OFFICE OF
THE INSPECTOR GENERAL

SOCIAL SECURITY ADMINISTRATION

PAYMENTS TO SPOUSES
ELIGIBLE FOR HIGHER
RETIREMENT BENEFITS

December 2008

A-09-08-18007

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: December 16, 2008 Refer To:

To: The Commissioner

From: Inspector General

Subject: Payments to Spouses Eligible for Higher Retirement Benefits (A 09 08 18007)

OBJECTIVE

Our objective was to determine whether beneficiaries receiving spousal benefits were eligible to receive higher retirement benefits on their own earnings records.

BACKGROUND

The Social Security Administration (SSA) administers the Old Age, Survivors and Disability Insurance program under Title II of the Social Security Act. This program provides monthly benefits to retired and/or disabled workers and their families and to survivors of deceased workers. Retired workers’ families include benefits for spouses; however, spouses with sufficient earnings, referred to as quarters of coverage, may become dually entitled to Title II benefits on their own earnings record.

Individuals receiving spousal benefits may have also earned sufficient quarters of coverage to be eligible for higher retirement benefits on their own earnings record. Their retirement benefits may be further increased for any month in which they did not receive a monthly benefit after full retirement age (FRA). The amount of the increase, referred to as a delayed retirement credit (DRC), depends on the number of months an individual was at FRA or older, fully insured, and eligible for retirement benefits but did not receive a monthly benefit. A DRC is earned for each month beginning at FRA up to age 70.

SSA annually performs the Widow(er)’s Insurance Benefits/Retirement Insurance Benefits (WIB/RIB) operation to identify and notify surviving spouses who are eligible for higher retirement benefits at FRA and age 70. The WIB/RIB operation provides surviving spouses with up to three notices during their lifetime: at FRA, age 70, and approximately 1 year after age 70. SSA does not send similar notices to spouses who are eligible for higher retirement benefits.

We estimate that, as of May 2007, there were approximately 123,000 spousal beneficiaries over age 70 who were fully insured and eligible for retirement benefits on their own earnings records.

RESULTS OF REVIEW

SSA’s controls and procedures did not always ensure that spouses receive the highest benefits due them at retirement age. This occurred because SSA did not have procedures in place to identify and notify spouses when they became eligible for higher benefits on their own earnings records as a result of DRCs and qualifying quarters of coverage. Specifically, we estimated

• 13,580 spouses were eligible for an additional $123.7 million in retirement benefits from February 1993 to January 2008 had they been paid on their own earnings records after attaining age 70. On average, each spouse could have received an additional $9,112 in benefits.

• Of these individuals, 12,340 spouses could receive an additional $209.0 million in retirement benefits over their remaining life expectancies. On average, each spouse could receive an additional $16,937 in benefits.

We also estimate that 4,940 spouses were eligible for an additional $27.3 million in retirement benefits from April 1986 to October 2003 had they been paid on their own earnings records between FRA and age 70 (see Appendix C). On average, each spouse could have received an additional $5,522 in benefits.

Spouses Eligible for Higher Benefits at Age 70

We identified 6,170 beneficiaries who were receiving spousal benefits and later became fully insured and eligible for retirement benefits on their own earnings records. Of the 200 spouses in our sample, 22 could have received $200,544 in additional payments after age 70 had they been notified of their eligibility for higher retirement benefits. Based on our sample results, we estimate that 13,580 spouses were eligible for an additional $123.7 million in retirement benefits on their own earnings records. We also estimate that 12,340 of these beneficiaries would receive an additional $209.0 million in retirement benefits over their remaining life expectancies (see Appendix C). The following chart illustrates the average age of the 22 spouses in our sample upon their initial entitlement to spousal benefits, as of the date of our review (January 2008), and their projected life expectancy.

SSA policy states that an application for any Title II benefit generally includes all Title II benefits for which an applicant may be eligible. When a claimant files an application for spouse's benefits, SSA determines whether entitlement to retirement benefits exists by (1) taking the application for retirement benefits or (2) obtaining a certified earnings record on the claimant’s own Social Security number to determine whether the spouse is fully insured. However, SSA policy does not currently require the Agency to routinely process an application for retirement benefits whenever an application for spousal
benefits is filed. Only individuals who apply for reduced spouse’s benefits are deemed to have filed an application for retirement benefits. Individuals who apply for unreduced spouse’s benefits are not required to apply for retirement benefits.

We found that SSA did not have procedures in place to identify and notify spouses when they became eligible for higher benefits on their own earnings records based on qualifying quarters of coverage and DRCs. Although SSA annually mails approximately 145 million Social Security Statements, eligible individuals who are over age 62 and receive Title II benefits as a dependent or survivor on another earnings record are excluded from these mailings.

