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The Management’s Discussion and Analysis(MD&A) is designed to provide a high leveloverview of the Agency. It provides a descriptionof who we are, what we do and how well we meet

the goals we have set.

The Mission and Organizational Structure sectionhighlights the Agency’s mission as refreshed in our1997 Strategic Plan. This section also discusses themajor programs we administer; the Old Age andSurvivors Insurance (OASI) and the DisabilityInsurance (DI) programs (commonly known asSocial Security) as well as the SupplementalSecurity Income (SSI) program.

Following the Mission and OrganizationalStructure section is a discussion of the Major Issues

that SSA will be facing in the future. We use theAccountability Report to provide a snapshot of theperformance we were able to achieve in FY 1999.However, the status of SSA would not be completewithout providing a sense of the challengestomorrow brings. These challenges includelong-term solvency of the Social Security programand fulfilling our commitment to world-classservice as well as topics that have a moreimmediate impact on our operations such asyear 2000 computer readiness, SSI and DImanagement improvement and fraud preventionand detection. While these issues are challenging,

we believe we have the policies and plans in placeto help ensure they are adequately addressed.

Next, the MD&A discusses SSA’s ability toachieve the five strategic goals contained inour current strategic plan. In February 1998,we provided Congress with our FY 1999

Annual Performance Plan (APP) outlining theperformance indicators we used to assess ourability to meet these five strategic goals. ThePerformance Goals and Results sectiondisplays selected indicators from the APP,targeted performance for FY 1999 and actualperformance achieved. Our complete FY 1999GPRA Annual Performance Report can befound beginning on page 56.

In addition to discussing programperformance, the MD&A also addresses ourfinancial performance. The major sources and

uses of SSA’s funds as well as the use of these resources in terms of both program andfunction are explained. Finally, the Systemsand Controls section of the MD&A providesthe Commissioner’s Federal Managers’Financial Integrity Act (FMFIA) assurancestatement, the actions SSA has taken toaddress our management controlresponsibilities and a discussion of theAgency’s FMFIA material weakness and planto correct this weakness.

Mission andOrganizational Structure

Management’s Discussion and Analysis

SSA’s Mission

To promote the economic security of the nation’speople through compassionate and vigilant

leadership in shaping and managing America’s

Social Security programs.

SSA's FY 1999 Accountability Report 1



The Social Security Act established a program tohelp protect aged Americans against the loss of income due to retirement. Protection for survivorsof deceased retirees was added by the 1939amendments, thus creating the OASI program.

Social Security protection for workers wasexpanded again in 1956 to include the DI program.SSA’s responsibilities were further expanded in1969 and 1972 to include the Black Lung (BL)program (Part B) and the SSI program,respectively. SSA’s responsibilities in1999 focused on administration of these fourprograms that deliver cash benefits to about50 million beneficiaries every month.

The combined Old-Age and Survivors andDisability Insurance (OASDI) programs,commonly referred to as Social Security, provide a

comprehensive package of protection against theloss of earnings due to retirement, disability anddeath. Monthly cash benefits are financed throughpayroll taxes paid by workers and their employersand by self-employed people. Social Security isintended to replace a portion of these lost earnings,but people are encouraged to supplement SocialSecurity with savings, pensions, investments andother insurance.

Social Security benefits have significantlyimproved the economic well being of the nation.Poverty among the elderly has been reduced by

58 percent over the past 30 years. In 1936, whenSocial Security numbers were first assigned toworkers, most of the nation’s elderly were living inpoverty. Today, monthly benefits are an importantpart of the quality of life of elderly Americans andmillions more who are protected in case of death ordisability.

The monthly benefit amount to which an individual(or spouse and children) may become entitledunder the OASDI program is based on theindividual’s taxable earnings during his or herlifetime. The maximum amount of earnings on

which contributions were payable in 1998 was$68,400 and increased to $72,600 in 1999.

OASI Program - In 1998, the family income of 16 percent of aged, unmarried beneficiaries fellbelow the poverty line. Without Social Securitybenefits, 58 percent of those beneficiaries wouldhave income below the poverty line—a differenceof 42 percent due to receipt of Social Security.Social Security also lifted many aged marriedbeneficiaries out of poverty.

In 1998, 3 percent of aged beneficiaries whowere members of a married couple hadincome below the poverty line. WithoutSocial Security benefits, 39 percent of thesebeneficiaries would have income below the

poverty line- -a difference of 36 percent.

To qualify for OASI benefits, a worker musthave paid Social Security taxes (FederalIncome Contributions Act and/orSelf-Employment Contributions Act) for atleast 10 years (or 40 quarters) over the courseof his/her lifetime. Individuals born before1929 need fewer quarters to qualify. Nine outof 10 working Americans can count onbenefits when they retire, with reduced

benefits payable as early as age 62.Benefits are also paid to certain members of retired workers’ families and to survivors.

Ninety-one percent of people age 65 or overin calendar year 1999 were receiving benefits.The largest category of beneficiaries over age65 is retired workers. About 98 percent of children under 18 and spouses with childrenin their care under 16 can count on benefits if a working parent dies.

