Retirement & Financial Planning Report

An inspector general audit has found numerous errors by the SSA in applying the “windfall elimination provision” that commonly results in a reduction in Social Security benefits for those under the federal CSRS retirement system. While those errors were in favor of the beneficiaries, resulting in overpayments, it added, the agency generally cannot reduce them.

The WEP reduces Social Security benefits for those drawing an annuity from a retirement system that does not include Social Security, such as the CSRS system; many of those under CSRS nevertheless qualify for a Social Security benefit due to work before or after a CSRS career, as well as from earnings on the side during their careers that were subject to Social Security deductions. The reduction applies to those who with fewer than 30 years of Social Security-covered earnings above a dollar threshold; the maximum reduction is currently about $460 a month, with a lesser reduction for those with between 20 and 29 years of such coverage. In addition to the exception for those with at least 30 years of qualifying earnings, there are certain other limited exceptions.

In a sample of 150 beneficiaries that the SSA had exempted, the auditors found that 26 were clearly in error, resulting in overpayments to them of nearly $800,000; in addition, the exemptions of another 28 were “questionable,” involving nearly $1 million in potential overpayments.

The audit said, though, that most of the instances it identified were exempt from collection attempts because of SSA’s “administrative finality” policy. Under that policy, unless there is fraud or other misconduct by the beneficiary, the SSA cannot reopen a benefits decision when it finds an error in the beneficiary’s favor if more than four years have passed since the initial determination.

It said that management agreed with its recommendations to collect the identified overpayments where still allowed, instruct staff to review the criterial for exemptions and consider changing its policies to discontinue overpayments once they have been discovered regardless of how long they have been made.