The annual Trustees Report provides financial estimates of the Social
Security program under current law. Changes made in methodology,
assumptions, and starting data between the 2008 and 2009 Trustees Report
are noted in the 2009 Trustees Report. In addition, we have made two
significant changes to the methodology and presentation of estimates for
provisions that would alter current law. These two changes, which are
described below, were not used for estimates for provisions and proposals
(groups of provisions) that are based on the intermediate assumptions of
the 2008 and earlier Trustees Reports.
- Provisions intended to change the amount of payroll tax income are
estimated with a new methodology. The methodology improves estimates
of employer and employee behavioral responses to any change in the
taxable maximum or any change in the payroll tax rate above or below
the taxable maximum.
The presentation of annual income rate, annual cost rate, and
annual balance, as well as the presentation of the long-range actuarial
balance and actuarial deficit for those proposals that would alter
taxable payroll, is changed.
- Behavioral Response by the Employer: We assume all other
compensation (other than payroll taxes paid by the employer) would
be reduced proportionally to completely offset the increase in
payroll taxes paid by the employer. The employer’s total
compensation, therefore, is assumed to remain the same.
- Behavioral Response by the Employee: We assume that, if the
employee’s payroll taxes are increased, some employees will shift
some amount of earnings to compensation not subject to payroll
taxes. The amount of earnings shifted reflects the earnings level
of the employee and the increase in the tax rate for the employee.
For employees with earnings below $10,680 in 2009 (10 percent of the
taxable maximum), no shift in earnings is assumed. For employees
with earnings above this amount, we assume the proportion shifted
increases as the employee’s earnings increases.
With the new presentation, all rates and summary measures are expressed in
terms of taxable payroll under present law. This new presentation reduces
the measured amount of interaction among provisions, thus simplifying the
consideration of multiple provisions. Previously, the rates and summary
measures were expressed in terms of taxable payroll as estimated under the