The Social Security Programs

Aged Beneficiary Population with FamilyIncome Above and Below the Poverty Line

97%

61%

84%

42%

-58%

-16%

-39%

-3%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

Aged Individuals Aged Married Persons

Calendar Year 1998

WithoutSocial

Security

WithoutSocial

Security

WithSocial

Security

WithSocial

Security

(updated biennially)

Population 65 or Over

Receiving OASI Benefits(1999)

Receiving No Benefits 9%

Receiving OASI Benefits 91% Living Spouse 7.8%

Survivors 13.5%

Retirees 78.7%

2 Management's Discussion and Analysis



Social Security benefits comprised 38 percent of the aggregate share of all income to the agedpopulation 65 and over of which 91 percent wereSocial Security beneficiaries. Other sources of income include assets (20 percent), earnings(21 percent), and pensions (19 percent) bothGovernment and private.

While many of the nation’s aged population haveincome from other sources, a portion of thebeneficiary population relies heavily on SocialSecurity. For 18 percent of beneficiaries, it is theonly income; for 12 percent of the population, itcontributes almost all of the income; and foranother 33 percent of the beneficiaries, it is themajor income source.

The level of preretirement earnings replaced bySocial Security benefits for a worker retiring at age

65 varies because the benefit formula is weightedto give more credit to workers with low levels of earnings. The chart below shows the replacementrate in 1999 for individuals and couples at variousearnings levels (1998 earnings levels are shownsince that is the assumed last year of earnings).

DI Program - To qualify for DI benefits, anindividual must meet a test of substantialrecent covered work. Disability benefitsprovide a continuing income base for eligibleworkers who have qualifying disabilities andfor eligible members of their families. Threeof four working Americans age 21 through 64can count on receiving benefits if they

become disabled. Workers are considereddisabled if they have severe physical ormental conditions that prevent them fromengaging in substantial gainful activity.The condition must be expected to last for acontinuous period of at least 12 months or toresult in death. Once benefits begin, theycontinue for as long as the worker is disabledand does not perform substantial gainfulwork. There are provisions that provideincentives for work. Disability cases arereviewed periodically to determine if theworker continues to be disabled. The chart

below shows the replacement rate in 1999 fordisabled workers and their dependents atvarious earnings levels (1998 earnings levelsare shown since that is the assumed last fullyear of earnings).

The following chart presents a historicalperspective on earnings replacement for boththe OASI and DI programs.

Portion of Beneficiaries That RelyHeavily On Social Security

(Calendar Year 1998 )

100% of Income(18% of Beneficiaries)

90%-99% of Income(12% of Beneficiaries)

Less than 50% of Income

(37% of Beneficiaries)

50%-89% of Income

(33% of Beneficiaries)

Pre-Retirement Earnings Replaced(Workers Age 65 Entitled in January 1999)

53.3%

24.1%

39.6%36.1%

79.9%

59.4%

0%

20%

40%

60%

80%

100%

Worker Worker/Spouse

Maximum Earnings($68,400)

Average Earnings($28,894*)

Minimum Earnings($13,002*)

* Estimated for 1998

Disabled Worker’s Earnings Replaced(Workers Age 45 Entitled in Calendar Year 1999)

57.4%

42.6%

28.5%

42.7%

63.9%

80.8%

0%

20%

40%

60%

80%

100%

Worker Worker/Dependent

Maximum Earnings

($68,400)

Average Earnings($28,894*)

Minimum Earnings($13,002*)

* Estimated for1998

Earnings Replaced(Historical Perspective)

0

10

20

30

40

50

Disabled Worker 0 34.6 30.6 41.6 42.8 42.6

Average Retiree 16.2 34.6 30.8 48.1 41.6 39.6

1949 1959 1969 1979 1989 1999

* Data not available for disability benefit payments which began in 1957

@ Based on 50-year old disabled worker.Prior to 1960, DI program applied only to workers age 50 and older.

@*

Percent




SSI Program - SSI is a means-tested programdesigned to provide or supplement the income of aged, blind or disabled individuals with limitedincome and resources. SSI payments and relatedadministrative expenses are financed from generaltax revenues, not the Social Security trust funds.Qualified recipients receive monthly cashpayments from SSA sufficient to raise their income

to the level guaranteed by the Federal SSI program.Children, as well as adults, can receive paymentsbecause of disability or blindness.

The definitions of disability and blindness used inthe SSI program, as well as continuing disabilityreview procedures, are the same as those used inthe DI program. There are general provisions toencourage working and special incentives to thosebeneficiaries who have disabilities or are blind.The Federal benefit rate and eligibilityrequirements are uniform nationwide. However,those with other income receive less since benefits

may be reduced by the income they receive fromother sources.

As shown in the chart below, SSI recipients withno other income receive the full SSI Federal benefitwhich is 72.8 percent of the poverty level for anindividual and 82.1 percent for a couple.

The portion of the poverty gap not filled by FederalSSI may be filled by State SSI payments. Also, SSIrecipients may be eligible for food stamps,

Medicaid and social services.

In September 1999, as shown by the followingchart, 36.5 percent of all SSI recipients alsoreceived Social Security benefits. Most did nothave any other income. For 4.5 percent of therecipients, earnings were a source of additionalincome, and 11.7 percent had unearned incomefrom other sources, such as Veterans’ pensions.

OASDI beneficiaries may qualify for SSIbenefits if they meet SSI income andresource eligibility requirements. Although36.5 percent of all SSI recipients receiveOASDI benefits, SSI aged recipients are morelikely (60.2 percent) to be receiving SocialSecurity benefits than SSI blind and disabled

recipients (30.5 percent).

Support to Other Programs

In addition to its basic programs, SSA alsoprovides a significant measure of servicedelivery support to other programs,particularly Black Lung, Medicare, Medicaid,Food Stamps and Railroad Retirement.