In addition, SSA annually performs the WIB/RIB operation to identify and notify surviving spouses who are eligible for higher retirement benefits at FRA and age 70. SSA conducts the WIB/RIB operation as an outreach project even though it is not required to send notices to these individuals. However, SSA does not send similar notices to spouses who are eligible for higher retirement benefits. As a result, individuals receiving spousal benefits do not receive detailed information about their eligibility for retirement benefits.

Our review disclosed that 22 spouses were over age 70 and had accumulated sufficient earnings and/or DRCs to increase their monthly retirement benefits over their spousal benefits. In most instances, these individuals were not eligible for retirement benefits on their own earnings records when they applied for spousal benefits. Although DRCs may be earned between FRA and age 70, there is no additional benefit increase after age 70, even if individuals continue to delay taking benefits. Since these spouses had already attained age 70, there is no incentive for these individuals to postpone applying for retirement benefits on their own earnings records. We believe these individuals should receive the highest benefit for which they are eligible.

As of January 2008, we determined that 22 spouses could have received an average of $9,116 in additional retirement benefits after age 70. Some of these individuals were eligible for higher retirement benefits as far back as February 1993. For 20 spouses, we determined they could have received an average of $16,937 in additional retirement benefits over their remaining life expectancies. In total, these individuals could have received an average of $26,053 in retirement benefits after age 70.

For example, one spouse in our sample was entitled to spousal benefits in October 2000. The beneficiary became eligible for retirement benefits on his own earnings record at age 68 in October 2003. However, the beneficiary did not receive retirement benefits and earned 24 DRCs between ages 68 and 70. Our review disclosed the beneficiary’s retirement benefits would have been higher than his spousal benefits. As a result, the beneficiary could have received an additional $12,057 from October 2005 to January 2008. Furthermore, if SSA notifies the beneficiary of his eligibility for retirement benefits, he could receive an additional $41,388 over his remaining life expectancy.

Spouses Eligible for Higher Benefits at Full Retirement Age

Of the 200 spouses in our sample, we found that 8 were eligible for higher benefits between FRA and age 70. Had SSA notified the spouses upon their initial eligibility for higher retirement benefits, they could have received $44,213 in additional payments between FRA and age 70. Based on our sample results, we estimate that 4,940 spouses were eligible for an additional $27.3 million in retirement benefits between FRA and age 70 (see Appendix C).

We recognize that individuals who are entitled to benefits before age 70 will receive a lower monthly amount over their lifetime than those who delay retirement until age 70. However, according to SSA, for individuals who live to their average life expectancy, the total amount of lifetime benefits is generally about the same. Nevertheless, by taking benefits at an earlier date, these individuals receive payments over a longer period of time.

For example, one spouse in our sample earned sufficient quarters of coverage to qualify for higher retirement benefits at FRA in June 2001. If SSA had notified the spouse of her eligibility for higher benefits at FRA, she could have received $7,892 in additional payments between FRA and June 2006, when she attained age 70. However, as of January 2008, the individual continued to receive only spousal benefits.

CONCLUSION AND RECOMMENDATION

SSA’s controls and procedures did not always ensure spouses receive the highest benefits due them at retirement age. This occurred because SSA did not have procedures in place to identify and notify spouses when they became eligible for higher benefits on their own earnings records. Specifically, we estimate that (1) 13,580 spouses were eligible for an additional $123.7 million in retirement benefits from February 1993 to January 2008 had they been paid on their own earnings records after attaining age 70, (2) 12,340 spouses were eligible for an additional $209.0 million in retirement benefits over their remaining life expectancies, and (3) 4,940 spouses were eligible for an additional $27.3 million in retirement benefits from April 1986 to October 2003 had they been paid on their own earnings records between FRA and age 70 (see Appendix C).

Although SSA annually performs the WIB/RIB operation to identify and notify surviving spouses who are eligible for higher retirement benefits at FRA and age 70, it does not send notices to spouses who are eligible for higher retirement benefits. We believe SSA should perform a similar operation to ensure beneficiaries receiving spousal benefits are timely notified of their eligibility to receive higher retirement benefits on their own earnings records.

We recommend that SSA identify and notify beneficiaries receiving spousal benefits of their eligibility to receive higher retirement benefits on their own earnings records at FRA and/or age 70.

AGENCY COMMENTS

SSA agreed with our recommendation. The Agency’s comments are included in Appendix D.

/s/

Patrick P. O’Carroll, Jr.

