 – The Honorable Sam Johnson


7) Beginning in January 2019, require full time school enrollment as a condition of eligibility
for child benefits at age 15 up to 18.

Under current law, children of qualifying retired, disabled, or deceased workers can receive
benefits on the worker’s account regardless of school attendance up to age 18. Children attending
elementary, middle, or high school can continue to receive benefits up to age 19. This provision
would require full time school enrollment for children age 15 up to age 18 in order to be eligible
for benefits. Eligibility for disabled adult child benefits after attaining age 18 would be
unchanged.

We estimate that enactment of this provision alone would reduce the long-range OASDI
actuarial deficit by 0.01 percent of taxable payroll and would reduce the annual deficit for the
75th projection year (2090) by 0.01 percent of payroll.

8) Provide a new minimum benefit for workers with more than 10 years of covered earnings
above a specified level, phased in for retired and disabled worker beneficiaries becoming
newly eligible in 2023 through 2032.

Under this provision, the PIA based on any worker’s account would be set at the higher of (a) the
amount based on the standard PIA computation or (b) a percentage of the AWI from the second
year prior to initial eligibility. The percentage under (b) would be set at zero percent of AWI for
those with 10 or fewer years of work (YOWs), rising to 15 percent of AWI for those with 15
YOWs, then increasing linearly to 19 percent of AWI for those with 19 YOWs. Then the
minimum PIA would jump to 25 percent of AWI for those with 20 YOWs, increasing linearly to
35 percent of AWI for those with 35 or more YOWs. A YOW is equal to earnings at or above
$10,875 in 2017 (reflecting a full-time worker earning the federal minimum wage), adjusted
thereafter for average wage growth. Scale the YOW requirements for disabled workers, based on
years of non-disability. Use the AWI for two years prior to the year of initial eligibility in the
minimum PIA calculation with COLA increases after the year of initial eligibility. This provision
applies to all individuals receiving benefits on the account of a retired, disabled, or deceased
worker.

We estimate that enactment of this provision alone would increase the long-range OASDI
actuarial deficit by 0.23 percent of taxable payroll and would increase the annual deficit for the
75th projection year (2090) by 0.41 percent of payroll.

9) Beginning in January 2019, eliminate the retirement earnings test for all beneficiaries
under NRA.

Under this provision, all beneficiaries under NRA would be exempt, including retired workers,
aged spouses, aged widow(er)s, young spouses with a child in care, surviving spouses with a
child in care, and children. Because beneficiaries at or above NRA are already exempt from the
retirement earnings test under current law, this provision would completely eliminate the
retirement earnings test for all beneficiaries.

Page 10 – The Honorable Sam Johnson

We estimate that enactment of this provision alone would reduce the long-range OASDI
actuarial deficit by 0.01 percent of taxable payroll and would reduce the annual deficit for the
75th projection year (2090) by 0.12 percent of payroll.

10) Eliminate federal income taxation of OASDI benefits that is credited to the OASI and DI
Trust Funds for 2054 and later, phased in from 2045 to 2053.

Under current law, single tax filers with combined “income” (approximately equal to adjusted
gross income plus non-taxable interest income and one-half of their Social Security benefit)
greater than $25,000 may have to pay income tax on up to 50 percent of the benefits. If
combined “income” exceeds $34,000, up to 85 percent of the benefits may be taxable. The
income tax revenue for taxing up to 50 percent of Social Security benefits goes to the OASI and
DI Trust Funds. The additional income tax revenue derived from taxing benefits in excess of 50
percent, up to 85 percent, goes to the Hospital Insurance (HI) Trust Fund. The process is similar
for joint tax filers, with $32,000 and $44,000 thresholds applying for possible taxation of up to
50 percent or 85 percent of the Social Security benefits, respectively. All threshold levels are
fixed amounts and not indexed to price inflation or average wage increase.

Under this provision, the $25,000/$32,000 thresholds would increase from 2045 to 2053, and
taxation of OASDI benefits that is credited to the OASI and DI Trust Funds would be completely
eliminated starting in 2054. The 2045 to 2053 thresholds for single and joint filers would be as
follows:

• 2045: $32,500/$65,000
• 2046: $40,000/$80,000
• 2047: $47,500/$95,000
• 2048: $55,000/$110000
• 2049: $62,500/$125,000
• 2050: $70,000/$140,000
• 2051: $77,500/$155,000
• 2052: $85,000/$170,000
• 2053: $92,500/$185,000.

We estimate that enactment of this provision alone would increase the long-range OASDI
actuarial deficit by 0.40 percent of taxable payroll and would increase the annual deficit for the
75th projection year (2090) by 0.96 percent of payroll. Note that the HI Trust Fund would be held
harmless relative to current law, with respect to taxation of benefit revenues.

11) Provide an option to split the 8-percent delayed retirement credit (DRC) to offer a lump
sum benefit at initial entitlement equivalent to 2 of the 8 percent DRC earned, and a 6
percent DRC on subsequent monthly benefits, effective for workers attaining age 62 in 2023
and later.

