Disability Insurance: Work Activity Indicates Certain Social Security Disability Insurance Payments Were Potentially Improper
Released: 2013-09-13T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: SSA's DI program is the nation's largest cash assistance program for workers with disabilities. Though program rules allow limited work activity, some work activity indicates beneficiaries are not disabled and therefore not entitled to DI benefits. Consequently, SSA might overpay beneficiaries if the agency does not detect disqualifying work activity and suspend benefits appropriately.

GAO was asked to study potential DI overpayments. GAO examined the extent to which (1) the NDNH indicates that individuals received potential DI overpayments; and (2) SSA's enforcement operation detects potentially disqualifying work activity during the waiting period. GAO drew random, generalizable samples of individuals from those whose earnings on the NDNH were beyond program limits and compared wages from their employers to DI program data to identify potential overpayments. To illustrate the circumstances in which SSA made potential DI overpayments, GAO reviewed case files for a nongeneralizable selection of six individuals--three who worked during their waiting period, and three who received potential overpayments for at least 3 years.

section_title: What GAO Found
paragraphs: On the basis of analyzing Social Security Administration (SSA) data on individuals who were Disability Insurance (DI) beneficiaries as of December 2010 and earnings data from the National Directory of New Hires (NDNH), GAO estimates that SSA made $1.29 billion in potential cash benefit overpayments to about 36,000 individuals as of January 2013. The exact number of individuals who received improper disability payments and the exact amount of improper payments made to those individuals cannot be determined without detailed case investigations by SSA. These DI beneficiaries represent an estimated 0.4 percent of all primary DI beneficiaries as of December 2010. Using a different methodology that includes additional causes of overpayments not considered in GAO's analysis, SSA estimated its DI overpayments in fiscal year 2011 were $1.62 billion, or 1.27 percent of all DI benefits in that fiscal year. GAO estimated DI program overpayments on the basis of work activity performed by two populations of individuals. The first population received potential overpayments due to work activity during the DI program's mandatory 5-month waiting period--a statutory program requirement to help ensure that SSA does not pay benefits to individuals who do not have long-term disabilities. Prior to receiving benefits, individuals must complete a 5-month waiting period, in which the individual cannot exceed a certain level of earnings, known as substantial gainful activity, during any month in order to be eligible for DI benefits. Earnings that exceed program limits during the waiting period indicate that individuals might not have long-term disabilities. The second population received potential overpayments due to work activity beyond the program's trial work period--the trial work period consists of up to 9 months in which a DI beneficiary may return to work without affecting her or his benefits. However, beneficiaries whose earnings consistently exceed program limits after completing a trial work period are generally no longer entitled to benefits.

SSA uses its enforcement operation to generate alerts for potentially disqualifying earnings, but the agency's enforcement operation does not generate alerts for earnings that occur in all months of the waiting period, which allows potentially disqualifying work activity to remain undetected. Specifically, GAO found that SSA's enforcement operation will not generate an alert for earnings during the waiting period if the earnings occur in a year when the beneficiary does not receive a benefit payment. For example, in two of the nongeneralizable case studies GAO reviewed, SSA's enforcement operation did not generate an alert for potentially disqualifying work activity during the waiting period because these individuals' waiting periods occurred in the year prior to their first benefit payment. GAO obtained earnings records from these individuals' employers that show they worked continually both during and after their waiting periods at a level of work that would normally result in a denial of benefits. GAO also reviewed information for individuals who worked beyond their trial work period and found that SSA had identified and established overpayments for these individuals. SSA officials stated that modifying its enforcement operation could be costly, but the agency has not assessed the costs of doing so. To the extent that it is cost-effective and feasible, establishing a mechanism to detect earnings during all months of the waiting period would strengthen SSA's enforcement operation.

section_title: What GAO Recommends
paragraphs: GAO recommends that SSA assess the costs and feasibility of establishing a mechanism to detect potentially disqualifying earnings during all months of the waiting period and implement the mechanism as appropriate. SSA concurred, but raised concerns about GAO's estimates. GAO believes its estimates are valid as discussed in this report.

section_title: Letter
paragraphs: The Social Security Administration’s (SSA) Disability Insurance (DI)  program is the nation’s largest cash assistance program for workers with  disabilities. In fiscal year 2011, more than 10 million DI beneficiaries  received cash benefits exceeding $128 billion, and the program is poised   Total government  to grow further as the baby-boom generation ages.spending on DI beneficiaries is substantially higher when including the  costs of Medicare benefits, which cost about $80 billion in 2011 for DI  beneficiaries. SSA administers the DI program and is responsible for  establishing national standards for disability determinations, reviewing DI  applications to verify work history and income rules, and periodically  evaluating beneficiary impairments to determine whether beneficiaries  remain entitled to benefits, among other things. SSA’s process for  approving benefits is complex and involves an evaluation of, among other  factors, medical evidence establishing a disabling condition, the  availability of possibly suitable employment, and the severity and length  of disability. Cash benefits are payable monthly, as long as the worker  remains eligible for benefits, until the worker reaches full retirement age  or dies. 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. 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.

42 U.S.C. § 423(a)(1) and (c)(2). nonconsecutive months, are generally no longer entitled to benefits, and  any benefit payments they receive after a subsequent 3-month grace  period could be improper. Medical and work-related overpayments  detected by SSA in the DI program grew from about $860 million in fiscal  year 2001 to about $1.4 billion in fiscal year 2010. The true extent of  overpayments is currently unknown, but our prior work suggests that most  overpayments are related to beneficiaries who worked while receiving  benefits.

This is the second in a series of reports that respond to your request that  we examine employment-related databases to determine whether  individuals are receiving SSA disability payments that were potentially  improper. Our first report addressed overlapping disability and  unemployment benefits. This report: (1) estimates the extent to which  individuals received DI benefit payments that were potentially improper  due to work activity performed during the 5-month waiting period or  beyond the 9-month trial work period; and (2) assesses the extent to  which SSA’s enforcement operation detects potentially disqualifying work  activity during the waiting period. The exact number of individuals who  received improper disability payments and the exact amount of improper  payments made to those individuals cannot be determined without  detailed case investigations by SSA. Thus, we refer to “benefit payments  that were potentially improper” and “potential overpayments” throughout  this report. As part of this work, we also provide examples of beneficiaries  with work activity during the waiting period or beyond the trial work period  to help illustrate the circumstances under which SSA made DI payments  that were potentially improper to beneficiaries. We plan to assess the  extent to which the National Directory of New Hires (NDNH) indicates  potential overpayments in SSA’s Supplemental Security Income (SSI)  program in future work, which will be available this year.

To determine the extent to which individuals received DI payments that  were potentially improper due to work activity, we compared NDNH  quarterly wage data with DI beneficiary files from the Master Beneficiary  Record (MBR) in order to identify individuals who were DI beneficiaries in  December 2010 and who received potential overpayments due to work  activity during the mandatory 5-month waiting period or beyond the trial  work period. Because of timing differences in the NDNH and MBR data,  we were not able to capture all earnings that may have resulted in  improper payments to these individuals. As such, our analysis of DI  beneficiaries whose work activity resulted in payments that were  potentially improper is likely understated. The timing of the NDNH and  MBR data we received is described in detail in appendix II. To identify  potential overpayments and to develop data for estimates of potential  overpayments in each population, we drew a random, generalizable  sample of individuals from each of the populations described above and  compared wage information from their employers to DI program  information from SSA. We drew samples of 133 and 130 individuals, and  received completed requests from employers for 98 individuals for each  sample. Because our analysis of overpayments is limited to earnings  data from the NDNH and DI payments from SSA, overpayments for each  sample are estimated.

