IRS and SSA Earnings Differences Total More Contacting Employers We estimate that the total earnings on the reports needing reconciliation is about $143 billion for 1978-83. Reconciliation does not always result in recording additional earnings to individuals' Social Security accounts. For example, employers may have used different EINS in reporting the same earnings to SSA and IRS; if so, SSA could have credited each of the employees for their earnings and could have the (W-3) record of total employees' earnings for the employer under an EIN different from IRS's. Employers must be contacted to determine whether employees' earnings were reported to SSA and IRS under different EINS or whether employees' earnings were not reported or were underreported. The question that arises is this: Is it beneficial to attempt to reconcile $143 billion in employers' earnings reports to try to find the $33.7 billion through 1983 that SSA did not record in individuals' Social Security accounts? (Considering 1984, the $143 billion in unreconciled employers' earnings reports would have grown, but we did not determine the extent of such growth.) SSA found that contacting employers with potentially missing or discrepant employees' earnings, as identified by IRS, does result in the crediting of earnings to some individuals' Social Security accounts. SSA did two studies of the usefulness of IRS-furnished data to contact employers; in addition, SSA initiated and completed the first part of a more comprehensive efforts to reduce backlogged employers' reports needing reconciliation. As a result of these efforts, SSA was able to credit an estimated $3.6 billion in earnings to 692,108 individuals' Social Security accounts. The results of SSA's crediting efforts are summarized in table 2.4. 2In its first study, SSA attempted to contact 1,424 employers with missing or discrepant earnings for 1980 or 1981 or both. In its second study, SSA attempted to contact 7,984 employers with missing or discrepant 1983 earnings. 3 For the first part of SSA's three-part effort to resolve the backlogged employers' reports, SSA attempted to contact about 204,558 employers with missing 1983 reports and 83,703 employers with missing 1978 reports. Using the data in tables 2.1, 2.3, and 2.4, it is possible to roughly estimate the total number of individuals affected by the reconciliation workload. In table 2.4, 692,108 individuals were credited with a total of about $3,553.5 million, about $5,134 for each individual. Assuming that the average amount credited for each individual would also apply to the $58.5 billion not recorded by SSA, shown in table 2.1, about 11.4 million instances of crediting would result. After adjusting for the fact that some of these instances of crediting would involve the same employees for more than 1 year, as indicated in table 2.3, we estimate that 9.7 million individuals have unrecorded earnings from the reconciliation workload. Chapter 3 Uncredited Earnings Affect Social Security Because earnings are used to determine an individual's eligibility and benefit amount, uncredited earnings can affect SSA benefit payments. Current beneficiaries have lost-and will continue to lose-benefits because of SSA's failure to correctly credit their earnings. In addition, individuals with uncredited earnings may receive less in benefits than they are entitled to when eligible if the earnings stay uncredited. Uncredited earnings can also affect Social Security trust fund revenues. These trust funds are entitled to tax revenues based on SSA-recorded earnings. Consequently, unrecorded or uncredited earnings should reduce these revenues. SSA would have to return about $7.7 billion to the Treasury, based on earnings reports for the years 1978-84, if (1) SSA-IRS earnings differences are not reconciled and (2) current SSA earnings records are used to adjust trust fund balances. Beneficiaries Are Effect on Employees The effects of uncredited earnings are illustrated by the extent of under- During a study of missing and discrepant employers' earnings reports for 1980 and 1981,' SSA obtained W-2s from employers. Using 11,151 of these W-2s, we checked Social Security's benefit rolls and identified 358 individuals who appeared to have uncredited wages and were receiving benefits. To determine whether uncredited earnings actually affected benefits, we judgmentally selected some of the 358 beneficiary case files for review. Case files are located throughout the country. We selected cases only in Philadelphia, New York City, and Woodlawn (Maryland) to facilitate our review. Of 159 cases selected, SSA was able to provide 137 files. In 68 of the 137 sample cases (50 percent), wages had been correctly included in SSA's benefit computation. The missing wages were identified When the volume of unreconciled employers' reports reached nearly 3 million, SSA initiated a study to determine the reasons for, and what to do about, those that SSA either (1) had no record of receiving or (2) had received, but which showed less in wages than reported to IRS. Five SSA regions participated in the study by attempting to contact a sample of 1,424 employers with missing or discrepant 1980, 1981, or both earnings reports. Uncredited Earnings Affect Social Security Table 3.1: Effect on Monthly Benefits for during the benefit application process, generally as a result of either Table 3.2: Cumulative Additional Benefits The 33 beneficiaries were due higher monthly benefits for an average of 31 months, including a few that exceeded 5 years. Accumulated payments should have been higher by an average of $456; they ranged from a few dollars to about $1,850. The additional benefits due are summarized in table 3.2. Uncredited Earnings Affect Social Security Effect on the Self- Table 3.3: Effect on Monthly Benefits for Individuals With Uncredited Self- Although self-employment earnings are not subject to the SSA-IRS wage reconciliation, such earnings—when uncredited—can also affect benefits. Of 7,100 self-employed (mentioned in ch. 1), whose earnings we identified (during a previous review) as uncredited in 1979 because either IRS did not furnish or SSA did not process the data, 1,060 were on Social Security's retirement and survivors benefit rolls. To determine whether uncredited earnings affected their benefits, we judgmentally selected individuals for review. Of 231 cases selected, SSA was able to provide 220 benefit files for our review. In 67 of the 220 reviewed cases (30 percent), the missing earnings had been identified by the individual or SSA, generally during the benefit application process, and included in the benefit computation. For the remaining 153 cases, we asked SSA to recalculate the benefits, including the earnings that were not credited. Inclusion of the uncredited earnings entitled 62 beneficiaries to an average of $7.90 more each month. The other 91 beneficiaries were not entitled to a higher benefit for various reasons: for example, the uncredited earnings were not high enough (relative to each beneficiary's own history of earnings) to be included in the benefit computation. The monthly benefit effect for the 62 beneficiaries that were affected is shown in table 3.3. The 62 beneficiaries were due higher monthly benefits for an average of 43 months, including a few for over 5 years. Accumulated payments should have been higher by an average of $434 and ranged from a few dollars to about $4,500. The additional benefits due are summarized in table 3.4. 2The selection was made based on a stratified random sample of uncredited earnings amounts for benefit files located in Philadelphia. |