TAMPA, Fla. (WFLA) — The latest report on funding for social security benefits did not give a financially positive outlook for the future to federal lawmakers. Instead, a report by the Social Security Administration said benefits will cost more than the income collected to pay for it.
By 2035, the SSA’s Social Security Board of Trustees reported that the money in the Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds will be depleted, putting funds toward insolvency, meaning it is unable to pay its debts. Slightly sooner, SSA reported the Old-Age and Survivors Insurance Trust Fund would be empty by 2034.
Yearly costs of maintaining the social security program are “projected to exceed total annual income in 2022 and remain higher” over the next 75 years. Since 2010, cost of maintaining the program has been higher than non-interest income. Now, paying for benefits to American retirees is higher than all income paid to the program.
To preserve funding, the SSA urged U.S. Congress to act.
“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,” Kilolo Kijakazi, Acting Commissioner of Social Security, said. “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.”
As of 2021, SSA said the total income of the two trust funds reached $1.088 trillion. Expenses from the two funds grew to almost $1.145 trillion in the same year. That was equal to a loss of roughly $57 million. The SSA paid out $1.133 trillion to its 65 million beneficiaries by the end of the 2021 calendar year.
The administration estimates cost and solvency over a 75-year range. The current estimate predicts funding to dry up in 2034. A detailed trustees report produced in June was presented to U.S. House of Representatives Speaker Nancy Pelosi (D-Cali.) and Vice President Kamala Harris, the Senate President.
The cost of administering SSA benefits in 2021 was just a fraction of the cost, at $6.5 billion. SSA said that equaled 0.6% of their expenditures. Overall, benefits were the bulk of the program costs. This includes payments for monthly income, medical coverage through Medicare and Medicaid, and potentially additional payments for the disabled, through additional benefit programs.
Analysis of the trustee report by the Committee for a Responsible Federal Budget said once the SSA funding becomes insolvent, benefits for social security recipients will be reduced by 20%, due to current law.
Their report, which included a statement from organization president Maya MacGuineas, said SSA is 13 years from insolvency. The Medicare Hospital Insurance Trust Fund is also expected to reach insolvency soon, reaching levels where it cannot pay its debt in just six years, or in 2028.
Reported by CNBC, MacGuineas said she was concerned the increased payments, made by 2021’s increased Cost of Living Adjustments, may be fueling the SSA funds’ depletion. A much-bigger COLA will cost the program tens of billions of dollars, putting further pressure on the program that is already facing insolvency, MacGuineas told CNBC.
The 5.9% benefits increase at the end of 2021, for use in 2022, was the largest increase for benefits in 40 years. The new report on SSA benefits given to federal lawmakers predicts a 3.8% increase in benefits due to COLA. However, the predictions in the report are based off of February data, meaning ongoing inflation increases are not included in all of the forecasts.
“The change in reserve depletion year for the OASI Trust Fund to 2034, compared to 2033 in last year’s report, is due primarily to (1) lower cost as a percentage of taxable payroll over several years in the near-term, and (2) higher projected revenue from taxation of benefits,” SSA reported.
As reported by CNBC, Stephen Goss, chief actuary at SSA, said during a briefing on the report that the COLA might be higher.
“Looking at the CPI-W trends that we’re seeing so far this year, it is likely we’re going to have a COLA closer to 8% than 3.8%,” Goss said. CPI-W is the Consumer Price Index for Urban Wage Earners and Clerical Workers, as defined by the Bureau of Labor Statistics. The BLS produces CPI reports every month to track inflation.
The SSA trustee report said the CPI-W is the measure used to decide if a cost of living benefit increase is given. “If there is no increase in the CPI-W, there is no cost-of-living benefit increase,” according to the SSA.
Regardless of the economy’s current issues, SSA needs help to continue providing for its beneficiaries.
“Policymakers need to get their heads out of the sand and stop pretending these vital programs’ funding issues will fix themselves,” MacGuineas said in a statement. “The looming insolvency of Social Security and Medicare are problems we’ve known about for decades. It’s long past time to enact trust fund solutions that put these programs and our national debt on a more sustainable path.”