Social Security overpayments: When will they begin and who will be impacted?

A Return to a Prior Practice

In 2024, the SSA implemented a 10% default withholding rate after several beneficiaries received letters requesting immediate repayments for overpayments that sometimes amounted to tens of thousands of dollars. The new policy announced last week will reverse that decision, with the withholding rate set to return to 100%, as reported by CNBC.

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A report by the Congressional Research Service in 2024 identified several factors that contribute to Social Security overpayments. These include beneficiaries failing to notify the SSA of changes in their circumstances, such as changes in income or household status, as well as administrative errors like incorrect data entry or delays in processing updated information.

Overpayments occur when recipients receive more benefits than they are entitled to, often due to these errors or omissions. While the SSA is legally required to recover these overpayments, the process can cause financial hardship for those affected.

Who all will it impact?

While the SSA has not disclosed the exact number of beneficiaries who will be impacted by the policy change, it is clear that anyone receiving an overpayment after March 27, 2025, will be subject to the 100% withholding rate. With approximately 73 million Americans receiving Social Security benefits each month, thousands of recipients could be affected by this change.

Beneficiaries who face financial hardship due to the overpayment recovery process are encouraged to contact their local Social Security office or call 1-800-772-1213 to request a lower withholding rate. If the overpayment was not their fault or if the repayment is deemed unreasonable, they can also appeal or request a waiver.

‘Clawback cruelty’

The return to a 100% withholding rate has sparked criticism from some quarters. Former Social Security Commissioner Martin O’Malley, who instituted the 10% default withholding rate in 2024, described the practice of intercepting 100% of a welfare check as “clawback cruelty” during a Senate committee hearing in March 2024. O’Malley argued that the policy unfairly burdens recipients already struggling with financial difficulties.

Budget Cuts and Federal Efficiency

The new policy comes amid broader federal budgetary constraints, including cuts implemented by the Department of Government Efficiency (DOGE) under the Trump administration. These cuts have been a key aspect of the government’s focus on “efficiency,” which has also impacted several other federal programs, including Social Security.

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O’Malley took to X (formerly Twitter) on Friday to highlight the potential negative effects of these budgetary reductions. “Because of the mass firings and deep cuts to Social Security being made by the Musk/Trump co-presidency, the incidence of these sorts of improper payments is now going up, instead of down,” he stated.