1. Highlights from the 2011 Social Security Trustees Report Bruce D. Schobel, FSA, MAAA, FCA

2. Short-Range Solvency: Trust Fund Ratios

3. Long-Range Solvency: Trust Fund Ratios

4. Long-Range Solvency: Trust Fund Ratio Sensitivity

5. Long-Range Solvency: Projected Annual Balance, % of Payroll

6. Long-Range Solvency: Projected Annual Balance Sensitivity

7. Long-Range Solvency: Actuarial Balance Actuarial Balance = Summarized Income Rate - Summarized Cost Rate Trust Fund Balance is included in Income Rate Ending Target Fund included in Cost Rate Expressed as a percentage of the summarized taxable payroll 2011 Values Income rateCost RateActuarial Balance 25 – Year15.01%15.61%-0.60% 50 – Year14.25%16.04%-1.78% 75 - Year14.02%16.25%-2.22%

8. Long-Range Solvency: Actuarial Balance, 2010-11 Actuarial Balance 20102011 25 – Year-0.25%-0.60% 50 – Year-1.45%-1.78% 75 - Year-1.92%-2.22%

9. Long-Range Solvency: Actuarial Balance Sensitivity 2011 Actuarial Balance LowIntermediateHigh 25 – Year0.78%-0.60%-2.26% 50 – Year0.23%-1.78%-4.37% 75 - Year0.29%-2.22%-5.59%

10. Congress Should Restore Social Security’s Financial Soundness Sooner Rather Than Later Workers will have time to plan for reduced after- tax income and benefits. Reforms can be phased-in more gradually over a longer period of time, affecting more people. – Starting in 2011, achieving actuarial balance over 75 years would require: Increase tax rate from 12.4% to 14.55%, or 13.8% decrease in benefits – Starting in 2036, it would require Increase tax rate from 12.4% to 16.45%, or 23% decrease in benefits

11. Policymakers must consider: Individual equity versus social adequacy? Pay-as-you-go funding versus pre-funding?

12. Reform Options These are some of the “big-ticket” items that would contribute significantly to restoring the program’s solvency: – Raising the normal retirement age beyond 67 – Raising the maximum taxable amount beyond $106,800 – Reducing the primary insurance account (PIA) formula in various ways – Modifying cost-of-living adjustments (COLAs)

13. Social Security’s Normal Retirement Age Worker’s Year of Birth Social Security’s Normal Retirement Age 1943-5466 years 195566 years and 2 months 195666 years and 4 months 195766 years and 6 months 195866 years and 8 months 195966 years and 10 months 1960 & later67 years

14. Questions?