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entitled 'Disability Insurance: Work Activity Indicates Certain Social 
Security Disability Insurance Payments Were Potentially Improper' 
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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

August 2013: 

Disability Insurance: 

Work Activity Indicates Certain Social Security Disability Insurance 
Payments Were Potentially Improper: 

GAO-13-635: 

GAO Highlights: 

Highlights of GAO-13-635, a report to congressional requesters. 

Why GAO Did This Study: 

SSA’s DI program is the nation’s largest cash assistance program for 
workers with disabilities. Though program rules allow limited work 
activity, some work activity indicates beneficiaries are not disabled 
and therefore not entitled to DI benefits. Consequently, SSA might 
overpay beneficiaries if the agency does not detect disqualifying work 
activity and suspend benefits appropriately. 

GAO was asked to study potential DI overpayments. GAO examined the 
extent to which (1) the NDNH indicates that individuals received 
potential DI overpayments; and (2) SSA’s enforcement operation detects 
potentially disqualifying work activity during the waiting period. GAO 
drew random, generalizable samples of individuals from those whose 
earnings on the NDNH were beyond program limits and compared wages 
from their employers to DI program data to identify potential 
overpayments. To illustrate the circumstances in which SSA made 
potential DI overpayments, GAO reviewed case files for a 
nongeneralizable selection of six individuals-—three who worked during 
their waiting period, and three who received potential overpayments 
for at least 3 years. 

What GAO Found: 

On the basis of analyzing Social Security Administration (SSA) data on 
individuals who were Disability Insurance (DI) beneficiaries as of 
December 2010 and earnings data from the National Directory of New 
Hires (NDNH), GAO estimates that SSA made $1.29 billion in potential 
cash benefit overpayments to about 36,000 individuals as of January 
2013. The exact number of individuals who received improper disability 
payments and the exact amount of improper payments made to those 
individuals cannot be determined without detailed case investigations 
by SSA. These DI beneficiaries represent an estimated 0.4 percent of 
all primary DI beneficiaries as of December 2010. Using a different 
methodology that includes additional causes of overpayments not 
considered in GAO’s analysis, SSA estimated its DI overpayments in 
fiscal year 2011 were $1.62 billion, or 1.27 percent of all DI 
benefits in that fiscal year. GAO estimated DI program overpayments on 
the basis of work activity performed by two populations of 
individuals. The first population received potential overpayments due 
to work activity during the DI program’s mandatory 5-month waiting 
period—a statutory program requirement to help ensure that SSA does 
not pay benefits to individuals who do not have long-term 
disabilities. Prior to receiving benefits, individuals must complete a 
5-month waiting period, in which the individual cannot exceed a 
certain level of earnings, known as substantial gainful activity, 
during any month in order to be eligible for DI benefits. Earnings 
that exceed program limits during the waiting period indicate that 
individuals might not have long-term disabilities. The second 
population received potential overpayments due to work activity beyond 
the program’s trial work period—-the trial work period consists of up 
to 9 months in which a DI beneficiary may return to work without 
affecting her or his benefits. However, beneficiaries whose earnings 
consistently exceed program limits after completing a trial work 
period are generally no longer entitled to benefits. 

SSA uses its enforcement operation to generate alerts for potentially 
disqualifying earnings, but the agency’s enforcement operation does 
not generate alerts for earnings that occur in all months of the 
waiting period, which allows potentially disqualifying work activity 
to remain undetected. Specifically, GAO found that SSA’s enforcement 
operation will not generate an alert for earnings during the waiting 
period if the earnings occur in a year when the beneficiary does not 
receive a benefit payment. For example, in two of the nongeneralizable 
case studies GAO reviewed, SSA’s enforcement operation did not 
generate an alert for potentially disqualifying work activity during 
the waiting period because these individuals’ waiting periods occurred 
in the year prior to their first benefit payment. GAO obtained 
earnings records from these individuals’ employers that show they 
worked continually both during and after their waiting periods at a 
level of work that would normally result in a denial of benefits. GAO 
also reviewed information for individuals who worked beyond their 
trial work period and found that SSA had identified and established 
overpayments for these individuals. SSA officials stated that 
modifying its enforcement operation could be costly, but the agency 
has not assessed the costs of doing so. To the extent that it is cost-
effective and feasible, establishing a mechanism to detect earnings 
during all months of the waiting period would strengthen SSA’s 
enforcement operation. 

What GAO Recommends: 

GAO recommends that SSA assess the costs and feasibility of 
establishing a mechanism to detect potentially disqualifying earnings 
during all months of the waiting period and implement the mechanism as 
appropriate. SSA concurred, but raised concerns about GAO’s estimates. 
GAO believes its estimates are valid as discussed in this report. 

View [hyperlink, http://www.gao.gov/products/GAO-13-635]. For more 
information, contact Steve Lord at (202) 512-6722 or lords@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

SSA Made $1.29 Billion in Benefit Payments That Were Potentially 
Improper as of January 2013, Mostly as a Result of Work Activity 
during the 5-Month Waiting Period: 

SSA Is Assessing Opportunities to Better Identify Potential Improper 
Payments, but Existing Controls Allow Potentially Disqualifying Work 
Activity to Remain Undetected: 

Conclusions: 

Recommendation for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Debt Owed to SSA from Overpayment of DI Benefits Is 
Increasing: 

Appendix II: Objectives, Scope, and Methodology: 

The NDNH Database: 

Wait Period Overpayments: 

Wait Period Overpayment Examples: 

Trial Work Period Overpayments: 

Trial Work Period Overpayment Examples: 

Data Reliability Assessments: 

Appendix III: Monthly Earnings That Indicate a Trial Work Period or 
Substantial Gainful Activity: 

Appendix IV: Comments from the Social Security Administration: 

Tables: 

Table 1: Monthly Earnings That Trigger a Trial Work Period, 2001-2012: 

Table 2: Monthly Earnings That Demonstrate Substantial Gainful 
Activity (SGA), 2001-2012: 

Figures: 

Figure 1: Substantial Earnings in the Waiting Period May Result in 
Disability Insurance (DI) Overpayments: 

Figure 2: Substantial Earnings beyond the Trial Work Period and Grace 
Period Make Benefits Potentially Improper: 

Figure 3: Disability Insurance (DI) Beneficiaries Estimated to Have 
Received Potential Overpayments: 

Figure 4: Balance of Disability Insurance (DI) Overpayment Debt 
Detected by the Social Security Administration (SSA), Fiscal Years 
2008-2012: 

Figure 5: The 15 Months from July 2009 to September 2010 Is the Period 
for Which GAO Had Both Disability Insurance Data and Earnings Data: 

Abbreviations: 

AERO: Automatic Earnings Reappraisal Operation: 

CDR: continuing disability review: 

DI: Disability Insurance: 

enforcement operation: Continuing Disability Review Enforcement 
Operation: 

MBR: Master Beneficiary Record: 

NDNH: National Directory of New Hires: 

OCSE: Office of Child Support Enforcement: 

POMS: Program Operations Manual System: 

SGA: substantial gainful activity: 

SSA: Social Security Administration: 

SSI: Supplemental Security Income: 

SSN: Social Security Number: 

TWP: trial work period: 

[End of section] 

August 15, 2013: 

The Honorable Thomas R. Carper: 
Chairman: 
The Honorable Tom Coburn: 
Ranking Member: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Carl Levin: 
Chairman: 
Permanent Subcommittee on Investigations: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Claire McCaskill: 
Chairman: 
Subcommittee on Financial and Contracting Oversight: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Social Security Administration's (SSA) Disability Insurance (DI) 
program is the nation's largest cash assistance program for workers 
with disabilities. In fiscal year 2011, more than 10 million DI 
beneficiaries received cash benefits exceeding $128 billion, and the 
program is poised to grow further as the baby-boom generation ages. 
[Footnote 1] Total government spending on DI beneficiaries is 
substantially higher when including the costs of Medicare benefits, 
which cost about $80 billion in 2011 for DI beneficiaries. SSA 
administers the DI program and is responsible for establishing 
national standards for disability determinations, reviewing DI 
applications to verify work history and income rules, and periodically 
evaluating beneficiary impairments to determine whether beneficiaries 
remain entitled to benefits, among other things. SSA's process for 
approving benefits is complex and involves an evaluation of, among 
other factors, medical evidence establishing a disabling condition, 
the availability of possibly suitable employment, and the severity and 
length of disability. Cash benefits are payable monthly, as long as 
the worker remains eligible for benefits, until the worker reaches 
full retirement age or dies. DI benefits are financed by payroll taxes 
paid into the Federal Disability Insurance Trust Fund by covered 
workers and their employers, on the basis of each worker's earnings 
history. The Social Security Board of Trustees projects that the DI 
trust fund will be exhausted in 2016 and notes that changes designed 
to improve the financial status of the DI program are needed soon. 
[Footnote 2] 

Individuals must meet certain statutory program requirements to 
receive DI benefits, including the completion of a 5-month waiting 
period prior to receiving benefits.[Footnote 3] According to SSA, the 
5-month waiting period ensures that SSA does not pay benefits to 
persons who do not have long-term disabilities because this period is 
long enough to permit most temporary disabilities to be corrected or 
for individuals to show definite signs of probable recovery. During 
this 5-month waiting period, the individual cannot have earnings that 
exceed about $1,000 per month--a level of earnings called substantial 
gainful activity (SGA).[Footnote 4] If an individual has substantial 
earnings from work during any month of the waiting period, the 
individual is considered not disabled and therefore ineligible for DI 
benefits, and any payments that SSA makes to these beneficiaries could 
be improper.[Footnote 5] Once approved for benefits, DI beneficiaries 
may return to work for a limited amount of time without affecting 
their benefits. However, beneficiaries who consistently have earnings 
above SGA after completing a trial work period, which may be up to 9 
consecutive or nonconsecutive months, are generally no longer entitled 
to benefits, and any benefit payments they receive after a subsequent 
3-month grace period could be improper. Medical and work-related 
overpayments detected by SSA in the DI program grew from about $860 
million in fiscal year 2001 to about $1.4 billion in fiscal year 
2010.[Footnote 6] The true extent of overpayments is currently 
unknown, but our prior work suggests that most overpayments are 
related to beneficiaries who worked while receiving benefits.[Footnote 
7] 

This is the second in a series of reports that respond to your request 
that we examine employment-related databases to determine whether 
individuals are receiving SSA disability payments that were 
potentially improper. Our first report addressed overlapping 
disability and unemployment benefits.[Footnote 8] This report: (1) 
estimates the extent to which individuals received DI benefit payments 
that were potentially improper due to work activity performed during 
the 5-month waiting period or beyond the 9-month trial work period; 
and (2) assesses the extent to which SSA's enforcement operation 
detects potentially disqualifying work activity during the waiting 
period. The exact number of individuals who received improper 
disability payments and the exact amount of improper payments made to 
those individuals cannot be determined without detailed case 
investigations by SSA. Thus, we refer to "benefit payments that were 
potentially improper" and "potential overpayments" throughout this 
report. As part of this work, we also provide examples of 
beneficiaries with work activity during the waiting period or beyond 
the trial work period to help illustrate the circumstances under which 
SSA made DI payments that were potentially improper to beneficiaries. 
We plan to assess the extent to which the National Directory of New 
Hires (NDNH) indicates potential overpayments in SSA's Supplemental 
Security Income (SSI) program in future work, which will be available 
this year. 

