Social security benefits are payable to people based on either taxes paid on their own covered earnings or taxes paid on the covered earnings of a spouse or parent. When social security was established in 1935, it covered only workers in commerce and industry (other than the rail industry, which was allowed to establish its own retirement plan). Over the years, however, coverage has been made mandatory for most types of employment. Today, workers excluded from coverage fall into five broad categories: federal civilian employees hired before 1984, railroad workers, certain employees of state and local governments, household and farm workers whose earnings are below certain minimum requirements, and people with low net earnings from self-employment. The largest categories of noncovered employment are federal government employees (about 1.3 million in 1995) and employees of state governments and their political subdivisions covered under a retirement system whose members have elected not to join social security (an estimated 3.3 million to 7.9 million workers). To implement the GPO and WEP provisions, SSA needs to know which social security applicants and beneficiaries are, or will be in the future, receiving pensions earned in noncovered employment. SSA takes several steps to identify them. When people apply for benefits, SSA’s staff are supposed to examine their earnings record for significant time gaps in their annual covered earnings. When the staff find such time gaps, they are to determine whether noncovered employment is the reason. In addition, staff are supposed to ask applicants whether they are receiving or will in the future receive a pension (either periodic payments or a lump sum payment) from noncovered employment. For those who respond that they are receiving such a pension, SSA makes the appropriate benefit reduction. For those who say that they will receive such a pension in the future, SSA enters in its records the date when the pension is expected to begin. SSA staff are supposed to contact the beneficiaries in these cases to determine whether an expected pension has begun and to take any actions needed to adjust benefit payment amounts. For applicants who say that they are not receiving and will not receive such a pension, SSA staff record and accept their answer unless the staff believe further investigation is warranted. For federal retirees, SSA applies additional levels of verification. OPM, the agency that administers the federal government’s pension system, provides monthly data that list retired federal employees and the amount of their civil service pension. When an application for benefits is filed, SSA compares the applicant’s name and social security number with similar identification data in the OPM beneficiary database. If the comparison provides evidence that the applicant is receiving a federal annuity, the pension information detected is appended to his or her earnings record as it is being examined by SSA staff. With this information, SSA can offset benefits to comply with GPO and WEP requirements. In addition, for the GPO benefit reduction, SSA makes a monthly “postentitlement” match in which it compares spouse and survivor benefit payments to OPM pension payment records. When SSA detects information that people receiving spouse or survivor benefits may be receiving a noncovered pension from their federal employment, it generates an “alert.” SSA refers “alert” cases to its program service centers for investigation of whether an overpayment has been made and should be recovered. SSA does not, however, make the same postentitlement comparison with OPM data to ensure proper application of the WEP benefit reduction for federal retirees. SSA records show that postentitlement comparisons have been effective in reducing overpayments. From 1994 through 1996, the comparison identified about 13,000 possible overpayment cases each year, even though SSA checks OPM records when a claim is filed. One SSA staff person pointed out that overpayments often happen because a person has an increase in benefits or begins to receive a noncovered federal pension after filing for social security but has not notified SSA. Most of the investigated cases reflect instances in which SSA and OPM records differ in the amount of the noncovered pension a person received. However, each year the comparison has also identified between 2,000 and 3,000 cases in which SSA did not know that a beneficiary was receiving a federal pension. Periodically, SSA examines a sample of about 500 of the identified cases to compare the reduction in overpayments resulting from the monthly GPO match with the costs of conducting the match. As shown in table 1, this postentitlement monthly match reduces overpayments by millions of dollars each year; administrative expenses for the match and investigation of cases are a fraction of the benefits that are derived. For the other large group of noncovered workers, retired state and local government employees, SSA has no third-party pension information to identify those who receive pensions from their noncovered employment. The varying level of SSA’s payment controls for both major groups of noncovered employees is summarized in table 2. Timely identification of payment errors is important. According to an SSA official, SSA issued regulations that limit its ability to change benefit payment amounts in order to provide for efficient program administration and protect beneficiaries from having to repay large overpayments caused by SSA errors. Under SSA regulations, reductions in the amount of benefits paid to an individual generally must be made within 4 years of the date of a benefit determination. If more than 4 years pass, SSA regulations preclude changing the benefit amount either to correct it or to recover any overpayment, unless fraud or some other unusual circumstance exists. However, favorable changes in benefit determinations can be made at any time. Concerned about the adequacy of its payment controls, SSA conducted three studies in the 1990s to assess the extent of GPO- and WEP-related overpayments. For GPO, SSA studied spouse and survivor benefit payments being made to retired state and local government employees in Illinois and Ohio. For WEP, SSA studied the utility of using the OPM pension data it receives for postentitlement matching of benefit payments to retired federal employees. Although these studies have certain limitations, they indicate that SSA made between $109 million and $274 million in GPO-related overpayments from 1978 to about 1993 and between $52 million and $81 million in WEP-related overpayments from 1986 to about 1995. On the basis of these studies, we estimate that GPO- and WEP-related overpayments range between $160 million and $355 million. While SSA has corrected and recovered overpayments in many of the cases studied, it has not yet established any approach to improve its payment controls. For many years, SSA has been concerned with its uneven approach to administering the GPO provision between federal and state and local government retirees. Verifying spouse and survivor benefit payments for federal employees is facilitated because they can be matched to pension benefit data available from a single source (OPM). Further, legislation explicitly permits such a match to enhance program integrity. For state and local government employees, however, such a match is logistically more difficult. No one retirement system makes benefit payments. Rather, possibly thousands of pension plans and retirement systems, administered by both public and private entities, make payments based on noncovered employment. SSA has no information that identifies these employers or the retirement systems offered to their employees. Further, to protect the privacy of former employees, many states have laws that restrict the disclosure of detailed pension information. Confronted with these problems, SSA relies on its field offices to detect retiring noncovered state and local government workers when they apply for benefits. By questioning applicants and examining earnings records, field staff are expected to identify cases in which GPO applies. Around 1993, SSA began to examine its application of the GPO offset to state and local government retirees residing in Illinois. One of its primary purposes was to assess whether its different levels of internal controls were manifest in actual overpayments. In the absence of information on who earned pensions from noncovered employment, SSA had to make its best “guess” to identify beneficiary payments for study. SSA decided to select persons living in Illinois who were receiving spouse or survivor benefits and had other pension income. From this group of persons, SSA then searched its earnings records to identify possible noncovered employment. Through this analysis, SSA identified more than 20,000 current beneficiaries living in Illinois to whom the GPO offset might apply and where its payment records did not indicate that the GPO reduction had been considered. SSA selected 440 of these cases for study. Among these 440 cases, SSA found 16 cases receiving overpayments. The overpayments exceeded $307,000, an average of about $19,200 per case. It also found one case for which its regulation, which places a 4-year limit on SSA’s changing of payment determinations and subsequent recovery of overpayments, precluded action. Because 17 overpayment cases had been found (3.8 percent of the cases), the Illinois study showed that there were about 730 overpayments in this state. If the average of $19,200 per case were applied, the study suggested about $14 million in GPO-related overpayments. Believing that its selection criteria needed to be refined to reduce the number of unproductive investigations, SSA undertook a similar study in 1995 of GPO application to state and local government retirees from Ohio. Making some adjustment in the manner in which cases were selected for study, SSA chose 500 cases for examination. As of October 1997, the study had not yet been completed, so we have not used the available results to estimate overpayments. However, SSA had identified 19 cases with more than $312,000 in overpayments, about the same proportion of cases and a similar amount as detected in the Illinois study.