Retirement Report, Fall 2024

Q&A—Immigration & Social Security

Gutterman The Social Security Committee released a public policy issue paper, Immigration and Social Security, which discusses the importance of immigration to the financial evolution of Social Security.

“In line with the American Academy of Actuaries’ public-service mission, this new issue paper is a resource for all who are looking for a clear, detailed, and actuarially informed explanation of immigration’s effects on this vital program, which supports financial security for tens of millions of older and disabled Americans,” said Sam Gutterman, chairperson of Social Security Committee, in an Academy news release.

To shed more light on this topic and the new issue paper, Retirement Report did a Q&A with Gutterman on the issue paper and immigration’s impacts on Social Security.

The paper distinguishes between lawful permanent residents, or LPRs, and other-than-LPRs. Acknowledging that we’re approaching a political minefield, how are these populations projected to change in the years ahead? How do both cohorts contribute to Social Security’s finances?

The simple answer to the first question is that the future of immigration is uncertain—the uncertainties involve future immigration policy and execution, as well as the relative economic, climate, and employment prospects between the United States and other countries. The trustees of the Social Security system expect net annual new LPR immigrants of about 600,000 and net annual other-than-LPRs of about 450,000, with about 450,000 new LPRs who were previously in the other category.

Lawful permanent residents can participate in Social Security through covered employment, and after working a defined number of years can then collect benefits. Thus, for several decades after entry, they only contribute positively to the finances of the system. Those who are not here lawfully cannot participate, although some do contribute to the system through fraudulent means (e.g., using a deceased person’s Social Security number)—but if done in that way, they will not be able to collect corresponding benefits; if they become a lawful immigrant at a later time, they may be able to receive credit for their earlier contributions if they can demonstrate they actually contributed.

What are some of the differences between LPRs and other-than-LPRs—that is, the idea that this isn’t solely focused on the undocumented, but rather a reminder that there are several categories of people who for a variety of reasons have come to the country to work and are taxed, even if they don’t have citizenship status—including the fact that we’re talking about students and those with work visas.

There have always been a large number of lawfully admitted immigrants. There are several categories of LPRs—the major ones are immediate family members and those who are family-sponsored, employment-sponsored, refugees, and admitted under diversified programs mainly from Central America. They are treated the same as the native-born—many work in covered employment, contribute to the system through payroll taxes, and receive benefits when eligible. In addition, millions of people are in the country as tourists, seasonal workers, and students, most of whom have little or no involvement with Social Security.

The paper offers some detailed statistics about migration with respect to U.S. population growth and fertility rates. What are some of the key takeaways in this area with respect to Social Security’s long-term health?

The key takeaway is the positive role that immigrants play in the financial soundness of the Social Security system. Because our overall population has experienced improved mortality and lower-than-replacement fertility rates, without immigration we would experience a declining workforce, resulting in a lower contribution base to support the tens of millions of Social Security beneficiaries.

An interesting and often-discussed trendline is shown in Table 3, about the projected decline in workers per Social Security beneficiary. It notes that the ratio fell from over 3 in 1970–2008 to about 2.7 today, and will gradually decline to 2 in 2070 before ticking up again. What can you say about some of the implications to Social Security’s solvency in the short, medium, or long term? How can immigration mitigate this trend?

The primary drivers of the decrease in workers per Social Security beneficiary have been decreasing fertility rates and improving mortality rates. Offsetting these drivers has been a high level of immigration over the 90 years of the system’s existence. The relatively young set of immigrants (median age under the age of 30) provides a more immediate favorable financial effect than other sources of new entrants to the system—that is, births. Thus, covered employment by lawful permanent resident immigrants makes an immediate contribution to the system’s finances. Their children’s future earnings will also contribute over the long term to the system. Without immigration, the workers per Social Security beneficiary would decrease more rapidly and would be less than 2.0.

One of the paper’s conclusions notes that although immigration overall benefits Social Security’s finances, the largest part of the solution to the program’s actuarial deficit must come from other sources. How much of a factor is immigration to shoring up Social Security in the long term?

Regardless of the level of immigration, the system’s current trust fund will continue to decline. Under the assumed rate of immigration, the combined OASDI [Old-Age, Survivors, and Disability Insurance] trust funds are projected by the systems’ trustees to become depleted by around 2035, which will result in a significant reduction in benefits. Without the support of immigrants, the depletion date would be somewhat earlier. Immigration will remain a significant factor, although the extent of this contribution will depend on many interrelated factors.

What about the impacts/effects felt by emigrants? The Academy also has a paper on the gig economy in the works, which feeds into the increase in the number of native-born citizens working outside of the country or outside of the traditional norms that could also feed into the solvency of Social Security.

