The Social Security Protection Act of 2003 (H.R. 743)

The Social Security Protection Act of 2003 (H.R. 743)

Order Code RL32089
CRS Report for Congress
Received through the CRS Web
The Social Security Protection Act of 2004
(H.R. 743)
Updated April 26, 2004
Dawn Nuschler
Specialist in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

The Social Security Protection Act of 2004 (H.R. 743)
Summary
On March 2, 2004, President Bush signed into law the Social Security
Protection Act of 2004 (P.L. 108-203). The bipartisan measure imposes stricter
standards on individuals and organizations that serve as representative payees for
Social Security and Supplemental Security Income (SSI) recipients; makes
nongovernmental representative payees liable for “misused” funds and subjects them
to civil monetary penalties; tightens restrictions on attorneys who represent Social
Security and SSI disability claimants; limits assessments on attorney fee payments;
prohibits fugitive felons from receiving Social Security benefits; modifies the “last
day rule” under the Government Pension Offset; and requires certain noncitizens to
have authorization to work in the U.S. at the time a Social Security Number is
assigned, or at some later time, to gain insured status under the Social Security
program. The Congressional Budget Office estimates that P.L. 108-203 reduces
direct spending (outlays) by $887 million and increases revenues by $33 million over
the fiscal year 2004-2014 period.

Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Major Provisions of P.L. 108-203 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Representative Payees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Claimant Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Social Security Benefits for Fugitive Felons . . . . . . . . . . . . . . . . . . . . . 6
Trial Work Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Government Pension Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Social Security Benefits for Noncitizens . . . . . . . . . . . . . . . . . . . . . . . . 7
Other Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

The Social Security Protection Act of 2004
(H.R. 743)
Background
On February 12, 2003, Rep. E. Clay Shaw, Chairman of the House Ways and
Means Subcommittee on Social Security, introduced H.R. 743, the Social Security
Protection Act of 2003 (H.Rept. 108-46).1 H.R. 743 closely resembles H.R. 4070
from the 107th Congress, which was passed by the House by a vote of 425-0 in June
2002. A substitute amendment to H.R. 4070 (S.Amdt. 4967) was passed by the
Senate under unanimous consent in November 2002. The measure did not receive
final action in the House before the 107th Congress adjourned.2 On February 27,
2003, the House Ways and Means Subcommittee on Social Security held a hearing
on the bill. On March 5, 2003, the House considered H.R. 743, as amended by the
Chairman, under suspension of the rules (debate was limited to 40 minutes, floor
amendments were not allowed and a two-thirds majority vote was required for
passage).3 Following debate in which many Members expressed strong opposition
to a provision that would modify the “last day rule” under the Government Pension
Offset (described below), the measure failed by a vote of 249-180.4
On March 13, 2003, the House Ways and Means Committee met to mark up
H.R. 743, as amended. Rep. Jefferson offered an amendment that would incorporate
H.R. 887 into the bill (H.R. 887 is a bill sponsored by Rep. Jefferson, co-sponsored
by 125 Members). Under H.R. 887, if an individual’s combined monthly income
from a noncovered pension and a Social Security spousal/widow(er)’s benefit is
$2,000 or less, he/she would be exempt from the Government Pension Offset (GPO).
In addition, the Jefferson amendment would hold the Social Security trust funds
harmless (i.e., the increased cost to the Social Security system as a result of the
change would be paid from general revenues). At the markup, Rep. Jefferson stated
1 H.R. 743 is a bipartisan measure co-sponsored by Rep. Matsui, the Ranking Democrat on
the Social Security Subcommittee, and 30 other Members. On Feb. 25, 2003, Sen. Jim
Bunning introduced a companion measure in the Senate (S. 439).
2 For information on H.R. 4070, see CRS Report RS21225, Social Security Program
Protection Act of 2002 (H.R. 4070).
3 The bill did not go before the House Ways and Means Committee or the Subcommittee on
Social Security for markup before consideration in the House on March 5, 2003.
4 The provision that modifies the “last day rule” under the Government Pension Offset was
not included in the version of H.R. 4070 that passed the House unanimously in the 107th
Congress. It was included in the Senate-passed version of the bill.

