OFFICE OF
THE INSPECTOR GENERAL

SOCIAL SECURITY ADMINISTRATION

ADJUSTMENT OF WIDOW'S
INSURANCE BENEFITS
AT FULL RETIREMENT AGE

May 2007

A-01-07-27122

AUDIT REPORT

Mission

By conducting independent and objective audits, evaluations and investigations, we inspire public confidence in the integrity and security of SSA's programs and operations and protect them against fraud, waste and abuse. We provide timely, useful and reliable information and advice to Administration officials, Congress and the public.

Authority

The Inspector General Act created independent audit and investigative units, called the Office of Inspector General (OIG). The mission of the OIG, as spelled out in the Act, is to:

Conduct and supervise independent and objective audits and investigations relating to agency programs and operations.
Promote economy, effectiveness, and efficiency within the agency.
Prevent and detect fraud, waste, and abuse in agency programs and operations.
Review and make recommendations regarding existing and proposed legislation and regulations relating to agency programs and operations.
Keep the agency head and the Congress fully and currently informed of problems in agency programs and operations.

To ensure objectivity, the IG Act empowers the IG with:

Independence to determine what reviews to perform.
Access to all information necessary for the reviews.
Authority to publish findings and recommendations based on the reviews.

Vision

We strive for continual improvement in SSA's programs, operations and management by proactively seeking new ways to prevent and deter fraud, waste and abuse. We commit to integrity and excellence by supporting an environment that provides a valuable public service while encouraging employee development and retention and fostering diversity and innovation.

MEMORANDUM

Date: May 14, 2007

To: The Commissioner

From: Inspector General

Subject: Adjustment of Widow's Insurance Benefits at Full Retirement Age (A-01-07-27122)

OBJECTIVE

Our objective was to determine whether the benefits to widow(er)s were properly adjusted when they attained full retirement age (FRA).

BACKGROUND

The Social Security Administration (SSA) administers the Old-Age, Survivors and Disability Insurance program under Title II of the Social Security Act. The program provides monthly benefits to retired or disabled workers and their families and to survivors of deceased workers.

Some individuals are dually entitled to both disability benefits based on their own earnings history and widow's benefits based on their deceased spouses' earnings. Although disability benefits are generally not reduced based on the age of the beneficiary, widow's benefits are reduced when beneficiaries elect to receive them prior to their FRA. However, if the widow's benefit started when the disability benefit began or later, the widow's benefits are adjusted-and the reduction for age is eliminated-when disability ends and retirement benefits are awarded. Usually, this occurs when the beneficiaries attain FRA. In December 2005, about 3.6 million beneficiaries were dually entitled to both retirement benefits and widow's benefits.

SSA staff are instructed to prepare manual diaries to control cases in which disability beneficiaries become entitled to reduced widow's benefits to ensure the appropriate adjustments are made when disability ends and retirement benefits are awarded. In addition, SSA's Title II Redesign system produces alerts when these beneficiaries attain FRA. SSA staff then determine whether adjustments to the widow's benefits are needed. Because the Agency does not currently have an automated system to make the necessary adjustments, employees must take manual actions to ensure these beneficiaries are paid correctly.

In November 2006, an SSA employee informed us of a population of 10,210 widows whose benefits appeared to not have been properly adjusted when they attained FRA. We randomly sampled 200 beneficiaries from this population for detailed analysis. (See Appendix A for additional information about our scope, methodology and sample results.)

RESULTS OF REVIEW

We found that the benefits to most of the widows in our population were not properly adjusted when the beneficiaries attained FRA. As a result, the widows were not paid all of the benefits that were due them. Based on the results of our sample, we estimate that about 9,751 beneficiaries were underpaid approximately $113.7 million through November 2006. In addition, if SSA does not take action to correct the benefits paid to these widows, we estimate they will continue to be underpaid about $137.8 million over the rest of their lives.

SAMPLE RESULTS

SSA did not properly adjust the benefits to 194 of the 200 widows in our sample (about 97 percent) when the widows attained FRA. Although the Agency detected 3 of these cases prior to our audit and took corrective action, the remaining 191 cases went unresolved. These 191 widows were owed approximately $2.2 million through November 2006.

