5 Million Could Lose $25 a Month in Retirement Funds
Five million workers could lose up to $25 a month in future Social Security retirement benefits despite an agreement between the Social Security Administration and the Internal Revenue Service to reconcile a dispute over wage records, the General Accounting Office said Tuesday.
The situation is a “mix-up, a foul-up, a screw-up, in giving credit (for wages) where credit is due,” said Rep. Andrew Jacobs Jr. (D-Ind.), chairman of the House Ways and Means Committee’s Social Security subcommittee, which conducted a hearing on the controversial issue.
The problem centers on a $59-billion discrepancy between records kept by the IRS and the Social Security Administration on wages earned by some workers from 1978 through 1986. Social Security, whose records show the lower amount, uses the earnings to determine the benefits the workers should receive when they retire or become disabled.
Will Share Task
The two agencies have worked out an arrangement to share the task of contacting employers to reconcile the conflicts for 1987 and later years, but many of the earlier discrepancies, involving incomplete records and unresponsive employers, may never be resolved, Joseph F. Delfico, senior associate director of the GAO, testified at the hearing.
“The fault is with us, the government, and something else ought to be done,” said Rep. J.J. Pickle (D-Tex.). He said the agencies should be more vigorous in attempting to find out which figures are correct in each of the cases.
“Ten years of wages are backed up, and you do the magnanimous thing and write a letter” to employers, he told high-ranking officials of the Social Security Administration and the IRS. “You ought to go after these employers and apply penalties” if they have not correctly reported a workers’ wages to the government, Pickle said.
Other House members also expressed sharp criticism. “I was astounded this kind of sloppy bookkeeping and computerization was going on,” said Rep. Mary Rose Oakar (D-Ohio).
Change in Reporting System
The discrepancies arose after the federal government changed the income reporting system for the two federal agencies.
Before 1978, employers filed quarterly reports on workers’ wages with the IRS, and those numbers were sent to the Social Security Administration for its use. That year, in an effort to streamline the process, the government directed businesses to file a single annual report of wages to Social Security.
However, in some cases the annual totals the employers gave Social Security proved to be less than the continuing quarterly ones it gave the IRS for the same workers. Federal officials fear that the employers may not have been as conscientious on the new report and that some workers could get shortchanged when their benefits are computed upon retirement.
The GAO previously estimated that approximately 10 million workers were not getting full credit for their earnings. A GAO sample covering 1981 and 1982 showed a potential average loss for the affected workers of $17 a month, but the figure now could be “as much as $25 a month if you include inflation,” Delfico said.
‘A Lot of Money’
“This money may not seem like much, but the average woman over 65 gets a Social Security benefit of about $400 a month and the average man gets $550,” said Rep. Oakar. “For many this is a survival issue, a lot of money for people to be cheated out of,” she said.
A union representing federal employees claims the potential loss could be much higher, with as many as 40 million workers facing prospective losses up to $50 a month when they retire.
The Social Security Administration has a “legal and ethical responsibility to correct these earnings discrepancies,” Kenneth T. Blaylock, president of the American Federation of Government Employees, said at the hearing. “By what right can Social Security deny these Americans their lawfully earned benefits?”
Norman Goldstein, Social Security’s chief financial officer, said his agency already had resolved discrepancies in 4.8 million of the estimated 10 million cases. Those workers have been credited with an additional $21 billion in previously unrecorded wages.
The agency also is waiting to hear back from employers it contacted on the cases of another 1 million workers, he said. However, Goldstein did not indicate how the agency can resolve the more than 4 million other cases pending.
Some Don’t Respond
In some cases, he said, no records may be available because employers are required to keep such information only for four years. In other cases, he said, employers have not responded to inquiries.
The agencies have said that the inquiries have posed an enormous administrative burden and, until they reached the new agreement, disagreed over which should be responsible for the bulk of the work.
Individual workers can determine whether there is a discrepancy in their earnings records by submitting Social Security form SSA-7004. It is available in Social Security offices or by calling 1-800-937-2000.
