Date: May 22, 2008
To: The Commissioner
From: Inspector General
Subject: Quick Response Evaluation: Underpayments to Widows (A-01-08-28116)
The attached final report presents the results of our review. Our objective was to quantify the amount of Title II benefits owed a group of widows whose benefits were not properly adjusted at full retirement age.
If you wish to discuss the final report, please call me or have your staff contact Steven L. Schaeffer, Assistant Inspector General for Audit, at (410) 965-9700.
Patrick P. O'Carroll
Underpayments to Widows
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Our objective was to quantify the amount of Title II benefits owed a group of widows whose benefits were not properly adjusted at full retirement age (FRA).
The Social Security Administration (SSA) administers the Old-Age, Survivors and Disability Insurance program under Title II of the Social Security Act. The program provides monthly benefits to retired or disabled workers and their families and to survivors of deceased workers.
Some individuals are dually entitled to both disability benefits based on their own earnings history and widow's benefits based on their deceased spouse's earnings. Although disability benefits are generally not reduced based on the beneficiaries' age, widow's benefits are reduced when beneficiaries elect to receive them before they reach FRA. However, if the widow's benefits started when the disability benefits began or later, the widow's benefits are adjusted and the reduction for age is eliminated when disability benefits end and retirement benefits are awarded. Usually, this occurs when the beneficiaries attain FRA. In December 2006, about 3.6 million beneficiaries were dually entitled to both retirement benefits and widow's benefits.
SSA technicians are instructed to prepare manual diaries to control cases in which disability beneficiaries become entitled to reduced widow's benefits, to ensure the appropriate adjustments are made when disability ends and retirement benefits are awarded. In addition, SSA's Title II Redesign system produces alerts when these beneficiaries attain FRA. SSA technicians then determine whether adjustments to the widow's benefits are needed. Because the Agency does not have an automated system to make the necessary adjustments, employees must take manual actions to ensure these beneficiaries are paid correctly.
In May 2007, we issued a report on Adjustment of Widow's Insurance Benefits at Full Retirement Age (A-01-07-27122). Based on the results of our audit, we estimated that about 9,751 beneficiaries were underpaid approximately $113.7 million through November 2006. In May 2008, SSA reported these widow's records were reviewed and corrected in Fiscal Year 2007. Because SSA corrected the benefits for these widows, they will receive about $137.8 million in additional payments over the rest of their lives.
As a result of our findings, we recommended that SSA review the automated programs in use and make necessary modifications to ensure all widows' cases requiring adjustment are properly identified and controlled. SSA agreed and planned to implement a computer system enhancement in May 2008.
Because the population used for our May 2007 audit was identified in 2004, we indicated in that report that we would conduct additional analysis to identify a more recent population of widows who may have been underpaid. Therefore, we identified 9,603 widows who were not in the prior audit population but appeared to be underpaid. In March 2008, we referred these new cases to SSA's Office of Operations for review and corrective action. SSA informed us it began working these cases in April 2008 and expects to complete them all in Fiscal Year 2008.
We selected a random sample of 200 cases from this new population for detailed
analysis. (See Appendix A for additional information about our scope, methodology
and sample results.)
Results of Review
Based on the results of our review, we estimate that about 8,403 beneficiaries were owed approximately $95 million through February 2008. In addition, if SSA does not take action to correct the benefits paid to these widows, we estimate they will continue to be underpaid about $211 million over the rest of their lives.
SSA did not properly adjust the benefits to the 200 widows in our sample when they attained FRA. As a result, the widows were not paid all of the benefits due them. Although the Agency detected 25 of these cases before our review and adjusted the benefit amounts, the remaining 175 cases went unresolved. These 175 widows were owed approximately $2 million through February 2008.
For example, one widow attained FRA in April 1994 and her disability benefits were converted to retirement benefits. At that time, she was entitled to receive an additional $231 per month in widow's benefits. As of February 2008-when she was 78 years old-her benefits had not been adjusted and, as a result, she was owed approximately $45,970. Unless SSA takes action to correct her benefit payments, we estimate she will be underpaid an additional $35,802 in the future.
We found that 3 of the 175 underpaid widows in our sample died and never received the additional amounts due them. These widows were owed about $18,417 before their deaths. For example, one widow attained FRA in December 1999. At that time, SSA should have begun paying her an additional $103 per month in widow's benefits. She died in 2007 (at the age of 73) without receiving the additional $10,964 owed her.
UNDERPAYMENTS TO THE WIDOWS IN OUR POPULATION
We found the beneficiaries in our population were underpaid because their benefits were not adjusted when they attained FRA and their disability benefits were converted to retirement benefits. As of February 2008, an average of about 7 years had elapsed since the beneficiaries attained FRA. The following table summarizes the number of years the beneficiaries in our population had been potentially underpaid.
