As of right now, Social Security will be able to pay scheduled benefits until 2034—one year later than reported last year—according to the just-released 2022 report from the Treasury Department’s Social Security Board of Trustees.
The new report found that without changes, the Old-Age and Survivors Insurance (OASI) Trust Fund is projected to become depleted in 2034, one year later than last year’s estimate. At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 77% of scheduled benefits.
The report also found the combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds are projected to become depleted in 2035, also one year later than projected last year, with 80% of benefits payable at that time.
The DI Trust Fund asset reserves are not projected to become depleted during the 75-year projection period.
The Senior Citizens League’s Mary Johnson told 401k Specialist Friday that while the solvency outlook improved as businesses got back up and running and wages grew to boost payroll tax revenues, there is a darker side to that rosier outlook.
“One factor playing a role in the improved solvency for the programs was the very high mortality rates of adults age 65 and up due to COVID-19 (according to the Congressional Budget Office). That lowered claims and program spending for both,” Johnson said.
In the 2022 Annual Report to Congress, the Trustees announced:
- The asset reserves of the combined OASI and DI Trust Funds declined by $56 billion in 2021 to a total of $2.852 trillion.
- The total annual cost of the program is projected to exceed total annual income in 2022 and remain higher throughout the 75-year projection period. Total cost began to be higher than total income in 2021. Social Security’s cost has exceeded its non-interest income since 2010.
Calls for Congressional action
“It is important to strengthen Social Security for future generations. The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually,” said Kilolo Kijakazi, Acting Commissioner of Social Security. “Social Security will continue to be a vital part of the lives of 66 million beneficiaries and 182 million workers and their families during 2022.”
Polls show that as many as a quarter of current working-age Americans don’t expect to receive Social Security benefits—a mistaken but understandable belief. A statement from the Bipartisan Policy Center (BPC) in response to the new Trustees Report said the sooner policymakers act, the more policy options are available with adequate time to phase them in and allow the public to prepare.
“Social Security’s financial shortfall has been well known for years, and now it’s staring us in the face just over a decade away. This year’s report shows yet again that we are well past the time for talking points and partisan entrenchment,” said Shai Akabas, Economic Policy Director for the BPC.
“We need specific plans. We need leadership. And we need action,” Akabas continued. “Pronouncements like ‘no tax increases,’ ‘no benefit cuts,’ and ‘no tax increases on anyone below a certain threshold’ need to be set aside. There’s no room for red lines. This is a societal challenge that requires broad contributions to a solution. The good news is that more members of Congress are actively working to chart a bipartisan path forward on this complex problem than at any time in recent years,” Akabas said.
One current attempt at addressing the situation is the Social Security 2100: A Sacred Trust, a bill which House Ways and Means Social Security Subcommittee Chairman John Larson (D-CT) introduced along with more than 200 cosponsors in the House that seeks to increase Social Security benefits across the board and strengthen the program.
On Thursday, Larson joined Connecticut AFL-CIO President Ed Hawthorne and members of the AFL-CIO to announce the AFL-CIO’s support for the bill, which Larson said will be debated by his committee “soon.”
“It has been more than 50 years since Congress acted to expand Social Security benefits. By passing Social Security 2100: A Sacred Trust, we can act now to expand our nation’s most effective anti-poverty program and ensure this program remains a ‘sacred trust’ between the government and its people,” Larson said.
“This year’s Trustee’s Report confirms Social Security’s financing is strong in the near term yet underscores why it is so important that Congress acts to strengthen Social Security for the longer term,” Larson said. “The COVID pandemic has highlighted the needs of our nation’s most vulnerable, and we must ensure the program that serves America’s workers, seniors, children, and people with disabilities can continue to provide these earned benefits for future generations. That is why I introduced Social Security 2100: A Sacred Trust to expand these vital benefits immediately while substantially strengthening the program for the long term.”
More report highlights
Other key statistics from the Trustees Report include:
- Total income, including interest, to the combined OASI and DI Trust Funds amounted to $1.088 trillion in 2021. ($980.6 billion from net payroll tax contributions, $37.6 billion from taxation of benefits, and $70.1 billion in interest)
- Total expenditures from the combined OASI and DI Trust Funds amounted to nearly $1.145 trillion in 2021.
- Social Security paid benefits of $1.133 trillion in calendar year 2021. There were about 65 million beneficiaries at the end of the calendar year.
- The projected actuarial deficit over the 75-year long-range period is 3.42% of taxable payroll—lower than the 3.54% projected in last year’s report.
- During 2021, an estimated 179 million people had earnings covered by Social Security and paid payroll taxes.
- The cost of $6.5 billion to administer the Social Security program in 2021 was a very low 0.6% of total expenditures.
- The combined trust fund asset reserves earned interest at an effective annual rate of 2.5% in 2021.
Board still shorthanded
The Social Security Board of Trustees usually comprises six members. Four serve by virtue of their positions with the federal government: Janet Yellen, Secretary of the Treasury and Managing Trustee; Kilolo Kijakazi, Acting Commissioner of Social Security; Xavier Becerra, Secretary of Health and Human Services; and Marty Walsh, Secretary of Labor. The other two Trustees are public representatives appointed by the President, subject to confirmation by the Senate. The two Public Trustee positions have been vacant since 2015.
“It’s shameful that many of the leadership positions for the Social Security program have gone without permanent officials for so many years,” Akabas said. “The commissioner is currently acting, and that position has only been filled by a confirmed appointee for two of the past nine years. Similarly, the public trustee positions have been vacant for the past seven years, mainly due to partisan squabbling.
“With Social Security in difficult financial straits, it’s critical that we have trusted public oversight of the program’s finances and operations.”
Report drops earlier than last year
The Social Security Board of Trustees is congressionally mandated to release an annual report on the financial status of the Social Security and Medicare Trust Funds by no later than April 1 of each calendar year—an apparently toothless deadline that was missed by more than four months in 2021, but only by two months this year.
View the full 2022 Trustees Report at www.socialsecurity.gov/OACT/TR/2022/.
SEE ALSO:
• 2021 Report: Social Security Trust Funds Lose Another Year of Solvency
• Social Security Benefits Lose 40% of Buying Power Since 2000; Latest 2023 COLA Estimate Drops