Those attaining age 62 in 2023 or later have the option to split the current-law 8 percent DRC
into two parts, a credit and a lump sum. The credit equals 6 percent for each year (0.5 percent for
each month) that eligible benefits are not taken within three years after reaching NRA. The lump
Page 11 – The Honorable Sam Johnson

sum is equal to the present value at the time of selecting the option of the additional future
monthly benefits the worker is foregoing by taking the 6 percent rather than the full 8 percent
DRC. Widows are held harmless from the lump sum decision, meaning that the full 8 percent
will apply for widow benefits, even when the deceased worker had elected to take the lump sum
option.

We estimate that the change in the long-range OASDI annual balance and the change in the
annual deficit for the 75th projection year (2090) from enactment of this provision alone would
be negligible: that is, between -0.005 and 0.005 percent of taxable payroll.

12) Beginning in January 2023, provide an addition to monthly benefits for all beneficiaries
who have been eligible for at least 20 years. The additional amount is calculated based on 5
percent of the PIA for a hypothetical worker with earnings equal to the national average
wage index each year.

Beginning in January 2023, augment the monthly benefit amount (not the PIA) for those of
qualifying age and eligibility duration with an MAGI below $25,000 if single and below $50,000
if married. Use the Medicare IRMAA definition of MAGI (AGI plus tax-exempt interest
income). For this provision, these thresholds are indexed for years after 2023 by the increase in
the C-CPI-U. The full additional amount is applicable for those born in 1957 and later, once 24
years elapse from initial eligibility. The basic additional amount is calculated as 5 percent of the
PIA of for a hypothetical worker with earnings equal to the AWI each year. For those born prior
to 1957, the full additional amount is multiplied by the number of years they have been affected
by the C-CPI-U, divided by 24.

Beneficiaries will receive 20 percent of their additional amount in their 20th year after initial
benefit eligibility, 40 percent in their 21st year after initial eligibility, …, and 100 percent of their
additional amount in their 24th and later years after initial benefit eligibility.

Retired and disabled worker beneficiaries, dually entitled spouse beneficiaries, and all survivor
beneficiaries receive their addition as described above. Spousal beneficiaries (aged or with a
child in care) and child beneficiaries of a living retired or disabled worker receive 50 percent of
the additional amount described above. Other beneficiary types (such as parents of deceased
workers) will receive the percentage of the flat benefit that is equal to the percentage of the
insured worker’s PIA that they receive.

The AWI used is for the second year prior to the beneficiary’s initial eligibility year, with
applicable COLAs applied up to the age when the addition is received. The additional amount is
added to the monthly benefit after reductions for early claiming or increases for delayed claiming
have been applied.

We estimate that enactment of this provision alone would increase the long-range OASDI
actuarial deficit by 0.07 percent of taxable payroll and would increase the annual deficit for the
75th projection year (2090) by 0.07 percent of payroll.



Page 12 – The Honorable Sam Johnson

13) Beginning in January 2023, for new and current disabled widow(er) beneficiaries,
change the requirement that disability must occur no later than 7 years after the worker’s
death, or after surviving spouse with child-in-care benefits were last payable, to no later than
10 years.

We estimate that the change in the long-range OASDI annual balance and the change in the
annual deficit for the 75th projection year (2090) from enactment of this provision alone would
be negligible: that is, between -0.005 and 0.005 percent of taxable payroll.

14) Beginning in January 2023, for new and current disabled surviving spouse beneficiaries,
eliminate the requirement to be age 50 or older for receipt of benefits.

Under current law, widow(er)s must attain age 50 in order to qualify for benefits as widow(er)s
on the basis of being disabled. This provision would remove the age-50 requirement.

We estimate that the change in the long-range OASDI annual balance and the change in the
annual deficit for the 75th projection year (2090) from enactment of this provision alone would
be negligible: that is, between -0.005 and 0.005 percent of taxable payroll.

15) Beginning in January 2023, for new and current beneficiaries, waive the two-year
duration of divorce requirement for divorced spouse benefit eligibility in cases where the
worker (former spouse) remarries someone other than the claimant before the two-year
period has elapsed.

We estimate that the change in the long-range OASDI annual balance and the change in the
annual deficit for the 75th projection year (2090) from enactment of this provision alone would
be negligible: that is, between -0.005 and 0.005 percent of taxable payroll.

Detailed Financial Results for the Provisions of the Proposal

Summary Results by Provision

Table A provides estimates of the effects on the OASDI long-range actuarial balance for each of
the fifteen provisions of the proposal separately and on a combined basis. The table also includes
estimates of the effect of each provision on the annual balance (the difference between income
rate and the cost rate, expressed as a percent of current-law taxable payroll) for the 75th
projection year, 2090. Interaction among individual provisions is reflected only in the total
estimates for the combined provisions.

Benefit Illustrations

Tables B1 and B2 provide illustrative examples of the projected change in benefit levels under
the fifteen provisions that affect benefit levels for beneficiaries retiring at age 65 in future years
at five selected earnings levels, with selected numbers of years of work. The “Maximum-AIME
Steady Earner” is assumed to have earnings at ages 22 through 64 that equal the current-law
taxable maximum level (equivalent to $118,500 for 2016). Table B3 provides additional
important information on characteristics of retired workers represented by these illustrations.
Page 13 – The Honorable Sam Johnson


Table B1 compares the initial scheduled benefit levels, assuming retirement at age 65 under the
provisions of the proposal, to both scheduled and payable current-law benefit levels. Benefit
amounts scheduled under the proposal are generally lower than those scheduled in current law,
because the three provisions included in the table that decrease benefits for most workers (NRA
increase, COLA decrease, mini-PIA) generally outweigh the other two provisions included
(change the PIA formula, increase the minimum benefit). Note that two of the hypothetical
worker examples provided have higher benefits than scheduled under current law because of the
minimum benefit provision. The final two columns of this table show the level of scheduled
benefits under the proposal as a percentage of current-law scheduled and current-law payable
benefits, respectively.

