Benefits July 23, 2015

Social Security Gains a Year of Solvency

The combined trust fund reserves are still growing and will continue to do so through 2019, the annual Trustees Report says.
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The combined asset reserves of the Old-Age and Survivors Insurance, and Disability Insurance (OASDI) Trust Funds are projected to become depleted in 2034, one year later than projected last year, according to the Social Security Board of Trustees annual report. 

Seventy-nine percent of benefits will be payable at that time. The DI Trust Fund will become depleted in 2016, unchanged from last year’s estimate, with 81% of benefits still payable.

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The combined trust fund reserves are still growing and will continue to do so through 2019, the report says. The asset reserves of the combined OASDI Trust Funds increased by $25 billion in 2014 to a total of $2.79 trillion. Beginning with 2020, the cost of the program is projected to exceed income. The projected actuarial deficit over the 75-year long-range period is 2.68% of taxable payroll—0.20 percentage points smaller than in last year’s report.

Income, including interest, to the combined OASDI Trust Funds amounted to $884 billion in 2014 ($756 billion in net contributions, $30 billion from taxation of benefits, $98 billion in interest, and less than $1 billion in reimbursements from the General Fund of the Treasury—almost exclusively resulting from the 2012 payroll tax legislation). Total expenditures from the combined OASDI Trust Funds amounted to $859 billion in 2014. The cost of $6.1 billion to administer the program in 2014 was a very low 0.7% of total expenditures, the trustees say.

The combined Trust Fund asset reserves earned interest at an effective annual rate of 3.6% in 2014.

Other highlights of the Trustees Report include:

  • Non-interest income fell below program costs in 2010 for the first time since 1983. Program costs are projected to exceed non-interest income throughout the remainder of the 75-year period.
  • During 2014, an estimated 166 million people had earnings covered by Social Security and paid payroll taxes.
  • Social Security paid benefits of $848 billion in calendar year 2014. There were about 59 million beneficiaries at the end of the calendar year.

The 2015 Trustees Report is at www.socialsecurity.gov/OACT/TR/2015/. 

Data and Research July 23, 2015

Employers Say Multiemployer Pension Reform Act is Helpful

Two-thirds of plan sponsors say the Multiemployer Pension Reform Act will be somewhat, very or extremely impactful.

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Sixty-six percent of sponsors of multiemployer plans say the Multiemployer Pension Reform Act (MPRA) of 2014, which was passed on December 13, 2014 to help troubled multiemployer plans from becoming insolvent, will be somewhat, very or extremely helpful. This is according to a survey of 216 multiemployer plans that the International Foundation of Employee Benefit Plans conducted in May.

Eighty-one percent say that the Pension Benefit Guaranty Corporation (PBGC) premium increase from $12 per participant in 2014 to $26 in 2015 will be somewhat, very or extremely impactful. The law also allows deeply troubled multiemployer plans to temporarily or permanently suspend current and future benefits, and allows the PBGC to facilitate multiemployer plan mergers and to order and finance plan partitions.

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Ninety-two percent of multiemployer plans have been closely monitoring the law, 96% have begun discussions on the potential impact, and 88% say they have a good understanding of the MPRA provisions.

Among the funds responding to the survey, 63% are in the green safe zone—but 37% are in potential trouble, with 16% in the endangered yellow zone, 1% in the seriously endangered orange zone, 14% in the critical status red zone and 6% in the critical and declining status zone.

MPRA permits funds in the critical and declining status zone to temporarily or permanently reduce current and future benefits. The International Foundation of Employee Benefit Plans survey found that 3% of multiemployer plans are interested in applying for this action. Another 5% are considering merging with better-funded plans, and 2% are thinking about adopting flexible tools to address funding challenges.

“Half of funds report that they have received questions from their participants expressing concern about the law,” says Julie Stich, director of research at the International Foundation of Employee Benefit Plans. “Going forward, plan sponsors will be closely watching the developments surrounding MPRA and continually evaluating their plan to ensure the best interests of their plan participants.”

The full results of International Foundation of Employee Benefit Plans’ survey of multiemployer plans can be viewed here.

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