Social Security to withhold full benefits in case of overpayments starting March 27; check impact

A new Social Security rule, which goes into effect this week, is set to a major change to how the agency recovers overpaid benefits.

Beginning on Thursday, March 27, the Social Security Administration (SSA) will reverse its policy on overpayments.

SSA shifts to full recovery for overpayments

Any beneficiary who is found to have been overpaid will "automatically be placed in full recovery at a rate of 100% of the Social Security payment," the SSA stated.


This policy will impact all overpayments that happen after Wednesday, March 27, 2025. The agency had previously implemented a withholding rate equal to 10 per cent of benefits in cases of overpayments.

Social Security can make errors in payment when it sends higher benefits than what recipients should receive. The agency, together with beneficiaries, encounters mistakes in payments due to either calculation errors or beneficiaries not reporting updates about their income, work status, and marital status changes correctly.

The SSA’s Office of the Inspector General documented that the agency issued approximately $72 billion in mistaken payments from 2015 to 2022, but still continued to hold $23 billion in September 2023 that remained unclaimed.

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Impact of new repayment rules on beneficiaries

Beneficiaries who are currently reimbursing an overpayment will continue to have a withholding rate of 10 per cent.

Those who will now receive overpayments will not be paid future benefits until the excess amount is repaid to the SSA.

After sending an overpayment notice, the SSA will initiate collection after a waiting period of at least 30 days. If you want to reduce the full withholding amount, then you should contact the SSA for a new repayment rate.

The new strict approach emerged after negative media coverage around SSA, which showed Social Security recipients who lost their houses or experienced financial hardships due to unexpected repayment requests.

Government efficiency plan and future changes

This policy change follows President Donald Trump's and Elon Musk-led Department of Government Efficiency’s (DOGE) focus on reducing federal funding. The Social Security Administration plans to reduce its operations force by more than 12 per cent, which may generate delays to benefit processing as well as slower customer service interactions.

Fully withholding benefits till recovery of overpayments will generate about $7 billion over the subsequent decade. Acting SSA Commissioner Lee Dudek said, “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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People who received overpayments have multiple options for resolution, such as filing appeals, requesting a waiver, or making repayments.

FAQs:

1. How long will the SSA wait before starting overpayment collections?
   The agency will wait at least 30 days after sending the overpayment notice before beginning collection.
   
2. When will the new change come into effect?

The new SSA policy change will be implemented from March 27 this year.