The Social Security Administration is backing away from a recent policy change on recovering overpayments, which raised concerns that it would cause financial hardship for tens of thousands of beneficiaries.
In a “emergency message” sent to Social Security employees on April 25, the agency announced that its overpayment clawback rate will be reduced from 100% to 50%.
The change comes after SSA began recovering erroneous overpayments to Social Security recipients on March 27 by deducting 100% of a beneficiary’s monthly check until the money is repaid, a significant increase from the previous rate of 10%.
The agency did not provide an explanation for the change or respond to a request for comment.
The 100% clawback policy was directed by SSA Acting Commissioner Lee Dudek, who collaborated with Elon Musk’s Department of Government Efficiency, or DOGE, to reduce agency costs. Dudek stated in a March 7 press release that the change was necessary to “properly safeguard taxpayer funds.”
The agency’s efforts to recover overpayments have long been a source of frustration for thousands of beneficiaries who are overpaid each year, with many unaware they had received a larger benefit than they were entitled to until receiving notices from the Social Security Administration.
The agency’s inspector general discovered that 73,000 overpayments in 2022 were caused by errors in Social Security’s calculations, not the beneficiary’s fault.
“SSA’s automated systems were unable to compute benefit payments due in certain situations, and the Agency did not provide employees with a comprehensive tool to use when manually calculating them. Employees can make mistakes if they do not have adequate automation tools, according to the inspector general’s report.
Severe clawbacks cause hardship
Last year, the Biden administration capped the clawback rate at 10% following reports that some seniors and disabled beneficiaries had been forced into financial hardship, including homelessness, as a result of the previous 100% clawback rate. However, the 10% rate only lasted about a year before the agency raised it to 100% in March.
Approximately one-third of Social Security recipients rely on their monthly benefit check for at least 75% of their income, making them the most vulnerable to the government’s increased effort to recover overpayments. Some seniors told CBS News that they were left with insufficient funds to cover rent, food, and other necessities.
Many of the overpayments involve disabled workers who receive payments through the Social Security Disability Insurance (SSDI) program, which pays out an average of $1,538 per month, according to Dan Adcock, director of government relations and policy at the National Committee to Preserve Social Security and Medicare.
According to one SSA report, SSDI has a higher rate of overpayments than the overall Social Security program because disabled recipients may fail to report work income, which can happen if they are unaware they are required to disclose extra earnings to the agency. Social Security reduces benefits for disabled people who make more than $1,620 per month.
“While walking back the clawback of overpayments from 100% to 50% is a step in the right direction, taking half of the monthly benefit will still be a burden to many workers with disabilities who receive SSDI,” Adcock told CBS MoneyWatch on Tuesday.
He went on to say, “A fifth of all SSDI recipients rely on their benefits for nearly all of their income. With the 50% clawback rate, some SSDI recipients will continue to struggle to pay rent, food, utilities, and prescriptions.
According to KFF, the Social Security Administration reduced the benefits of approximately 670,000 recipients by 10% due to overpayments last year.
According to the SSA, the new rule began on April 25 with a 50% clawback for overpayments.