For the most part, emigrants continue to receive earned benefits, no matter where they live. Emigration can, however, affect some people’s eligibility for benefits, because benefit eligibility for retirement benefits requires at least 40 quarters of covered earnings. Those who emigrate before meeting the benefit eligibility requirements will not receive benefits. Work in countries with which the United States has a totalization agreement can fill benefit gaps for persons who have divided their careers between the United States and another country. In contrast, those who work in the informal economy or whose earnings are not covered do not receive Social Security benefits.

Academy ‘ERISA at 50’ Series Continues

Retirement Practice Council (RPC) members attended the Sept. 12 ERISA 50th Anniversary Symposium & Gala in Washington, D.C., marking this month’s 50th anniversary of the Employee Retirement Income Security Act of 1974 (ERISA). The Academy was part of the event’s Research Committee, with Senior Retirement Fellow Linda K. Stone an active member.

Single-Employer Issue Paper

The Pension Committee released an issue paper, ERISA: 50 Years of Shaping the Single-Employer Defined Benefit Landscape. It discusses the broad impacts of the Employee Retirement Income Security Act of 1974 on the retirement landscape, focusing specifically on the single-employer space. The issue brief is included in the ERISA at 50 group above’s Digital Research Journal.

Webinar Looks at Multiemployer Plans

Continuing the Academy’s “ERISA at 50” series marking the landmark law’s anniversary, an Aug. 29 webinar, ERISA at 50: Multiemployer Perspectives From the Past to the Future, featured a panel of experts discussing the unique features of multiemployer plans.

December Webinars to Look at Capital Markets, Surplus Considerations

Save the date for a Dec. 3 webinar, Retirement Capital Markets Update, that will look at the latest in capital markets in a retirement context.

A Dec. 12 webinar will provide additional illumination on a recently issue brief, ‘Surplus’ Considerations for Public Pension Plans. Speakers will provide an overview of the brief and put context around the term “surplus,” as well as describe various surplus management strategies. Register now.

Webinars Examine PBGC Premiums, Church Plans

A Sept. 17 webinar, Rethinking the PBGC Premium Structure, explored changes to the single-employer premium structure to better align with the PBGC’s mission. Presenters also gave an overview of the differences in the PBGC’s single-employer and multiemployer programs.

Church plans & GAO

A July 30 webinar featured a panel of U.S. Government Accountability Office (GAO) officials who reviewed two publications on church plans—an Academy issue brief and a GAO report. Senior Retirement Fellow Linda K. Stone moderated.

Actuaries Longevity Illustrator Updated With New Look & Feel

The Academy and the Society of Actuaries (SOA) have updated the Actuaries Longevity Illustrator, an online tool that helps users with a vital aspect of financial planning for retirement.

Originally launched in 2016, the illustrator now has a more consumer-friendly mobile version, making it easier than ever to calculate the impact of an important factor in retirement planning: longevity risk.

“Achieving financial security in retirement isn’t just a question of the assets you’ve accumulated, but critically involves other questions like how long they may need to last,” said Academy Senior Retirement Fellow Linda K. Stone. Read the news release.

Visit the illustrator—longevityillustrator.org—and share it with your family, friends, and colleagues.

Eric Keener Among New Member-Selected Directors

KeenerLongtime Retirement Practice Council volunteer Eric Keener is among three of recently member-selected volunteers who will become Academy Board members in November. For more, visit the Board Selection Center.

Keener chaired the Retirement Policy and Design Evaluation Committee and drove the Academy’s series of policy documents on national retirement income. He has also moderated and participated in many Academy webinars and has been active in the annual “Hill visits”—meetings with federal lawmakers and regulators.

Candidate statement excerpt—“I have a strong interest and commitment to broader public policy and professionalism issues and hope to bring practical perspectives to Board discussions on how the Academy can best offer independent, nonpartisan actuarial input to public policymakers.” See Keener’s full bio.

Issue Briefs Cover Collective Defined Contributions, Lump Sums

The Retirement Policy and Design Evaluation Committee released an issue brief, Collective Defined Contribution Plans, which defines Collective Defined Contribution (CDC) plans broadly, and discusses advantages and criticisms of CDC plans.

The Public Plans Committee released an issue brief, Public Pension Plans: Helping Members Evaluate Buyout Programs and Other Lump Sums, which offers critical information that would help members compare the value lump-sum payments to the value of the lifetime benefits.

Policy Paper Explores Retirement Outcomes

The Retirement Policy and Design Evaluation Committee released a policy paper, Improving Retirement Outcomes: Demographic Considerations, which discusses retirement inequities and how current retirement plan design elements and policies may inadvertently disadvantage certain cohorts of individuals. Also published—a related executive summary.