Social Security clawed back overpayments tied to COVID-19 stimulus – lawmakers want answers

Some Americans said that they are being asked to pay money back on their Social Security benefits or have had that income suspended over claims of overpayment because of COVID-19 stimulus checks.

Several reports have indicated that some Social Security and Supplemental Security Income (SSI) recipients have seen their benefits suspended or have been assessed overpayments due to stimulus checks worth up to $3,200 per individual or $6,400 per married couple. But these payments, made between April 2020 and July 2021, were not supposed to count against Social Security benefits. 

Concerns over recipients paying a penalty for COVID-19 stimulus have pushed several democratic lawmakers to look into the situation. Sens. Ron Wyden, D-Ore., Sherrod Brown, D-Ohio, and Bob Casey, D-Penn. sent a letter to the Social Security Administration (SSA) regarding the matter.

"We are deeply concerned that [SSI] beneficiaries are receiving overpayment notices in error, because SSA is not following its own determination to exclude Economic Impact Payments [stimulus checks] from countable resources," the senators wrote to SSA Acting Commissioner Kilolo Kijakazi. "As you know, SSI benefits, while modest, have a substantial impact in the lives of the people who rely on them. 

"Benefit suspensions and overpayment notices – regardless of the cause – can have a profound negative impact in their lives. Further, losing SSI eligibility risks a lengthy bureaucratic process to restore eligibility and also risks beneficiaries' access to Medicaid coverage."  

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Overpayments process under review

SSA recently announced plans to review how it handles overpayments of Social Security benefits to make it easier for impacted Americans to navigate the recovery and waiver processes if they believe they shouldn't have to pay the money back.

In roughly 0.5% of cases, beneficiaries may have received overpayments of Social Security benefits. That number rises to 8% for overpayments of the Supplemental Security Income (SSI) program. According to an SSA statement between the fiscal years of 2015 and 2019, the agency paid roughly $283.4 billion to SSI recipients – $21 billion (7%) was estimated to have been overpaid. During the 2022 fiscal year, the agency recovered $4.7 billion of overpayments, according to a report by SSA's inspector general.

Kijakazi said that the agency wants to improve the process of appeals and waivers for Americans who may disagree about being overpaid. Some changes have already happened, including a just-released streamlined waiver request form. The form is easier to understand, making requesting a debt recovery waiver less burdensome. SSA is also developing a new electronic payroll data exchange program that will automatically use wage information to adjust payment amounts when appropriate to prevent overpayments. Additionally, the agency intends to publish a proposed rule to streamline processes and reduce the burden so eligible individuals can more easily seek debt relief.

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Some recipients owe more on taxes

Social Security and SSI benefits for more than 71 million Americans will increase by 3.2% in 2024, which pushes some beneficiaries into a higher income tax bracket, according to The Senior Citizens League (TSCL).

Recipients received increases of 8.7% in 2023 and 5.9% in 2022, which were the largest since the early 1980s because of record-high inflation. As many as 26% of survey participants who have received Social Security for more than three years report paying taxes on a portion of their benefits for the first time during the 2023 tax season, TSCL said in a survey. An even greater percentage will likely pay taxes on their benefits in 2024 because of a significant COLA increase in 2023. 

Higher incomes because of the large COLA increases over the past three years may also impact some seniors' eligibility for low-income assistance programs such as SNAP and rental assistance, the TSCL warned.

"Up to 85% of Social Security benefits can be taxable when income exceeds certain thresholds," TSCL said. "Unlike other parts of the federal income tax code, the income thresholds that subject Social Security benefits to taxation have never been adjusted for inflation. Consequently, as Social Security income increases due to COLAs, that can bump more retirees into the thresholds that triggers the tax on their Social Security benefits."

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