Social Security

Under the government pension offset provision, enacted in 1977, the Social Security Administration (SSA) must reduce social security benefits to persons whose entitlement to social security benefits is based on another person's (usually their spouse's) social security coverage. Their social security benefits are to be reduced by two-thirds of the amount of their government pension. Under the windfall elimination provision, enacted in 1983, SSA must use a modified formula to calculate the social security benefits that people earn when they have had a limited career in covered employment. The modified formula reduces the amount of payable benefits. With regard to the government pension offset provision, spouse and survivor benefits were intended to provide some social security protection to spouses with limited working careers. With regard to the windfall elimination provision, Congress was concerned that the social security benefit formula provided unintended windfall benefits to workers who had spent most of their careers in noncovered employment. This report discusses how well SSA administers the two provisions and identifies ways to overcome administrative deficiencies.

GAO noted that: (1) from several internal studies of SSA's administration of the Government Pension Offset and WEP provisions, GAO estimates that the agency made overpayments costing the social security trust funds between $160 million and $355 million from 1978 to about 1995; (2) weaknesses in its internal controls are a primary cause; (3) in implementing the benefit reduction provisions for retired federal employees, SSA could make better use of available information; (4) although SSA reviews information on pension payments to federal retirees to ensure that it has properly applied the Government Pension Offset provisions, it does not use that information to ensure the appropriate application of the WEP provision; (5) in implementing the benefit reduction provisions on retired state and local government workers, SSA relies on the accuracy of information provided by the retirees regarding whether they receive, or will in the future receive, a pension that results from noncovered employment; (6) SSA has not developed any independent source of this pension information; (7) thus, it cannot verify the accuracy of the self-reported information, a basic and effective internal control practice; (8) although SSA managers have long suspected that its controls needed strengthening, they have not yet decided on a way to improve them; (9) several courses of action could improve SSA's internal controls; (10) for retired federal employees, SSA could periodically use the pension data it already receives from the Office of Personnel Management (OPM) to check whether WEP has been properly applied; (11) for state and local government retirees, SSA needs to obtain independently reported pension data to adequately control its payments for the Government Pension Offset and WEP reductions; (12) both retirement systems that pay benefits for noncovered employment and the Internal Revenue Service (IRS), which receives reports of each taxpayer's pension income from individual retirement systems, are potential sources of pension data; and (13) both sources have various merits and drawbacks.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Team: Phone: