Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments
Released: 2010-08-04T00:00:00

Letter

Background

SSA administers two federal programs under the Social Security Act that provide benefits to people with disabilities who are unable to work: The DI program provides cash benefits to workers with disabilities and their dependents based on their prior earnings. The SSI program provides benefits to the elderly and individuals with disabilities if they meet the statutory test of disability and have income and assets that fall below levels set by program guidelines.

Disability Insurance

The DI program was established in 1956 to provide monthly cash benefits to individuals who were unable to work because of severe long-term disability. SSA pays disability benefits to eligible individuals under Title II of the Social Security Act. An individual is considered eligible for disability benefits under the Social Security Act if he or she is unable to engage in any SGA because of a medically determinable impairment that (1) can be expected to result in death or (2) has lasted (or can be expected to last) for a continuous period of at least 12 months. To be eligible for benefits, individuals with disabilities must have a specified number of recent work credits under Social Security (specifically, working 5 out of the last 10 years or 20 quarters out of 40 quarters) at the onset of medical impairment. An individual may also be able to qualify based on the work record of a deceased spouse or of parent who is deceased, retired, or considered eligible for disability benefits, meaning one disability beneficiary can generate multiple monthly disability payments. Benefits are financed by payroll taxes paid into the Federal Disability Insurance Trust Fund by covered workers and their employers, based on each worker’s earnings history. Individuals are engaged in SGA if they have earnings above $940 per month in calendar year 2008 or $980 per month in calendar year 2009.

SSA conducts work-related continuing disability reviews (CDR) to determine if beneficiaries are working at or above the SGA level. Each beneficiary is allowed a 9-month trial work period, during which the beneficiary is permitted to earn more than the SGA level without affecting his or her eligibility for benefits. The trial work period is one of several provisions in the DI program intended to encourage beneficiaries to resume employment. Once the trial work period is completed, beneficiaries are generally ineligible for future DI benefits unless their earnings fall below the SGA level during the 36-month extended period of eligibility (EPE). Work issue CDRs are triggered by several types of events, although most are generated by SSA’s Continuing Disability Review Enforcement Operation. This process involves periodic computer matches between SSA’s administrative data and Internal Revenue Service (IRS) wage data. Work CDRs can also be triggered by other events. For example, SSA requires beneficiaries to undergo periodic medical examinations to assess whether they continue to be considered eligible for benefits. During such reviews, SSA’s staff sometimes discovers evidence that a beneficiary may be working and usually forwards the case to an SSA field office or program service center for earnings/work development. Additional events that may trigger a work CDR include reports from state vocational rehabilitation agencies, reports from other federal agencies, and anonymous tips. Finally, DI beneficiaries may voluntarily report their earnings to SSA by visiting an SSA field office or calling the agency’s toll- free number. SSA had increased work-related CDRs from about 106,500 in fiscal year 2003 to about 175,600 in fiscal year 2006. However, the number of work CDRs has decreased slightly since 2006, and SSA projects that it will conduct about 174,200 work CDRs in fiscal year 2010.

Supplemental Security Income

Created in 1972, the SSI program is a nationwide federal cash benefit program administered by SSA that provides a minimum level of income to financially needy individuals who are aged, blind, or considered eligible for benefits because of physical or mental impairments. Payments under the SSI program are paid under Title XVI of the Social Security Act and are funded from the government’s General Fund, which is financed through tax payments from the American public. Individuals are not eligible for SSI payments for any period during which they have income or resources that exceed the allowable amounts established under the Social Security Act. In addition, relevant information will be verified from independent or collateral sources to ensure that such payments are correct and are only provided to eligible individuals. SSI recipients are required to report events and changes of circumstances that may affect their eligibility and payment amounts, including changes in income, resources, and living arrangements. SSI generally reduces the monthly benefit $1 for every $2 of monthly earnings after the first $85.

SSA has implemented measures to help identify SSI recipients with excess income, excess resources, or both, such as periodically conducting redeterminations to verify whether recipients are still eligible for and receiving the correct SSI payments. A redetermination is a review of a recipient’s nonmedical eligibility factors, such as income, resources, and living arrangements. There are two types of redeterminations: scheduled and unscheduled. Scheduled redeterminations are conducted periodically depending on the likelihood of payment error. Unscheduled redeterminations are conducted based on a report of change in a recipient’s circumstances or if SSA otherwise learns about a change that may affect eligibility or payment amount.

