That's A Lot Of Underpaid Widows And Widowers

     From a recent report by Social Security's Office of Inspector General (OIG):

... We identified 30,768 individuals receiving retirement benefits as of January 2019 who may be eligible for additional widow(er)’s benefits. From this population, we selected a random sample of 100 beneficiaries for review. ...

Of the 100 retirement beneficiaries sampled, 69 were eligible for higher widow(er)’s benefits. Of these 69 widow(er)s, there were

• 20 who filed claims and whom SSA determined were entitled to widow(er)’s benefits before the start of our audit and
  
• 49 who were eligible for approximately $630,000 in widow(er)’s benefits. ...
  

This occurred because SSA (1) employees did not always assess and take action when cases were alerted for possible payment increases, and/or (2) did not have processes to detect beneficiaries potentially eligible for higher widow(er)s benefits. Based on the results of our review, we estimate 15,076 retirement beneficiaries were eligible for $193.8 million in widow(er)’s benefits as of September 2019. Further, we estimate 12,615 of these beneficiaries could lose an additional $530.9 million in widow(er)’s benefits over their lifetimes. ...

     Social Security agreed that it will have to do something to address this problem.

     My guess is that the underpaid group includes more widowers than you might think. A lot of widower claims get missed because the widowers just don't think of applying for benefits on their late wife's account. In my experience two types of claims most often missed are Disabled Adult Child and Widowers benefits.

Looking For A New Path Forward

     From a Request For Information (RFI) posted by the Social Security Administration:

... The Social Security Administration’s Digital Identity team is issuing this RFI. The information obtained because of this RFI will be used to create a Market Assessment Report, which may inform budget and acquisition decisions for the agency.

The Social Security Administration (SSA) Office of Systems is researching a solution for managing all aspects of Identity Credential and Access Management (ICAM) for external users that is separate and apart from anything we have in production today; the potential end goal is to replace the existing external ICAM platform(s) currently in use at SSA. ...

     What they're talking here about here is how the public logs on to their Social Security portals (my Social Security) to transact business, such as changing bank account information. I can guess that the agency needs to address at least two problems. First, what they're using now hasn't been completely successful in preventing fraud. Second, Social Security would like to encourage members of the public to do more business with the agency online. Perhaps easier login would help. Obviously, there may be tension between these two goals. In any case, they're clearly not happy with what they have now which is based upon credit information.

A Benefit Computation Controversy Coming?

     From Think Advisor:

If Congress does nothing to shore up the Social Security Trust Fund, benefits will be cut 21% when the [trust] fund is depleted, which could happen as soon as a dozen years from now if not sooner. ...

Pre-retirees born in 1960 may suffer another blow to benefits. That’s because the Social Security Administration employs a complicated formula to calculate benefits, which includes using the top 35 years of a retiree’s earnings, adjusted by an indexing factor. That factor, in turn, is based on the Average Wage Index for the year an individual turns 60, which will be 2020 for those born in 1960.

Job losses and declines in average wages this year due to the pandemic will affect the average wage index, which has risen almost every year since the 1950s, according to Wade Pfau, director of the Retirement Income Certified Professional (RICP) program at the American College of Financial Services. The index fell in 2009 but only slightly, according to Pfau.

“We don’t know what will happen this year but if the average wage index has a dramatic drop, then suddenly those born in 1960 would have a lot lower benefit than those born in 1959,” said Pfau. ...

     People are being laid off in this recession in numbers not seen since the Great Depression but I don't know that average wages have been cut. We'll see. I started to compare this to the Notch Baby controversy but unlike that controversy this could be real. I've probably made some old timers mad at me for even mentioning "Notch Babies"! Sorry to bring up the bad memories!

How Well Has Andrew Saul Performed His Duties As Commissioner?

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I Agree That It’s A Problem But I’m Still Aghast

     From Tom Margenau’s syndicated column:

There is a provision of Social Security law that is rather archaically called the “annual earnings test.” It is sometimes also called the “retirement test.” (More about where those terms come from in a minute.) But I call it the Social Security earnings penalty. And I’ve never liked this law. Before I explain why, let me clarify what I am talking about.

