Income Security: Overlapping Disability and Unemployment Benefits Should be Evaluated for Potential Savings
Published: 2012-07-31T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The DI and UI trust funds face serious fiscal sustainability challenges. In addition to other services, both programs provide cash benefits to their targeted populations to replace lost earnings. DI is available to workers who are unable to engage in SGA because of physical or mental impairments expected to last at least 12 months or result in death. SGA is defined as work activity that involves significant physical or mental activities performed for pay or profit. UI provides temporary cash benefits to eligible workers who are able to work but remain involuntarily unemployed.
GAO was asked to determine the extent to which individuals received DI and UI benefits concurrently. To do so, GAO matched unemployment files with SSA disability files for fiscal year 2010. GAO also reviewed DI and UI case files for a nongeneralizable selection of 8 individuals  4 from the top 50 recipients of concurrent DI and UI benefits in fiscal year 2010, and 4 who received UI benefits based on wages from multiple states. These examples cannot be generalized beyond those presented.
section_title: What GAO Found
paragraphs: In fiscal year 2010, 117,000 individuals received concurrent cash benefit payments from the Disability Insurance (DI) and Unemployment Insurance (UI) programs of more than $850 million, which is allowable in certain circumstances under current program authority. While these individuals represented less than 1 percent of the total beneficiaries of both programs, the cash benefits they received totaled over $281 million from DI and more than $575 million from UI. One individual GAO selected for further investigation received over $62,000 in overlapping benefits in a year. Based on GAO inquiries, state UI officials are reviewing the persons UI eligibility because of earnings that may be related to work that makes the person ineligible for UI benefits.
Under certain circumstances, individuals may be eligible for concurrent cash benefit payments due to differences in DI and UI eligibility requirements. Specifically, the Social Security Administrations (SSA) definition of a disability involves work that does not rise to the level of substantial gainful activity (SGA). In 2010, a monthly income of $1,000 or more for a non-blind beneficiary generally demonstrated SGA. In contrast, the Department of Labor allows states determination of able and available for work eligibility criteria for UI benefits to include work that does not rise to the level of SGA. Therefore, some individuals may have a disability under federal law but still be eligible for UI under state law because they are able and available for work that does not rise to the level of SGA. Although DI and UI generally provide separate services to separate populationsand thus are not overlapping programsthe concurrent cash benefit payments for individuals eligible for both programs are an overlapping benefit when both replace lost earnings. While SSA must reduce DI benefits for individuals receiving certain other government disability benefits, such as workers compensation, no federal law authorizes an automatic reduction or elimination of overlapping DI and UI benefits. As a result, neither SSA nor DOL has any processes to identify these overlapping payments. Reducing or eliminating overlapping or improper payments could offer substantial savings, though actual savings are difficult to estimate because the potential costs of establishing mechanisms to do so are not readily available.
section_title: What GAO Recommends
paragraphs: DOL should work with SSA to (1) evaluate overlapping DI and UI cash benefit payments, taking appropriate action for any improper payments, and (2) assess whether cost savings or other benefits might be achieved by reducing or eliminating overlapping DI and UI cash benefit payments being made within the existing laws and regulations, seeking congressional authority to do so as appropriate. DOL and SSA agreed with the recommendations.

section_title: Letter
paragraphs: Both the Social Security Disability Insurance (DI) and Unemployment  Insurance (UI) trust funds face serious fiscal-sustainability challenges.  The Social Security Board of Trustees projects that the DI trust fund will  be exhausted in 2016 and notes that changes designed to improve the  financial status of the DI program are needed soon. In fiscal year 2010,  more than 10 million beneficiaries received DI cash benefits. Total  benefit payments for fiscal year 2010 were $121.6 billion, and the aging of  the baby-boom generation is set to further strain the program. Similarly,  we reported in April 2010 that state UI trust funds were at historically  weak levels, with most requiring federal loans to pay benefits. In fiscal  year 2010, 11.3 million beneficiaries received UI cash benefits totaling  $156 billion, $93 billion of which was paid by the federal government.
