New Bill Gives More Time to Respond to Social Security Clawback Notices

New legislation would give Social Security beneficiaries who receive notice that they have been overpaid 120 days to respond before clawbacks begin, up from the current 30 days.

The bill, the Social Security Overpayment Fairness Act, was introduced on May 7 by Reps. Yadira Caraveo, D-Colo., and Colin Allred, D-Texas, in an “effort to protect American seniors from facing financial hardship due to incidental Social Security benefit overpayments.”

About a million people a year are billed by the agency for benefit overpayments, often thousands of dollars, 60 Minutes reported in late 2023.

In response to an outcry over the clawbacks, Social Security Commissioner Martin O’Malley told Congress March 20 that SSA was ceasing the practice of withholding 100% of benefits, effective March 25.

Those who do not respond to repayment notices now have their benefits withheld at a rate of 10%, or $10, whichever is greater.

The SSA says 10% is a ”much more reasonable default withholding rate,” similar to the current rate in the Supplemental Security Income (SSI) program.

‘Devastating Overpayment Issues’

“In Colorado, there are over 939,000 Social Security recipients who receive $1.6 billion in monthly benefits,” Caraveo said in the statement introducing her bill. “However, over 2 million Americans are affected by Social Security overpayments each year, which occurs when a beneficiary receives more money than they should have received in a given month.”

While the Social Security Administration is required by law “to attempt to recover overpayments, Colorado’s seniors are being negatively impacted by overpayment notices that aren’t always their fault,” Caraveo said. 

Caraveo explained that her office “has seen devastating overpayment issues, such as constituents being told they are over the gainful employment threshold when they clearly aren’t, yet they’re still compelled to repay a large sum of money.”

The bill, Caraveo continued, “will address this issue head-on by extending collection periods and establishing a clear process for beneficiaries to challenge wrongful overpayment notices.”

The legislation would also improve “the process of reviewing changes in information reported by beneficiaries,” including expanding efforts to limit discrepancies in accuracy from beneficiaries self-reporting information, prevent and track overpayments to beneficiaries, the lawmakers said in a statement.

The bill, Allred added, “will provide flexibility and extend the time beneficiaries have before they have to repay overpayments and their benefits are intercepted” by the Social Security Administration.

The Social Security Overpayment Fairness Act would allow individuals notified of an overpayment to have more time to understand the notice, speak to a representative from the Social Security Administration, apply for the relevant waivers or develop a payment plan, the lawmakers said.

A First Step

Maria Freese, senior legislative representative at the National Association to Preserve Social Security and Medicare, told ThinkAdvisor Monday in an email that while the group has “not been asked to endorse this bill” and has no comment on it, the group supports “any action to mitigate the negative impacts of overpayments on beneficiaries.”

The main challenge, Freese said, “is that the Social Security Administration needs adequate funding from Congress in order to address this and other issues it faces. Unfortunately, the agency has been chronically underfunded for more than a decade.”

Nancy Altman, president of Social Security Works, added in another email that “demands to immediately repay benefits deemed overpayments months, years, or even decades after they were paid, caused by no fault of the beneficiary, can result in extreme hardship. The stress of a letter from the government demanding the repayment of tens of thousands of dollars that you don’t have and didn’t know that you owed, has landed people in the hospital.”

While overpayments have gotten the most public attention, “underpayments also create serious hardship, reducing income essential to meet basic necessities,” Altman said.

The Social Security Administration “is doing what it can through executive action, but legislation is needed,” she added.

While the Social Security Overpayment Fairness Act “is an extremely important first step. Congress should quickly enact it, but also do much more” by enacting a statute of limitations on the demand for repayment of overpayments, Altman said.

Congress “should also allow SSA to spend just a few tenths of a percent more of its accumulated surplus to hire enough staff to catch overpayments and underpayments more quickly,” Altman added.

Further, she said, lawmakers should “simplify and update Supplemental Security Income, including enacting the SSI Savings Penalty Elimination Act, so that the program is more administrable and fewer errors occur.”