To determine the extent to which individuals received DI payments that 
were potentially improper due to work activity, we compared NDNH 
quarterly wage data with DI beneficiary files from the Master 
Beneficiary Record (MBR) in order to identify individuals who were DI 
beneficiaries in December 2010 and who received potential overpayments 
due to work activity during the mandatory 5-month waiting period or 
beyond the trial work period.[Footnote 9] Because of timing 
differences in the NDNH and MBR data, we were not able to capture all 
earnings that may have resulted in improper payments to these 
individuals. As such, our analysis of DI beneficiaries whose work 
activity resulted in payments that were potentially improper is likely 
understated. The timing of the NDNH and MBR data we received is 
described in detail in appendix II. To identify potential overpayments 
and to develop data for estimates of potential overpayments in each 
population, we drew a random, generalizable sample of individuals from 
each of the populations described above and compared wage information 
from their employers to DI program information from SSA. We drew 
samples of 133 and 130 individuals, and received completed requests 
from employers for 98 individuals for each sample.[Footnote 10] 
Because our analysis of overpayments is limited to earnings data from 
the NDNH and DI payments from SSA, overpayments for each sample are 
estimated.[Footnote 11] 

We also developed detailed case-file information for a 
nongeneralizable selection of six individuals from our two statistical 
samples to illustrate the circumstances under which SSA made DI 
payments that were potentially improper. From the sample of 
individuals who received payments that were potentially improper due 
to work activity during the 5-month waiting period, we randomly 
selected three beneficiaries from those who had substantial earnings 
during the waiting period and continued to have substantial earnings 
after their waiting period.[Footnote 12] From the sample of 
individuals who received payments that were potentially improper due 
to work activity beyond the trial work period, we randomly selected 
three beneficiaries from those who received potential overpayments for 
at least 36 months (3 years). Because we selected a small number of 
individuals for further review, these examples cannot be generalized 
to the population of individuals receiving potential DI benefit 
overpayments. We also examined SSA's mechanisms to detect potentially 
disqualifying work activity and compared them with Standards for 
Internal Control in the Federal Government.[Footnote 13] A detailed 
description of our scope and methodology is included in appendix II. 

To determine the reliability of the SSA disability records and NDNH 
quarterly wage records, we reviewed documentation related to these 
databases and interviewed officials responsible for compiling and 
maintaining relevant DI and NDNH data. In addition, we performed 
electronic testing to determine the validity of specific data elements 
in the databases that we used to perform our work. We also reviewed 
detailed wage data from employers and DI program data from SSA for the 
statistical samples of individuals selected as described above to 
confirm that quarterly wage data from the NDNH indicated that payments 
from the DI program were potentially improper. On the basis of our 
discussions with agency officials, our review of related 
documentation, and our own testing, we concluded that the data 
elements used for this report were sufficiently reliable for our 
purposes. 

We conducted this performance audit from April 2012 to July 2013 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

The DI program was established in 1956 to provide monthly cash 
benefits to individuals unable to work because of severe long-term 
disability.[Footnote 14] Cash benefits are payable monthly, as long as 
the worker remains eligible for benefits, until the worker reaches 
full retirement age or dies. In fiscal year 2011, more than 10 million 
beneficiaries received DI benefits exceeding $128 billion, and the 
program's average monthly benefit was about $926. 

An individual is eligible to receive DI benefits if she or he has a 
medically determinable physical or mental impairment that (1) has 
lasted (or is expected to last) at least 1 year or is expected to 
result in death and (2) prevents the individual from engaging in 
substantial gainful activity, defined as work activity that involves 
significant physical or mental activities performed for pay or profit. 
[Footnote 15] For individuals whose impairment is anything other than 
blindness, earnings averaging over $1,000 a month for calendar year 
2011 generally demonstrate substantial earnings from work. For blind 
individuals, earnings averaging over $1,640 a month for the year 2011 
generally demonstrate substantial earnings for DI. The amount of 
earnings that generally demonstrates SGA can vary from year to year. 
[Footnote 16] For example, the SGA amount for individuals with 
disabilities other than blindness was $1,010 a month in 2012. 
Individuals with disabilities must also have a specified number of 
recent work credits under the Social Security program at the onset of 
medical impairment.[Footnote 17] In some circumstances, dependents of 
disability beneficiaries can qualify for benefits as well. Thus, a 
dependent may qualify on the basis of the work record of a deceased 
spouse or the work record of a parent who is deceased, retired, or 
considered eligible for disability benefits, meaning one disability 
beneficiary can generate multiple monthly disability payments for 
dependents. 

To help ensure that SSA does not pay benefits to persons who do not 
have long-term disabilities, a DI program statute requires individuals 
to serve a 5-month waiting period prior to receiving DI benefits. 
[Footnote 18] The waiting period begins in the first full month in 
which the individual has been under a disability and continues for the 
next 4 consecutive months.[Footnote 19] During this waiting period, 
individuals must have a medically determinable impairment that 
prevents the individual from earning SGA-level wages throughout a 
period of 5 consecutive calendar months. As shown in figure 1, if an 
individual has substantial earnings from work during any month of the 
waiting period, the individual is considered to be not disabled and 
therefore ineligible for DI benefits, and any DI payments SSA makes 
are potentially improper. 

Figure 1: Substantial Earnings in the Waiting Period May Result in 
Disability Insurance (DI) Overpayments: 

[Refer to PDF for image: illustration] 

To help prevent paying benefits to individuals without long-term 
disabilities, individuals are required to serve a 5-month waiting 
period, during which they cannot have earnings above about $1,000 per 
month, a level called substantial gainful activity (SGA). 

Onset of Disability: 
Waiting Period: 1-5 months; 
Eligible for Benefits: Benefits Are Paid. 

If monthly earnings in 5-month waiting period are above SGA amount: 
Disability benefits paid are potentially improper. 

Note: Monthly SGA-level earnings for nonblind beneficiaries in 2008-
2012 were $940, $980, $1000, $1000, and $1010, respectively. 

Source: GAO representation based on Social Security Administration 
(SSA) policies. 

[End of figure] 

After the 5-month waiting period, statutes and SSA regulations allow 
DI beneficiaries to return to work for a limited time without 
affecting their benefits. Specifically, during the trial work period, 
beneficiaries test their ability to work in as many as 9 months, not 
necessarily consecutive, while receiving benefits, no matter how high 
their earnings. After completing the trial work period, the extended 
period of eligibility begins. According to SSA regulations, the first 
time a beneficiary works above the SGA level in the extended period of 
eligibility, SSA will decide that the beneficiary no longer meets the 
requirements for disability due to work and that the disability 
ceased. However, SSA will continue to pay benefits for the month the 
disability ceased and the following 2 months, which SSA calls the 
grace period. Additionally, SSA pays benefits to beneficiaries in any 
month in which earnings are below SGA during the first 36 months of 
the extended period of eligibility, the reentitlement period. 
Eligibility for benefits will not completely terminate until the 
beneficiary has substantial earnings after the 36-month reentitlement 
period of the extended period of eligibility. As shown in figure 2, 
SSA might make improper DI payments if it does not suspend payments to 
beneficiaries who have substantial earnings in a month beyond the 
trial work period and grace period. 

Figure 2: Substantial Earnings beyond the Trial Work Period and Grace 
Period Make Benefits Potentially Improper: 

[Refer to PDF for image: illustration] 

SSA might make improper payments if it does not suspend benefits to 
individuals who have completed a 9-month trial work period, a 3-month 
grace period, and continue to have earnings above about $1,000 per 
month, a level called substantial gainful activity (SGA). 

Eligible for Benefits: 

Trial Work Period (TWP): 1-9 months; 
A 9-month (consecutive or nonconsecutive) period during which SSA pays 
benefits while the individual works, no matter how high their earnings. 

Extended Period of Eligibility: 
3-month grace period (months 9-12): 
A 3-month period in which a beneficiary can have earnings above SGA 
without losing disability benefits. 

Potential improper payments: 
Benefit payments to beneficiaries who have earnings above SGA during 
the extended period of eligibility months beyond the grace period are 
potentially improper. 

Source: GAO representation based on statutes and Social Security 
Administration (SSA) regulations. 

[End of figure] 

The number of DI beneficiaries who return to work is unknown, and 
estimates of the extent to which DI beneficiaries work vary. For 
example, SSA reported that less than 1 percent of primary DI 
beneficiaries had benefits suspended because of substantial work in 
calendar year 2010.[Footnote 20] However, a longitudinal study 
published by SSA in 2011 shows that 6.5 percent of DI beneficiaries 
whose first benefit payment was in 1996 went on to have their benefits 
suspended for work in at least 1 month of the 10 years for which the 
study tracked work activity.[Footnote 21] 

To determine if beneficiaries are working above the SGA level, SSA 
conducts work-related continuing disability reviews (CDR).[Footnote 
22] While work CDRs can be prompted by several events, most are 
generated by SSA's enforcement operation.[Footnote 23] This process 
involves periodic data matches between SSA's MBR database and Internal 
Revenue Service earnings data. The enforcement operation generates 
alerts for cases that exceed specified earnings thresholds,[Footnote 
24] which are then forwarded to SSA's processing centers and field 
offices for additional development by staff.[Footnote 25] Additional 
events that may trigger a work CDR include reports from state 
vocational-rehabilitation agencies, reports from other federal 
agencies, and anonymous tips. Finally, DI beneficiaries are required 
to report increases to their earnings to SSA and may do so by visiting 
an SSA field office or calling the agency's toll-free number. 

SSA Made $1.29 Billion in Benefit Payments That Were Potentially 
Improper as of January 2013, Mostly as a Result of Work Activity 
during the 5-Month Waiting Period: 

SSA Made $1.29 Billion in DI Benefit Payments That Were Potentially 
Improper: 

On the basis of our analysis of SSA data on individuals who were DI 
beneficiaries as of December 2010 and earnings data from the NDNH, we 
estimate that SSA made $1.29 billion in DI benefit payments that were 
potentially improper to about 36,000 individuals as of January 2013. 
Our estimate for the amount of payments that were potentially improper 
has a margin of error of plus or minus $352 million, meaning the 
actual amount of payments that were potentially improper could be as 
low as $936 million and as high as $1.64 billion with a 95 percent 
level of confidence.[Footnote 26] Our estimate for the number of 
individuals has a margin of error of plus or minus 7,000 individuals, 
meaning the actual number of individuals to whom SSA made payments 
that were potentially improper could be as low as 29,000 and as high 
as 43,000 with a 95 percent level of confidence. As shown in figure 3, 
the estimated 36,000 DI beneficiaries receiving potential overpayments 
represent about 0.4 percent of all primary DI beneficiaries at that 
time. Our analysis identifies individuals who received DI benefits 
that were potentially improper due to work activity performed (1) 
during the 5-month waiting period, or (2) beyond the 9-month trial 
work period and the grace period. 

Figure 3: Disability Insurance (DI) Beneficiaries Estimated to Have 
Received Potential Overpayments: 

[Refer to PDF for image: illustration] 

8.3 million primary Disability Insurance (DI) beneficiaries as of 
December 2010: 

11.8% of DI beneficiaries had wages in the National Directory of New 
Hires (NDNH): 983,000 beneficiaries; 

0.4% of DI beneficiaries received potential overpayments: 
36,000 beneficiaries; 
$1.29 billion. 

Source: GAO analysis of data from SSA and the NDNH. 

Note: The number of beneficiaries and the amount of potential 
overpayments are estimates. GAO’s estimate for the number of 
beneficiaries has a margin of error of 7,000 beneficiaries, and the 
estimate for the amount of payments that were potentially improper has 
a margin of error of $352 million, both with a 95 percent level of 
confidence. 

[End of figure] 

It is important to note that it is not possible to determine from data 
analysis alone the extent to which SSA made improper disability 
benefit payments to these individuals. To adequately assess an 
individual's work status, a detailed evaluation of all the facts and 
circumstances must be conducted for each beneficiary. This evaluation 
would include contacting the beneficiary and the beneficiary's 
employer to gather information on certain impairment-related work 
expenses, such as transportation costs and attendant care services, 
which are not considered in our analysis. On the basis of this 
additional information, SSA can determine whether the individual is 
entitled to continue to receive disability benefits or have such 
payments suspended. As described below, SSA had identified and 
established overpayments for some of the individuals we reviewed at 
the time of our audit. However, SSA had not identified potentially 
disqualifying work activity for other individuals we reviewed at the 
time of our audit. 

