This new rule applies to Social Security retirement, survivors, and disability benefits, and could leave some recipients without any payment while the debt is being collected.
The policy has raised an alarm among advocates and lawmakers, who warn that it could cause serious financial strain for seniors, disabled individuals, and others who rely heavily on Social Security for their income.
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Changes introduced in Social Security Overpayment Rules
The new change, which will be effective from March 27, might result in the full withholding of benefits. This change does not apply to existing repayment plans, which will continue with the previous 10% withholding rate.
Moreover, Supplemental Security Income benefits are unaffected by this change and will maintain the 10% withholding limit. The SSA has started sending out notifications to beneficiaries about this new policy, which it considers a return to the previous practice before the 10% cap was implemented.
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Why are the changes being introduced?
The government defends the stricter policy as a fiscal responsibility measure. According to SSA actuaries, increasing the clawback rate to 100% could recover around $7 billion over the next decade, helping to strengthen the Social Security trust funds.
The acting commissioner of Social Security, Lee Dudek told Kiplinger in a statement, “We have the significant responsibility to be good stewards of the trust funds for the American people. 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.”
This policy shift marks a reversal of the SSA’s approach from last year. In March, under former Commissioner Martin O’Malley, the agency introduced a 10% withholding cap to prevent financial hardship after public backlash over aggressive recovery efforts. These efforts have led some beneficiaries to face unexpected bills for thousands of dollars in overpaid benefits.
The changes introduced to the Social Security Overpayment Rules are a result of claims of fraud and waste. The move to 100% withholdings is part of a larger push by the current administration to address perceived misuse of Social Security funds. President Donald Trump and his associates have consistently argued that the system is plagued by fraud and excessive overpayments.
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