From The Social Security Administration’s Enforcement of the Earnings Test, a report by Social Security's Office of Inspector General:
The earnings test is a provision of the Social Security Act that requires that SSA withhold payments from beneficiaries who are under full retirement age (FRA) if their earnings exceed a certain limit. ...
SSA did not accurately or timely pay beneficiaries subject to the earnings test. As a result, we estimate SSA:
- inaccurately calculated approximately 47,000 of the 294,000 earnings-test overpayments established in FY 2021, totaling more than $148 million;
- inaccurately paid approximately 9,000 beneficiaries approximately $29 million based on estimated earnings that were more or less than their actual earnings; and
- did not timely pay approximately 176,000 beneficiaries approximately $81 million in monthly benefit increases. ...
And to think that the retirement earnings test used to apply to all retirees regardless of age.
Doing away with the retirement test altogether at any age would probably save both Administrative time and not be as costly as believed. When people take early retirement, they end up getting less, maybe much less, from SS over their lifetimes. That is why for people who can, delaying to age 70 is considered ideal.
ReplyDeleteIf the test is eliminated completely, then far more people would claim earlier and the net difference to SS over the years might even be positive for the Trust Fund as a whole.
Goss and the Actuaries could probably put better numbers on that if asked.
As on of the few advocates who handle OPs resulting from work activity and early retirement let me say-- All sort of errors all the time. Every day. Private attorneys out there. Please do these OP cases for your clients. I can help you and it keeps folks from becoming homeless. LITERALLY.
ReplyDeleteThe annual earnings test has been around for over 40 years. It appears it's been around since SSA was voted into law in 1935.
ReplyDeletehttps://www.ssa.gov/history/ret.html
The problem is pushing FRA out so far into the future. This year, 66 and 10months but eligible for Medicare at 65. Work and Medicare make you file for at least Part A of Medicare. Depending on the number of employees, you may have to file for Part B of Medicare and a Part D plan. But, you didnt take cash benefits, because you want to make it to FRA. So you might end up paying quarterly for Part B directly to Medicare. The Part D plan can be paid in full for a year or a monthly bill.
ReplyDeleteEventually you know to help reduce the burden on Medicare they will move Medicare eligibility to the same as FRA. Early retirement will move as well, up from 62 to something more like 65. They want you to pay in, but die at work on the job and not cost Medicare anything or SSA to pay out. Somehow now everyone thinks you can work to 70 but even SSA shows very very few people do.
It’s time to get rid of the work test. The annual earnings test harms poor to lower working class individuals. Wealthy individuals who have alternate incomes can collect at 62. While a low wage worker has to take reduced social security benefits and have a limit on how much they can earn.
ReplyDeleteRetirement benefits are paid to replace earnings.
DeleteMaybe we should pay disability benefits to the healthy workers?
During peak Covid I had an accountant client choose early retirement. He submitted all the necessary proof showing his wages predated the early retirement election date, but they still claimed he was overpaid. Took upwards of 8 months to sort out because FOs were unreachable for months. Staff are not properly trained on how to deal with these situations.
ReplyDeleteAnother client just received an overpayment letter due to a Workers Comp settlement. We spoon feed SSA all the required information but it has no effect. Our cover letter includes the POM regulations relating to lump sum settlements, provides the proration rate included in the workers comp settlement docs, and we even give them a direct page citation to the proration clause of the WC settlement. Our representation ceased over a year ago, so I will probably need to have the client sign a new 1696, b/c SSA makes it impossible for claimants to handle these issue on their own.
anon@4:39pm,
ReplyDeleteIn those cases with excess earnings prior to entitlement, submitting the wage information at the time of filing isn't enough. It allows the claimant to initially be paid correctly, but further action is needed at end of year. The individual also has to file an annual report at the end of the year to properly close out the year. Otherwise, the system just ignores the initial monthly earnings test input and processes an annual report based upon the annual test and total yearly earnings.
This workload (annual reports) is really a function that should absolutely be added to online services; however, the agency just seems to be unwilling to do it for some reason. More incompetent managerial decision making....
On the WC overpayment, make sure to file a reconsideration request ASAP. While the FO should probably be able to correct the error with an ICF input, as you've seen it is difficult to get them to do things. And, that is presuming that they even know how to do it (I personally know a couple of Title II technical experts that can't do worker's comp offsets -- much less the below average new/midrange hires they have now. The training is atrocious on things like this).
Insider information about this:
ReplyDeleteThe majority of the "errors" were related to the work test being applied in the first your of retirement or entitlement to survivor benefits. So there is no need to do away with the work test as a whole. Exempting the claimant to the AET in their first year of entitlement as a whole would drastically reduce the number of overpayments, inappropriate month of entitlement changes (that are cumbersome for the PSCs to do and reverse), eliminate unnecessary reconsideration filings and FO contacts.
Making the above change alone would significantly reduce the back-end burdened, slightly help FO and TSC inquiries that are not fully trained on the technical application of the work test.
Another class of errors related to an outreach to the claimant for potential "special wage payments" that should be counted in the last month of work. Unfortunately, OIG misapplied the LMETY rules (non-work months) to the most favorable when it only applies to the first year. But there is certainly a need for training on the handling of special wage payments, what is and is not excludable, and to what year those earnings apply to for the work test.
But what is the point of the earnings tests? It doesn't save the agency money. The average person "breaks even" by filing later for a higher rate within 14 years. The average 62 years old man is expected to live an additional 19 years and the average 62 year old woman is expected to live an extra 22 years.
DeleteTherefore, to help protect the trust funds, Congress should abolish the earnings tests and incentivize early filing.
@823. Not paying money to people that are still working doesn't save money? The earnings test incentives people to keep working and paying into the system. It also provides a better standard of living to those who keep working. It also makes sense since the purpose of SSA benefits is to replace lost income.
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