Source: https://oig.ssa.gov/sites/default/files/audit/full/html/A-03-05-25009.html
Timestamp: 2016-08-26 20:01:16
Document Index: 560621962

Matched Legal Cases: ['§ 401', '§ 422', '§ 570', '§ 405', '§ 405', '§ 1324']

A-03-05-25009 - Alternate Format
MEMORANDUM Date: October 20, 2006 Refer
To: To: The Commissioner From: Inspector General
Subject: Effectiveness of the Young Children's Earnings Records Reinstatement
Our objective was to assess the effectiveness of the Young Children's Earnings
Record (YCER) reinstatement process in resolving suspended earnings, reducing
the size of the Earnings Suspense File (ESF), and detecting potential fraud. BACKGROUND
As part of the Annual Wage Reporting process, the
Social Security Administration (SSA) validates the names and Social Security
numbers (SSN) on wage reports submitted by employers and
self‑employment income (SEI) reported by the Internal Revenue Service
(IRS) against the Numident file. Earnings
items that cannot be matched to SSA records are posted to the ESF—a file
of unmatched items. SSA maintains two ESFs—one for wages reported by employers and one for SEI
reported by the IRS. For example, as of October 2005, the wage ESF had
accumulated about $520 billion in wages and approximately 255 million
wage items for Tax Years (TY) 1937 through 2003 that could not be posted
to individuals’ earnings records.
In 1992, SSA began checking the date of birth (DoB) on the Numident for the
reported SSN to determine whether the earnings reported by employers and SEI
belong to children. If
the DoB on the Numident indicates that numberholders are under age 7, their
earnings are placed in the ESF and assigned a YCER indicator. The earnings
are saved to an investigate file, which is transmitted to a contractor so notices
can be printed and mailed to employers, employees, or self-employed individuals
to assist SSA with reinstating the earnings. SCOPE AND METHODOLOGY
To meet our objective, we sampled YCER items from the TY 2002 investigate
file, which contained 40,461 earnings items. We
selected 300 sample items for review—250 earnings items where the
SSNs appeared 1 to 4 times in the investigate file and 50 SSNs where the SSNs appeared 5 or more times in the investigate file. Below
we focus on the 250 earnings items, ranging between $22 and $71,700, from the
total population of 38,013 earnings items. See Appendix G for the results
of our 50 sample items. RESULTS OF REVIEW
Our review of the TY 2002 YCER investigate file found that while the YCER
reinstatement process was effective in suspending those earnings that appeared
suspect, the process was not effective in resolving and reinstating suspended
items to the correct earnings record. We found that of 250 sample YCER
earnings items included in the
investigate file, 72 percent were not reinstated to individuals’ earnings
records. The majority of these YCER items appeared to involve potential
SSN misuse. In addition, while SSA reinstated the remaining 28 percent
of the earnings items from the investigate file, our review
determined that about one out of four reinstatements were questionable because
they may have also involved potential SSN misuse. As
a result, individuals may use these questionable reinstatements to qualify
for future SSA benefits. We also found that 8 of the top 25 employers
reporting YCER earnings items related to industries that do not normally hire
children under age 7, such as agriculture and temporary employment. Furthermore,
since SSA’s employee verification services do not require employers to
submit employees’ DoB, employers may not be informed that the verified
SSNs belong to children under age 7. Table 1: Status of the 250 Sample YCER Items
Status of YCER Items YCER Items
Earnings Items Still
in Suspense -- Items Related to Legitimate
-- Items Related to Potential
Reinstated Earnings Items -- Valid Reinstatements
Total Sample YCER Items 250
Our review of 250 sample earnings items totaling approximately $1.3 million
in earnings revealed that 180 of the 250 sample earnings items, or 72 percent,
were not reinstated to numberholders’ earnings records. The suspended
earnings items totaled approximately $1.1 million in earnings. Among
the suspended earnings items, we believe that 9 out of 10 items represent SSN
misuse, while the remaining items may represent legitimate work activity.
Potential SSN Misuse Among Suspended Items
Of the 250 sample earnings items, 180 items had not been resolved and were
still in the ESF. Of these unresolved earnings items, 163
items appeared to involve others using the numberholders’ SSNs for employment. The
163 items represented approximately $1 million in earnings. If we
project these 163 questionable items to our population of about 38,000 items,
we estimate that approximately 25,000 YCER items related to about $158 million
in earnings involved potential SSN misuse. The 163 sample items appeared suspect due to the age of the child at the time
they supposedly worked for employers that do not normally hire children under
age 7. The numberholders ranged in age from less than 1 year to 6 years
old when they supposedly worked for employers in industries such as restaurant,
construction, and agriculture. For
example, a 2-year old enumerated in 2000 had approximately $72,000 in earnings
reported for TY 2002 from a meat processing company located in Illinois. The
meat processing company had other reporting problems during TY 2002. For
example, the employer reported 89 wage items to SSA, of which 19 wage items,
or 21 percent, were posted to the ESF. We found employers in the service, temporary employment, restaurant, and construction
industries accounted for the highest number of questionable items as shown in
Figure 1. These employers reported 116 of the 163 questionable items. We
have noted in prior reports that SSN misuse is problematic in these types of
industries. For example in our April 2005 report, we noted SSN misuse was widespread among
employers in the service, restaurant, and agriculture industries. -- IMAGE OMITTED IN THIS TEXT-ONLY VERSION --
Moreover, we found that for 30 of the 163 suspended sample items, the reported
names did not appear to be the same person in SSA’s Numident file. We
believe these name discrepancies could indicate that potential SSN misuse was
involved. Although it is possible that someone accidentally used the
numberholders’ SSNs, it is more likely that someone deliberately misused
the numberholders’ identity. For the 30 items, we found the
following name discrepancies:
For 28 cases, the first name did not match the Numident records. In
10 of these cases, the reported names matched the names of the numberholders’ parents
shown on the Numident file. Therefore, it is possible that the parents
misused their own children’s SSNs for employment.