In addition to other services, the DI and UI programs both provide cash  benefits to their targeted populations to replace lost earnings. The DI  program, which is administered by the Social Security Administration  (SSA), provides cash benefits to replace earnings for workers who are  unable to engage in substantial gainful activity (SGA) because of physical  or mental impairments expected to last at least 12 months or expected to  result in death. SGA is defined as work activity that involves significant  physical or mental activities performed for pay or profit. The federal-state  UI program, which is federally administered by the Department of Labor  (DOL), provides temporary cash benefits to eligible workers who are able  to work but remain involuntarily unemployed.
In response to your request, we determined the extent to which  individuals received DI and UI benefits concurrently by comparing  disability benefit files to national records of work-related income and  unemployment insurance. Under certain circumstances, individuals can  legitimately receive DI and UI concurrently, but concurrent receipt could  also be an indicator of improper payments. Although excluded from the  scope of this report, we plan to conduct subsequent work to evaluate the  internal controls of the DI program.
To determine the extent to which individuals received both DI and UI  benefits in fiscal year 2010, we matched the National Directory of New  Hires (NDNH) unemployment files with our extracts of SSA disability files  of DI beneficiaries as of December 2010, the most current data at the  time we began our work. To determine the subset of recipients who  received DI and UI benefits at the same time during fiscal year 2010, we  identified individuals who received DI benefits in all 3 months of the  quarter for which they received UI benefits. For example, to be  considered in receipt of overlapping DI and UI benefits under our criteria,  an individual must have records in SSA disability files indicating the  monthly receipt of DI benefits in January, February, and March of 2010,  and must also have records in the NDNH indicating the quarterly receipt  of UI benefits in the corresponding quarter of fiscal year 2010, which is  the second quarter of fiscal year 2010. Because our population of  overlapping DI and UI beneficiaries includes only those individuals who  received DI in all 3 months of the quarter for which the NDNH reports the  receipt of UI, our analysis understates the population of individuals who  received overlapping DI and UI benefits in fiscal year 2010. For example,  individuals who received overlapping DI and UI payments in only 1 or only  2 months of a quarter are not included in our population of individuals  who received overlapping DI and UI benefits in fiscal year 2010. Because  of differences in the timing of DI and UI payments, the amount of  overlapping DI and UI payments for our population is estimated. For each  instance of concurrent DI and UI benefits, we used the monthly DI benefit  amounts in SSA’s disability files and the quarterly UI benefit amounts in  the NDNH to estimate the total amount of overlapping DI and UI benefits  in fiscal year 2010. Our estimate of overlapping DI benefits is understated  because it includes DI benefits payable for only 1 of the 3 months in a  quarter for which an individual also received UI benefits. Thus,  overlapping DI benefits that were payable in more than 1 month of a  quarter are not included in our estimate.
We also reviewed detailed DI and UI case files for a nongeneralizable  selection of eight individuals who received concurrent DI and UI benefits  to corroborate SSA DI data and UI data in the NDNH. To do this, we drew  a stratified random, nongeneralizable sample of eight individuals from two  different populations. The first four individuals we selected were from a  population comprising the top 50 recipients of concurrent DI and UI  benefits in fiscal year 2010. The second four individuals we selected were  from a population comprising the individuals who appeared to receive  concurrent DI and UI benefits, the latter from multiple states in fiscal year  2010. Because we selected a small number of individuals for further  investigation, the results cannot be projected to the population of  individuals receiving concurrent DI and UI benefits. For these eight  individuals, we obtained DI information from SSA and UI information from  state UI offices to determine the total amount of DI and UI benefits  received from 2008 to April 2012, the time frame for those benefits, and  any applicable employment information that illustrate instances of  individuals receiving concurrent DI and UI benefits. Although identifying  improper payments was not the primary purpose of this audit, some  individuals we selected for further review received improper DI or UI  payments.
