The Social Security Administration (SSA) pays benefits on a monthly basis to millions of retirees, disabled individuals, and survivors all over the country. For many of these beneficiaries, their monthly benefit income is a crucial source of funds that enables them to cover their living expenses and make ends meet each month.
A new policy recently announced by the Trump Administration, however, may spell trouble for those reliant on their monthly Social Security benefits. In April, a 50% clawback rate for beneficiaries with an overpayment balance was confirmed. This means that beneficiaries could potentially lose half of their monthly benefit income if they had been overpaid in the past.
Fortunately, if a beneficiary does receive a notice of overpayment, there are steps that can be taken to prevent having half of your benefit withheld. Here is what you need to know.
Social Security beneficiaries face significant clawbacks
The Social Security Administration (SSA) has undergone a number of changes since the Trump Administration had been elected to office at the beginning of the year. The agency implemented cutbacks at the behest of the Department of Government Efficiency which was headed by Elon Musk at the time, and as a result, 7,000 jobs were cut and several offices were closed. The SSA also made some changes to its policies regarding identity verification over the telephone, and later in the year, the use of paper checks is slated to be eliminated as per an executive order from President Donald Trump.
The change that sparked the most concern from beneficiaries, however, has been the clawback rate for overpayment balances. During the former President Joe Biden’s time in office, the withholding rate for overpayment balances was capped at 10%. In March, however, the Trump Administration announced that the withholding rate would be brought back up to 100% of the benefit for those with overpaid balances. This new clawback rate sparked much concern and criticism and as a result, a few weeks later, an “emergency meeting” was held at the SSA and the clawback rate was dropped to 50%.
“In the last 100 days, we’ve gone from as low as 10 [percent] to 100 and now to 50,” observed Richard Fiesta, executive director of the Alliance for Retired Americans.
“Losing 50% [of benefits] for a lot of people could put them into immediate economic hardship,” Fiesta further noted.
Can the 50% withholding rate be avoided?
If a beneficiary is found to have an overpayment balance, the SSA will send them a notice expressing this. Overpayments can occur due to mistakes from either the SSA or the beneficiary themselves, for instance, if the beneficiary did not update their income or other changes in a timely manner.
“The agency overpaid more than 1 million beneficiaries in fiscal 2022 (the federal government’s fiscal year ends on Sept. 30) and over 980,000 recipients in fiscal 2023,” according to statements from the then-acting SSA Commissioner Kilolo Kijakazi.
As such, if a beneficiary does receive an overpayment notice, they should immediately contact the SSA as there are options available to avoid losing the full 50% of their benefit. The beneficiary has a 90 day window to do so before the 50% withholding rate comes into effect.
The first option available to a beneficiary is to submit an appeal regarding the overpayent notice because they do not believe that they have been overpaid. This can be done by filing Form SSA-561, the “Request for Reconsideration.”
Alternatively, the beneficiary could request a different repayment rate by filing Form SSA-634, the “Request for Change in Overpayment Recovery Rate.” Opting for this method will mean admitting to having been overpaid, however, losing half of your benefit would cause significant financial struggles.
The most ideal path to follow, however, would be filing Form SSA-632BK, the “Request for Waiver of Overpayment Recovery.” This option should be considered if the fault of the overpayment lies with the SSA and losing half of your benefit will cause financial hardship.