Social Security: Improvements to Claims Process Could Help People Make Better Informed Decisions about Retirement Benefits
Highlights
What GAO Found
GAO's review of nine surveys and academic studies, and interviews with retirement experts, suggest that many individuals do not fully understand key details of Social Security rules that can potentially affect their retirement benefits. For example, while some people understand that delaying claiming leads to higher monthly benefits, many are unclear about the actual amount that benefits increase with claiming age. The studies and surveys also found widespread misunderstanding about whether spousal benefits are available, how monthly benefits are determined, and how the retirement earnings test works. Understanding these rules and other information, such as life expectancy and longevity risk, could be central to people making well-informed decisions about when to claim benefits. By having this understanding of retirement benefits, people would also be in a better position to balance other factors that influence when they should claim benefits, including financial need, poor health, and psychological factors.
The Social Security Administration (SSA) makes comprehensive information on key rules and other considerations related to claiming retirement benefits available through its publications, website, personalized benefits statements, and online calculators. However, GAO observed 30 in-person claims at SSA field offices and found that claimants were not consistently provided key information that people may need to make well-informed decisions. For example, in 8 of 26 claims interviews in which the claimant could have received higher monthly benefits by waiting until a later age, the claims specialist did not discuss the advantages and disadvantages of delaying claiming. Further, only 7 of the 18 claimants for whom the retirement earnings test could potentially apply were given complete information about how the test worked. SSA's Program Operations Manual System (POMS) states that claims specialists should explain the advantages and disadvantages of filing an application so that the individual can make an informed filing decision. The problems we observed during the claims interviews occurred in part because the questions included in the claims process did not specifically cover some key information.
Online applicants have more access to key information on the screen or through tabs and pop-up boxes as they complete an application. However, similar to in-person interviews, the online application process does not inform claimants that benefits are based on the highest 35 years of earnings or that life expectancy is an important consideration in deciding when to claim.
Why GAO Did This Study
Many eligible individuals claim Social Security retirement benefits at the earliest eligibility age, even though they would receive higher benefits if they waited until older ages. In order to make an informed decision about when to claim, people need to understand how various Social Security rules and other factors affect benefit amounts. GAO was asked to examine these issues.
This report examines (1) the extent to which people understand Social Security rules affecting their retirement benefits; and (2) what information SSA provides to individuals to enable them to make informed claiming decisions. GAO observed a demonstration of the online claims process and a nongeneralizable sample of 30 in-person claims applications and inquiries in 7 field offices; reviewed applicable federal laws, regulations, and agency documentation; reviewed surveys and academic studies, selected in part based on expert referrals and a comprehensive review of the research literature; and interviewed Social Security experts and agency officials.
Recommendations
GAO is making six recommendations to SSA, including that SSA take steps to ensure that claims specialists provide information on delayed benefits that is consistent with POMS, and that the claims process provides claimants better information on the retirement earnings test. SSA generally agreed with our recommendations. recommendations.ns.ommendations.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Social Security Administration |
Priority Rec.
To ensure that key information provided by claims specialists to potential claimants of Social Security retirement benefits is clear and consistent with POMS, the Commissioner of the SSA should take steps to ensure when applicable, claims specialists inform claimants that delaying claiming will result in permanently higher monthly benefit amounts, and at least offer to provide claimants their estimated benefits at their current age, at full retirement age (FRA) (unless the claimant is already older than FRA), and age 70. |
On 10/19/16, SSA sent an administrative message to technicians (including claims representatives who discuss claiming with clients in field offices or over the phone) reminding them to 1) inform claimants that delaying results in permanently higher benefits; and 2) provide estimated benefits at different claiming ages. SSA followed up this guidance with another administrative message in March 2018 reinforcing "month of election" policy, as stated in the POMS, that claims representatives should review a claimant's benefits for which they are currently eligible, along with benefits at their earliest possible month of election, at FRA, and at age 70. SSA also informed GAO in August 2018 that they plan to update the POMS toward the end of every calendar year, at which point they will remind claims technicians of this policy.
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| Social Security Administration | To ensure that key information provided by claims specialists to potential claimants of Social Security retirement benefits is clear and consistent with POMS, the Commissioner of the SSA should take steps to ensure claims specialists understand that they should avoid the use of breakeven analysis to compare benefits at different claiming ages. |
In March 2020, SSA introduced a training video to claims technicians about information to present to potential retirement benefit claimant. The training emphasized that "It is important to remember that you are not to discuss breakeven points with the claimant." Further, it said that information about benefit should present monthly benefits at different claiming ages, and not "total SSA benefits paid for the year or time period." It went on to provide a counter-example of what not to present that included total accumulated monthly benefits over a period. Finally, it presented stylized scenarios showing a technician presenting information about benefit at different claiming ages correctly -- giving monthly benefit at different claiming ages -- and incorrectly -- giving accumulated benefits until full retirement age. This followed a 10/19/16 message SSA sent to technicians (including claims representatives who discuss claiming with clients in field offices or over the phone) reminding them not to use breakeven analysis or discuss breakeven points with claimants to compare benefits at different claiming ages.
