ADMINISTRATIVE INTEGRITY OF THE SOCIAL

SECURITY PROGRAM

MONDAY, APRIL 9, 1979

UNITED STATES SENATE,

SUBCOMMITTEE ON SOCIAL SECURITY,

COMMITTEE ON FINANCE,

Washington, D.C.

The subcommittee met, pursuant to notice, in room 2221 Dirksen Senate Office Building, Hon. Gaylord Nelson (chairman of the subcommittee) presiding.

Present: Senators Nelson and Wallop.

[The press release announcing this hearing and the opening statement of Senator Dole follow:]

[Press Release Mar. 23, 1979]

FINANCE SUBCOMMITTEE ON SOCIAL SECURITY SETS HEARING ON ADMINISTRATIVE INTEGRITY OF SOCIAL SECURITY PROGRAM

Senator Gaylord Nelson (D., Wis.), Chairman of the Senate Finance Subcommittee on Social Security today announced that a hearing will be held on Monday, April 9, 1979, on the subject of the administrative integrity of programs administered by the Social Security Administration (SSA).

The hearing will examine the management of the social security programs and the question of what improvements in this area-legislative or administrative— may be necessary.

The hearing will begin at 10 a.m. and will be held in room 2221, Dirksen Senate Office Building.

Senator Nelson noted that the social security program provides a wide range of benefits to some 35 million retired and disabled workers, dependents, and survivors. This year 113 million persons will make social security payroll tax contributions. Social security benefits are payable in the event of the worker's retirement, disability, or death and are based on the worker's individual earnings history.

Thus, in addition to administering benefit payments totaling some $110 billion per year, the Social Security Administration is charged with maintaining an accurate record of the annual earnings of persons who are now working or have in the past worked in jobs covered by social security.

Senator Nelson noted that, in view of the size and complexity of this program, there is a continuing need for SSA to carefully administer and review the program in order to avoid error and abuse which could result in losses of substantial sums of money. He also stated that, while it may not be possible to attain completely error-free administration of this or any other program, the importance of the social security program to the economic security of nearly all Americans requires that the Congress and the Administration attach the highest importance to reaching the maximum feasible level of program integrity. For these reasons, this hearing will examine the adequacy of existing efforts and consider the need for any legislative or administrative changes to bolster those efforts.

Witnesses.-Senator Nelson stated that the following witnesses have been scheduled to testify at the hearing: Hon. Stanford G. Ross, Commissioner of Social Security; and Gregory Ahart, Director, Human Resources Division, General Accounting Office.

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Written testimony.—The Chairman stated that the Subcommittee would be pleased to receive written testimony from those persons or organizations who wish to submit statements for the record. Statements submitted for inclusion in the record should be mailed with five copies by Monday, April 16, 1979, to Michael Stern, Staff Director, Committee on Finance, Room 2227 Dirksen Senate Office Building, Washington, D.C. 20510.

OPENING STATEMENT OF SENATOR DOLE

Mr. Chairman, the hearings today before the Subcommittee on Social Security represent an important exercise of the Finance Committee's oversight function with respect to the vast Social Security Administration. In my view, this Committee's continuing oversight of the Social Security system plays a vital role in assuring that the taxpayer's money is not being squandered and in assuring that the 39 million recipients of Social Security benefits are treated fairly.

Mr. Chairman, the American people are keenly interested in the management of their Social Security system. They are affected in a direct and personal way when the Social Security Administration delays benefit payments or makes some error in benefit computation. Virtually every Member of Congress has heard horror stories from constituents about their dealings with the Social Security Administration. Even though such problems may arise in only a tiny fraction of the staggering number of transactions handled by the Social Security Administration each year, we must constantly strive to improve the level of performance. An elderly or disabled person who has experienced the frustration of trying to correct an error made by the Social Security Administration may find little comfort in favorable statistics or error-free transactions.

Public confidence in the Social Security system is profoundly affected by reports of waste and mismanagement in the Social Security system. A number of Kansans have written me to convey their concern about the $69 billion in wages that the Social Security Administraiion has been unable to credit to the proper employee accounts because of identification problems. Even more disturbing are the reports that more than $2 billion a year may be lost by the Social Security Administration as a result of waste, administrative errors or mismanagement. Such stories probably directly contribute to the growing concern among Americans that they will never get benefits from Social Security.

In my view we must move decisively to restore public confidence in the viability and management of the Social Security system.

In that regard, it would seem far preferable to achieve cost savings through better management than to rely on cutbacks in benefits to accomplish budgetary objectives.

Mr. Chairman, I hope these hearings will reveal exactly how much is being misspent as a result of fraud, administrative error or mismanagement in Social Security programs. I also hope these hearings will shed some light on the specific steps that are or can be taken to address identified abuses and to achieve more efficient administration of the Social Security system.

Senator NELSON. The hearing will come to order.

The Finance Social Security Subcommittee is holding this hearing today to examine the administrative integrity of the social security programs. The subcommittee will focus on current management practices of the social security program and the questions of what improvements in this area-legislative or administrative-may be necessary, if any.