Table B2 compares the change in scheduled benefit levels at ages 65, 75, 85, and 95 under the
proposal to scheduled benefits under current law, assuming retirement at age 65. Table B2 shows
that projected scheduled benefits under the provisions of the proposal decrease in relation to
current-law scheduled benefits between ages 65 and 75 for most earners. The benefit addition
increases proposal benefits for ages 85 and 95 above the level scheduled in current-law for
several hypothetical lower-earner examples, and diminishes the decrease relative to current-law
scheduled benefits for other earners.

The hypothetical workers represented in these tables reflect average career-earnings patterns of
workers who started receiving retirement benefits under the Social Security program in recent
years. The tables subdivide workers with very low and low career-average earnings levels by
their numbers of years of non-zero earnings.

Table B3 provides information helpful in interpreting the benefit illustrations in tables B1 and
B2. Percentages in Table B3 are based on tabulations from a 10-percent sample of newly-entitled
retired workers in 2007. Table B3 displays the percentages of these newly-entitled retired
workers in 2007 that are closest to each of the illustrative examples and are:

1) “Dually Entitled”, meaning they received a higher spouse or widow(er) benefit based on
the career earnings of their husband or wife,
2) “WEP” (Windfall Elimination Provision), meaning that they received a reduced benefit
due to having a pension based on earnings that were not covered under the OASDI
program (primarily certain government workers), and they had less than 30 years of
substantial earnings that were taxable under the OASDI program,
3) “Foreign Born”, meaning that they entered the Social Security coverage area after birth
(and generally after entering working ages), and
4) “All Others”, meaning they had none of the three characteristics listed above.

The extent to which retired-worker beneficiaries represented by each of the illustrative examples
have any of the characteristics listed above (dually entitled, WEP, foreign born) is important
because such individuals are less dependent on the OASDI benefit that relates to their own
career-average earnings level.



Page 14 – The Honorable Sam Johnson

Detailed Tables Containing Annual and Summary Projections

Enclosed with this letter are tables 1, 1a, 1b, 1b.n, 1c, and 1d, which provide annual and
summary projections for the proposal.

Trust Fund Operations

Table 1 provides projections of the financial operations of the OASDI program under the
proposal and shows that the combined OASDI Trust Funds would be fully solvent throughout the
75-year projection period. The OASDI program would also be solvent for the foreseeable future
(sustainably solvent), because the OASDI trust fund ratio is projected to rise by the end of the
period, 2091. As mentioned earlier, however, the relatively low trust fund ratios projected around
2045 provide only a small contingency reserve for solvency. Unforeseen economic conditions or
other events affecting benefits and revenue might require additional measures around that time.

The table shows the annual cost and income rates, annual balances, and trust fund ratios
(reserves as percent of annual program cost) for OASDI, as well as the change from current law
in these cost rates, income rates, and annual balances. Included at the bottom of this table are
summarized rates for the 75-year (long-range) period.

The annual balance (non-interest income minus program cost) under the proposal is slightly
worse (more negative) than under current law from 2019 through 2021. For 2022 and later, the
proposal improves the annual balance. The improvement in the annual balance increases to 3.7
percent of payroll for 2053, drops to 3.3 for 2054 (due to the full elimination of OASDI taxation
of benefits starting in that year), and thereafter increases steadily to 4.5 percent of payroll for
2090. Under the proposal, the annual deficit generally worsens from 1.1 percent of payroll for
2016 to 2.1 percent of payroll for 2028, and then improves until the annual balance turns positive
for 2045. The annual balance increases to 0.5 percent of payroll for 2053, drops to 0.2 percent of
payroll for 2054, and then stays relatively stable through the end of the long-range period,
ultimately reaching 0.2 percent of payroll for 2090. Under current law, the projected annual
deficit for 2090 is 4.3 percent of payroll.

The actuarial balance for the OASDI program over the 75-year projection period is improved by
2.67 percent of taxable payroll, from an actuarial deficit of 2.66 percent of payroll under current
law to a positive actuarial balance of 0.02 percent of taxable payroll under the proposal.

Program Transfers and Trust Fund Reserves

Column 4 of Table 1a provides a projection of the level of reserves for the theoretical combined
OASI and DI Trust Funds, assuming enactment of the fifteen Social Security provisions of the
proposal. These trust fund reserve amounts are expressed in present value dollars discounted to
January 1, 2016. The table indicates that the provisions include no new specified transfers of
general revenue to the trust funds. For purpose of comparison, the OASDI Trust Fund reserves,
expressed in present value dollars, are also shown for the current-law Social Security program
both without and with the added proposal general fund transfers (zero in this case) in columns 6
and 7.

