The Social Security Administration (SSA) has put in place sweeping changes to its policy. Now, they will levy these administrative penalties differently in cases of overpayment. Following concerns from advocates and beneficiaries, the agency has reduced the default withholding rate from a staggering 100% to 50%. This new cost of living rate affects Title II benefits, such as retirement, survivors and disability insurance. It will be effective for overpayment notices released on/after 4/25.
President Joe Biden’s administration previously intervened by lowering the default withholding rate from 100% to just 10% of a beneficiary’s monthly payment or $10—whichever amount was greater. The SSA’s recent decision to move ahead with a 50% withholding rate has raised alarms. This ill-timed move brings into question the fiscal security of impacted individuals.
Beneficiaries who are receiving Title II benefits must move quickly. If they do not appeal to the SSA within 90 days after being notified of an overpayment, the agency will automatically recoup up to 50% of their monthly benefit until the total overpaid has been recovered. For the very low-income, mostly disabled Americans on Supplemental Security Income (SSI), the withholding rate is still stuck at 10%.
Richard Fiesta, the executive director of the Alliance for Retired Americans, stated passionately against the previous 100% withholding rate. He referred to it as “ridiculously draconian and cruel.” He said that a 50% cut still presents significant dangers to most beneficiaries.
“Losing 50% [of benefits] for a lot of people could put them into immediate economic hardship.” – Richard Fiesta
Experts are cautiously optimistic that the new policy provides meaningful improvements. It would still be a major blow to financial security for millions of people who depend on these benefits to pay for necessities. Kate Lang, director of federal income security at Justice in Aging, pointed out that losing half of one’s income can be particularly devastating for those living paycheck to paycheck.
“But if you’re relying on your benefits to pay your rent or your mortgage and buy food, losing half of that income is going to be devastating and can still result in people becoming homeless.” – Kate Lang
The SSA has long stated that beneficiaries should not be placed in a more adverse position because of factors outside their control. Fiesta acknowledged that the agency’s approach has changed pretty dramatically in a short period of time.
“In the last 100 days, we’ve gone from as low as 10 [percent] to 100 and now to 50.” – Richard Fiesta
Even with these improvements, beneficiaries continue to face a lack of choice. They may apply for a reduced withholding rate or contest the determination through an administrative process within a 90-day period. The reality is that results can differ dramatically based on personal situations. Lang once again made clear that just because there is a mechanism for negotiation, that doesn’t mean everyone gets the desired outcomes.
The SSA’s update is a welcomed step towards alleviating fears of fairness and equity in their administration of benefits. Advocates warn that clawback policies shift a significant and disproportionate financial burden on low-income people. These folks rely on these hard-earned benefits to supplement their daily living expenses.