June 21, 1999

Re: Social Security's secret actuarial assumptions

While it appears on reading the Annual Reports of the OASDI Trustees that Social Security's actuaries set the assumptions used in making the actuarial projections for the reports, we now know it is the politically appointed Trustees who have the final say. The procedure is basically that the actuaries prepare a recommended assumptions proposal for the Trustees to review. These are then discussed by the Trustees with the actuaries and further deliberated among the Trustees, and it is they, not the actuaries, who make the final decisions.

We know, of course, what the final assumptions are from the Annual Reports. However, we do not know what the actuaries recommended. This matter came up last month at a meeting attended by senatorial staff, OASDI's deputy chief actuary, and two research economists from Washington's Preamble Center. When the OASDI actuary was asked to provide the proposed assumptions from prior years, his reply was surprised indeed: they are secret and may not even be available under the Freedom of Information Act.

While we may not know what is in the secret proposals, questions naturally arise. Why is there a need for secrecy in this limited area, especially when there are tons of other data made public on every other aspect of Social Security? Does the secrecy have to do with the fact that the Trustees may have established the unusual actuarial conservatism, which has led the public to believe that Social Security is in poor financial condition? Would the secret input explain why the actuaries have seemed to ignore the relevant actuarial standards of practice in setting assumptions? Is it another possible violation of the standards to not have revealed the input of the Trustees?

I am pleased to enclosed a reprint of my article, "Social Security Finances are in Fine Shape," from the May-June Contingencies. Call me if you have any question or comment. With best regards,

Sincerely,

David Langer

© 2001 DAVID LANGER COMPANY, INC.