For 1 case, the first and last name did not match the Numident record. For 1 case, the last name did not match the Numident record. Additional Questionable Earnings Reported by Employers
SSA’s YCER reinstatement process prevented many questionable earnings
that may have related to SSN misuse from being posted to children’s earnings
records. However, when these same children reached age 7 and older, questionable
items were posted to their records. Our review of the SSA Numident showed
that 69 of the 163 children with questionable earnings attained age 7 during
TYs 2003 or 2004. Of these 69 numberholders, 19 had questionable
earnings successfully posted to their earnings record by the same employers
after they reached age 7. For example, in TY 2002 a shipping container maintenance and repair company
located in California reported $30,500 for a 6-year old that was not reinstated
to the child’s earnings record. However, in TYs 2003 and 2004,
when the child was age 7 and 8, the company reported $41,000 and $37,000 in
earnings that were posted to the child’s record. Items Related to Legitimate Work Activity
Of the 180 suspended earnings items, 17 items totaling approximately $55,000 appeared to relate to legitimate work activity. However, it appears
the items were not reinstated because employers and/or the parents of the numberholders
did not respond to SSA’s YCER notices. Specifically, we found the
For 11 items, employers that appeared to be the parent of the numberholders
reported the earnings. The Fair Labor Standards Act (FLSA)
allows parents to hire their children for employment at any age. For 4 items, SEI was reported for numberholders who had a history of working
in the entertainment industry. For 1 item, a company in the entertainment industry reported the earnings
item. For 1 item, the earnings item was reported by an Indian tribe that mistakenly
reported non-employment income on a W-2. This employer realized the
mistake and submitted a corrected W-2 to resolve the discrepancy. RESOLVED EARNINGS ITEMS Of the 250 sample items, SSA reinstated 70 earnings items, or 28 percent, totaling
about $202,000 in earnings and posted these earnings to numberholders’ earnings
records. SSA reinstated these items because the employers responded to
the YCER notices, the workers (or their legal guardians) contacted SSA and requested
that the earnings be reinstated, or the earnings were reinstated as part of a
special workload project. Among the 70 reinstated earnings items, 18 items
appeared questionable and
may have been related to SSN misuse, while the remaining 52 items appeared
to be validly reinstated YCER items. Questionable Reinstatements
Of the 70 reinstated items, we found that 18 earnings items totaling approximately
$105,000 in earnings appeared questionable because SSA did not follow appropriate
procedures or the earnings were reported by employers that do not normally
hire children under age 7. If we project the 18 questionable items to
the population of about 38,000 items included in the investigate file, we estimate
that about 2,700 YCER items related to approximately $16 million in earnings
were questionable reinstatements. The questionable earnings may be used to determine whether the numberholders
qualify for future Social Security benefits. Additionally, since the
numberholders were children they may not learn about the questionable earnings
until they receive their first annual Social Security Statement at age 25,
approximately 19 years after the earnings are reported to SSA. We found that 15 of the 18 earnings
items were reinstated by field offices (FO) and headquarters staff. We
determined that 12 of the 15 questionable items were processed by 2 FOs in
Region IX. According
to the managers at these FOs, their staffs were working a special project
to reinstate YCER items reported by employers in the entertainment industry. They
agreed that the 12 sample items did not meet that criterion since the items
were reported by employers in the agriculture and construction industries,
or related to unsubstantiated self-employment. For example, SSA reinstated
to a 5-year old’s earnings record about $19,100 in earnings reported
in TY 2002 by a meat processing company located in North Carolina. The
company reported 4,306 wage items, of which 1,173 wage items, or 27
percent, were posted to the ESF. Moreover, 144 of the suspended items
for this company had YCER indicators.
