Social Security Administration Makes Major Policy Shift on Clawing Back Overpayments

A Social Security card sits alongside checks from the US Treasury in Washington, on Oct. 14, 2021. Kevin Dietsch/Getty Images

The Social Security Administration (SSA), the federal agency that administers Social Security payments, announced that it’s reforming how it recovers overpayment of benefits after receiving backlash over policies that cause financial strain for vulnerable and older Americans when the agency demanded abrupt repayment.

Reports such as those by “60 Minutes” and KFF Health News indicate that the SSA has been overpaying billions of dollars to beneficiaries, many of them on disability, and then causing harm to them by abruptly halting benefit checks to recoup the money it sent in error rather than offering them reasonable repayment terms.

While the law requires the SSA to recover overpaid benefits, the agency would sometimes dock people’s entire monthly Social Security payment, or send surprise demands that they pay back tens of thousands of dollars within 30 days, leaving some people financially destitute or even driving them into homelessness.

The SSA’s approach to recouping overpayments triggered outrage, leading to a congressional hearing, increased Senate oversight of the agency, and, finally, a policy change.

The agency announced on March 20 that it would adopt a series of reforms, including limiting clawback to 10 percent of an overpaid monthly benefit and extending repayment plans.

End of ‘Clawback Cruelty’

Social Security Commissioner Martin O'Malley said in a statement on March 20 that the SSA would be taking “four vital steps” to address the way it recovers overpayments.

Beginning next week, he said the SSA will be “ceasing the heavy-handed practice of intercepting 100 percent” of a beneficiaries monthly Social Security check if they fail to respond to a repayment demand.

Instead, the agency will use a “much more reasonable” withholding rate of 10 percent of monthly benefits, which is similar to the current rate in the Supplemental Security Income (SSI) program, he added.

During March 20 testimony at two Senate hearings, Mr. O'Malley referred to the much-maligned practice of using a 100 percent withholding rate as “clawback cruelty.”

Also, the SSA is adjusting repayment plans, giving recipients who have received overpayments an additional two years to repay the money by extending repayment plans from the current limit of 36 months up to 60 months.

The two other changes are that the agency will change its procedures so that claimants will no longer have to prove that the overpayments aren’t their fault, and that it will be easier for people to request waivers of repayment if they’re unable to pay or if they believe the overpayment wasn’t their fault.

During an interview with KFF Health News between Senate hearings on March 20, Mr. O'Malley said that a fifth reform is being considered, namely limiting how far back in time the SSA can reach to claw back overpayments.

Last year, KFF Health News and Cox Media Group stations obtained internal SSA documents showing that more than 2 million Americans are subjected to overpayment demands each year.

SSA Watchdog Put on Notice

A joint investigation by the Department of Justice (DOJ) Inspector General and the Council of the Inspectors General on Integrity and Efficiency’s Integrity Committee (IC) has raised concerns that some Americans may be subject to financial harm by the SSA’s Office of Inspector General’s (OIG) past administration of its civil monetary penalty program.

The issue was identified when the DOJ watchdog was carrying out the IC’s investigation of alleged wrongdoing by SSA OIG staff who were implementing or overseeing the civil monetary penalty program, which is an anti-fraud scheme, according to records obtained by The Washington Post.

The SSA OIG allegedly failed to properly notify some people before levying huge fines on them, according to the DOJ watchdog.

“Specifically, the SSA OIG’s records appear to show several cases in which the SSA OIG defaulted individuals for civil monetary penalties in excess of $100,000 where the SSA OIG had no evidence in its files that the individuals had been provided any written notice of the initiation of a Section 1129 action against them,” wrote DOJ Inspector General Michael Horowitz in a letter to Kevin Winters, IC chairperson.

Other instances that were identified by the DOJ watchdog were “numerous” cases where the SSA OIG imposed civil penalties on people after using service methods for providing notifications that Section 1129 doesn’t authorize.

“This information from the SSA OIG’s files raises significant questions about the validity of the SSA OIG’s imposition of civil monetary penalties,” the DOJ watchdog wrote.

Mr. Horowitz recommended several corrective actions, including an internal SSA review and legal analysis to determine whether the notices it sent out between 1995 and the present conformed to the law.

He also recommended that the agency review every Section 1129 action from 1995 to the present that resulted in imposition of penalty to determine if people were properly notified before being assessed penalties.

Mr. Horowitz also urged SSA not to initiate any new actions under Section 1129 until procedures have been put into place to ensure compliance with notification requirements.

The SSA OIG pushed back on the DOJ watchdog’s findings and recommendations in comments on a draft version of the report.

In Mr. Horowitz’s final report, the SSA OIG was cited as saying that, even though some of the methods it used to serve notices weren’t expressly authorized by some Section 1129 provisions, they were nevertheless “legally sufficient.”

The SSA OIG also argued that any “technical deficiencies” to the way it served notices would amount to “harmless error under 20 C.F.R. § 498.224, which is one of the implementing regulations for Section 1129.”

Further, a spokesperson for the SSA OIG told The Washington Post that it believes the DOJ watchdog “has no authority to make unprecedented programmatic recommendations” to the SSA.

Mr. Horowitz’s office referred requests for comment to the inspectors general council, while a spokesperson for the chairman of the council declined comment, according to The Washington Post.