'Record-breaking backlog' leads to $1.1 billion in improper Social Security payments, report finds

• A "record-breaking backlog" of pending actions has led to an estimated $1.1 billion in improper beneficiary payments, according to a new report.
• Experts say the Social Security Administration needs more funding in its budget to properly address a "customer service crisis."

The Social Security Administration faces a "record-breaking backlog" of open cases, leading to approximately $1.1 billion in projected improper payments to beneficiaries, according to a new report from the Social Security Administration Office of the Inspector General.

The SSA OIG, which provides independent oversight of the agency's programs and operations, found the agency's backlog of so-called pending actions climbed to an all-time high of 5.2 million as of February.

Of those that were improper payment cases, the average processing time was 698 days, according to a sample evaluated by SSA OIG.

Improper payment includes overpayments, where beneficiaries are paid more than they should be, as well as underpayments, where payments to beneficiaries may be erroneously reduced.

If the pending cases had been resolved immediately, about 528,000 beneficiaries would have been improperly paid about $534 million, the report estimates.

After 12 months, that improper payment amount for those beneficiaries rose to about $756 million. At the time of the SSA OIG's review, many of the cases had been outstanding for more than 12 months, bringing the improper payment amount to the reported $1.1 billion figure.

Some overpayments may be preventable

Earlier this year, the Social Security Administration put in place new policies to make it easier for beneficiaries to resolve overpayment issues with the agency, loosening previous rules that called for clawing back 100% of the money beneficiaries received.

However, the agency's workflow still makes it vulnerable to inaccurate payments, which is worsened by processing delays.

The SSA OIG report's findings are based pending actions at the SSA's processing centers, which handle appeal decisions, collect debt, correct records and process benefit decisions.

"The longer it takes SSA to process [processing center] pending actions, the longer beneficiaries wait for underpayments due or they receive larger overpayments to pay back," the SSA OIG report states.

Some incidents of overpayments may be preventable in cases where beneficiaries do not provide necessary information to the Social Security Administration in a timely fashion, said Paul Van de Water, senior fellow at the Center on Budget and Policy Priorities.

However, other cases are just due to slow processing times by the agency, he said.

"Whatever the source of the problem, getting the claims and adjustments processed more quickly would be advantageous," Van de Water said.

Improvements depend on 'sustained adequate funding'

Notably, the Social Security Administration met its performance measure goals for pending processing center actions in four of the six fiscal years between 2018 and 2023, according to the report.

However, the agency was not able to meet is goals in two of the fiscal years in that time period was due to unexpected staff reductions, increased workloads and less than expected overtime funding, according to the Social Security Administration.

"The number of beneficiaries continues to grow while we have the lowest staffing levels across the agency in 25 years," Dustin Brown, acting chief of staff at the Social Security Administration, wrote in a letter in response to the SSA OIG report.

The Social Security Administration has more than 650 fewer employees working on processing center workloads than it did eight years ago, Brown added. During that time, the number of beneficiaries who rely on Social Security benefits has risen to almost 72 million, up from about 64 million, he said.

More from Personal Finance:

What the presidential election could mean for Social Security and Medicare

How Kamala Harris' running mate Tim Walz could help shape the child tax credit

Kamala Harris' tax records reveal 'fairly basic' approach, experts say

The Social Security Administration agreed with the recommendations that came out of SSA OIG's report to develop a workload and staffing plan, to create performance measures for pending actions and to establish time frame targets to handle those workloads.

However, the agency's ability to successfully implement those recommendations will depend on "sustained adequate funding" to pay for hiring, overtime and improved technology, Brown wrote in his letter.

The Social Security Administration has faced a "customer service crisis" that has prompted long phone hold times and waits for disability determinations in addition to inaccurate payments, Van de Water said.

Unless the agency is given an adequate amount of funding in its budget, that crisis could worsen, Van de Water predicts.

While a Senate proposal calls for increased funding for the agency for the fiscal year starting in October, a House version instead calls for cutting the agency's funding.

"Everyone wants to get rid of these long processing delays, but as long as the budget is so tightly constrained, that's going to be very difficult to do," Van de Water said.