Social insurance in connection with foreign income – high risk of incorrect payments

The Swedish National Audit Office’s analysis shows that the paying government agencies have not had access to comprehensive data about individuals’ foreign incomes that may impact social insurance benefit payments. By way of example, we compared data on Nordic pensions for 2022 identified by the Swedish Social Insurance Agency and the Swedish Pensions Agency using data on Nordic pensions received by the Swedish Tax Agency in the same year. This comparison shows that the paying government agencies were aware of Nordic pensions for about 80 000 people who received one of the benefits covered by the audit, but lacked data for about 12 500 people. As a result, there is a risk that compensation amounts from the Swedish social insurance system to these people have been too high. Moreover, the Swedish National Audit Office notes that this is an underestimation, as the Swedish Tax Agency’s data concerning Nordic pensions for people residing in Sweden are not comprehensive.

The Swedish National Audit Office’s analysis also shows that for 2 200 people who received a guarantee pension in 2022, the compensation amount was too high, as data on Nordic pensions, that affect the size of the guarantee pension, was missing. Our calculations show that overpayment amounted to about SEK 10 000 per person, corresponding to roughly SEK 21 million in total.

The Swedish National Audit Office’s assessment is that the paying government agencies’ lack of comprehensive data on Nordic pensions means that there is reason to assume that similar issues of incomplete data are also present in relation to other countries. This is in view of the fact that data exchange between Nordic authorities in the social insurance area functions relatively well and is established, compared to data exchange with other countries. Similarly, the exchange of information between the Swedish Tax Agency and the Nordic countries functions relatively well.

The paying government agencies’ checks of foreign income are inadequate. The deficiencies are mainly related to error detection and changed income in the course of ongoing social insurance benefit payments. The Swedish Social Insurance Agency and the Swedish Pensions Agency rely mainly on the individual to provide up-to-date information on any foreign income during ongoing payments and most of the reviewed benefits are not systematically followed up. This means that the paying government agencies do not adjust Swedish compensation amounts of ongoing payments unless the individual reports altered circumstances. Nor do they routinely adjust Swedish compensation amounts with respect to annual adjustments made by foreign authorities, resulting in a risk of incorrect payments accumulating to large amounts over time.

In connection with benefit applications, the paying government agencies carry out certain controls to identify cases with foreign connections – but there are shortcomings. The government agencies’ checks are generally hampered by the fact that foreign authorities’ response times concerning foreign income remain long, even after the introduction of an electronic exchange of information between countries in the social insurance field. Nor is the data in the Swedish Tax Agency’s population register – which the Swedish Social Insurance Agency and the Swedish Pensions Agency use for their controls – completely reliable or comprehensive, which means there is a risk that errors go undetected.

The overall persistently long processing times in EU cases give rise to the risk of unreasonably protracted coordination of Swedish social insurance benefits and other countries’ corresponding benefits. This means that people may have to wait for excessive periods of time for decisions on foreign compensation. In addition, IT support for processing EU cases is inadequate at the Swedish Social Insurance Agency, thereby increasing the risk of error. Taken together, the inefficient coordination of social insurance benefits with other countries in cases where people have income from abroad increases the risk of incorrect social insurance payments.

By making a claim for recovery, the paying agencies can request repayment from another EU country when an overpayment of Swedish benefits is made. However, the Swedish National Audit Office concludes that the paying agencies’ approach to processing claims for recovery is inadequate. For example, the government agencies are not always able to issue a claim for recovery to the foreign authority within the time limit set out in the regulations. The main reason is that, during peak periods in benefits processing, the Swedish Social Insurance Agency and the Swedish Pensions Agency have not given priority to work related to claims for recovery. As a result of these shortcomings, paying government agencies rarely recover funds from foreign authorities concerning overpayment during a period of provisional decisions, even though the regulatory framework provides for it. Moreover, under the regulations, in these cases, government agencies are unable to demand recovery directly from the individual. Therefore, taken together, the Swedish National Audit Office concludes that shortcomings in the government agencies’ operations related to claims for recovery have led to unjustifiably high costs for the Government.

Furthermore, the Swedish National Audit Office notes that the paying agencies have disparate practices for recovery claims in cases related to foreign income. This means that, in some cases, individuals who receive benefits from the Swedish Pensions Agency may be liable for repayment; for example, for the period between receipt of a decision from a foreign institution and the Swedish Pensions Agency’s final decision on the Swedish benefit, while in a similar situation, individuals who receive benefits from the Swedish Social Insurance Agency are normally not liable for repayment.

The Swedish National Audit Office also notes that there has been no legal framework for an effective exchange of relevant information on foreign income between the paying government agencies and the Swedish Tax Agency. The Swedish Tax Agency is annually given access to relevant information transferred by virtue of the Nordic assistance agreement and in connection with income tax returns. However, the paying government agencies have only been able to access this information on request in individual cases and for specific purposes. The Swedish National Audit Office assesses that a systematic exchange of information between the Swedish Tax Agency and the paying government agencies concerning this data would significantly improve prospects for the paying government agencies to counteract errors and reduce the proportion of incorrect social insurance payments in cases of foreign income. On 1 July 2024, new legislation entered into force that might facilitate a more systematic exchange of information even if the provisions do not focus on foreign income. However, it was not possible to assess the impact of the new provisions in the context of this audit.

Under the regulations, the Swedish Tax Agency must notify the paying government agencies if there is an assumption of an incorrect benefit payment. The Swedish National Audit Office notes that the Swedish Tax Agency rarely issues such notifications to the Swedish Social Insurance Agency and the Swedish Pensions Agency in matters related to foreign income. Possible explanations include complex regulations and limited knowledge of various social insurance benefits among tax administrators, and poor written guidance and support about various risk situations for administrators.