To determine the reliability of the SSA disability records and NDNH UI  records, we reviewed documentation related to these databases and  interviewed officials responsible for compiling and maintaining relevant DI  and UI data. In addition, we performed electronic testing to determine the  validity of specific data elements in the databases that we used to  perform our work. We also reviewed detailed DI and UI case files for the  nongeneralizable selection of eight individuals selected as described  above who received concurrent DI and UI benefits to corroborate SSA DI  data and UI data in the NDNH. On the basis of our discussions with  agency officials and our own testing, we concluded that the data elements  used for this report were sufficiently reliable for our purposes.
We conducted this performance audit from December 2011 through July  2012 in accordance with U.S. 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  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our objective.
subsections: section_title: Background
subsections: section_title: Disability Insurance
paragraphs: As the nation’s largest cash-assistance program for workers with  disabilities, DI provides benefits to eligible individuals under Title II of the  Social Security Act. An individual is eligible to receive DI benefits if he or  she has a medically determinable physical or mental impairment that (1)  has lasted (or is expected to last) at least 1 year or is expected to result in  death and (2) prevents the individual from engaging in SGA. SGA is  defined as work activity that involves significant physical or mental  activities performed for pay or profit. For individuals whose impairment is  anything other than blindness, earnings averaging over $1,000 a month  for calendar year 2010 generally demonstrate SGA. For blind individuals,  earnings averaging over $1,640 a month for the year 2010 generally  demonstrate SGA for DI. The amount of earnings that generally  demonstrates SGA can vary from year to year. For example, the SGA  amount for individuals with disabilities, other than blindness, was $980 in  2009. Individuals with disabilities must also have a specified number of  recent work credits under the Social Security program at the onset of  medical impairment. An individual may qualify on the basis of the work  record of a deceased spouse or the work record of a parent who is  deceased, retired, or considered eligible for disability benefits, meaning  one disability beneficiary can generate multiple monthly disability  payments.
DI benefits are financed by payroll taxes paid into the Federal Disability  Insurance Trust Fund by covered workers and their employers, on the  basis of each worker’s earnings history. Cash benefits are payable  monthly, as long as the worker remains eligible for benefits, until the  worker reaches full retirement age or dies. In fiscal year 2010, more than  10 million beneficiaries received DI benefits totaling $121.6 billion, and  the program’s average monthly benefit was about $922. As directed by  federal law, SSA must reduce DI benefits for individuals receiving certain  other government disability benefits, such as worker’s compensation.  However, SSA may not reduce DI benefits for individuals receiving UI or  for individuals earning less than SGA. As mentioned, the Social Security  Board of Trustees projects that the DI trust fund will be exhausted in 2016  and noted that changes designed to improve the financial status of the DI  program are needed soon.
section_title: Unemployment Insurance
paragraphs: Established by the Social Security Act of 1935, the federal-state UI  program temporarily and partially replaces the lost earnings of those who  become unemployed through no fault of their own. To be eligible for UI  benefits, unemployed workers must meet eligibility requirements  established by state laws that conform to federal law, including that they  have worked recently, be involuntarily unemployed, and be able and  available for work. Whereas federal statutes and regulations provide  broad guidelines on UI eligibility, the specifics of UI eligibility are  determined by each state. According to DOL, all states require that a  claimant must have earned a specified amount of wages, worked a  certain number of weeks in covered employment, or must have met some  combination of the wage and employment requirements within his/her  base period. To be eligible for benefits, claimants must also be free from  disqualification for acts such as voluntary leaving without good cause,  discharge for misconduct connected with the work, and refusal of suitable  work. In addition to these eligibility requirements, all states require that a  claimant must be able and available for work. However, “able and  available for work” requirements vary among the states, according to  DOL. For example, a few states specify that a worker must be physically  able, or mentally and physically able, to work. Likewise, while some  states require that a worker must be available for work, other states  require that a worker must be available for suitable work; still other states  require that a worker be available for work in the worker’s usual  occupation or for work in which the worker is reasonably fitted by training  and experience. According to DOL, in addition to being able and available  for work, all states require by law or by practice that a worker be actively  seeking work or making a reasonable effort to obtain work. Finally,  some state laws expressly prohibit denying UI eligibility on the basis of  illness or disability under certain circumstances.