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that the proposal would cost an estimated $19 billion over 10 years.5 The Jefferson
amendment was defeated by a vote of 14-21. Rep. Stark offered an amendment that
would reduce the GPO from two-thirds to one-third of the government pension.6 As
under the Jefferson amendment, the increased cost to the Social Security system
would be paid from general revenues. The Stark amendment was defeated by a vote
of 15-22. H.R. 743, as amended, was approved by the Committee by a 35-2 vote.
On April 2, 2003, the House considered H.R. 743, as amended, for a second
time. The measure was considered under a rule (H.Res. 168, H.Rept. 108-54) that
provided for one hour of debate on the measure and 40 minutes of debate on a
substitute amendment offered by Rep. Green of Texas. The Green amendment would
strike from the bill the provision that would modify the GPO “last day rule” (section
418, described below). It would make no other changes to the measure. The Green
amendment failed by a vote of 196-228, mostly along party lines. A motion by Rep.
Green to recommit the bill to the House Ways and Means Committee with
instructions to report the measure back to the House with an amendment that
addresses the concerns of federal, state and local government employees with respect
to the GPO also failed by a vote of 203-220. Then H.R. 743, as amended, was passed
by the House by a vote of 396-28. The Congressional Budget Office (CBO)
estimates that the House-passed version of the bill would result in net savings of
$655 million over 10 years (fiscal years 2004-2013).
On September 17, 2003, the Senate Finance Committee approved an amendment
in the nature of a substitute to H.R. 743, by voice vote (S.Rept. 108-176). H.R. 743
as reported by the Senate Finance Committee contains several provisions that are not
included in the version of the bill passed by the House in April 2003, including a
provision that would require a noncitizen to have work authorization at the time a
Social Security Number is assigned, or at some later time, for benefits to be payable
on his/her earnings record. In addition, the measure would require State and local
pension plan administrators to report to the Internal Revenue Service (IRS), as part
of a modified Form 1099R, if an individual’s pension is based on employment that
was not covered by Social Security. The measure would authorize the IRS to provide
such information to SSA for purposes of administering the GPO and the Windfall
Elimination Provision.7
On December 9, 2003, the Senate approved H.R. 743, with an amendment, by
unanimous consent. Among other differences, the managers’ amendment passed by
the Senate, which substitutes for the version of the bill reported by the Senate
Finance Committee, excludes the reporting requirement for State and local pension
plan administrators. On February 11, 2004, the House of Representatives agreed to
5 The hold harmless provision is not included in H.R. 887. For more information, see CRS
Report RS20148, Social Security: The Government Pension Offset.
6 A reduction in the GPO to one-third of the government pension is included in Rep. Shaw’s
Social Security reform bill (H.R. 75, the Social Security Guarantee Plus Act of 2003).
7 An individual who receives a pension from employment that was not covered by Social
Security may be subject to a reduction in Social Security benefits based on his/her own work
record under the Windfall Elimination Provision. For more information, see CRS Report
98-35, Social Security: The Windfall Benefit Provision.

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the Senate amendments and passed H.R. 743 (renamed the Social Security Protection
Act of 2004) by a vote of 402-19. CBO estimates that H.R. 743, as approved by the
Congress on February 11, 2004, reduces direct spending (outlays) by $887 million
and increases revenues by $33 million over the fiscal year 2004-2014 period.
On March 2, 2004, President Bush signed into law the Social Security
Protection Act of 2004 (P.L. 108-203). Major provisions of the new law are
described below.
Major Provisions of P.L. 108-203
Representative Payees. The Social Security Administration (SSA) may
designate a “representative payee” to accept monthly benefit payments on behalf of
Social Security and Supplemental Security Income (SSI) recipients who are
physically or mentally incapable of managing their own funds, or on behalf of
children under age 18. In December 2001, an estimated 10.5% of Social Security
recipients and 34.1% of SSI recipients had representative payees. In most cases, a
family member or friend of the recipient serves as the representative payee. Other
individuals and organizations that may serve as representative payees include
members of community organizations; public agencies or non-profit institutions that
have custody of the recipient; noncustodial federal institutions; and private, for-profit
organizations licensed under state law that have custody of the recipient.8
SSA is required to reissue benefits misused by an individual or organizational
representative payee if the Commissioner of Social Security (hereafter referred to as
the Commissioner) finds that SSA negligently failed to investigate or monitor the
payee. P.L. 108-203 eliminates the requirement that reissuance be subject to a
finding of negligence on the part of SSA. Under the new law, SSA is required to
reissue any payments misused by an organizational payee, or by an individual payee
representing 15 or more recipients. Such payments may be reissued directly to the
recipient or to an alternative representative payee. The “misuse of benefits” occurs
when payments are used by the representative payee for purposes other than the “use
and benefit” of the recipient. The Commissioner is authorized to prescribe by
regulation the meaning of the term “use and benefit.”
Before enactment of P.L. 108-203, representative payees were not liable for
misused funds. P.L. 108-203 makes individual payees and nongovernmental
organizational payees (those other than federal, state and local government agencies)
liable for the reimbursement of misused funds. Such funds are treated as
overpayments to the representative payee (not the recipient), making them subject to
overpayment recovery procedures specified in the Social Security Act.
8 For more information, see: SSA, Office of the Inspector General, “Organizational
Representative Payee Program.” Testimony by Inspector General James G. Huse, Jr. before
the Senate Special Committee on Aging, May 2, 2000; and Testimony by Susan Daniels,
Deputy Commissioner, Disability and Income Security Programs, before the House
Committee on Ways and Means, Subcommittee on Social Security, May 4, 2000.

