U.S.
House of Representatives - March 14, 2006
U.
S. Senate
Committee on Finance
Statement for the
Record
Administrative
Challenges Facing the
Social Security Administration
The
Honorable Patrick P. O'Carroll, Jr.
Inspector General of the
Social Security Administration
March 14, 2006
Good Morning, Chairman Grassley, Senator Baucus, Members of
the Senate Finance Committee. I am pleased to be here today to be a part of
the discussion on Administrative Challenges Facing the Social Security Administration.
While there are varous challenges that SSA faces, I would like to specifically
focus on the issue of unauthorized workers in the U.S. and how it contributes
to one of SSA's greatest challenges - erroneous wage reports held in SSA's
Earnings Suspense File (ESF).
The impact of unauthorized workers in the U.S. is an area in which my office
has performed significant audit and investigatory work, as it relates not
only to SSA program administration, but to broader concerns of illegal immigration
and homeland security.
Unauthorized Work in the United States
Title II of the Social Security Act requires SSA to maintain the reported
earnings records of individuals. SSA uses these reported earnings to determine
individuals' eligibility for, and amount of, retirement, survivors, disability
and health insurance benefits. SSA validates the names and Social Security
numbers (SSN) on the Wage and Tax Statements (Forms W-2) it receives against
information in its own records. When an earnings report contains a name and/or
SSN that does not match SSA's records and cannot be resolved, the report cannot
be posted to an individual earnings record in SSA's Master Earnings File.
Instead, the report is posted to the ESF, a repository for unmatched wages.
From Tax Years (TY) 1937 through 2003, the most recent year for which data
is available, the ESF accumulated about 255 million wage reports, representing
$520 billion in wages, that SSA remains unable to resolve. As of October 2005,
approximately 8.8 million wage reports, representing $57.8 billion in wages,
remained in the suspense file for TY 2003 alone. Unless corrected, suspended
wages could reduce the amount of benefits paid to individuals and their families.
SSA has stated that it believes unauthorized work by non-citizens is a major
cause of wage items being posted to the ESF instead of an individual's earnings
record.
Another indicator of unauthorized noncitizens working in the U.S. is the
Nonwork Alien, or NWALIEN file. This is a file of noncitizens who have received
earnings using a nonwork Social Security number. SSA assigns nonwork SSNs
to noncitizens lacking Department of Homeland Security (DHS) work authorization
but who have valid nonwork reasons for the SSNs. In recent years, SSA has
strictly limited the assignment of these numbers. Despite the fact that such
SSNs are not to be used for work purposes, some noncitizens continue to work
under these numbers and SSA is required to post the earnings reported under
these nonwork SSNs.
By law, SSA annually sends DHS an electronic version of the NWALIEN file
to provide information on noncitizens who have earnings recorded under SSNs
assigned for nonwork purposes. This file is sent 6 to 18 months after the
earnings occur.
In May 2005, SSA reported to the Senate Judiciary Committee that for TY 2003
SSA credited earnings under 555,227 individual nonwork SSNs.
The issue of unauthorized noncitizens working in the U.S. is a complex issue
that directly contributes to SSA's problem of erroneous wage reports held in
the ESF and the NWALIEN files.
Over the years, SSA has developed various tools to assist employers in verifying
a worker's SSN, so that Social Security can properly credit employees' earnings
records.
Current Verification Processes
Because one of the SSA's most important responsibilities is to maintain reliable
records of wages employers pay individuals, accuracy in recording those earnings
is critical. SSA's ability to do so, however, greatly depends on employers
and employees correctly reporting names and SSNs. As such, SSA provides employers
information and services to help them with this responsibility.
SSA utilizes the following tools:
(1) Telephone, fax, and walk-ins, and
(2) Automated employee verification programs, such as the Employee Verification
System (EVS), the Social Security Number Verification System (SSNVS), and the
Basic Pilot.
Telephone, Fax, and Walk-ins
Employers can verify up to five SSNs at no cost by calling SSA's toll-free
number for employers (1-800-772-6270). Employers may also use this number
to get answers to any questions they may have about EVS or to request assistance.
Employers also have the option to fax a paper listing to the local Social
Security office to verify up to 50 names and SSNs.
Employees may also visit a local field office and request a copy of their
Numident print-out, a document containing all the verified information necessary
to obtain employment.
While we have not conducted a full audit in this area to determine the effectiveness
of telephone, fax, and walk-in verifications, current policies and procedures,
if utilized, should help employers verify SSNs of employees.
