There are several reasons why Social Security might have paid you too much in benefits. But if it happens, no matter whose fault it is, the Social Security Administration is required by federal law to reclaim the money. Generally, they do this by withholding part of your monthly Social Security payment until the overpayment has been satisfied.
Because this process of recovering overpayments can put some beneficiaries in a financial bind, the Biden Administration had limited the monthly collection rate – the amount of your benefit Social Security is allowed to withhold – to 10 percent. But effective later this month, the motto at SSA is, “No more Mr. Nice Guy.” Starting March 27th, Social Security will hold back up to 100 percent of your monthly payment in order to square your account with the agency.
Proponents of the plan argue that the state of our federal budget requires urgent, even draconian action. Opponents dub the new rule harsh and unnecessary, adding that the SSA is making the appeal process far more difficult by cutting back on personnel, as this Blog article describes.
In order to get a clearer picture, let’s take a look at this Kiplinger article on the topic, written by reporter Kathryn Pomroy. We’ve also searched out some other sources in order to report on the new “clawback” rules at Social Security. Should you be worried? The answer is, maybe.
Social Security Reinstates “100 Withholding Rate”
Pomroy writes, “The Social Security Administration (SSA) said it will reinstate its policy of recouping overpayments made to beneficiaries at a 100 percent withholding rate.” She adds that this action, reversing a year-old policy that was far more lenient, may put seniors in a bind.
“The move comes as many older workers and people over 65, who are largely retired, continue to experience a rise in financial hardship,” she writes. “This decision, set to take effect on Thursday, March 27, is driven by a push for what the Trump administration says is stricter financial oversight of the Social Security trust fund.”
$7 Billion in Projected Savings in Coming Decade
The math seems to indicate that this new, more aggressive policy will help the Social Security budget, at least a little. As Kiplinger reports, federal officials project program savings of about $7 billion over the next decade. Still, this represents a tiny percentage of the estimated $1 trillion that Social Security pays out annually.
Indeed, according to the article, the scope of the problem seems relatively small. “In a July report,” says Pomroy, “the SSA’s Office of the Inspector General said there were about $71.8 billion in benefits – less than 1 percent of the $8.6 trillion paid out – in improper payments between fiscal years 2015 and 2022.” Most of those have been traced to overpayments.
Pomroy notes that the program saving needs to be considered against the cost to individual beneficiaries. “[The 100 percent rate] is a sharp increase from the 10 percent limit put in place in early 2024 during the Biden era to help alleviate the financial hardship of retirees asked to repay large sums, often due to administrative errors,” she notes.
There are exceptions to the new, tougher rules, which only apply to new overpayments of Social Security benefits. Anyone who has been on a repayment plan in effect prior to March 27 will not see any chage in withholding rates. What’s more, says Kiplinger, those receiving disability payments through Supplemental Security Income (SSI) will not see any change in withholding rates for overpayment of benefits: it remains at 10 percent.
Appeal Process Could be Difficult with Staff Cuts at SSA
What happens next? Pomroy writes that your benefits are at risk if you have an overpayment that hasn’t been addressed.
“Beneficiaries who receive an overpayment after March 27 will have their entire monthly Social Security check withheld until the debt is repaid,” she writes. “However, if someone cannot afford full recovery of their overpayment, they can contact Social Security at 1-800-772-1213 or their local office to request a lower rate of recovery.”
Besides lodging an outright appeal of the overpayment decision, beneficiaries can request that collection be waived “if they feel it was not their fault or they can’t afford to pay it back,” says Pomroy. “The agency does not pursue recoveries while an initial appeal or waiver is pending.”
SSA Website Takes a Kinder, Gentler Approach to Collection
The Social Security website puts a somewhat kinder spin on the collection process.
“An overpayment is when you receive more money than you should have received for one or
more months,” the agency explains. “If this happens, we will notify you by mail. We are required by law to adjust benefits or recover debts when we establish that someone received payments to which they are not entitled.”
While SSA acknowledges that an overpayment notice can be “unsettling or unclear,” the agency promises to help. Overpayments are handled on a case-by-case basis. Once you’ve read the notice, you have 30 days to pay the bill, or 60 days to contact Social Security for an appeal. If you don’t, or if your appeal is denied, deductions will begin from your monthly benefit payments in order to recover the overpayment.
Biden Administration Changed to a Lower Rate in 2024
As we noted above, the Biden Administration made the change to a 10 percent monthly maximum withholding rate in March 2024. This article from Investopedia explains.
“Social Security beneficiaries who receive more than they are owed could have their entire monthly check withheld under a new policy update,” says the Investopedia report. “This reverses a policy from President Joe Biden’s administration, which decreased beneficiaries’ default overpayment withholding rate from 100 percent to 10 percent of a person’s monthly benefit.”
During the Obama years and in President Trump’s first administration, those owing money to Social Security could have their entire monthly check withheld to pay the debt. However, says Investopedia, “the policy to recoup overpayments by taking the full amount of a beneficiary’s check faced backlash. Beneficiaries received bills for up to tens of thousands of dollars, causing financial stress and sometimes homelessness, according to reporting by KFF Health News and Cox Media Group.”
We’ll watch this story as the new repayment policy kicks in later this month.
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(originally reported at www.kiplinger.com)