Why the government keeps giving millions of dollars a year to dead people

This image was removed due to legal reasons.

Improper payments made by federal agencies were up 17 percent last year, to $124 billion.


A chunk of that went to people who really, really didn’t deserve it.

Because they’re dead.

This month, the Social Security Administration’s (SSA) Office of the Inspector General (OIG) announced that since 2007, the SSA has paid 740 individuals an estimated $17 million in faulty Social Security claims. It did not report separate figures for 2014.

Another new report found 6.5 million people have active Social Security numbers who, based on SSA's own records, would be more than 112 years old.

In fact, according to data provided to Fusion by the SSA, the agency says it has paid $501 million to dead recipients over the last three decades, or about $17 million a year.

SSA is not alone in this problem. The Office of Personnel Management was found to have made an estimated $601 million in benefits payments to deceased individuals between 2006 and 2011, with annual payouts ranging from $100 million to $150 million. And in 2007 we learned that the Department of Agriculture distributed an estimated $1.1 billion between 1999 and 2005 to the estates or companies of deceased farmers.

“The federal government has wasted billions of dollars over the last few decades giving money to dead people,” Senator Ron Johnson (R-Wisconsin) said in remarks at a Senate hearing on the topic last week.


But while other agencies experience these problems, they are to a substantial degree SSA’s fault, because they control the Death Master File. This is the subset of SSA’s master Social Security number database that includes, if available, the deceased individual’s SSN, first name, middle name, surname, date of birth, and date of death.

The problem is that SSA does not verify all the death reports it receives — only those from financial institutions, other federal agencies, and some states.


And, it only verifies deaths for its own beneficiaries.

This image was removed due to legal reasons.

According to the Government Accountability Office (GAO), this isn’t good enough.

"Because SSA verifies a limited portion of death reports, it increases the risk of having erroneous information in its death data, such as including living individuals or not including deceased individuals," the GAO said in a report issued earlier this month.


The report found instances in which an individual was listed in the DMF as having died before they were born, and of individual’s age at the time of death being between 115 and 195.

A host of federal agencies rely on the DMF to make payments, and Congress believes it’s up to the SSA to be the primary backstop against payments to the deceased.


“[SSA’s] attitude does not reflect the reality that [it] is the purveyor of death information, and its failure to ensure the accuracy of the list has serious consequences both in and outside of government,” Sen. Johnson said.

Often, instead of attempting to efficiently verify deaths, SSA will simply suspend payments, hoping someone will reach out to them. But once benefits are suspended instead of terminated, it ends up being extremely difficult for SSA to recover funds that have already gone out. The report found that 79 percent of the funds in the accounts were withdrawn or accrued back to the state in which the deceased individual lived, placing it out of SSA’s reach.


The other main reason why dead people keep getting paid is that Americans keep trying to game the system. In another report released this month, the government found Americans unsuccessfully tried to pass off $3.1 billion in earnings of people 112 years old and older. To its credit, this amount represents items caught in time by SSA.

But the Inspector General has some amusing stories of how this kind of thing went down:

—In 1953, a 67-year-old (i.e. born in 1886) filed for Social Security. The person died 12 years later. From 1956 to 2007, no earnings were reported on the person’s name. But from 2008 to 2012, an Arizona employer reported paying wages (ranging from $12,594 to $17,100) to someone using the individual’s name and SSN.


—In 1958, a 62-year-old (i.e. born in 1896) filed. He kept earning wages for the next four years, the nothing through 2006. But beginning in Tax Year 2007, and each year since, a South Carolina employer has reported payment of wages (ranging from $11,450 to $27,694) to someone using the person’s name and SSN.

Lots of times bogus payments still go through. Last year, in response to an investigation that found three people used information of California residents who died in the 1980s to file bogus retirement benefit claims, the OIG estimated that the government paid approximately $3 million just to dead Californians over the last four decades.


“Significant funds can accumulate in bank accounts before likely dead beneficiaries’ payments are suspended,” the OIG report said. “If benefits paid after a beneficiary’s death are not reclaimed timely, a third party may take control of the funds.”

It’s true that less than half of one percent of the SSA’s annual death reports—just 0.35 percent—are erroneous.


But that’s still approximately 100,000.

And the amounts received are probably starting to making living people envious.

Rob covers business, economics and the environment for Fusion. He previously worked at Business Insider. He grew up in Chicago.