Page 15 – The Honorable Sam Johnson

Note that negative values in columns 6 and 7 represent the “unfunded obligation” for the
program through the year. The unfunded obligation is the present value of the shortfall of
revenue needed to pay full scheduled benefits on a timely basis from the date of trust fund
reserve depletion through the end of the indicated year. Gross Domestic Product (GDP),
expressed in present value dollars, is shown in column 5 for comparison with other values in the
table.

Effect of the Social Security Provisions on the Federal Budget

Table 1b shows the projected effect, in present value discounted dollars, on the federal budget
(unified-budget and on-budget) annual cash flows and balances, assuming enactment of the
fifteen Social Security provisions of the proposal. Table 1b.n provides the estimated nominal
dollar effect of enactment of the proposal on annual budget balances for years 2016 through
2026. All values in these tables represent the amount of change from the level projected under
current law. In addition, changes reflect the budget scoring convention that presumes benefits,
not payable under the law after depletion of trust fund reserves, would still be paid using revenue
provided from the General Fund of the Treasury. The reader should be cautioned that this
presumption of payment of benefits beyond the resources of the trust funds is prohibited under
current law and is also inconsistent with all past experience under the Social Security program.

We understand that the elimination of taxation of Social Security benefits under provision 10 is
intended to hold the Medicare HI Trust Fund harmless. The tables provided here for effects on
the budget do not reflect any change based on revenue provided to HI from taxing OASDI
benefits.

Column 1 of Table 1b shows the added proposal general fund transfers (zero for this proposal).
Column 2 shows the net changes in OASDI cash flow from all provisions of the proposal.

We expect the net effect of the proposal on unified budget cash flow (column 3) to be negative in
years 2019 through 2021, and then positive in years 2022 and later, with the decrease in program
cost more than offsetting income decreases.

Column 4 of Table 1b indicates that the effect of implementing the proposal is a reduction of the
federal debt held by the public, reaching about $11.9 trillion in present value at the end of the 75-
year projection period. Column 5 provides the projected effect of the proposal on the annual
unified budget balances, including both the cash flow effect in column 3 and the additional
interest on the accumulated debt in column 4. Columns 6 and 7 indicate that the provisions of
this proposal would have no expected direct effects on the on-budget cash flow, or on the total
federal debt, in the future.

It is important to note that we base these estimates on the intermediate assumptions of the 2016
Trustees Report, so these estimates are not consistent with estimates made by the Office of
Management and Budget or the Congressional Budget Office based on their assumptions. In
particular, all present values are discounted using trust fund yield assumptions under the
intermediate assumptions of the 2016 Trustees Report.



Page 16 – The Honorable Sam Johnson

Annual Trust Fund Operations as a Percent of GDP

Table 1c provides annual cost, annual expenditures (amount that would be payable), and annual
tax income for the OASDI program expressed as a percentage of GDP for both current law and
assuming enactment of the fifteen Social Security provisions of the proposal. Showing the annual
trust fund cash flows as a percent of GDP provides an additional perspective on these trust fund
operations in relation to the total value of goods and services produced in the United States. The
relationship between income and cost is similar when expressed as a percent of GDP to that
when expressed as a percent of taxable payroll (Table 1).

Effects on Trust Fund Reserves and Unfunded Obligations

Table 1d provides estimates of the changes in trust fund reserves and unfunded obligations on an
annual basis. Values in this table are expressed in present value dollars discounted to January 1,
2016.

For the 75-year (long-range) period as a whole, the current-law unfunded obligation of $11.4
trillion is replaced by a positive trust fund reserve of $0.6 trillion in present value assuming
enactment of the proposal. This change of $11.9 trillion results from:

•
A $2.0 trillion net decrease in revenue (column 2), primarily from eliminating OASDI
taxation of benefits in 2054 and later, minus
•
A $13.9 trillion net decrease in cost (column 3), primarily from increasing the NRA,
reducing (and, for some, eliminating) the COLA, using a “mini-PIA” calculation, and
modifying the PIA bend points and factors.

We hope these estimates are helpful. Please let me know if we may provide further assistance.

Sincerely,








Stephen C. Goss, ASA, MAAA






Chief Actuary

Enclosures

Table A—Estimated Long-Range OASDI Financial Effects of H.R. 6489,
the “Social Security Reform Act of 2016,”
Introduced by Chairman Sam Johnson
Provision
Estimated Change in
Long-Range OASDI
Actuarial Balance 1
(as a percent of payroll)
Estimated Change
in Annual Balance
for 75th year 2
(as a percent of payroll)

1) For retired worker and disabled worker beneficiaries becoming
initially eligible in January 2023 or later, phase in a new benefit
formula (from 2023 to 2032). Replace the existing two primary
insurance amount (PIA) bend points with three new bend points as
follows:
• 25% AWI/12 from 2 years prior to initial eligibility
• 100% AWI/12 from 2 years prior to initial eligibility
• 125% AWI/12 from 2 years prior to initial eligibility
The new PIA factors are 95%, 27.5%, 5% and 2%. During the phase
in, those becoming newly eligible for benefits will receive an
increasing portion of their benefits based on the new formula,
reaching 100% of the new formula in 2032 ............................................