Work Activity during the Waiting Period Indicates SSA Made $920 
Million in Benefit Payments That Were Potentially Improper: 

We estimate that SSA made payments that were potentially improper to 
about 21,000 individuals who were DI beneficiaries in 2010 and who had 
substantial earnings from work during the 5-month waiting period, 
resulting in potential overpayments of $920 million as of January 
2013.[Footnote 27] Our estimate for the amount of payments that were 
potentially improper due to work activity during the waiting period 
has a margin of error of plus or minus $348 million, meaning the 
actual amount of payments that were potentially improper due to work 
activity during the waiting period could be as low as $571 million and 
as high as $1.27 billion with a 95 percent level of confidence. 
[Footnote 28] Our estimate for the number of individuals has a margin 
of error of plus or minus 7,000 individuals, meaning the actual number 
of individuals to whom SSA made payments that were potentially 
improper could be as low as 14,000 and as high as 28,000 with a 95 
percent level of confidence. The exact number of individuals who 
received improper disability payments and the exact amount of improper 
payments made to those individuals cannot be determined without 
detailed case investigations by SSA. See appendix II for more 
information on the statistical estimations of overpayments for these 
populations. 

In addition to our statistical sample, we reviewed detailed DI case-
file information for a random selection of three beneficiaries from 
our sample who had substantial earnings during the waiting period and 
continued to have substantial earnings from work after the waiting 
period.[Footnote 29] Although SSA regulations indicate that this level 
of work activity should result in a denial of a disability claim, all 
three individuals were approved for benefits. SSA officials told us 
they plan to conduct follow-up work on these cases based on the 
information we provided during this review. Because we selected a 
small number of individuals for further review, these examples cannot 
be projected to the population of individuals receiving potential DI 
benefit overpayments. 

As mentioned earlier, individuals are required to serve a 5-month 
waiting period prior to receiving DI benefits to ensure that SSA does 
not pay benefits to persons who do not have long-term disabilities. 
[Footnote 30] Specifically, substantial earnings from work during the 
5-month waiting period may indicate that individuals are not 
considered disabled and therefore are not entitled to DI benefits. 
Thus, if SSA discovers substantial earnings from work during the 
waiting period prior to adjudicating the disability claim, SSA will 
deny the disability claim. SSA may also reopen previously awarded 
disability claims by revising the decision to a denial of benefits 
after providing due process rights. Additionally, SSA's policies allow 
it the option of considering a later disability-onset date rather than 
denying the disability claim if it discovers the SGA-level work 
activity after the SGA subsequently stops. According to SSA guidance, 
an unsuccessful work attempt during the waiting period will not 
preclude a finding of disability.[Footnote 31] 

Text box: 

Waiting Period Example 1: Beneficiary Did Not Report All Earnings, 
SSA's Enforcement Operation Did Not Generate Alert, and SSA Applied 
Trial Work Period Rather than Waiting Period Program Rules--Potential 
Overpayment of $90,000: 

The beneficiary filed for benefits in November 2009 while he had 
substantial earnings from working as a physician. He had substantial 
earnings from work in all 5 months of the waiting period, as much as 
$22,000 monthly, and continued to have substantial earnings from work 
in the month he started receiving benefits. 

As mentioned, SSA's policies allow it the option of considering a 
later disability-onset date rather than denying the disability claim 
when it discovers SGA-level earnings during the waiting period. 
According to this SSA guidance, work activity of 6 months or less can 
be considered an "unsuccessful work attempt" during the waiting 
period, and will not preclude a finding of disability. During his 
initial claims interview, the beneficiary told SSA that he worked for 
only 2 months during the waiting period, a period short enough to be 
considered an unsuccessful work attempt. 

However, SSA did not verify the beneficiary's wages with his employer 
and approved the individual for benefits beginning in January 2010. In 
contrast, the wages we confirmed with the beneficiary's employer 
indicate that the beneficiary had earnings continuously above the SGA 
level for every month of the year that he applied for and was approved 
for benefits, including all 5 months of the waiting period. Further, 
because these earnings were continuously above the SGA level for more 
than 6 months, SSA policy indicates that his work activity cannot be 
considered an unsuccessful work attempt. As such, this individual's 
work activity indicates that he was not disabled, and therefore was 
ineligible for benefits. 

Additionally, SSA's enforcement operation did not generate an alert 
for his work activity during the waiting-period months in 2009 because 
his first benefit payment was in January 2010. According to SSA 
officials, the enforcement operation will only generate an earnings 
alert for a year in which a beneficiary receives a payment. In this 
example, because DI benefit payments began in 2010, and the waiting 
period was during the year prior to the first payment, no earnings 
alert was generated. 

In 2011, SSA initiated a work-related continuing disability review 
(CDR) as a result of an earnings alert for work activity after the 
waiting period. As mentioned, SSA conducts CDRs to determine if 
beneficiaries are working above the SGA level. However, during the 
CDR, SSA program staff did not request and verify wages from the 
beneficiary's employer, nor did staff apply program rules regarding 
work activity during the waiting period. Instead, the CDR considered 
the work activity under the trial work period rules and determined 
that benefits should continue. Because the beneficiary's impairment 
did not prevent him from earning SGA-level wages during the waiting 
period and his SGA continued after the waiting period, SSA policies 
indicate that SSA should have denied the individual benefits when his 
case was adjudicated, or reopened the determination after adjudication 
and revised the claim to a denial of benefits, which would have 
resulted in an overpayment of all benefits previously paid. As such, 
we estimate that SSA made $90,000 in cash benefit payments that were 
potentially improper to this individual over a period more than 3 
years. As of May 2013, SSA had not detected or assessed any 
overpayments for the beneficiary and continued to pay monthly DI 
benefits of about $2,500. SSA officials told us they plan to conduct 
follow-up work on this case on the basis of the information we 
provided. 

[End of text box] 

Text box: 

Waiting Period Example 2: Beneficiary Did Not Report Earnings and 
SSA’s Enforcement Operation Did Not Generate Alert—Potential 
Overpayment of $21,000: 

The beneficiary began work in August 2009 and continued to work 
through January 2010, the month that SSA began making DI benefit 
payments due to mental disorders. The beneficiary had substantial 
earnings from work during 3 months of her waiting period and continued 
to have SGA-level earnings during the month she started receiving 
benefits, but she did not report any wages to SSA as required by 
program regulations. No enforcement operation earnings alert was 
generated for her work activity during the waiting period because her 
waiting period occurred in 2009, but her first benefit payment was not 
until January 2010. Additionally, no enforcement operation earnings 
alert was generated for her earnings in 2010 because, SSA officials 
told us, her earnings were too low to generate an alert. SSA had not 
assessed any overpayments for the beneficiary and continued to pay 
monthly DI benefits as of May 2013. We identified about $21,000 in 
benefit payments that were potentially improper through our analysis 
of the beneficiary's wage records. SSA officials told us they plan to 
conduct follow-up work on this case. 

[End of text box] 

Text box: 

Waiting Period Example 3: SSA Did Not Follow Its Program Rules—
Potential Overpayment of $25,000: 

The beneficiary began working in October 2004 and remained employed 
through at least June 2012. SSA approved the beneficiary for DI 
benefits starting in December 2009 for a malignant tumor. The 
beneficiary had substantial earnings from work during her waiting 
period as well as SGA-level earnings in 9 months of the first 12 
months that SSA determined her impairment prevented her from having 
substantial earnings from work. When the beneficiary eventually self-
reported earnings in 2011, SSA initiated a CDR that discovered 
substantial earnings from work during the waiting period. However, SSA 
staff did not consider this work in accordance with its own policies, 
and the CDR resulted in a determination that DI benefits should 
continue. Specifically, according to SSA, the discovery of SGA-level 
wages during the waiting period should have prompted SSA staff to 
initiate processes for determining whether benefits should have 
originally been denied or if the onset date should be changed to the 
date the SGA-level work stopped, but the SSA staff did not do so. On 
the basis of this individual's substantial earnings from work during 
the waiting period, the revised disability determination may have 
resulted in a revised disability denial or revised date of disability 
onset. SSA ceased providing DI benefits to the beneficiary in April 
2013 when the beneficiary died. Although SSA never assessed 
overpayments for the beneficiary, we identified about $25,000 in cash 
benefit payments that were potentially improper through our analysis 
of the beneficiary's wage records. Because the beneficiary died, her 
estate, or the beneficiaries of her estate, would be responsible for 
repaying the overpayment. SSA officials told us they plan to conduct 
follow-up work on this case. 

[End of text box] 

Work Activity beyond the Trial Work Period Indicates SSA Made $368 
Million in Benefit Payments That Were Potentially Improper: 

We estimate that SSA made potential overpayments to 15,500 individuals 
who were DI beneficiaries in 2010 and who worked beyond their trial 
work period, resulting in potential overpayments of $368 million as of 
January 2013.[Footnote 32] Our estimate for the amount of payments 
that were potentially improper due to work activity beyond the trial 
work period has a margin of error of plus or minus $62 million, 
meaning the actual amount of payments that were potentially improper 
due to work activity beyond the trial work period could be as low as 
$306 million and as high as $430 million, with a 95 percent level of 
confidence. Our estimate for the number of individuals has a margin of 
error of plus or minus 1,500 individuals, meaning the actual number of 
individuals to whom SSA made payments that were potentially improper 
could be as low as 14,000 and as high as 17,000, with a 95 percent 
level of confidence. The exact number of individuals who received 
improper SSA disability payments cannot be determined without detailed 
case investigations by SSA. See appendix II for more information on 
the statistical estimations of overpayments for these populations. 

In addition to our statistical sample, we reviewed detailed DI case-
file information for a nongeneralizable selection of three 
beneficiaries from among those in our sample that we identified to 
have potential overpayments for at least 36 months (3 years) due to 
work activity beyond their trial work period. Our case file reviews 
for these three beneficiaries confirmed instances in which SSA made 
overpayments to beneficiaries with substantial earnings from work, as 
discussed later in this report. SSA officials told us they plan to 
conduct follow-up work on these cases on the basis of the information 
we provided during this review. Because we selected a small number of 
individuals for further review, these examples cannot be projected to 
the population of individuals receiving potential DI benefit 
overpayments. 

As previously discussed, federal statutes and SSA regulations allow DI 
beneficiaries to work for a limited time without affecting their 
benefits. However, after completing the 9-month trial work period and 
entering the reentitlement period, beneficiaries who have substantial 
earnings from work beyond the 3-month grace period are generally no 
longer entitled to benefits. If SSA does not stop their benefits in a 
timely manner, SSA may overpay beneficiaries who are not entitled to 
benefits due to their work activity. 

Text box: 

Trial Work Period Example 1: No Increased Scrutiny for Known Rule 
Violator--Overpayment of $57,000: 

The individual filed for DI benefits on the basis of personality 
disorders and affective disorders in July 2006, and SSA approved his 
claim the following day. The day after he was approved for benefits, 
the beneficiary began working. At no point did the beneficiary report 
the new wages from his employment, as required by SSA regulations. 
SSA's enforcement operation generated earnings alerts each year from 
2008-2011, but SSA did not initiate a CDR until April 2011. Agency 
officials told us that SSA does not have any policies that dictate 
time limits for initiating a CDR on the basis of an earnings alert, 
nor stipulating that a CDR must be initiated if earnings alerts are 
generated for several consecutive years. As a result of the CDR in 
2011, SSA suspended the beneficiary's DI benefits in December 2011 and 
subsequently assessed an overpayment of more than $57,000 due to his 
work activity. SSA officials were unable to explain why a CDR was not 
performed until 2011, though they stated that limited resources and 
competing workloads may be factors that contributed to the timeliness 
with which the CDRs were initiated. 

