Social Security isn't perfect. The agency has been known to overpay recipients by accident and then go after that money when beneficiaries least expect it.
Understandably, in the past, that's created some major hardships. Imagine getting overpaid in the amount of $5,000 by Social Security through no fault of your own, only to then find out about the agency's mistake and see that same sum withheld from your incoming benefits until Social Security recoups its funds in full.
Thankfully, it's a practice the Social Security Administration (SSA) will no longer uphold. Going forward, the SSA will reduce its overpayment recovery rate to 10% or $10 -- whichever is greater. And that could spell a world of relief for seniors who wind up with more Social Security income accidentally.
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An important change
The SSA recognizes that recouping overpayments at a rate of 100% has the potential to place an undue financial burden on seniors in that position. Going forward, it's limiting its recovery rate to 10% or $10 -- whichever amounts to more.
So let's say you were overpaid by the SSA in the amount of $5,000. Now, the agency won't come after you for $5,000 in full, but rather, $500.
Of course, there's an exception to this rule, and it's for beneficiaries who were overpaid due to intentional fraud. In that case, the SSA reserves the right to recoup all of its funds in full, and understandably so.
Social Security needs all the money it can get
The fact that the SSA is changing its approach to overpayments is a good thing in theory. But the problem is that the less money the agency is able to recoup from overpayments, the more precarious its financial situation is apt to get.
As it is, Social Security is staring down a major financial shortfall. In the coming years, it expects to owe more money in scheduled benefits than it collects in revenue, due to a shrinking labor force.
Social Security can tap its trust funds for a period of time to keep up with benefits as scheduled. But once those trust funds run dry, which is expected to happen in about 10 years' time, the program may have no choice but to cut benefits universally, leaving seniors who are already reliant on the program with even less monthly income at their disposal.
But still, the aforementioned change is one that's designed to be more fair to seniors, some of whom can't afford to see an overpayment clawed back. So for the most part, it can be considered a positive one.
That said, if you're notified of a Social Security overpayment, you should know that you do have the right to appeal that decision. You can also ask the SSA to waive collection of the overpayment if it wasn't your fault and you truly can't afford to pay it back. Don't hesitate to exercise these options if having to make any sort of repayment is likely to be a big burden on you.
