Rescission order creates gaping loophole for Social Security fraud, says union.
The American Federation of Government Employees cried foul today on the Social Security Administration’s plans to rescind Social Security Rulings 66-1c and 91-1c, which allow the agency to question retirement allegations made by corporate officers and the self-employed.
“Development of questionable retirement allegations have always been an important part of what SSA employees do to ensure that only qualified individuals receive Social Security benefits,” said Steve Kofahl, regional vice president of AFGE Council 220. “By rescinding this policy, SSA will be ignoring potential fraudulent activity by wealthy corporate offices and self-employed individuals who shift their income in order to receive SSA benefits.”
“Corporate officers and self-employed individuals are in positions to control how earnings are received, providing an opportunity to defraud the system. Earnings that represent wages for work activity may be taken instead as dividends or other income. Wages earned by the corporate officer may be erroneously reported as belonging to a spouse or child involved in the corporation, or not involved. A self-employed individual may claim that a family member or other individual has taken over the business, with subsequent self-employment earnings reported to that person’s record in error, when there has been no real change. Self-employment earnings also can be taken as other income, or plowed back into the business to be taken at a later date,” explained Kofahl.
In order to prevent fraud and the draining of the Trust Funds, SSA employees complete detailed questionnaires through interviews with corporate officers and the self-employed who claim that there will be a sharp drop in earnings, in order to maintain the integrity of the program.
The Trust Fund implications of rescinding questionable retirement review in the future are significant. For instance, benefits could be paid that are not due, depleting the Fund; earnings that would be subject to FICA taxation if reported properly are misreported as unearned income thereby Trust Fund income is further reduced; and as the full retirement age (at which benefits are no longer subject to deductions for work and earnings) gradually advances to age 67, there are more months/years between age 62 and full retirement age for which benefits should be withheld but are not. The policy change clearly causes an increasing drain on the Trust Fund as the years go by.
“When SSA had field representatives in every one of the 1300 field offices, the field representatives made visits to businesses where there was a question about the veracity of what had been said during an interview, and it was not unusual for field representatives to be greeted by the so-called retiree or to see him/her continuing to run the business,” said Kofahl. “Unfortunately, field representatives are nearly extinct. It seems like proper administration of the Social Security Act is increasingly endangered as well.”
The American Federation of Government Employees (AFGE) is the largest federal employee union, representing 625,000 workers in the federal government and the government of the District of Columbia. For the latest AFGE news and information, follow us on Facebook and Twitter.