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Although an individual may not charge a fee for serving as a representative
payee, certain organizations (such as Department of Veterans Affairs hospitals,
nursing homes and nonprofit agencies) may charge a fee for serving in this capacity.
The fee is based on a statutory formula and deducted from the recipient’s benefit
payment. P.L. 108-203 requires such organizations to forfeit fee payments for any
month for which the Commissioner or a court of jurisdiction finds that the
organization misused all or part of a recipient’s benefit.

The Commissioner may impose a civil monetary penalty and an assessment on
persons who knowingly provide false information, or knowingly withhold
information, to obtain Social Security benefits. The civil monetary penalty may be
up to $5,000 for each violation, and the assessment may be up to twice the amount
of benefits wrongfully paid to the individual. P.L. 108-203 clarifies that such
penalties may be imposed on persons who withhold information that they know, or
should have known, affects their eligibility status or benefit amount. In addition, it
requires the Commissioner to issue a receipt to recipients upon notification of
changes in a recipient’s work or earnings status until SSA has implemented a
centralized computer file to record when such changes are reported. The new law
imposes the same penalties on representative payees who misuse benefits (i.e., a civil
monetary penalty of up to $5,000 for each violation and an assessment of up to twice
the amount of misused benefits).
Before enactment of P.L. 108-203, nongovernmental fee-for-service
organizational payees were required to be bonded or licensed, but they were not
required to submit proof of such certification. P.L. 108-203 requires such
representative payees to be bonded and licensed (if licensing is available in the state)
and to submit proof of such certification annually (along with a copy of any
independent audit performed on the organization since the previous certification).
In addition to existing periodic onsite reviews of state institutions, the new law
requires periodic onsite reviews of individual representative payees who serve 15 or
more recipients; nongovernmental fee-for-service organizational payees; and any
other agency that serves as a representative payee for 50 or more recipients. It also
requires the Commissioner to submit an annual report to Congress on the findings of
such reviews, including problems identified and any action taken or planned to
correct them.
Individuals are disqualified from serving as a representative payee if they have
been convicted of fraudulent conduct involving Social Security programs. P.L. 108-
203 extends the restriction to individuals convicted of an offense under federal or
state law that results in imprisonment for more than 1 year (unless the Commissioner
determines that the individual’s designation as a representative payee would be
appropriate despite the conviction) and to individuals fleeing prosecution, custody,
or confinement for a felony. The new law requires the Commissioner to prepare a
report on the adequacy of existing procedures and reviews.
Representative payees are required to complete an annual accounting report that
describes how a recipient’s benefits have been used. If misuse is suspected, a report
may be requested by the Commissioner at any time. P.L. 108-203 authorizes the
Commissioner to require a representative payee to collect the recipient’s benefits in
person at a local SSA office if he/she fails to submit annual accounting reports.