Furthermore, the managers stated that their FOs may have mistakenly reinstated
other YCER items for TY 2002 as part of the special workload project. For
example, one manager stated that her office reinstated over 500 SEI items for
TY 2002. For these items, the office verified that the reported names
matched the Numident, but neither contacted the numberholders nor a third party
to verify that the earnings were valid. Both managers agreed to locate the
other reinstatements and take corrective action, where appropriate. Valid Reinstatements
Of the 70 reinstated sample items, 52 items representing $97,000 in earnings
appeared to be valid reinstatements. These items were reported by employers
in the entertainment and retail industries as well as by employers that appeared
to be the parent of the numberholders. For example, a payroll company
located in California that specialized in the entertainment industry reported
about $1,000 in TY 2002 for a 6-year old. The child had an additional
$800 in earnings posted to his record for TY 2002 from three additional payroll
companies that specialized in the entertainment industry. These reinstatements
appeared valid because they were reported by employers that normally hire children
under age 7. TOP EMPLOYERS REPORTING YCER ITEMS
The top 25 employers in the YCER investigate file reported approximately 4,800
YCER items representing about $12.3 million in earnings that were included
in the TY 2002 investigate file. These 25 employers accounted for 12 percent of
the YCER items and about 6 percent of the total earnings. Sixteen of
the top employers were in the entertainment and retail industries and these
employers generally hire children in occupations such as acting and modeling. As
noted earlier, one of the employers was an Indian tribe that mistakenly reported
non-employment earnings using Forms W-2 instead of the Form 1099 Miscellaneous (see Table 2). Table 2: Top 25 Employers that Reported YCER
Items in TY 2002
Employer Industry YCER
Percent of YCER
Suspended Wages
$4,353,893.89 Local Government (1)
1,894,859.40 Agriculture
4,106,104.84 Temporary employment 407
1,304,094.76 Retail
652,777.24 Total 4,782
100(2) 25
$12,311,730.13 Note: (1) This employer was an Indian tribe that mistakenly reported
non-employment income on a W-2. The
employer submitted corrected W-2s to resolve the discrepancies.
(2) This figure does not total 100 percent due to rounding. Employers in the agriculture and temporary employment industries that would normally
hire children under age 7. We found that 8 of the
25 top employers were in these two industries. These eight employers reported
2 percent of the total YCER earnings items and about 3 percent of the associated
earnings for TY 2002. We contacted the Employer Service Liaison Officers
(ESLO) to confirm whether the eight employers regularly hire children under age
7. Overall, the ESLOs stated
it was unlikely that these employers were employing children. They believe
the earnings were probably
reported by numberholders’ family members. Furthermore, the ESLOs
were well aware of the eight employers because these employers appear on the
national listing of employers who submit 100 or more suspended wage items. The
list is used by the ESLOs to contact the employers to assist them with wage
reporting problems. The 8 employers would have been included on
the listing for TY 2002 because they had reported 400 to 35,000 suspended items. Moreover, for three of the eight employers, the YCER items represented at
least 2 percent of their reported payroll. We contacted one of the
three employers, a poultry processing company located in North Carolina, and
the representative stated that her company did not employ children. Further,
she acknowledged that the company had received YCER notices and their policy
was to provide the requested information that was included in their payroll
records. Lastly, she stated that her company did not routinely request
to review the employee’s Social Security card to verify the SSN actually
belongs to the employee, as instructed in the YCER notice. Therefore,
the company was not complying with SSA’s instructions included in the
YCER notices. USE OF EMPLOYEE VERIFICATION SERVICES SSA offers several verification services to employers to verify the identity
and work authorization status of their employees. However, since SSA’s
employee verification services do not require employers to submit employees’ dates
of birth, employers may not be informed that the verified SSNs belong to children
under age 7. SSA verification programs include: Employer Verification Service (EVS) for Registered Users—an electronic
and paper-based program available to all employers to ensure their employees
names and SSNs are valid “before” the employer submits their
W-2s to SSA; and Social Security Number Verification Service (SSNVS)—an online program
that enables employers and submitters to verify employees’ names and
SSNs with information in SSA’s records.
EVS for Registered Users and SSNVS do not require employers to enter an employee’s
DoB, as it is an optional field. Therefore,
employers that only enter the required information, in this case the name and
SSN, would not be timely informed that the verified SSNs belong to children
under age 7. If a YCER
indicator was added to the verification service, employers that used the service
could be informed prior to submitting the earnings items to SSA that the verified
SSNs belong to children under age 7 (whether or not the employer provides a
DoB). Moreover, the indicator could be a useful tool to help reduce
the size of the ESF as well as reduce the number of YCER notices that are generated.
SSA already provides such feedback through a separate verification service. SSA
has a joint effort with the Department of Homeland Security (DHS) to assist
employers with verifying newly-hired employees’ authorization to work
in the United States. Employers
using the Basic Pilot are more likely to detect that a child’s SSN is
being misused because the DoB is a required element for verification. CONCLUSION AND RECOMMENDATIONS
Overall, while the YCER reinstatement process prevented many YCER items that
appeared to involve SSN misuse from being posted to numberholders’ earnings
record, it was not always effective in reinstating YCER items to the correct
earnings record. We also found that about one of four reinstatements
appeared questionable. Furthermore, SSA could improve its employee verification
services to notify employers of potential SSN misuse when they hire individuals
using children’s SSNs. To improve the effectiveness of the YCER process, we recommend SSA:
Review and correct the reinstated earnings that we identified as questionable.
Ensure SSA staff receives additional guidance and training in the YCER
reinstatement process to ensure that YCER earnings items are reinstated appropriately.
Consistent with the Agency’s disclosure policies, modify EVS for
Registered Users and SSNVS to detect SSNs for children under age 7 to provide
appropriate notice to employers and potentially reduce the number of future
YCER notices.
