Millions Could Lose Some Aged Benefits : Social Security, IRS Fail to Resolve Disparity in Earnings Records

WASHINGTON â€”  More than 10 million workers could lose some of their Social Security benefits because of discrepancies in federal government records on how much the nation’s employees have earned in the last 10 years, federal officials say.

Since 1978, when the Social Security Administration began independently receiving statements from employers on how much each worker earned, a disparity has appeared between these totals and the employee earnings records received by the Internal Revenue Service.

For unknown reasons, officials say, Social Security’s totals--which are used to determine the benefits of each retiring worker--have been nearly $60 billion lower.

Can’t Reach Compromise

With the total disparity growing each year, the agencies have been unable to agree which will undertake the huge task of contacting employers to reconcile the difference. Because Social Security uses its own figure to determine benefits, one congressional study estimates that more than 10 million future retirees with possibly conflicting records could wind up getting an average of about $17 less in monthly benefits.

“The senior citizen community will continue to suffer as long as an agreement is not reached,� Rep. Edward R. Roybal (D-Los Angeles), chairman of the House Aging Committee, said Wednesday in an interview. “I thought I had gotten them together before, but there is no use in continuing to exchange letters without an agreement,� said Roybal, who is also chairman of the appropriations subcommittee that oversees the IRS budget.

He said that he spoke with the heads of the IRS and Social Security on Wednesday and pressed them to schedule a special meeting soon to attempt to resolve their dispute.

“Each of the agencies is trying to get the other one to do the work,� a government official familiar with the dispute said.

Most Not Yet Affected

For most of those whose earnings records are in conflict for the 10-year period, there have been no actual losses yet because they are still in the work force and are not drawing benefits. However, an undetermined number of those who have retired since 1978 may be receiving less than they should be and will be recompensed when the dispute is resolved, officials say.

Each year, federal officials say, there are an estimated 650,000 new cases in which the Social Security Administration’s and the IRS’ records on employee earnings do not agree. Social Security receives from employers annual statements on how much they paid each of their workers. The IRS receives quarterly reports from businesses on how much they paid their overall work force and furnishes this total to Social Security.

The Social Security figure is sometimes lower than the IRS figure, and officials speculate that some businesses may accidentally be omitting some payments in their direct filings to Social Security.

Resolving the disparity soon is important, congressional officials say. The IRS requires companies to keep employment tax records for four years. Once the records are destroyed, it will be difficult to rectify under-reporting that would affect a retiree’s benefits.

Sees Need for IRS Help

Nevertheless, Dorcas R. Hardy, commissioner of Social Security, said in a June 22 letter to IRS Commissioner Lawrence B. Gibbs: “We cannot be effective alone in this process. We are convinced from our experience and feedback from employers that, in order for this process to be effective, it must be done under the auspices of IRS intervention.�

Social Security officials say they have been working on hundreds of thousands of cases but that the backlog is large and that the IRS must help. The IRS contends that it cannot investigate more than 175,000 cases a year.

Complicating the process is a long-term program at Social Security to reduce its work force to save money.

The amount of potential lost benefits would vary considerably from one worker to another, according to a General Accounting Office study issued last year based on an examination of a sample of employee records.

‘Moment of Truth’

“You can’t really know until the moment of truth, until benefits begin at retirement, or when someone is disabled, or when a worker dies and the family gets survivors’ benefits,� one GAO expert said.

Already, one senior citizens’ group has filed suit challenging the agency’s decision to ignore discrepancies in more than 700,000 earnings reports that involve lesser amounts--about $9 a month or less in potential benefits, according to the GAO study.

The problem began in 1978 after Congress decided that the Social Security agency should receive its own data from employers for use in determining benefits. Immediately, the disparities began appearing in comparisons with the payroll totals the IRS was continuing to supply.

At businesses, “people make errors in filling out forms, they switch numbers, there are all sorts of reasons for the discrepancies,� the GAO expert said.

1987 Gap Hit $58.7 Billion

By 1987, the gap had reached $58.7 billion, and it keeps growing each year.

Social Security officials say they are willing to make the initial contact with employers but they want the IRS to make the necessary follow-up calls to get the correct numbers.

But, on June 8, IRS Commissioner Gibbs said in a letter to Social Security chief Hardy that his agency’s responsibility “will not exceed 175,000 cases.�

“We don’t think we’ve reached an impasse,� an IRS spokesman said Wednesday. “We’re trying to work out the differences with them.� The IRS is preparing a proposal to send to Social Security and “we hope to have a resolution within the next couple of weeks,� the spokesman said.