We also developed detailed case-file information for a nongeneralizable  selection of six individuals from our two statistical samples to illustrate the  circumstances under which SSA made DI payments that were potentially  improper. From the sample of individuals who received payments that  were potentially improper due to work activity during the 5-month waiting  period, we randomly selected three beneficiaries from those who had  substantial earnings during the waiting period and continued to have  substantial earnings after their waiting period. From the sample of  individuals who received payments that were potentially improper due to  work activity beyond the trial work period, we randomly selected three  beneficiaries from those who received potential overpayments for at least  36 months (3 years). Because we selected a small number of individuals  for further review, these examples cannot be generalized to the  population of individuals receiving potential DI benefit overpayments. We  also examined SSA’s mechanisms to detect potentially disqualifying work  activity and compared them with Standards for Internal Control in the  Federal Government.methodology is included in appendix II.

A detailed description of our scope and  To determine the reliability of the SSA disability records and NDNH  quarterly wage records, we reviewed documentation related to these  databases and interviewed officials responsible for compiling and  maintaining relevant DI and NDNH 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  wage data from employers and DI program data from SSA for the  statistical samples of individuals selected as described above to confirm  that quarterly wage data from the NDNH indicated that payments from the  DI program were potentially improper. On the basis of our discussions  with agency officials, our review of related documentation, 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 April 2012 to July 2013 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 that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: The DI program was established in 1956 to provide monthly cash benefits  to individuals unable to work because of severe long-term disability.  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 2011, more than 10 million beneficiaries received DI benefits  exceeding $128 billion, and the program’s average monthly benefit was  about $926.

42 U.S.C. § 423 and 20 C.F.R. § 404.1572. deceased, retired, or considered eligible for disability benefits, meaning  one disability beneficiary can generate multiple monthly disability  payments for dependents.

To help ensure that SSA does not pay benefits to persons who do not  have long-term disabilities, a DI program statute requires individuals to  serve a 5-month waiting period prior to receiving DI benefits. The  waiting period begins in the first full month in which the individual has  been under a disability and continues for the next 4 consecutive  months.determinable impairment that prevents the individual from earning SGA- level wages throughout a period of 5 consecutive calendar months. As  shown in figure 1, if an individual has substantial earnings from work  during any month of the waiting period, the individual is considered to be  not disabled and therefore ineligible for DI benefits, and any DI payments  SSA makes are potentially improper.

section_title: SSA Made $1.29 Billion in Benefit Payments That Were Potentially Improper as of January 2013, Mostly as a Result of Work Activity during the 5-Month Waiting Period
subsections: section_title: SSA Made $1.29 Billion in DI Benefit Payments That Were Potentially Improper
paragraphs: On the basis of our analysis of SSA data on individuals who were DI  beneficiaries as of December 2010 and earnings data from the NDNH, we  estimate that SSA made $1.29 billion in DI benefit payments that were  potentially improper to about 36,000 individuals as of January 2013. Our  estimate for the amount of payments that were potentially improper has a  margin of error of plus or minus $352 million, meaning the actual amount  of payments that were potentially improper could be as low as $936 million and as high as $1.64 billion with a 95 percent level of confidence.Our estimate for the number of individuals has a margin of error of plus or  minus 7,000 individuals, meaning the actual number of individuals to  whom SSA made payments that were potentially improper could be as  low as 29,000 and as high as 43,000 with a 95 percent level of  confidence. As shown in figure 3, the estimated 36,000 DI beneficiaries  receiving potential overpayments represent about 0.4 percent of all  primary DI beneficiaries at that time. Our analysis identifies individuals  who received DI benefits that were potentially improper due to work  activity performed (1) during the 5-month waiting period, or (2) beyond the  9-month trial work period and the grace period.

It is important to note that it is not possible to determine from data  analysis alone the extent to which SSA made improper disability benefit  payments to these individuals. To adequately assess an individual’s work  status, a detailed evaluation of all the facts and circumstances must be  conducted for each beneficiary. This evaluation would include contacting  the beneficiary and the beneficiary’s employer to gather information on  certain impairment-related work expenses, such as transportation costs  and attendant care services, which are not considered in our analysis. On  the basis of this additional information, SSA can determine whether the  individual is entitled to continue to receive disability benefits or have such  payments suspended. As described below, SSA had identified and  established overpayments for some of the individuals we reviewed at the  time of our audit. However, SSA had not identified potentially disqualifying  work activity for other individuals we reviewed at the time of our audit.

section_title: Work Activity during the Waiting Period Indicates SSA Made $920 Million in Benefit Payments That Were Potentially Improper
paragraphs: We estimate that SSA made payments that were potentially improper to  about 21,000 individuals who were DI beneficiaries in 2010 and who had  substantial earnings from work during the 5-month waiting period,  resulting in potential overpayments of $920 million as of January 2013.  Our estimate for the amount of payments that were potentially improper  due to work activity during the waiting period has a margin of error of plus  or minus $348 million, meaning the actual amount of payments that were  potentially improper due to work activity during the waiting period could  be as low as $571 million and as high as $1.27 billion with a 95 percent   Our estimate for the number of individuals has a  level of confidence.margin of error of plus or minus 7,000 individuals, meaning the actual  number of individuals to whom SSA made payments that were potentially  improper could be as low as 14,000 and as high as 28,000 with a 95  percent level of confidence. The exact number of individuals who  received improper disability payments and the exact amount of improper  payments made to those individuals cannot be determined without  detailed case investigations by SSA. See appendix II for more information  on the statistical estimations of overpayments for these populations.

Specifically, these three beneficiaries were randomly selected from those in our sample  with SGA-level earnings during the waiting period and additional SGA-level earnings after  the waiting period that were earned within 1 year of their alleged disability onset date.  According to SSA policy, when a beneficiary returns to work less than 1 year after onset it  may indicate the 12-month duration requirement for disability was not met and thus the  beneficiary’s disability claim must be denied. these examples cannot be projected to the population of individuals  receiving potential DI benefit overpayments.

As mentioned earlier, individuals are required to serve a 5-month waiting  period prior to receiving DI benefits to ensure that SSA does not pay  benefits to persons who do not have long-term disabilities. Specifically,  substantial earnings from work during the 5-month waiting period may  indicate that individuals are not considered disabled and therefore are not  entitled to DI benefits. Thus, if SSA discovers substantial earnings from  work during the waiting period prior to adjudicating the disability claim,  SSA will deny the disability claim. SSA may also reopen previously  awarded disability claims by revising the decision to a denial of benefits  after providing due process rights. Additionally, SSA’s policies allow it the  option of considering a later disability-onset date rather than denying the  disability claim if it discovers the SGA-level work activity after the SGA  subsequently stops. According to SSA guidance, an unsuccessful work  attempt during the waiting period will not preclude a finding of disability.

Waiting Period Example 1: Beneficiary Did Not Report All Earnings, SSA’s  Enforcement Operation Did Not Generate Alert, and SSA Applied Trial Work Period  Rather than Waiting Period Program Rules—Potential Overpayment of $90,000  The beneficiary filed for benefits in November 2009 while he had substantial earnings  from working as a physician. He had substantial earnings from work in all 5 months of  the waiting period, as much as $22,000 monthly, and continued to have substantial  earnings from work in the month he started receiving benefits.

