According to a report from the Social Security Administration’s inspector general, the agency estimates that during the 2021 fiscal year alone, it made roughly $6 billion in overpayments. While investigating this story, our team reached out to seasoned professionals in the field, posing a crucial question: How can individuals reduce the likelihood of receiving unexpected bills from Social Security?
The amount of Social Security you’ll receive in retirement hinges on your accumulative payroll tax contributions during your working years. Any inaccuracies in the agency’s records can lead to complications down the road. You can access this information through your annual Social Security statements or by visiting your personal My Social Security account on the Social Security Administration’s website.
Retirement Benefits and Avoiding Overpayments
If you’re currently receiving Social Security retirement benefits, a crucial step in preventing overpayments is to review your earnings history as maintained by Social Security. It’s wise to do this well before your retirement. For those approaching retirement or already retired, there are tools available to help determine the correct benefit amount.
One such tool is “Maximize My Social Security,” a program that aids in evaluating intricate scenarios, such as the optimal timing for you and your spouse to claim retirement benefits. This choice can significantly impact your benefits. This program is available for an annual fee of $39.
Additionally, AARP offers a free basic Social Security calculator to assist you in calculating your expected benefits.
Experts in the field strongly advise all recipients to ascertain their correct benefit amounts, as it can take the Social Security Administration several years to rectify any errors.
Non-Covered Pension Plans
If you’re employed in the public sector, such as in roles like teaching or firefighting, it’s crucial to determine if you participate in a non-covered pension plan.
In the case of non-covered pension plans, rather than contributing to the Social Security system, your contributions are directed towards a pension plan administered by a state or local government. When you reach retirement age, it’s imperative to inform Social Security about the income from your non-covered pension. Failing to do so while also receiving Social Security benefits from another job could lead to potential overpayments.
Managing Social Security Disability Benefits and Returning to Work
For individuals currently receiving Social Security disability benefits who intend to reenter the workforce, it’s crucial to exercise caution. Once the initial trial work period concludes, it’s vital to adhere to specific income limits per month to maintain eligibility for disability benefits. This monthly earnings threshold is referred to as “Substantial Gainful Activity” (SGA). The SGA limit for non-blind recipients in 2023 is $1,470, with annual adjustments.
If you’re simultaneously receiving both Social Security disability benefits and worker’s compensation, it’s essential to report the worker’s compensation income. Neglecting to do so could result in owing substantial amounts to Social Security, creating potential financial complications.
Supplemental Security Income (SSI) Considerations
Supplemental Security Income (SSI) stands as one of the primary sources of overpayments, primarily intended for elderly or disabled individuals with limited incomes. However, the eligibility criteria for this program have remained static for years, making qualification increasingly stringent. If your individual assets exceed $2,000, you may lose eligibility for SSI benefits.
Navigating the SSI rules can be intricate. For instance, if you find yourself homeless and seek shelter on a friend’s couch, you’re required to disclose the couch’s value as part of the assessment.
Furthermore, if you meet the criteria for a full subsidy on your Medicare Part D premiums, you may also qualify for a $10 per month repayment plan. This means that Social Security will cap your monthly repayment at $10 to recover any overpayment. However, it’s essential to proactively contact Social Security to request this arrangement. Neglecting to address an overpayment notice could lead to the suspension of your benefit payments by the agency.
In addition to overpayments, Social Security also encounters situations where recipients receive less than they should. A report from the agency’s inspector general highlights that during the 2021 fiscal year, Social Security underpaid recipients by a significant $1.4 billion.
In such cases, Social Security is responsible for notifying affected individuals and disbursing the owed funds. However, your likelihood of receiving the correct amount is significantly higher if you proactively recognize the discrepancy, realize you should be entitled to more, and take the initiative to rectify the situation with Social Security.
Taking Action on Errors
If you come across any errors, whether in your earnings history maintained by Social Security or the payments you receive, it’s imperative to promptly inform the agency. Experts stress the importance of persistence, emphasizing that you should continue notifying the agency until you’re certain the mistake has been rectified.
Additionally, it is recommended that you maintain thorough records of all interactions with the agency, including documentation of correspondence sent and received. Keep meticulous notes detailing whom you spoke with, the dates of your conversations, the content of their responses, and their contact information for future reference.
In accordance with legal experts, if you can demonstrate that you reported an error to Social Security and received assurance from an agency representative that it was resolved, and subsequently, this information turned out to be incorrect, you may have a basis to contest an overpayment and potentially seek a waiver of repayment. To get in touch with Social Security, you can reach out by visiting your local field office, making a phone call, or contacting the national hotline at 1-800-772-1213.
In short, what about Social Security overpayments?
In essence, the issue revolves around the recovery rules for overpayments, stipulating that if the recipient is at fault, they must repay the incorrect benefits. While this seems logical, complications arise when the overpayment is due to the agency’s error. Some argue that, regardless of fault, overpaid funds should be returned, while others believe the government should absorb the loss for its mistake. The rulebook mandates repayment even if the fault lies with the SSA, provided the recipient can afford it, leading to complex and varied interpretations.
Addressing the root cause, the outdated “annual earnings test” or “retirement test” emerges as a major contributor to overpayments. This test deducts one dollar from Social Security checks for every two dollars earned over an annual limit, currently set at $21,240 for those below full retirement age. The complexity arises in administration, illustrated by a personal example from the 1970s, where adjustments led to frequent overpayments.