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| Social Security Administration | To ensure potential claimants are consistently provided with key information during the claiming process to help them make informed decisions about when to claim benefits, SSA should take steps to ensure that when applicable, claims specialists inform claimants that monthly benefit amounts are determined by the highest (indexed) 35 years of earnings, and that in some cases, additional work could increase benefits. |
SSA reported in formal agency comments that, as appropriate, it will issue a reminder to technicians or include instructions in SSA's Program and Operations Manual System (POMS) to reinforce the instructions. As of August 2018, POMS (GN 01010.011) has been updated to remind claims technicians that they are to "inform claimants, when applicable, that monthly benefit amounts are determined using the highest 35 years of indexed earnings and, that in some cases, additional work could increase the benefit amount." GAO considers this recommendation closed.
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| Social Security Administration | To ensure potential claimants are consistently provided with key information during the claiming process to help them make informed decisions about when to claim benefits, SSA should take steps to ensure that when appropriate, claims specialists clearly explain the retirement earnings test and inform claimants that any benefits withheld because of earnings above the earnings limit will result in higher monthly benefits starting at FRA. |
In a March 2020 training video to claims technicians, SSA advised technicians to explain to potential claimant that "If an individual is under FRA or in the year of FRA and still working, clearly explain the annual earnings test. Inform claimants that if, after filing, we withhold some of their retirement benefits because of their earnings, the system will automatically re-compute the monthly benefit at FRA to adjust the reduction months..." In addition, the training included a stylized scenario showing a technician explaining to a claimant that "after filing, we withhold some of your retirement benefits because of your earnings, the system will automatically re-compute the monthly benefit at [f]ull retirement age to adjust the reduction months." This followed a 10/19/16 administrative message SSA sent to technicians reminding them to inform claimants that any amounts withheld due to earnings (over limits) will result in higher benefits later on. Further, POMS RS 02501.021 (The Earnings Test) instructs that "technicians must clearly explain the relationship between work activity and the [annual earnings test] to all beneficiaries under FRA," including that withheld benefits will result in higher monthly benefits starting at FRA.
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| Social Security Administration | To ensure potential claimants are consistently provided with key information during the claiming process to help them make informed decisions about when to claim benefits, SSA should take steps to ensure that claims specialists explain that lump sum retroactive benefits will result in a permanent reduction of monthly benefits. For the online claiming process, SSA should evaluate removing or revising the online question that asks claimants to provide a reason for not choosing retroactive benefits. |
SSA stated that it will issue a reminder to technicians, instructing them to explain that a lump sum retroactive benefit would result in a permanent reduction in monthly benefits; or include instructions in SSA's Program and Operations Manual System (POMS). As of February 2018, SSA revised POMS GN 00204.030 to add "If a claimant is eligible and elects retroactivity, explain the effect the retroactive payment will have on the ongoing monthly benefit amount when electing to start benefits in a retroactive month at any time before age 70 (i.e., taking the lump sum payment will permanently reduce the ongoing monthly benefit amount)." In July 2018, SSA informed GAO that it had reviewed this question but had decided not to revise the online wording or remove this question from the online application process, saying that it provided useful confirmation of the claimant's intention to file for benefits.
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| Social Security Administration | To ensure potential claimants are consistently provided with key information during the claiming process to help them make informed decisions about when to claim benefits, SSA should take steps to ensure that the claims process include basic information on how life expectancy and longevity risk may affect the decision to claim benefits. |
SSA updated Pub No. 05-10147 to mention that: 1) monthly benefits are higher for the rest of one's life the longer one delays claiming; 2) retirement may be longer than you think; and 3) for married couples, delaying claiming may increase survivor benefits. SSA also added a new question on this topic to its frequently asked questions (FAQ) page, "At what age should I start receiving my Social Security Retirement benefits?" The answer provides key information for individuals to consider, and links to the newly updated publication, the Retirement Estimator tool, and other resources that SSA offers. In POMS GN 00204.039, on the month of election decision by claimants, SSA guidance now says "when directing claimants to publications or website information, make sure to inform them about specific resources such as the Life Expectancy calculator and SSA mortality reports which may affect the claimant's decisions."
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