Appendices
APPENDIX A – Acronyms

APPENDIX B – Scope and Methodology

APPENDIX C – Sampling Methodology and Results

APPENDIX D – Agency Comments

APPENDIX E – OIG Contacts and Staff Acknowledgments

Appendix A
Acronyms

DRC Delayed Retirement Credit
FRA Full Retirement Age
MBR Master Beneficiary Record
MEF Master Earnings File
OIG Office of the Inspector General
RIB Retirement Insurance Benefits
SSA Social Security Administration
U.S.C. United States Code
WIB Widow(er)’s Insurance Benefits

Appendix B
Scope and Methodology

From one segment of the Social Security Administration’s (SSA) Master Beneficiary Record (MBR), we obtained a data extract of spouses in current, deferred, or suspended payment status who were eligible for retirement benefits on their own earnings records as of May 2007. We also obtained the earnings records for these spouses from SSA’s Master Earnings File (MEF). Using this information, we identified a population of 6,170 individuals receiving spousal benefits who may be entitled to higher retirement benefits on their own earnings records.

To accomplish our objective, we

• reviewed the applicable sections of the Social Security Act and SSA’s Program Operations Manual System;

• interviewed SSA employees from the Western Program Service Center and Offices of Quality Performance and Eligibility and Enumeration Policy;

• selected a random sample of 200 spouses who were over age 70 and eligible for retirement benefits on their own earnings records;

• reviewed queries from SSA’s MBR, Online Computational Earnings, and Informational Certified Earnings Record System; and

• compared the amount of retirement benefits payable to the amount of spousal benefits received for eligible beneficiaries.

We determined the computer processed data from the MBR were sufficiently reliable for our intended use. We conducted tests to determine the completeness and accuracy of the data. These tests allowed us to assess the reliability of the data and achieve our audit objective. We relied on the earnings records obtained from the MEF to determine whether the spouses had sufficient earnings to be included in our population. We did not test SSA’s automated systems to verify the completeness and accuracy of the MEF. The entity responsible for the MEF is the Office of Earnings, Enumeration, and Administrative Systems under the Deputy Commissioner for Systems.

We performed audit work in Richmond, California, and Baltimore, Maryland, between April and July 2008. The entity audited was the Office of Income Security Programs under the Deputy Commissioner for Retirement and Disability Policy.

We conducted this performance audit 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 the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Appendix C
Sampling Methodology and Results

We obtained a data extract from one segment of the Social Security Administration’s (SSA) Master Beneficiary Record (MBR) of beneficiaries over age 70 who were in current, deferred, or suspended payment status. Based on the extract, we identified a population of 6,170 beneficiaries receiving spousal benefits who were fully insured and eligible for retirement benefits on their own earnings records as of May 2007.

Spouses Eligible for Higher Benefits at Age 70

We randomly selected 200 records to determine whether the spouses were eligible for higher retirement benefits at age 70 or older on their own earnings records. Using SSA’s automated systems, we determined the incremental delayed retirement credits (DRC) earned and compared the amount of retirement benefits payable to the amount of spousal benefits received. We found that 22 spouses could have received $200,544 in additional payments after age 70. Estimating these results to all 20 MBR segments, we determined that 13,580 spouses were eligible for an additional $123.7 million in retirement benefits on their own earnings records.

To estimate the amount of additional benefits these beneficiaries could receive in the future, we multiplied the last additional monthly payment amount by the number of months the beneficiaries were expected to live beyond January 2008. As a result, we estimate that 12,340 beneficiaries could receive an additional $209.0 million in retirement benefits over their remaining life expectancies. The following tables provide the details of our sample results, statistical projections, and estimates.

Table 1 – Population and Sample Size

Description Number of Beneficiaries
Population Size (Data extract from 1 segment) 6,170
Sample Size 200

Table 2 – Spouses Age 70 and Older

Description Number of Beneficiaries Additional Benefits
Sample Results 22 $200,544
Point Estimate 679 $6,186,785
Projection Lower Limit 470 $2,240,305
Projection Upper Limit 941 $10,133,266
Estimate for Entire MBR 13,580 $123,735,700
Note: All statistical projections are at the 90 percent confidence level.

Table 3 – Estimated Additional Payments over Life Expectancy

Description Number of Beneficiaries Additional Benefits
Sample Results 20 $338,731
Point Estimate 617 $10,449,845
Projection Lower Limit 418 $5,649,395
Projection Upper Limit 871 $15,250,295
Estimate for Entire MBR 12,340 $208,996,900
Note: All statistical projections are at the 90 percent confidence level.

Spouses Eligible for Higher Benefits at Full Retirement Age

Based on our random sample of 200 records, we determined whether the beneficiaries could have received higher retirement benefits between full retirement age (FRA) and age 70. Using SSA’s automated systems, we determined the DRCs earned and compared the amount of retirement benefits payable to the amount of spousal benefits received. We found that eight spouses could have received $44,213 in additional payments between FRA and age 70. Estimating these results to all 20 MBR segments, we determined that 4,940 spouses were eligible for an additional $27.3 million in retirement benefits between FRA and age 70. The following tables provide the details of our sample results, statistical projections, and estimates.