As mentioned, SSA’s policies allow it the option of considering a later disability-onset  date rather than denying the disability claim when it discovers SGA-level earnings during  the waiting period. According to this SSA guidance, work activity of 6 months or less can  be considered an “unsuccessful work attempt” during the waiting period, and will not  preclude a finding of disability. During his initial claims interview, the beneficiary told SSA  that he worked for only 2 months during the waiting period, a period short enough to be  considered an unsuccessful work attempt.

However, SSA did not verify the beneficiary’s wages with his employer and approved the  individual for benefits beginning in January 2010. In contrast, the wages we confirmed  with the beneficiary’s employer indicate that the beneficiary had earnings continuously  above the SGA level for every month of the year that he applied for and was approved  for benefits, including all 5 months of the waiting period. Further, because these earnings  were continuously above the SGA level for more than 6 months, SSA policy indicates  that his work activity cannot be considered an unsuccessful work attempt. As such, this  individual’s work activity indicates that he was not disabled, and therefore was ineligible  for benefits.

Additionally, SSA’s enforcement operation did not generate an alert for his work activity  during the waiting-period months in 2009 because his first benefit payment was in  January 2010. According to SSA officials, the enforcement operation will only generate  an earnings alert for a year in which a beneficiary receives a payment. In this example,  because DI benefit payments began in 2010, and the waiting period was during the year  prior to the first payment, no earnings alert was generated.

In 2011, SSA initiated a work-related continuing disability review (CDR) as a result of an  earnings alert for work activity after the waiting period. As mentioned, SSA conducts  CDRs to determine if beneficiaries are working above the SGA level. However, during  the CDR, SSA program staff did not request and verify wages from the beneficiary’s  employer, nor did staff apply program rules regarding work activity during the waiting  period. Instead, the CDR considered the work activity under the trial work period rules  and determined that benefits should continue. Because the beneficiary’s impairment did  not prevent him from earning SGA-level wages during the waiting period and his SGA  continued after the waiting period, SSA policies indicate that SSA should have denied  the individual benefits when his case was adjudicated, or reopened the determination  after adjudication and revised the claim to a denial of benefits, which would have  resulted in an overpayment of all benefits previously paid. As such, we estimate that  SSA made $90,000 in cash benefit payments that were potentially improper to this  individual over a period more than 3 years. As of May 2013, SSA had not detected or  assessed any overpayments for the beneficiary and continued to pay monthly DI benefits  of about $2,500. SSA officials told us they plan to conduct follow-up work on this case on  the basis of the information we provided.

Waiting Period Example 2: Beneficiary Did Not Report Earnings and SSA’s  Enforcement Operation Did Not Generate Alert—Potential Overpayment of $21,000  The beneficiary began work in August 2009 and continued to work through January  2010, the month that SSA began making DI benefit payments due to mental disorders.  The beneficiary had substantial earnings from work during 3 months of her waiting period  and continued to have SGA-level earnings during the month she started receiving  benefits, but she did not report any wages to SSA as required by program regulations.  No enforcement operation earnings alert was generated for her work activity during the  waiting period because her waiting period occurred in 2009, but her first benefit payment  was not until January 2010. Additionally, no enforcement operation earnings alert was  generated for her earnings in 2010 because, SSA officials told us, her earnings were too  low to generate an alert.and continued to pay monthly DI benefits as of May 2013. We identified about $21,000 in  benefit payments that were potentially improper through our analysis of the beneficiary’s  wage records. SSA officials told us they plan to conduct follow-up work on this case.

SSA had not assessed any overpayments for the beneficiary  Waiting Period Example 3: SSA Did Not Follow Its Program Rules—Potential  Overpayment of $25,000  The beneficiary began working in October 2004 and remained employed through at least  June 2012. SSA approved the beneficiary for DI benefits starting in December 2009 for a  malignant tumor. The beneficiary had substantial earnings from work during her waiting  period as well as SGA-level earnings in 9 months of the first 12 months that SSA  determined her impairment prevented her from having substantial earnings from work.  When the beneficiary eventually self-reported earnings in 2011, SSA initiated a CDR that  discovered substantial earnings from work during the waiting period. However, SSA staff  did not consider this work in accordance with its own policies, and the CDR resulted in a  determination that DI benefits should continue. Specifically, according to SSA, the  discovery of SGA-level wages during the waiting period should have prompted SSA staff  to initiate processes for determining whether benefits should have originally been denied  or if the onset date should be changed to the date the SGA-level work stopped, but the  SSA staff did not do so. On the basis of this individual’s substantial earnings from work  during the waiting period, the revised disability determination may have resulted in a  revised disability denial or revised date of disability onset. SSA ceased providing DI  benefits to the beneficiary in April 2013 when the beneficiary died. Although SSA never  assessed overpayments for the beneficiary, we identified about $25,000 in cash benefit  payments that were potentially improper through our analysis of the beneficiary’s wage  records. Because the beneficiary died, her estate, or the beneficiaries of her estate,  would be responsible for repaying the overpayment. SSA officials told us they plan to  conduct follow-up work on this case.

section_title: Work Activity beyond the Trial Work Period Indicates SSA Made $368 Million in Benefit Payments That Were Potentially Improper
paragraphs: We estimate that SSA made potential overpayments to 15,500 individuals  who were DI beneficiaries in 2010 and who worked beyond their trial work  period, resulting in potential overpayments of $368 million as of January  2013. Our estimate for the amount of payments that were potentially  improper due to work activity beyond the trial work period has a margin of  error of plus or minus $62 million, meaning the actual amount of  payments that were potentially improper due to work activity beyond the  trial work period could be as low as $306 million and as high as $430  million, with a 95 percent level of confidence. Our estimate for the number  of individuals has a margin of error of plus or minus 1,500 individuals,  meaning the actual number of individuals to whom SSA made payments  that were potentially improper could be as low as 14,000 and as high as  17,000, with a 95 percent level of confidence. The exact number of  individuals who received improper SSA disability payments cannot be  determined without detailed case investigations by SSA. See appendix II  for more information on the statistical estimations of overpayments for  these populations.

In addition to our statistical sample, we reviewed detailed DI case-file  information for a nongeneralizable selection of three beneficiaries from  among those in our sample that we identified to have potential  overpayments for at least 36 months (3 years) due to work activity  beyond their trial work period. Our case file reviews for these three  beneficiaries confirmed instances in which SSA made overpayments to  beneficiaries with substantial earnings from work, as discussed later in  this report. SSA officials told us they plan to conduct follow-up work on  these cases on the basis of the information we provided during this  review. Because we selected a small number of individuals for further  review, these examples cannot be projected to the population of  individuals receiving potential DI benefit overpayments.

As previously discussed, federal statutes and SSA regulations allow DI  beneficiaries to work for a limited time without affecting their benefits.  However, after completing the 9-month trial work period and entering the  reentitlement period, beneficiaries who have substantial earnings from  work beyond the 3-month grace period are generally no longer entitled to  benefits. If SSA does not stop their benefits in a timely manner, SSA may  overpay beneficiaries who are not entitled to benefits due to their work  activity.