0.85










1.53

2) Use an annualized “mini-PIA” formula beginning with retired and
disabled worker beneficiaries becoming newly eligible in 2023,
phased in over 10 years. For each year of earnings (indexed as under
current law in a monthly equivalent form), compute a single year’s
PIA For retired workers, sum these individual PIAs for the 35
highest years of indexed earnings and divide that total amount by 35
to get the PIA under this provision. For disabled workers, the
number of highest mini-PIA years would equal the number of
current-law benefit computation years. Phase-in over ten years,
meaning that in 2023, 90 percent of the benefit would be based on
the old PIA formula and 10 percent on the new mini-PIA formula,
shifting by 10 percentage points each year until 100 percent is based
on the new mini-PIA formula for those becoming newly eligible in
2032 and later .........................................................................................











0.34










0.59

3) Replace the current-law WEP with a new calculation for most
OASI and DI benefits based on covered and non-covered earnings,
phased in for beneficiaries becoming newly eligible in 2023 to
through 2032. For this new approach, compute a PIA based on all
past earnings (covered and non-covered), and multiply by the “non-
covered earnings ratio.” This ratio is equal to the current-law
concept of the average indexed monthly earnings computed without
non-covered earnings divided by a modified average indexed
monthly earnings that includes both covered and non-covered
earnings in our records ...........................................................................










0.03









0.05

Table A—Estimated Long-Range OASDI Financial Effects of H.R. 6489,
the “Social Security Reform Act of 2016,”
Introduced by Chairman Sam Johnson
Provision
Estimated Change in
Long-Range OASDI
Actuarial Balance 1
(as a percent of payroll)
Estimated Change
in Annual Balance
for 75th year 2
(as a percent of payroll)

4) After the normal retirement age (NRA) reaches 67 for those
attaining age 62 in 2022, increase the NRA by 3 months per year
starting for attaining age 62 in 2023 until it reaches 69 for those
attaining age 62 in 2030. Increase the age up to which delayed
retirement credits may be earned from 70 to 72 on the same
schedule. Increase the widow(er) NRA in the same manner. The
earliest eligibility age (EEA) for worker and widow(er)’s benefit is
unchanged ...............................................................................................








0.84







1.33

5) For single/head-of-household/married-filing-separate taxpayers
with modified adjusted gross income (MAGI) below $85,000 and for
joint filers with MAGI below $170,000 for the prior tax year, use the
chain-weighted version of the Consumer Price Index for All Urban
Consumers (C-CPI-U) to calculate the cost-of-living adjustment
(COLA), beginning with the December 2018 COLA. For those
beneficiaries whose MAGI is above the $85,000/$170,000 for the
prior tax year, provide no COLA. Index the eligibility income
threshold amounts to the CPI-U after December 2018 ...........................



1.25
2.31

6) For spouses and children of retired and disabled workers
becoming newly eligible beginning in 2023 and phased in for 2023
through 2032, limit their auxiliary benefit to one-half of the PIA for
a hypothetical worker with earnings equal to the national average
wage index (AWI) each year ..................................................................





0.07
0.11

7) Beginning in January 2019, require full time school enrollment as
a condition of eligibility for child benefits at age 15 up to 18 ................



0.01
0.01

8) Provide a new minimum benefit for workers with more than 10
years of covered earnings above a specified level, phased in for
retired and disabled workers becoming newly eligible in 2023
through 2032. Set the minimum PIA at zero percent of AWI for
those with 10 or fewer years of work (YOW) to 15 percent of AWI
of those with 15 YOWs, increasing linearly so that it reaches 19
percent for 19 YOWs. Then the minimum PIA would jump up to 25
percent of AWI for those with 20 YOWs, increasing linearly so that
it equals 35 percent of AWI for those with 35 or more YOWs. A
YOW is equal to earnings at or above $10,875 in 2017 (reflecting a
full-time worker earning the federal minimum wage), adjusted
thereafter for average wage growth. Scale the YOW requirements for
disabled workers, based on years of non-disability. Use the AWI for
two years prior to the year of initial eligibility in the minimum PIA
calculation with COLA increase after the year of initial eligibility ........



-0.23
-0.41

Table A—Estimated Long-Range OASDI Financial Effects of H.R. 6489,
the “Social Security Reform Act of 2016,”
Introduced by Chairman Sam Johnson
Provision
Estimated Change in
Long-Range OASDI
Actuarial Balance 1
(as a percent of payroll)
Estimated Change
in Annual Balance
for 75th year 2
(as a percent of payroll)

9) Beginning in January 2019, eliminate the retirement earnings test
for all beneficiaries under normal retirement age, including retired
workers, aged spouses, aged widow(er)s, young spouses with a child
in care, young surviving spouses with a child in care, and children ......



0.01
0.12

10) Eliminate federal income taxation of OASDI benefits that is
credited to the OASI and DI Trust Funds for 2054 and later. Phase
out OASDI taxation of benefits by increasing relevant “income”
thresholds from 2045 through 2053 as follows, for single/joint tax
filers:
• 2045 = $32,500/$65,000
• 2046 = 40,000/80,000
• 2047 = 47,500/95,000
• 2048 = 55,000/110000
• 2049 = 62,500/125,000
• 2050 = 70,000/140,000
• 2051 = 77,500/155,000
• 2052 = 85,000/170,000
• 2053 = 92,500/185,000
Taxation of benefits revenues for the Hospital Insurance (HI) Trust
Fund would be maintained at the same level as if the current-law
computation applied ..............................................................................