For example, one widow attained age 65 in August 1997 and her disability benefits were converted to retirement benefits. At that time, she was entitled to receive an additional $222 per month in widow's benefits. As of November 2006-when she was 74 years old-her benefits had not been adjusted and, as a result, she was owed approximately $27,869. Unless SSA takes action to correct her benefit payments, we estimate she will continue to be underpaid an additional $31,947 in the future.

We found that 27 of the 191 underpaid widows in our sample died and never received the additional amounts due them. The widows were owed about $260,039 prior to their deaths. For example, one widow attained age 65 in January 1993. At that time, SSA should have begun paying her an additional $103 per month in widow's benefits. She died in August 2006 (at the age of 79) without receiving the additional $19,827 that was owed her.

Because SSA does not currently have an automated system to make the necessary adjustments, manual actions are needed to ensure the widows are paid correctly. Agency staff acknowledged that these cases are error prone. SSA's Office of Automation Support is in the planning and analysis stages of automating dual entitlement processing in the Title II Redesign system. SSA's Office of Quality Performance plans to begin a project to identify all beneficiaries-living and deceased-whose widow's benefits were not properly adjusted when disability benefits ended and retirement benefits began.

SSA's Office of Systems could not confirm whether the cases in our audit were previously identified and alerted through its automated systems. Therefore, we could not determine whether the benefits went uncorrected because the cases were not identified for adjustment, or whether they were in fact alerted but were not properly corrected by SSA staff.

UNDERPAYMENTS TO THE WIDOWS IN OUR POPULATION

We estimate that about 9,751 of the 10,210 beneficiaries in our population were underpaid because their benefits were not adjusted when they attained FRA and their disability benefits were converted to retirement benefits. On average, 121 months (or 10 years) elapsed since the beneficiaries attained FRA. The following table summarizes the number of months that the beneficiaries in our population have been potentially underpaid.

Period Potentially Underpaid Number of Beneficiaries Percent
Up to 3 years 556 5%
4 to 6 years 1,469 14%
7 to 9 years 3,285 32%
10 to 12 years 2,633 26%
13 to 15 years 885 9%
16 to 18 years 617 6%
19 to 21 years 264 3%
Over 21 years 501 5%
Total 10,210 100%
Average Period 10 Years
Median Period 9 Years

CONCLUSION AND RECOMMENDATIONS

The benefits to most of the widows in our population were not properly adjusted when the beneficiaries attained FRA. As a result, we estimate they have been underpaid about $113.7 million through November 2006. In addition, we estimate these widows will continue to be underpaid about $137.8 million in the future unless SSA takes action to correct the benefits paid to them. Therefore, we recommend SSA:
1. Review the 10,210 cases in our population and take action to pay the additional amounts due the widows.
2. Remind staff of the proper procedures for: (a) establishing diaries when adjustments will be needed in the future; and (b) adjusting widow's benefits when disability ends and retirement benefits are awarded.
3. Review the automated programs in use and modify them if necessary to ensure all widows' cases requiring adjustment are properly identified and controlled.

AGENCY COMMENTS

SSA agreed with our recommendations. (See Appendix B.)

Patrick P. O'Carroll, Jr.

Appendices

APPENDIX A - Scope, Methodology and Sample Results
APPENDIX B - Agency Comments
APPENDIX C - OIG Contacts and Staff Acknowledgments

Appendix A
Scope, Methodology and Sample Results

To accomplish our objective, we:

Reviewed applicable sections of the Social Security Act and Social Security Administration (SSA) regulations, policies and procedures.

Obtained a file of the 10,210 beneficiaries-identified by an SSA employee in September 2004-whose benefits appeared to have not been properly adjusted when they attained full retirement age (FRA) and their disability benefits were converted to retirement benefits.

Randomly sampled 200 beneficiaries from the population for detailed analysis. For each sampled beneficiary, we reviewed the electronic benefit records on SSA's systems.