SSA has deferred a significant number of SSI redeterminations since fiscal year 2003. Although SSA increased the number of SSI redeterminations in fiscal year 2009 above the 2008 level, the number of reviews remains significantly below the fiscal year 2003 level. Specifically, SSA conducted about 719,000 SSI redeterminations in fiscal year 2009, 30 percent fewer than it did in fiscal year 2003. However, if SSA completes the number of SSI redeterminations it is projecting for fiscal year 2010, it will be close to the fiscal year 2003 level.

Federal Employees, Commercial Drivers, and Commercial Vehicle Company Owners Received SSA Disability Benefits

Our overall analysis found thousands of federal employees, commercial drivers, and owners of commercial vehicle companies who were receiving Social Security disability benefits during fiscal year 2008. It is impossible to determine from data mining alone the extent to which beneficiaries improperly or fraudulently received disability payments. To adequately assess an individual’s work status, a detailed evaluation of all the facts and circumstances should be conducted. This evaluation would include contacting the beneficiary and the beneficiary’s employer, obtaining corroborating evidence such as payroll data and other financial records, and evaluating the beneficiary’s daily activities. Based on this evaluation, a determination can be made if the individual is entitled to continue to receive SSA disability payments or have such payments suspended. As such, our analysis provides an indicator of potentially improper or fraudulent activity related to federal employees, commercial drivers, and owners of commercial vehicle companies receiving SSA disability payments. Our case studies, discussed later, confirmed some examples in which individuals received SSA disability payments that they were not entitled to receive.

Federal Employees Receiving SSA Disability Benefits

Our analysis of federal civilian salary data and SSA disability data found that about 7,000 individuals at selected agencies had been wage-earning employees for the federal government while receiving SSA disability benefits during fiscal year 2008. The exact number of individuals who may be improperly or fraudulently receiving SSA disability payments cannot be determined without detailed case investigations. Our analysis of federal salary data from October 2006 through December 2008 found that about 1,500 federal employees’ records indicate that they may be improperly receiving payments. The individuals were identified using the following criteria: (1) DI beneficiaries who received more than 12 months of federal salary payments above the maximum SSA earnings threshold for the DI program (e.g., $940 per month for nonblind DI beneficiaries during calendar year 2008) after the start date of their disabilities or (2) SSI recipients who received more than 2 months of federal salary above the maximum SSA earnings threshold for the SSI program after the start date of their disabilities. Based on their SSA benefit amounts, we estimate that these approximately 1,500 federal employees received about $1.7 million of payments monthly. Table 1 summarizes the types of SSA disability benefits for these 1,500 federal employees who are receiving disability benefits.

Figure 1 shows that 379 of the approximately 1,500 federal employees were U.S. Postal Service workers and 241 were DOD civilian employees. The remainder was other federal civilian employees.

According to SSA officials, SSA currently does not obtain payroll records from the federal government to identify SSA disability beneficiaries or recipients who are currently working. SSA officials stated that they have not conducted a review to determine the feasibility of conducting such a match. However, SSA acknowledged that these payroll records may be helpful in more quickly identifying individuals who are working so that work CDRs could be performed to evaluate whether those individuals should have their disability payments suspended.

Commercial Drivers and Transportation Business Registrants Receiving SSA Disability Benefits

Our analysis of data from DOT on commercial drivers and from SSA on disability beneficiaries found that about 600,000 individuals had been issued CDLs and were receiving full Social Security disability benefits. The actual number of SSA disability beneficiaries with active CDLs cannot be determined for two reasons. First, states maintain the current status of CDLs, not DOT. Second, possession of a CDL does not necessarily indicate that the individual returned to work. Because federal regulations require interstate commercial drivers to be examined and certified by a licensed medical examiner to be able to physically drive a commercial vehicle once every 2 years, we selected a nonrepresentative selection of 12 states to determine how many SSA disability beneficiaries had CDLs issued after their disabilities were determined by SSA. Of the 600,000 CDL holders receiving Social Security disability benefits, about 144,000 of these individuals were from our 12 selected states. As figure 2 shows, about 62,000 of these 144,000 individuals, or about 43 percent, had CDLs that were issued after SSA determined that the individuals met the federal requirements for full disability benefits. As a result, we consider the issuance of CDLs to be an indication that these individuals may no longer may no longer have serious medical conditions and may have returned to work. have serious medical conditions and may have returned to work.