-0.40
-0.96

11) Provide an option to split the 8-percent delayed retirement credit
(DRC) to offer a lump sum benefit at initial entitlement equal to 2
percent of the 8 percent DRC earned, and a 6 percent DRC on
subsequent monthly benefits, effective for workers attaining age 62
in 2023 and later. Widows are held harmless from the lump-sum
decision ...................................................................................................



3

4

Table A—Estimated Long-Range OASDI Financial Effects of H.R. 6489,
the “Social Security Reform Act of 2016,”
Introduced by Chairman Sam Johnson
Provision
Estimated Change in
Long-Range OASDI
Actuarial Balance 1
(as a percent of payroll)
Estimated Change
in Annual Balance
for 75th year 2
(as a percent of payroll)

12) Beginning in January 2023, provide an addition to monthly
benefits for all beneficiaries who have been eligible for at least 20
years, with the following specifications:

• Augment benefits (not the PIA) for those of qualifying age and
eligibility duration with a MAGI below $25,000 if single and $50,000
if married. MAGI is set to equal the IRMAA definition (AGI plus
tax-exempt interest income). Index these thresholds after 2023 by the
increase in the C-CPI-U.
• The full additional amount is applicable for those born 1957 and
later, once 24 years elapse from initial eligibility. The basic
additional amount is calculated as 5 percent of the PIA for a
hypothetical worker with earnings equal to the AWI each year.
• For those born prior to 1957, the full additional amount is multiplied
by the number of years they have been affected by the C-CPI-U,
divided by 24.
• Beneficiaries will receive 20 percent of their additional amount in
their 20th year after initial eligibility, 40 percent in their 21st year after
initial eligibility,…, and 100 percent of their additional amount in
their 24th and later years after benefit eligibility.
• Retired and disabled worker beneficiaries, dually entitled spouse
beneficiaries, and all survivor beneficiaries received their addition as
described above. Spousal beneficiaries (aged or with child in care)
and child beneficiaries of a living retired or disabled worker receive
50 percent of the additional amount described above. Other
beneficiary types (such as parents of deceased workers) will receive
the percentage of the flat benefit that equals the percentage of the
insured worker’s PIA that they receive.
• The AWI used is for the second year prior to the beneficiary’s initial
eligibility year, with applicable COLAs applied up to the age when
the addition is received.
• The additional amount is added to the monthly benefit after
reductions for early claiming or increases for delayed claiming have
been applied...........................................................................................

-0.07
-0.07

13) Beginning in January 2023, for new and current disabled
widow(er) beneficiaries, change the requirement that disability must
occur no later than 7 years after the worker’s death or after surviving
spouse with child-in-care benefits were last payable, to no later than
10 years ..................................................................................................



3

4

Table A—Estimated Long-Range OASDI Financial Effects of H.R. 6489,
the “Social Security Reform Act of 2016,”
Introduced by Chairman Sam Johnson
Provision
Estimated Change in
Long-Range OASDI
Actuarial Balance 1
(as a percent of payroll)
Estimated Change
in Annual Balance
for 75th year 2
(as a percent of payroll)

14) Beginning in January 2023, for new and current disabled
surviving spouse beneficiaries, eliminate the requirement to be age
50 or older for receipt of benefits ...........................................................



3

4

15) Beginning in January 2023, for new and current beneficiaries,
waive the two-year duration of divorce requirement for divorced
spouse benefit eligibility, in cases where the worker (former spouse)
remarries someone other than the claimant before the two-year
period has elapsed ..................................................................................



3

4

Total for all provisions, including interaction ..........................



2.67
4.53

1Under current law, the estimated long-range OASDI actuarial balance is -2.66 percent of taxable payroll.
2Under current law, the estimated 75th year annual balance is -4.35 percent of taxable payroll.
3Estimated change in actuarial balance that is negligible; that is, between -0.005 and 0.005 percent of taxable payroll.
4Estimated change in 75th year annual balance that is negligible; that is, between -0.005 and 0.005 percent of taxable
payroll.









Notes: All estimates are based on the intermediate assumptions of the 2016 OASDI Trustees Report.
Estimates of individual provisions appear on a stand-alone basis relative to current law, unless otherwise stated.





Social Security Administration
Office of the Chief Actuary
December 8, 2016

Year
Bend Points
Attain
Increase
Reduced
PIA Formula
Incremental
Minimum
Age 65
(Wage-Indexed
(CPI-Indexed
NRA4
COLA5
Factors6
Mini PIA7
Benefit8
Total
Scheduled
Payable
2015 Dollars)
2015 Dollars)

2016
718
718
0.0
0.0
0.0
0.0
0.0
0.0
100
100
2030
660
812
-9.1
-0.9
7.0
-7.0
21.5
8.9
109
109
2050
661
1,036
-13.5
-0.9
14.1
-13.2
43.7
22.1
122
153
2080
665
1,469
-13.5
-0.9
14.1
-13.2
43.7
22.1
122
162

2016
718
718
0.0
0.0
0.0
0.0
0.0
0.0
100
100
2030
660
812
-9.1
-0.9
7.0
-16.5
1.0
-18.7
81
81
2050
661
1,036
-13.5
-0.9
14.1
-31.0
15.8
-21.8
78
98
2080
665
1,469
-13.5
-0.9
14.1
-31.0
15.8
-21.8
78
104

