Passage of OBBBA Deepens Social Security’s Funding Hole

This post is a follow-up to our post of June 18, 2025
in which we addressed the magnitude of Social Security’s long-term
funding hole based on results of the 2025 Trustees Report and their
“intermediate assumptions.” Last week, Karen P. Glenn, the Chief Actuary
of the Social Security Administration (SSA) updated the primary 2025
results in a letter to Senator Ron Wyden reflecting SSA’s understanding of the tax provisions in the One Big Beautiful Bill Act (OBBBA). 

According
to Ms. Glenn, passage of OBBBA increased the 75-year long-range
actuarial deficit from 3.82% to 3.98% of taxable payroll under the
intermediate assumptions by reducing the present value of expected OASDI
tax revenue by almost $1,103 billion over the next 75 years.

Measured
as the ratio of the present value of system assets to system
liabilities (i.e., Funded Status) over the next 75 years, OBBBA
decreased this metric from 78.3% to 77.4%.

As discussed in our
post of June 18, 2025 and other previous posts, the 75-year long-range
balance (and equivalent 75-year Funded Status comparison of assets to
liabilities) actually overstates the system’s actual funded status
(i.e., understates the long-term funding problem) because annual
deficits expected after the end of the 75-year projection period are
ignored. These deficits are slowly recognized in each year’s valuation
(Valuation Date Creep) but, for some reason, neither the system’s Chief
Actuary nor the Trustees bother to project what the long-range actuarial
deficit may expected to be in the future.

Further, the
intermediate assumptions used for all these calculations may be
optimistic projections of future experience. If this is the case, the
system’s future long-range funded status measurements will be even worse
without future congressional reform.

In her letter, Ms. Glenn indicated

“Finally,
note that we will be using the results provided in this letter as an
updated baseline for evaluating the effects of proposals that affect the
OASI and DI Trust Funds, and particularly proposals intended to extend
solvency, starting now and until the issuance of the 2026 Trustees
Report next year.”

We hope that Mr. Glenn and her staff receive
many serious proposals to address the system’s short and long-term
funding problems prior to issuance of the 2026 Trustees Report. Because
of the Valuation Date Creep, we expect that the new “baseline” 3.98%
long-range actuarial deficit will be in excess of 4% of taxable payroll
in the 2026 report even if all assumptions are unchanged from 2025. It
is way past time for Congress to address this issue.