A month after SSA assessed the overpayment, while he continued to have 
substantial earnings from working for the same employer, the 
beneficiary applied to have his benefits reinstated, and fraudulently 
affirmed that he did not have substantial earnings from work. We found 
no evidence in SSA's files that SSA had contacted the beneficiary's 
employer to confirm his statement before approving his benefits. Thus, 
even though SSA had information documenting that the individual did 
not report earnings before, the agency approved the application and 
continued to pay DI benefits as of May 2013. Because the individual 
had SGA-level wages for the entire year prior to his application for 
reinstatement and for at least 2 months after SSA approved him for 
reinstated benefits, the cash benefit payments SSA made after 
reinstating this individual were potentially improper, though SSA had 
not established an overpayment for this work activity as of April 
2013. To recover the prior outstanding overpayment, SSA is withholding 
$75 per month from the current monthly DI benefits that SSA may be 
improperly paying to the beneficiary. At $75 per month, it would take 
63 years for SSA to recover the $57,000 overpayment, at which time the 
beneficiary would be well over 100 years old. SSA officials told us 
they plan to conduct follow-up work on this case on the basis of the 
information we provided. 

[End of text box] 

Text box: 

Trial Work Period Example 2: Earnings Alerts Did Not Result in Review 
for 5 Years—-Overpayment of $74,000: 

SSA approved the beneficiary for DI benefits in April 1998 for mental 
disorders. The beneficiary began working in October 2005 and remained 
employed as of August 2012. After he reported his earnings in October 
2005, SSA completed a CDR and found that the beneficiary was within 
his trial work period. From 2007 to 2011, SSA's enforcement operation 
generated earnings alerts for the beneficiary. Despite knowing the 
beneficiary began working in 2005 and receiving 5 additional years of 
earnings alerts, SSA did not perform another CDR until December 2011. 
SSA officials were unable to explain why a second CDR was not 
performed for more than 5 years when it had previously identified that 
the beneficiary had partially completed a trial work period. However, 
SSA officials told us that resource constraints may have delayed this 
CDR. As a result of the 2011 CDR, SSA assessed over $56,000 in 
overpayments and ceased providing benefits to the beneficiary in June 
2012. SSA also assessed a total of over $18,000 in additional 
overpayments for the beneficiary's two child dependents. SSA approved 
a repayment plan of $200 per month for the $74,000 in overpayments. 
SSA officials told us they plan to conduct follow-up work on this case. 

[End of text box] 

Text box: 

Trial Work Period Example 3: Known Work Activity Not Monitored—-
Overpayment of $25,000: 

SSA approved the beneficiary for DI benefits starting in June 2005 for 
mental disorders. The beneficiary began working in November 2007 and 
remained employed through at least August 2012. In May 2008, he 
provided SSA pay stubs for 2 months of earnings, which showed that he 
was not earning substantial wages. SSA's enforcement operation 
generated earnings alerts in 2008 and 2009, and SSA completed a CDR in 
2010 in which the agency determined that benefits should continue 
because he had not yet completed his trial work period. In the month 
following the completion of the CDR, SSA contacted the beneficiary to 
inform him that he had completed his trial work period. Despite 
knowing that the beneficiary had completed his trial work period, SSA 
did not complete a subsequent CDR for more than 2 years. SSA officials 
told us that resource constraints may have contributed to the delay in 
initiating a subsequent CDR. As a result of the CDR performed 2 years 
later, SSA assessed overpayments of $25,000 due to work activity and 
stopped paying benefits. As of April 2013, the beneficiary had not 
made any payments toward his overpayment debt. SSA officials told us 
they plan to conduct follow-up work on this case. 

[End of text box] 

SSA Is Assessing Opportunities to Better Identify Potential Improper 
Payments, but Existing Controls Allow Potentially Disqualifying Work 
Activity to Remain Undetected: 

SSA Is Assessing Opportunities to Improve the Timeliness of DI Program-
Integrity Efforts, but It Is Too Early to Assess What Effect These 
Initiatives May Have on DI Overpayments: 

We identified instances in which the timeliness of SSA's process for 
identifying disqualifying work activity allowed DI overpayments to 
remain undetected and accrue; however, SSA is assessing opportunities 
to obtain more-timely earnings information and improve its work CDR 
process. Specifically, in the course of this review, we identified 
instances in which SSA did not obtain timely earnings information and 
did not act promptly when it did receive earnings alerts, which led to 
significant cash benefit overpayments. This is consistent with our 
prior work that found DI overpayments for beneficiaries who return to 
work may accrue over time because SSA lacks timely data on 
beneficiaries' earnings and does not act promptly when it receives 
earnings alerts from its enforcement operation.[Footnote 33] During 
this review, SSA officials told us that limited resources and 
competing workloads may have constrained the agency's ability to act 
promptly when it received earnings alerts or self-reported earnings 
for beneficiaries from our nongeneralizable examples described above. 
We also reported in April 2013 that budget decisions and the way SSA 
prioritizes competing demands, such as processing initial claims, 
contribute to challenges SSA faces in maintaining the integrity of the 
disability program.[Footnote 34] 

In 2004, we reported that SSA's lack of timely earnings data on 
beneficiaries' earnings and work activity impeded its ability to 
prevent and detect earnings-related overpayments. To enhance SSA's 
ability to detect and prevent overpayments in the DI program, we 
recommended that SSA use more-timely earnings information in the NDNH 
in conducting program-integrity operations.[Footnote 35] Although SSA 
uses the NDNH to perform oversight of the SSI program, it does not use 
the NDNH to conduct oversight of the DI program. In 2009, SSA 
conducted a cost-effectiveness study on use of the NDNH, which 
estimated its return on investment would be about $1.40 for every $1 
spent, or a 40 percent rate of return; however, SSA concluded in its 
2009 study that this expected return on investment was low, and noted 
that a match with the NDNH would generate a large number of CDR alerts 
needing development that were not of high quality. In July 2011, we 
reported that due to overly pessimistic assumptions in SSA's cost-
effectiveness study, it is likely that the actual savings that result 
from SSA's use of the NDNH could be much higher.[Footnote 36] Further, 
it is not clear whether this cost-benefit analysis accounted for 
improper payments that would be prevented by identifying work activity 
during the 5-month waiting period. Thus, the real return on investment 
could be understated. SSA agreed with our assessment and in January 
2013 said that it is currently reevaluating the cost-effectiveness of 
using the NDNH for DI program-integrity initiatives and expects the 
cost-benefit analysis to be completed in the fourth quarter of fiscal 
year 2013. 

SSA officials also stated that the agency has made improvements to its 
CDR process, but we were unable to determine how they might reduce 
improper payments due to beneficiaries' work activity because these 
initiatives were still being tested at the time of our review. For 
example, in 2010 SSA began a pilot to use what the agency refers to as 
a predictive model to prioritize enforcement operation earnings 
alerts, working cases likely to incur large work-related overpayments 
first. SSA officials told us the agency is planning to implement the 
model nationally in June 2013. Additionally, in response to a 
recommendation we made in a prior report, in 2012 SSA began testing a 
new process to use its model to identify and delay benefit increases 
for beneficiaries with pending work CDRs.[Footnote 37] Because these 
initiatives were still being tested at the time of our review, we were 
unable to determine how they might reduce improper payments due to 
beneficiaries' work activity. As such, it is too early to assess what 
effect these initiatives may have on the prevalence and size of DI 
overpayments. 

SSA Can Improve Its Ability to Detect Potentially Disqualifying Work 
Activity: 

We found that a limitation of SSA's enforcement operation[Footnote 38] 
allows individuals with substantial earnings from work during the 
waiting period to be approved for DI benefits and allows resulting DI 
benefit payments that were potentially improper to remain undetected 
by SSA.[Footnote 39] Specifically, we found that SSA's enforcement 
operation will not generate an alert for earnings during the waiting 
period if the earnings occur in a year when the beneficiary does not 
receive a benefit payment. For example, if a beneficiary receives her 
or his first benefit payment in January 2013, the enforcement 
operation will not generate an earnings alert for wages earned during 
the waiting-period months occurring in the prior year, which would be 
from August to December 2012. As a result, for any beneficiary whose 
first month of entitlement is January to May, the enforcement 
operation does not generate an earnings alert for at least 1 month of 
the waiting period. In two of the three examples we randomly selected 
from our sample of beneficiaries with work activity during the waiting 
period, SSA's enforcement operation did not generate alerts for SGA-
level earnings during the waiting period because their waiting periods 
occurred in the year prior to their first benefit payment. These 
individuals were approved for benefits despite disqualifying work 
activity, and SSA had not detected any overpayments for these 
individuals at the time of our audit. For the third beneficiary we 
reviewed, SSA's enforcement operation generated an alert for earnings 
during the waiting period because the individual also received benefit 
payments in that year. However, this alert was generated more than 1 
year after the work activity during the waiting period occurred, and 
in the resulting work CDR, SSA did not apply its own waiting period 
program rules to the work activity. Specifically, SSA approved the 
individual for benefits despite disqualifying work activity and did 
not detect and establish overpayments for this work activity when it 
later became aware of the work activity. 

Standards for Internal Control in the Federal Government states that 
internal controls should generally be designed to assure that ongoing 
monitoring occurs in the course of normal operations.[Footnote 40] SSA 
officials acknowledged that the systemic limitation to their 
enforcement operation allows potentially disqualifying work activity 
to remain undetected, but SSA expressed concern that modifying its 
existing enforcement operation may be costly. However, SSA has not 
assessed either the costs of such a modification or the additional 
program savings it might realize should such a change be implemented. 
Such an analysis would assist SSA in making an informed decision 
regarding the costs and benefits of modifying its existing enforcement 
operation. To the extent that such an analysis determines modifying 
its existing enforcement operation is cost effective and feasible, 
establishing a mechanism to identify work activity performed during 
all months of the waiting period, including those that occur in a year 
when beneficiaries were not paid, may help provide SSA greater 
assurance that DI beneficiaries are eligible to receive benefits. 

Conclusions: 

The DI program provides an important safety net for disabled 
beneficiaries. However, during a time of growing concerns about the 
solvency of the DI trust fund, it is important that SSA take every 
opportunity to ensure that only eligible beneficiaries receive 
payments under this program and that additional actions are taken to 
improve the financial status of the program. Without reliable and 
timely earnings information on the work activity of individuals 
applying for DI benefits, SSA risks making overpayments to individuals 
whose work activity indicates they are not disabled and therefore 
ineligible for disability benefits. While we cannot generalize the 
examples we found, SSA's inability to identify work activity during 
the waiting period may result in overpayments to beneficiaries who are 
ineligible for benefits. Assessing the costs and savings associated 
with establishing a mechanism to identify work activity during all 
months of the waiting period would help SSA to determine whether 
establishing such a mechanism would be cost-effective and feasible. To 
the extent that it is determined to be cost-effective and feasible, 
implementing a mechanism to identify work activity performed during 
all months of the waiting period, including those that occur in a year 
when benefits were not paid, may help provide SSA greater assurance 
that DI beneficiaries are eligible to receive benefits. 