AGENCY COMMENTS SSA concurred with our recommendations. The Agency’s comments
are included in Appendix I.
APPENDIX B – Young Children’s Earnings Record
APPENDIX C – Young Children’s Earnings Record
Notices Sent to Employers
APPENDIX D – Composition of
the Tax Year 2002 Investigate File
APPENDIX E – Scope and Methodology
APPENDIX F – Sampling Methodology
APPENDIX G – Results of 50 Sample Social Security Numbers
APPENDIX H – Employee Verification Programs
APPENDIX I – Agency Comments
APPENDIX J – OIG Contacts and Staff Acknowledgments
WBDOC
Forms/Numbers
“A” Number
Arrival/Departure Number
Appendix B - Young Children’s Earnings Record Reinstatement
Process Effective with the Tax Year (TY) 1991 Annual Wage Reporting process, the Social
Security Administration (SSA) began checking the date of birth (DoB) on the
Numident for the reported Social Security number (SSN). If
the DoB indicated that the numberholder is a child age 6 or younger during
the year, the earnings are identified as a Young Children's Earnings Record
(YCER) item and placed into the Earnings Suspense File (ESF)—a file of
unmatched earnings items. The YCER items are saved to an investigate
file used to verify whether the earnings actually belong to the child. The investigate file is sent to the Wilkes-Barre Data Operation Center (WBDOC)
to be converted to a mailer file and then transmitted to a vendor who generates
notices that are sent to employers, employees, and self-employed individuals. The
SSA-L3231 notice is sent to
employers requesting identifying information about their employees. The
employer responses are mailed to the WBDOC for review. If the employer
states that the employee’s SSN, name, and DoB agree with SSA’s
records, the earnings are reinstated to the employee’s earnings record. If
the employer states the employee’s name and SSN are the same as SSA’s
records, but the DoB is different, a notice (SSA‑L3232) is sent to the
employee advising him or her to contact a local SSA field office (FO) to correct
the discrepancy. If the employer does not return the form or states that
the individual was not an employee, a notice is sent to the purported employee
with the earnings, asking him or her to contact a local FO. Unresolved
items remain in the ESF.
If self-employment earnings are reported, a notice (SSA-L3241) is sent to
the individual instructing him or her to contact a local FO. If the self-employed
individual contacts an SSA FO and provides evidence to support that the earnings
belong to him or her, the earnings are removed from the ESF and posted to the
person’s earnings record. Otherwise, the items remain in the ESF.
Appendix C - Young Children’s
Earnings Record Notices Sent to Employers
-- IMAGES OMITTED FROM THIS TEXT-ONLY VERSION --
Appendix D - Composition of the Tax Year 2002 Investigate File
The Tax Year (TY) 2002 Young Children’s Earnings Record (YCER) investigate
file included 40,461 earnings items representing approximately $219 million
in earnings. The amount
of earnings ranged from $.60 to $412,394. Further,
the 40,461 suspended earnings items related to 30,102 individuals. We
found that 21,977 employers reported 38,615 YCER items and 1,846 items
were reported for self‑employed individuals. The number of earnings
items reported for each individual ranged from 1 to 14 earnings items. Ninety-four
percent of the individuals had 1 to 4 earnings items posted to the investigate
file and 6 percent had 5 to 14 earnings items posted, as shown in Figure D-1.
-- IMAGE OMITTED FROM THIS TEXT-ONLY VERSION --
Appendix E - Scope and Methodology
To meet our objective, we performed the following steps:
Reviewed prior Social Security Administration (SSA) Office of the Inspector
General reports related to the Earnings Suspense File (ESF) and inaccurate
earnings reporting.
Reviewed applicable Federal laws and regulations, as well as SSA policies
and procedures for maintaining individual earnings records and contacting
employers with suspended earnings.
Visited the Wilkes-Barre Data Operations Center to perform a walk-through
of the Young Children's Earnings Record (YCER) reinstatement process and
reviewed available workload data to determine the overall effectiveness of
the YCER process. Obtained and analyzed the Tax Year (TY) 2002 YCER investigate file. The
file contained 40,461 earnings items totaling about $219 million in earnings. Selected
two samples from the TY 2002 investigate file for review (see Sampling Methodology
in Appendix F).
Reviewed SSA’s Numident file, Master
Earnings File (MEF), ESF,
and Earnings Modernization 2.8 program to determine the following:
Age of the numberholder;
Earnings were reinstated; and
Reason for reinstatements.
Selected a random sample of 1,100 items from SSA’s TY 2002 Decentralized
Correspondence Mailer File, which contained 9,529,889 wage
items where the names/SSNs on the wage items did not match SSA’s records. We
determined whether the sample wage items were reported using SSNs assigned
to children under age 7. Our sample methodology, and projections, can
Contacted the regional Employer Service Liaison Officers for information
about employers that contributed a significant number of items to the YCER
investigate file. We also contacted a few employers that submitted
a significant number of YCER items.
Contacted two Field Office managers in Region IX that
reinstated a significant number of questionable YCER items to determine how
these items were processed.
