House Committee on Government Reform, Subcommittee on Government Management, Information and Technology (Horn) on implementation of the Debt Collection Improvement Act of 1996 (PL 104-134)
Yvette S. Jackson, Deputy Commissioner for Finance, Assessment and Management testified.
June 8, 2000


Mr. Chairman and Members of the Subcommittee:

Thank you for the opportunity to come here today to discuss the Social Security Administration's (SSA) efforts to implement and comply with the Debt Collection Improvement Act of 1996 (DCIA). We particularly appreciate your, leadership, Mr. Chairman, and that of this subcommittee in enactment of this legislation which has enabled SSA to improve our debt management program. As you will see, we have already implemented a significant number of debt collection improvements. We will implement five more debt collection tools in the year 2001. When we finish with those tools, we will turn our attention to the remaining provisions to be implemented.

Background on SSA's Debt

The public's trust in the Social Security program is absolutely critical. Even a perception of lack of program integrity can threaten this trust. SSA is dedicated to program stewardship and program integrity. We must remain vigilant if we are to fulfill our role as capable stewards of the public trust.

Before I discuss our progress in implementing the debt collection provisions of DCIA and other laws, I will briefly describe some basic points about SSA's debt. It is important to know why it occurs, how much of it occurs, and actions we take to control it.

SSA has undertaken significant initiatives over the past several years to prevent and detect Social Security program overpayments. Our stewardship responsibilities require that we recover as much of the debt owed as possible. Our goal is to achieve an annual average increase of 7 percent in debt collections over the 5-year period from Fiscal Years 1998-2002. In Fiscal Year 1999, we met our goal for both the Title II and Title XVI programs. In Fiscal Year 1999 our collections for Title II were $1.2 billion, an 8 percent increase. In the Title XVI program, we collected $640 million, an 18.7 percent increase.

SSA's debts consist of overpayments that occur in the Old-Age, Survivors, and Disability Insurance (OASDI) and Supplemental Security Income (SSI) programs. An overpayment results when a beneficiary is paid more money than he or she is due. People become overpaid for a variety of reasons. Retirees under the age of 65 are overpaid when, for example, they work and earn more money than allowed for unreduced benefits. Disabled beneficiaries can become overpaid as a result of medical recovery. SSI recipients are overpaid when they have increased income or resources over the allowable limit.

In fiscal year (FY) 1999, overpayment-related events led to $3.6 billion in new debts in the OASDI and SSI programs. While this amount seems high, I would like to put it in context. In FY 1999, SSA paid $410 billion in benefits to over 50 million people receiving OASDI and SSI payments. Overpayments of $3.6 billion amounted to less than 1 percent of those benefit outlays. The elimination of the annual earnings test for beneficiaries who are age 65 up to age 70 will further reduce the rate of new debts by avoiding about $445 million in new debt in the OASDI program.

When overpayments do occur, SSA uses a vigorous debt collection program. If the individual is on the benefit rolls, we recover the overpayment by withholding future monthly payments. We have a high degree of success in collecting debts owed by people on the rolls, achieving a collection rate of more than 90 percent. If the overpaid person is no longer on the rolls, we employ our in-house billing and follow-up system to collect the debts. It is this type of debt for which the tools provided by DCIA and other laws are effective, since they give us the enforcement capability we need to collect from recalcitrant debtors. Of course, if the overpaid person later becomes re-entitled, we collect the debt from ongoing monthly benefits. We are committed to using every available technique to collect debts owed to SSA.

Embedded in our commitment to provide world class service to our customers are measurements and enhancements that promote an accurate benefit calculation. The accuracy of our decisions in the Old Age and Survivors Insurance program and the effect of any error on dollar outlays have consistently been very good, exceeding 99 percent. In fact, the systematic fixes and improvements we have made in postentitlement computations over the last few years have eliminated hundreds of thousands of errors.

On another crucial front, we have initiated a series of actions to attack the problem of the accuracy rate in the SSI program which was 94.3 percent in 1999. The SSI program is a needs-based program that provides monthly cash assistance to individuals who are aged, blind or disabled. Over the past several years, the program has grown in size and complexity. We have increased the number of SSI case reviews once individuals are on the rolls which helps us to detect overpayments.

We also have a strong program of computer matches that detect and prevent debts. For instance, SSA conducts matches involving prisoners, nursing homes and wages that detect debts each year. In FY 1999, SSA's matches saved $2.5 billion in combined collections and debt prevention. Redeterminations of ongoing SSI eligibility led to the eventual collection of $0.6 billion and prevented the occurrence of $1 billion in overpayments. It is critical to note that the Social Security Number (SSN) is used in those matching operations, and is essential to its continuance.

SSA's Progress on Debt Collection Tools

SSA has made substantial progress toward implementing the debt collection tools authorized by DCIA, as well as other legislation enacted during the 1990s. This has greatly improved SSA's ability to collect its debt.

Tools Already Implemented

In the decade of the 1990s, SSA strengthened its debt collection program in a number of significant ways. In November 1990, we were given the authority to use tax refund offset (TRO), in which debts are recovered directly from Federal tax refunds before the refunds are sent to taxpayers. We began receiving our first collections from TRO in January 1992. We expanded TRO twice--in 1995 and again in 1998--to add new classes of debtors, such as SSI debtors and to make use of the Treasury Offset Program (TOP). TRO and TOP, which allows us to collect delinquent debts from Federal payments in addition to tax refunds, have yielded $275 million in offsets from former OASDI and SSI recipients who owed delinquent debts.

In 1995, we began using credit bureau locator services to help us track down delinquent debtors who moved and left no forwarding address. This online, automated system has enabled us to obtain close to 200,000 addresses of delinquent debtors, and resume our debt collection efforts.

