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period results in an overpayment. Beginning this month, SSA will suspend benefits if the beneficiary does not respond to the notification that the trial work period has elapsed, assuming it has been successful.

Third, to address overpayments in the student benefit program we have initiated a systematic certification process that will require students to provide semiannual verification of full-time school attendance. Further, we have begun plans to check our student records against those kept by the Basic Education Opportunity Grant (BEOG) program for additional information that might alter a student's entitlement to social security benefits such as only part-time enrollment status or marriage.

Fourth, we will begin to contact young widows receiving benefits to determine if they have remarried. Perhaps as many as 3 percent of these beneficiaries, whose benefits by law should be terminated upon remarriage, neglect to inform SSA of changes in status. We believe that by periodically recontacting young widows and widowers, we will increase the likelihood of prompt reports of remarriage which will lead to a reduction in overpayments to these beneficiaries. The fifth area involves cases when overpaid beneficiaries go off the rolls, receiving no further benefit checks from which the overpayments could be recovered. In these cases SSA generally arranges a payment plan with which the former beneficiary is expected to comply without billing or regular reminder. We are in the process of modifying our overpayment collection process to provide a centralized automated monthly billing system-in place of our current manual process controlled at the district office level-for situations which involve collection of overpayments by installments. We believe that by regularly billing former beneficiaries who have agreed to return overpayments in installments, we will improve recovery.

Sixth, since a majority of payment errors occur because recipients forget or are unaware of their responsibilities for reporting changes in circumstances, we believe we can prevent a large share of payment errors by better educating beneficiaries about reporting requirements. We are issuing new instructions to SSA employees who have personal contact with beneficiaries. These instructions emphasize the importance of informing beneficiaries about the requirements to report work activity and other circumstances that may change beneficiary status, particularly:

Disabled beneficiaries who return to work;

Student beneficiaries who lose student status;

Beneficiaries whose earnings may exceed the limitation;

Young widowed beneficiaries who remarry; and

Wives and widows who may be entitled to higher benefits when they reach age 65.

In addition to these initiatives already underway, we will be proposing two legislative changes which would assist us in improving our record on payment accuracy in the RSDI programs. Our continuing review of the structure and operation of these programs will undoubtedly produce a number of other legislative recommendations in the future.

First, we are recommending improved integration between the social security disability insurance program and the SSI program to eliminate a problem that results when a retroactive social security payment is made for months in which SSI benefits have already been paid. Under present law, we cannot retroactively adjust the SSI payment except in the quarter during which the retroactive social security benefit is paid. A legislative change will make it possible to recover overpayments beyond the current quarter.

Second, we are proposing a modification in the earnings test that would decrease the incidence of overpayments in situations when beneficiaries are on the rolls for only a portion of the year. Under present law, properly paid benefits can become overpayment later in the year if a beneficiary is terminated and subsequently has substantial earnings. An example is the student who graduates and goes to work. The legislative change would apply a monthly earnings test only to that part of the year for which the person is eligible to receive benefits.

Secretary Califano and I recognize we have a major responsibility to taxpayers who finance our programs, and to program beneficiaries, most of whom rely on monthly payments from SSA as their principal source of income, to pay the appropriate person the right amount on time. We are committed to continuing review and improvement of SSA programs and the way they are administered. Inaccurate payments and management waste are intolerable and only serve to undermine public support for our programs and disrupt beneficaries.

We believe it is absolutely vital to the future of income support in this country to demonstrate that social programs for the vulnerable of our society can be run

efficiently. Compassion for the people served by our programs will be shown by efficient management that preserves the integrity of the programs and earns support from the American people as a whole. I am confident Mr. Chairman, that we share the same goals for program integrity and that we can continue to work together to improve our programs and ensure their support from the American people.



Question. How many social security checks remain unnegotiated in a year's time? What is the cumulative total of social security checks which have never been cashed? What is the dollar value of these checks? If a limitation were placed on the length of time a social security check could be cashed, say six months for example, what would be the dollar value of the immediate savings the trust funds would realize? What would be the dollar value of the savings which could be expected each year in the future? This limitation would not, of course, affect entitlement rights of any beneficiary to his or her benefits.

Answer. Based on a statistical sample, SSA estimates that approximately 100,000 social security benefit checks have remained unnegotiated for at least 3 years in each of the last few years. It is necessary to estimate by statistical sample, because the system used by the Treasury Department cannot readily provide specific information on count and amount values for unnegotiated social security checks. We also estimate that 1.2 million social security benefit checks that are at least 3 years old will remain unnegotiated at the end of 1979; the dollar value of these checks is approximately $181 million. At the end of 1980, the additional value of checks outstanding for over 3 years would be about $20 million. This amount would increase each year since the number and amount of checks issued increase each year.

It would be difficult to estimate the savings that would result from a 6-month limitation on the life of a check since many people hold their checks 6 months or longer. If the checks were voided after 6 months, many beneficiaries would simply ask for their checks to be reissued.


