The clawback reversal would apply to new overpayments and will save $7 billion over 10 years
The Social Security Administration said late Friday it is going to increase the amount it would claw back from Social Security recipients who received overpayments of their benefits, bringing the withholding back to 100% from 10%.
The change would apply to new overpayments.
Citing the Office of the Chief Actuary, the Social Security Administration expects this change will lead to overpayment recoveries, or a program savings, of roughly $7 billion over the next 10 years.
Social Security is slated to pay out $1.6 trillion in benefits in 2025.
"We have the significant responsibility to be good stewards of the trust funds for the American people," said Lee Dudek, acting commissioner of Social Security, in a statement announcing the change. "It is our duty to revise the overpayment repayment policy back to full withholding, as it was during the Obama administration and first Trump administration, to properly safeguard taxpayer funds."
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For years, the Social Security Administration (SSA) has erroneously overpaid some beneficiaries. Once discovered, the SSA would withhold money from the beneficiary's check until the amount was repaid, sometimes 100% of the benefit. Many people affected were elderly, disabled and low income who didn't realize they were being overpaid, and for whom losing their full benefit was a hardship. In early 2024, under former Social Security Commissioner Martin O'Malley, the repayment requirements were changed and the withholding was reduced to 10% from 100%. Now it will revert to 100% for most cases.
"This action, ostensibly taken to cut costs at SSA, needlessly punishes beneficiaries who receive overpayment notices - usually through no fault of their own. Many overpayments are the result of errors on SSA's part," the National Committee to Preserve Social Security and Medicare told MarketWatch.
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The announcement comes as Social Security, which pays out benefits to about 69 million Americans every month, is facing an insolvency crisis. The Social Security trust fund is on track to become insolvent by 2035, at which time benefits would be cut for current and future beneficiaries. Social Security is a major source of income for most people over the age of 65.
Social Security has also been under scrutiny by President Trump and Elon Musk, who heads the so-called Department of Government Efficiency. Both men have said there is fraud within the SSA and have repeated debunked claims that beneficiaries are collecting Social Security payments on accounts linked to people who are 150, 200 or even 300 years old.
The Social Security Administration's inspector general found that out of $8.6 trillion in benefits paid between fiscal 2015 and fiscal 2022, about $71.8 billion (or less than 1%) were improper payments. The agency said most of those were overpayments.
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The agency announced a massive reorganization last week, including significant job cuts.
"People should get the correct benefits they earned and if there is an overpayment it should be recovered by the Social Security Administration," said Richard Fiesta, executive director of the Alliance for Retired Americans. "However, going back to a 100% repayment rate is cruel. This will cause unnecessary harm and some of the most vulnerable Americans may see their monthly benefit reduced to zero until the repayment is satisfied."
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As of March 27, the agency will mail notices about the withholding rate increasing to 100% from 10%. The withholding-rate change only applies to new overpayments related to Social Security benefits, the agency said.
"The withholding rate for current beneficiaries with an overpayment before March 27 will not change and no action is required," the SSA said. The withholding rate for Supplemental Security Income overpayments will remain 10%.
Beneficiaries will be able to appeal the overpayment decision or the amount. If they don't believe the overpayment is their fault or they are unable to pay it back, they can ask for the SSA for a waiver. The agency said it does not pursue recoveries while an initial appeal or waiver is pending. A beneficiary that cannot afford the "full recovery of their overpayment" should call Social Security at 1-800-772-1213 or their local office to request a lower rate of recovery, the agency said.
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