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Claimant Representatives. Social Security and SSI disability claimants
may choose to have an attorney or other qualified individual represent them in
proceedings before SSA. The representative may charge a fee for his/her services,
but the fee must be authorized by SSA under the fee petition process or the fee
agreement process. Under the fee petition process, the representative must file a fee
petition with SSA after work on a claim is completed (a copy must be sent to the
claimant). SSA determines the amount of the fee, which is limited to 25% of past-
due benefits awarded, based on factors that include the complexity of the case and
the type of services performed by the representative. Under the more simplified fee
agreement process, the representative and the claimant must file a written fee
agreement with SSA before a decision on the claim is made. The representative’s fee
is limited to the lesser of 25% of past-due benefits awarded or $5,300.
If a Social Security claimant is awarded past-due benefits and his/her
representative is an attorney, SSA withholds the attorney’s fee from the benefit award
and pays the attorney directly. To cover administrative costs associated with the
direct fee payment process, SSA charges an assessment equal to 6.3% of the
attorney’s fee and deducts that amount from the attorney’s fee payment.9 Before
enactment of P.L. 108-203, if the representative was not an attorney, or the claim was
for SSI benefits, SSA would pay the total benefit award to the claimant, and the
representative would collect his/her fee from the recipient. P.L. 108-203 temporarily
extends the attorney fee payment process to certain non-attorney representatives10
and to SSI claims; caps the assessment on direct fee payment at $75 (increased each
year thereafter with the rate of inflation); and requires GAO to study the fee payment
process for claimant representatives.11
Before enactment of P.L. 108-203, SSA was required to recognize as a claimant
representative any attorney currently licensed to practice, even if he/she had been
disbarred in another jurisdiction. P.L. 108-203 authorizes the Commissioner to
refuse to recognize as an attorney representative (or disqualify if already recognized)
an attorney who has been disbarred or suspended from any court or bar to which
he/she was previously admitted to practice, or has been disqualified from
participating in or appearing before any federal program or agency. In addition, P.L.
108-203 authorizes the Commissioner to refuse to recognize (or disqualify if already
9 The assessment on attorney fees was established under the Ticket to Work and Work
Incentives Improvement Act of 1999 (P.L. 106-170) and set at 6.3% effective January 31,
2000. For each calendar year thereafter, the rate is set at the level (not to exceed 6.3%)
needed to cover full administrative costs. In calendar years 2001-2004, the rate has
remained 6.3%.
10 The version of H.R. 743 passed by the House in April 2003 would require the General
Accounting Office (GAO) to study extension of the attorney fee payment process to non-
attorney representatives before making any changes.
11 For more information on the attorney fee payment process, see: U.S. General Accounting
Office (GAO), “Paying Attorneys Who Represent Disability Applicants,” testimony by
Barbara D. Bovbjerg before the House Ways and Means Subcommittee on Social Security,
June 14, 2000; and “Systems Support Could Improve Processing Attorney Fee Payments in
the Disability Program,” testimony by Barbara D. Bovbjerg before the House Ways and
Means Subcommittee on Social Security, May 17, 2001.

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recognized) an attorney who has been disbarred or suspended from any court or bar
to which he/she was previously admitted to practice as a non-attorney representative.
Social Security Benefits for Fugitive Felons. The Commissioner is
authorized to withhold SSI benefits from fugitive felons.12 In addition, upon written
request, SSA is required to provide the current address, Social Security Number and
photograph of an SSI recipient in fugitive status to federal, state and local law
enforcement officials to assist in the individual’s apprehension. P.L. 108-203
authorizes the Commissioner to withhold Social Security benefits as well from
fugitive felons and requires SSA to share information about such persons with law
enforcement officials. In addition, the new law authorizes the Commissioner to pay,
with good cause, withheld SSI and Social Security benefits.13
Trial Work Period. Social Security disability recipients are entitled to a “trial
work period” in which they may have earnings above a certain amount ($580 a month
in 2004) for up to 9 months (not necessarily consecutive) within a rolling 60-month
period without any loss of benefits. Under P.L. 108-203, an individual who is
convicted of fraudulently concealing work activity during a trial work period is not
entitled to receive benefits for trial work period months and is liable for repayment
of those benefits, as well as any other applicable penalties, fines or assessments.
Government Pension Offset. If an individual receives a government
pension based on work that was not covered by Social Security, under a provision of
current law called the Government Pension Offset, his/her Social Security
spousal/widow(er)’s benefit is reduced by an amount equal to two-thirds of the
government pension.14 Before enactment of P.L. 108-203, under the “last day rule,”
a State or local government worker could gain exemption from the GPO by working
in a government job covered by Social Security on his/her last day of employment.
Under P.L. 108-203, a State or local government employee must work in a
Social Security-covered position for at least the last 60 calendar months of
employment to gain exemption from the GPO.15 Generally, the 60-month
12 As defined under Section 1611(e)(4) of the Social Security Act, a fugitive felon is “an
individual fleeing to avoid prosecution, or custody or confinement after conviction, under
the laws of the place from which the person flees, for a crime, or an attempt to commit a
crime, which is a felony under the laws of the place from which the person flees, or which,
in the case of the state of New Jersey, is a high misdemeanor under the laws of such state;
or violating a condition of probation or parole imposed under federal or state law.”
13 The version of H.R. 743 passed by the House in April 2003 would authorize the
Commissioner to pay, with good cause, withheld Social Security benefits only.
14 If an individual receives a pension based on work that was covered by Social Security,
his/her Social Security spousal/widow(er)’s benefit is reduced by 100% of his/her Social
Security benefit earned as a worker, under a feature of current law known as the “dual
entitlement rule.”
15 Federal government workers who switched from the Civil Service Retirement System
(which does not have a Social Security component) to the Federal Employees Retirement
System (FERS) must have at least 5 years of service under FERS to be exempt from the
(continued...)

