The second Wednesday of July is almost here which means that Social Security benefit payments for the month will soon begin to roll out from the Social Security Administration (SSA). For some of these beneficiaries, however, Social Security benefit checks for July may be hit with a steep garnishment before it reaches your bank account due to the SSA taking action to recoup all overpayments of Social Security benefits made in the past.
Whilst there had been some back and forth regarding the rate of withholding under the new Trump Administration, a 50% clawback rate was eventually settled on in April and subsequently, notices of overpayment were sent out to recipients deemed to have been overpaid by the SSA. Here is what you need to know.
Social Security benefit overpayments
In March, the Trump Administration announced that the 100% withholding rate on overpaid benefits would be reinstated, however, this sparked much controversy and criticism from beneficiaries and advocates. As such, an emergency meeting was held at the SSA in April, less than a month after the initial withholding rate announcement and the withholding rate was amended to be 50% of the benefit total for those with Title II benefits. Subsequently, in the emergency message, it was stated that, “any new Title II overpayment determinations will have the 50 percent benefit withholding automatically applied for overpayment notices sent beginning April 25, 2025, which is the first day of COM 05.”
The overpayment of Social Security benefits can occur for a number of reasons. For instance, if a beneficiary does not report a change in income or living situation, an overpayment could occur. Alternatively, the mistake could also occur due to a miscalculation from the SSA themselves. As such, if a beneficiary received a notice of overpayment on April 25th, they will have had a 90 day period during which a request for a waiver of repayment could be submitted or a lower rate of withholding could be negotiated.
Following this 90 day period that begun on April 25th, the SSA states in their emergency message that, “If the individual does not request a lower rate of withholding, reconsideration, or waiver after the approximately 90-day period, we will recover the overpayment by withholding up to 50 percent of their Title II benefit payment (if there is no fraud or similar fault), until we fully recover the overpayment.”
When will the garnishments go into effect?
Since the notices of overpayment were sent out by the SSA on April 25th, the 90 day window to take action will come to a close by July 24th which is fast approaching. If a beneficiary who had received a notice from the SSA but had not taken any action — by requesting a lower withholding rate or a waiver because they felt they had been paid correctly and would be placed under financial burden in the event of garnishment — the SSA will begin withholding 50% of their benefits going forward from July 24th until their balance is cleared. It should also be noted that the withholding rate for recipients of the Supplemental Security Income will continue to be 10%.
“Most recipients don’t realize they’ve been overpaid until they receive a letter from the SSA. Without regularly reviewing your earnings history and benefit statements, overpayments can go unnoticed. Even if the error wasn’t your fault, you’re still responsible for repayment—unless you appeal, request a waiver, or set up a payment plan within the 90-day period,” Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, said to Newsweek.
“The consequences can be significant, especially for retirees living on a fixed income. With inflation still elevated, a 50 percent reduction in benefits could severely impact housing, food, and healthcare,” Thompson added. “For many, Social Security is their only source of income—making these garnishments potentially devastating.”