Our analysis of DOT data on commercial carriers found about 7,900 individuals who registered as transportation businesses and also received SSA disability benefits. The extent to which these business registrants are obtaining disability benefits fraudulently, improperly, or both is not known because each case must be investigated separately for such a determination to be reached. These companies may have gone out of business and not reported their closure to DOT, which would explain their registration. In addition, DI beneficiaries may have a passive interest in the business, which would not affect their eligibility for benefits. However, we believe that the registration of a business is an indicator that the individual could be actively engaged in the management of the company and gainfully employed, potentially disqualifying him or her from receiving either DI or SSI benefits. It also suggests that the individual’s assets may exceed the SSI maximum for eligibility.

According to SSA officials, SSA currently does not obtain CDL or transportation businesses registrant records from DOT. SSA officials stated that these records do not have specific income records associated with them.

Examples of Individuals Receiving SSA Disability Benefits Fraudulently and/or Improperly

Based on our overall analysis above, we nonrepresentatively selected 20 examples of federal employees, commercial drivers, and registrants of commercial vehicle companies who received disability payments fraudulently and/or improperly. As mentioned earlier, the 20 cases were primarily selected based on our analysis of SSA electronic and paper files for the higher overpayment amounts, the types of employment, and the locations of employment, and thus they cannot be projected to other federal employees, commercial drivers, or commercial vehicle owners who received SSA disability payments. In each case, SSA’s internal controls did not prevent improper and fraudulent payments, and as a result, tens of thousands of dollars of overpayments were made to individuals for 18 of these 20 cases. In fact, in one case, we estimate that SSA improperly paid an individual over $100,000 in disability benefits. For 10 of the 20 cases, SSA continued to pay these individuals their SSA disability benefits through October 2009 primarily because the agency had not yet identified their ineligibility for benefits. For the other cases, SSA has terminated the disability benefits and has negotiated repayment agreements for 2 of those cases.

Our investigations found that five individuals committed fraud in obtaining SSA disability benefits because they knowingly withheld employment information from SSA. Fraud is “a knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment.” Although SSA instructions provided to beneficiaries require them to report their earnings to SSA in a timely manner to ensure that they remain eligible for benefits, several individuals knowingly did not notify SSA of their employment.

Our investigations also found that 11 individuals potentially committed fraud because these individuals likely withheld required employment information from SSA. Most of these individuals claimed that they reported their employment information to SSA. However, according to SSA officials, for all 11 individuals, SSA did not have any tangible documentation in its files that these individuals actually reported their employment status to SSA. SSA officials stated that their workers are required to document all contacts in their files and that these purported contacts regarding employment notifications were likely never made.

Finally, our investigations found four cases with no evidence of fraud but, rather, of administrative error. In these situations, the beneficiaries told our investigators that they reported their employment to SSA and SSA had evidence in its files that such contact did occur. Thus, we concluded that SSA made improper payments to these individuals because SSA was aware of the employment but continued to make disability payments to those individuals.

During our investigations of the 20 cases, we also noted the following: SSA has an automated process, called Automated Earnings Reappraisal Operations (AERO), that screens changes in an individual’s earnings record and uses that information to compute changes in the monthly disability benefit payment. However, SSA currently does not use AERO to identify individuals who return to work and alert SSA staff to review these individuals’ records for possible suspension of disability payments. As a result, SSA increased the monthly disability benefits of several individuals based on the higher wages the individuals’ current employers reported to the agency but did not properly suspend the payments to those individuals.

Four individuals received additional disability benefits because they had dependent children living with them.

One individual was hired by a federal agency during the required waiting period prior to becoming eligible for benefits. This individual also improperly received additional government medical assistance (i.e., Medicare) based on the SSA disability determination.

Certain individuals who claim that they are unable to immediately repay the disability benefits they improperly received can be put on long-term repayment plans that span years or decades. Although SSA has the authority to charge interest and penalties, SSA did not do so on these agreements. As a result, several individuals from our cases were placed in long-term, interest-free repayment plans for improperly accepting disability overpayments. For 1 of our 20 cases, SSA placed an individual on a repayment plan to repay approximately $33,000 in overpayments through $20 monthly installments. Based on this agreement, it will take over 130 years to repay this debt, exceeding the life expectancy for this individual.

