COULD YOU OWE A MASSIVE OVERPAYMENT DEBT TO SOCIAL SECURITY?

Bill and Susan went to their mailbox one day last August.  There was a letter from the Social Security Administration (SSA) in Baltimore.  Communication from Social Security wasn't unusual.  Bill had been receiving Social Security disability benefits for about 8 years due to a heart condition. 

But this letter was different.  It was a bill for $72,136.00.  It said the full amount must be repaid to the Social Security Administration within 30 days.  It created panic.  Bill and Susan had savings of only about $10,000.  Paying an over payment of $72,000 would be impossible.  Bill is 63 years old and unable to work.

In 2023, 986,912 people received over-payment bills because Social had paid them too much.  Now they wanted the money back.  This can happen when a recipient somehow becomes ineligible for Social Security payments-but keeps receiving and cashing the checks anyway.  Or, it may happen because Social Security made a mistake and overpaid the recipient through their own error.  But it makes no difference. Social Security will still want their money back, even if the over payment was their mistake.

Over payments can occur when a disabled beneficiary goes back to work after starting Social Security disability benefits.  When wages reach a certain level, the beneficiary has begun working at "substantial gainful activity" (SGA) and, therefore, has become ineligible to receive disability checks.  If the individual just keeps cashing the Social Security disability checks, however, an over payment debt begins to accumulate.

It can take years, even decades, for Social Security over payments to come to light.  Some recipients honestly don't realize that they are being overpaid; they just trust Social Security to pay the correct benefit.  Others might question the benefit but when finances are tight it's hard to stop the checks or refuse to cash them.  It's easy to assume that since Social Security sent the checks they meant for them to be cashed and spent.  Not always true.  The recipient is responsible for over payments, even when it was Social Security's fault.

Each year this happens to about one million people.   Some get staggering over payment  bills.  And Social Security assigns a collection specialist to get the money back.  It can become a nightmare.

The Social Security Administration actually has some discretion for leniency on over payments but they seldom show mercy.   And they've trained the staff, "Look, your job is to collect every penny you can, no matter what."  

The Social Security trust funds are expected to be so depleted by 2035 that full benefits cannot continue to be paid.  Therefore, the SSA is cash strapped and feels it incumbent upon them to collect every dollar of over payments.

How do you avoid the over payment trap?  Be sure that Social Security knows about changing life situations:  you go back to work, you begin earning more income from work, your household income increases, or your disabling condition improves--any number of situations that might change your benefit.  When in doubt, check with your Social Security office to be sure your benefit is correct.  

Remember, there is no excuse for taking an over payment from Social Security.  Even if it was Social Security's fault, you are still responsible for it.