Social Security:

More Must Be Done To Credit Earnings to Individuals' Accounts

HRD-87-52: Published: Sep 18, 1987. Publicly Released: Sep 18, 1987.

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GAO reviewed the effectiveness of the Social Security Administration's (SSA) process for crediting individuals' earnings to their individual accounts and the effect of uncredited or erroneously credited earnings on individuals' benefits and eligibility and on Social Security trust funds.

GAO found that: (1) SSA consistently reported less in earnings than the Internal Revenue Service (IRS), and the two agencies have not worked well together to resolve differences in employers' earning reports; (2) SSA contact with employers to resolve such differences resulted in recording about an additional $3.6 billion in earnings for 700,000 employees, although half of employers contacted did not provide information; (3) neither SSA nor IRS compiled sufficient data to identify the causes of differences and actions necessary to prevent or reduce future occurrences; (4) three of five individuals with uncredited earnings faced possible loss of about $17 a month in benefits; (5) SSA plans to resolve some backlogged uncredited earnings reports did not encompass all such reports, or address employers who did not respond to information requests, or ensure that employers saved employees' earning records; and (6) unless it can certify recorded earnings for previous tax years, SSA may not be entitled to a portion of tax revenues received based on IRS records.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Matter for Congressional Consideration

    Matter: Congress should consider amending section 201(a) of the Social Security Act to specify a time limit, such as the employer earnings record retention period specified by IRS, for the Secretary of Health and Human Services to certify earnings. If Congress chooses not to specify a time limit for certifying earnings, it should consider whether: (1) SSA should be required to relinquish trust fund money to general revenue funds for those earnings amounts that employers have reported to IRS, but which SSA has not recorded; or (2) the trust funds should be permitted to retain revenues based on IRS-recorded employers' earning reports.

    Status: Closed - Not Implemented

    Comments: Legislation has been considered but prospects for changes are not high. The House Subcommittee on Social Security is concerned about what is supposed to happen if an established time limit for certification is violated. Also, they lack a legislative vehicle to make this change.

    Recommendations for Executive Action

    Recommendation: The Secretaries of Health and Human Services and the Treasury should direct the Commissioners of Social Security and Internal Revenue to work together to revise the SSA-IRS interagency agreement to specify what will be reconciled and who will perform and complete the reconciliation.

    Agency Affected: Department of Health and Human Services

    Status: Closed - Implemented

    Comments: On July 12, 1988, the Commissioners of Internal Revenue and Social Security signed a new agreement that details responsibilities and actions that each agency will take to resolve past and future differences in employer wage reports sent to the two agencies.

    Recommendation: The Secretaries of Health and Human Services and the Treasury should direct the Commissioners of Social Security and Internal Revenue to work together to revise the SSA-IRS interagency agreement to specify what will be reconciled and who will perform and complete the reconciliation.

    Agency Affected: Department of the Treasury

    Status: Closed - Implemented

    Comments: On July 12, 1988, the Commissioners of Internal Revenue and Social Security signed a new agreement that details responsibilities and actions that each agency will take to resolve past and future differences in employer wage reports sent to each agency.

    Recommendation: The Secretaries of Health and Human Services and the Treasury should direct the Commissioners of Social Security and Internal Revenue to work together to develop and pursue a strategy for examining the backlogged and newer cases that emphasizes contacting employers: (1) who have multiple years of earnings differences; and (2) for whom the IRS record retention period of 4 years has already lapsed or will soon lapse.

    Agency Affected: Department of the Treasury

    Status: Closed - Implemented

    Comments: The new interagency agreement between IRS and SSA accomplishes this recommendation. It establishes timeframes for required data exchanges to ensure the 4-year record retention period will not lapse. In addition, SSA has already attempted to contact all employers with backlogged wage reports.

    Recommendation: The Secretaries of Health and Human Services and the Treasury should direct the Commissioners of Social Security and Internal Revenue to work together to develop and pursue a strategy for examining the backlogged and newer cases that emphasizes contacting employers: (1) who have multiple years of earnings differences; and (2) for whom the IRS record retention period of 4 years has already lapsed or will soon lapse.

    Agency Affected: Department of Health and Human Services

    Status: Closed - Implemented

    Comments: The new interagency agreement between IRS and SSA accomplishes this recommendation. It establishes timeframes for required data exchanges to ensure the 4-year record retention period will not lapse. In addition, SSA has already attempted to contact all employers with backlogged wage reports.

    Recommendation: The Secretaries of Health and Human Services and the Treasury should direct the Commissioners of Social Security and Internal Revenue to work together to develop and submit a plan of action, before submitting their fiscal year (FY) 1989 budget requests, to the congressional committees that have oversight and resource responsibilities for these agencies, specifying: (1) a time-phased schedule for eliminating the backlog and resolving new discrepancies; and (2) any additional resources that will be required.

