Millions of Social Security beneficiaries could soon find themselves without a monthly check if they are overpaid, following a major policy shift by the Social Security Administration (SSA).
Beginning March 27, 2025, the SSA will withhold 100% of benefits from individuals newly identified as having been overpaid – a significant jump from the current 10% withholding rate that had been introduced to protect recipients from financial ruin.
This controversial move, aimed at recovering $7 billion over the next decade, is being implemented as part of the SSA’s effort to be “good stewards of the trust funds” that support Social Security.
“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.
“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.”
Although the agency strives to ensure accurate payments, mistakes happen – and when they do, the law requires the SSA to seek repayment.
But critics argue that this harsh policy could devastate seniors who depend on their monthly checks for survival, especially when overpayments often result from SSA’s own errors.
Who Is Affected, and Why Are Overpayments Happening?
This new 100% clawback rate applies only to overpayments discovered after March 27, 2025.
Those with overpayments identified before this date will continue under the current 10% recovery rate, and Supplemental Security Income (SSI) recipients will also remain at 10%.
But while overpayments affect fewer than 1% of all Social Security payments, the total cost is staggering.
Between 2015 and 2022, the SSA issued approximately $72 billion in improper payments, most of which were overpayments, according to an inspector general report.
These overpayments represent 0.84% of all Social Security disbursements during that time – a small percentage, but a large number when dealing with trillions in benefits.
So how do these overpayments happen? According to the SSA:
- Beneficiaries fail to report earnings or life changes that affect eligibility.
- SSA employees do not update records in time, sometimes due to system complexities and manual processes.
Some beneficiaries may also intentionally risk overpayments – a tactic known as “strategic overpayment.” Ed Weir, a former SSA manager, explained that working seniors unsure if they’ll exceed the $23,400 earnings limit might take the risk, only to face harsh consequences under this new policy.
What Are the Risks and What Can Beneficiaries Do?
One major concern is Medicare premiums, typically deducted from Social Security checks.
If the SSA seizes the entire benefit for overpayment recovery, it’s unclear how Medicare premiums would be handled, raising fears that seniors could lose essential healthcare coverage.
“If you are on Medicare, it means you might not pay your Medicare, so you might lose your Medicare,” warned Weir. “It’s a trickle-down effect.”
For seniors facing hardship due to overpayment claims, there are options:
- Appeal the overpayment using SSA Form 561, if you believe you were not overpaid or dispute the amount.
- Request a waiver with SSA Form 632, if the overpayment was not your fault and repaying would cause financial distress.
- Negotiate a reduced withholding amount if full recovery would leave you unable to cover basic expenses.
“Two things have to be met for the payment to be waived: No. 1, it’s not your fault, and No. 2, you don’t have the ability to pay,” explained Weir.
Although SSA has not provided full clarification on how Medicare and other deductions would be handled under this policy, seniors are urged to contact SSA directly at 1-800-772-1213 or visit their local office for guidance.
As the new rule takes effect, advocacy groups and experts fear that the most vulnerable seniors could face devastating financial consequences.
While the SSA seeks to protect trust funds, many argue that the human cost of this aggressive recovery policy is too high, especially when the overpayments are often the result of administrative mistakes rather than fraud.