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Session 108 Social Security and Medicare The Challenge of Long-Term Sustainability

Session 108 Social Security and Medicare The Challenge of Long-Term Sustainability. SPEAKERS: TOM TERRY, FCA, FSA, MAAA, EA – THE TERRY GROUP KAI PETERSEN, FSA, EA, MAAA, CFA – BUCK GLOBAL INVESTMENT ADVISORS KEN BUFFIN, FCA, FSA, FIA, MAAA – THE BUFFIN FOUNDATION.

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Session 108 Social Security and Medicare The Challenge of Long-Term Sustainability

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  1. Session 108Social Security and MedicareThe Challenge of Long-Term Sustainability SPEAKERS: TOM TERRY, FCA, FSA, MAAA, EA – THE TERRY GROUP KAI PETERSEN, FSA, EA, MAAA, CFA – BUCK GLOBAL INVESTMENT ADVISORS KEN BUFFIN, FCA, FSA, FIA, MAAA – THE BUFFIN FOUNDATION

  2. Actuarial Metrics for Monitoring the Sustainability of the US Social Security System Kenneth G. Buffin FCA, FSA, FIA, MAAA The Buffin Foundation CCA ANNUAL MEETING | RANCHO MIRAGE, CA

  3. Actuarial Metrics for Monitoring the Sustainability of the US Social Security System The US Social Security System • The triple financial challenges • Stability • Solvency • Sustainability • The fixed payroll tax rate • Design leads to actuarial imbalance • Sustainability compromised CCA ANNUAL MEETING | RANCHO MIRAGE, CA

  4. Actuarial Metrics for Monitoring the Sustainability of the US Social Security System The US Social Security System • Cash transfer system • Asset-income cash flow stream • Liability-outgo cash flow stream • Buffer fund • Actuarial equilibrium • Economic cost concept • Payroll tax and stability CCA ANNUAL MEETING | RANCHO MIRAGE, CA

  5. Actuarial Metrics for Monitoring the Sustainability of the US Social Security System M1 AND M2: Asset-Income and Liability-Outgo Rates (Percent of Covered Payroll) CCA ANNUAL MEETING | RANCHO MIRAGE, CA

  6. Actuarial Metrics for Monitoring the Sustainability of the US Social Security System The US Social Security System • Solvency metrics • Projection periods • Alternative assumption sets • Nine-point solvency ratio matrix • Secular trend • Secular decline • Annual rate of decline CCA ANNUAL MEETING | RANCHO MIRAGE, CA

  7. Actuarial Metrics for Monitoring the Sustainability of the US Social Security System M3: Social Security Solvency Ratios M4: Amount of Decline 2002-13 M5: Annual Rate of Decline 2002-13 CCA ANNUAL MEETING | RANCHO MIRAGE, CA

  8. Actuarial Metrics for Monitoring the Sustainability of the US Social Security System Secular Trend in Solvency Ratios 2002-2013 CCA ANNUAL MEETING | RANCHO MIRAGE, CA

  9. Actuarial Metrics for Monitoring the Sustainability of the US Social Security System Secular Trend in Solvency Ratios 2002-2013 CCA ANNUAL MEETING | RANCHO MIRAGE, CA

  10. Actuarial Metrics for Monitoring the Sustainability of the US Social Security System The US Social Security System • Actuarial equilibrium objective • Payroll tax rates to achieve equilibrium • Nine-point equilibrium matrix • Secular trend • Secular increase • Annual rate of increase • Question of affordability CCA ANNUAL MEETING | RANCHO MIRAGE, CA

  11. Actuarial Metrics for Monitoring the Sustainability of the US Social Security System M6: Social Security Solvency Equilibrium Payroll Tax Rates M7: Amount of Increase 2002-13 M8: Annual Rate of Increase 2002-13 CCA ANNUAL MEETING | RANCHO MIRAGE, CA

  12. Actuarial Metrics for Monitoring the Sustainability of the US Social Security System Equilibrium Payroll Tax Rates 2002-2013 CCA ANNUAL MEETING | RANCHO MIRAGE, CA

  13. Actuarial Metrics for Monitoring the Sustainability of the US Social Security System Equilibrium Payroll Tax Rates 2002-2013 CCA ANNUAL MEETING | RANCHO MIRAGE, CA

  14. Actuarial Metrics for Monitoring the Sustainability of the US Social Security System Conclusion & Recommendations • Eight suitable actuarial metrics • Three projection periods • Three alternative assumption sets • Dynamic and stochastic features • Secular trend monitoring • Potential role model for other countries • Communicating to policymakers CCA ANNUAL MEETING | RANCHO MIRAGE, CA

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