Social Security Will No Longer Withhold 100 Percent of Monthly Benefits to Recover Overpayments

Lawmakers have criticized the 100 percent withholding policy as being a burden to vulnerable Americans dependent on their benefits.

The logo of the U.S. Social Security Administration seen outside a Social Security building in Burbank, Calif., on Nov. 5, 2020. Valerie Macon/AFP via Getty Images

The Social Security Administration (SSA) announced a new measure on Friday, slashing the amount that social security beneficiaries must pay to the agency from their monthly benefits to repay overpayments.

“When a person has been overpaid, the law requires the agency to seek repayment, which can create financial difficulties for beneficiaries,” the SSA said in a March 29 blog post. Earlier, if the agency overpaid a beneficiary, it would withhold 100 percent of their monthly benefits until the overpaid amount was recovered. But beginning March 25, “the agency will collect ten percent (or $10, whichever is greater) of the total monthly Social Security benefit to recover an overpayment, rather than collecting 100 percent as was previous procedure. There will be limited exceptions to this change, such as when an overpayment resulted from fraud.”

There will be a transition period during which beneficiaries will continue with the older policy. Those who are placed in the 100 percent withholding category can contact Social Security’s National 800 Number at 1-800-772-1213.

The change only applies to new overpayments. If social security beneficiaries already have an overpayment with a withholding rate greater than 10 percent and want a lower recovery rate, SSA advised them to contact the agency. Alternatively, they can get in touch with their local Social Security office.

“If a beneficiary requests a rate lower than ten percent, a representative will approve the request if it allows recovery of the overpayment within 60 months—a recent increase to improve how the agency serves its customers from the previous policy of only 36 months,” SSA said.

“If the beneficiary’s proposed rate would extend recovery of the overpayment beyond 60 months, the Social Security representative will gather income, resource, and expense information from the beneficiary to make a determination.”

The SSA noted that beneficiaries have the right to appeal the agency’s overpayment decision or the amount. In case beneficiaries are not in a financial position to pay it back, they can ask the SSA to waive the collection of the overpaid amount. While the appeal or waiver is pending, the agency will not pursue recoveries.

“Social Security is taking a critically important step towards our goal of ensuring our overpayment policies are fair, equitable, and do not unduly harm anyone,” said Martin O’Malley, commissioner of Social Security.

“It’s unconscionable that someone would find themselves facing homelessness or unable to pay bills, because Social Security withheld their entire payment for recovery of an overpayment.”

According to the SSA’s fiscal year 2023 financial report, the agency paid approximately $1.26 trillion in social security benefits in fiscal year 2022, which includes the Old-Age and Survivors Insurance and Disability Insurance (DI) programs.

Out of this, the agency estimates it made $6.5 billion in overpayments, accounting for 0.51 percent of the $1.26 trillion disbursal.

Burden on Americans

Social security overpayments have come under severe criticism from lawmakers. During a Social Security Subcommittee hearing in October last year, Chairman Drew Ferguson (R-Ga.) said that “way too many Americans now have the burden of having to deal with an overpayment.”

“With a program this size, which pays out more than $1.2 trillion a year, even a small percentage of errors can have a big impact.”

“Every error can affect beneficiaries, livelihood. Let’s all agree that we shouldn’t be going after beneficiaries who receive payments improperly. Let’s focus first on stopping the improper payments. Whether we’re talking about an overpayment, or whether we’re talking about an underpayment, we have to get this right,” he said.

In November, U.S. Sens. Maggie Hassan (D-N.H.) and Bill Cassidy (R-La.), members of the Senate Finance Committee, urged the the SSA to cut down on overpayments and prevent harm to vulnerable recipients of the program.

“We have been deeply concerned by stories from our constituents and recent reports of the extreme financial hardship placed upon beneficiaries who are asked to quickly repay in full or whose payments are halted, reduced, or reclaimed as the agency attempts to correct improper payments, many of which occurred due to agency error,” they wrote in a letter to the SSA.

A report from the U.S. Government Accountability Office (GAO) last year also found that overpayments can impose burdens on DI beneficiaries.

“GAO and past research have consistently found that the majority of DI beneficiaries who have earnings sufficient to affect their benefits will receive an overpayment. The financial burden of these overpayments can amount to thousands of dollars, which beneficiaries may have to repay.”

“In 2015, we reported that more than one-half of all DI overpayments were paid to beneficiaries earning above program limits. Further, a 2019 study conducted by Mathematica and SSA estimated that 71 percent of DI beneficiaries with earnings sufficient to affect their benefits receive overpayments, which often accumulate to thousands of dollars.”

The GAO said that the SSA was facing “ongoing challenges” when it comes to reducing overpayments. Though the SSA has made efforts to deal with the overpayment issues, “more remains to be done,” the report stated.

In October, the SSA launched a review of its overpayment policies as well as procedures to ensure payment accuracy. On Friday, the agency said that the new rule reducing overpayment recovery to 10 percent is a “direct result of the ongoing review.”

The SSA said it was establishing information exchanges with payroll data providers aimed at “significantly” reducing the number of improper payments.