Unchanged from last year’s projection, Social Security’s combined retirement and disability programs have dedicated resources sufficient to cover benefits for the next 19 years, until 2033. However, the projected depletion date for Social Security’s Disability Insurance Trust Fund is much sooner, according to the Social Security and Medicare Trustees report released Monday.
“Social Security’s disability program alone has dedicated funds sufficient to cover all scheduled benefits for only two years,” said Treasury Secretary and Managing Trustee Jacob Lew during a press briefing to discuss the annual report. “As was true last year, beginning in 2016, projected tax income will be sufficient to finance about 80% of scheduled benefits. Legislation will be needed to avoid disruptive reductions in benefit payments to this vulnerable population.”
While the projections in this year’s reports for Social Security are essentially the same as last year, the projections for Medicare have shown some improvement.
According to the report, the Medicare Hospital Insurance Trust Fund will have sufficient funds to cover its obligations until 2030, four years later than was projected last year, and 13 years later than was projected in the last report issued prior to passage of the Affordable Care Act.
“As today’s reports make absolutely clear, Social Security and Medicare are fundamentally secure, and they will remain fundamentally secure in the years ahead,” Lew said. “The reports also remind us of something we all understand: we must reform these programs if we want to keep them sound for future generations.”
“The long-term looks very similar to last year, but the short term picture has grown more urgent.” In public trustee Charles Blahous’ statements on Social Security during the public hearing, he said,
In the 2014 annual report to Congress, the Trustees reported that the combined trust fund reserves are still growing and will continue to grow through 2019. Beginning with 2020, though, the cost of the program is projected to exceed income. And, as projected, when the combined trust fund reserves become depleted in 2033, there will be sufficient income coming in to pay 77% of scheduled benefits. Once exhausted, the report stated, the annual revenues from the dedicated payroll tax will be sufficient to fund three-quarters of scheduled benefits through 2088.
Program costs are projected to exceed noninterest income throughout the remainder of the 75-year period, as this year’s report projected the actuarial deficit over that time to be 2.88% of taxable payroll, 0.16 percentage point larger than in last year’s report.
Current projections in this year’s report show that the “annual cost of Social Security benefits expressed as a share of workers’ taxable earnings will grow rapidly from 11.3% in 2007, the last prerecession year, to roughly 17.1% in 2037, and will then decline slightly before slowly increasing after 2050.”