blindpig
12-10-2016, 08:22 AM
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.
Much more.....
https://www.ssa.gov/oact/solvency/SJohnson_20161208.pdf
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.
Much more.....
https://www.ssa.gov/oact/solvency/SJohnson_20161208.pdf