Social Security Program Protection Act of 2002 (H.R. 4070)

Social Security Program Protection Act of 2002 (H.R. 4070)

Order Code RS21225
Updated November 25, 2002
CRS Report for Congress
Received through the CRS Web
Social Security Program Protection Act of
2002 (H.R. 4070)
Dawn Nuschler
Analyst in Social Legislation
Domestic Social Policy Division
Summary
On June 26, 2002, the House of Representatives passed H.R. 4070 (Social Security
Program Protection Act of 2002), as amended, by a vote of 425-0. The bipartisan
measure would impose stricter standards on individuals and organizations that serve as
representative payees for Social Security and Supplemental Security Income (SSI)
recipients; make nongovernmental representative payees liable for “misused” funds and
subject them to civil monetary penalties; tighten restrictions on attorneys who represent
Social Security and SSI disability claimants and limit assessments on attorney fee
payments; prohibit fugitive felons from receiving Social Security benefits; and make
other changes designed to reduce program fraud and abuse. The Congressional Budget
Office estimates that the House-passed version of H.R. 4070 would result in net savings
of $541 million over 10 years. On November 18, 2002, the Senate passed its version of
H.R. 4070 by voice vote. The Senate-passed version of H.R. 4070 closely resembles the
House-passed version, however, it contains several additional provisions regarding the
trial work period for disability recipients, the Government Pension Offset, and the
Railroad Retirement program. The House did not take up the Senate-passed version of
the bill before the 107th Congress adjourned sine die. This report will not be updated.
On April 25, 2002, the House Ways and Means Subcommittee on Social Security
met to mark up H.R. 4070 (Social Security Program Protection Act of 2002) sponsored
by Subcommittee Chairman E. Clay Shaw.1 Representative Shaw offered an amendment
in the nature of a substitute making minor changes to the bill as introduced. A second
amendment in the nature of a substitute, offered by Representative Matsui, was defeated
by a 5-7 vote along party lines.2 The Matsui amendment would have expanded H.R. 4070
to include benefit enhancements targeted to divorced spouses and disabled and elderly
widow(er)s (provisions reflected in H.R. 4069, as introduced by Representative Shaw on
1 H.R. 4070 is a bipartisan measure co-sponsored by Representative Matsui, the Ranking
Democrat on the Social Security Subcommittee, and 17 other Members.
2 Many of the same provisions are reflected in H.R. 4671 (Social Security Widow’s Benefit
Guarantee Act of 2002) introduced by Representative Matsui on May 7, 2002.
Congressional Research Service ˜ The Library of Congress

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March 20, 2002).3 It also would have increased widow(er)’s benefits from 100% of the
deceased worker’s benefit to 75% of the couple’s combined pre-death benefit,4 subject to
a cap. To pay for the increase, the amendment would have transferred funds from the
general fund of the Treasury to the Old-Age and Survivors Insurance (OASI) trust fund
in an amount equal to the revenue cost associated with reductions in the highest individual
income tax rate bracket for years after 2003 under the Economic Growth and Tax Relief
Reconciliation Act of 2001 (P.L. 107-16). The amounts transferred would have been
determined as if the “sunset” provisions of the Act had never been enacted (i.e., as if the
tax rate reductions under the Act were to remain in place for years after 2010).5
The Shaw amendment in the nature of a substitute was adopted by the Social
Security Subcommittee by voice vote. H.R. 4070, as amended, was ordered favorably
reported to the Ways and Means Committee by voice vote. On June 25, 2002, the House
of Representatives began consideration of H.R. 4070, as amended, under suspension of
the rules (the measure did not go before the full Committee). On June 26, 2002, the
House passed the bipartisan measure by a vote of 425-0. Major provisions of H.R. 4070,
amended, as passed by the House, are described below.6
H.R. 4070 as Passed by the House
Provisions Affecting Representative Payees. Under current law, the Social
Security Administration (SSA) may designate “representative payees” to accept monthly
benefits on behalf of Social Security or SSI recipients who are considered physically or
mentally incapable of managing their own funds, or on behalf of children under age 18.
In December 2000, an estimated 10.5% of Social Security recipients and 33.7% of SSI
recipients had representative payees. Examples of individuals and organizations that may
serve as a representative payee include a family member or friend who has custody of the
3 H.R. 4069 (Social Security Benefits for Women Enhancement Act of 2002) is a bipartisan
measure co-sponsored by Representative Matsui and 38 other Members. On May 14, 2002, the
House considered a manager’s amendment to H.R. 4069 under suspension of the rules (the
measure did not go before the House Ways and Means Social Security Subcommittee or the full
Committee). 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. The House passed
H.R. 4069, as amended, by a vote of 418-0.
4 Under current law, a widow(er) receives from 50% to 67% of what the couple had been
receiving on a combined basis. A number of proposals would increase the widow(er)’s benefit
to 75% of the couple’s combined pre-death benefit including H.R. 3497 (Social Security
Guarantee Plus Act) sponsored by Representative Shaw and two of the three plans recommended
by the President’s Commission to Strengthen Social Security.
5 P.L. 107-16, signed into law on June 7, 2001, provides for a gradual reduction in individual
income tax rates. To date, the highest income tax rate bracket has dropped from 39.6% to 39.1%
for 2001 and to 38.6% for 2002-2003. It is scheduled to drop further to 37.6% for 2004-2005 and
to 35% for 2006-2010. After 2010, tax rate reductions under the Act will expire.
6 The House-passed version of H.R. 4070, as amended, contains two provisions that were not in
the version of the bill approved by the Social Security Subcommittee on April 25, 2002. The first
provision would add Kentucky to the list of States that offer coverage under a divided retirement
system to public employees, as specified in section 218(d)(6)(C) of the Social Security Act. The
second provision would provide compensation for Social Security Advisory Board members.

