Overpayments of Social Security benefits can occur as a result of an incorrect calculation from the Social Security Administration (SSA). This miscalculation often happens if the agency does not have the correct or complete information of the beneficiary.
In pursuit of retrieving the overpaid funds, the Social Security Agency announced that beneficiaries with overpaid balances would now be subject to a 100% withholding rate, as per a post on the SSA website at the beginning of March.
However, a few weeks following this, the agency amended this decision to have the withholding rate capped at 50% for certain beneficiaries.
Social Security drops clawback rate
When a beneficiary is found to have an overpayment balance, the agency will send the beneficiary a notice requesting a complete refund. The former 100% clawback rate applied to those who had received an overpayment after March 27 and the agency had begun sending out notices regarding this on March 27 as well.
According to estimates from the Office of the Chief Actuary, “this change will result in an increase in overpayment recoveries (i.e., a program savings) of about $7 billion in the next decade.”
The 100% withholding rate faced major backlash upon its announcement, however. Richard Fiesta, executive director of the Alliance for Retired Americans, said that “the 100% withholding rate was ridiculously draconian and cruel.”
Following this, in an “emergency message” in April, it had been stated that only 50% of benefits would be withheld from those who qualify for Title II benefits with overpayment balances. Title II beneficiaries include retirees, survivors, and disabled individuals. As such, the new 50% withholding rate for this cohort will apply to overpayment notices that have been sent out on or after April 25. It should also be noted that the Supplemental Security Income will continue to have a 10% withholding rate.
“In the last 100 days, we’ve gone from as low as 10 [percent] to 100 and now to 50,” Fiesta noted. Despite the clawback rate being dropped to 50% of the benefit, experts are of the opinion that the impacted individuals will still be faced with increased financial pressures. “Losing 50% [of benefits] for a lot of people could put them into immediate economic hardship,” Fiesta asserted.
“Obviously, it’s better not to lose all of your income,” said Kate Lang, director of federal income security at Justice in Aging. “But if you’re relying on your benefits to pay your rent or your mortgage and buy food, losing half of that income is going to be devastating and can still result in people becoming homeless.”
Under the previous administration of former President Joe Biden, the withholding rate for overpayment balances had been capped at 10%, or alternatively, $10 — with the larger amount of the two withheld. However, in the initial announcement detailing the 100% clawback rate, Lee Dudek, Acting Commissioner of Social Security said, “It is our duty to revise the overpayment repayment policy back to full withholding, as it was during the Obama administration and first Trump administration, to properly safeguard taxpayer funds.”
Repayment terms
Upon receiving a notice of overpayment, a beneficiary will have 90 days to request a lower withholding rate. Alternatively, a waiver of recovery or reconsideration could also be requested. If the beneficiary fails to do so within 90 days, however, the agency will go forward with the 50% withholding rate until the overpayment balance is cleared, as per the agency’s update.
Lang, however, feels that beneficiaries should note that negotiating their repayment terms may result in varying results, some of which might not turn out successfully.
“There are thousands of employees that individual beneficiaries are going to be dealing with to ask for a waiver or ask to negotiate a different repayment rate,” Lang explains. “And those employees have a lot of discretion in what they decide.”