Social Security Actuarial Projections

This study examined past Social Security Administration (SSA) actuarial projections of the future long-range financial status of the old-age, survivors, and disability insurance (OASDI) trust funds. The study focused on the integrity of the demographic and economic assumptions, the actuarial methods, and the actuaries' professional independence.

The evidence gathered neither proved nor disproved that the demographic and economic assumptions which SSA made were always reasonable or that the lack of actuarial independence significantly affected the projections. However, the majority of the experts interviewed felt that the SSA demographic and economic assumptions were generally too optimistic from 1973 through 1982 and that more actuarial independence was needed. Most of them felt that the SSA actuarial methodology was appropriate for evaluating a public insurance program. However, there are no criteria as to what constitutes an acceptable variance when SSA makes its 75-year projections in its annual report to Congress. GAO analysis showed that SSA adjusted its projections each year from 1973 to 1982 with each successive projection showing an increased actuarial deficit. This change amounted to trillions of dollars over a 75-year projection. Most of the volatility in the actuarial projections appear to have been caused by the interaction between the automatic benefit increases, tied to cost-of-living increases, and the economy's unfavorable performance. The Social Security Amendments of 1977 minimized the effects of inflationary wages by computing initial benefits on the basis of average monthly indexed earnings rather than on average monthly earnings. The Social Security Amendments of 1983 should keep the average rate of increase in program costs equal to or less than the average rate of increase in wages.