Social Security increases overpayment withholding rate effective late march: What to know

The Social Security Administration (SSA) announced this weekend that it will resume the policy of recovering 100% of overpayments made to beneficiaries. The Office of the Chief Actuary estimates this change will result in an increase in overpayment recoveries (i.e., a program savings) of about $7 billion in the next decade.

A previous plan under the Biden administration had just sought 10% of funds that were overpaid. The current full recovery measure had been suspended last year after cases in which some Americans received surprise bills for thousands of dollars. Now, the policy will be implemented again under the Trump administration, as the agency claimed is required by law to recover improper payments.

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Social Security increases overpayment withholding rate

According to a statement issued last Friday, the SSA will increase the default overpayment withholding rate to 100% of a person's monthly benefits, the same percentage that applied before the 2024 reform. This modification is made in order to comply with regulations that require full recovery of overpaid benefits.

However, the change will not affect cases before March 27, 2025, in which the withholding rate will remain at 10%. This will also apply to overpayments related to the Supplemental Security Income (SSI) program, which benefits low-income seniors and people with disabilities.

This announcement comes after the 100% overpayment recovery system generated a strong public backlash last year. Beneficiaries who received additional payments were forced to return large sums of money within 30 days, seriously affecting their financial situation. In some cases, the bills ran into tens of thousands of dollars.

Those who were unable to pay the debt immediately faced having their monthly Social Security payment withheld altogether, leaving them in a situation of extreme economic vulnerability.

Here's what you need to know about overpayments

In many cases, the overpayments were caused by SSA errors. A report from the agency's Office of Inspector General revealed that 73,000 improper payments were the result of inadequate oversight over the accuracy of benefit calculations. Despite these mistakes, the agency has defended the recovery policy, arguing that it is their “responsibility” as stewards of the American people's funds.

SSA Acting Commissioner Lee Dudek stressed that a return to full withholding is necessary to ensure that Social Security funds are managed efficiently and responsibly. Overall, the SSA distributes about $1.6 billion a year in benefits, underscoring the magnitude of the operation and the importance of ensuring that erroneous payments are not made.

Recipients should be aware of this new measure and prepare for possible changes to their monthly payments if they have received overpayments. Although the SSA assures that recovery cases will be handled carefully, it is crucial that recipients keep an eye on their account statements and report any discrepancies as soon as possible.