In 1998, we began reporting our delinquent OASDI debtors to credit bureaus as a way of inducing them to repay their debts, and thus clear their credit records. To date, we have reported almost 75,000 delinquent debtors to credit bureaus. As a result of the letters we send to delinquent debtors warning them of our plans to refer them for offset and report their delinquencies to credit bureaus, we have collected $95 million in voluntary payments from people who seek to avoid those actions.

Tools to Be Implemented by February 2001 (Phase 1)

We have been busy over the last year developing the debt collection tools that we think have the most payoff and can be fairly quickly implemented. Our choices were governed by which tools would give us the most return earliest in the process of collecting the debt.

In January 2001, we will implement mandatory cross program recovery, or the collection of an SSI debt from the debtor's OASDI benefits. The Noncitizen Benefit Clarification and Other Technical Amendments Act, which was enacted in October 1998, granted the authority for this collection tool. We estimate that it will yield about $175 million in extra collections over the next 5 years.

Also in January 2001, we plan to implement two additional tools to collect delinquent SSI debts. Those tools are administrative offset, which is the collection of a delinquent debt from a Federal payment in addition to a tax refund, and credit bureau reporting. We received the authority to use these tools for SSI debts when the Foster Care Independence Act of 1999 was passed in December 1999.

In February 2001, SSA, in partnership with the Financial Management Service (FMS) plans to implement Benefit Payment Offset (BPO). This is the reduction of Social Security benefits to collect delinquent debts owed to other Federal agencies. While this tool will not contribute to SSA's debt collections, it will benefit the Federal government by enabling the Treasury Department to collect an estimated $40-60 million in delinquent debt. Treasury estimates that about 400,000 Social Security OASDI beneficiaries per year will incur a reduction of their benefits as payment toward another Federal debt.

In view of the magnitude and potential sensitivity of this program, I would like to talk about what SSA and FMS are doing to develop it. First, we fully support this project and we intend to implement it as soon as possible. We have a target date of February 2001. We have been working with FMS since July 1998 to develop a program that gives maximum collections at a minimum cost to the Federal government.

As you can imagine, we had many issues to resolve, such as concerns about adequate notification of Social Security beneficiaries who will incur an offset. We want to be sure that the right people are offset for the correct amount. We also want to ensure that the people who are offset under this program understand why it is happening and whom they can contact when they have questions.

We have worked out these issues with FMS. Our agencies are in the final phase of our development of BPO. SSA and FMS signed an agreement for conducting the program. We have developed the required systems changes, which were extensive because they would affect the amount of Social Security benefits payable to people. We are poised to begin the testing phase of the program, where both FMS and SSA will ensure that BPO functions as it should. All of our preparations have been designed to make sure that the citizens to whom BPO applies are treated fairly; that Federal agencies which are owed debts receive them in an efficient and effective way; and that SSA can deliver world-class service to the public. In less than one year, we expect BPO to start generating debt collections for the Federal government.

Tools to Be Implemented After February 2001 (Phase 2)

In June 2001, we plan to implement administrative wage garnishment, a DCIA-authorized tool, as one more tool for collecting delinquent OASDI and SSI overpayments. We believe that this debt collection tool plus administrative offset and credit bureau reporting for SSI debts will yield at least an additional $10 million per year in debt collections.

While the next year will be one of great activity for our development of debt collection tools, we also have plans for putting into place additional tools. We will initially focus on a DCIA provision, Federal salary offset, which is the collection of a delinquent debt owed by a Federal worker from his or her salary. Treasury plans to incorporate Federal salary offset into TOP after the third quarter of FY 2001.

We will also implement another DCIA provision--Treasury's cross servicing program, in which Treasury acts as a debt collector for Federal agencies. Although we fully intend to participate in cross servicing, we want to use our limited resources to first complete implementing the debt collection tools that will yield the most collections. We have been working with Treasury and will continue to work with them on this program. In fact, we have a round of meetings coming up this month with Treasury on cross servicing.

An important aspect of cross servicing involves the use of private collection agencies, which is on our list of debt collection tools to implement after we finish the tools that we believe are more lucrative and can be quickly implemented.

Interest charging is another provision of DCIA that we plan to implement. Our priorities are such that we will begin developing interest charging as early as the year 2002. While interest charging is a valuable tool, we believe it will function more as a threat to our debtors, yielding collections in the form of voluntary repayments by people who perceive it as something to avoid.

Recently, we began working with FMS and the Internal Revenue Service (IRS) on the continuous tax levy program. Under this program, IRS will collect delinquent tax debts from payments made by SSA. We fully support this program, which is conducted by Treasury through the Treasury Offset Program. At this time, SSA, together with FMS and IRS, are engaged in planning and analysis of the impact on Treasury, SSA and the American people to whom this program will apply. As with Benefit Payment Offset, we want to be sure that the continuous tax levy program is built to achieve collections in an efficient and effective way, while protecting the people subject to it, and allowing SSA to continue its mission.


In conclusion, our Agency has accomplished much in the way of implementing the new debt collection tools authorized for us. We are well on our way to completing the implementation of an additional five major debt collection tools. In less than one year, we will implement mandatory cross program recovery, administrative offset and credit bureau reporting for SSI debts, administrative wage garnishment for OASDI and SSI debts, and benefit payment offset. Immediately after that, we will focus on the remaining authorities of Federal salary offset, cross servicing, private collection agencies and interest charging.

SSA is committed to implementing the provisions of DCIA and other relevant debt collection laws. Our record of achievement--implementing TRO, administrative offset, and credit bureau reporting--shows our commitment to debt management.

Thank you for the opportunity to testify before you today. I will be glad to answer any questions you may have.