Trial Work Period Example 1: No Increased Scrutiny for Known Rule Violator— Overpayment of $57,000  The individual filed for DI benefits on the basis of personality disorders and affective  disorders in July 2006, and SSA approved his claim the following day. The day after he  was approved for benefits, the beneficiary began working. At no point did the beneficiary  report the new wages from his employment, as required by SSA regulations. SSA’s  enforcement operation generated earnings alerts each year from 2008-2011, but SSA  did not initiate a CDR until April 2011. Agency officials told us that SSA does not have  any policies that dictate time limits for initiating a CDR on the basis of an earnings alert,  nor stipulating that a CDR must be initiated if earnings alerts are generated for several  consecutive years. As a result of the CDR in 2011, SSA suspended the beneficiary’s DI  benefits in December 2011 and subsequently assessed an overpayment of more than  $57,000 due to his work activity. SSA officials were unable to explain why a CDR was  not performed until 2011, though they stated that limited resources and competing  workloads may be factors that contributed to the timeliness with which the CDRs were  initiated.

A month after SSA assessed the overpayment, while he continued to have substantial  earnings from working for the same employer, the beneficiary applied to have his  benefits reinstated, and fraudulently affirmed that he did not have substantial earnings  from work. We found no evidence in SSA’s files that SSA had contacted the beneficiary’s  employer to confirm his statement before approving his benefits. Thus, even though SSA  had information documenting that the individual did not report earnings before, the  agency approved the application and continued to pay DI benefits as of May 2013.  Because the individual had SGA-level wages for the entire year prior to his application  for reinstatement and for at least 2 months after SSA approved him for reinstated  benefits, the cash benefit payments SSA made after reinstating this individual were  potentially improper, though SSA had not established an overpayment for this work  activity as of April 2013. To recover the prior outstanding overpayment, SSA is  withholding $75 per month from the current monthly DI benefits that SSA may be  improperly paying to the beneficiary. At $75 per month, it would take 63 years for SSA to  recover the $57,000 overpayment, at which time the beneficiary would be well over 100  years old.basis of the information we provided.

SSA officials told us they plan to conduct follow-up work on this case on the  Trial Work Period Example 2: Earnings Alerts Did Not Result in Review for 5  Years—Overpayment of $74,000  SSA approved the beneficiary for DI benefits in April 1998 for mental disorders. The  beneficiary began working in October 2005 and remained employed as of August 2012.  After he reported his earnings in October 2005, SSA completed a CDR and found that  the beneficiary was within his trial work period. From 2007 to 2011, SSA’s enforcement  operation generated earnings alerts for the beneficiary. Despite knowing the beneficiary  began working in 2005 and receiving 5 additional years of earnings alerts, SSA did not  perform another CDR until December 2011. SSA officials were unable to explain why a  second CDR was not performed for more than 5 years when it had previously identified  that the beneficiary had partially completed a trial work period. However, SSA officials  told us that resource constraints may have delayed this CDR. As a result of the 2011  CDR, SSA assessed over $56,000 in overpayments and ceased providing benefits to the  beneficiary in June 2012. SSA also assessed a total of over $18,000 in additional  overpayments for the beneficiary’s two child dependents. SSA approved a repayment  plan of $200 per month for the $74,000 in overpayments. SSA officials told us they plan  to conduct follow-up work on this case.

Trial Work Period Example 3: Known Work Activity Not Monitored—Overpayment  of $25,000  SSA approved the beneficiary for DI benefits starting in June 2005 for mental disorders.  The beneficiary began working in November 2007 and remained employed through at  least August 2012. In May 2008, he provided SSA pay stubs for 2 months of earnings,  which showed that he was not earning substantial wages. SSA’s enforcement operation  generated earnings alerts in 2008 and 2009, and SSA completed a CDR in 2010 in  which the agency determined that benefits should continue because he had not yet  completed his trial work period. In the month following the completion of the CDR, SSA  contacted the beneficiary to inform him that he had completed his trial work period.  Despite knowing that the beneficiary had completed his trial work period, SSA did not  complete a subsequent CDR for more than 2 years. SSA officials told us that resource  constraints may have contributed to the delay in initiating a subsequent CDR. As a result  of the CDR performed 2 years later, SSA assessed overpayments of $25,000 due to  work activity and stopped paying benefits. As of April 2013, the beneficiary had not made  any payments toward his overpayment debt. SSA officials told us they plan to conduct  follow-up work on this case.

section_title: SSA Is Assessing Opportunities to Better Identify Potential Improper Payments, but Existing Controls Allow Potentially Disqualifying Work Activity to Remain Undetected
subsections: section_title: SSA Is Assessing Opportunities to Improve the Timeliness of DI Program-Integrity Efforts, but It Is Too Early to Assess What Effect These Initiatives May Have on DI Overpayments
paragraphs: We identified instances in which the timeliness of SSA’s process for  identifying disqualifying work activity allowed DI overpayments to remain  undetected and accrue; however, SSA is assessing opportunities to  obtain more-timely earnings information and improve its work CDR  process. Specifically, in the course of this review, we identified instances  in which SSA did not obtain timely earnings information and did not act  promptly when it did receive earnings alerts, which led to significant cash  benefit overpayments. This is consistent with our prior work that found DI  overpayments for beneficiaries who return to work may accrue over time  because SSA lacks timely data on beneficiaries’ earnings and does not  act promptly when it receives earnings alerts from its enforcement  operation. During this review, SSA officials told us that limited resources  and competing workloads may have constrained the agency’s ability to  act promptly when it received earnings alerts or self-reported earnings for  beneficiaries from our nongeneralizable examples described above. We  also reported in April 2013 that budget decisions and the way SSA  prioritizes competing demands, such as processing initial claims,  contribute to challenges SSA faces in maintaining the integrity of the  disability program.

In 2004, we reported that SSA’s lack of timely earnings data on  beneficiaries’ earnings and work activity impeded its ability to prevent and  detect earnings-related overpayments. To enhance SSA’s ability to detect  and prevent overpayments in the DI program, we recommended that SSA  use more-timely earnings information in the NDNH in conducting  program-integrity operations. Although SSA uses the NDNH to perform  oversight of the SSI program, it does not use the NDNH to conduct  oversight of the DI program. In 2009, SSA conducted a cost-effectiveness  study on use of the NDNH, which estimated its return on investment  would be about $1.40 for every $1 spent, or a 40 percent rate of return;  however, SSA concluded in its 2009 study that this expected return on  investment was low, and noted that a match with the NDNH would  generate a large number of CDR alerts needing development that were  not of high quality. In July 2011, we reported that due to overly  pessimistic assumptions in SSA’s cost-effectiveness study, it is likely that  the actual savings that result from SSA’s use of the NDNH could be much  higher. Further, it is not clear whether this cost-benefit analysis  accounted for improper payments that would be prevented by identifying  work activity during the 5-month waiting period. Thus, the real return on  investment could be understated. SSA agreed with our assessment and  in January 2013 said that it is currently reevaluating the cost- effectiveness of using the NDNH for DI program-integrity initiatives and  expects the cost-benefit analysis to be completed in the fourth quarter of  fiscal year 2013.