Black Lung Program - The Black Lung (BL)program pays monthly cash benefits to coalmine workers and their dependents andsurvivors. SSA is responsible foradministering Part B of the BL program undertitle IV of the Federal Coal Mine Health andSafety Act. Part B covers claims filed byminers before July 1973 and survivor claimsfiled before January 1974 or within 6 monthsof the death of a miner or widow on the SSArolls, whichever is later. Any claims filed after

February 1999 Poverty Income GuidelinesPoverty Gap Filled

By SSI Federal Benefit

72.8%

27.2%

81.4%

18.6%

Poverty Gap$2,240

Poverty Gap$2,048

SSI Guaranteed Income$6,000

SSI Guaranteed Income$9,012

Guidelines: Individual $8,240 Per Year Couple $11,060 Per Year

Percent of SSI Recipients WithIncome From Other Sources

(September 1999)

4.4%

11.7%

36.5%

0%

10%

20%

30%

40%

Social Security Other Unearned

Income

Earned Income

SSI Recipients Also ReceivingOASDI Benefits

(September 1999)

60.2%

39.8%

30.5%

69.5%

Receiving OASDIReceiving OASDI

SSI Payments Only SSI Payments Only

Aged Recipients Blind & Disabled Recipients




these dates generally are the responsibility of theDepartment of Labor (DOL) covered underPart C of the program.

SSA is also responsible for taking claims for,and performing certain other services related to,Part C benefits. In FY 1999, SSA field offices took 208 claims for Part C benefits and transferred them

to DOL for payment, as required by law. SSAreceived full reimbursement from DOL for theseservices. Beginning in FY 1998, DOL certified forpayment all Part B benefits from fundsappropriated to SSA. However, SSA retainsresponsibility for these payments.

Medicare - - Being a primary public contact pointfor the Health Care Financing Administration(HCFA), SSA provides key services to theMedicare program. SSA staff determine andanswer questions regarding Medicare eligibility,maintain the computerized records of Medicare

eligibility, and collect Medicare premiums throughwithholdings from Social Security payments.Annually, SSA devotes about 1,545 workyears tosupporting these workloads and is reimbursed bythe Medicare trust fund for these services.

Medicaid - - In 31 States and the District of Columbia, eligibility for SSI benefits confersautomatic entitlement to Medicaid. Thus, the SSIeligibility determination made by SSA saves asignificant amount of workyears for these States.SSA also provides information and referral servicesin support of Medicaid and is directly funded by

the States and HCFA.

Railroad Retirement - - SSA providesservices in connection with entitlement tobenefits from the Railroad Retirement Board(RRB). SSA takes the applications,determines jurisdiction and coordinatesbenefit payments with the RRB. The latterorganization, as required by statute, issues acombined monthly benefit payment when a

retiree is entitled to both Railroad and SocialSecurity retirement benefits due to havingworked for both the railroad and otherindustries prior to retirement. SSAreimburses the RRB for OASI benefits paidon SSA’s behalf. In addition, SSA arranges anannual financial interchange with the RailroadRetirement Trust Fund to place the SocialSecurity trust funds in the same position theywould have been in had railroad employmentbeen covered by Social Security.

Food Stamps - - SSA assists the Department

of Agriculture by providing information aboutthe food stamp program and taking foodstamp applications for qualified OASI, DI andSSI claimants. In FY 1999, SSA processed23,354 food stamp applications andrecertifications.

State and Local Programs - - SSA regularlyprovides information from Social Securityrecords needed to make eligibility andpayment decisions for a variety of State andlocal welfare programs, and providesautomated data exchanges with over 100 State

and Federal agencies.




SSA’s organization features centralizedmanagement of the national Social Securityprograms and a decentralized nationwide network of 10 regional offices overseeing 7 processing

centers, 1,343 field offices (includes 54 residentstations), 1 data operations center, 36 teleservicecenters and 132 hearings offices.

Field offices are located in cities and ruralcommunities across the nation and are theAgency’s main physical point of contact withbeneficiaries and the public. Additionally, theSocial Security disability program depends onthe services of 54 Disability DeterminationServices which include all 50 States, the District of

Columbia, Guam and Puerto Rico.SSA’s unique organizational structure isdesigned to provide responsive, swift andaccurate world-class service to the public.

To meet the needs of non-English-speakingcustomers, SSA recruits bilingual individualsto serve as a public contact for customersvisiting SSA field offices and calling SSA’s800-number telephone service. DuringFY 1999, 19 percent of public contactemployee new hires were bilingual. At yearend, SSA had bilingual public contactemployees who could provide service inEnglish and at least one of 23 other languages.

Agency Organization

SSA’s Service Delivery Network

1,343 Field Offices

132 Hearings Offices

36 Teleservice Centers1 Data Operations Center7 Processing Centers

58.8 Million 800 Number

Calls Handled

6 Million Claims

Processed

249.9 Million EarningsReports Posted

16.3 Million SSN Cards Issued




The major goal of SSA’s Accountability Report is todemonstrate the Agency’s success in administering ourprograms and managing the resources entrusted to us. Inaddition to the retrospective information reportedthroughout the Accountability Report, we believe that

full disclosure necessitates that we discuss the prevailingissues that will affect our programs and our ability toadminister these programs in the future. In addition tothe long-term financing of the Social Security systemand Year 2000 computer compliance, we will berequired to continue to meet the challenge of ourstewardship responsibilities while administering ourprograms in a fair and equitable manner.

