Each month, approximately 70 million vulnerable Americans anxiously await the payment of their Social Security benefit. For some beneficiaries, however, the Social Security benefit payment for July may just be the last full check they receive for the foreseeable future. This is because the Social Security Administration (SSA) has officially started to withhold from benefits for beneficiaries who were found to have been overpaid in the past.
Notices informing the impacted beneficiaries that they had been overpaid were sent out earlier in the year on April 25th and beginning on July 24th, 50% of the benefit will be withheld for those who have an overpayment balance. Here is what you need to know.
The Social Security Administration officially begins clawbacks on overpayments
According to a report from the Office of the Inspector General at the SSA, “from FYs 2015 through 2022, SSA estimates it made nearly $72 billion in improper payments, most of which were overpayments. While this is less than 1 percent of the total benefits paid during that period, at the end of FY 2023, SSA had an uncollected overpayment balance of $23 billion.”
Subsequently in March, the Trump Administration announced that a 100% withholding rate for those found to have been overpaid will be put in place. The idea of a vulnerable household losing their entire benefit check this way sparked major criticism from advocates and beneficiaries and as a result, an emergency meeting was held at the SSA in April.
During this meeting, it was decided that the withholding rate would be dropped to 50% of the benefit instead and whilst this provides some relief to beneficiaries, many could still be at risk of financial strain if their benefits are withheld because a large number of beneficiaries rely on their monthly benefit check as a primary source of income. According to estimates from the agency, “roughly 21 percent of married couples and 45 percent of single recipients rely on Social Security for 90 percent or more of their income.”
As such, the emergency message stipulates 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.”
When will the clawbacks come into effect?
Notices informing beneficiaries of overpayment balances were sent out on April 25th. Following this, there would be a 90 day period before the withholding begins. During this period, if the recipient believed that they had been paid the correct amount in benefits and that repaying the debt would result in severe financial hardship, a waiver of repayment could be submitted — provided the recipient can prove that this is indeed the case. Alternatively, the recipient could also negotiate a lower rate of withholding, however, this would mean accepting that they had been overpaid in the past as well.
“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,” according to the SSA.
Since the notices of overpayment were sent on April 25th, the 90 day window will come to an end on July 24th, subsequently bringing the clawbacks into effect officially. This means that all benefits paid out from July 24th going forward will be subject to the 50% withholding rate if the recipient of an overpayment notice had not taken any action.
According to the SSA’s official payment schedule, the final benefit payment for July was scheduled for the 23rd — the final day of the 90 day window to take action — and as such, it is not likely that any July benefits had been withheld. As a result, benefit payments for August will likely be the first to be impacted by the clawbacks.