We found that YCER data was sufficiently reliable to meet the objectives of
our review. Our work was conducted at SSA's Data Operations Center in
Wilkes-Barre, Pennsylvania, Mid-Atlantic Social Security Center in Philadelphia,
Pennsylvania, and Headquarters in Baltimore, Maryland. We
conducted our fieldwork between January 2005 and July 2006. The SSA entities
responsible for the maintenance of the ESF are the Office of Central Operations
within the Office of the Deputy Commissioner for Operations and the Office
of Earnings, Enumeration and Administrative Systems within the Office of the
Deputy Commissioner for Systems. Our review was conducted in accordance
with generally accepted government auditing standards. Appendix F - Sampling Methodology
Below we provide our projections associated with the Social Security Administration’s
(SSA) Tax Year (TY) 2002 Young Children’s Earnings Record (YCER) investigate
file. We also projected the number of children’s Social Security
numbers (SSN) reported to SSA under a name that does not match SSA’s
records. These items were recorded in the Decentralized Correspondence
(DECOR) Mailer File.
Young Children’s Earnings Record The TY 2002 YCER investigate file contained 40,461 earnings items representing
approximately $219 million in earnings. We divided the population into
two groups for analysis since multiple earnings items were associated with
the same SSN. The first subset represents 38,013 earnings items where
the same SSN was associated with 4 or fewer earnings items. We selected
for review 250 sample items totaling $1.3 million in earnings.
YCER Projections Sample population—Number
of YCER items
Sample population—Total
YCER earnings
$211,245,935
Sample Results and
Projections – Potential SSN Misuse Attribute
Sample cases—Suspended
YCER items related to potential SSN misuse
Projection—Suspended
YCER items related to potential SSN misuse in the population
Projection lower limit 22,786
YCER earnings related to potential SSN misuse
YCER earnings related to potential SSN misuse in the population
$157,805,813
Projection lower limit $124,684,511
$190,927,116
Projections – Questionable Reinstatement Attribute
Sample cases—Questionable reinstated
Projection—Questionable reinstated
items in the population
Projection lower limit 1,791
YCER earnings in the population
$15,966,556
Projection lower limit $7,166,141
$24,766,971
Note: The projections were
made at a 90-percent confidence level.
Decentralized Correspondence The purpose of the DECOR process is to contact employees and
employers to resolve SSN and/or name discrepancies on wage items stored in
the Earnings Suspense File (ESF). Details related to the suspended wage
items are placed within the DECOR Mailer File, which is sent to a contractor
who prints the DECOR letters and mails them to the appropriate parties. For
TY 2002, SSA mailed approximately 9.5 million DECOR letters, relating
to about $60.4 billion in wages, to employees and employers. Approximately
7.6 million DECOR letters were sent to employees and another 1.9 million
letters were sent to employers. We selected for review 1,100 sample wage items from the TY 2002
DECOR mailer file. Based on our sample results, we estimate
that for TY 2002, the ESF included approximately 606,000 children’s SSNs
with suspended wages where the reported names did not match SSA’s records.
DECOR Projections Sample population—Number of DECOR
9,529,889
Sample population—Total DECOR wage
Sample cases—Wage items reported
with SSNs assigned to children under age 7
Projection—Wage items reported with
SSNs assigned to children under age 7 in the population
606,448
Projection lower limit 495,132
Appendix G - Results for 50 Sample Social Security
We selected for review 50 Social Security numbers (SSN) included in the Tax
Year (TY) 2002 Young Children’s Earnings Record (YCER) investigate file
that were used to report 5 to 11 earnings items. The 50 sample SSNs were
associated with 308 earnings items totaling about $928,000. We reviewed
these items separately because of the increased risk of SSN misuse for multiple
earnings items reported for children in the same TY. Of the 50 sample
SSNs, we found the following:
Unresolved Items: We found that 38 of the 50 SSNs,
or 76 percent, related to earnings that were not reinstated to the numberholders’ earnings
records. These 38 SSNs were associated with 227 earnings items totaling
approximately $713,000 in earnings. We also determined that earnings
associated with all 38 SSNs appeared suspect because of the age of the numberholders
at the time they worked for employers that do not normally hire children under
age 7 and the number of earnings items reported for the same SSN. Although
it is possible someone accidentally used the numberholders’ SSNs for
employment, it is more likely that someone deliberately used the numberholder’s
identity for employment.