Long-Term Program Financing

Tax revenues to the Social Security system currentlyexceed benefit payments, and the system is building

large reserves that are held in the trust funds. TheApril 1999 Board of Trustees Report extendedprojections for trust fund solvency by 2 years over theprevious year’s estimates. The Trustees credit thecontinuing strong economy and improved prospects forfuture performance for the improvement in financialstatus. Under the current estimates, benefit payments willbegin to exceed tax collections in 2014. After that time,interest on the trust funds, and ultimately the trust fundsthemselves, will be used to pay part of each monthlybenefit check. Current estimates are that the trust fundreserves will be exhausted in 2034.

Under current projections, Social Security tax receiptswill provide sufficient funds after 2034 to meetapproximately 71 percent of benefit obligations. Tocorrect the long-term imbalance in Social Securityfinancing, the President has proposed to use a portion of the budget surpluses to help meet future commitments.Under his plan, all Social Security surpluses would beused to reduce the national debt held by the public.Reducing the debt held by the public will strengthen theeconomy and, by reducing interest payments to the

public, help provide the fiscal ability to meet futureSocial Security obligations. Under the President’splan, interest savings from the reduction in the debtheld by the public due to the Social Securitysurpluses will be deposited in the trust funds. In

addition, a small portion of the trust funds will beinvested in the private sector, as other trust fundsdo to achieve a higher rate of return.

These elements of the President’s proposals wouldextend the solvency of the trust funds from 2034 to2053. The President has called for furtherbipartisan action to extend Social Security solvencyfor 75 years. Other plans to ensure long-termprogram solvency have also been proposed.

The need to resolve the long-range financing issueis clear. Social Security has made an enormous

difference in the lives of older Americans. Morethan 9 in 10 older Americans get Social Securityretirement benefit payments each month. Onlyabout 11 percent of America’s senior citizens livebelow the poverty line, but without Social Security,about 50 percent would be below the poverty line.

For two-thirds of the elderly, Social Security istheir major source of income, representing at leasthalf of their total income. For about a third of theelderly, Social Security is virtually their onlyincome. An in-depth discussion of the SocialSecurity programs can be found on pages2 through 5.

Social Security is more than a retirement program.In fact, about one in three Social Securitybeneficiaries are not retirees. They are disabledworkers and their dependents, and children andspouses of deceased workers. Approximately7 million people get monthly survivors benefits,and more than 6 million workers and familymembers get disability benefits.

Major IssuesFacing SSA

The Social Security Trust FundWill Be Exhausted In 2034

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2000 2005 2010 2015 2020 2025 2030 2034

In 2014, Social Securitybenefit payments will beginto exceed tax collections

After 2034, onlyabout 3/4 of benefitswould continue tobe paid based onincoming revenues

Trillions of Dollars (Nominal)

Poverty Rate Among the Elderly

25.0%

16.3%

14.0% 13.8%12.0% 12.2%

10.5%

0.0%

10.0%

20.0%

30.0%

19 68 1973 19 78 1983 19 88 19 93 19 98

Calendar Year




SSA is continuing its efforts to educate the Americanpublic about the value of the program and its role infamily financial planning.

SSA will help further the dialogue on critical long- andshort-term Social Security issues by conducting in-houseresearch, promoting research by others, framing policydiscussions, and refining policies to meet the needs of

society. We continue to prepare analyses on thedistributional and fiscal effects of proposals developedby the Administration, Congress, and other policymakersso that decision makers may understand the impact of changes to the programs. SSA has worked to ensure thatthe public has the information it needs to understand theessentials of the program and the implications of variousoptions for changing the program as the Administrationand Congress examine how best to strengthen SocialSecurity for the future.

Commitment to

World-Class ServiceSSA is dedicated to providing world-class service to allof the people it serves. We have many initiativesunderway that will improve service to the public. But werecognize that changes in customer preferences,emerging technologies and other factors will result inmodifications to the way we deliver service in the future.The Agency has begun a planning effort designed tocreate a vision for service in 2010 that will provide aroadmap to the future. The following are just some of theexamples of the initiatives underway to improve ourservice to the public

Social Security Statement

One of SSA’s major goals is to help Americansunderstand Social Security and its importance to themand their families. The Agency’s earnings and benefitestimate statements, available since 1988, play a key rolein this educational effort.

In October 1999, SSA began mailing these statementsevery year to over 125 million persons age 25 and olderwho are not already receiving Social Security benefits.Recipients can expect to get their statement about3 months before their birthday.

The redesigned and renamed Social Security Statement

(formerly called the Personal Earnings and BenefitEstimate Statement, or PEBES) is a 4-page, 8 1/2-inchby 11-inch document that focuses on the worker’sindividual record. The Social Security Act and itssupporting regulations state specifically what personaldata SSA must include in each statement. We alsoprovide general information and explanations to helprecipients understand their personal data, and we tellthem how to contact us if they have questions.

A major public information campaign throughoutFY 2000 will call attention to the statements andencourage recipients to use the information inplanning their financial futures. The benefitestimates SSA provides can help recipients preparefor financial needs when they retire, if they becomedisabled, or if they die and leave survivors. Wepoint out that Social Security is a foundation on

which they can build, together with other pensions,savings and investments.