Recommendation for Executive Action: 

To improve SSA's ability to detect and prevent potential DI cash 
benefit overpayments due to work activity during the 5-month waiting 
period, we recommend that the Commissioner of Social Security take the 
following action: 

* assess the costs and feasibility of establishing a mechanism to 
detect potentially disqualifying earnings during all months of the 
waiting period, including those months of earnings that the agency's 
enforcement operation does not currently detect and implement this 
mechanism, to the extent that an analysis determines it is cost-
effective and feasible. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Office of the Commissioner 
of SSA. In its written comments, SSA concurred with our recommendation 
and stated that it would conduct the recommended analysis. In 
addition, SSA expressed some concerns about our methodology for 
estimating potential improper payments due to beneficiaries' work 
activity, which are summarized below. The agency also provided general 
and technical comments, which have been incorporated into the report, 
as appropriate. SSA's comments are reproduced in full in appendix IV. 

In commenting on our recommendation to assess the costs and 
feasibility of establishing a mechanism to detect potentially 
disqualifying earnings during all months of the waiting period and to 
implement the mechanism, to the extent that it is cost-effective and 
feasible, SSA requested the data we gathered as part of this study to 
help the agency assess the costs and feasibility of establishing such 
a mechanism. At SSA's request, we will provide SSA the population of 
individuals with earnings during the 5-month waiting period that we 
identified from our match of 2010 NDNH earnings data and SSA's 2010 DI 
program data. During the course of this audit, we also provided SSA 
with the SSNs of the individuals in our two random samples. These data 
would allow SSA to perform the recommended analysis using the NDNH 
wage data, which we obtained from SSA. We note that SSA's assessment 
would benefit from using the most-recently available wage data, such 
as 2013 data that are directly available to SSA from the NDNH. 

In addition to this data request, SSA raised several concerns about 
our methodology and asserted that our inability to replicate the 
process it uses to make SGA determinations may lead to substantial 
overstatement of our estimate of potentially improper payments. First, 
SSA noted that our review does not consider program features, such as 
unsuccessful work attempts and Impairment Related Work Expenses 
(IRWE), or whether the work involved subsidies or special conditions. 
As mentioned in the report, SSA's process for determining SGA and its 
policies for determining whether individuals remain entitled to 
benefits despite potentially disqualifying work activity involve a 
consideration of all the facts and circumstances surrounding a case, 
including medical data that doctors and hospitals are not required to 
share with GAO for purposes of this audit. As such, our objective was 
to estimate the extent to which individuals received DI benefit 
payments that were potentially improper due to their work activity. To 
do this, we used wage data to identify two populations of individuals 
with earnings beyond program limits; we then drew a random, 
generalizable sample of individuals from each population and compared 
wage information from their employers to DI program information from 
SSA to develop estimates of potential overpayments in each population. 
Because our analysis of potential overpayments is limited to earnings 
data from the NDNH and DI payments from SSA, potential overpayments 
for each sample are estimated. Thus, we continue to believe that the 
methodology we applied using the data we were able to access led us to 
valid estimates of potentially improper payments due to beneficiaries' 
work activity. 

Second, SSA noted that we assume that every payment made after the 5-
month waiting period is likely to be an improper payment instead of 
reestablishing the disability onset date, as its policy allows in some 
instances. However, our method of calculating potential overpayments 
is consistent with current DI program policies and interviews with SSA 
officials who stated that individuals who perform substantial gainful 
activity during the waiting period are not disabled and therefore not 
entitled to benefits; thus, all DI payments made to those individuals 
are potentially improper payments. Further, determining which 
individuals in our samples, if any, should have their onset date 
reestablished despite disqualifying work activity in the waiting 
period was not reasonably possible because making such a determination 
would involve a consideration of medical data that doctors and 
hospitals were not required to share with GAO for purposes of this 
audit. 

Third, SSA stated that payment for medical leave may have been 
included in some of the payroll data we used for our analysis and 
suggested that this may have led to a substantial overstatement of 
estimated improper payments. However, our calculation of earned income 
excludes material payments for medical leave, as described in detail 
in appendix II. Thus, we do not expect that these payments or the 
other concerns SSA raises in its letter led to a substantial 
overstatement of potential overpayments, as SSA suggested. 

Finally, SSA noted that improving payment accuracy is critical to 
preserving the public's trust in the DI program and that available 
resources may affect SSA's ability to increase its payment accuracy. 
We recognize SSA's ongoing efforts to improve the program and that 
federal resources are currently constrained. However, without making 
changes to its existing processes for identifying beneficiaries' work 
activity, to the extent that the benefits exceed the costs, SSA may 
remain unable to detect work activity in a timely manner, and SSA may 
continue to make improper payments to individuals whose work activity 
indicates they are not entitled to benefits. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies to the 
Commissioner of Social Security and other interested parties. In 
addition, the report will be available at no charge on the GAO website 
at [hyperlink, http://www.gao.gov]. 

If you or your staff have questions about this report, please contact 
me at (202) 512-6722 or lords@gao.gov. Contact points for our Offices 
of Congressional Relations and Public Affairs may be found on the last 
page of this report. 

Signed by: 

Stephen M. Lord: 
Director, Forensic Audits and Investigative Service: 

[End of section] 

Appendix I: Debt Owed to SSA from Overpayment of DI Benefits Is 
Increasing: 

As shown in figure 4 below, in fiscal year 2010, the total amount owed 
to the Social Security Administration (SSA) for Disability Insurance 
(DI) overpayments was $5.4 billion. This debt has increased through 
fiscal year 2012, as individuals owed over $6 billion in overpayments 
of DI benefits. 

Figure 4: Balance of Disability Insurance (DI) Overpayment Debt 
Detected by the Social Security Administration (SSA), Fiscal Years 
2008-2012: 

[Refer to PDF for image: line graph] 

Fiscal year 2008: $5 billion. 

Fiscal year 2009: $5.2 billion. 

Fiscal year 2010: $5.4 billion. 

Fiscal year 2011: $5.9 billion. 

Fiscal year 2012: $6.1 billion. 

Source: Social Security Administration. 

[End of figure] 

[End of section] 

Appendix II: Objectives, Scope, and Methodology: 

This report (1) estimates the extent to which individuals received 
disability insurance (DI) benefit payments that were potentially 
improper due to work activity performed during the 5-month waiting 
period or beyond the 9-month trial work period; and (2) assesses the 
extent to which the Social Security Administration's (SSA) enforcement 
operation detects potentially disqualifying work activity during the 
waiting period. The exact number of individuals who received improper 
disability payments and the exact amount of improper payments made to 
those individuals cannot be determined without detailed case 
investigations by SSA. Thus, we refer to "benefit payments that were 
potentially improper" and "potential overpayments" throughout this 
report. As part of this work, we also provide examples of 
beneficiaries with work activity during the waiting period or beyond 
the trial work period to help illustrate the circumstances under which 
SSA made DI payments that were potentially improper to beneficiaries. 
We plan to assess the extent to which the National Directory of New 
Hires (NDNH) indicates potential overpayments in SSA's Supplemental 
Security Income (SSI) program in future work, which will be available 
this year. 

To determine the extent to which the NDNH provides evidence that 
individuals received DI benefit payments that were potentially 
improper due to work activity, we matched the NDNH quarterly wage data 
with our extract of SSA's Master Beneficiary Record (MBR) as of 
December 2010. To ensure the best quality matches, we matched only 
against Social Security Numbers (SSN) that the NDNH categorizes as 
"verified" through the SSA's Enumeration Verification System process. 
[Footnote 41] Thus, we did not match against SSNs that the NDNH 
categorizes as "unverified" or "non-verifiable." The match process 
identified two populations with potential overpayments due to work 
activity. The first population consisted of individuals who received 
potential overpayments due to substantial gainful activity (SGA) level 
earnings during the 5-month waiting period. The details of this match 
are described in the section below titled "Wait Period Overpayments." 
The second overpayment population consisted of individuals who 
received potential overpayments due to SGA-level earnings beyond the 
trial work period.[Footnote 42] The details of this match are 
described in the section below titled "Trial Work Period Overpayments." 

The NDNH Database: 

Sections 452(a)(9) and 453(a)(1) of the Social Security Act required 
the Secretary of Health and Human Services to establish and maintain 
the Federal Parent Locator Service, which includes the NDNH database. 
[Footnote 43] The NDNH database contains employment data on newly 
hired employees (W4), quarterly wage (QW) data on individual 
employees, and unemployment insurance (UI) data. The federal Office of 
Child Support Enforcement (OCSE) matches case information from state 
child support enforcement agencies against the NDNH and returns 
information on the case to the appropriate state or states. NDNH data 
are deleted after 24 months, as required by Section 453(i) of the 
Social Security Act. The data reported to OCSE for the NDNH come from 
several sources. Employers report W4 data to the State Directories of 
New Hires, which then report them to OCSE. UI data originate with the 
State Workforce Agencies, which then send data to the State 
Directories of New Hires, which send data to OCSE. The quarterly wage 
data are reported by employers to the State Workforce Agencies for 
their state, which in turn reports them to the State Directories of 
New Hires (sometimes colocated with the State Workforce Agencies), 
which then reports the information to OCSE. Federal agency W4 and QW 
data are reported directly to OCSE. 

Limitations to Using NDNH Data to Determine SGA: 

The timing and nature of NDNH earnings data we received present 
limitations to the data's capacity to identify SGA in accordance with 
SSA's complex program rules. First, the quarterly wage amounts on the 
NDNH represent 3 months of earnings; however, the statute for 
evaluating SGA-level earnings requires SSA to use monthly earnings 
amounts. To facilitate our analysis, we calculated monthly earnings 
for each month in a quarter by dividing the quarterly wage amount in 
the NDNH by 3. For example, if the NDNH reported quarterly earnings of 
$3,000 in the first quarter of 2010, we calculated the monthly 
earnings to be $1,000 for January, February, and March of 2010. This 
monthly computed earnings amount could differ from the actual monthly 
earnings. For instance, using the previous example, the actual monthly 
earnings in January 2010 could be $3,000, and actual earnings in 
February or March could be $0. Second, when SSA evaluates earnings to 
determine SGA for DI beneficiaries, SSA counts earnings when they are 
earned, not paid; however, amounts of earnings on the NDNH for a 
particular quarter could be paid in that quarter, but earned in prior 
quarters. In addition to these timing limitations, the NDNH quarterly 
earnings data may contain payments not related to work activity, such 
as paid time off, long-term disability payments, or post-termination 
compensation; however, SSA's assessment of SGA generally involves 
doing significant physical or mental activities, rather than receiving 
payments not related to work. 

To account for these limitations, we drew a simple random sample from 
each of the potential overpayment populations and contacted the 
employers that reported the earnings to determine the exact timing, 
amount, and nature of the earnings for the beneficiaries in our 
sample.[Footnote 44] With these simple random samples, each member of 
the study populations had a nonzero probability of being included, and 
that probability could be computed for any member. Each sample element 
was subsequently weighted in the analysis to account statistically for 
all the members of the population, including those who were not 
selected. Additional details on our sample work are described in the 
"Wait Period Overpayments" and "Trial Work Period Overpayments" 
sections below. 

As mentioned, it is impossible to determine from reported earnings 
alone the extent to which SSA made improper disability benefit 
payments to these individuals. To adequately assess an individual's 
work status, a detailed evaluation of all the facts and circumstances 
should be conducted for all cases. This evaluation may necessitate 
contacting the beneficiary, the beneficiary's employer, and the 
beneficiaries' physician to evaluate the nature of the work performed. 
This evaluation may also consider certain impairment-related work 
expenses, which were not considered in our analysis.[Footnote 45] On 
the basis of this comprehensive evaluation of all facts and 
circumstances surrounding a case, SSA can determine whether the 
individual is entitled to continue to receive disability payments or 
have such payments suspended. 

