The Social Security Administration is going to be less forgiving on their overpayment rules.
They announced recently that beneficiaries who have accidentally been overpaid may see 100% of their monthly Social Security check withheld until the debt is recovered. The previous cap on withholdings was 10%.
The new policy is set to start March 27. Social Security retirement, survivors, and disability benefits and could leave some people with no benefit payment in the interim.
"This latest announcement is going to be to revert to the previous procedure which was to essentially collect all benefits that were inadvertently paid to the beneficiaries," said Russell Gloor, a certified Social Security Advisor for the AMAC Foundation.
Some advocates and lawmakers fear that this will cause severe financial hardship for seniors, disabled individuals, and anyone else who relies on Social Security as their primary source of income.
"Everybody's different but if you look at the totality of what's owed to Social Security, it could be around $1 billion in overdue payments that were made, or more," Gloor said. "That's a pretty significant chunk of money, especially when Social Security is facing some solvency issues in about 10 years. It's a pretty severe impact to people."
Gloor believes what Social Security is doing to try and recover that money is good for solvency. He calls this method of collecting overpayments "reasonable." The only questionable thing about it to him is knowing how much time had transpired until Social Security notified the person that they had overpaid them.
"In some cases, people are owing $50,000 to $80,000 which is almost impossible for the normal person to pay back," he said.
There are a few reasons for why someone would be overpaid. One could be someone who's collecting early benefits did not know that they were restricted on how much they could earn so they continued to work.
"Unfortunately, Social Security doesn't learn about that until after the fact or until the IRS informs them on what someone's earnings are and so that results in a substantial amount of overpayment that needs to be collected," said Gloor.
A beneficiary can request a reconsideration, a waiver or both. If they can't afford full recovery of the overpayment, they can request a lower rate of recovery by contacting their local Social Security office.
Millions of Americans could be affected.