Social Security Cuts Overpayment Withholding Rate to 50 Percent Down From 100 Percent

The Social Security Administration (SSA) has announced a new policy that reduces the default withholding rate to 50 percent for recovering Social Security benefit overpayments under Title II, the federal program covering retirement and disability insurance.

The change, outlined in an “emergency message” dated April 25, comes less than a month after the agency raised the withholding rate to 100 percent of monthly benefits—up from a prior 10 percent—to recoup overpayments. The initial sharp increase drew criticism from some lawmakers and advocates, who warned that full withholding could harm some lower-income Americans who rely on Social Security to meet basic needs.

Under the updated directive, any overpayment notice issued on or after April 25 will automatically carry a 50 percent withholding rate. Beneficiaries will have 90 days to respond—either by contesting the overpayment, requesting a waiver, or negotiating a lower repayment rate. If no action is taken within that window, the SSA will start withholding half the monthly benefit until the overpayment is fully repaid.

The updated rules do not apply to Title XVI overpayments, such as those involving Supplemental Security Income (SSI) recipients, who still face the 10 percent withholding rate. The revised policy also excludes cases involving fraud or similar fault, which follow different recovery procedures.

The shift marks the third related policy change in just over a year. In March 2024, the agency lowered the default withholding rate from 100 percent to 10 percent, citing the wish to ease financial hardship for affected Americans.

“It’s unconscionable that someone would find themselves facing homelessness or unable to pay bills, because Social Security withheld their entire payment for recovery of an overpayment,” Martin O’Malley, then Commissioner of Social Security, said at the time.

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That policy was reversed last month, on March 27, when SSA reinstated full 100 percent withholding, citing fiscal responsibility and an estimated $7 billion in savings over the next decade.

“We have the significant responsibility to be good stewards of the trust funds for the American people,” Lee Dudek, Acting Commissioner of Social Security, said in a statement.

Rep. John B. Larson (D-Conn.) criticized the increase as “unconscionable,” arguing that overpayments are not the fault of beneficiaries and overpaid recipients who rely on Social Security to make ends meet would face undue hardship if their entire checks were suddenly seized.

With its latest decision to cut the withholding rate in half, the SSA appears to be seeking a middle ground between fiscal responsibility and potential beneficiary hardship.

The agency disbursed roughly $1.4 trillion in benefits in fiscal year 2023 across its retirement and disability programs, according to the agency’s 2024 financial report. Of that amount, around $3.3 billion—or 0.24 percent—was classified as overpayments.

SSA’s overpayment recovery practices have come under increasing scrutiny from lawmakers and watchdogs in recent years, particularly for the stress they impose on beneficiaries who may have had little or no role in the errors.

In a November 2023 letter, Sens. Maggie Hassan (D-N.H.) and Bill Cassidy (R-La.) urged the agency to minimize overpayments and protect recipients from abrupt financial disruption, especially when the mistakes stem from agency error.

The Government Accountability Office has echoed those concerns, noting that the majority of disability beneficiaries who return to work eventually face overpayments—often amounting to thousands of dollars due to complex reporting rules and processing delays.

The SSA says it has launched an internal review and is working to expand data-sharing with payroll systems to help reduce payment errors.