Social Security Myth Debunked

By Tom Margenau

November 12, 2013 7 min read

Recently, several readers sent me yet another in the long line of damnable lies that are being spread in cyberspace about Social Security.

The salacious email reads, in part: "Once again the government has shown it can't do anything right. The Social Security Administration reports that it has hundreds of billions of dollars in unspent funds sitting around in something called the 'suspense file.' This is further proof that we can't let the b------- in Washington raise our taxes by one nickel until they get rid of all the waste, fraud and mismanagement of the tax money they already collect from us!"

The email goes on to accuse President Barack Obama of "instituting the corrupt policies that led to all this waste."

I will use this column to give you the facts about the so-called suspense file that the Social Security Administration maintains.

The suspense file, which has been around since the 1930s (before President Obama was even born), doesn't contain even one nickel in funds. It simply contains paper and electronic records of unreportable income. Let me explain.

When people work at a job, their employer withholds Social Security taxes (and matches that tax payment with an equal amount of money). Those withheld funds are sent directly to the U.S. Department of the Treasury -- about $2.5 billion deposited to the Treasury every day in Social Security tax collections. The government instantly spends that money for whatever the federal government spends money on -- everything from veterans hospitals to National Park Service employee salaries to NASA rockets to air traffic control computers. At the same time, the Treasury Department deposits a Treasury note into the Social Security trust funds for the money received. (Social Security currently has more than $1 trillion in Treasury notes in its funds.) Social Security checks are paid three times a month. So three times each month, SSA redeems enough Treasury bonds to cover the billions of dollars' worth of Social Security checks it is sending out that day. The Treasury Department credits the Social Security funds for those bonds -- with interest. Social Security has been working this way for about 80 years now.

But none of this has anything to do with the suspense file. So why did I bring it up? Well, you have to go back to that employer sending the tax collections to the Treasury. At the same time it sends the money to the Treasury Department, it sends a paper or electronic report to SSA listing the names of all its employees, their Social Security numbers and the total earnings reported to that person. So it is simply a report that goes to SSA. The agency takes these reports and posts earnings to the Social Security record for everyone listed on the employer's report. That is a big part of its job -- to maintain earnings records for all Americans while they are working and to pay benefits based on those records when they retire. More than 95 percent of the time, there is no problem. These earnings are posted to the proper record, and all is right with the world.

But occasionally, there is a glitch. The name and/or SSN reported by the employer does not match the name and/or SSN in Social Security records. SSA makes some attempts to resolve the problem. It first applies tolerances to fix the issue. For example, if it sees wages reported for "Tom Margenau" and Social Security records show "Thomas Margenau" -- assuming all other information matches -- it will make the logical assumption that "Tom Margenau" and "Thomas Margenau" are the same person.

Or if it sees wages reported for Steve Jackson with SSN 123-45-6789 but Social Security records show his SSN as being 123-45-6798, it will simply presume (again, assuming all other information matches) that the last digits were transposed in processing, and it will post the income to Steve's Social Security record.

If these tolerances don't work, it will contact the employer to attempt to resolve the discrepancy. Or it will attempt to contact individual employees.

If these and other procedures don't work, then SSA doesn't know whose record should be posted with the proper earnings, so then these reports go into the suspense file. (Think of it as the reports being "suspended" until the discrepancy can be resolved.) Again, there is no money in that file. The tax collections long ago were deposited into the Treasury. It's just the earnings report that is in suspense.

Many of these discrepant reports are eventually straightened out, properly posted to the correct SSN record and removed from the suspense file.

However, because we are talking about millions of paper reports coming in every day -- over the nearly 80-year history of the Social Security system -- unresolved reports have built up to the tune of tens of millions of records representing hundreds of billions of dollars in unreportable wages. (I can't emphasize enough: not billions of dollars in money but billions of dollars in reports of unreportable wages.)

Obviously, there are certain classes of workers who contribute most to the suspense file. The biggest one is kids -- teenagers getting their first jobs at McDonald's, for whom Social Security means almost nothing. They frequently give their employer faulty data. Other big contributors to the suspense file are new brides who change their names and report those new names to their employers but forget to tell the government; Social Security still has the old name. Seasonal and migrant workers -- for example, those doing agricultural, landscaping or construction jobs -- are big contributors to the file, too.

One final point: If you wonder whether some of your earnings were properly reported to your Social Security record, it is a simple matter to go to and check your earnings files.

Tom Margenau's weekly column, "Social Security and You," can be found at

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