2016
718
718
0.0
0.0
0.0
0.0
0.0
0.0
100
100
2030
660
812
-9.1
-0.9
7.0
-22.8
0.0
-25.6
74
74
2050
661
1,036
-13.5
-0.9
14.1
-42.9
0.0
-44.1
56
70
2080
665
1,469
-13.5
-0.9
14.1
-42.9
0.0
-44.1
56
74
2016
940
940
0.0
0.0
0.0
0.0
0.0
0.0
100
100
2030
863
1,062
-9.1
-0.9
3.7
0.0
11.9
4.5
105
105
2050
865
1,356
-13.5
-0.9
7.4
0.0
19.5
10.1
110
138
2080
869
1,921
-13.5
-0.9
7.5
0.0
19.5
10.1
110
147
2016
940
940
0.0
0.0
0.0
0.0
0.0
0.0
100
100
2030
863
1,062
-9.1
-0.9
3.7
-4.4
8.6
-3.0
97
97
2050
865
1,356
-13.5
-0.9
7.4
-8.5
18.1
-0.4
100
125
2080
869
1,921
-13.5
-0.9
7.5
-8.5
18.1
-0.4
100
133
2016
940
940
0.0
0.0
0.0
0.0
0.0
0.0
100
100
2030
863
1,062
-9.1
-0.9
3.7
-12.8
0.7
-18.0
82
82
2050
865
1,356
-13.5
-0.9
7.4
-24.7
13.3
-21.4
79
99
2080
869
1,921
-13.5
-0.9
7.5
-24.7
13.3
-21.3
79
105
2016
1,548
1,548
0.0
0.0
0.0
0.0
0.0
0.0
100
100
2030
1,423
1,750
-9.1
-0.9
-0.6
-1.0
0.0
-11.4
89
89
2050
1,425
2,234
-13.5
-0.9
-1.2
-2.0
0.0
-16.9
83
104
2080
1,433
3,166
-13.5
-0.9
-1.2
-2.0
0.0
-16.9
83
111
2016
1,548
1,548
0.0
0.0
0.0
0.0
0.0
0.0
100
100
2030
1,423
1,750
-9.1
-0.9
-0.6
-7.5
0.0
-17.2
83
83
2050
1,425
2,234
-13.5
-0.9
-1.2
-15.1
0.0
-28.1
72
90
2080
1,433
3,166
-13.5
-0.9
-1.2
-15.1
0.0
-28.0
72
96
2016
2,053
2,053
0.0
0.0
0.0
0.0
0.0
0.0
100
100
2030
1,885
2,319
-9.1
-0.9
-11.1
0.0
0.0
-19.9
80
80
2050
1,888
2,960
-13.5
-0.9
-22.2
0.0
0.0
-33.2
67
84
2080
1,899
4,195
-13.5
-0.9
-22.2
0.0
0.0
-33.2
67
89
2016
2,492
2,492
0.0
0.0
0.0
0.0
0.0
0.0
100
100
2030
2,308
2,839
-9.1
-0.9
-17.0
0.0
0.0
-25.2
75
75
2050
2,309
3,622
-13.5
-0.9
-34.0
0.0
0.0
-43.3
57
71
2080
2,317
5,119
-13.5
-0.9
-33.8
0.0
0.0
-43.2
57
76
1 Average of highest 35 years of earnings wage indexed to 2016.
2 Projected percent of new retired worker awards in 2050 closest to AIME levels and years of work.
3 After the trust fund reserves deplete under present law continuing taxes are expected to be enough to pay about three fourths of scheduled benefits.
4
5
6
7
8
Note: These tables do not reflect the reduced taxation of OASDI benefits that would go to the Hospital Insurance (HI) Trust Fund assuming enactment of this Bill.
All estimates based on the intermediate assumptions of the 2016 Trustees Report.
Monthly Benefits3
Percent of Present Law:
Table B1. Changes in Benefits for Hypothetical Workers Beginning Benefit Receipt at age 65
H.R. 6489, the "Social Security Reform Act of 2016," Introduced by Chairman Sam Johnson
Scheduled Benefit Level Percent Change at age 65
Present Law Scheduled
Proposal Scheduled Benefit
High-AIME ($78,594 for 20161) 44-Year Scaled Earner (19.8% of Retirees2)
(Percent change)
(Percents)
Very-Low-AIME ($12,280 for 20161) 30-Year Scaled Earner (8.9% of Retirees2)
Very-Low-AIME ($12,280 for 20161) 20-Year Scaled Earner (5.2% of Retirees2)
Very-Low-AIME ($12,280 for 20161) 14-Year Scaled Earner (4.2% of Retirees2)
Low-AIME ($22,105 for 20161) 44-Year Scaled Earner (16.9% of Retirees2)
Low-AIME ($22,105 for 20161) 30-Year Scaled Earner (4.4% of Retirees2)
Low-AIME ($22,105 for 20161) 20-Year Scaled Earner (2.0% of Retirees2)
Medium-AIME ($49,121 for 20161) 44-Year Scaled Earner (29.2% of Retirees2)
Medium-AIME ($49,121 for 20161) 30-Year Scaled Earner (3.2% of Retirees2)
Office of the Chief Actuary, Social Security Administration
December 8, 2016
Maximum-AIME ($118,500 for 20161) 43-Year Steady Earner (6.3% of Retirees2)
After NRA reaches 67 in 2022, increase 3 months per year until NRA reaches 69 for those attaining 62 in 2030.
Starting Dec 2018, prior to benefit receipt, compute the COLA using the chain-weighted C-CPI-U, producing 0.3% lower annual COLAs on average.
