Around 72 million Americans receive monthly benefit checks from the Social Security Administration (SSA), and for a large number of this cohort, these checks are a primary source of income that allows these households to cover their living expenses. In March, however, the Trump Administration announced that it would be reinstating a 100% withholding rate for beneficiaries who had been overpaid in the past. This withholding rate — which would essentially mean losing your benefit for the month — sparked much criticism and as a result, the withholding rate was dropped to 50% of the benefit not too long after the initial announcement.
Whilst the decreased withholding rate means that beneficiaries with overpayment balances will still be able to receive a portion of their monthly income, losing half of their monthly benefit could still cause financial strain to these households — particularly those who are reliant on their benefit as a primary source of income.
As such, the SSA will begin withholding benefits starting at the end of July. Here is what you need to know regarding smaller benefit checks for July.
The Social Security Administration begins clawbacks on overpaid benefits
An overpayment of benefits can occur for various reasons such as a miscalculation by the agency, a processing or data entry error, or failure from the beneficiary to report any changes to income or living situation. A report from the Office of the Inspector General at the SSA has revealed that “from FYs (fiscal years) 2015 through 2022, SSA estimates it made nearly $72 billion in improper payments, most of which were overpayments.”
Subsequently, the SSA will soon begin enacting clawbacks from beneficiaries who have been found to have been overpaid in the past and as such, it is stated in the emergency message 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. If an overpaid individual has a prior overpayment and incurs a new overpayment, all outstanding overpayments will default to 50 percent benefit withholding at the end of the approximately 90-day period if the individual does not request reconsideration, a waiver, or negotiate a lower repayment rate.”
Notices of overpayment had been sent out to the impacted beneficiaries on April 25th, and following this the recipient had a 90 day period to take action by appealing the notice if they believed it to be incorrect or if repaying the balance would result in severe financial strain. The recipient also has the option to negotiate a lower rate of withholding.
The 90 day period will come to a close on July 24th which means that all benefits following this date will be subject to the 50% withholding rate if the recipient had not submitted a waiver or reconsideration. The final Social Security benefit payment for July will roll out on July 23rd which means that the first round of benefits to be impacted by the 50% withholding rate will likely be the benefits for August which will roll out on the 13th, 20th, and 27th.
Other reasons for a smaller check
If you have not received a notice of overpayment but are still noticing a deduction in your benefit amount for July, there are two reasons other than overpayments that could be causing this.
The first reason could be your Medicare premium. As those enrolled in Medicare Part B would know, the premium amount is automatically deducted from your benefit. The reason your benefit may seem slightly lower in July is due to the mid-year increase that some enrollees may have faced as a result of factors such as a change in income bracket or enrollment to additional coverage.
The other reason could be due to income reporting changes and IRMAA. “The IRMAA surcharge is based on income reported two years prior—meaning 2023 tax returns now affect 2025 benefits. Seniors who had higher taxable income in 2023—whether due to asset sales, retirement account withdrawals, or delayed retirement credits—may now find themselves in a higher IRMAA bracket,” according to Fingerlakes1. This adjustment to your benefit occurs automatically and cannot be negotiated, however, an appeal can be submitted in the event of a major life change such as retirement or divorce.