An overpayment arises when Social Security pays you more benefits than you are legally entitled to receive. Each year thousands of people are overpaid benefits. Overpayments occur for many reasons. Sometimes it is Social Security’s fault, sometimes it is the beneficiary’s fault and sometimes it is a combination of both. Of course, Social Security would like to recover any benefits that were erroneously paid. When they realize that the overpayment occurred, they will try to collect back the money.
However, the law and the Social Security rules allow for “waiver” of repayment of the overpayment. If a waiver is granted a beneficiary who has been overpaid will not be required to make a refund.
There are two types of overpayments. The most common type is called a “deduction overpayment.” In these cases the beneficiary is legally entitled to benefits but was paid more than he or she should have been paid. This situation frequently arises when the beneficiary had earnings over the limit for the year, but benefits were paid because the beneficiary did not report the earnings, or gave an estimate that was too low.
Another common cause of overpayments is when a new beneficiary becomes entitled on a Social Security account on which there are already beneficiaries. For example, a man dies and leaves his wife and two children. They become entitled to benefits. Several months later a child by a previous marriage applies for benefits on that account. Due to the family maximum provisions, which limit the overall total of benefits that can be paid on one account, an overpayment may arise retroactively. When the widow and the first two children filed and started receiving benefits they were paid on the assumption that there would be only three beneficiaries on the account. When the child by the first marriage applies, his application can be retroactive for up to 6 months. His retroactive benefits mean that the other survivor beneficiaries were overpaid in the past.
Sometimes overpayments can occur due to clerical errors. When your benefits are being calculated, they are based on the amount of the worker’s earnings. Sometimes a clerical error can occur so that the amount of the earnings are miscalculated. This means that the amount of your benefit was greater than it should have been and the difference is an overpayment.
When Social Security determines that you have been overpaid, a letter will be sent advising you of that fact and the amount of the overpayment. The letter will explain how the overpayment occurred. Social Security will always request a full refund of the overpaid amount immediately, but will frequently accept either a partial refund or payments over time. In the overpayment letter, Social Security says they will start withholding 100% of your monthly benefits until the full amount of overpayment has been recovered. If you request an appeal, a waiver, or some other method of payment, Social Security will hold up any further processing of the recovery until a decision has been made on your request.
If waiver is approved, Social Security will not require repayment. Waiver is granted only upon certain conditions. In all cases you must have no fault in causing the overpayment, and it must be against equity and good conscience to make you repay it, or it would otherwise cause great financial hardship. They have very detailed rules about when waiver can be granted, and presumptions about certain fact patterns that qualify.
If you waiver request is denied, Social Security requires a refund. This can be done in different ways. They may accept a partial refund as a compromise in full settlement or allow for repayment over a period of time. Again, they have detailed rules they follow when deciding on your request for a partial or deferred repayment.
If you disagree that there has been an overpayment, or disagree with the amount of the overpayment, you are entitled to the usual appeals procedures including a reconsideration and hearing before and administrative law judge. No action to recover the overpayment is taken while the appeals process is pending.