Wait Period Overpayments: 

Our analysis of the NDNH match file identified individuals who were in 
current pay status in the DI program as of December 2010 and had 
computed monthly earnings that exceeded the corresponding monthly SGA 
threshold for any of the 5 months prior to the individual's DI date of 
entitlement to disability.[Footnote 46] We included individuals who 
received potential overpayments due to work activity during the 
waiting period on the basis of the following criteria: 

1. monthly computed earnings were greater than the corresponding SGA 
threshold during any month of the individual's 5-month waiting 
period,[Footnote 47] and: 

2. DI payment records on the MBR showed that DI benefits were paid to 
the individual during any of the 36 months for which we had DI payment 
data from the MBR.[Footnote 48] 

Thus, to be included in our Wait Period overpayment population, 
individuals had to be in current pay status as of December 2010 and 
have at least 1 month of potential overpayments as defined by the 
criteria above. Our analysis determined there were 83,179 individuals 
meeting these potential-overpayment criteria. Because SGA-level 
earnings during the waiting period would result in a denial of 
eligibility for DI benefits, we considered all the benefits paid to 
the individual as potential overpayments. 

Next, we drew a simple random sample of 133 individuals from the Wait 
Period overpayment population and contacted the employers to verify 
the timing and nature of the wages paid to the individuals. We 
received completed requests from employers for 98 individuals for a 
response rate of 75 percent.[Footnote 49] Nonresponses included sample 
items whose employers we could not locate, employers who were no 
longer in business, and employers who refused to cooperate with our 
requests. We asked employers who provided earnings data to identify 
payments that were not related to work activity, such as paid time 
off, extended sick leave, or post-termination compensation. Many 
employers provided payroll reports indicating hours and payments by 
payment category, such as total payments for hours in regular work, 
hours in overtime work, and hours of vacation time. 

Using the earnings data employers provided, we calculated monthly 
earned income for each sample item and identified whether the 
beneficiaries' monthly earned income exceeded SGA during any of the 5 
months of their waiting period. Because employers use different 
payroll cycles and provided different levels of detail in their 
responses, we adhered to the following guidelines to standardize our 
calculation of monthly earned income: 

1. In consideration of SSA guidance regarding the timing of payments, 
we calculated monthly earned income according to the period in which 
payments were earned rather than when they were paid. However, if an 
employer's payroll reports indicated only the dates when payments were 
issued, we calculated monthly earned income according to those dates. 

2. In consideration of SSA guidance regarding the nature of payments, 
our calculation of monthly earned income excludes payments not related 
to work activity, such as payments for paid time off, vacation pay, 
and extended sick leave, if those payments covered the entire pay 
period, as defined by the employer. Thus, payments not related to work 
activity that were episodic, such as sick pay or vacation pay received 
during a pay period when the individual also performed work, are 
included in our calculation of monthly earned income. 

We then obtained additional DI program data on the MBR to estimate 
total program overpayments to-date for our sample items.[Footnote 50] 
Because we followed a probability procedure based on random 
selections, our sample is only one of a large number of samples that 
we might have drawn. Since each sample could have provided different 
estimates, we express our confidence in the precision of our 
particular sample's results as a 95 percent confidence interval. 

Wait Period Overpayment Examples: 

To provide examples of the circumstances under which SSA made 
potential overpayments to individuals with work activity during the 5-
month waiting period, we randomly selected three beneficiaries from 
our waiting period sample who were among those that met the following 
criteria: 

1. the individual's employer reported that the individual received SGA-
level earnings during the 5-month waiting period, and: 

2. the individual's employer reported additional SGA-level earnings 
that were earned after the waiting period and within 1 year of their 
date of disability onset. 

According to statutes and SSA regulations, when individuals have SGA-
level work activity during the waiting period, this normally means 
they will be considered not disabled and therefore not eligible for 
benefits. For these three individuals, we obtained detailed DI case-
file information from SSA to determine the facts and circumstances 
surrounding their potential overpayments. Because we selected a small 
number of individuals for further investigation, the results cannot be 
projected to the population of individuals receiving DI overpayments 
due to SGA in the 5-month waiting period. 

Trial Work Period Overpayments: 

Our analysis of the NDNH match file identified individuals who were in 
current pay status in the DI program as of December 2010 and who had 
SGA-level earnings after the completion of their trial work period 
(TWP) and 3 grace period months. We determined a month to be a TWP 
month if the monthly computed earnings after the date of entitlement 
was greater than the TWP threshold.[Footnote 51] After we identified 9 
TWP months, we identified 3 grace period months where monthly computed 
earnings were greater than the corresponding SGA threshold. Next, we 
identified potential overpayment months that met the following 
criteria: 

1. monthly computed earnings after the 3 month grace period were 
greater than the corresponding SGA threshold,[Footnote 52] and: 

2. DI payment records on the MBR showed that DI benefits were both due 
and paid for that month.[Footnote 53] 

Thus, to be included in our TWP overpayment population, beneficiaries 
had to be in current pay status as of December 2010 and have at least 
1 month of potential overpayments as defined by the criteria above. 
Our analysis determined there were 19,208 individuals that met these 
overpayment criteria. 

Our TWP overpayment population understates the number of individuals 
with potential overpayments beyond their trial work period for several 
reasons. First, because we were given limited access to the NDNH, our 
analysis is generally limited to the 15-month period from July 2009 to 
September 2010, which is the period for which we were able to capture 
both DI payment records on the MBR and earnings data on the NDNH. As a 
result, any individuals with material work activity outside these 15 
months may not be included in our TWP overpayment population. For 
example, if NDNH earnings data indicated the beneficiary completed all 
9 TWP months and 3 grace period months from October 2009 to September 
2010 (i.e., 12 months), but the next month of SGA-level earnings 
occurred in October 2010, which is outside our 15-month time frame, 
the beneficiary was not included in our TWP overpayment population. 
Figure 5 below illustrates the 15 months from July 2009 to September 
2010 for which our analysis captured both DI payment records on the 
MBR and earnings data on the NDNH.[Footnote 54] Second, because our 
calculation of potential overpayment months includes only months where 
DI payment records on the MBR showed that DI benefits were both due 
and paid for that month, our TWP overpayment population does not 
include individuals whose only months of SGA beyond the TWP occurred 
in months where benefits were due, but not paid. Similarly, our TWP 
overpayment population does not include individuals whose only months 
of SGA beyond the TWP occurred in months where benefits were paid, but 
not due. 

Figure 5: The 15 Months from July 2009 to September 2010 Is the Period 
for Which GAO Had Both Disability Insurance Data and Earnings Data: 

[Refer to PDF for image: illustration] 

November 2007-September 2010: 
Social Security Administration (SSA) Disability Insurance (DI) data. 

July 2009-June 2011: 
National Directory of New Hires (NDNH) earnings data (contains wages 
from the most-recently reported 8 quarters). 

July 2009-September 2010: 
15-month analysis window. 

Source: GAO. 

[End of figure] 

Next, we drew a simple random sample of 130 individuals from the TWP 
overpayment population and contacted the employers to verify the wages 
paid to the individuals. We completed requests from employers for 98 
individuals for a response rate of 76 percent.[Footnote 55] 
Nonresponses included sample items whose employers we could not 
locate, employers who were no longer in business, and employers who 
refused to cooperate with our requests. We asked employers who 
provided earnings data to identify payments that were not related to 
work activity, such as paid time off, extended sick leave, or post-
termination compensation. Many employers provided payroll reports 
indicating hours and payments by payment category, such as total 
payments for hours in regular work, hours in overtime work, and hours 
of vacation time. 

Using the earnings data employers provided, we calculated monthly 
earned income for each sample item and identified whether the 
beneficiaries' monthly earned income exceeded SGA during any month of 
the extended period of eligibility. Because employers use different 
payroll cycles and provided different levels of detail in their 
responses, we adhered to the following guidelines to standardize our 
calculation of monthly earned income: 

1. In consideration of SSA guidance regarding the timing of payments, 
we calculated monthly earned income according to the period in which 
payments were earned rather than when they were paid. However, if an 
employer's payroll reports indicated only the dates when payments were 
issued, we calculated monthly earned income according to those dates. 

2. In consideration of SSA guidance regarding the nature of payments, 
our calculation of monthly earned income excludes payments not related 
to work activity, such as payments for paid time off, vacation pay, 
and extended sick leave, if those payments covered the entire pay 
period, as defined by the employer. Thus, payments not related to work 
activity that were episodic, such as sick pay or vacation pay received 
during a pay period when the individual also performed work, are 
included in our calculation of monthly earned income. 

We then obtained additional DI program data on the MBR to estimate 
total program overpayments to-date for our sample items.[Footnote 56] 
Because we followed a probability procedure based on random 
selections, our sample is only one of a large number of samples that 
we might have drawn. Since each sample could have provided different 
estimates, we express our confidence in the precision of our 
particular sample's results as a 95 percent confidence interval. 

Trial Work Period Overpayment Examples: 

To provide examples of the circumstances under which SSA made 
potential overpayments to individuals with work activity beyond their 
trial work period, we randomly selected three beneficiaries from our 
trial work period sample who were among those beneficiaries receiving 
potential overpayments for at least 36 months (3 years). For these 
three individuals, we obtained detailed DI case-file information from 
SSA to determine the facts and circumstances surrounding their 
potential overpayments. Because we selected a small number of 
individuals for further investigation, the results cannot be projected 
to the population of individuals receiving DI overpayments due to SGA 
beyond the trial work period. 

Data Reliability Assessments: 

To determine the reliability of the SSA disability records and NDNH 
quarterly wage records, we reviewed documentation related to these 
databases and interviewed officials responsible for compiling and 
maintaining relevant DI and NDNH data. In addition, we performed 
electronic testing to determine the validity of specific data elements 
in the databases that we used to perform our work. We also reviewed 
detailed wage data from employers and DI program data from SSA for the 
statistical samples of individuals selected as described above to 
confirm that quarterly wage data from the NDNH indicated payments that 
were potentially improper from the DI program. On the basis of our 
discussions with agency officials and our own testing, we concluded 
that the data elements used for this report were sufficiently reliable 
for our purposes. 

To assess the extent to which SSA's enforcement operation detects 
potentially disqualifying work activity during the waiting period, we 
interviewed officials from SSA regarding the agency's internal 
controls for detecting and preventing overpayments due to work 
activity. We interviewed agency officials from SSA's policy offices to 
confirm our interpretations of SSA regulations and policies regarding 
work activity during the waiting period and beyond the trial work 
period. We also interviewed officials from SSA's operations offices to 
confirm the actions SSA took while reviewing the work activity for our 
nongeneralizable examples. We also examined SSA's mechanisms to detect 
potentially disqualifying work activity and compared them with 
Standards for Internal Control in the Federal Government.[Footnote 57] 

We conducted this performance audit from April 2012 to July 2013 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our objectives. 

[End of section] 

Appendix III: Monthly Earnings That Indicate a Trial Work Period or 
Substantial Gainful Activity: 

To be eligible for disability benefits, a person must be unable to 
engage in substantial gainful activity (SGA). A person who is earning 
more than a certain monthly amount (net of impairment-related work 
expenses) is ordinarily considered to be engaging in SGA. During a 
trial work period, a beneficiary receiving Social Security disability 
benefits may test her or his ability to work and still be considered 
disabled. The Social Security Administration (SSA) does not consider 
services performed during the trial work period as showing that the 
disability has ended until services have been performed in at least 9 
months (not necessarily consecutive) in a rolling 60-month period and 
1 additional month, at an SGA-level, after the trial work period has 
ended. Table 1 shows the amount of monthly earnings that trigger a 
trial work period month for calendar years 2001-2012. 

Table 1: Monthly Earnings That Trigger a Trial Work Period, 2001-2012: 

Year: 2001; 
Monthly earnings: $530. 

Year: 2002; 
Monthly earnings: $560. 

Year: 2003; 
Monthly earnings: $570. 

Year: 2004; 
Monthly earnings: $580. 

Year: 2005; 
Monthly earnings: $590. 

Year: 2006; 
Monthly earnings: $620. 