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recipient; a public agency or non-profit institution that has custody of the recipient; a
noncustodial federal institution; a private, for-profit organization licensed under state law
that has custody of the recipient; or a member of a community organization. Individual
payees are prohibited from charging a fee for their services, but organizational payees
(such as Department of Veterans Affairs hospitals, nursing homes and nonprofit agencies)
may charge a fee for serving in this capacity.7
Under current law, 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. H.R. 4070 would eliminate the requirement that reissuance be subject
to a finding of negligence on the part of SSA. As a result, SSA would be required to
reissue any payments misused by an organizational payee or an individual payee
representing 15 or more recipients. Such payments would 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 bill would authorize the Commissioner to prescribe by
regulation the meaning of the term “use and benefit.”
Under current law, representative payees are not liable for misused funds. H.R. 4070
would make individual payees and nongovernmental organizational payees (i.e., those
other than federal, state and local government agencies) liable for the reimbursement of
misused funds. Such funds would be treated as overpayments to the representative payee
(not the recipient) making them subject to current overpayment recovery procedures.
Under current law, qualified organizational payees may be authorized by SSA to
receive payment for their services. Those payments are based on a formula specified in
the law and are deducted from the recipient’s monthly benefit. H.R. 4070 would require
the organization 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.
Under current law, 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; the assessment may be up to twice the amount of benefits
wrongfully paid to the individual. H.R. 4070 would clarify that such penalties may be
imposed on persons who fail to notify SSA of changes that affect their eligibility status
or benefit amount,8 and it would require the Commissioner to issue a receipt
acknowledging notification of changes in a recipient’s work or earnings status. In
addition, H.R. 4070 would impose the same penalties on representative payees who
misuse benefits (a civil monetary penalty of up to $5,000 for each violation and an
assessment of up to twice the amount of misused benefits).
7 For more information, refer to: Social Security Administration. 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.
8 This change is not included in the Senate-passed version of H.R. 4070.

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Under current law, nongovernmental fee-for-service organizational representative
payees must be bonded or licensed, but they are not required to submit proof of such
certification. H.R. 4070 would require such representative payees to be both bonded and
licensed (if licensing is available in the state) and to submit proof of such certification on
an annual basis (along with a copy of any independent audit performed on the
organization since the previous certification). H.R. 4070 would require, in addition to
existing periodic onsite reviews for state institutions, periodic onsite reviews of individual
representative payees who serve 15 or more recipients; nongovernmental fee-for-service
organizational representative payees; and any other agency that serves as a representative
payee for 50 or more recipients. The bill would require the Commissioner to submit to
Congress an annual report on the findings of such reviews including the problems
identified and any action taken or planned to correct the problems.
Under current law, individuals are disqualified from acting as a representative payee
if they have been convicted of fraudulent conduct involving Social Security programs.
H.R. 4070 would extend the restriction to individuals convicted of an offense under
federal or state law which 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 any individual who is a fugitive felon
as defined in the Social Security Act.9
Under current law, representative payees are required to complete an annual
accounting report form describing how a recipient’s benefits have been used. (If misuse
is suspected, a report may be requested at any time by the Commissioner.) H.R. 4070
would authorize the Commissioner to require a payee to collect a recipient’s benefits in
person at a local SSA office if he or she fails to submit annual accounting reports.
Provisions Affecting Attorney 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
or her services, but the fee must be authorized by SSA under either the fee petition
process or the fee agreement process. Under the fee petition process, the representative
must file a fee petition with SSA after completing work on a claim (with a copy sent to
the claimant). SSA determines the amount of the fee, which is limited to 25% of past-due
benefits awarded, based on factors including 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 is made on the claim.10 In fee agreement cases, the attorney’s fee is
limited to 25% of past-due benefits awarded or $5,300 (whichever is less).
9 Under Section 1611(e)(4) of the Social Security Act, a fugitive felon is defined as “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.”
10 In 2000, an estimated 88% of attorney fees were based on fee agreements.