Question. The President recently proposed the elimination of the $255 lump-sum death benefit. Under the current program, the primary means by which the social security program is notified of the death of a social security beneficiary is by way of an informal system under which local funeral directors notify the local social security office of a death in order to receive payment of the lump-sum death benefit as an offset to funeral expenses. What impact would elimination of the lump-sum death benefit have on social security program costs, in light of the connection which exists between the benefits and notification of a death?

Answer. It is true that funeral directors have been helpful in reporting the deaths of social security beneficiaries and in referring persons who might be eligible for survivor benefits to SSA offices. However, we do not believe that there will be a significant increase in the number of unreported deaths as a result of eliminating the lump-sum death payment.

In addition to notifications by funeral directors, SSA learns of beneficiary deaths through reports by relatives and prospective beneficiaries and through returned checks. (When checks are not deliverable because of the beneficiary's death, the Post Office returns them to Treasury, which in turn notifies SSA).

SSA is exploring other means of learning about beneficiary deaths. One possibility is using automated records of death which State Departments of Vital Statistics will shortly be providing to the Public Health Service. These records would be useful for verification, but they would not be available sufficiently timely that they could be used as a substitute for other reports.


Question. What system exists for the Treasury Department to notify the ocial Security Administration if a beneficiary fails to cash a check or checks: Answer. There is, at present, no system which can tell us the numbers or the mounts of the unnegotiated checks. Under present law, unnegotiated social security checks remain an obligation of the trust funds even though such checks have not been negotiated and, in fact, may never be negotiated. These unnegotiated benefit check amounts then go to the general revenue funds of the Treasury.

HEW is exploring the idea of a legislative change with Treasury and OMB which would credit the OASDI trust funds for amounts of benefit checks that remain unnegotiated for a lengthy period of time.


Question. Do you know whether the Los Angeles Times is correct in its allegations that there is over $2 billion wasted or lost annually by the Social Security Administration? How accurate is this figure?

Answer. The figures given by the Los Angeles Times are misleading. The figures in the article are a mix of annual figures and cumulative figures, and include as well some amounts which the courts have ruled must be paid as a matter of due process to the beneficiaries (e.g., benefits that are paid to an SSI beneficiary pending appeal of an agency decision that disability has terminated). A copy of the SSA response to the Los Angeles Times is attached.

The quality data we presently rely on tell us, basically, how good our claims process determinations are, but the data do not tell us the level of payment error. For this reason, we have developed a quality assurance system which will determine the rate of continuing payment error in the retirement and survivors and disability programs. The quality assurance system will help to identify and prevent cases of error and will, for the first time, give us an accurate statement of the payment error rate. In the supplemental security income and Aid to Families with Dependent Children programs, similar quality assurance systems have helped us to greatly reduce payment errors over the last few years.


To the EDITOR,

Washington, D.C., March 23, 1979.

The Los Angeles Times,
Times Mirror Square, Los Angeles, Calif.

DEAR SIR: Your March 12 article, "Social Security Annual Waste Put at $2 Billion," was a confusing and essentially misleading story. It mixed annual and cumulative figures. For example, the article cited a four year cumulative figurefor overpayments in the Supplemental Security Income (SSI) program, and then. apparently used that figure to reach a $2 billion annual total. It confused legislatively mandated procedures and administrative shortcomings. For example, rounding off benefits to the next highest ten cents is not an administrative book-keeping procedure since it is mandated by law.

Certainly better management can lead to less waste. My first effort when I became Commissioner six months ago was to look at the way social security was administered and to initiate improvements. Thus, I reorganized the agency to emphasize key functions and directed a number of changes to tighten program operations.

There are a few basic points which should be brought to the public's attention. First, the agency basically has a good record and does its work effectively. Nearly 35 million people receive a social security check each month and 4.2 million receive supplemental security income payments. Nearly all of these checks are delivered on time and in the right amounts to the right persons. Second, the amount of errors we are dealing with is relatively small and the sources are complex. For example, the incorrect payments often result from a beneficiary not advising us of changes which affect eligibility or payment amount. Such errors may relate to the complexity of the program without individual or agency fault.

To take another example, the article talks about error rates, but it does not mention recovery efforts. Overpaid social security and supplemental security income payments are not necessarily lost when the checks have been endorsed and the money spent. Overpayments can generally be recovered by adjusting current or future benefits. In the Old-Age, Survivors, and Disability Insurance program, in particular, the great bulk of the total overpaid amount is recovered in this fashion.

Finally, I would like to assure your readers that the Social Security Administration is working hard to correct program deficiencies and that they can be confident that we are doing everything possible to make certain that their social security contributions are being disbursed as accurately and effectively as possible.




Question. In calculating the alleged $2 billion figure, the Los Angeles Times included the costs of rounding social security benefits to the nearest higher dime. Is it correct to include this in a figure of administrative waste as a practice which is determined administratively? Are the Social Security Administration computers equipped to handle exact amounts down to the nearest cent? How much would be saved if Social Security recorded exact earnings and calculated exact benefits to the nearest cent?