The statement also encourages recipients to helpSSA keep their records of earnings complete andaccurate. Entitlement to monthly benefits and theamount of those payments depend on theindividuals’ earnings over their working lifetimes.If their earnings are not reported and recordedaccurately, they may not receive the benefits theyhave worked for. Only the individuals themselvesknow all the places they have worked and whenthey worked there. SSA needs their help in

identifying and correcting any missing or erroneousearnings on their records.

To design the new form and simplify the languagein it, SSA used extensive public and employeeinput. We tested the statement with focus groupsand in a nationwide mail survey. We also soughtcomments from agencies and organizations thatserve diverse sections of the public. As themailings proceed and we assess reaction to thestatement, we will continue to “fine tune” it tomake it even more useful and responsive to thepublic. We expect the Social Security Statement to

remain a major element in SSA’s ongoing effort toincrease public understanding of the program.




Electronic Payment Services

SSA is the leader in electronic payment deliverythroughout the Federal Government. Currently,73 percent of benefit payments and 80 percent of administrative payments are made electronically. SSAprograms have experienced considerable growth inelectronic payment delivery in recent years.

Specifically, in December 1995, 60 percent of allOASDI and 26 percent of SSI benefit payments weremade by direct deposit. As of June 1999, the OASDIparticipation rate had risen to 77 percent and the SSIparticipation rate to 48 percent.

To achieve this success, SSA has aggressively pursuedits direct deposit strategy to convey to beneficiaries theadvantages of using direct deposit; i.e., direct deposit issafe, convenient, and reliable. SSA’s direct depositstrategy includes the following initiatives:

• Each year SSA, in conjunction

with the financial community,sponsors a direct deposit publicinformation campaign includingradio and television publicservice announcements toencourage current check receivers to switch to directdeposit. This year, Calvin Hill,a former Dallas Cowboy star,serves as the spokesperson forthe campaign.

To promote the annual campaign, SSA distributescollateral printed literature and marketing materials to

the financial community including a statement stufferfeaturing the spokesperson.

• New beneficiaries are enrolled in direct deposit at thepoint they apply for benefits unless they allege usingdirect deposit would cause them a hardship. In thesecases, they are exempted from the direct depositrequirement and may receive benefits by check.

• SSA has also partnered with the financial communityto simplify the enrollment of beneficiaries for directdeposit. The “automated enrollment” feature, betterknown as Quickstart, allows financial institutions tosend SSA direct deposit enrollment informationelectronically through the same system that deliversbenefit payments. This innovation allows thefinancial institution to immediately enroll theircustomer for direct deposit and saves SSA resourcesthat would be spent processing the enrollment action.

SSA was the first Federal agency to make cross-borderpayments to consumers with the start of its InternationalDirect Deposit (IDD) service in 1987. Since 1987, SSAhas expanded its IDD services to 11 countries providingfast and economical electronic payment delivery to over

100,000 beneficiaries living in foreign countries.In response to the increasing popularity of its IDDprogram, SSA is accelerating the expansion of itsinternational service to 25 additional countries bythe end of 1999.

SSA has partnered with the Department of theTreasury to implement an Electronic Transfer

Account (ETA) program for beneficiaries who donot have an account at a federally insured financialinstitution or who cannot obtain one. The ETAprogram will ensure recipients an account at areasonable cost and with consumer protectionscomparable to other accounts at the financialinstitution. This program will become fullyoperational in the year 2000.

Internet Services

SSA faces several challenges to maintaining its

long tradition of delivering customer-responsive,world-class service. As baby boomers becomeeligible for benefits over the next two decades,increased workloads and increased expectations byour customers for service delivery options willrequire different and more varied service deliverymechanisms. In addition, the number of customersexpecting immediate access to information andservices, anytime, anywhere, is rapidly increasing.

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

Line 1 1994 1995 1996 1997 1998 1999

22,212 171,175 722,415 2,700,518 4,921,218 9,900,000

SSA Internet AccessMay 1994-December 1999 (Projected)

Customer Accesses




In response to these demands, SSA began testing andimplementing direct-access, customer services on theInternet in 1994. The number of Internet customers hasrapidly increased from 22,000 in 1994 to almost10 million in 1999.

Through comments on the web, surveys and focusgroups, customers tell us that they like these earlyservices and want SSA to extend the convenience of doing business on the Internet to more services.

However, before any such expansion can occur, SSAmust be confident that personal information in recordswill be disclosed only to the person to whom it pertainsor a third party with their consent. In other words, SSAmust be able to authenticate customers (or confirmidentity) before initiating a transaction that could resultin personal information being disclosed or changed. Todate, SSA has restricted development to a few onlineprocesses where data in SSA records is not changed andthe response is mailed to reduce the risk of improperdisclosure. Knowledge-based authentication; i.e.,something the customer knows that can be matched to

SSA records such as a mother’s maiden name, is used toidentify the customer for these applications. SSA isevaluating a range of authentication measures todetermine if they would provide the requisite level of privacy and security safeguards. In order to provideworld-class service to our customers, our Internetservices must be both convenient and secure.

Year 2000 Compliance

SSA has made significant progress in its efforts toaddress the Year 2000 problem. We have completedrenovation of all mission-critical systems targeted forrenovation. Detailed forward year, integration testing

and formal certification procedures have been developedto certify Year 2000 compliance. To ensure the integrityof our production environment, SSA established aseparate Year 2000 Test Facility to test the operatingsystems, vendor products and all of SSA’s mainframeapplications that run in SSA’s National Computer Centerand distributed applications that run on the IntelligentWork Station/Local Area Network environment.Year 2000 compliance testing of SSA’s mission criticalapplications began in September 1997 and wascompleted in January 1999.

