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Social Security Short-Changes 100,000+ Widows

A recent audit report of the Social Security Administration’s Office of the Inspector General estimates that the SSA has underpaid 110,000 widow(er)s $285 million.  While SSA is working to correct the 101 widow(er)s that were actually discovered in their sampling of 200, it is unclear how others affected by this error will be identified and corrected.

Here is the issue, quoted directly from the report,

Generally, the initial month of entitlement to widow(er)’s benefits begins with the month in which an individual files an application. However, a widow(er)’s initial month of entitlement could be earlier than the month of application if it does not reduce the widow(er)’s monthly benefit amount. Specifically, a widow(er)’s initial month of entitlement may be up to

 

  • 6 months before the application filing date, for widow(er)s who are older than full retirement age;
  • 6 months before the application filing date, for widow(er)s who are full retirement age or younger and whose monthly benefit amount is reduced because the deceased wage earner received a reduced retirement benefit; or
  • 12 months before the application filing date, for widow(er)s who are disabled.

What the report has determined is that incorrect payment of benefits results when the SSA employee improperly identifies the correct initial month of entitlement.  There are 3 groups that have been affected by this discovered error and are addressed in the report as follows.

Widow(er)s Who Applied for Benefits After Full Retirement Age

Widow(er)s who apply for benefits after full retirement age may have an initial month of entitlement up to 6 months before their application filing date.  For example, a surviving spouse who applies for survivor benefits 6 months or more after her full retirement age should have an earliest month of entitlement that is 6 months prior to the application date.  For a widow applying within the 6 months after her full retirement age, the earliest month of entitlement should be the month of her full retirement age.

The audit determined that some widows in this group were underpaid because the SSA employee incorrectly used the application date as the earliest month of entitlement.  Still others established an incorrect month of entitlement because of an incorrect application filing date or incorrectly determining the beneficiary’s full retirement age.

Widow(er)s Who Applied for Benefits at Full Retirement Age or Younger

A widow(er)’s monthly benefit amount may be reduced when a deceased wage earner received a reduced retirement benefit. When this occurs, the maximum monthly benefit amount a widow(er) is entitled to receive is the greater of the amount paid to the deceased wage earner or 82.5 percent of the primary insurance amount. In these situations, widow(er)s may be entitled for up to 6 months before their application filing date.

In short, similar errors were made within this group.

Disabled Widow(er)s Who Applied for Benefits

A widow(er) who is disabled can apply for disabled widow’s benefits if he/she is between ages 50 and 60. The eligibility requirements for a widow(er) are similar to the requirements for other disability claimants, except a widow(er) must also meet disability requirements within a prescribed period. Disabled widow(er)s may have an initial month of entitlement up to 12 months before the date they apply.

While this 3rd group probably represents a smaller percentage of the widow(er) population, the longer look-back means the potential underpayments are even greater.

Takeaways

First, since the SSA has put us on notice that there are likely 110,000 widows who have been underpaid (an average of $2,600 each) AND they have not determined how to deal with determining who they are, I believe we need to call attention to this specific issue.  Anyone who has claimed survivor benefits under the above circumstances should question whether their initial month of entitlement was determined correctly.

Second, the above description is a summary.  The intricate details would make this article way too long and bore most anyone.

Third, because of the first and second point, I continue to emphasize the need to work with an experienced professional in social security benefit claiming and a host of other complicated financial planning scenarios.  Successful financial management isn’t about hitting big winning shots, it’s about reducing errors.

Any information presented here is general in nature, believed to be reliable as of the date published and is not intended to be and should not be taken as legal, tax, investment or individual financial planning advice. Competent, licensed professionals should be consulted when implementing any kind of financial, estate, tax or investment strategy.

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