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Retirement Planning > Social Security

Social Security Made Nearly $72B in Improper Payments, Watchdog Reveals

By Melanie Waddell

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What You Need to Know

  • The payments, comprising less than 1% of total benefits paid, were mostly overpayments made from fiscal years 2015 through 2022.
  • The SSA recently eased the rules around recovering overpayments to reduce financial hardship to the beneficiaries who must pay back the excess amount.
  • The agency is working to improve data collection to help prevent overpayments.

Social Security made nearly $72 billion in improper payments, most of which were overpayments from fiscal years 2015 through 2022, according to a recently released report by the Social Security Administration’s Office of the Inspector General.

While the $72 billion is less than 1% of the total benefits paid during that period, at the end of fiscal 2023, SSA had an uncollected overpayment balance of $23 billion, according to the report, Preventing, Detecting, and Recovering Improper Payments.

The watchdog office has identified improper payments as a major management challenge since fiscal 2002, according to the report.

Clawing back improperly paid benefits can result in financial hardship. About a million people a year are billed by the agency for benefit overpayments, often thousands of dollars, “60 Minutes“ reported in late 2023.

Social Security Commissioner Martin O’Malley told lawmakers earlier this year that addressing overpayments was a top priority.

On March 20, O’Malley, who took over as head of the agency in December, told Congress that SSA was ceasing the practice of recovering overpayments by 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 has said 10% is a ”much more reasonable default withholding rate,” similar to the current rate in the Supplemental Security Income (SSI) program.

“Improper payments have been a longstanding challenge for SSA,” Michelle Anderson, assistant inspector general for audit and acting inspector general, said in a statement. “While the Agency has taken actions to address this challenge, it needs to do more, and OIG’s recommendations can guide the Agency as it determines those corrective actions.”

Anderson stated that “without better access to data, increased automation, systems modernization, and policy or legislative changes, improper payments will continue to be a major challenge for SSA into the future.”

Root Causes

While O’Malley has prioritized addressing improper payments, Nancy Altman, president of Social Security Works, told ThinkAdvisor Thursday in an email, ”there is a limit in what any commissioner can do.”

Said Altman: “To address the root causes of improper payments, the Supplemental Security Income program must be simplified and the Agency must be adequately staffed. Only Congress can simplify the law. Only Congress can stop starving the agency.”

Beneficiaries who receive overpayment notices, “whether as a consequence of an error on their part or on the part of the program, are often surprised to receive them and may not have the money on hand to immediately pay back the overpaid funds,” added Maria Feese, senior legislative representative at the National Committee to Preserve Social Security and Medicare, in another email.

O’Malley “has been in office for less than a year, and, under his leadership, SSA has taken admirable strides to reduce overpayments and cushion the impact on seniors who receive overpayment notices,” Feese said.

While the OIG report “may be correct that SSA’s efforts to date have not yet solved the problem,” Feese continued, “it’s important to bear in mind that SSA has been chronically underfunded for more than a decade, while the agency’s workload has significantly increased as the number of retirees swells.”

House appropriators have designated roughly $400 million below current funding, while the Senate approprations bill provides some $400 million above current funding, Feese noted, “but nowhere near the boost of $1.3 billion that President Biden requested in his 2025 budget.”

SSA “cannot properly service Social Security beneficiaries without proper funding, let alone fully solve the overpayment problem,” Feese said.

Improper Payments

Improper payments “can be overpayments (when SSA pays someone more than they are due) or underpayments (when SSA pays someone less than they are due),” the report states.

Most of the unimplemented recommendations made by OIG addressed two reasons for improper payments in SSA’s programs: beneficiary self-reporting information and insufficient controls in SSA’s automated and manual processes, the report states.

OIG’s audits confirmed SSA’s reliance on beneficiaries to self-report changes in their circumstances resulted in improper payments.

“Obtaining data that assist with making eligibility and payment determinations from external sources, such as other Federal and state agencies and financial institutions, is critical to preventing and detecting improper payments,” the report warns.

While processes to recover overpayments and address underpayments also need to be improved, the report states, SSA has taken some steps to improve the prevention, detection and recovery of improper payments.

For instance, the report notes that in October 2023, “SSA initiated a comprehensive review of overpayment procedures, policies, systems, and communications to determine where it could make improvements.”

SSA is also developing “an information exchange to obtain monthly earnings data from third-party payroll data providers, which may reduce the occurrence of improper payments for beneficiaries who work while receiving benefits,” the report states.

Melanie Waddell

@Think_MelanieW

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