Page 45 - Investment Advisor - October 2021

But this may not have been an issue, impact on solvency projections, since they pay for inpatient hospital care, and is
Altman said. “If that had not been paid largely canceled each other out, and you scheduled to pay benefits until 2026, the
back but instead had been made perma- see that the modest projected reduction in same as reported last year. Once deplet-
nent, that would have had a substantial the actuarial balance is the result of using ed, program income will be sufficient to
impact. Because it is being paid and was different and more accurate methodology. pay 91% of total scheduled benefits.
temporary, though, that should not have “The bottom line is that we’ve known The Supplemental Medical Insurance
an impact either.” for years that either taxes collected will Trust Fund has two accounts: Medicare
The Trustees concluded that “law- need to rise, benefits will need to be Part B (physician and outpatient services)
makers have many policy options that reduced, or inflation adjustments will and Part D (prescription drug benefits).
would reduce or eliminate the long-term need to be more modest. It’s more than The trustees noted that these are “ade-
financing shortfalls in Social Security and likely that politicians will wait as long as quately financed into the indefinite future”
Medicare. Lawmakers should address possible before making the hard choices, because they are financed from general
these financial challenges as soon as pos- but the alternative of a 24% benefit cut revenue and beneficiary premiums, by law.
sible. Taking action sooner rather than is a political death sentence.”
later will permit consideration CHANGES FROM 2020
of a broader range of solutions Michael Finke added that TRUSTEES REPORT
and provide more time to phase advisors “should anticipate The actuarial changes of
in changes so that the public the OASI and DI trust funds
has adequate time to prepare.” an increase in payroll taxes, increased to 3.54% from 3.21%

year, but that may be due to
EXPERTS SAW POSITIVES particularly among high earners, of taxable payroll since last
Once the funds are depleted, and only a modest reduction in a combination of factors from
the OASI should be able to changes in methodology to
pay 76% of scheduled benefits, future projected benefits.” legislation to demographics.
while the DI will pay 91% of Some long-range assump-
scheduled benefits, the report stated. This Jamie Hopkins, managing partner of tions were changed, the trustees stated:
is better than some retirement experts wealth solutions at Carson Group, said • The total fertility rate was raised to
feared at the height of the pandemic. in a tweet: “I’m happy SS report was bet- 2.0 births per woman from 1.95.
“The news from the new report was ter than expected but I wonder if the full • The unemployment rate fell to 4.5%
definitely less dire than many thought impact is still a year away.” from 5%.
could be possible,” Wade Pfau, professor In the press conference on the report, • Near-term economic and demo-
of retirement income at The American SSA Chief Actuary Stephen Goss esti- graphic assumptions reflected the
College of Financial Services, told mated the Social Security cost-of-living pandemic and 2020 recession,
Investment Advisor in an email. ”Last adjustment at 3.1% but said that “due to which resulted in lower payroll tax
year’s report projected that the com- widespread reports to the media from income and lower revenue from
bined OASDI funds could be depleted by ‘other prognosticators,’ it looks like it income taxation benefits.
2035. During the pandemic, there was will be around 6%,” Mary Johnson, The trustees board is made up of
analysis circulated that this date could Social Security and Medicare policy Janet Yellen, secretary of the treasury
be moved to as early as 2029. In the end, analyst for The Senior Citizens League, and managing trustee of the trust funds;
it’s only one year sooner at 2034.” told investment Advisor. Martin J. Walsh, secretary of labor;
The depletion date isn’t written in stone, Johnson, who produces monthly esti- Xavier Becerra, secretary of health and
but Congress will have to take action. mates of the Social Security COLA based human services and Kilolo Kijakazi, act-
“[Last year] saw a reduction in payroll on the Consumer Price Index, added ing commissioner of Social Security.
taxes collected, but also an increase in that this was the “closest to insolvency On a final note, Finke added that advi-
expected mortality among Social Security [for the trust fund] I’ve ever seen.” sors “should anticipate an increase in
recipients,” Michael Finke, professor payroll taxes, particularly among high
and Frank M. Engle Chair of Economic HOSPITAL INSURANCE, MEDICARE earners, and only a modest reduction in
Adobe Stock College of Financial Services, told included The Hospital Insurance Trust Ginger Szala can be reached at [email protected].
future projected benefits.”
Other programs discussed in the report
Security Research at The American
Investment Advisor. “Neither had a big
Fund, or Medicare Part A, which helps

OCTOBER 2021 INVESTMENT ADVISOR 43