Table B--Estimated Long-Range OASDI Financial Effect of a Proposal Developed by Representative Nick Smith
(Assumes 67% worker participation in establishing Personal Retirement Savings Accounts)
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Provision
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Estimated Change in
Long-Range OASDI
Actuarial Balance 1/
(as a percent of payroll)
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Raise the normal retirement age by two months per year for those age 62 through 2011, then increase by one month every two years thereafter
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0.64
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Provide a third bend point in 2004 with a factor declining 2 percentage points per year until reaching 5 percent in 2009; index the second and third bend points by the CPI, and gradually phase down the 32, 15 and 5 percent factors. Limit reduction for older OASI workers and near term survivor benefits. Provide for no change from present law for lower-earner disability cases and a minimum benefit for higher-earner disability cases
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3.12
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Reimburse the DI Trust Fund annually for additional payments resulting from guaranteeing present-law benefits for lower earner disabled workers and a specified minimum benefit for higher-earner disabled workers
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0.10
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Transfer the following amounts from the Treasury to the OASDI Trust Funds in fiscal years 2007-2013: $21 billion in 2007, $47 billion in 2008, $78 billion in 2009, $106 billion in 2010, $147 billion in 2011, $184 billion in 2012, and $283 billion in 2013
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0.26
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Beginning in 2005, cover state and local government employees newly hired in 2004 or later
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0.20
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Increase benefit payable to all widowed individuals by 10 percent beginning in 2004
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-0.31
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Set the delayed retirement credit to 8 percent for all months after 2004
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2/
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Provide up to 5 child care dropout years for workers with no earnings who are living with a child under age 13--effective for computation base years after 2004
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-0.08
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Beginning in 2003, eliminate the family maximum for disabled children aged 18 or older
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-0.01
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Subtotal, benefit provisions (including interaction)
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3.80
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Establish personal retirement savings accounts and specific General Fund transfers:
- Redirect 2.5 percentage points of taxable payroll in 2005-25, 2.75 percentage points in 2026-2038. After 2038, redirect OASDI income in excess of the amount needed to cover annual program costs and maintain a minimal contingency reserve in the trust funds (15% trust fund ratio)
- Reduce OASI benefit levels by the value of PRSA contributions accumulated at an assumed annual rate of the yield on trust fund assets plus 0.7 percentage points
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-1.42
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Total for proposal
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2.38
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Note: All estimates are based on the intermediate assumptions of the 2003 OASDI Trustees Report.
1/ Totals for individual provisions exclude interaction.
2/ Decrease in actuarial balance that is negligible, i.e., less then 0.005 percent of taxable payroll.
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Social Security Administration
Office of the Chief Actuary
September 10, 2003
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