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Under current law, if a Social Security claimant is awarded past-due benefits and his
or her representative is an attorney, SSA withholds the attorney’s fee from the benefit
award and pays the attorney directly. If the representative is not an attorney or the claim
is for SSI benefits, SSA pays the total amount of the benefit award to the claimant, and
the representative must collect his or her fee from that individual. To cover the
administrative costs associated with the attorney fee payment process, SSA charges an
assessment of up to 6.3% of the attorney’s fee (the assessment is deducted from the
attorney’s fee payment).11 H.R. 4070 would cap the assessment on attorneys’ fees at $100
and extend the attorney fee payment process to SSI claims.12 In addition, it would require
the Commissioner to submit a report to Congress on the feasibility of extending the fee
withholding and payment process to non-attorney representatives.13
Under current law, attorneys who are licensed to practice must be recognized by SSA
as a claimant representative even if they have been disbarred in another jurisdiction. H.R.
4070 would authorize the Commissioner to refuse to recognize as an attorney
representative (or disqualify if already recognized) any attorney who has been disbarred
or suspended from any court or bar to which he or she was previously admitted to
practice, or who has been disqualified from participating in or appearing before any
federal program or agency. Furthermore, H.R. 4070 would authorize the Commissioner
to refuse to recognize (or disqualify if already recognized) any attorney who has been
disbarred or suspended from any court or bar to which he or she was previously admitted
to practice as a non-attorney representative.
Provisions Affecting the Payment of Benefits to Fugitive Felons. Under
current law, the Commissioner is authorized to withhold SSI benefits from fugitive felons
and persons fleeing prosecution. In addition, SSA is required to provide to federal, state
and local law enforcement officials, upon written request, the current address, Social
Security number and photograph of any SSI recipient who is in fugitive status to assist in
the individual’s apprehension. H.R. 4070 would authorize the Commissioner to withhold
Social Security benefits from fugitive felons and persons fleeing prosecution, and it would
require SSA to share information about those individuals with law enforcement officials.
In some cases, the Commissioner would be allowed, with good cause, to pay withheld
Social Security benefits (the terms governing the payment of withheld Social Security
benefits would be prescribed by regulation).
11 The assessment on attorney fees was enacted 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
year thereafter, it is set at a rate (not to exceed 6.3%) needed to cover full administrative costs.
In 2001 and 2002, the rate has remained 6.3%.
12 The Senate-passed version of H.R. 4070 would cap the assessment at $75 (the cap would be
indexed to the Social Security cost-of-living adjustment). In addition, the Senate-passed version
of the bill would not extend the attorney fee payment process to SSI claims.
13 For more information on the attorney fee payment process, refer to: 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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In addition, H.R. 4070 includes a number of miscellaneous provisions designed to
reduce fraud and abuse in the Social Security programs (such as a provision requiring
individuals and businesses to notify prospective customers in advance that a product or
service being offered for a fee is available directly from SSA free of charge) as well as a
number of clarifying and technical amendments to the Ticket to Work and Work Incentives
Improvement Act of 1999 and other aspects of the Social Security program. The
Congressional Budget Office estimates that the House-passed version of H.R. 4070 would
result in net savings of $541 million over 10 years (fiscal years 2003-2012).
H.R. 4070 as Passed by the Senate
On November 18, 2002, the Senate passed, by voice vote, a substitute amendment
to H.R. 4070. The amendment (Senate Amendment 4967 sponsored by Senators Baucus
and Grassley) was discharged from the Committee on Finance and passed by Unanimous
Consent. The Senate amendment closely resembles the House-passed version of the bill,
however, it contains several additional provisions.
First, Social Security disability recipients are entitled to a trial work period in which
they may have earnings above the “substantial gainful activity” level for up to 9 months
(not necessarily consecutive) within a rolling 60-month period without any loss of
benefits. Under current law, an individual convicted of fraudulently concealing work
activity during the trial work period is not entitled to receive benefits for months in which
such fraud was committed and is liable for repayment of those benefits. Under the
Senate-passed version of H.R. 4070, an individual convicted of fraudulently concealing
work activity during the trial work period would not be entitled to receive benefits in any
trial work period month and would be liable for repayment of those benefits as well as
any other applicable penalties, fines or assessments.
Second, an individual who receives a pension from work that was not covered by
Social Security (for example, some State and local government workers) is subject to a
reduction in his or her Social Security spousal benefit equal to two-thirds the amount of
the noncovered pension under a provision of current law called the Government Pension
Offset (GPO). Under the “last day rule,” however, an individual is exempt from the GPO
if he or she worked in a job that was covered by Social Security on his or her last day of
employment. Under the Senate-passed version of H.R. 4070, an individual would be
required to work in a Social Security-covered job for the last 5 years of employment to be
exempt from the GPO. (See Social Security Administration: Revision to the Government
Pension Offset Exemption Should Be Considered, GAO-02-950, August 2002.)
Finally, the Senate-passed version of the bill would make several technical changes
to the Railroad Retirement and Survivors’ Improvement Act of 2001 (P.L. 107-90). SSA
estimates that the Senate-passed version of H.R. 4070 would have a negligible effect on
the long-range actuarial status of the Social Security trust funds based on the intermediate
assumptions of the 2002 Social Security Trustees’ report. The House did not take up the
Senate-passed version of the bill before the 107th Congress adjourned sine die.