News & Information

CCH® UNEMPLOYMENT INSURANCE — 10/19/16

GAO: Improvements to claims process could help individuals make better decisions about retirement benefits

Many eligible individuals claim Social Security retirement benefits at the earliest eligibility age, even though they would receive higher benefits if they waited until older ages. In order to make an informed decision about when to claim, individuals need to understand how various Social Security rules and other factors affect benefit amounts. The Government Accountability Office (GAO) was asked to examine these issues and produced a report on its findings.

The report examines (1) the extent to which people understand Social Security rules affecting their retirement benefits; and (2) what information the SSA provides to individuals to enable them to make informed claiming decisions. The GAO observed a demonstration of the online claims process and a nongeneralizable sample of 30 in-person claims applications and inquiries in seven field offices; reviewed applicable federal laws, regulations, and agency documentation; reviewed surveys and academic studies, selected in part based on expert referrals and a comprehensive review of the research literature; and interviewed Social Security experts and agency officials.

What the GAO found

The GAO's review of nine surveys and academic studies, and interviews with retirement experts, suggested that many individuals do not fully understand key details of Social Security rules that can potentially affect their retirement benefits. For example, while some people understand that delaying claiming leads to higher monthly benefits, many are unclear about the actual amount that benefits increase with claiming age. The studies and surveys also found widespread misunderstanding about whether spousal benefits are available, how monthly benefits are determined, and how the retirement earnings test works. Understanding these rules and other information, such as life expectancy and longevity risk, could be central to people making well-informed decisions about when to claim benefits. By having this understanding of retirement benefits, people also would be in a better position to balance other factors that influence when they should claim benefits, including financial need, poor health, and psychological factors.

The SSA makes comprehensive information on key rules and other considerations related to claiming retirement benefits available through its publications, website, personalized benefits statements, and online calculators. However, the GAO observed 30 in-person claims at SSA field offices and found that claimants were not consistently provided key information that they might need to make well-informed decisions. For example, in eight of 26 claims interviews in which the claimant could have received higher monthly benefits by waiting until a later age, the claims specialist did not discuss the advantages and disadvantages of delaying claiming. Further, only seven of the 18 claimants for whom the retirement earnings test could potentially apply were given complete information about how the test worked. The SSA's Program Operations Manual System (POMS) states that claims specialists should explain the advantages and disadvantages of filing an application so that the individual can make an informed filing decision. The problems the GAO observed during the claims interviews occurred in part because the questions included in the claims process did not specifically cover some key information.

Online applicants have more access to key information on the screen or through tabs and pop-up boxes as they complete an application. However, similar to in-person interviews, the online application process does not inform claimants that benefits are based on the highest 35 years of earnings or that life expectancy is an important consideration in deciding when to claim.

What the GAO recommends

The GAO made six recommendations to the SSA, including that the agency take steps to ensure that claims specialists provide information on delayed benefits that is consistent with the POMS, and that the claims process provide claimants with better information on the retirement earnings test. The SSA generally agreed with the recommendations. For more information, contact Charles Jeszeck at (202) 512-7215 or jeszeckc@gao.gov (GAO-16-786, September 2016).