Answer. Under present law, we round social security benefits to the next higher 10 cents at each step in the calculation of the monthly benefit amount. This results in slightly higher benefits than would otherwise occur. It is incorrect to classify these additional amounts as administrative waste because current provisions of the Social Security Act require that the benefits be rounded in this manner. We have recommended legislation to change the Social Security Act so that we could round the benefit amounts at each step of the calculation to the nearest dollar, rather than to the next higher 10 cents. Our computers could certainly be programed to round benefits to the nearest cent. We think the dollar rounding provision would be preferable, though, since it would greatly facilitate those benefit calculations that are not made by computer. The savings under the dollar rounding proposal are equivalent to the savings that would be generated by rounding to the nearest cent.

Assuming that rounding to the nearest dollar would apply to benefits of all new beneficiaries effective January 1980, and to all current beneficiaries beginning with the June 1980 benefit increase, the OASDI program saving would be:

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The long-range saving would be 0.01 percent of the taxable payroll.


Question. How many replacement checks are issued each year? How many of these replacement checks turn out to be improperly claimed?

Answer. In the OASDI programs, about 160,000 replacement checks are issued each year, or between 13,000 and 14,000 each month. These checks are generally issued on the basis of an allegation that a check was either lost, stolen, or never received. In the 20 percent of these cases, the replacement checks are improperly claimed; that is, the checks were in fact received. Most of the overpayments caused by people receiving a second check are recovered through reductions in future benefits.


Question. What is the error rate for student social security benefit payments? What is the dollar value of this error rate? What is the main cause of error in student social security benefits?

Answer. The Social Security Administration pays $1.9 billion a year to some 900,000 students. Nearly complete results from our latest analysis show that there are as much as $250 million in annual overpayments in the student program. The main cause of error is inadequate reporting by beneficiaries of their student status and lack of good monitoring systems. We have taken a number of steps to reduce errors in student benefits, including a systematic certification process that will require semiannual verification of full-time school attendance.


Question. How many duplicate social security checks are issued to students each year? How many of these duplicate payments are recovered?

Answer. A duplicate payment occurs when a beneficiary receives more than one check each month based on two different earnings records. For example, if a person who is receiving widow's benefits files for retirement benefits and does not report the other benefit, a duplicate payment may occur, although we have safeguards that make this possibility rare.

We do not keep records of duplicate payments by benefit category (such as student benefit) and therefore cannot tell you how many student duplicate payments are made. However, there are very few duplicate payments for all benefit categories; in 1977, the number was 943.


Question. How many earnings records are the Social Security Administration unable to assign to the earnings history of the person whose actual earnings they are? At the end of each year what is the value of earnings which remain unassigned or "posted," as the Social Security Administration refers to it.

Answer. "Unposted" earnings items are reports of wages that are reported to SSA by employers with incorrect or incomplete identifying information. Thus, we may not be able immediately to credit the wages to the record of the person who earned them, and these earnings credits are held in suspense until we can identify them. A relatively small percentage of earnings items remain unposted: 99.3 percent of all earnings items received for the years 1937-1977 have been correctly posted.

The amount of unposted earnings for any one year is not constant, since it continues to decrease as earnings discrepancies are resolved; however, for the past 10 years, the average yearly unidentified earnings were $3.3 billion.

The $69 billion amount that was reported in the press as being the total amount for 1937-1977 that was as yet unposted provides a good example of this dynamic process. Since March 1979, when that figure was reported, we have reduced those unposted earnings by more than $3 billion.

Beginning with the 1978 tax year, employers report wages on a yearly rather than quarterly basis, and this should reduce part of the problem of unposted earnings. Employees will be able to check one form, the W-2, and determine if their earnings have been correctly reported for the year. In addition, we are conducting public information campaigns and improving our computer processes in order to further reduce unidentified earnings. (Additional information is provided. in the attached statement.)



Question. How many disability beneficiaries are receiving benefits they are not entitled to on a disability basis?

Answer. We will be able to supply this information once the quality assurance system for the disability insurance program is fully implemented, but we cannot provide the information at the present. The new system will give us the potential to pinpoint program errors and assist us in developing appropriate actions to correct them. Similar quality assurance systems were installed previously for the SSI and AFDC programs, and facilitated dramatic improvements.

What we now use to measure performance is a system that tells us the accuracy rates of the State disability determination units that make the initial determinations on disability claims. We currently measure State performance against an accuracy goal of 90 percent. As of December 1978, the national accuracy rate was 93 percent, and 46 of the individual States met or exceeded the 90 percent goal. This was a significant improvement from December 1977, when the national accuracy rate achieved was just 86 percent.

The accuracy rate for initial determinations, though, is higher than 93 percent, because the performance system measures some errors that do not change the decision. Only 2 to 3 percent of State allowed disability claims which review are reversed by the Social Security Administration.


Question. If the Social Security Administration required an annual review of each disability beneficiary in an effort to determine whether the medical criteria which establish what physical ailments are of sufficient severity to be considered a disability are still being met, what would the savings be due to these determinations?

Answer. If fully implemented, assuming we performed a full review of every disabled worker every year, the reduction in benefit payments would be more than offset by the administrative cost.

An annual review of all 3 million disability cases is not cost effective because half of all disability beneficiaries are permanently disabled and reviewing such

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