Year: 2007; 
Monthly earnings: $640. 

Year: 2008; 
Monthly earnings: $670. 

Year: 2009; 
Monthly earnings: $700. 

Year: 2010; 
Monthly earnings: $720. 

Year: 2011; 
Monthly earnings: $720. 

Year: 2012; 
Monthly earnings: $720. 

Source: SSA. 

[End of table] 

The amount of monthly earnings considered as SGA depends on whether a 
person's disability is for blindness or some other condition. The 
Social Security Act specifies a higher SGA amount for statutorily 
blind individuals and a lower SGA amount for nonblind individuals. 
Both SGA amounts generally change with changes in the national average 
wage index. Table 2 shows the amount of monthly earnings that 
ordinarily demonstrate SGA for calendar years 2001-2012. 

Table 2: Monthly Earnings That Demonstrate Substantial Gainful 
Activity (SGA), 2001-2012: 

Year: 2001; 
Blind: $1,240; 
Nonblind: $740. 

Year: 2002; 
Blind: $1,300; 
Nonblind: $780. 

Year: 2003; 
Blind: $1,330; 
Nonblind: $800. 

Year: 2004; 
Blind: $1,350; 
Nonblind: $810. 

Year: 2005; 
Blind: $1,380; 
Nonblind: $830. 

Year: 2006; 
Blind: $1,450; 
Nonblind: $860. 

Year: 2007; 
Blind: $1,500; 
Nonblind: $900. 

Year: 2008; 
Blind: $1,570; 
Nonblind: $940. 

Year: 2009; 
Blind: $1,640; 
Nonblind: $980. 

Year: 2010; 
Blind: $1,640; 
Nonblind: $1,000. 

Year: 2011; 
Blind: $1,640; 
Nonblind: $1,000. 

Year: 2012; 
Blind: $1,690; 
Nonblind: $1,010. 

Source: SSA. 

[End of table] 

[End of section] 

Appendix IV: Comments from the Social Security Administration: 

Social Security Administration: 
Office of the Commissioner: 
Baltimore, MD 21235-0001: 

July 16, 2013: 

Mr. Steve Lord, Director: 
Forensic Audits and Investigative Service: 
United States Government Accountability Office: 
441 G. Street, NW: 
Washington, DC 20548: 

Dear Mr. Lord, 

Thank you for the opportunity to review the draft report, "Disability 
Insurance: Work Activity Indicates Certain Social Security Disability 
Insurance Payments Were Potentially Improper" (GAO-13-635). Our 
response to the audit report contents, findings, and recommendation 
are enclosed. We also provided technical comments directly to your 
staff. 

If you have any questions, please contact me at (410) 965-0520. Your 
staff may contact Gary S. Hatcher, Senior Advisor for Records 
Management and Audit Liaison Staff, at (410) 965-0680. 

Sincerely, 

Signed by: 

Katherine Thornton: 
Deputy Chief of Staff: 

Enclosure: 

Comments On The Government Accountability Office Draft Report, 
"Disability Insurance: Work Activity Indicates Certain Social Security 
Disability Insurance Payments Were Potentially Improper" (GAO-13-635l: 

As described in our 2013-2016 Agency Strategic Plan goal of preserving 
the public's trust in our programs, improving payment accuracy is one 
of our highest priorities. According to our Fiscal Year 2012 Title II 
Payment Accuracy Report, our Disability Insurance (DI) non-medical
overpayment accuracy rate was 99.03 percent and our DI non-medical 
underpayment accuracy rate was 99.82 percent. While our payment 
accuracy rates are high, even small payment errors result in large 
costs to taxpayers and to DI beneficiaries. We strive to improve payment
accuracy, and we appreciate information provided by the Government 
Accountability Office (GAO) and others that will help us improve the 
stewardship of our programs. 

Our Fiscal Year 2012 Title II Payment Accuracy Report shows that the 
largest source of overpayment errors is DI beneficiary work activity 
that we identify through work continuing disability reviews (CDR). Our 
Office of Quality Performance (OQP) recently completed a quality 
review of our work CDR process. The review revealed that there are 
problems with the inconsistent and inaccurate application of the 
various work incentives involved in the Title II disability program. 
OQP recommended specialized training for staff on substantial gainful
activity (SGA) policy and the application of work incentives; and that 
our Operations component target work CDRs for in-line quality review, 
utilizing or developing, as appropriate, tools to profile and select 
cases based on certain criteria. We are determining how to implement 
these recommendations within the current budget environment. 

The GAO report acknowledges some of our efforts to improve the work 
CDR process. For example, we developed a predictive model that 
identifies beneficiaries who are at risk of high work-related 
overpayments and prioritizes those beneficiaries for work CDRs. We 
have also prioritized beneficiaries for work CDRs who are eligible for 
benefit increases due to earnings from work. These efforts will help 
reduce the number of beneficiaries with large overpayment amounts, but 
some overpayments will continue to occur because of the complexity of 
the Title II work incentive provisions, the SGA determination process, 
the annual Federal wage reporting process, and decreasing budget 
allocations. Work incentive simplification, quarterly Federal wage 
data, and sufficient budget appropriations are more promising methods 
of substantially reducing overpayments. 

The President's fiscal year (FY) 2014 budget proposal does include 
several provisions that focus on reducing overpayments. The budget 
proposal contains a provision for restructuring the Federal wage 
reporting process by moving from an annual reporting process to 
quarterly wage reporting. Increasing the timeliness of wage reporting 
will improve program integrity for a range of programs, including the 
Social Security disability programs. The President's FY 2014 budget
also includes a proposal to reauthorize our demonstration authority. 
This reauthorization would allow us to continue to test effective ways 
to boost employment and support return to work for current DI 
beneficiaries, as well as explore work incentive simplifications. 
Simplifying work incentives would make them easier for beneficiaries 
to understand and for us to administer, which could reduce 
overpayments. 

We point out that the GAO did not replicate the process we use to make 
SGA determinations. and GAO made assumptions that may not be 
consistent with our policy. First, GAO did not follow our process of 
identifying whether a beneficiary's work activity qualifies as an
unsuccessful work attempt, whether the beneficiary had impairment-
related work expenses (IRWE), or whether the work involved subsidies 
or special conditions. Second, for the five-month waiting period 
analysis, GAO assumes that every payment made after the five-month
waiting period is likely to be an improper payment instead of re-
establishing the disability onset date. Third, the GAO report notes 
that pay for medical leave may be included in some of the payroll 
data. We do not count payment for medical leave when making an SGA 
determination. As a result, the GAO report's limitations may lead to a 
substantial overstatement of the estimated amount of improper payments. 

To assess the extent that GAO estimates may overstate the dollar value 
of improper payments, we asked GAO to provide us with additional data. 
For the five-month waiting period example, we inferred from its 
estimate that 25 of the 98 people in the sample had at least one month 
of payroll data indicating their work activities during the waiting 
period might be SGA. We asked GAO for the number of the 25 
beneficiaries who had only one month of payroll data indicating SGA 
during the waiting period, the number who had only two months, the 
number who had only three months, etc. The data would allow us to 
assess the number of the 25 beneficiaries who might have had an 
unsuccessful work attempt. In addition, GAO selected 3 examples from a
subset of the 25 beneficiaries with payroll data indicating that they 
may have performed SGA in at least 1 month after the waiting period. 
We asked GAO for the exact number in its subset so we can assess the 
validity of its improper payment estimate to following our policy of 
reestablishing the disability onset date. The data would provide us 
with baseline data we may use for assessing GAO's recommendation. GAO 
has not provided the requested data that would have allowed us to do 
additional analysis. 

We also asked GAO to provide an additional estimate and confidence 
interval for the five-month waiting period overpayment amount. Rather 
than assuming every payment we made after the waiting period is an 
improper payment, the GAO could follow our policy of re-establishing the
disability onset date and calculating improper payments based on a re-
established onset date. While the estimate would not account for 
unsuccessful work attempts, IRWEs, subsidies, and special conditions, 
it would help us assess the validity of the GAO estimate. The 
additional data would also provide us with the data we need to address 
the GAO recommendation. GAO did not provide the requested data that 
would have allowed for refinement of the payment estimates. 

We recognize that improving payment accuracy is critical to preserving 
the public's trust in our program. Our ability to increase payment 
accuracy is ultimately determined by available resources. We must 
conduct all agency work within the funding levels set by our annual
appropriation. In the current fiscal environment, expansion of our 
earnings enforcement operation or work continuing disability review 
program would require additional administrative funding, or we would 
need to defer performing other agency priority work. The President's FY
2014 budget includes the proposals and the resources necessary to make 
meaningful increases in payment accuracy. We look forward to working 
with GAO, Congress, and others to improve the stewardship of the 
disability program. 

Recommendation: 

Assess the costs and feasibility of establishing a mechanism to detect 
potentially disqualifying earnings during all months of the waiting 
period, including those months of earnings that the Agency's 
enforcement operation does not currently detect and implement this 
mechanism to the extent that an analysis determines it is cost 
effective and feasible. 

Response: 

We agree. The data GAO gathered as part of this study could help us 
assess the costs and the feasibility of establishing such a mechanism. 
To perform our assessment, we request the detailed individual-level 
data GAO gathered. Using the GAO data, we will re-examine GAO's 
estimates using policy-compliant assumptions, and we will re-calculate 
the estimated amount of improper payments. We will develop 
administrative cost estimates by assuming that we would need to
investigate a subset of the 83,179 National Directory of New Hires 
(NDNH) cases for work activity during the five-month waiting period to 
find a subset of the GAO upper bound estimate of21 ,000 with an 
indication of at least one month of possible SGA during the waiting 
period. As stated in the GAO report, we must conduct detailed case 
investigations because: 

* As noted on page 23, the NDNH posts earnings quarterly, which is an 
improvement on the annual postings we use in our current enforcement 
operation, but still not monthly; 

* we must evaluate earnings when earned, and the NDNH postings are 
when earnings are paid; 

* many of the NDNH postings represent payments that are not work for 
wages (e.g., sick and vacation pay, disability payments, etc.) and 
based on our experience, these payments are most likely to occur right 
after disability onset, specifically in the waiting period; and; 

* we must investigate for IRWEs, subsidies, special conditions, and 
unsuccessful work attempts. 

We will examine whether we can reduce the number of cases we would 
need to investigate based on the characteristics of the cases. For 
example, indications of work activity in periods both before and after 
the waiting period might result in a more productive set of cases for 
our staff to investigate and, therefore, a greater return on 
investment. 

[End of section] 

Footnotes: 

[1] The more than 10 million beneficiaries we refer to here include 
about 0.2 million spouses and about 1.9 million dependent children. 

[2] See Social Security Administration and Medicare Boards of 
Trustees, Status of the Social Security and Medicare Programs: A 
Summary of the 2012 Annual Reports, accessed April 2013, [hyperlink, 
http://www.ssa.gov/oact/trsum/]. 

[3] 42 U.S.C. § 423(a)(1) and (c)(2). 

[4] 20 C.F.R. §§ 404.1571 and 404.1574(b)(2). The SGA level was $1,000 
per month in 2010 for beneficiaries with disabilities and $1,640 per 
month for blind beneficiaries. While the SGA amount for statutorily 
blind individuals has remained the same for fiscal years 2009 through 
2011, the SGA amount for nonblind individuals in 2009 was $980, and 
for 2010 and 2011 was $1,000. See 75 Fed. Reg. 65696 (Oct. 26, 2010); 
74 Fed. Reg. 55614 (Oct. 28, 2009); and 73 Fed. Reg. 64651 (Oct. 30, 
2008). 