SSA officials also stated that the agency has made improvements to its  CDR process, but we were unable to determine how they might reduce  improper payments due to beneficiaries’ work activity because these  initiatives were still being tested at the time of our review. For example, in  2010 SSA began a pilot to use what the agency refers to as a predictive  model to prioritize enforcement operation earnings alerts, working cases  likely to incur large work-related overpayments first. SSA officials told us  the agency is planning to implement the model nationally in June 2013.  Additionally, in response to a recommendation we made in a prior report,  in 2012 SSA began testing a new process to use its model to identify and  delay benefit increases for beneficiaries with pending work CDRs.Because these initiatives were still being tested at the time of our review,  we were unable to determine how they might reduce improper payments  due to beneficiaries’ work activity. As such, it is too early to assess what  effect these initiatives may have on the prevalence and size of DI  overpayments.

section_title: SSA Can Improve Its Ability to Detect Potentially Disqualifying Work Activity
paragraphs: We found that a limitation of SSA’s enforcement operation allows  individuals with substantial earnings from work during the waiting period  to be approved for DI benefits and allows resulting DI benefit payments  that were potentially improper to remain undetected by SSA.  Specifically, we found that SSA’s enforcement operation will not generate  an alert for earnings during the waiting period if the earnings occur in a  year when the beneficiary does not receive a benefit payment. For  example, if a beneficiary receives her or his first benefit payment in  January 2013, the enforcement operation will not generate an earnings  alert for wages earned during the waiting-period months occurring in the  prior year, which would be from August to December 2012. As a result,  for any beneficiary whose first month of entitlement is January to May, the  enforcement operation does not generate an earnings alert for at least 1  month of the waiting period. In two of the three examples we randomly  selected from our sample of beneficiaries with work activity during the  waiting period, SSA’s enforcement operation did not generate alerts for  SGA-level earnings during the waiting period because their waiting  periods occurred in the year prior to their first benefit payment. These  individuals were approved for benefits despite disqualifying work activity,  and SSA had not detected any overpayments for these individuals at the  time of our audit. For the third beneficiary we reviewed, SSA’s  enforcement operation generated an alert for earnings during the waiting  period because the individual also received benefit payments in that year.  However, this alert was generated more than 1 year after the work activity  during the waiting period occurred, and in the resulting work CDR, SSA  did not apply its own waiting period program rules to the work activity.  Specifically, SSA approved the individual for benefits despite disqualifying  work activity and did not detect and establish overpayments for this work  activity when it later became aware of the work activity.

Standards for Internal Control in the Federal Government states that  internal controls should generally be designed to assure that ongoing  monitoring occurs in the course of normal operations. SSA officials  acknowledged that the systemic limitation to their enforcement operation  allows potentially disqualifying work activity to remain undetected, but  SSA expressed concern that modifying its existing enforcement operation  may be costly. However, SSA has not assessed either the costs of such a  modification or the additional program savings it might realize should  such a change be implemented. Such an analysis would assist SSA in  making an informed decision regarding the costs and benefits of  modifying its existing enforcement operation. To the extent that such an  analysis determines modifying its existing enforcement operation is cost  effective and feasible, establishing a mechanism to identify work activity  performed during all months of the waiting period, including those that  occur in a year when beneficiaries were not paid, may help provide SSA  greater assurance that DI beneficiaries are eligible to receive benefits.

section_title: Conclusions
paragraphs: The DI program provides an important safety net for disabled  beneficiaries. However, during a time of growing concerns about the  solvency of the DI trust fund, it is important that SSA take every  opportunity to ensure that only eligible beneficiaries receive payments  under this program and that additional actions are taken to improve the  financial status of the program. Without reliable and timely earnings  information on the work activity of individuals applying for DI benefits,  SSA risks making overpayments to individuals whose work activity  indicates they are not disabled and therefore ineligible for disability  benefits. While we cannot generalize the examples we found, SSA’s  inability to identify work activity during the waiting period may result in  overpayments to beneficiaries who are ineligible for benefits. Assessing  the costs and savings associated with establishing a mechanism to  identify work activity during all months of the waiting period would help  SSA to determine whether establishing such a mechanism would be cost- effective and feasible. To the extent that it is determined to be cost- effective and feasible, implementing a mechanism to identify work activity  performed during all months of the waiting period, including those that  occur in a year when benefits were not paid, may help provide SSA  greater assurance that DI beneficiaries are eligible to receive benefits.

section_title: Recommendation for Executive Action
paragraphs: To improve SSA’s ability to detect and prevent potential DI cash benefit  overpayments due to work activity during the 5-month waiting period, we  recommend that the Commissioner of Social Security take the following  action: assess the costs and feasibility of establishing a mechanism to detect  potentially disqualifying earnings during all months of the waiting  period, including those months of earnings that the agency’s  enforcement operation does not currently detect and implement this  mechanism, to the extent that an analysis determines it is cost- effective and feasible.

section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Office of the Commissioner of  SSA. In its written comments, SSA concurred with our recommendation  and stated that it would conduct the recommended analysis. In addition,  SSA expressed some concerns about our methodology for estimating  potential improper payments due to beneficiaries’ work activity, which are  summarized below. The agency also provided general and technical  comments, which have been incorporated into the report, as appropriate.  SSA’s comments are reproduced in full in appendix IV.

In commenting on our recommendation to assess the costs and feasibility  of establishing a mechanism to detect potentially disqualifying earnings  during all months of the waiting period and to implement the mechanism,  to the extent that it is cost-effective and feasible, SSA requested the data  we gathered as part of this study to help the agency assess the costs and  feasibility of establishing such a mechanism. At SSA’s request, we will  provide SSA the population of individuals with earnings during the 5- month waiting period that we identified from our match of 2010 NDNH  earnings data and SSA’s 2010 DI program data. During the course of this  audit, we also provided SSA with the SSNs of the individuals in our two  random samples. These data would allow SSA to perform the  recommended analysis using the NDNH wage data, which we obtained  from SSA. We note that SSA’s assessment would benefit from using the  most-recently available wage data, such as 2013 data that are directly  available to SSA from the NDNH.

In addition to this data request, SSA raised several concerns about our  methodology and asserted that our inability to replicate the process it  uses to make SGA determinations may lead to substantial overstatement  of our estimate of potentially improper payments. First, SSA noted that  our review does not consider program features, such as unsuccessful  work attempts and Impairment Related Work Expenses (IRWE), or  whether the work involved subsidies or special conditions. As mentioned  in the report, SSA’s process for determining SGA and its policies for  determining whether individuals remain entitled to benefits despite  potentially disqualifying work activity involve a consideration of all the  facts and circumstances surrounding a case, including medical data that  doctors and hospitals are not required to share with GAO for purposes of  this audit. As such, our objective was to estimate the extent to which  individuals received DI benefit payments that were potentially improper  due to their work activity. To do this, we used wage data to identify two  populations of individuals with earnings beyond program limits; we then  drew a random, generalizable sample of individuals from each population  and compared wage information from their employers to DI program  information from SSA to develop estimates of potential overpayments in  each population. Because our analysis of potential overpayments is  limited to earnings data from the NDNH and DI payments from SSA,  potential overpayments for each sample are estimated. Thus, we  continue to believe that the methodology we applied using the data we  were able to access led us to valid estimates of potentially improper  payments due to beneficiaries’ work activity.