The rules say that if you are a Social Security beneficiary who is under full retirement age and still working, $1 must be deducted from your Social Security checks for every $2 you earn over $18,240 annually. A more lenient penalty applies in the year you reach full retirement age. The earnings threshold is $48,600 with a 3-for-1 withholding scheme. In other words, $1 is withheld from your benefits for every $3 you make over $48,600. And once you reach your full retirement age, the penalties go away. Starting with that month, you could make $1 million a day and still be eligible for Social Security checks. ...

To illustrate, I’ll use my own mother as an example.

Back in the 1970s, she was getting Social Security widows benefits, but she was working part time to supplement her rather meager benefits. She would start out the year reporting her anticipated earnings to her local Social Security office. They would adjust her benefits accordingly, applying the $1 deduction for every $2 earned. Inevitably, as the year went on, she’d work a little overtime or pick up a couple of extra hours of work. She would dutifully report her change in anticipated earnings to the Social Security people, and further adjustments would be made to her monthly widows checks. More often than not, she’d be charged with an overpayment and be asked to return some of her Social Security funds. 

Then maybe she’d be laid off for a time, and her earnings would go down; she’d file yet another report with the SSA, and there would be more adjustments to her benefits. Sometimes, the SSA owed her some extra money. 

Eventually, once the year was over and she got her W-2 form, she would make a final report of her earnings to the Social Security office, leading to yet another benefit adjustment. And on top of that, they would ask for an estimate of her anticipated earnings for the new year; more adjustments would be made, and the whole vicious cycle would start over again.  

My mom used to complain bitterly to me about this, saying, “Can’t you do anything to help me?” I always had to tell her that there was (and still is) a law that says SSA employees cannot work on any cases involving their relatives. 

Still, when people griped to me about how they couldn’t understand the constant tinkering with their Social Security benefit amount due to the earnings penalty, I used to tell them, “If I can’t keep my own mother’s records straight, how do you expect me to help you?!” .. 

So, because the earnings penalty isn’t going away any time soon, let me share with you some tips for dealing with it. Of course, you could play by the rules and religiously report your earnings to the SSA — and then get stuck in the vicious cycle of earnings variances and benefit adjustments that plagued my mother. ... 

Or you could bend the rules a bit. You could tell the SSA that you plan to make less than whatever the earnings threshold happens to be. So, for example, for this year, you would say you expect to make less than $18,240, even if you think you will make more than that. What that means is that the SSA won’t withhold any of your benefits. But you must remember that you will have to pay back some of that money once the year is over with. At the beginning of 2021, you will tell the SSA how much money you made in 2020, and they will calculate how much money you have to pay back. 

If you don’t like the idea of having to owe the government any money, you could go the other way around. For example, you could tell the SSA you plan to make $100,000 in 2020, even though you actually expect to make much less. In this scenario, the SSA won’t send you any Social Security checks. Then in early 2021, you would tell the SSA how much money you actually made in 2020, and they will send you a check to cover the benefits you are due. 

I know some of my former SSA colleagues will be absolutely aghast at these suggestions. They will say that I am coaching people to lie to the government. But c’mon, chill out! Both scenarios I presented require the claimant to eventually settle the books with the SSA. ...

COLA This Year?

     Some analysts say there may be no Cost Of Living Adjustment (COLA) for Social Security beneficiaries this year. 

     I can’t get over how much attention is paid to the annual COLA. It’s merely supposed to hold beneficiaries harmless, not to improve their purchasing power. Of course there are issues with whether the current COLA formula is fair but if the cost of living goes down without a cut in benefits, recipients are better off even though they won’t believe it.

Don Wortman 1927-2020

     Don Wortman, who served as Acting Commissioner of Social Security in the late 1970s, has died at the age of 92. Wortman had an incredibly varied career as a federal employee, working at various times with Medicare and Medicaid, refugee resettlement, Head Start, the Atomic Energy Commission, the CIA and the GAO in addition to Social Security.

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