[5] Throughout this report, we use the terms "substantial earnings 
from work" and "substantial earnings" to refer to SGA. According to 
SSA guidance, an unsuccessful work attempt during the waiting period 
will not preclude a finding of disability. For more information on 
what SSA considers an unsuccessful work attempt, see Social Security 
Administration, Program Operations Manual System (POMS), section DI 
24005.001, accessed April 2013, [hyperlink, 
https://secure.ssa.gov/poms.nsf/lnx/0424005001]. 

[6] For additional information on DI overpayments detected by SSA, see 
appendix I. 

[7] GAO, Disability Insurance: SSA Can Improve Efforts to Detect, 
Prevent, and Recover Overpayments, [hyperlink, 
http://www.gao.gov/products/GAO-11-724] (Washington, D.C.: July 27, 
2011). 

[8] GAO, Income Security: Overlapping Disability and Unemployment 
Benefits Should be Evaluated for Potential Savings, [hyperlink, 
http://www.gao.gov/products/GAO-12-764] (Washington, D.C.: July 31, 
2012). 

[9] The MBR is an electronic record of all DI beneficiaries and 
contains information on beneficiaries' entitlement status and benefit 
payments, among other information. The NDNH database contains 
quarterly wage data on individual employees, among other information. 

[10] We sorted the two lists of cases randomly and initially sampled 
100 from each population. Due to nonresponse, we selected supplemental 
samples until we achieved a sufficiently large sample size. The 
ultimate sample size depended on the particular response rates for 
each subpopulation. 

[11] It is impossible to determine from earnings data alone the extent 
to which SSA made improper disability benefit payments to these 
individuals. To adequately assess an individual's work status, a 
detailed evaluation of all the facts and circumstances should be 
conducted for all cases. This evaluation may include contacting the 
beneficiary and the beneficiary's physician to gather information on 
certain impairment-related work expenses, such as transportation costs 
and attendant care services, which are not considered in our analysis. 
On the basis of an evaluation of all facts and circumstances 
surrounding a case, SSA can determine if the individual is entitled to 
continue to receive disability payments or have such payments 
suspended. SSA had identified and established overpayments for some of 
the individuals we reviewed at the time of our audit. However, SSA had 
not identified potentially disqualifying work activity for other 
individuals we reviewed at the time of our audit. 

[12] Specifically, these three beneficiaries were randomly selected 
from those in our sample with SGA-level earnings during the waiting 
period and additional SGA earnings after the waiting period that were 
earned within 1 year of their alleged disability-onset date. According 
to SSA regulations, this level of work activity would normally result 
in a denial of disability benefits. 

[13] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[14] Social Security Amendments of 1956, Pub. L. No. 84-880, § 103, 70 
Stat. 807, 815-24. 

[15] 42 U.S.C. § 423 and 20 C.F.R. § 404.1572. 

[16] SGA amounts generally change with changes in the national average 
wage index. For more information on earnings that demonstrate SGA from 
2001 to 2012, see appendix III. 

[17] Specifically, eligible individuals must have worked 5 out of the 
last 10 years or 20 quarters out of the last 40 quarters. 42 U.S.C. § 
423(c)(1); 20 C.F.R. §§ 404.130, 404.132. 

[18] 42 U.S.C. § 423(a)(1) and (c)(2). According to SSA, the 5-month 
waiting period ensures that SSA does not pay benefits to persons who 
do not have long-term disabilities because this period is long enough 
to permit most temporary disabilities to be corrected or for 
individuals to show definite signs of probable recovery. 

[19] The first month counted as part of the waiting period can be no 
more than 17 months before the month of application, and benefits can 
be applied retroactively for up to 12 months. The waiting period does 
not apply to individuals who have been previous recipients of DI 
benefits in the 5 years prior to any current disability. 

[20] Social Security Administration, Annual Statistical Report on the 
Social Security Disability Insurance Program, 2010, SSA Publication 
no. 13-11827 (August 2011). 

[21] Su Liu and David C. Stapleton, "Longitudinal Statistics on Work 
Activity and Use of Employment Supports for New Social Security 
Disability Insurance Beneficiaries," Social Security Bulletin, 71 no. 
3 (2011). 

[22] 20 C.F.R. §§ 404.1589 - 1590. 

[23] We use the term "work CDRs" to describe "full" work CDRs in which 
a case is fully developed and staff fill out specific forms to receive 
work credit for completing a work CDR, as well as instances in which 
SSA staff perform limited development of beneficiary earnings because 
they determine that a full work CDR is not necessary (an activity that 
SSA refers to as a "work CDR action"). SSA also conducts medical CDRs 
to periodically assess beneficiaries' continuing medical eligibility 
for benefits. 

[24] SSA generally uses six times the monthly SGA amount, or $6,000 in 
2010, as the annual earnings cutoff. 

[25] In fiscal year 2010, the enforcement operation identified 
approximately 2 million records of which more than 531,000 were sent 
to SSA's processing centers and field offices for review. The 
remaining records did not meet SSA's criteria for conducting an 
enforcement work CDR. For more information on the results of the 
enforcement operation for fiscal years 2008 to 2010, see [hyperlink, 
http://www.gao.gov/products/GAO-11-724]. 

[26] The numbers may not add due to rounding. Using a different 
methodology that includes additional causes of overpayments not 
considered in our analysis, SSA estimated its DI overpayments in 
fiscal year 2011 were $1.62 billion, or 1.27% of all DI benefits in 
that fiscal year. 

[27] These individuals were DI beneficiaries in 2010, but the onset of 
their disabilities and their subsequent 5-month waiting periods were 
not necessarily in 2010. For example, the waiting periods for the 
three beneficiaries we randomly selected for further review occurred 
in 2009. 

[28] The numbers may not add due to rounding. 

[29] Specifically, these three beneficiaries were randomly selected 
from those in our sample with SGA-level earnings during the waiting 
period and additional SGA-level earnings after the waiting period that 
were earned within 1 year of their alleged disability onset date. 
According to SSA policy, when a beneficiary returns to work less than 
1 year after onset it may indicate the 12-month duration requirement 
for disability was not met and thus the beneficiary's disability claim 
must be denied. 

[30] 42 U.S.C. § 423(a)(1) and (c)(2). 

[31] For more information on what SSA considers an "unsuccessful work 
attempt," see SSA, POMS section DI 24005.001. 

[32] These individuals were beneficiaries in 2010, but their trial 
work periods did not necessarily begin and end in 2010. For example, 
the trial work periods for the three beneficiaries we randomly 
selected for further review occurred in various years, as described 
below. 

[33] [hyperlink, http://www.gao.gov/products/GAO-11-724]. 

[34] See GAO, Social Security Administration: Preliminary Observations 
on Key Management Challenges, [hyperlink, 
http://www.gao.gov/products/GAO-13-545T] (Washington, D.C.: Apr. 26, 
2013). 

[35] GAO, Disability Insurance: SSA Should Strengthen Its Efforts to 
Detect and Prevent Overpayments, [hyperlink, 
http://www.gao.gov/products/GAO-04-929] (Washington, D.C.: Sept. 10, 
2004). 

[36] [hyperlink, http://www.gao.gov/products/GAO-11-724]. 

[37] In a 2010 report, we recommended that SSA evaluate the 
feasibility of incorporating the twice-annual Automatic Earnings 
Reappraisal Operation (AERO) process in the agency's work CDR process. 
The AERO process provides a systematic recomputation of benefits for 
DI beneficiaries who continue to work after entitlement. As such, the 
AERO process may result in the release of higher benefits that SSA 
later determines are not payable as a result of a work CDR. As of 
April 2013, SSA does not use AERO to identify beneficiaries who work. 
GAO, Social Security Administration: Cases of Federal Employees and 
Transportation Drivers and Owners Who Fraudulently and/or Improperly 
Received SSA Disability Payments, [hyperlink, 
http://www.gao.gov/products/GAO-10-444] (Washington, D.C.: June 25, 
2010). 

[38] As mentioned, SSA's enforcement operation generates alerts for 
cases that exceed specified earnings thresholds. The enforcement 
operation alerts are then forwarded to processing centers for 
additional development by SSA staff in work CDRs. Work CDRs determine 
if beneficiaries are working above the SGA level. 

[39] In our case studies, we also found that SSA's reliance on 
beneficiaries to self-report increases in earnings inhibited its 
detection of potential DI overpayments due to work activity during the 
waiting period. Specifically, two of the three beneficiaries we 
examined did not report changes to their work activity during the 
waiting period, as required by SSA regulations. The third beneficiary 
we examined eventually reported her increased earnings to SSA, but SSA 
did not review these earnings in accordance with its own policies, and 
as a result, did not detect and establish an overpayment for this work 
activity. However, because we identified these deficiencies in our 
three nongeneralizable examples, and we were unable to establish the 
extent that these weaknesses are systemic, we are not making 
recommendations related to these issues. 

[40] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[41] The NDNH system posts quarterly wage records that, among other 
tests, can be verified through SSA's Enumeration Verification System, 
which verifies identity information, such as the name, date of birth, 
and SSN. 

[42] The number of individuals appearing in both populations was 297. 

[43] The Federal Parent Locator Service is a computerized national 
location network that provides address and SSN information to state 
and local child-support agencies for the purpose of locating parents 
to establish or enforce child support orders and to assist authorized 
persons in resolving parental kidnapping and child-custody cases. 

[44] To identify the employers, we used the federal and state employer 
identification number on the corresponding NDNH record. 

[45] Impairment-related work expenses include items such as 
transportation costs and attendant care services. 

[46] The date of entitlement is the first month for which a 
beneficiary is entitled to DI benefit payments and is the first full 
calendar month after the 5-month waiting period. As mentioned, we 
calculated monthly computed earnings by dividing the NDNH quarterly 
earnings by 3. 

[47] Our analysis accounts for the higher SGA amounts for individuals 
whose disability is blindness. The monthly earnings amounts that 
demonstrate SGA are described in greater detail in appendix III. 

[48] This analysis used DI payment data from the MBR covering the 36 
months from November 2007 through October 2010. 

[49] The method we used to calculate the response rate, The American 
Association for Public Opinion Research Response Rate 3, uses a 
calculation that includes an estimate of the proportion of the sample 
that is eligible to complete the survey among those whose eligibility 
for the survey is unknown. The estimate is derived using a formula 
that includes the number of respondents interviewed, the number of 
respondents known to be eligible that were not interviewed, and the 
number of respondents contacted that were determined to be ineligible. 

[50] We received an additional extract of MBR data as of January 2013 
for the individuals in our sample. 

[51] In accordance with 20 CFR § 404.1592(e), the TWP cannot begin 
before the month in which a beneficiary files an application for 
benefits. Thus, if the beneficiary's DI filing date was later than the 
date of entitlement, we considered the TWP to begin in the same month 
as the DI filing date. Our analysis also verified that the 9 TWP 
months did not span more than 60 consecutive months. As mentioned, we 
calculated monthly computed earnings by dividing the NDNH quarterly 
earnings by 3. 

[52] Our analysis accounts for the higher SGA amounts for individuals 
whose disability is blindness. The monthly earnings amounts that 
demonstrate SGA are described in greater detail in appendix III. 

[53] SSA may hold payments to beneficiaries for a month under certain 
circumstances, such as when a payment address is in question. In these 
instances, the MBR may indicate benefits due, but not paid for that 
month. 

[54] The NDNH maintains data only from the most-recently reported 24 
months. 

[55] The method we used to calculate the response rate, The American 
Association for Public Opinion Research Response Rate 3, uses a 
calculation that includes an estimate of the proportion of the sample 
that is eligible to complete the survey among those whose eligibility 
for the survey is unknown. The estimate is derived using a formula 
that includes the number of respondents interviewed, the number of 
respondents known to be eligible that were not interviewed, and the 
number of respondents contacted that were determined to be ineligible. 

[56] We received an additional extract of MBR data as of January 2013 
for the individuals in our sample. 

[57] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[End of section] 

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