Social Security Is Starting to Do Right by People It Wronged

It's rare for a U.S. government agency to acknowledge making a mistake, let alone apologize to Americans and begin making amends. But that's exactly what the Social Security Administration is doing to address what its new Commissioner, Martin O'Malley, calls the agency's "heavy-handed" practice.

He's talking about "clawbacks" — a Social Security term for demanding more than one million Americans to immediately return Social Security benefits that the agency said were overpayments.

The Social Security Administration recovered $4.9 billion in overpayments last year and says another $23 billion is still due.

Some people have been ordered to quickly repay tens of thousands of dollars in cash or risk having all of their future Social Security benefits withheld. One 73-year-old widow wrote to personal finance journalist Terry Savage that the Social Security Administration had sent her a letter saying she owed $87,000 and had 30 days to repay it or the government would cut off her benefits.

"I was shocked," said Savage on an episode of the "Friends Talk Money" podcast she co-hosts with Pam Krueger and me. "I thought: 'There's got to be a mistake.'"

Social Security maven and Boston University economics professor Laurence Kotlikoff, who has heard many sad clawback tales himself, said: "Almost all the clawbacks come with: 'You owe us X and we have no obligation to tell you why, how we came up with that number or give you any proof.' It's worse than a Kafka novel."

But in a recent Congressional appearance, O'Malley — the former Democratic Governor of Maryland and Mayor of Baltimore — said his agency would soon begin taking dramatic action to address what he called the "grave injustice" to individuals subjected to clawback claims.

Some beneficiaries have lost their homes or faced dire financial straits after suddenly seeing their benefits cut off to recover decades-old overpayments, he noted.

"These injustices shock our shared sense of equity and good conscience as Americans," O'Malley told the Senate Special Committee on Aging.

Said Krueger: "I've never heard the Social Security Administration talk like this."

O'Malley's acknowledgement is far different from the way Social Security has handled clawbacks until now.

Perhaps you watched Anderson Cooper's "60 Minutes" clawbacks segment in November 2023, when four people described Social Security's resistance to their pleas to waive what they maintained were debts they didn't owe.

It took the harsh "60 Minutes" spotlight for the agency to halt those clawbacks. "Social Security only acts when they get embarrassed," said Kotlikoff.

Now, the Social Security Administration has a four-pronged effort to address overpayments nationwide with what O'Malley calls "urgency, diligence and speed." The agency's new and coming policies:

• It has stopped intercepting 100% of a monthly Social Security benefit by default if the person doesn't respond to the agency's demand for repayment. Instead, the Social Security Administration is shifting to a default withholding rate of 10% of monthly benefits.

• The burden of proof will no longer be on the beneficiary to prove whether they were at fault in causing the overpayment. The agency has started to reframe its guidance and procedures on this.

• It will become much easier for beneficiaries to ask for a waiver of repayment if they believe they weren't at fault or lack the ability to pay.

• The Social Security Administration will now approve repayment plans of up to five years for most beneficiaries asking for extra time. Previously, the plans were just three years long. For approval, you must only provide a verbal summary of your income, resources and expenses. Social Security's Supplemental Security Income (SSI) beneficiaries — people with disabilities or little or no income or resources — won't need to provide this summary.

Kotlikoff and Savage, who have written the new book on clawbacks, "Social Security Horror Stories," said on "Friends Talk Money" that they were pleased about the new clawback policies and what O'Malley's been doing.

"Right now, things are going exactly in the right direction. We could not be more happy," said Kotlikoff. "O'Malley is trying to change the culture of the organization overnight, and that's a big job."

Kotlikoff believes fewer people will wrongly receive overpayment notices in the future because O'Malley set up a better system for payroll companies to report workers' employment earnings to the Social Security Administration.

"They should have been doing this decades ago," Kotlikoff said.

But he and Savage say the Social Security Administration needs to do more, including getting specific about how it will address clawbacks.

For example, said Kotlikoff, O'Malley has said there would be a statute of limitations on clawbacks, but hasn't made clear exactly what that means.

He and Savage have been pushing for an 18-month limit. "So, if they've been overpaying you for more than 18 months, it's their mistake," said Kotlikoff, co-author of "Get What's Yours: The Secrets to Maxing Out Your Social Security."

Kotlikoff and Savage have been meeting privately with Social Security Administration staffers and think the agency will adopt their 18-month cap.

Kotlikoff also believes the agency must say how it will assist Social Security beneficiaries who've made repayments even though the government never proved the money was owed.

He concedes that fixing the clawbacks problem will require spending by the Social Security Administration even though it's expected to soon run short of money to pay beneficiaries. But Kotlikoff believes the overpayment fixes are "completely doable."

His big worry: "That we have an election, a new administration comes in and all these things get reversed."

But Kotlikoff thinks Republicans and Democrats in Congress will hold Social Security's proverbial feet to the fire. "I think it's not a Democrat/Republican thing. I think it's a human being versus Neanderthal thing," he said.

Sen. Ron Wyden, a Democrat from Oregon, has said he plans to meet monthly with Social Security Administration officials until the clawback problems are fixed.

Meantime, if you receive an overpayment notice and believe you didn't cause the overpayment, you believe the demand is unfair or you can't afford to repay the money, complete the Social Security Administration's newly simplified Request for Waiver of Overpayment Recovery, SSA-632-BK.

Savage offers this advice for anyone who has received a Social Security clawback letter: "Immediately, call Social Security at 1-800-772-1213 to make sure they adjust the repayment, and you get at least 90% of your check."

Richard Eisenberg is the former Senior Web Editor of the Money & Security and Work & Purpose channels of Next Avenue and former Managing Editor for the site. He is the author of "How to Avoid a Mid-Life Financial Crisis" and has been a personal finance editor at Money, Yahoo, Good Housekeeping, and CBS MoneyWatch. Read More