For 18 of these 20 cases, the individuals also received $250 stimulus checks as part of the Recovery Act while they were improperly receiving SSA disability payments. According to SSA officials, most of these individuals were entitled to and would receive the $250 stimulus checks even if SSA had properly suspended the disability payments to them. Specifically, SSA officials stated that beneficiaries covered under the DI program would have been covered under EPE, which is a 36-month period in which SSA does not pay any benefit amounts (i.e., payments are suspended) if the beneficiary has earnings above the maximum SSA SGA threshold. According to SSA officials, all working beneficiaries covered by EPE received the $250 stimulus check.

The Recovery Act states that these stimulus benefit payments should be provided to individuals who are entitled to DI benefit payments or are eligible for SSI cash benefits. SSA stated that it did not seek a formal legal determination as to whether individuals who had their paym suspended because of employment should receive these stimulus payments. In total, SSA paid about $10.5 million in stimulus payments to However, approximately 42,000 individuals who were covered by EPE. we believe that a question exists as to whether these payments were proper and believe that SSA should have at least sought a formal legal opinion before making the payments.

Table 2 highlights 10 of the 20 individuals we investigated. Table 3 in appendix I describes the other 10 individuals that we investigated. For 3 of these 20 cases, we videotaped the individuals who had improperly received disability benefits working at their federal government jobs. (See http://www.gao.gov/products/GAO-10-444.) In all 20 cases, we found that SSA had improperly paid the Social Security disability benefits.

Conclusions

While it is important to encourage individuals with disabilities to return to work, SSA must also ensure that it has an effective system in place to maintain its program integrity. SSA has a stewardship responsibility to identify those individuals who have returned to work and are no longer eligible for benefits. Because of limited resources, SSA must effectively allocate its resources to identify such individuals. Federal payroll records and the AERO process are tools that SSA could utilize to timely initiate reviews and minimize improper and fraudulent payments.

Recommendations for Executive Action

To enhance SSA’s ability to detect and prevent fraudulent and improper payments in its disability programs, we recommend that the Commissioner of Social Security take the following two actions to improve the agency’s processes: Evaluate the feasibility (including consideration of any costs and operational and system modifications) of incorporating the AERO process to identify individuals who have returned to work.

Evaluate the feasibility of periodically matching SSA disability beneficiaries and recipients to federal payroll data. Such matches would provide SSA with more timely data to help SSA systematically and more effectively identify federal employees who are likely to incur overpayments.

Agency Comments and Our Evaluation

We provided a draft of this report to SSA and DOT for comment. DOT stated that it did not have comments on the report. SSA’s comments, along with our responses, are reprinted in appendix IV, and its technical comments were incorporated throughout the report as appropriate.

SSA agreed with all our recommendations. SSA stated that it will evaluate the feasibility of using the AERO process. In addition, SSA stated that it will review the efficacy of matching federal salary payment records with SSA disability files of DI beneficiaries and SSI recipients. We encourage SSA to follow through on these recommendations. SSA also expressed concern that the overall message of our report is misleading and in some cases factually incorrect. We believe our report accurately describes the cases and our methodology.

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 interested congressional committees, the Commissioner of Social Security, and the Secretary of Transportation. The report also will be available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-6722 or kutzg@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report.

Appendix I: Examples of Individuals Receiving SSA Disability Benefits Fraudulently and/or Improperly

This appendix presents summary information on fraudulent and improper payments associated with 10 of our 20 case studies. Table 3 shows the remaining case studies that we audited and investigated. As with the 10 cases discussed in the body of this report, the Social Security Administration (SSA) did not prevent improper payment of Social Security disability benefits to these individuals. We referred all 20 cases to SSA management for collection action. The SSA Office of Inspector General has been informed of the 5 cases that we believe committed fraud. We also referred the case involving the SSA employee to the SSA Office of Inspector General for investigation.

Appendix II: Attributes of Selected Cases of SSA Disability Beneficiaries and Recipients Who Fraudulently and/or Improperly Received Benefits While Working

Our investigations detailed examples of 20 federal employees, commercial drivers, and owners of commercial vehicle companies who fraudulently and/or improperly received disability payments. For the 20 cases, our investigations found the following: For six cases, SSA eventually identified the disability overpayment and sent notification letters to the individuals indicating that they would have to repay the debts.

For 10 cases, the individuals were continuing to receive disability benefits as of October 2009.

For 14 cases, the individuals claimed to have notified SSA that they had returned to work or that it should terminate the disability benefits because they were no longer eligible because of employment income. However, for only 4 of these 14 cases did SSA have indications in its records that the individuals notified SSA of the return to work or requested termination of disability benefits.

