Social Security Takes Action on Overpayments

The Social Security Administration said it would no longer withhold entire payouts when it seeks to claw back cash from Americans who were accidently overpaid.

The change, announced on March 29, means that instead of 100 percent of a payment being held back—which had been the default position—10 percent (or $10, whichever is greater) will be withheld from each check.

The SSA, which pays out monthly benefits to recipients such as retirees and those with disabilities, came under fire from lawmakers and the public last year after an investigation found it had asked for billions of dollars back from beneficiaries, including some of the most vulnerable Americans, following overpayments. The agency’s new boss, Martin O’Malley, took the helm in December and promised to overhaul the system.

Stock image of a Social Security card. The SSA has overhauled its overpayments system to avoid causing financial hardship to beneficiaries when seeking repayment.

Kevin Dietsch/Getty Images

The policy change is an attempt to ensure the agency does not “unduly harm anyone” by withholding money to repay itself after making a mistake and overpaying a beneficiary, O’Malley said. Instead, a smaller amount of 10 percent is expected to be withheld until the accounts are balanced and the overpayment has been recovered. However, any overpayments resulting from fraud by the beneficiary would not benefit from the lower percentage repayment system.

“Social Security is taking a critically important step towards our goal of ensuring our overpayment policies are fair, equitable, and do not unduly harm anyone,” O’Malley said in the announcement. “It’s unconscionable that someone would find themselves facing homelessness or unable to pay bills, because Social Security withheld their entire payment for recovery of an overpayment.”

The change came into effect on March 25, the SSA said, adding that there would be a “short transition period where people will continue to experience the older policy.” Anyone who has 100 percent of their payout withheld during the transition period should contact the agency to discuss reducing the rate to 10 percent.

In October, the agency launched a review of its procedures, instigating a shake-up of the overpayments system. A number of new policies are set to be implemented as a result of the review. For example, the agency is working to reduce wage-related improper payments by establishing information exchanges with payroll-data providers in an effort to reduce the number of incorrect payments.

In the announcement Friday, the SSA said: “The agency works to pay the right people the right amounts at the right time, and Social Security issues correct payments in most cases. However, there is room to improve, as people count on the agency to prevent overpayments from happening and make it easier to navigate the recovery and waiver processes when they occur.”

The agency added, “When a person has been overpaid, the law requires the agency to seek repayment, which can create financial difficulties for beneficiaries.”

Anyone placed in 100 percent withholding during the transition period, or those who were already on the highest withholding rate, should call Social Security at 1-800-772-1213 to discuss reducing the rate with a representative. Beneficiaries also have the right to appeal the overpayment decision or the amount and should contact the agency if repayment would cause hardship. They can also ask Social Security to waive collection of the overpayment if they believe it was not their fault and they cannot afford to repay the sum.