Employee Verification Programs
EVS and SSNVS are SSA's two primary automated verification programs made
available to employers to verify a large quantity of employees' names and
SSNs. The employers can also provide optional fields, such as an employee's
date of birth and gender for additional verification of identity. Participation
in EVS and SSNVS is voluntary, and both services are available to employers
to ensure information related to their new and existing employees is valid
before the employer submits their Forms W-2 to SSA. Employers must register
to gain access to these programs.
EVS
Employers may verify requests of more than 50 names and SSNs on paper or
any number of requests can be submitted on magnetic media (tape, cartridge,
or diskette). To verify employee records through the registered user process,
employers must submit three required elements: employee's SSN, last name,
and first name. Employers can also provide optional data such as date of birth
and gender. Through EVS, SSA confirms whether the name, SSN, date of birth,
and gender of an employee match SSA's records. As of January 2004, SSA also
began to disclose whether SSA's records indicate that the wage earner is deceased.
We have conducted audits of this program in the past and found that it was
not frequently used by employers. While use of EVS has increased in the years
since our work was done, and SSA made improvements based on our recommendations,
emphasis and resources eventually became more focused on SSNVS.
SSNVS
To further increase the ease and convenience of verifying employee SSNs,
SSA developed SSNVS. SSNVS, which was implemented nationwide in June 2005,
is an on-line service that enables employers to verify whether employees'
names and SSNs match the information in SSA's records. Employers can either
verify up to 10 names and SSNs (per screen) on-line and receive immediate
results or upload batch files of up to 250,000 names and SSNs, and usually
receive results the next Government business day. SSA reported that it processed
over 25.7 million verifications for over 12,000 employers in 2005.
Basic Pilot
The Basic Pilot is a joint program between SSA and DHS, whereby employers
verify the employment eligibility of newly-hired employees. This voluntary
program helps employers determine whether an individual is eligible to work
in the United States. The President signed the Basic Pilot Program Extension
and Expansion Act of 2003 (Pub. L. No. 108-156) into law on December 3, 2003.
This law extended the operation of the Basic Pilot for an additional 5 years
(to a total of 11 years) and expanded the operation to all 50 States, not
later than December 1, 2004.
The Basic Pilot system first checks the information entered by the employer
against SSA's database to verify the name, SSN, and DoB of all newly-hired
employees, regardless of citizenship. When the Numident shows the U.S. as
the place of birth for the newly-hired employee or a code indicating the number
holder is a U.S. citizen, the Basic Pilot automated system confirms employment
eligibility. If the Basic Pilot system cannot confirm employment eligibility
based on the information in SSA's database or if an Alien Registration Number
or I-94 Number was entered, the Basic Pilot system automatically checks the
data against DHS' database.
If the Basic Pilot finds that the employees name, SSN, and/or date of birth
do not match SSA's records, or that an employee who represented himself to
be a citizen is not a citizen, the employer will receive an "SSA Tentative
Non-Confirmation." If the Basic Pilot finds that the employee has presented
a non-work SSN for work purposes, the employer will receive a "DHS Tentative
Confirmation." In either case, the employer asks the employee whether
he/she wishes to contest the tentative non-confirmation. If contested, the
employee must contact SSA or DHS within 8 Government working days of the notification.
After the employee contacts SSA or DHS to correct the record, the employer
resubmits the query through the Basic Pilot system. If the system still does
not confirm employment eligibility after the employer resubmits the query,
the employer may terminate the new-hire.
While the Basic Pilot has been highly efffective on a limited basis, there
are concerns about mandating its use for all employers.
We would also point out that while Basic Pilot provides verification of work
authorization as well as name, SSN, and date of birth, it is available only
for new hires, not existing employees. Meanwhile, while SSNVS and EVS are
available for existing employees, they do not provide work authorization verification.
At this time, no existing system offers a fully comprehensive approach to
verifying all relevant information for both new and existing employees.
Potential Mandatory Verification Service
To date, the OIG has not conducted any specific audit work to determine the
impact of a mandatory verification program for all U.S. employers, but we
recognize that such a program has been supported in several immigration reform
bills, including, Representative Sensenbrenner's "Border and Immigration
Enforcement Act of 2005," and that there are potential benefits to a
mandatory verification program.