Resolved Items: The remaining 12 of the 50 SSNs, or
24 percent, related to earnings reinstated to the earners’ records. The
12 SSNs were associated with 81 earnings items that had at least 1 item that
was reinstated to the numberholder’s earnings record. In total,
there were 32 earnings items reinstated to the numberholders’ earnings
record representing about $100,000 in earnings. The remaining 49 items,
totaling $115,000, were not reinstated. Of the 12 SSNs with 32 reinstated
earnings, we found the following:
For 9 SSNs associated with 10 earnings items totaling about $28,000, the reinstatements
appeared questionable based on the age of the numberholders at the time they
worked for employers that do not normally hire children under age 7. These
employers were in industries such as the agriculture, temporary employment, restaurant,
For 2 numberholders with 15 items totaling about $61,000 in earnings, the
numberholders’ parents used their SSNs for employment and then had
the earnings reinstated to their own earnings account. The 15 earnings
items were reported for TYs 1991 to 2002. In the first case, both the
father and numberholder shared the same first and last name. In the
second case, the father, who was a noncitizen, had earnings reported for
TYs 1991 to 1998 reinstated to his own earnings record after being enumerated
For 1 numberholder with 7 earnings items totaling about $11,000 it appeared
that SSA’s SWEEP edit routine erroneously reinstated the earnings to
a 3-year old’s earnings record. SWEEP is an electronic matching
routine that uses name changes from the Numident file and additional reinstatements
to reinstate items from the ESF. In this case, the numberholder’s
name did not appear to have changed nor were there any items reinstated to
the numberholder’s record. Appendix H - Employee Verification Programs
The Social Security Administration (SSA) has a number of programs to assist
employers with the wage reporting process. Below we discuss some of the
various programs, such as (1) Employee Verification Service (EVS) for Registered
Users, (2) Social Security Number Verification Service (SSNVS), and (3)
the Basic Pilot.
Employee Verification Service and Social Security Number Verification
Service EVS for Registered Users and SSNVS are SSA’s two primary verification
programs made available to employers to verify employees’ names and Social
Security numbers (SSN). EVS and SSNVS are available to employers to ensure
their employees’ names and SSNs are valid before the employer submits
their Wage and Tax Statements (Form W-2) to SSA. Employers
must register to gain access to these programs.
Under EVS for Registered Users, requests can be submitted on magnetic media
(tape, cartridge, or diskette) or paper. For
each employee record to be verified through the registered user process, employers
must submit three required elements: employee’s SSN, last name, and first
name. Employers can also provide optional data as well, such as date
of birth (DoB) and gender. Through EVS, SSA confirms whether the name,
SSN, DoB, and gender of an employee matches SSA’s records. Further,
SSA discloses death responses to employers when the wage earner’s record
indicates that they are deceased. SSNVS, which was implemented nationwide in June 2005, is an online service
that enables employers and submitters to verify whether employees’ names
and SSNs matches the information in SSA’s records. Employers can
either verify up to 10 names and SSNs (per screen) online and receive immediate
results or upload batch files of up to 250,000 names and SSNs and usually receive
results the next Government business day.
The Basic Pilot is an SSA and Department of Homeland Security (DHS) joint
program whereby employers verify the employment eligibility of newly-hired
employees. This voluntary
program helps employers determine whether an individual is eligible to work
in the United States. The President signed the Basic Pilot Program
Extension and Expansion Act of 2003 (Public Law Number 108-156) on December
3, 2003. This law extended the operation of the Basic Pilot for an additional
5 years (to a total of 11 years) and expanded the operation to all 50
States no later than December 1, 2004. As discussed with SSA staff, the Basic Pilot involves using the information
in Government databases (SSA databases and, if needed, DHS databases) to determine
the employment eligibility of new hires. The SSN and Alien Registration
Number (“A” Number) or
I-94 Arrival/Departure Number (I-94 Number) are
used for these checks. The employer must complete the DHS-issued Employment
Eligibility Verification Form (Form I-9) for each employee and then enter
elements of this data into the Basic Pilot system within 3 days of hiring,
including the employee’s SSN, name, DoB, and whether the new hire indicated
he/she was a U.S. citizen and, if not, enter the “A” Number or
I-94 Number. The system first checks the information entered against SSA’s database
to verify the name, SSN, and DoB of all newly-hired employees, regardless of
citizenship. When the Numident shows the U.S. as the place of birth for
the newly-hired employee or a code indicating the number holder is a U.S. citizen,
the Basic Pilot automated system confirms employment eligibility. If
the Basic Pilot system cannot confirm employment eligibility based on the information
in SSA’s database or an “A” Number or I-94 Number was entered,
the Basic Pilot system automatically checks the data against DHS’ database. The employer will receive notification of "SSA tentative non-confirmation" of
employment eligibility when the SSN, name, or DoB does not match the information
in SSA’s database. In addition, employers will receive an "SSA
tentative non‑confirmation" if the new hire indicated he/she was a
U.S. citizen and SSA’s records did not show that the person was a U.S.
citizen. The employer will receive notification of "DHS tentative
non-confirmation" of employment eligibility when DHS’ database does
not show the new hire as authorized for employment. In these cases, the
employer asks the employee whether he/she wishes to contest the tentative non-confirmation. If
contested, the employee must contact SSA or DHS within 8 Government working
days of the notification. After the employee contacts SSA or DHS to correct
the record, the employer resubmits the query through the Basic Pilot system. If
the system does not confirm employment eligibility after the employer resubmits
the query, the employer may terminate the new hire.
Appendix I - Agency Comments
Refer To: S1J-3 To: Patrick P. O'Carroll, Jr. Inspector General
Subject: Office of the Inspector General (OIG) Draft
Report, “Effectiveness of the Young Children’s Earnings Records
Reinstatement Process” (A-03-05-25009)--INFORMATION
We appreciate OIG’s efforts in conducting this review. Our comments
on the draft report’s recommendations are attached.
