To help ensure that SSA does not pay benefits to persons who do not  have long-term disabilities, a DI program statute requires individuals to  serve a 5-month waiting period prior to receiving DI benefits. SSA Made $1.29 Billion in Benefit Payments That Were Potentially Improper as of January 2013, Mostly as a Result of Work Activity during the 5-Month Waiting Period

		SSA Made $1.29 Billion in DI Benefit Payments That Were Potentially Improper

On the basis of our analysis of SSA data on individuals who were DI  beneficiaries as of December 2010 and earnings data from the NDNH, we  estimate that SSA made $1.29 billion in DI benefit payments that were  potentially improper to about 36,000 individuals as of January 2013. As shown in figure 3, the estimated 36,000 DI beneficiaries  receiving potential overpayments represent about 0.4 percent of all  primary DI beneficiaries at that time. The exact number of individuals who  received improper disability payments and the exact amount of improper  payments made to those individuals cannot be determined without  detailed case investigations by SSA. However, after completing the 9-month trial work period and entering the  reentitlement period, beneficiaries who have substantial earnings from  work beyond the 3-month grace period are generally no longer entitled to  benefits. Specifically, we found that SSA’s enforcement operation will not generate  an alert for earnings during the waiting period if the earnings occur in a  year when the beneficiary does not receive a benefit payment. In two of the three examples we randomly  selected from our sample of beneficiaries with work activity during the  waiting period, SSA’s enforcement operation did not generate alerts for  SGA-level earnings during the waiting period because their waiting  periods occurred in the year prior to their first benefit payment. For the third beneficiary we reviewed, SSA’s  enforcement operation generated an alert for earnings during the waiting  period because the individual also received benefit payments in that year. SSA officials  acknowledged that the systemic limitation to their enforcement operation  allows potentially disqualifying work activity to remain undetected, but  SSA expressed concern that modifying its existing enforcement operation  may be costly. Without reliable and timely earnings  information on the work activity of individuals applying for DI benefits,  SSA risks making overpayments to individuals whose work activity  indicates they are not disabled and therefore ineligible for disability  benefits. Recommendation for Executive Action

To improve SSA’s ability to detect and prevent potential DI cash benefit  overpayments due to work activity during the 5-month waiting period, we  recommend that the Commissioner of Social Security take the following  action: assess the costs and feasibility of establishing a mechanism to detect  potentially disqualifying earnings during all months of the waiting  period, including those months of earnings that the agency’s  enforcement operation does not currently detect and implement this  mechanism, to the extent that an analysis determines it is cost- effective and feasible. To do this, we used wage data to identify two  populations of individuals with earnings beyond program limits; we then  drew a random, generalizable sample of individuals from each population  and compared wage information from their employers to DI program  information from SSA to develop estimates of potential overpayments in  each population. Appendix II: Objectives, Scope, and Methodology

This report (1) estimates the extent to which individuals received disability  insurance (DI) benefit payments that were potentially improper due to  work activity performed during the 5-month waiting period or beyond the  9-month trial work period; and (2) assesses the extent to which the Social  Security Administration’s (SSA) enforcement operation detects potentially  disqualifying work activity during the waiting period. We plan to assess the extent to which the National  Directory of New Hires (NDNH) indicates potential overpayments in  SSA’s Supplemental Security Income (SSI) program in future work, which  will be available this year. Wait Period Overpayments

Our analysis of the NDNH match file identified individuals who were in  current pay status in the DI program as of December 2010 and had  computed monthly earnings that exceeded the corresponding monthly  SGA threshold for any of the 5 months prior to the individual’s DI date of   We included individuals who received potential  entitlement to disability.overpayments due to work activity during the waiting period on the basis  of the following criteria:  1.  monthly computed earnings were greater than the corresponding SGA  threshold during any month of the individual’s 5-month waiting  period, and 2. Trial Work Period Overpayment Examples

To provide examples of the circumstances under which SSA made  potential overpayments to individuals with work activity beyond their trial  work period, we randomly selected three beneficiaries from our trial work  period sample who were among those beneficiaries receiving potential  overpayments for at least 36 months (3 years).
Why GAO Did This Study