If benefits should have been adjusted at FRA but were not, we calculated the amount of benefits that should have been paid between the beneficiary's FRA and the earlier of: (1) November 2006, or (2) his/her date of death.

If the beneficiary was currently receiving benefits, we multiplied the last monthly underpayment amount by the number of months the beneficiary was expected to live beyond November 2006, to estimate the amount of additional benefits that will be owed in the future.

We consulted staff in SSA's Office of Systems to gain an understanding of how the Agency's systems identify these cases.

We performed our audit between November 2006 and January 2007 in Boston, Massachusetts. We tested the data obtained for our audit and determined it to be sufficiently reliable to meet our objective. The principal entities audited were SSA's Program Services Centers under the Deputy Commissioner for Operations and the Office of Retirement and Survivors Insurance Systems under the Deputy Commissioner for Systems. We conducted our audit in accordance with generally accepted government auditing standards.

POPULATION AND SAMPLE INFORMATION

Table 1: Population by Program Service Center.Responsible Program Service Center Number of Beneficiaries
Northeastern Program Service Center 2,090
Mid-Atlantic Program Service Center 1,584
Southeastern Program Service Center 1,403
Great Lakes Program Service Center 1,533
Western Program Service Center 2,037
Mid-America Program Service Center 1,449
Office of International Operations 114
Total 10,210

Table 2: Population by State.
State Count State Count
Alabama 135 Montana 57
Alaska 18 Nebraska 34
Arizona 208 Nevada 83
Arkansas 158 New Hampshire 73
California 1,120 New Jersey 349
Colorado 195 New Mexico 50
Connecticut 138 New York 850
Delaware 36 North Carolina 231
District of Columbia 13 North Dakota 41
Florida 551 Ohio 423
Georgia 226 Oklahoma 133
Hawaii 27 Oregon 170
Idaho 57 Pennsylvania 537
Illinois 416 Puerto Rico 221
Indiana 168 Rhode Island 77
Iowa 103 South Carolina 158
Kansas 49 South Dakota 37
Kentucky 124 Tennessee 170
Louisiana 147 Texas 400
Maine 89 Utah 76
Maryland 105 Vermont 40
Massachusetts 311 Virginia 148
Michigan 355 Washington 231
Minnesota 120 West Virginia 111
Mississippi 114 Wisconsin 177
Missouri 219 Wyoming 17
Outside the United States 114

Table 3: Population and sample size.
Population Size 10,210
Sample Size 200

Table 4: Beneficiaries who were underpaid because their benefits were not properly adjusted when disability ended and retirement benefits were awarded at full retirement age.

Number of widows Additional benefits owed through November 2006 Estimated additional benefits to be owed after November 2006
Identified in Sample 191 $2,227,658 $2,699,483
Point Estimate 9,751 $113,721,946 $137,808,597
Projection Lower Limit 9,425 $102,365,525 $121,822,335
Projection Upper Limit 9,966 $125,078,367 $153,794,858
Note: All projections are at the 90 percent confidence level.

Table 5: Beneficiaries in Table 4 who died before receiving the additional benefits due them.
Number of widows Dollars Underpaid
Identified in Sample 27 $260,039
Point Estimate 1,378 $13,274,991
Projection Lower Limit 995 $8,275,097
Projection Upper Limit 1,846 $18,274,885
Note: All projections are at the 90 percent confidence level.

Appendix B
Agency Comments

MEMORANDUM

Date: April 25, 2007

To: Patrick P. O'Carroll, Jr.
Inspector General

From: Larry W. Dye

Subject: Office of the Inspector General (OIG) Draft Report, "Adjustment of Widow's Insurance Benefits at Full Retirement Age" (A-01-07-27122)--INFORMATION

We appreciate OIG's efforts in conducting this review. Our comments on the draft report content and recommendations are attached.

Please let me know if we can be of further assistance. Staff inquiries may be directed to
Ms. Candace Skurnik, Director, Audit Management and Liaison Staff, at extension 54636.