    Agency Affected: Department of the Treasury

    Status: Closed - Implemented

    Comments: IRS and SSA worked together throughout FY 1988 to reach a new interagency agreement. The agreement was signed on July 12, 1988, and details actions each agency must take to reconcile differences in wage reports. The agreement covers both backlogged and future cases.

    Recommendation: The Secretaries of Health and Human Services and the Treasury should direct the Commissioners of Social Security and Internal Revenue to work together to develop and submit a plan of action, before submitting their fiscal year (FY) 1989 budget requests, to the congressional committees that have oversight and resource responsibilities for these agencies, specifying: (1) a time-phased schedule for eliminating the backlog and resolving new discrepancies; and (2) any additional resources that will be required.

    Agency Affected: Department of Health and Human Services

    Status: Closed - Implemented

    Comments: IRS and SSA worked together throughout FY 1988 to reach a new interagency agreement. The agreement was signed on July 12, 1988, and details responsibilities and actions each agency must take to reconcile differences in wage reports. The agreement covers both backlogged and future cases.

    Recommendation: The Secretaries of Health and Human Services and the Treasury should direct the Commissioners of Social Security and Internal Revenue to work together to determine the major causes that result in SSA and IRS recording different earnings totals, and take corrective action to prevent their occurrence or reduce their frequency.

    Agency Affected: Department of Health and Human Services

    Status: Closed - Implemented

    Comments: To reach a new agreement, IRS and SSA formed a task force that reviewed about 200 employer reports where differences existed to determine causes of reporting problems. Study results were used to establish actions to reduce the frequency of wage report problems.

    Recommendation: The Secretaries of Health and Human Services and the Treasury should direct the Commissioners of Social Security and Internal Revenue to work together to determine the major causes that result in SSA and IRS recording different earnings totals, and take corrective action to prevent their occurrence or reduce their frequency.

    Agency Affected: Congress

    Status: Closed - Implemented

    Comments: As a part of efforts to reach a new interagency agreement, an IRS and SSA task force reviewed about 200 employer reports to determine causes of problems. Results of the study were used to establish actions to reduce the frequency of wage report problems.

    Recommendation: The Secretary of Health and Human Services should direct the Commissioner of Social Security to require that the chief financial officer serve as the focal point for ensuring that: (1) earnings are certified, as required by law; (2) internal controls for the earnings recording system are adequate; and (3) intra-organizational conflicts that hinder reconciliation of earnings reports are resolved.

    Agency Affected: Department of Health and Human Services

    Status: Closed - Implemented

    Comments: The chief financial officer was given the responsibility to implement an improved reconciliation process.

    Recommendation: The Secretary of Health and Human Services should direct the Commissioner of Social Security to assess the actual effect of IRS-SSA reconciliation tolerances on individuals' eligibility and benefits to determine the equity and reasonableness of the tolerances, adopting tolerances, if appropriate, based on this assessment.

    Agency Affected: Department of the Treasury

    Status: Closed - Implemented

    Comments: SSA conducted a study as recommended. On May 17, 1988, the Commissioner of Social Security lowered the tolerance used in deciding whether to reconcile discrepant wage reports. The study showed that some beneficiaries could lose benefits if the tolerance was retained. As a result, SSA will attempt to reconcile about 500,000 employer reports previously excluded by using the former tolerance.

    Recommendation: The Secretary of Health and Human Services should direct the Commissioner of Social Security to immediately alert employers for whom SSA and IRS have recorded different earnings totals for each year from 1978 through 1982, asking them to retain their employees' earnings records for the year or years that SSA and IRS records indicate are missing or discrepant, thus minimizing the possible loss of data.

    Agency Affected: Department of Health and Human Services

    Status: Closed - Implemented

    Comments: By April 15, 1988, SSA had sent at least one letter to every employer involved in its reconciliation process. This letter informed employers of the questions SSA had about their specific wage reports and requested information to resolve the existing differences.

    Recommendation: The Secretary of Health and Human Services should direct the Commissioner of Social Security to gather data on employers' unwillingness to respond to requests for verification of employees' prior years' earnings and determine whether enforcement authority for SSA is warranted, considering IRS ability to provide enforcement assistance.

    Agency Affected: Department of the Treasury

    Status: Closed - Implemented

    Comments: The new interagency agreement with IRS provides that SSA will refer any cases where it does not receive a reply from employers. IRS will assess penalties against nonfiling employers who have failed to respond to SSA and IRS requests for information.

    Recommendation: The Secretary of the Treasury should direct the Commissioner of Internal Revenue to reassess the decision to further delay providing data to SSA for the 1979 earnings of self-employed individuals, which SSA needs to ensure the accuracy of benefit payments.

    Agency Affected: Department of Health and Human Services

    Status: Closed - Implemented

    Comments: Beginning September 16, 1988, IRS started shipping correcting data to SSA. The process was completed by the end of September 1988. It will take SSA several months to evaluate the data and update the affected accounts.

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