What You Should Know About the Social Security Overpayment Policy

The Social Security Administration (SSA) has announced a significant policy shift that will impact beneficiaries who have been overpaid. As of March 27, 2025, the SSA will implement a 100% default withholding rate for monthly checks to recover overpayments. This marks a stark reversal from the 10% withholding rate introduced in 2024, a policy designed to alleviate financial hardship for those affected.

This change has sparked concern among beneficiaries and advocates, as it could lead to severe financial strain for individuals who rely on Social Security payments as their primary source of income. 

How is Social Security calculated?

The SSA takes your average indexed monthly earnings (AIME) from your 35 highest-earning years, adjusts them for inflation, and applies a formula to determine your primary insurance amount (PIA). The PIA is the benefit amount you'll receive at your full retirement age. Factors like the age you begin claiming benefits and any additional earnings can also impact the final amount.

The Social Security Fairness Act, signed into law in 2025, eliminated the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO), which had previously reduced benefits for certain retirees, such as teachers, firefighters, and police officers, if they received pensions from non-Social Security-covered employment . By December 2025, this change is expected to result in at least a $360 monthly increase in benefits for some beneficiaries.¹ 

Understanding the overpayment issue

Overpayments occur when beneficiaries receive more money than they are entitled to under Social Security rules. These errors can stem from various factors, including miscalculations by the SSA, beneficiaries failing to update their income or marital status, or complex rules that are difficult to navigate. While overpayments represent a small percentage of the SSA’s total payments, they still amounted to nearly $72 billion in improper payments between fiscal years 2015-2022.² 

For beneficiaries, overpayments can come as a surprise. Many assume that the SSA has calculated their benefits correctly and may not realize they have been overpaid until they receive a notice about repayment. This can be a distressing experience, especially for those who are on a tight budget. 

The new policy: What it means

Under the new policy, beneficiaries who have been overpaid will face a 100% withholding rate from their monthly Social Security checks until the debt is repaid. This means that the SSA will withhold the entire monthly benefit, leaving recipients without any income from Social Security during the repayment period.

This policy applies to new cases of overpayments identified after March 27, 2025. For overpayments identified before this date, the 10% withholding rate will remain in effect. Supplemental Security Income (SSI) beneficiaries will also continue to have a 10% withholding rate.

The SSA has justified this change as a necessary step to safeguard taxpayer funds and ensure the integrity of the Social Security program. However, critics argue that the policy could exacerbate financial hardship for beneficiaries, particularly seniors and individuals with disabilities who depend on these payments to cover basic living expenses.

For beneficiaries facing overpayment recovery, there are options to mitigate the impact of the new policy.

Navigating the repayment process

1. Request a lower withholding rate

Beneficiaries who cannot afford the 100% withholding rate can contact the SSA to request a lower rate. This requires providing detailed information about income, expenses, and financial resources.

2. Appeal the overpayment decision

If beneficiaries believe the overpayment was not their fault or disagree with the amount, they can appeal the decision. The SSA does not pursue recovery while an appeal is pending.

3. Seek a waiver

Beneficiaries can request a waiver of the overpayment recovery if they can demonstrate that the overpayment was not their fault, and that repayment would cause financial hardship.

4. Stay informed

To avoid future overpayments, beneficiaries should regularly update the SSA with any changes to their income, marital status, or work situation. They can also review their benefit calculations to ensure accuracy.

The new Social Security overpayment policy represents a significant change that will have far-reaching consequences for beneficiaries. It’s crucial for individuals to understand their options and take proactive steps to address overpayment issues. Visit: SSA.gov to learn more.