Table 4 – Spouses from FRA to Age 70

Description Number of Beneficiaries Additional Benefits
Sample Results 8 $44,213
Point Estimate 247 $1,363,968
Projection Lower Limit 126 $503,398
Projection Upper Limit 435 $2,224,538
Estimate for Entire MBR 4,940 $27,279,360
Note: All statistical projections are at the 90 percent confidence level.

Appendix D
Agency Comments

SOCIAL SECURITY

MEMORANDUM

Date: December 3, 2008 Refer Refer To: S1J 3

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

From: James A. Winn /s/
Chief of Staff

Subject: Office of the Inspector General (OIG) Draft Report, "Review of Payments to Spouses Eligible for Higher Retirement Benefits" (A 09 08 18007) INFORMATION

We appreciate OIG’s efforts in conducting this review. Our response to the report findings and recommendation are attached.

Please let me know if we can be of further assistance. Please direct staff inquiries 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, "REVIEW OF PAYMENTS TO SPOUSES ELIGIBLE FOR HIGHER RETIREMENT BENEFITS" (A 09 08 18007)

Thank you for the opportunity to review and comment on the report. Although the report recommendation refers to our controls and procedures, it should note that we currently notify the public of spouse's benefits through our website, publications, and during interviews either in person or by phone. Specifically, an explanation of how someone can receive a spouse's benefit at Full Retirement Age (FRA) and later receive a higher retirement benefit on their own record is provided online at www.socialsecurity.gov/retire2/applying6.htm,
www.socialsecurity.gov/retire2/yourspouse.htm,
http://www.socialsecurity.gov/retire2/yourdivspouse.htm, and
www.socialsecurity.gov/retire2/otherthings.htm.

Also, the following statement is currently in Retirement Benefits, Publication No. 05
10035 and will be added to What Every Woman Should Know, Publication No. 05 10127 the next time it is updated:
If you have reached your full retirement age, and are eligible for a spouse’s or ex spouse’s benefit and your own retirement benefit, you may choose to receive only spouse’s benefits and continue accruing delayed retirement credits on your own Social Security record. You may then file for benefits at a later date and receive a higher monthly benefit based on the effect of delayed retirement credits.
Our response to the specific recommendation is provided below.

Recommendation 1

Identify and notify beneficiaries receiving spousal benefits of their eligibility to receive higher retirement benefits on their own earnings records at FRA and/or age 70.

Comment

The recommendation suggests contacting at FRA and/or age 70. We agree and believe the optimal approach for the agency and our beneficiaries is to initiate contact only at age
70.

We do not believe we should initiate contact at FRA because we are concerned that by contacting these beneficiaries at the FRA, we may inadvertently induce claiming of benefits at that age, regardless of the information provided in the letter. That is, some individuals may simply apply for benefits in response to a contact by SSA. For these reasons, we are also planning to contact other dually eligible auxiliaries (widows) only at
age 70.

[In addition to the information listed above, SSA also provided technical comments
which have been addressed, where appropriate, in this report.]

Appendix E
OIG Contacts and Staff Acknowledgments

OIG Contacts

James J. Klein, Director, San Francisco Audit Division, (510) 970 1739

Jack H. Trudel, Audit Manager, (510) 970 1733

Acknowledgments

In addition to those named above:

Daniel Hoy, Senior Auditor

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 Staff Assistant at (410) 965 4518. Refer to Common Identification Number
A 09 08 18007.

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Overview of the Office of the Inspector General
The Office of the Inspector General (OIG) is comprised of an Office of Audit (OA), Office of Investigations
(OI), Office of the Counsel to the Inspector General (OCIG), Office of External Relations (OER), and Office of Technology and Resource Management (OTRM). To ensure compliance with policies and procedures, internal controls, and professional standards, the OIG also has a comprehensive Professional Responsibility and Quality Assurance program.
Office of Audit
OA conducts 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 reviews and program evaluations on issues
of concern to SSA, Congress, and the general public.
Office of Investigations
OI conducts investigations 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 liaison to the Department of Justice on all matters relating to the investigation of SSA programs and personnel. OI also conducts joint investigations with other Federal, State,
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Office of the Counsel to the Inspector General
OCIG provides independent legal advice and counsel to the IG on various matters, including statutes,
regulations, legislation, and policy directives. OCIG 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. Also, OCIG administers the Civil Monetary Penalty program.
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OER manages OIG’s external and public affairs programs, and serves as the principal advisor on news releases
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Office of Technology and Resource Management
OTRM supports OIG by providing information management and systems security. OTRM also coordinates
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focal point for OIG’s strategic planning function, and the development and monitoring of performance
measures. In addition, OTRM receives and assigns for action allegations of criminal and administrative
violations of Social Security laws, identifies fugitives receiving benefit payments from SSA, and provides technological assistance to investigations.