Second, SSA noted that we assume that every payment made after the 5- month waiting period is likely to be an improper payment instead of  reestablishing the disability onset date, as its policy allows in some  instances. However, our method of calculating potential overpayments is  consistent with current DI program policies and interviews with SSA  officials who stated that individuals who perform substantial gainful  activity during the waiting period are not disabled and therefore not  entitled to benefits; thus, all DI payments made to those individuals are  potentially improper payments. Further, determining which individuals in  our samples, if any, should have their onset date reestablished despite  disqualifying work activity in the waiting period was not reasonably  possible because making such a determination would involve a  consideration of medical data that doctors and hospitals were not  required to share with GAO for purposes of this audit.

Third, SSA stated that payment for medical leave may have been  included in some of the payroll data we used for our analysis and  suggested that this may have led to a substantial overstatement of  estimated improper payments. However, our calculation of earned income  excludes material payments for medical leave, as described in detail in  appendix II. Thus, we do not expect that these payments or the other  concerns SSA raises in its letter led to a substantial overstatement of  potential overpayments, as SSA suggested.

Finally, SSA noted that improving payment accuracy is critical to  preserving the public's trust in the DI program and that available  resources may affect SSA’s ability to increase its payment accuracy. We  recognize SSA’s ongoing efforts to improve the program and that federal  resources are currently constrained. However, without making changes to  its existing processes for identifying beneficiaries’ work activity, to the  extent that the benefits exceed the costs, SSA may remain unable to  detect work activity in a timely manner, and SSA may continue to make  improper payments to individuals whose work activity indicates they are  not entitled to benefits.

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  Social Security 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 lords@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: Debt Owed to SSA from Overpayment of DI Benefits Is Increasing
paragraphs: As shown in figure 4 below, in fiscal year 2010, the total amount owed to  the Social Security Administration (SSA) for Disability Insurance (DI)  overpayments was $5.4 billion. This debt has increased through fiscal  year 2012, as individuals owed over $6 billion in overpayments of DI  benefits.

section_title: Appendix II: Objectives, Scope, and Methodology
paragraphs: This report (1) estimates the extent to which individuals received disability  insurance (DI) benefit payments that were potentially improper due to  work activity performed during the 5-month waiting period or beyond the  9-month trial work period; and (2) assesses the extent to which the Social  Security Administration’s (SSA) enforcement operation detects potentially  disqualifying work activity during the waiting period. The exact number of  individuals who received improper disability payments and the exact  amount of improper payments made to those individuals cannot be  determined without detailed case investigations by SSA. Thus, we refer to  “benefit payments that were potentially improper” and “potential  overpayments” throughout this report. As part of this work, we also  provide examples of beneficiaries with work activity during the waiting  period or beyond the trial work period to help illustrate the circumstances  under which SSA made DI payments that were potentially improper to  beneficiaries. We plan to assess the extent to which the National  Directory of New Hires (NDNH) indicates potential overpayments in  SSA’s Supplemental Security Income (SSI) program in future work, which  will be available this year.

To determine the extent to which the NDNH provides evidence that  individuals received DI benefit payments that were potentially improper  due to work activity, we matched the NDNH quarterly wage data with our  extract of SSA’s Master Beneficiary Record (MBR) as of December 2010.  To ensure the best quality matches, we matched only against Social  Security Numbers (SSN) that the NDNH categorizes as “verified” through   Thus, we did not  the SSA’s Enumeration Verification System process.match against SSNs that the NDNH categorizes as “unverified” or “non- verifiable.” The match process identified two populations with potential  overpayments due to work activity. The first population consisted of  individuals who received potential overpayments due to substantial  gainful activity (SGA) level earnings during the 5-month waiting period.  The details of this match are described in the section below titled “Wait  Period Overpayments.” The second overpayment population consisted of  individuals who received potential overpayments due to SGA-level  earnings beyond the trial work period.described in the section below titled “Trial Work Period Overpayments.”
subsections: section_title: The NDNH Database
paragraphs: Sections 452(a)(9) and 453(a)(1) of the Social Security Act required the  Secretary of Health and Human Services to establish and maintain the  Federal Parent Locator Service, which includes the NDNH database.The NDNH database contains employment data on newly hired  employees (W4), quarterly wage (QW) data on individual employees, and  unemployment insurance (UI) data. The federal Office of Child Support  Enforcement (OCSE) matches case information from state child support  enforcement agencies against the NDNH and returns information on the  case to the appropriate state or states. NDNH data are deleted after 24  months, as required by Section 453(i) of the Social Security Act. The data  reported to OCSE for the NDNH come from several sources. Employers  report W4 data to the State Directories of New Hires, which then report  them to OCSE. UI data originate with the State Workforce Agencies,  which then send data to the State Directories of New Hires, which send  data to OCSE. The quarterly wage data are reported by employers to the  State Workforce Agencies for their state, which in turn reports them to the  State Directories of New Hires (sometimes colocated with the State  Workforce Agencies), which then reports the information to OCSE.  Federal agency W4 and QW data are reported directly to OCSE.
subsections: section_title: Limitations to Using NDNH Data to Determine SGA
paragraphs: The timing and nature of NDNH earnings data we received present  limitations to the data’s capacity to identify SGA in accordance with SSA’s  complex program rules. First, the quarterly wage amounts on the NDNH  represent 3 months of earnings; however, the statute for evaluating SGA- level earnings requires SSA to use monthly earnings amounts. To  facilitate our analysis, we calculated monthly earnings for each month in a  quarter by dividing the quarterly wage amount in the NDNH by 3. For  example, if the NDNH reported quarterly earnings of $3,000 in the first  quarter of 2010, we calculated the monthly earnings to be $1,000 for  January, February, and March of 2010. This monthly computed earnings  amount could differ from the actual monthly earnings. For instance, using  the previous example, the actual monthly earnings in January 2010 could  be $3,000, and actual earnings in February or March could be $0.  Second, when SSA evaluates earnings to determine SGA for DI  beneficiaries, SSA counts earnings when they are earned, not paid;  however, amounts of earnings on the NDNH for a particular quarter could  be paid in that quarter, but earned in prior quarters. In addition to these  timing limitations, the NDNH quarterly earnings data may contain  payments not related to work activity, such as paid time off, long-term  disability payments, or posttermination compensation; however, SSA’s  assessment of SGA generally involves doing significant physical or  mental activities, rather than receiving payments not related to work.

To account for these limitations, we drew a simple random sample from  each of the potential overpayment populations and contacted the  employers that reported the earnings to determine the exact timing,  amount, and nature of the earnings for the beneficiaries in our sample.  With these simple random samples, each member of the study  populations had a nonzero probability of being included, and that  probability could be computed for any member. Each sample element  was subsequently weighted in the analysis to account statistically for all  the members of the population, including those who were not selected.  Additional details on our sample work are described in the “Wait Period  Overpayments” and “Trial Work Period Overpayments” sections below.

As mentioned, it is impossible to determine from reported earnings alone  the extent to which SSA made improper disability benefit payments to  these individuals. To adequately assess an individual’s work status, a  detailed evaluation of all the facts and circumstances should be  conducted for all cases. This evaluation may necessitate contacting the  beneficiary, the beneficiary’s employer, and the beneficiaries’ physician to  evaluate the nature of the work performed. This evaluation may also  consider certain impairment-related work expenses, which were not  considered in our analysis. On the basis of this comprehensive evaluation of all facts and circumstances surrounding a case, SSA can  determine whether the individual is entitled to continue to receive  disability payments or have such payments suspended.

section_title: Wait Period Overpayments
paragraphs: Our analysis of the NDNH match file identified individuals who were in  current pay status in the DI program as of December 2010 and had  computed monthly earnings that exceeded the corresponding monthly  SGA threshold for any of the 5 months prior to the individual’s DI date of   We included individuals who received potential  entitlement to disability.overpayments due to work activity during the waiting period on the basis  of the following criteria:  1.  monthly computed earnings were greater than the corresponding SGA  threshold during any month of the individual’s 5-month waiting  period, and 2.  DI payment records on the MBR showed that DI benefits were paid to  the individual during any of the 36 months for which we had DI  payment data from the MBR.

