SOCIAL SECURITY (OASDI)ACTUARIAL STATUS

2010 ANNUAL REPORT OF THE BOARD OF TRUSTEES

Office of the Chief ActuarySocial Security Administration

October 8, 2010Middle Atlantic Actuarial Club

Social Security – Current Status and the Future?

Key results under intermediate assumptions – Alice Wade

Provisions to change Social Security – Daniel Nickerson

Comprehensive proposals to change Social Security – Chris Chaplain

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News from the 2010 OASDI Trustees Report

Near-term—More disabled workers and slower economic recovery DI Trust Fund exhausts in 2018, 2 years earlier Lower Annual Balance through 2016

Long-term—Actuarial deficit reduced from 2.00 to 1.92 percent of payroll due to effect of health care legislation Combined OASDI Trust Fund exhaustion still

2037 Annual Balance improved after 2016

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Near-Term Factors

Deeper recession, longer recovery Reduced employment More disability beneficiaries Result in:

Lower annual balance in the near-term Sooner DI Trust Fund exhaustion

No COLA for December 2010

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SOLVENCY: OASDI Trust Fund Exhaustion 2037 — No Change Last 16 Reports (1995-2010) varied from 2029 to 2042 DI Trust Fund — Exhaustion in 2018, or 2 years earlier OASI Trust Fund — Exhaustion in 2040, or 1 year later

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Social Security Trust Fund Ratios Assets as Percent of Annual Cost

Trustees Report Intermediate Projections

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

OASDI 2010TR

OASI 2010TR

DI 2010TR

OASDI 2009TR

OASI 2009TR

DI 2009TR

Historical

DI

OASI

OASDI

Tax Rate Reallocation

OASDI Annual Cost and Tax Income: Percent of Taxable Payroll Persistent Negative Balance in 2015 — 1 Year EarlierThree fourths of scheduled benefits still payable after TF exhaustionAnnual deficit in 2083: 4.08 percent of payroll — 0.26 percent lower than last year

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0%

5%

10%

15%

20%

25%

2005 2015 2025 2035 2045 2055 2065 2075 2085

Calendar year

Cost: Scheduled and payable benefits

IncomePayable benefits as percentof scheduled benefits:2010-36: 100%2037: 78%2084: 75%

Cost: Scheduled but not fully payable benefits

Expenditures: Payable benefits = income after trust fund exhaustion in 2037

OASDI Annual Balances Are Lower Through 2016 But Higher Thereafter (Tax Income minus Cost as percent of

Payroll)

-6%

-4%

-2%

0%

2%

4%

2005 2015 2025 2035 2045 2055 2065 2075 2085

Calendar year

2009 Report

2010 Report

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SUSTAINABILITY: Cost as Percent of GDP Rises from 4.8 percent in 2009 to a peak of 6.1 percent in 2035 then roughly stabilizes between 5.9 and 6.0 percent

0%

2%

4%

6%

8%

10%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080Calendar year

Historical Estimated

Cost

Scheduled Tax Revenue

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Long-Term Effects: Health Care Legislation

9

Ratio of OASDI Covered Wages to Employee Compensation: 2010 Trustees Report Intermediate Projection

0.62

0.64

0.66

0.68

0.70

0.72

0.74

0.76

2005 2015 2025 2035 2045 2055 2065 2075 2085

Final 2010TR with ACA

Prelim Baseline Constant Rate

of Decline

New Baseline Without ACA

Average Annual DeclinePrelim Baseline 0.2%New Baseline 0.2%2010TR with ACA 0.1%

Measures used to address uncertainty

Low-cost and high cost estimates

Sensitivity analysisStochastic modeling

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