The Social Security Administration (SSA) has introduced new changes to its overpayment policies that could significantly impact beneficiaries who owe money. These changes include reduced withholding rates from monthly Social Security checks for those who have been overpaid. Here’s an overview of what these changes mean and how they might affect you.
Understanding Social Security Overpayments
A Social Security overpayment occurs when the SSA pays a beneficiary more than they are eligible to receive. This can happen for various reasons, such as failure to update income or changes in marital or work status, or due to SSA miscalculations. Regardless of the reason, beneficiaries are required by law to return the excess funds.
The SSA has several methods to recover overpayments, including:
- Seizing funds from other government benefits, such as tax refunds.
- Withholding future Social Security benefits.
- Garnishing wages, particularly if the beneficiary is not currently receiving Social Security benefits and is not making efforts to repay the amount.
- Reporting the debt to credit bureaus.
Why Were These Changes Needed?
The SSA recently acknowledged the issue of overpayments, which accounts for about 0.5% of the $1.4 trillion it pays in benefits to over 71 million people annually. The overpayment rate is even higher, around 8%, within the Supplemental Security Income (SSI) program due to its complexity.
As of November 2022, the SSA reported a total of over $20 billion in overpayments. The issue gained public attention after media reports highlighted the financial hardships faced by beneficiaries due to these overpayments. The SSA has faced criticism for overpaying beneficiaries and then using legal means to reclaim the money, often causing significant stress for recipients, particularly those with low incomes.
In the 2022 fiscal year, the IRS recovered approximately $4.7 billion in overpayments. Overpayment errors can go unnoticed for years, leading to large sums owed by the time the beneficiary is informed.
Key Changes to Overpayment Policies
To address these concerns, the SSA announced changes on March 29. The most notable change is that the SSA will no longer withhold 100% of monthly checks when recovering overpayments. Instead, the withholding will be limited to 10% or $10 per check, whichever is greater. This reduced withholding will continue until the overpaid amount is fully recovered.
It’s important to note that this reduced withholding rate does not apply to cases involving fraud.
Transition Period and Other Changes
There will be a brief transition period as the new policies are implemented. During this time, beneficiaries subject to the previous 100% withholding policy can request to have their withheld rate reduced to 10%. Beneficiaries can also appeal the overpayment decision or request a waiver if they believe the overpayment was not their fault and repayment would cause hardship.
Additionally, the SSA has implemented other measures to address overpayment issues:
- Shifting the burden of proof away from beneficiaries when determining responsibility for overpayments.
- Extending the maximum repayment period from 36 to 60 months.
- Improving information exchange with payroll data providers to reduce wage-related overpayments.
- Enhancing education for beneficiaries on reporting responsibilities and the consequences of inaccurate reporting.
- Streamlining internal processes through automation to expedite overpayment cases and exploring regulatory changes to make the process more efficient.
These changes are designed to reduce the burden on beneficiaries while improving the SSA’s ability to manage and recover overpayments more effectively.