Thus, to be included in our Wait Period overpayment population,  individuals had to be in current pay status as of December 2010 and have  at least 1 month of potential overpayments as defined by the criteria  above. Our analysis determined there were 83,179 individuals meeting  these potential-overpayment criteria. Because SGA-level earnings during  the waiting period would result in a denial of eligibility for DI benefits, we  considered all the benefits paid to the individual as potential  overpayments.

Next, we drew a simple random sample of 133 individuals from the Wait  Period overpayment population and contacted the employers to verify the  timing and nature of the wages paid to the individuals. We received  completed requests from employers for 98 individuals for a response rate  of 75 percent. Nonresponses included sample items whose employers  we could not locate, employers who were no longer in business, and  employers who refused to cooperate with our requests. We asked  employers who provided earnings data to identify payments that were not  related to work activity, such as paid time off, extended sick leave, or  posttermination compensation. Many employers provided payroll reports  indicating hours and payments by payment category, such as total  payments for hours in regular work, hours in overtime work, and hours of  vacation time.

Using the earnings data employers provided, we calculated monthly  earned income for each sample item and identified whether the  beneficiaries’ monthly earned income exceeded SGA during any of the 5  months of their waiting period. Because employers use different payroll  cycles and provided different levels of detail in their responses, we  adhered to the following guidelines to standardize our calculation of  monthly earned income:  1.  In consideration of SSA guidance regarding the timing of payments,  we calculated monthly earned income according to the period in which  payments were earned rather than when they were paid. However, if  an employer’s payroll reports indicated only the dates when payments  were issued, we calculated monthly earned income according to those  dates.  2.  In consideration of SSA guidance regarding the nature of payments,  our calculation of monthly earned income excludes payments not  related to work activity, such as payments for paid time off, vacation  pay, and extended sick leave, if those payments covered the entire  pay period, as defined by the employer. Thus, payments not related to  work activity that were episodic, such as sick pay or vacation pay  received during a pay period when the individual also performed work,  are included in our calculation of monthly earned income.

We then obtained additional DI program data on the MBR to estimate  total program overpayments to-date for our sample items. Because we  followed a probability procedure based on random selections, our sample  is only one of a large number of samples that we might have drawn.  Since each sample could have provided different estimates, we express  our confidence in the precision of our particular sample’s results as a 95  percent confidence interval.

section_title: Wait Period Overpayment Examples
paragraphs: To provide examples of the circumstances under which SSA made  potential overpayments to individuals with work activity during the 5- month waiting period, we randomly selected three beneficiaries from our  waiting period sample who were among those that met the following  criteria:  1.  the individual’s employer reported that the individual received SGA- level earnings during the 5-month waiting period, and  2.  the individual’s employer reported additional SGA-level earnings that  were earned after the waiting period and within 1 year of their date of  disability onset.

According to statutes and SSA regulations, when individuals have SGA- level work activity during the waiting period, this normally means they will  be considered not disabled and therefore not eligible for benefits. For  these three individuals, we obtained detailed DI case-file information from  SSA to determine the facts and circumstances surrounding their potential  overpayments. Because we selected a small number of individuals for  further investigation, the results cannot be projected to the population of  individuals receiving DI overpayments due to SGA in the 5-month waiting  period.

section_title: Trial Work Period Overpayments
paragraphs: Our analysis of the NDNH match file identified individuals who were in  current pay status in the DI program as of December 2010 and who had  SGA-level earnings after the completion of their trial work period (TWP)  and 3 grace period months. We determined a month to be a TWP month  if the monthly computed earnings after the date of entitlement was greater  than the TWP threshold. After we identified 9 TWP months, we  identified 3 grace period months where monthly computed earnings were  greater than the corresponding SGA threshold. Next, we identified  potential overpayment months that met the following criteria:  1.  monthly computed earnings after the 3 month grace period were  greater than the corresponding SGA threshold, 2.  DI payment records on the MBR showed that DI benefits were both  due and paid for that month.

Thus, to be included in our TWP overpayment population, beneficiaries  had to be in current pay status as of December 2010 and have at least 1  month of potential overpayments as defined by the criteria above. Our  analysis determined there were 19,208 individuals that met these  overpayment criteria.

Our analysis accounts for the higher SGA amounts for individuals whose disability is  blindness. The monthly earnings amounts that demonstrate SGA are described in greater  detail in app. III.

SSA may hold payments to beneficiaries for a month under certain circumstances, such  as when a payment address is in question. In these instances, the MBR may indicate  benefits due, but not paid for that month. months may not be included in our TWP overpayment population. For  example, if NDNH earnings data indicated the beneficiary completed all 9  TWP months and 3 grace period months from October 2009 to  September 2010 (i.e., 12 months), but the next month of SGA-level  earnings occurred in October 2010, which is outside our 15-month time  frame, the beneficiary was not included in our TWP overpayment  population. Figure 5 below illustrates the 15 months from July 2009 to  September 2010 for which our analysis captured both DI payment records  on the MBR and earnings data on the NDNH. Second, because our  calculation of potential overpayment months includes only months where  DI payment records on the MBR showed that DI benefits were both due  and paid for that month, our TWP overpayment population does not  include individuals whose only months of SGA beyond the TWP occurred  in months where benefits were due, but not paid. Similarly, our TWP  overpayment population does not include individuals whose only months  of SGA beyond the TWP occurred in months where benefits were paid,  but not due.

Next, we drew a simple random sample of 130 individuals from the TWP  overpayment population and contacted the employers to verify the wages  paid to the individuals. We completed requests from employers for 98  individuals for a response rate of 76 percent. Nonresponses included  sample items whose employers we could not locate, employers who were  no longer in business, and employers who refused to cooperate with our  requests. We asked employers who provided earnings data to identify  payments that were not related to work activity, such as paid time off,  extended sick leave, or posttermination compensation. Many employers  provided payroll reports indicating hours and payments by payment  category, such as total payments for hours in regular work, hours in  overtime work, and hours of vacation time.

Using the earnings data employers provided, we calculated monthly  earned income for each sample item and identified whether the  beneficiaries’ monthly earned income exceeded SGA during any month of  the extended period of eligibility. Because employers use different payroll  cycles and provided different levels of detail in their responses, we  adhered to the following guidelines to standardize our calculation of  monthly earned income:  1.  In consideration of SSA guidance regarding the timing of payments,  we calculated monthly earned income according to the period in which  payments were earned rather than when they were paid. However, if  an employer’s payroll reports indicated only the dates when payments  were issued, we calculated monthly earned income according to those  dates.  2.  In consideration of SSA guidance regarding the nature of payments,  our calculation of monthly earned income excludes payments not  related to work activity, such as payments for paid time off, vacation  pay, and extended sick leave, if those payments covered the entire  pay period, as defined by the employer. Thus, payments not related to  work activity that were episodic, such as sick pay or vacation pay  received during a pay period when the individual also performed work,  are included in our calculation of monthly earned income.