UI benefits and administrative costs are financed primarily by taxes levied  on employers. These taxes are deposited in the appropriate accounts within the Unemployment Trust Fund, which consists of 53 state accounts  and other federal accounts dedicated to special purposes. The severity  and length of the recent recession, and the slow pace of recovery, have  placed a heavy demand on state UI trust funds, resulting in very large  numbers of workers receiving benefits for very long periods of time. Since  mid-2008, Congress and the states have temporarily extended the period  of time that displaced workers can receive UI benefits to up to 99 weeks,  though the maximum number of weeks of available benefits varies among  the states. In April 2010, GAO reported that state UI trust funds were at  historically weak levels, with most requiring federal loans to pay  benefits. During fiscal year 2010, state agencies paid 11.3 million  beneficiaries $156.4 billion in federal and state unemployment benefits.
UI benefits vary substantially during a business cycle. As shown in figure  1, UI benefits varied substantially from 2005 to 2011, while DI benefits  steadily increased during those years.
section_title: Concurrent DI and UI Payments Resulted in Hundreds of Millions of Dollars in Overlapping Benefit Payments
paragraphs: In fiscal year 2010, 117,000 individuals received concurrent cash benefit  payments of more than $850 million. As shown in figure 2, these  individuals represented less than 1 percent of the total beneficiaries of  both programs. However, estimated overlapping cash benefits paid to  these individuals totaled over $281 million from the DI program and more  than $575 million from the UI program.
For individuals receiving  overlapping benefits in fiscal year 2010, we estimate the average  quarterly amount of overlapping cash benefit payments to be $1,093 in DI  and $2,231 in UI, for a quarterly average of $3,324 in overlapping  benefits.
Differences in program rules and definitions allow individuals in certain  circumstances to receive overlapping DI and UI benefits without violating  eligibility requirements. As mentioned, SSA’s definition of a disability  involves work that does not rise to the level of SGA. For 2010, a non-blind  person who is earning more than a $1,000 a month is ordinarily  considered to be engaging in SGA. In contrast, states’ determination of  “able and available for work” criteria for UI benefits may include  performing work that does not rise to the level of SGA. As a result, some  individuals may have a disability under federal law but still be able and  available for work under state law, thus eligible to receive DI and UI  concurrently. SSA officials stated that UI is considered unearned  income and therefore does not affect DI benefits. DOL officials  acknowledged that certain individuals may be eligible for both DI and UI,  depending on the applicable state laws regarding UI eligibility. Because  these overlapping payments may be allowed under both programs’  eligibility requirements, and no federal law authorizes an automatic  reduction or elimination of benefits if a recipient receives both payments,  neither SSA nor DOL have any processes to identify these overlapping  payments. As such, the costs associated with establishing mechanisms to  reduce or eliminate these overlapping payments are not readily available.
While the DI and UI programs generally serve separate populations and  provide separate services—thus not meeting our definition for overlapping  programs—the concurrent cash benefit payments made to individuals  eligible for both programs are an overlapping service for the replacement  of their lost earnings. We define overlaps as programs that have similar  goals, devise similar strategies and activities to achieve those goals, or  target similar users. Our prior work on overlapping government programs has found that, in some instances, overlapping programs or  activities have led to inefficiencies, and we have determined that greater  efficiencies or effectiveness might be achievable. However, in other  instances, it may be appropriate for multiple agencies or entities to be  involved in the same programmatic or policy area due to the nature or  magnitude of the federal effort.
Although current program rules allow overlapping benefits under certain  circumstances, concurrent receipt of DI and UI benefits can also be an  indicator of improper payments. For example, some individuals who have  a disability as determined by SSA may be receiving improper UI  payments because they are not “able and available” for work. Similarly,  some individuals receiving UI benefits may be receiving improper DI  payments because they no longer have a disability as defined by SSA.  Specifically, being “able and available” for work may indicate that an  individual’s medical condition no longer prevents him or her from  performing work that rises to the level of SGA. As mentioned, neither SSA  nor DOL have any processes to identify overlapping DI and UI payments.  As a result, neither SSA nor DOL currently evaluates whether overlapping  payments made to these individuals may be proper or improper.