The social security old age survivors and disability insurance programs currently provide a wide range of benefits to some 35 million retired and disabled workers, dependents, and survivors. This year, 113 million persons will make social security payroll contributions. These contributions finance social security benefits which are payable in the event of a worker's retirement, disability, or death, and are based on a worker's individual earnings history.

During 1979, the Social Security Administration will administer social security benefit payments totaling over $110 billion. In addition, the SSA is responsible for maintaining accurate earnings records for

persons covered by the system, insuring that adequate quality control measures are functioning properly to minimize waste and error, and for collecting overpayments as well as for disposing of thousands of disputed claims for benefits.

In recent months, some allegations have been made by various individuals and organizations charging that hundreds of millions of dollars in waste, error, and fraud exist in the various social security programs. This has resulted in reports that the social security system is not in a stable condition and that future benefits may be in jeopardy. The Los Angeles Times, for example-and many other newspapers across the country-recently reported that more than $2 billion was wasted and lost by the SSA annually through administrative errors and poor management.

The General Accounting Office has stated that no one really knows the extent of waste and error in the social security programs because SSA does not have quality assurance system in place. GAO has indicated to my staff that overpayments in retirement benefits alone amount to at least $800 million a year.

A recent United Auto Workers' publication reported that the social security program is in a perilous situation and that the future stability of the trust funds is in question.

And, an Esquire magazine article asserted not long ago that Social Security was ripping off American workers, especially younger workers who are just entering full-time work.

These allegations are all too familiar to Members of Congress. Each day constituents write scores of letters to their Representatives in Congress, complaining about the increased social security taxes, disability benefits being paid to persons who are not in need of them, and about press reports which question the ability of the social security trust funds to meet future obligations.

In my judgment, social security is the most important and successful social program ever enacted by the Congress. The allegations of doom for social security simply cannot become a self-fulfilling prophecy. Congress has the responsibility to insure the program's fiscal stability as well as to insure that the program is properly managed. This is a responsibility that Congress has assumed in the past and will continue to fulfill in the future.

In 1977, the Congress enacted legislation to increase social security payroll taxes by $227 billion in the 10-year period from 1978 to 1987. No one-neither the American public nor any Member of Congresswanted to raise social security taxes, but this action was necessary to restore the program to a sound financial basis. This action demonstrated the commitment of the administration and Congress to the integrity of the social security programs. But it also created a situation in which the management and stability of social security has come under more intense scrutiny than ever before.

The purpose of this hearing is to determine what the facts are with respect to allegations that have been made about the system's management and stability, and to set the record straight on the current level of waste and error in the program, as well as the efforts being made to resolve whatever problems may exist.

The first witness this morning is Stanford G. Ross, Commissioner of the Social Security Administration.

Senator WALLOP. Mr. Chairman. I have a brief opening statement and would obviously like to associate myself with your remarks as delivered and add my welcome to Mr. Ross and Mr. Short, and their colleagues.

I have a special interest in the subject matter under discussion because last Thursday Senator Smith and I introduced what was labeled S. 908, the Social Security Fair Reporting Act of 1979. The primary thrust of the legislation is to provide a direct accounting on a yearly basis to wage earners throughout the country who have made contributions into the social security system.

The Social Security Administration is currently responsible for maintaining an accurate record of the wage and social security tax history of all people who have made contributions into the system. Yet, we were told that approximately $69 billion of unposted earnings have accumulated in a suspense account since 1937, and we know that from 5 to 6 percent of the data that is being reported contains errors, and still another 1 percent is reported without names or social security numbers. It would seem that something must be done to increase the level of accuracy in the social security program. S. 908 will have the desirable effect of reducing error and thereby increasing accuracy of the data that the Social Security Administration is responsible for maintaining.

The bill would require SSA to prepare "W-2-like" forms for mailing to all persons who have worked in jobs covered by social security. The annual report would set forth the amount of wages and selfemployment income for which the individual has been credited that year, and the amount of social security tax imposed and actually paid on those wages by the individual and his employers.

It would also state the total amount of wages and self-employment income for which the indivudual has been credited throughout his working career and the total social security taxes imposed and collected upon those wages.

Additionally, the report would state the surplus-or deficit-in the social security trust fund and will estimate the projected status of the funds for the next 2 years.

Each individual will also be informed of the number of quarters of coverage credited to his account and the number required for social security retirement benefits, survivor insurance benefits, and disability insurance benefits.

In the event an individual has questions, needs additional information, or wishes to correct his record, a toll-free telephone number would be maintained by the administration to answer these questions promptly and take necessary remedial action expeditiously. It would be most useful if our witnesses this morning would be able to comment on this proposal as they comment on the other questions that are before the committee, especially with respect to the extent to which such annual reports would assist in identifying and thereby correcting accounting errors in individual accounts; the mechanics of implementing the proposal; the feasibility of sending an annual accounting to each contributor; the cost of the proposal-would the cost decrease once the system was established and, if so, by what amount; the prospects for savings to offset the costs; and any alternative ways an accounting could be made to each individual about the status of his account.