We then obtained additional DI program data on the MBR to estimate  total program overpayments to-date for our sample items. Because we  followed a probability procedure based on random selections, our sample  is only one of a large number of samples that we might have drawn.  Since each sample could have provided different estimates, we express  our confidence in the precision of our particular sample’s results as a 95  percent confidence interval.

section_title: Trial Work Period Overpayment Examples
paragraphs: To provide examples of the circumstances under which SSA made  potential overpayments to individuals with work activity beyond their trial  work period, we randomly selected three beneficiaries from our trial work  period sample who were among those beneficiaries receiving potential  overpayments for at least 36 months (3 years). For these three  individuals, we obtained detailed DI case-file information from SSA to  determine the facts and circumstances surrounding their potential  overpayments. Because we selected a small number of individuals for  further investigation, the results cannot be projected to the population of  individuals receiving DI overpayments due to SGA beyond the trial work  period.

section_title: Data Reliability Assessments
paragraphs: To determine the reliability of the SSA disability records and NDNH  quarterly wage records, we reviewed documentation related to these  databases and interviewed officials responsible for compiling and  maintaining relevant DI and NDNH 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  wage data from employers and DI program data from SSA for the  statistical samples of individuals selected as described above to confirm  that quarterly wage data from the NDNH indicated payments that were  potentially improper from the DI program. 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.

To assess the extent to which SSA’s enforcement operation detects  potentially disqualifying work activity during the waiting period, we  interviewed officials from SSA regarding the agency’s internal controls for  detecting and preventing overpayments due to work activity. We  interviewed agency officials from SSA’s policy offices to confirm our  interpretations of SSA regulations and policies regarding work activity  during the waiting period and beyond the trial work period. We also  interviewed officials from SSA’s operations offices to confirm the actions  SSA took while reviewing the work activity for our nongeneralizable  examples. We also examined SSA’s mechanisms to detect potentially  disqualifying work activity and compared them with Standards for Internal  Control in the Federal Government.

We conducted this performance audit from April 2012 to July 2013 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 that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our objectives.

section_title: Appendix III: Monthly Earnings That Indicate a Trial Work Period or Substantial Gainful Activity
paragraphs: To be eligible for disability benefits, a person must be unable to engage in  substantial gainful activity (SGA). A person who is earning more than a  certain monthly amount (net of impairment-related work expenses) is  ordinarily considered to be engaging in SGA. During a trial work period, a  beneficiary receiving Social Security disability benefits may test her or his  ability to work and still be considered disabled. The Social Security  Administration (SSA) does not consider services performed during the  trial work period as showing that the disability has ended until services  have been performed in at least 9 months (not necessarily consecutive) in  a rolling 60-month period and 1 additional month, at an SGA-level, after  the trial work period has ended. Table 1 shows the amount of monthly  earnings that trigger a trial work period month for calendar years 2001– 2012.

The amount of monthly earnings considered as SGA depends on whether  a person’s disability is for blindness or some other condition. The Social  Security Act specifies a higher SGA amount for statutorily blind  individuals and a lower SGA amount for nonblind individuals. Both SGA  amounts generally change with changes in the national average wage  index. Table 2 shows the amount of monthly earnings that ordinarily  demonstrate SGA for calendar years 2001–2012.

section_title: Appendix IV: Comments from the Social Security Administration


Question-summary annotations: questions: question: What did GAO determine about SSA overpayments?
answer: On the basis of analyzing Social Security Administration (SSA) data on individuals who were Disability Insurance (DI) beneficiaries as of December 2010 and earnings data from the National Directory of New Hires (NDNH), GAO estimates that SSA made $1.29 billion in potential cash benefit overpayments to about 36,000 individuals as of January 2013.
child_questions: question: To what extent can the exact number of individuals be determined?
answer: The exact number of individuals who received improper disability payments and the exact amount of improper payments made to those individuals cannot be determined without detailed case investigations by SSA. These DI beneficiaries represent an estimated 0.4 percent of all primary DI beneficiaries as of December 2010.

question: How did GAO make its estimate?
answer: GAO estimated DI program overpayments on the basis of work activity performed by two populations of individuals.
child_questions: question: What differences are there between the two populations of individuals that GAO looked at to estimate overpayments?
answer: The first population received potential overpayments due to work activity during the DI program's mandatory 5-month waiting period--a statutory program requirement to help ensure that SSA does not pay benefits to individuals who do not have long-term disabilities. Prior to receiving benefits, individuals must complete a 5-month waiting period, in which the individual cannot exceed a certain level of earnings, known as substantial gainful activity, during any month in order to be eligible for DI benefits. Earnings that exceed program limits during the waiting period indicate that individuals might not have long-term disabilities. The second population received potential overpayments due to work activity beyond the program's trial work period--the trial work period consists of up to 9 months in which a DI beneficiary may return to work without affecting her or his benefits. However, beneficiaries whose earnings consistently exceed program limits after completing a trial work period are generally no longer entitled to benefits.

question: What did SSA determine about its own overpayments?
answer: Using a different methodology that includes additional causes of overpayments not considered in GAO's analysis, SSA estimated its DI overpayments in fiscal year 2011 were $1.62 billion, or 1.27 percent of all DI benefits in that fiscal year.

questions: question: How well does SSA's enforcement operation work?
answer: SSA uses its enforcement operation to generate alerts for potentially disqualifying earnings, but the agency's enforcement operation does not generate alerts for earnings that occur in all months of the waiting period, which allows potentially disqualifying work activity to remain undetected. Specifically, GAO found that SSA's enforcement operation will not generate an alert for earnings during the waiting period if the earnings occur in a year when the beneficiary does not receive a benefit payment.
child_questions: question: What specific cases did GAO identify?
answer: For example, in two of the nongeneralizable case studies GAO reviewed, SSA's enforcement operation did not generate an alert for potentially disqualifying work activity during the waiting period because these individuals' waiting periods occurred in the year prior to their first benefit payment. GAO obtained earnings records from these individuals' employers that show they worked continually both during and after their waiting periods at a level of work that would normally result in a denial of benefits. GAO also reviewed information for individuals who worked beyond their trial work period and found that SSA had identified and established overpayments for these individuals.

question: How did SSA respond to GAO's report?
answer: SSA officials stated that modifying its enforcement operation could be costly, but the agency has not assessed the costs of doing so.
child_questions: question: Why is it important that SSA improve its processes?
answer: To the extent that it is cost-effective and feasible, establishing a mechanism to detect earnings during all months of the waiting period would strengthen SSA's enforcement operation.

questions: question: What was GAO asked to study?
answer: GAO was asked to study potential DI overpayments.

question: What does GAO examine in this report?
answer: GAO examined the extent to which (1) the NDNH indicates that individuals received potential DI overpayments; and (2) SSA's enforcement operation detects potentially disqualifying work activity during the waiting period.
child_questions: question: What kinds of individuals did GAO include in their samples?
answer: GAO drew random, generalizable samples of individuals from those whose earnings on the NDNH were beyond program limits and compared wages from their employers to DI program data to identify potential overpayments. To illustrate the circumstances in which SSA made potential DI overpayments, GAO reviewed case files for a nongeneralizable selection of six individuals--three who worked during their waiting period, and three who received potential overpayments for at least 3 years.