We are pleased to report that all of the software thatproduces the Social Security Income Payment fileshas been forward-date tested and certified. Inaddition, testing with Treasury’s FinancialManagement Service has been completed, andbeginning with the October 1998 payments, bothSocial Security and the SSI benefit payments arebeing made using Year 2000 compliant systems.

The Federal Reserve (Automated Clearing House)has also successfully tested Social Security directdeposit payments.

Also, SSA has made significant progress inaddressing non-mission critical systems. As of March 1999, all of SSA’s non-mission criticalsystems have been made Year 2000 compliant.With regard to data exchanges, SSA has been incontact with all of its trading partners regarding theformat and schedule for making data exchangescompliant. All data exchanges have beenimplemented as Year 2000 compliant. In the area of

telecommunications, SSA inventoried all of itstelecommunications systems and worked with thevendor community to obtain upgrades and fixes tomake all systems Year 2000 compliant. Numerousacquisitions were made that resulted in theinstallation of telecommunications software andhardware upgrades. All telecommunicationsystems are now Year 2000 compliant.

SSA has worked closely with all of the State DDSsand as of January 1999, all State DDS systems havebeen made Year 2000 compliant.

On March 31, 1998, SSA issued its Y2K BusinessContinuity and Contingency Plan (version 1). Thisplan is updated quarterly. On September 30, 1999,the final update (version 7) was issued. The planwas developed to assure that SSA’s core businessfunctions could be performed if unforeseenYear 2000 related disruptions occur.

The plan is consistent with General AccountingOffice guidelines for contingency planning. Itidentifies potential risks to business processes,ways to mitigate each risk and strategies forensuring continuity of operations if planned

corrections are not completed or if systems fail tooperate as intended. The plan also identifiesmilestones, target dates and responsiblecomponents for developing local contingency plansand procedures throughout all of SSA’s operatingcomponents. The plan addresses all five corebusiness processes of SSA — enumeration,earnings, claims, postentitlement and informing thepublic, as well as disability claims processingfunctions supported by the State DDSs.

Internet Customer Satisfaction

Very

Good

38%

Good

27%

Fair

11%Excellent

17%

Poor4% VeryPoor

3%




In addition, on April 30, 1999, SSA completed version 1of the Day One Strategy Plan, and the final version of the plan (version 3) was distributed in November 1999.The Day One Strategy Plan is designed to ensurecontinuation of operations by taking advantage of therollover weekend to check all systems and infrastructureprior to January 3, 2000, the first business day of the newcentury.

As with all other businesses and government agencies,SSA is critically dependent on infrastructure services,such as the power grid and telecommunications industry.Since SSA delivers 50 million payments each month, theAgency is also dependent on financial institutions.SSA’s Business Continuity and Contingency Planaddresses how the Agency can mitigate risks in theseareas and if problems occur, where contingencies will beimplemented. In addition, SSA participates in the BenefitPayments and the Financial Institutions workgroups of the President’s Council on Year 2000 Conversion.

SSA estimates the cost of its Year 2000 Program will beapproximately $48 million.

Stewardship

Zero Tolerance for Fraud

To achieve the goal of making SSAprogram management the best in thebusiness, SSA established a policyof zero tolerance for fraud andabuse and initiated an aggressiveprogram of anti-fraud efforts to:

• Eliminate wasteful practices that erode publicconfidence in the Social Security system;

• Vigorously prosecute individuals or groups whodamage the integrity of the programs; and

• Change programs, systems and operations to reduceinstances of fraud.

SSA’s National Anti-Fraud Committee, under theleadership of top SSA executives, continues to overseethe implementation and coordination of SSA’s strategies

to eliminate fraud. To address fraud issues at the locallevel, each SSA region has in place an active RegionalAnti-Fraud Committee which is the focal point for anaggressive and coordinated effort to combat fraud. Bestpractices are shared among the regional committees andwith the National committee.

Recent Progress In Combating Fraud

Many aspects of SSA’s anti-fraud efforts began at agrassroots level with initiatives proposed byemployees. Communication of these successes hasencouraged an expansion of progress in thefollowing areas:

• Our residency verification projects identifyindividuals who are fraudulently receivingSSI payments while living outside of theUnited States. The New York Region began anew project to identify SSI recipients whoseState Medicaid files have shown no activity forat least 1 year indicating they may not live in theUnited States or may be deceased or fictitious.This concept is being expanded to other regions.

• Implemented the first part of a comprehensiveAllegation Management System to improve thefraud referral and tracking process. The Office

of the Inspector General, and ultimately SSAstaff, will have access to an electronic fraudreferral and reporting system to streamline theircooperative efforts to deter and prosecute fraud.

• The number of Cooperative DisabilityInvestigation units has expanded to eight.These units, staffed by personnel from theOffice of the Inspector General, State lawenforcement agencies and experienced programanalysts, provide investigative support duringthe initial disability decision-making processand help prosecute individuals who try to obtain

benefits fraudulently. Special emphasis isplaced on identifying third-party facilitators.Additional expansion is planned.

• In June 1999, the House passed H.R. 1802, theFoster Care Independence Act of 1999, whichincluded an administrative sanctions proposal.These sanctions would impose periods of ineligibility on individuals who furnishinformation material to OASDI and SSI claimsthat they knew, or should have known, wasinaccurate or incomplete.