For our review, we obtained DI and UI information for these eight individuals beyond  fiscal year 2010. Of the eight individuals we selected for further investigation, SSA  determined that one individual had a DI benefit overpayment. Additionally, three  individuals had UI benefit overpayments, as determined by the appropriate state UI office.  Because we selected a small number of individuals for our review, the results cannot be  projected to the population of individuals receiving overlapping DI and UI benefits. earnings may be related to work that makes this individual ineligible for UI  benefits. The Massachusetts UI benefits were exhausted after 99 weeks  as of June, 2011. As of April, 2012, the individual remains in current pay  status in the DI program, with a monthly DI benefit amount of $2,377.
Six of the individuals we selected for further investigation received  overlapping DI and UI benefits for 18 months or more. For example, one  individual began receiving DI benefits in 2004 originally due to disorders  of the back, and received overlapping DI and UI payments, which totaled  over $107,000, in 36 different months from 2008 to 2011. During that  period, this individual worked for construction companies and received UI  benefit payments from New Mexico in 2008, Wisconsin in 2009, Kansas  in 2010, and Montana in 2011. Montana officials stated that they also  received wage data from North Dakota for use in adjudicating the UI claim  in their state. As of April, 2012, this individual was no longer receiving UI  benefits from these states, but continued to receive cash benefits from  the DI program. SSA officials told us that this individual is currently under  a continuing disability review to determine if the beneficiary is ineligible for  DI due to work at or above the SGA level.
section_title: Conclusions
paragraphs: DI and UI provide important safety nets for American workers who have  lost their income. However, both trust funds face serious fiscal  sustainability challenges, prompting the need to examine opportunities for  potential cost savings. While the programs target different populations  and generally provide separate services, existing rules and definitions  result in a limited number of individuals being eligible for overlapping DI  and UI payments. However, the concurrent receipt of these benefits can  also provide an indicator of improper payments related to DI or UI.  Because these overlapping payments may be allowed under both  programs’ eligibility requirements, and no federal law authorizes an  automatic reduction or elimination of benefits if a recipient receives both  payments, neither SSA nor Labor has a process to identify these  overlapping benefit payments. As a result, for individuals receiving both  DI and UI benefits, the government is replacing a portion of their lost  earnings not once, but twice. Reducing or eliminating this overlap and  potential improper payments could offer substantial savings, though  actual savings are difficult to estimate because the potential costs of  establishing mechanisms to do so are not readily available.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of Labor work with the Commissioner  of SSA to (1) evaluate the circumstances under which individuals are  receiving overlapping DI and UI payments, taking appropriate action, as  necessary, for any payments determined to be improper, and (2) assess  whether cost savings or other benefits might be achieved by reducing or  eliminating overlapping DI and UI cash benefit payments being made  within the existing laws and regulations, seeking congressional authority  to do so as appropriate.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to SSA and DOL for comment. DOL and  SSA provided written comments to the draft which can be found in  appendices I and II. DOL and SSA agreed with our recommendation that  DOL work with SSA to evaluate overlapping DI and UI benefits, taking  appropriate action for any payments determined to be improper, and  assessing whether cost savings or other benefits might be achieved by  reducing or eliminating overlapping DI and UI cash benefit payments.  DOL and SSA also both recognized that the states play an important role  in the UI program, and DOL recommended that we encourage states to  participate in addressing the report’s recommendations. In this regard, we  agree that states’ programmatic knowledge would significantly contribute  to the evaluation of overlapping DI and UI benefits and encourage state  participation as appropriate. We also believe that it will be important for  DOL to reach out to the states in carrying out our recommendations to  evaluate these overlapping benefits. DOL and SSA also provided  technical comments, which we incorporated as appropriate.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Commissioner of the  Social Security Administration, the Secretary of Labor, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.
If you or your staff have questions about this report, please contact me at  (202) 512-6722 or hillmanr@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report.
section_title: Appendix I: Comments from Department of Labor
section_title: Appendix II: Comments from the Social Security Administration