Attachment:
SSA Response

COMMENTS ON THE OFFICE OF THE INSPECTOR GENERAL (OIG) DRAFT REPORT, "ADJUSTMENT OF WIDOW'S INSURANCE BENEFITS AT FULL RETIREMENT AGE" (A-01-07-27122)

Thank you for the opportunity to review and comment on the draft report. Our responses to the specific recommendations are provided below.

Recommendation 1

The Social Security Administration (SSA) should review the 10,210 cases in our population and take action to pay the additional amounts due the widows.

Response

We agree. The processing centers will complete reviewing the 10,210 cases by the end of fiscal year 2007.

Recommendation 2

SSA should remind staff of the proper procedures for: (a) establishing diaries when adjustments will be needed in the future; and (b) adjusting widow's benefits when disability ends and retirement benefits are awarded.

Response

We agree. We will issue an Administrative Message (AM) with reminders in April 2007. Specifically, the AM will cover: (a) establishing diaries when adjustments will be needed in the future; (b) adjusting widow's benefits when disability ends and retirement benefits are awarded; and (c) explaining the benefit rules to members of the public to help widow(er)s make appropriate claim decisions and better inform them of the benefits that will be available once full retirement age is reached.

Recommendation 3

SSA should review the automated programs in use and modify them if necessary to ensure all widows' cases requiring adjustment are properly identified and controlled.

Response

We agree. Our policy and operations staff will review the existing automated programs in use and explore options to modify them to ensure all widows' cases requiring adjustment are properly identified and controlled.
[SSA also provided technical comments.]

Appendix C

OIG Contacts and Staff Acknowledgments
OIG Contacts
Judith Oliveira, Director, Boston Audit Division (617) 565-1765
Jeffrey Brown, Audit Manager (617) 565-1814

Acknowledgments
In addition to those named above:
Chad Burns, Auditor
Kevin Joyce, IT Specialist
Frank Salamone, Auditor
Melinda Tabicas, Auditor
David York, Program Analyst

For additional copies of this report, please visit our web site at www.socialsecurity.gov/oig or contact the Office of the Inspector General's Public Affairs Specialist at (410) 965-3218. Refer to Common Identification Number A-01-07-27122.

Overview of the Office of the Inspector General
The Office of the Inspector General (OIG) is comprised of our Office of Investigations (OI), Office of Audit (OA), Office of the Chief Counsel to the Inspector General (OCCIG), and Office of Resource Management (ORM). To ensure compliance with policies and procedures, internal controls, and professional standards, we also have a comprehensive Professional Responsibility and Quality Assurance program.

Office of Audit
OA conducts and/or supervises financial and performance audits of the Social Security Administration's (SSA) programs and operations and makes recommendations to ensure program objectives are achieved effectively and efficiently. Financial audits assess whether SSA's financial statements fairly present SSA's financial position, results of operations, and cash flow. Performance audits review the economy, efficiency, and effectiveness of SSA's programs and operations. OA also conducts short-term management and program evaluations and projects on issues of concern to SSA, Congress, and the general public.

Office of Investigations
OI conducts and coordinates investigative activity related to fraud, waste, abuse, and mismanagement in SSA programs and operations. This includes wrongdoing by applicants, beneficiaries, contractors, third parties, or SSA employees performing their official duties. This office serves as OIG liaison to the Department of Justice on all matters relating to the investigations of SSA programs and personnel. OI also conducts joint investigations with other Federal, State, and local law enforcement agencies.

Office of the Chief Counsel to the Inspector General
OCCIG provides independent legal advice and counsel to the IG on various matters, including statutes, regulations, legislation, and policy directives. OCCIG also advises the IG on investigative procedures and techniques, as well as on legal implications and conclusions to be drawn from audit and investigative material. Finally, OCCIG administers the Civil Monetary Penalty program.

Office of Resource Management
ORM supports OIG by providing information resource management and systems security. ORM also coordinates OIG's budget, procurement, telecommunications, facilities, and human resources. In addition, ORM is the focal point for OIG's strategic planning function and the development and implementation of performance measures required by the Government Performance and Results Act of 1993.