Supplemental Security Income (SSI)

Management Improvement

The SSI program provides benefits toapproximately 6.5 million needy beneficiaries whoare aged, blind or disabled. Like othermeans-tested programs that respond to changingcircumstances of individuals’ lives, the SSIprogram presents challenges to ensure that it isadministered efficiently, accurately, and fairly.




A report issued by the Commissioner in October 1998,delineated a series of actions SSA would undertake toimprove oversight and stewardship of the SSI programwhile safeguarding the rights of SSI beneficiaries andproviding world-class service to our customers.

In the last year, the Agency has moved aggressively toimplement this plan and to strengthen the management

of the SSI program through improving paymentaccuracy, debt collection and expanding efforts tocombat fraud.

SSI benefits are paid on the first day of the month,over- and underpayments are difficult to prevent becauseof changes in an individual’s income, resources orliving arrangements that occur during the month and dueprocess requirements. However, some changes are notreported or reported much later than the event which canlead to a much larger payment error.

The Agency is performing new and more frequent

computer matches to detect these changes earlier and,thus, reduce the level of payment error. For example, weare performing new and more frequent matches for wageand unemployment compensation information andnursing home admissions that will save in excess of $100 million over the next few years. SSA has alsodeveloped partnerships with Federal, State and localentities to establish matching agreements with prisonsand correctional facilities. Through this matchingactivity, SSA has made significant progress in ensuringthat incarcerations are reported timely and accuratelyand that benefits are suspended accordingly. Theseagreements cover 99 percent of the inmate population in

the United States and have resulted in hundreds of millions of dollars in program savings over the last fewyears.

In addition to computer matches, SSA is pursuing realtime access to databases. This access will enable fieldoffices to detect changes in income and resources evenearlier than computer matches and will, therefore,increase our ability to prevent and detect payment errors.

Another important aspect of payment accuracy isensuring that only those entitled to benefitscontinue to receive benefits. This is achievedthrough the redetermination and continuingdisability review (CDR) processes. In the last year,SSA has made improvements to redeterminationmethods by implementing a new profilingmethodology for selecting high error profile cases.

SSA also selected 505,000 high errorredetermination cases for field office processing inFY 1999, an increase of 219,000 over the previousyear. In FYs 2000 and 2001, SSA plans to select639,000 high error cases each year. SSA projectsthat the increases in redeterminations each yearfrom FY 1999 through FY 2002 will achieveoverpayment reductions of $260 million annually.

In addition to increasing the number of redeterminations processed, SSA has increased thenumber of CDRs it is conducting. In FY 1999, SSA

processed over 1.7 million total CDRs, more thantwice the number processed in 1996. SSA willcontinue with its 7-year plan to ensure that it iscurrent in processing all SSI CDRs by 2002. Thereare also initiatives underway to improve the CDRprocess by improving the statistical profiling of theCDR selection process, reviewing the medical diaryprocess and evaluating the CDR mailer to makesure it accurately identifies cases with medicalimprovement.

Finally, during the coming year, SSA willimplement two major debt collection projects thatare expected to yield direct collections of more than$175 million over 5 years. The two projects, crossprogram recovery and administrative wagegarnishment, will enable SSA to collect both title IIand title XVI delinquent debts. Enhancements toimprove SSA’s debt detection and collectionabilities are included in The Foster CareIndependence Act of 1999 legislation currentlypending before Congress.

0%

20%

40%

60%

80%

100%

Excess

Payments

95.7% 94.5% 94.7% 93.5%

FY 95 FY 96 FY 97 FY98*

SSI Benefit Payment Accuracy

Outlays Free of Overpayments

* Latest available data

$0

$100

$200

$300

$400

$500

$600

$700

$424 $511 $539 $640

FY 96 FY 97 FY 98 FY 99

SSI Overpayment Dollars Collected

Dollars in Millions




Disability Management Improvement

SSA strives to deliver the highest levels of service bymaking fair, consistent and timely decisions at alladjudicative levels. However, applicants andbeneficiaries sometimes find the current processcomplex, fragmented, confusing, impersonal, andtime-consuming. Some also perceive the process as one

in which different decisions are reached on similar casesat different levels of the administrative review process,thus applicants must maneuver through multiple appealssteps before they receive a final decision.

To remedy these concerns, the Commissioner announceda plan to improve the disability process. Part of that planinvolves focusing on a combination of initiatives thathave demonstrated significant promise through testingand piloting over the last few years.

These initiatives include the following:

•

Providing more complete development and improvedexplanations of how the disability determination wasmade in order to enhance the quality of decisions.

• Enhancing the role of the State agency medical orpsychological consultant to truly function as aconsultant in the disability determination process byproviding information and advice to the disabilityexaminer deciding the case. This change maximizesthe effectiveness of agency resources — focusingState agency medical and psychological consultantson duties and responsibilities commensurate withtheir professional training and experience, such as thereview of complex disability claims, as well as thetraining and mentoring of disability examiners.

• Providing the claimant with an increased opportunityto interact with the disability decisionmaker earlier inthe process and to submit further information whenevidence in the initial claim is insufficient to make afully favorable initial determination of disability.

• Eliminating the reconsideration step in order tostreamline the disability process. This allows theAgency to invest more resources to improve quality atthe front end of the process, as described above.

