How Social Security Calculates Benefits Based On Illegal Work

How Social Security Calculates Benefits Based On Illegal Work

President Obama and House leadership are discussing support of a more "limited approach" to immigration reform.  Under discussion is a plan to grant illegal immigrants limited legal status by providing the right to work in the U.S., but not citizenship.

Yet even a "limited approach" like this one could create huge new long-term costs for Social Security and Medicare.  Citizenship is not a requirement to claim Social Security benefits.  Work authorization, like the type under discussion in the House, is all that immigrants would need to at some point file claims.

When an individual files a claim for benefits, the Social Security Administration (SSA) searches its records for every wage report connected with that individual to determine entitlement.  The search even includes earnings from jobs worked prior to legal authorization, under fake, invalid or stolen Social Security numbers (SSNs) if the applicant kept evidence of such earnings like pay stubs or W2s.

Immigrants use fake or stolen Social Security numbers to work in the U.S., and the SSA receives more than 9 million W2s every year in which the name and Social Security number don't match those in the Administration's records.  Those W2s are saved to a special Earnings Suspense File until the SSA reconciles them with the rightful owner at a later date, which can occur years later when a claim is filed.

Benefits are based on lifetime earnings.  To be qualified for retirement benefits, workers need about 10 years of earnings.  The earnings are indexed to account for changes in average wages since the year the earnings were received.  Then SSA calculates the average indexed monthly earnings using the 35 years of highest earnings.  A formula is applied to this amount to arrive at the basic benefit.

Suppose, for example, that an illegal immigrant works for 13 years under an invalid Social Security number(s), but then gains legal status and works another 22 years under a valid Social Security number.  The earnings under the invalid SSN are reinstated under the new work-authorized Social Security number because the individual kept W2s.  Thirteen years of earnings would be more than enough to become qualified for Social Security.  In this case, 13 years of illegal work would form one-third of the earnings that are used to determine the individual's basic Social Security benefit.  This scenario isn't as unlikely as you might think.   A major national pro-immigration reform advocacy organization counsels "undocumented" workers to save their pay stubs and W2s "in case their legal status changes."

TSCL is highly concerned that paying benefits based on illegal work rewards people for breaking the law while weakening program financing for people who paid into the system the legal way.  Concerned about this issue?  Sign a petition!

Source: "Social Security:  What The Latino Community Should Know," National Council of La Raza, 2014.