Starting in 2023, set BP1 equal to 25% of AWI/12, BP2 equal to AWI/12, BP3 equal to 125% AWI/12 (2 year lag), and change the PIA factors to 95%/27.5%/5%/2%. Phase in the new BP and PIA factors
years of initial eligibility 2023-2032.
Incremental change due to the mini-PIA approach. Phase in the new benefit formula for those newly eligible in years 2023-2032.
Provide a minimum PIA such that a worker with 35/20/19/15/10 years of work would have a PIA of at least 35%/25%/19%/15%/0% of AWI/12. A year of work is equal to $10,875 in 2017, indexed for average
wage growth. This provision would take full effect for all worker beneficiaries in 2032 and later, phasing in between 2023 and 2032. The Minimum Benefit Percent change is calculated by applying this
provision after after all other provisions.
Year
Attain
Age 65
Age 65
Age 75
Age 853
Age 953
2016
100.0
97.7
101.8
100.5
2030
108.9
105.8
112.0
111.0
2050
122.1
118.6
124.3
123.0
2080
122.1
118.6
124.4
123.0
2016
100.0
97.7
101.8
100.5
2030
81.3
79.0
85.9
85.7
2050
78.2
75.9
82.9
82.8
2080
78.2
76.0
82.9
82.8
2016
100.0
97.7
101.8
100.5
2030
74.4
72.2
79.4
79.4
2050
55.9
54.3
61.9
62.4
2080
55.9
54.3
61.9
62.4
2016
100.0
97.7
100.2
98.6
2030
104.5
101.5
105.7
104.3
2050
110.1
106.9
110.9
109.4
2080
110.1
106.9
103.9
100.9
2016
100.0
97.7
100.2
98.6
2030
97.0
94.2
98.5
97.4
2050
99.6
96.7
101.0
99.8
2080
99.6
96.8
94.0
91.3
2016
100.0
97.7
100.2
98.6
2030
82.0
79.7
84.4
83.7
2050
78.6
76.4
81.2
80.6
2080
78.7
76.4
74.2
72.0
2016
100.0
97.7
94.9
92.1
2030
88.6
86.1
83.6
81.2
2050
83.1
80.7
78.3
76.1
2080
83.1
80.7
78.3
76.1
2016
100.0
97.7
94.9
92.1
2030
82.8
80.4
78.1
75.8
2050
71.9
69.9
67.9
65.9
2080
72.0
69.9
67.9
65.9
2016
100.0
97.7
94.9
92.1
2030
80.1
77.8
75.5
73.4
2050
66.8
51.6
40.0
30.9
2080
66.8
51.7
40.0
30.9
2016
100.0
81.4
63.0
48.7
2030
74.8
57.8
44.7
34.6
2050
56.7
43.8
33.9
26.2
2080
56.8
43.9
34.0
26.3
1 Average of highest 35 years of earnings wage indexed to 2016.
2 Projected percent of new retired worker awards in 2050 closest to AIME levels and years of work.
3
Other Changes:
- After NRA reaches 67 in 2022, increase 3 months per year until NRA reaches 69 for those attaining 62 in 2030.
-
-
Note: These tables do not reflect the reduced taxation of OASDI benefits that would go to the Hospital Insurance (HI) Trust Fund assuming enactment of this Bill.
All estimates based on the intermediate assumptions of the 2016 Trustees Report.
Very-Low-AIME ($12,280 for 20161) 20-Year Scaled Earner (5.2% of Retirees2)
Table B2. Changes in Benefits for Hypothetical Workers Beginning Benefit Receipt at age 65
H.R. 6489, the "Social Security Reform Act of 2016," Introduced by Chairman Sam Johnson
Proposal Scheduled Benefit as Percent of Present Law Scheduled
(Percent)
Very-Low-AIME ($12,280 for 20161) 30-Year Scaled Earner (8.9% of Retirees2)
Provide a minimum PIA such that a worker with 35/20/19/15/10 years of work would have a PIA of at least 35%/25%/19%/15%/0% of AWI/12. A year of work is equal to $10,875 in
2017, indexed for average wage growth. This provision would take full effect for all worker beneficiaries in 2032 and later, phasing in between 2023 and 2032.
Very-Low-AIME ($12,280 for 20161) 14-Year Scaled Earner (4.2% of Retirees2)
Low-AIME ($22,105 for 20161) 44-Year Scaled Earner (16.9% of Retirees2)
Low-AIME ($22,105 for 20161) 30-Year Scaled Earner (4.4% of Retirees2)
Low-AIME ($22,105 for 20161) 20-Year Scaled Earner (2.0% of Retirees2)
Medium-AIME ($49,121 for 20161) 44-Year Scaled Earner (29.2% of Retirees2)
Medium-AIME ($49,121 for 20161) 30-Year Scaled Earner (3.2% of Retirees2)
High-AIME ($78,594 for 20161) 44-Year Scaled Earner (19.8% of Retirees2)
Maximum-AIME ($118,500 for 20161) 43-Year Steady Earner (6.3% of Re