Period Potentially Underpaid Beneficiaries
Up to 3 years 3,725 39%
4 to 6 years 1,295 13%
7 to 9 years 1,885 20%
10 to 12 years 1,286 13%
13 to 15 years 651 7%
16 to 18 years 362 4%
19 to 21 years 171 2%
Over 21 years 228 2%
Total 9,603 100%
Average Period 7 Years
Median Period 6 Years
Matters for Consideration
The benefits to the widows in our population were not properly adjusted when they attained FRA and, as a result, they were not paid all of the benefits due them. Although the Agency detected some of these cases before our review and adjusted the benefit amounts, most of the cases went unresolved.
We estimate about 8,403 widows were owed approximately $95 million through February 2008. In addition, we estimate these widows will continue to be underpaid about $211 million in the future unless SSA takes action to correct the benefits paid to them.
APPENDIX A - Scope, Methodology and Sample Results
APPENDIX B - OIG Contacts and Staff Acknowledgments
Scope, Methodology and Sample Results
To accomplish our objective, we:
Reviewed applicable sections of the Social Security Act and Social Security
Administration (SSA) regulations, policies and procedures.
Identified a file of 9,603 individuals receiving benefits in January 2008 whose benefits appeared to have not been properly adjusted when they attained full retirement age (FRA) and their disability benefits were converted to retirement benefits.
Randomly sampled 200 beneficiaries from the population for detailed analysis. For each sampled beneficiary, we reviewed the electronic benefit records on SSA's systems.
If benefits should have been adjusted at FRA but were not, we calculated the amount of benefits that should have been paid between the beneficiary's FRA and the earlier of February 2008 or his/her date of death.
If the beneficiary was receiving benefits, we multiplied the last monthly underpayment amount by the number of months the beneficiary was expected to live beyond February 2008, to estimate the amount of additional benefits that will be owed in the future.
We performed our review in March and April 2008 in Boston, Massachusetts. We tested the data obtained for our review and determined them to be sufficiently reliable to meet our objective. We conducted our review in accordance with the President's Council on Integrity and Efficiency's Quality Standards for Inspections.
POPULATION AND SAMPLE INFORMATION
Table 1: Population by Program Service Center.Responsible Program Service Center
Number of Beneficiaries
Northeastern Program Service Center 1,407
Mid-Atlantic Program Service Center 1,486
Southeastern Program Service Center 1,952
Great Lakes Program Service Center 1,579
Western Program Service Center 1,710
Mid-America Program Service Center 1,391
Office of International Operations 78
Table 2: Population by State.
State Count State Count
Alabama 218 Montana 50
Alaska 13 Nebraska 34
Arizona 175 Nevada 73
Arkansas 134 New Hampshire 59
California 905 New Jersey 301
Colorado 118 New Mexico 47
Connecticut 97 New York 554
Delaware 30 North Carolina 348
District of Columbia 11 North Dakota 29
Florida 561 Ohio 452
Georgia 284 Oklahoma 140
Hawaii 29 Oregon 168
Idaho 46 Pennsylvania 503
Illinois 381 Puerto Rico 175
Indiana 173 Rhode Island 56
Iowa 80 South Carolina 215
Kansas 75 South Dakota 27
Kentucky 199 Tennessee 255
Louisiana 114 Texas 428
Maine 64 Utah 54
Maryland 108 Vermont 19
Massachusetts 194 Virginia 208
Michigan 347 Washington 179
Minnesota 97 West Virginia 138
Mississippi 143 Wisconsin 190
Missouri 209 Wyoming 18
Outside the United States 78
Table 3: Population and sample size.
Population Size 9,603
Sample Size 200
Table 4: Beneficiaries who were underpaid because their benefits were not properly
adjusted when disability ended and retirement benefits were awarded at full
Number of widows underpaid through February 2008 Additional benefits owed through February 2008 Estimated additional benefits to be owed after February 2008
Identified in Sample 175 $1,979,828 $4,401,242
Point Estimate 8,403 $95,061,451 $211,325,654
Projection Lower Limit 7,974 $83,416,734 $188,789,798
Projection Upper Limit 8,750 $106,706,168 $233,861,510
Note: All projections are at the 90-percent confidence level.
OIG Contacts and Staff Acknowledgments
Judith Oliveira, Director, Boston Audit Division, 617-565-1765
Jeffrey Brown, Audit Manager, 617-565-1814
In addition to those named above:
Chad Burns, Auditor
Kevin Joyce, IT Specialist
Katie Toli, Auditor
David York, Program Analyst
For additional copies of this report, please visit our web site at www.socialsecurity.gov/oig
or contact the Office of the Inspector General's Public Affairs Specialist at
(410) 965-3218. Refer to Common Identification Number A-01-08-28116.
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