What Undocumented Workers Mean for Social Security

by | Published on May 27, 2019 | Social Security Disability

Social security retirement and disability programs are the United States of America’s most important social welfare programs. Disability benefits are more challenging to obtain because disability claims processing involves steps such as medical records review and analysis, which are necessary for the SSA (Social Security Administration) to arrive at an independent and fair medical judgment as regards the nature and severity of the claimant’s medical condition. Approximately 63 million people receive benefits from the SSA each month, and among these 70% are retired workers. The significance of these benefits are highlighted in an analysis by the Center on Budget and Policy Priorities that found that more than fifteen million seniors are kept out of poverty because of their assured monthly social security benefit. Apart from this, social security programs cover around 175 million working Americans as well via either long-term disability insurance or survivors’ insurance.

Undocumented Workers and Social Security

Typically, retirement benefits are paid to Americans who have worked and paid taxes into the Social Security system. However, the SSA also collects billions of dollars in taxes from unknown workers, meaning those who have no legal documents. Employers often send in W-2 forms that have social security numbers that don’t match with any person on record, and the SSA sends those forms to the Earnings Suspense File, where these remain until people can prove those wages were theirs and collect their retirement benefits.

According to an article in The Atlantic, the Earnings Suspense File at present contains social security tax forms dating back as far as 1937 and are linked to the taxes paid on approximately $1.3 trillion in wages. These forms belong to either people who filled out their tax forms incorrectly or those who got married and never reported changing their name. By 2014, the SSA was able to match 171 million tax forms to their actual owners. However, there remains at least 340 million unclaimed tax forms recorded in the file. The SSA says that a considerable number of those forms were filed by employers on behalf of undocumented immigrants. It is estimated that undocumented workforce pay billions in taxes for retirement benefits that they are totally unlikely to receive.

How does this happen?

  • Immigrants not authorized to work in America purchase bogus social security cards and present them to their employers. The employers may not know they are fake or may not scrutinize them closely.
  • The employer submits a W-2 form and a tax payment on those workers’ behalf to the SSA, the government retains those payroll taxes even if the social security number is not linked to anyone on file.
  • A considerable portion of that money arrive in the Social Security trust funds, from which retirement benefits are paid to retired Americans.

The chief actuary of the SSA, Stephen Goss says that approximately 1.8 million immigrants had been working with false/stolen social security cards in 2010. This number is estimated to reach 3.4 million by the year 2040. These undocumented immigrants paid $13 billion into the retirement trust fund in 2010, but only got about $ 1 billion in benefits. The Immigration Reform and Control Act of 1986 has set penalties for employers who intentionally hire undocumented immigrants. However, this new law has boosted the market for fake U.S. birth certificates, identity cards, social security cards and so on, that undocumented workers presented to their employers when asked for their papers. The federal government deducted payroll taxes from these undocumented workers who filled out the W-2 forms, even thought the false social security numbers didn’t match anyone in the system. The SSA sends no-match letters to employers to alert them of the problem and persuade them to resolve it.

What Does Undocumented Immigrants’ Contribution Mean to Social Security?

  • An analysis form New American Economy found that undocumented immigrants contributed $13.3 billion into the system via payroll tax in 2016.
  • An AARP report found that $12 billion were paid in payroll tax from undocumented workers in 2010.

In the year 2018, the social security program generated nearly $3.2 billion, its smallest on record since the mid-1980s. Social Security would have spend more than it collected in revenue for the first time in 36 years last year, if they had not received a steady level of payroll tax contributions from undocumented workers. However, these undocumented workers will not receive any benefit from their contributions to the SSA. There are many proposals being put forward to save the program as well as ensure that all eligible Americans receive the due retirement benefits. Recently, a democratic presidential candidate proposed the idea of allowing all current residents in the United States, whether American citizens, legal immigrants who have applied for citizenship and even undocumented persons should have a means to pay into the social security system. She pointed out how undocumented workers without a path to citizenship have no means whatsoever to ever receive a single dollar from the SSA, even though they contribute a considerable amount to the social security program by using a friend’s social security number or a fake one.  According to her, all residents of America, regardless of documentation status should be provided with the opportunity to obtain a social security number. This would allow them to collect their wages legally and also pay into the social security program.

This proposal could have a positive implication for Social Security because the ability to collect more in payroll tax revenue would make the program more financially stable. Immigrants to the U.S are assumed to be younger and therefore would be paying into the system for many decades to come before they themselves retire. So, what are the negative consequences possible? Nobody knows the demography of undocumented persons and if they are on an average older than the legal immigrants the country accepts each year, they may not have the means to earn the mandatory 40 credits to receive a social security benefit. This in turn could prove to be burdensome for the program and make things worse.

Any development such as the above is keenly watched by social security lawyers, providers of medical review services to disability lawyers and social security beneficiaries and prospects. An interesting fact that emerges from various studies and analyses is that undocumented workers do not drain the nation’s economy, In fact, they may be contributing something positive to it.

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