For 10 cases, SSA improperly increased the benefit amounts of the disability payments because the individuals had increases in the reported wages on which the disability benefit payments are based.

For 18 cases, SSA sent the SSA beneficiaries and recipients the $250 economic stimulus check.

For five cases, we believe that there is sufficient evidence that the beneficiaries committed fraud to obtain or continue receiving Social Security disability payments. For each of these five cases, we concluded that the individual withheld employment information from SSA to obtain or continue receiving disability payments.

Table 4 provides these attributes for each selected case that we investigated.

Appendix III: Debt Owed to SSA from Overpayment of DI and SSI Benefits Is Mounting

SSA’s failure to promptly prevent improper disability payments for the DI and SSI programs has, in part, contributed to overpayments in these programs. The overpayment of DI and SSI benefits may come from beneficiaries who had their benefits suspended or terminated following a work CDR. Overpayments may also be caused by other types of events, including receipt of workers compensation benefits, being in prison while receiving benefits, and medical improvement to the point where the individual no longer has disabilities. As shown in figure 3, in fiscal year 2004 the total net amount owed to SSA for DI and SSI overpayments was $7.6 billion. This debt has significantly increased through fiscal year 2008, as individuals owed over $10.7 billion in overpayments of DI and SSI benefits.

Appendix IV: Comments from the Social Security Administration

The following are GAO’s comments on the Social Security Administration’s letter dated May 28, 2010.

GAO Comments

1. In the report, we identify those cases where SSA has sent an overpayment notification letter to the individual. However, we do not believe that identifying fraudulent or improper payments after dollars have been disbursed is an effective internal control. Our work across the government has shown that once fraudulent or improper payments are made, the government is likely to only recover pennies on the dollar. Preventive controls are the most efficient and effective. 2. In the report, we state that to adequately assess an individual’s work status, a detailed evaluation of all the facts and circumstances should be conducted. This evaluation would include contacting the beneficiary and the beneficiary’s employer, obtaining corroborating evidence such as payroll data and other financial records, and evaluating the beneficiary’s daily activities. Based on this evaluation, a determination can be made on whether the individual is entitled to continue to receive SSA disability payments or whether such payments should be suspended. As such, our analysis provides an indicator of potentially improper or fraudulent activity related to federal employees, commercial drivers, and owners of commercial vehicle companies receiving SSA disability payments. 3. Our report described two cases of transportation drivers and owners who fraudulently and/or improperly received SSA disability payments. We do not believe that a change to the title is necessary. 4. We believe that SSA should perform the match with more current federal payroll records to determine the efficacy of matching federal salary payment records with SSA disability files of DI beneficiaries and SSI recipients. 5. We revised the report to address SSA’s specific comment. 6. IRS provides summary earnings data for a calendar year. We have previously reported that the IRS earnings data used by SSA in its enforcement operations are typically 12 to 18 months old when SSA first receives them, thus making some overpayments inevitable. The federal payroll data provide detailed earnings information for each pay period (e.g., all 26 pay periods for a fiscal year). We believe that these data are more useful in the determination of whether continuing disability reviews and redeterminations should be conducted and could be more current. 7. We believe the footnote is appropriate for this report. 8. As we stated in the report, SSA has the authority to charge interest and penalties, but SSA did not do so on any of its agreements with beneficiaries in our case studies. 9. The American Recovery and Reinvestment Act of 2009 states that these stimulus benefit payments should be provided to individuals who are entitled to DI benefit payments or are eligible for SSI cash benefits. SSA did not seek a formal legal determination as to whether individuals who had their payments suspended because of employment—and were thus not receiving DI or SSI payments during November and December of 2008 or January of 2009—should receive these stimulus payments. We continue to believe that a question exists as to whether these payments were proper and believe that SSA should have at least sought a legal opinion before making the payments. 10. IRS may well collect some of these stimulus benefits payments through a reduction of the “Making Work Pay” tax credit. We simply stated the magnitude of the stimulus payments made to those individuals covered under the extended period of eligibility. However, we believe that relying on the IRS offset is not an effective internal control activity. 11. Our estimated overpayment amount was based on our review of detailed payroll records and discussion with the SSA beneficiary. We believe that our estimated overpayment is accurate. 12. Our estimated overpayment amount was based on our review of detailed payroll records and discussion with the SSA beneficiary. Detailed payroll records showed that the beneficiary’s earnings were never below the substantial gainful activity threshold. As such, our estimated overpayment is about $25,000.