The scope of the problem
In February 2024, improper Social Security payments hit $1.1 billion, with overpayments and underpayments spread across various Social Security programs, including retirement, disability and survivor benefits.
Overpayments are anything but a windfall. They can create massive stress when the SSA demands that money back — sometimes years after the mistake was made. For many recipients, especially those on fixed incomes, repaying these funds is a struggle and can lead to financial hardship and even exacerbate poverty.
Underpayments, meanwhile, can leave retirees and other beneficiaries scrambling to make ends meet. Some eligible individuals aren’t receiving the full amount of benefits they’re entitled to, which can severely undermine their financial security during retirement — a time when every dollar counts.
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How improper payments are impacting Americans
When Social Security Commissioner Martin O’Malley announced a series of actions aimed at ending the problem in March, he acknowledged the hardships his agency has placed on those who get paid too little or too much.
Speaking on SSA’s efforts to claw back overpayments, O’Malley conceded that “doing so without regard to the larger purpose of the program can result in grave injustices to individuals.” The mistakes, he said, “shock our shared sense of equity and good conscience as Americans.”
In one extreme case, a legally-blind Georgia mother was forced to relocate to an extended-stay hotel after losing her $1,700 monthly disability check because of overpayments.
Underpayments present a different but equally alarming problem. Some retirees find themselves shortchanged because of errors in earnings records or miscalculations by the SSA. These discrepancies can result in months, if not years of lost income. For retirees on fixed incomes, shortfalls jeopardize basic expenses such as food, housing and healthcare.
How is the SSA fixing the problem?
The SSA is trying to improve administrative accuracy and reduce the backlog of cases waiting for review. The SSA is also working to modernize its technology and allocate additional resources to handle the rising volume of claims.
As for the heavy-handed approach to recovering overpayments, O’Malley pledged the SSA would reduce the default withholding rate for overpayments to 10% of monthly benefits, shift the burden of proof away from claimants for fault determinations, extend repayment plans to 60 months and make it easier to request a waiver if someone can’t repay an overpaid amount.
“Implementing these policy changes — with proper education and training across the people, policies, and systems of the agency — is an important but complex shift,” he said in his testimony. “And we are undertaking that shift with urgency, diligence and speed.”
But the solutions to the root problems may not be easy or quick. The SSA is experiencing ongoing staffing shortages, and surging claims – particularly as more baby boomers enter retirement – have increased the strain. The SSA’s outdated technology systems also contribute to delays, making it difficult for the agency to keep up with the growing workload.
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Read MoreImpact on Social Security’s financial health
Beyond the immediate impacts on individuals, improper payments could threaten the overall financial health of the Social Security Trust Fund. With the fund projected to become insolvent in 2037, every dollar counts. Improper payments — whether overpayments or underpayments — divert critical funds away from their intended purposes, exacerbating the financial challenges facing the program.
The longer these errors go unchecked, the greater the strain on Social Security’s resources. Over time, these inefficiencies could necessitate additional funding to fix administrative problems that could otherwise be used to bolster benefits for future beneficiaries.
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