Please let me know if you have any questions. Staff inquiries may be
directed to Ms. Candace Skurnik, Director, Audit Management and Liaison Staff, at extension
COMMENTS ON THE OFFICE OF THE INSPECTOR GENERAL’S (OIG) DRAFT
REINSTATEMENT PROCESS” (A-03-05-25009)
Thank you for the opportunity to review and provide comments on this draft
Review and correct the reinstated earnings that OIG identified as questionable.
We agree. We will review the cases identified and take the necessary
corrective actions within 6 months of receipt of the records.
Recommendation 2 Ensure SSA staff receives additional guidance and training in the Young Children’s
Earnings Record (YCER) reinstatement process to ensure that YCER earnings items
are reinstated appropriately.
We agree. We will issue a reminder to staff responsible for reinstating
YCER items. The reminder will include the proper procedures to be followed
when processing a YCER case and should be released by the end of calendar year
Recommendation 3 Consistent with the Agency’s disclosure policies, modify the Employer
Verification Service for Registered Users and the Social Security Number (SSN)
Verification Service to detect SSNs for children under age 7 to provide appropriate
notice to employers and potentially reduce the number of future YCER notices.
Comment We agree. The Agency’s current disclosure policy would allow for
the date of birth information to be shared with employers consistent with their
wage reporting responsibilities. We will consider the cost effectiveness
of systematic changes based on other pending stewardship-related activities.
Appendix J - OIG Contacts and Staff Acknowledgments
Mildred Soto, Auditor-in-Charge
Damon Mahoner, Auditor
Frank Trzaska, 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 Specialist
at (410) 965-3218. Refer to Common Identification Number
A-03-05-25009.
Commissioner of Social Security Office of Management and Budget, Income Maintenance Branch Chairman and Ranking Member, Committee on Ways and Means Chief of Staff, Committee on Ways and Means Chairman and Ranking Minority Member, Subcommittee on Social Security Majority and Minority Staff Director, Subcommittee on Social Security Chairman and Ranking Minority Member, Subcommittee on Human Resources Chairman and Ranking Minority Member, Committee on Budget, House of Representatives Chairman and Ranking Minority Member, Committee on Government Reform and Oversight Chairman and Ranking Minority Member, Committee on Governmental Affairs Chairman and Ranking Minority Member, Committee on Appropriations, House of Representatives Chairman and Ranking Minority, Subcommittee on Labor, Health and Human Services,
Education and Related Agencies, Committee on Appropriations,
House of Representatives Chairman and Ranking Minority Member, Committee on Appropriations, U.S. Senate Chairman and Ranking Minority Member, Subcommittee on Labor, Health and Human
Services, Education and Related Agencies, Committee on Appropriations, U.S. Senate Chairman and Ranking Minority Member, Committee on Finance Chairman and Ranking Minority Member, Subcommittee on Social Security and Family
Policy Chairman and Ranking Minority Member, Senate Special Committee on Aging Social Security Advisory Board
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.
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.
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.
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. -- FOOTNOTES FOLLOW -- See 42 U.S.C. § 401(a)(3).
Each year, employers must
send Wage and Tax Statements (Form W-2) to SSA to report the wages
and taxes of their employees for the previous calendar year. See
20 C.F.R. § 422.114.
The IRS transmits to SSA
self-employment income reported by individuals on their U.S. Individual
Income Tax Return (Form 1040) and an attached Schedule SE (Self-Employment
The Numident includes
identifying information (such as name, date of birth, date of death, mother’s
maiden name, etc.) provided by the applicant on his or her Application
for a Social Security Number (Form SS-5) for an original SSN
and subsequent applications for replacement SSN cards. Each record
is housed in the Numident master file in SSN order. The Numident
official name is the Master Files of Social Security Number (SSN) Holders
and SSN Applications (SSA/OSR, 60-0058).
Manual System, RM 03870.065 Earnings Posted to Young Children -
General. See Appendix B for
a more detailed description of the YCER process and Appendix C for
a copy of a YCER notice.
See Appendix D for
the composition of the TY 2002 investigate file. The TY 2002
YCER investigate file does not include suspended earnings items associated
with SSNs issued to children under age 7 where the reported name does
not match the Numident. For example, we estimate that for TY
2002 the ESF contained approximately 606,000 children’s SSNs
with suspended wages where the reported names did not match SSA records
(see Appendix F).
See Appendix F for
more details about the sampling methodology.
We selected 50 of
the 409 SSNs associated with 5 or more items. The 409 SSNs were
associated with 2,448 items. Our findings related to the 50 sample
items were similar to the 250 earnings items and are included in Appendix
Earnings items represent
wages reported on W-2s and self-employment income. These 180 suspended
sample items were reported by both employers and self-employed individuals.
In one case, we could
not determine the numberholder’s age because the reported SSN
was invalid. SSA
Office of the Inspector General, Social Security Number Misuse
in the Service, Restaurant, and Agriculture Industries (A-08-05-25023),
SSA’s SSN/Name
validation routines had determined that these 30 items matched the
Numident file for posting to an earner’s record. SSN/Name
Validation performs a series of up to 22 routines, which manipulates
the reported name in various ways. The rules attempt to match
the data against the Numident. Examples of these rules include
exchanging the first and last name, and rearranging letters within
the first name and last name independently. The rules are performed
on the reported name while the SSN remains unchanged. The reported
name is not altered in any way when validated.