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requirement applies to individuals whose last day of government service occurs after
June 30, 2004. If an individual’s last day of government service occurs within 5
years after the date enactment (i.e., before March 2, 2009), the required 60 months
is reduced (to no less than one month) by the number of months the individual was
covered by Social Security under the same retirement system before the date of
enactment. The old law (i.e., the last day rule) still applies to State and local
government workers who applied for Social Security spousal/widow(er)’s benefits
before April 1, 2004, regardless of when their last day of government service occurs.
In addition, P.L. 108-203 includes provisions designed to better inform workers
who are not covered by Social Security of the effects of the GPO and the WEP.
Currently, SSA is required to provide an annual Social Security account statement
to persons age 25 and older who have wages or net self-employment income. The
new law requires SSA to provide such statements to persons for whom the
Commissioner has information that the pattern of wages or self-employment income
indicates a likelihood of noncovered employment. Such statements must include an
explanation of the possible effects of noncovered employment on Social Security
benefits. In addition, State and local governments are required to provide workers
who begin employment in a noncovered position on or after January 1, 2005, with
written notice that explains such possible effects. The written notification must
include a form that the individual must sign and return before beginning employment.
Social Security Benefits for Noncitizens. The Social Security Act does
not explicitly prohibit unauthorized aliens (noncitizens) from receiving Social
Security benefits. However, Section 202(y) of the Act does prohibit the payment of
benefits to aliens in the U.S. who are not “lawfully present.” If an alien residing in
the U.S. does not meet the lawful presence requirement, his/her benefits are
suspended. If such individual subsequently establishes lawful presence in the U.S.,
his/her benefits are paid, including benefits based on work performed in the U.S.
without authorization. Under certain circumstances, an alien may receive benefits
while residing outside the U.S., including benefits based on unauthorized work.
P.L. 108-203 requires noncitizens to have work authorization at the time a
Social Security Number is assigned, or at some later time, to gain insured status
under the Social Security program, with broad exceptions. In certain cases, if a
noncitizen never had authorization to work in the U.S., benefits would not be payable
on his/her earnings record. This provision applies to benefit applications based on
Social Security Numbers assigned on or after January 1, 2004.16
Other Provisions. P.L. 108-203 includes a number of other provisions
designed to reduce Social Security program fraud and abuse, such as a requirement
15 (...continued)
GPO. For more information, see General Accounting Office, “Social Security
Administration: Revision to the Government Pension Offset Exemption Should Be
Considered,” Aug. 2002 (GAO-02-950).
16 The version of H.R. 743 passed by the House in April 2003 did not include this provision.
For more information on the payment of Social Security benefits to noncitizens, see CRS
Report RL32004, Social Security Benefits for Noncitizens: Current Policy and Legislation.

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that individuals and businesses notify prospective customers that a product or service
being offered for a fee is available from SSA free of charge. The new law provides
compensation to Social Security Advisory Board members and makes several
clarifying and technical amendments to the Ticket to Work and Work Incentives
Improvement Act of 1999 and other aspects of the program. P.L. 108-203 adds
Kentucky and Louisiana to the list of 21 States authorized to have retirement systems
with either Social Security-covered or noncovered positions.17 It makes a number of
SSI program changes and technical changes to the Railroad Retirement and
Survivors’ Improvement Act of 2001.
17 The version of H.R. 743 passed by the House in April 2003 would extend the option to
Kentucky only. The version of the bill reported by the Senate Finance Committee would
extend the option to all States.