SSA's DI program is the nation's largest cash assistance program for workers with disabilities. Though program rules allow limited work activity, some work activity indicates beneficiaries are not disabled and therefore not entitled to DI benefits. Consequently, SSA might overpay beneficiaries if the agency does not detect disqualifying work activity and suspend benefits appropriately.
GAO was asked to study potential DI overpayments. GAO examined the extent to which (1) the NDNH indicates that individuals received potential DI overpayments; and (2) SSA's enforcement operation detects potentially disqualifying work activity during the waiting period. GAO drew random, generalizable samples of individuals from those whose earnings on the NDNH were beyond program limits and compared wages from their employers to DI program data to identify potential overpayments. To illustrate the circumstances in which SSA made potential DI overpayments, GAO reviewed case files for a nongeneralizable selection of six individuals--three who worked during their waiting period, and three who received potential overpayments for at least 3 years.

What GAO Found

On the basis of analyzing Social Security Administration (SSA) data on individuals who were Disability Insurance (DI) beneficiaries as of December 2010 and earnings data from the National Directory of New Hires (NDNH), GAO estimates that SSA made $1.29 billion in potential cash benefit overpayments to about 36,000 individuals as of January 2013. The exact number of individuals who received improper disability payments and the exact amount of improper payments made to those individuals cannot be determined without detailed case investigations by SSA. These DI beneficiaries represent an estimated 0.4 percent of all primary DI beneficiaries as of December 2010. Using a different methodology that includes additional causes of overpayments not considered in GAO's analysis, SSA estimated its DI overpayments in fiscal year 2011 were $1.62 billion, or 1.27 percent of all DI benefits in that fiscal year. GAO estimated DI program overpayments on the basis of work activity performed by two populations of individuals. The first population received potential overpayments due to work activity during the DI program's mandatory 5-month waiting period--a statutory program requirement to help ensure that SSA does not pay benefits to individuals who do not have long-term disabilities. Prior to receiving benefits, individuals must complete a 5-month waiting period, in which the individual cannot exceed a certain level of earnings, known as substantial gainful activity, during any month in order to be eligible for DI benefits. Earnings that exceed program limits during the waiting period indicate that individuals might not have long-term disabilities. The second population received potential overpayments due to work activity beyond the program's trial work period--the trial work period consists of up to 9 months in which a DI beneficiary may return to work without affecting her or his benefits. However, beneficiaries whose earnings consistently exceed program limits after completing a trial work period are generally no longer entitled to benefits.
SSA uses its enforcement operation to generate alerts for potentially disqualifying earnings, but the agency's enforcement operation does not generate alerts for earnings that occur in all months of the waiting period, which allows potentially disqualifying work activity to remain undetected. Specifically, GAO found that SSA's enforcement operation will not generate an alert for earnings during the waiting period if the earnings occur in a year when the beneficiary does not receive a benefit payment. For example, in two of the nongeneralizable case studies GAO reviewed, SSA's enforcement operation did not generate an alert for potentially disqualifying work activity during the waiting period because these individuals' waiting periods occurred in the year prior to their first benefit payment. GAO obtained earnings records from these individuals' employers that show they worked continually both during and after their waiting periods at a level of work that would normally result in a denial of benefits. GAO also reviewed information for individuals who worked beyond their trial work period and found that SSA had identified and established overpayments for these individuals. SSA officials stated that modifying its enforcement operation could be costly, but the agency has not assessed the costs of doing so. To the extent that it is cost-effective and feasible, establishing a mechanism to detect earnings during all months of the waiting period would strengthen SSA's enforcement operation.

What GAO Recommends

GAO recommends that SSA assess the costs and feasibility of establishing a mechanism to detect potentially disqualifying earnings during all months of the waiting period and implement the mechanism as appropriate. SSA concurred, but raised concerns about GAO's estimates. GAO believes its estimates are valid as discussed in this report.