In previous audit reports we have recommended that chronic problem employers
should be required to participate in a verification program, such as the Basic
Pilot. We made this recommendation to SSA for the purpose of addressing employers
who frequently and egregiously report wages for employees with name and SSN
discrepancies. In the absence of effective IRS penalties and DHS workplace
enforcement, we believe requiring chronic problem employers to use the Basic
Pilot could be the best method to address ESF growth.
However, we are concerned that implementation of a mandatory verification
program for all employers is seen as an instant solution for SSA's erroneous
wage reporting problem, and/or more broadly, for unauthorized work or illegal
immigration issues in the United States. There are numerous implications of
requiring employers to use such a service, including the impact on labor availability
for employers who rely on the unauthorized noncitizen workforce. The GAO has
identified several challenges to an employment verification program, including
costs, work load implications, education, identity fraud, and increase for
the production of counterfeit documents.
Along with GAO, we would express similar concerns about various challenges
in light of our own prior audit and investigative work. In particular, prior
OIG audit work involving modified programs has suggested that systems capabilities
would have to be significantly expanded and an increased workload in the field
offices and teleservice centers would result from traffic/calls attempting
to resolve any initial "non-verifications" for employees.
Another of our primary concerns is Identity fraud. In order to avoid "no-match" results
in a mandatory verification environment, unauthorized workers could make greater
attempts to steal valid names and SSNs that match, especially, considering
that valid name/SSN matches are widely available on the internet and public
documents.
Commercial websites, such as those administered by Choicepoint and LexisNexis,
provide SSNs and other personal information. Furthermore, websites designed
for genealogy searches may sometimes link to documents containing SSNs. SSA
death information is also readily available, and in fact, may be purchased
by private parties.
To combat this issue, our Office of Investigations (OI) regularly reviews
websites such as eBay for Social Security cards being sold, as well as search
engines like Google and Yahoo for offers to obtain Social Security cards and
numbers. Each search engine provides approximately 35-40 vendors per inquiry.
OI reviews each vendor to determine if the advertisement constitutes fraudulent
behavior, and undertakes criminal investigations as appropriate.
A related concern is the production of counterfeit documents. Our Office
of Investigations (OI) has suggested that if a mandatory verification program
makes it more difficult to obtain work with non-work SSNs, criminal enterprises
may turn to counterfeiting Social Security cards rather than risk discovery
during a more rigorous application process. In addition, improvements in technology
are facilitating the manufacture of more deceptive documents, and production
has become cheaper and easier. Not only do counterfeit documents weaken the
integrity of the Social Security number - they also pose a real threat to
Homeland Security. In an attempt to address both of these concerns, our OI
has participated in collaborative efforts with DHS and other law enforcement
entities on task forces and joint investigations targeting these counterfeit
document rings.
One example of this cooperation is Operation Card Shark, a continuing effort
to dismantle numerous such rings operating in the heart of our nation's capital.
In August 2005, our agents participated in a major raid on five separate locations
in the District of Columbia, seizing documents and manufacturing equipment,
and making 16 arrests. Since May 2002, this operation has identified several
document vending organizations and has dismantled three of them, apprehending
118 aliens in the process. SSA OIG has been involved in similar operations
around the country, and the issue of counterfeit document rings remains a
high investigative priority as we support SSA in its efforts to maintain the
integrity of the Social Security number.
We are currently undertaking an examination of three separate aspects of
verification programs, which may provide valuable information to Congress
in determining whether to require that all employers use an employee verification
service. These reviews will address:
- The
accuracy of SSA information used to verify an employee's SSN, name, date of
birth, citizenship status and, if applicable, date of death. The accuracy
of these data elements is essential in ensuring that employees are not improperly
denied employment simply because SSA records are incorrect or not up-to-date.
- Employer
satisfaction with current verification services-SSNVS and the Basic Pilot.
- Management
controls over SSNVS to ensure that employers are properly using the verification
service.
Conclusion
Since the inception of this office in 1995, the issue of erroneous wage reports
held in SSA's ESF was of great concern. More than a decade later, the ESF
remains one of SSA's greatest challenges. While SSA has taken steps to address
the issue through various tools, such as employee verification programs, the
issue remains largely unresolved. My office is particularly concerned about
this issue not only because it affects SSA, but also because on a larger scale,
it impacts Homeland Security. We continue to work toward a solution, we appreciate
Congress' interest and concern, and we stand ready as always to assist you
and SSA by providing accurate and meaningful audit and investigative work.
Thank you, and I would be happy to answer any questions you may have.
www.socialsecurity.gov