We provide two such
examples in Appendix G.
The FLSA sets the
minimum age requirement for employment. Generally, 14 is the
minimum age for most non-agricultural work. There are exceptions
to the minimum age requirement such as if a parent employs his or her
child or if the child is an actor or performer. See 29 C.F.R. § 570.2. Annually SSA mails
about 143 million statements to workers who are at least 25-years old
and are not in benefit status. The statements provide workers
the ability to determine whether their earnings are accurately posted
to their records. The remaining three
items were reinstated based on employer responses to the YCER notices. All
three employers were in the service industries--one sold seeds, fertilizers,
and erosion products; one sold portable equipment to test water; and
one sold and serviced air filters. These companies did not appear
to employ children. Region IX includes
the States of California, Arizona, Nevada, Hawaii, as well as Guam,
American Samoa and the Northern Mariana Islands.
SSA provides assistance to employers through ESLOs located in 10
regions throughout the United States. The ESLOs (1) answer employers’ questions
on wage reporting submissions; (2) encourage employers to use SSA’s
verification programs; (3) conduct wage-reporting seminars, in partnership
with the IRS; and (4) contact employers in their regions with significant
suspended wage items.
See Appendix H for more details about the employee verification programs.
The employee’s gender is another optional field. For
example, if an employer provides the DoB and gender under the SSNVS
program, the Agency may inform the employer that (1) name and DoB match,
gender does not match; (2) name and gender match, DoB does not match;
or (3) name matches, DoB and gender do not match. As noted earlier, the employer will eventually receive a letter from
SSA stating, “Our records show that the employee is a young child.” See
Appendix C for a copy of this letter.
See Appendix H for more details about the employee verification
programs. Employers enter their employees’ information from the DHS-issued Employment
Eligibility Verification Form (Form I-9), which captures the
employees' DoBs. The Numident includes
identifying information (such as name, date of birth, date of death,
mother’s maiden name, etc.) provided by the applicant on his
or her Application for a Social Security Number (Form SS-5)
for an original SSN and subsequent applications for replacement SSN
cards. Each record is housed in the Numident master file in SSN
order. The Numident official name is the Master Files of
Social Security Number (SSN) Holders and SSN Applications (SSA/OSR,
60-0058).
copies of the notices.
Approximately 38,356 earnings items, or 95 percent, were related to TY
2002. The remaining items related to prior TYs, beginning with
TY 1991. The $412,394 earnings item was a reporting error. The employer
submitted a corrected Wage and Tax Statement (Form W-2) that
showed the earnings should have been $4,123.
The Numident includes identifying information (such as name, date
of birth, date of death, mother’s maiden name, etc.) provided
by the applicant on his or her Application for a Social Security
Number (Form SS-5) for an original SSN and subsequent applications
for replacement SSN cards. Each record is housed in the Numident
master file in SSN order. The Numident official name is the Master
Files of Social Security Number (SSN) Holders and SSN Applications (SSA/OSR,
The MEF contains all earnings data reported by employers and self-employed
individuals. The data is used to calculate the Social Security
benefits due an individual with an earnings record. The MEF official
name is the Earnings Recording and Self-Employment Income System (SSA/OSR
60-0059).
Region IX includes
American Samoa and the Northern Mariana Islands. We did not project
the results of the second subset representing the remaining 2,448 YCER
items. See Appendix G for our findings.
The SSNs were
assigned to children under age 7.
We reported this
issue in a prior audit, Reported Earnings Prior to the Issuance
of a Social Security Number (A-03-04-14037) issued in August
2005. The use of these
systems is voluntary and can assist employers in eliminating common
SSN reporting errors.
In addition, employers
can also verify (1) up to 5 names/SSNs by calling SSA’s toll-free
number for employers and/or (2) up to 50 names/SSNs by sending
a fax to an SSA field office.
Section 7213(a)(2)
of the Intelligence Reform and Terrorism Prevention Act of
2004, Public Law 108-458 (codified at 42 U.S.C.§ 405
note) authorized SSA to add death indicators to all verification
routines determined appropriate, regardless of the prohibition
of 42 U.S.C. § 405(r) and effective as of the date of enactment,
December 2004, with certain indicators required within stated time
limits. Section 401 of
Act of 1996, Pub. L. No. 104-208, as amended, 8 U.S.C. § 1324a
note. The “A” number
is the 9-digit number following “A” which is shown
on the “green card” or Permanent Resident Card (formerly
the I-551 Alien Registration Receipt Card), the Employment
Authorization Document (I-766 and I-688B), and on certain
other immigration documents and notices. For newly admitted
immigrants, the “A” number is shown on the machine-readable
immigrant visa affixed to the foreign passport.
The I-94 Number
is the 11-digit number located on the Arrival-Departure Record (Form
I-94). The Form I-94 shows the date the individual arrived
in the United States, the “Admitted Until” date, and
the date when his/her authorized period of stay expires.