Implications of population change on social insurance systems providing old-age benefits

Abstract

General agreement, although not completely universal, exists in North America that cost analysis of programs providing old-age retirement benefits should be conducted over the long range, and not merely over the next few years. The actuarial cost estimates for what is now the U.S. Old-Age, Survivors, and Disability Insurance program have always been made over a long period of future years. Initially, for the 1935 Act, this period was 44 years (up through 1980), but most subsequent valuations of the program have used a 75-year period. The justification for this length of time is that it covers essentially the entire lifetime of every person in covered employment on the valuation date. It must be recognized that outside of North America — but with the exception of the United Kingdom — long-range social insurance programs providing retirement benefits are not generally considered over long future periods. The argument made in support of this short-sighted approach is that it is impossible to predict with any precision such long-range future operations. Countering this is the point that an estimate prepared by well-qualified persons is far better for policy planning and analysis than nothing at all.