• Improving the hearing process to significantly reduceprocessing time from request for hearing to finalhearing disposition. The new process will identify thedevelopment needs of each case early in the process;will ensure that case development or expedited reviewoccurs, and that cases move to the hearing fullydeveloped and ready for decisionmaking.

All of these initiatives will be combined to form animproved disability process that the Agency willprototype in 10 States, representing 20 percent of the

national disability workload, beginningOctober 1, 1999. Through this prototype theAgency will further analyze and refine itsimprovements to the disability process with an eyetowards national rollout.

Return to Work Initiatives

Among SSA’s beneficiaries with disabilities, thereare many who would like to return to work. Thiscan be done if beneficiaries receive the support theyneed. SSA’s Office of Employment SupportPrograms (OESP) is instrumental in promoting anddesigning programs that increase employmentopportunities for Social Security beneficiaries. Keyconcepts to this employment strategy are:

• Planning, implementing and evaluating SSAprograms and policies related to the employmentof Social Security DI and SSI beneficiaries withdisabilities;

• Providing greater incentives for public andprivate sector providers of employment servicesand promoting innovation in the design of programs that will increase employmentopportunities for Social Security beneficiaries;

• Maximizing the employment potential of youngpeople with disabilities and educating the publicabout SSA and other public programs thatsupport employment;

• Enhancing services provided to beneficiaries,

removing employment barriers for people withdisabilities and making the transition toemployment from income support programs aseasy as possible.

This strategy has a number of initiatives, some thatrequire legislation and others that can be pursuedusing existing legislative authorities. Some of themajor initiatives are:

1. Ticket to Independence Program

The President proposed the Ticket to IndependenceProgram in 1997 as an alternative to the currentSSA Vocational Rehabilitation (VR) program.Under the proposal, a beneficiary with a long-termimpairment would be issued a “ticket” which he orshe could use for access to a broad range of employment and VR services. Approved privateand public service providers who receive a ticketfrom a beneficiary, would be rewarded when theyare successful in helping the beneficiary achieveindependence from SSA’s benefit rolls. In eachcase where SSA realizes a cash benefit savings dueto a beneficiary’s work activity, the provider wouldbe paid a proportion of the savings.




For FY 1999, the Senate passed S.331, “The Work Incentives Improvement Act of 1999." The House haspassed a similar bill, H.R. 1180. The bills are currentlyin conference.

2. Youth Employment Strategy

The goal of this initiative is to inform and motivate

young SSI recipients about entering the workforce. SSAis partnering with The Presidential Task Force on theEmployment of Adults with Disabilities, Subcommitteeon Expanding Employment Opportunities for YoungAdults with Disabilities, to complete the following goals:

• Identify and eliminate Federal policies that arebarriers to employment for young people withdisabilities;

• Make recommendations that promote effectiveFederal policies and the removal of policies which arebarriers to employment;

• Develop an action plan that leads to a coordinated andaggressive national strategy to assure that youngpeople with disabilities enter the workforce atcomparable rates and pace as their non-disabled peers;

• Develop recommendations for influencing State andlocal policy and practice for young people withdisabilities in achieving employment.

SSA’s OESP is also initiating a Youth Early InterventionInitiative pilot to assess the impact of a more proactiveapproach on the successful transition of young people(ages 15-17) from school (and the SSI rolls) to work.

3. Service Delivery

In August 1998, Commissioner Apfel directed that anexamination be undertaken of SSA’s service tobeneficiaries with disabilities who want to work todetermine where such service could be improved and todevelop new models for service delivery.

In March 1999, a multi-component workgroup presenteda series of recommendations for improving customerservice by dedicating specially trained field personnel todeliver return to work services, training our partners in

the disability community on Social Security’semployment support provisions, increasing public accessto electronic services and by providing employees withbetter client information through improved technologies.

Teams comprised of Headquarters and regional/fieldstaff were formed to implement the workgroup’srecommendations. They began working in August 1999with their first priority being the pilot of a temporaryEmployment Support Representative position. Theposition will be staffed by employees trained and

dedicated to the task of providing service tobeneficiaries who want to enter or reenter theworkforce.

4. State Partnership Initiative (SPI)

The initiative is designed to help States developinnovative and integrated State-wide programs of

services and support for their residents withdisabilities that will increase job opportunities anddecrease dependence on benefits, includingSocial Security Disability Insurance andSupplemental Security Income benefits.

In April 1998, SSA announced the availability of cooperative agreements to States to conductprojects that will determine the degree of interaction of State and Federal systems andbenefits and seek ways to integrate services toovercome barriers to employment. The approvedStates awarded agreements were: California,

Illinois, Iowa, Minnesota, New Hampshire,New Mexico, New York, North Carolina, Ohio,Oklahoma, Vermont, and Wisconsin. All of theState projects are operational; most have begunenrolling participants and collecting data.

SPI is the first activity launched under an ExecutiveOrder signed on March 13, 1998, by the Presidentthat created the National Task Force on theEmployment of Adults with Disabilities. The totalfirst-year funding for the competitively awardedcooperative agreements under SPI includes fundingfrom the Department of Health and Human

Services and the Department of Labor. In addition,SSA has awarded a contract to VirginiaCommonwealth University to provide technicalassistance to the States and to monitor and collectdata on the State projects. This data will then beanalyzed under a separate SSA contract todetermine how much the initiative improvedemployment outcomes for participants and therebyreduced their dependence on benefits. Weanticipate that the new approaches developed byStates under this program will create and enhanceFederal-State partnerships and serve as models thatcan be replicated in other States.


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