Dealing with Social Security and SSI Disability Overpayments
Description: Receiving an overpayment notice from the Social Security Administration can be overwhelming and confusing. In the first installment of our new Deeper Dive Series, we break down exactly why these overpayments happen, what they mean for your SSI or SSDI benefits, and the immediate, practical steps you can take to address them. Don't panic—get the facts and protect your financial security.
What is an Overpayment and Why do They Happen?
A Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) overpayment occurs when a beneficiary receives a cash payment when eligible for a lower payment or not eligible for any payment at all. SSDI is used in this article to refer to Social Security Disability Insurance Benefits, Childhood Disability Benefits, and Disabled Widow’s/Widower’s Benefits.
Overpayments may be caused by various factors affecting eligibility or payment amount. For SSDI this may include, having countable monthly earnings above the substantial gainful activity (SGA) level following the nine-month trial work period, benefit cessation month, and two additional grace period months. For SSI this may be caused by unreported and/or unbudgeted income, including earnings, by a change in living arrangements, or by retaining countable resources above the SSI limit.
Our primary focus in this article is on overpayments related to work and wages earned as an employee. This article will address:
avoiding overpayments in the first place,
appealing the finding of overpayment through the reconsideration process,
seeking a waiver of all or part of the overpayment,
seeking a favorable rate of repayment for any overpayment still owed, and
the role a benefits counselor may consider playing related to overpayments.
Avoiding Overpayments in the First Place
SSDI – Timely Reporting of Earnings and Reductions from Earnings
Benefits counselors can play a critical role here. Early on, you can verify the beneficiary’s benefits and status by obtaining the Social Security Administration’s (SSA’s) Benefits Planning Query (BPQY), and verifying, for example, the use of one or more trial work period (TWP) months (i.e., $970 monthly gross earnings in 2022). As of March 18, 2021, a beneficiary can get their IRS data (wages) previously available in their BPQY, by downloading their Social Security statement from their my SSA account at www.ssa.gov/myaccount (formerly known as Social Security Earnings Statement).
The SSDI beneficiary should report monthly earnings if they believe one or more TWP months were used in the past, if it appears current earnings are enough to start using TWP months, or when countable earnings (i.e., after deductions for paid time off (PTO), impairment related work expenses (IRWEs), and subsidies) are above the monthly SGA amount for the year in question ($1,350 or $2,260 for statutorily blind in 2022). We urge benefits counselors to communicate with local SSA offices to determine when and the best way to report earnings from a job or self-employment. When in doubt, plan to report earnings every month.
It is important that beneficiaries, or benefits counselors acting on their behalf, report any proposed reductions, including those related to PTO, IRWEs, or subsidies. As appropriate, documentation and references to SSA policy should be submitted to support the use of these proposed reductions, and work reviews should be requested to ensure that SSA considers applying these reductions.
SSI – Timely Reporting of Earnings, Other Relevant Events; Spending Down Excess Resources
Monthly SSI payments can vary, generally based on gross earnings from two months earlier (e.g., June’s payment is based on April’s wages). If wages are the same each month, your SSA office will likely prefer an estimate of monthly wages with a new report of wages only when they vary from what was estimated. Knowing that SSA might not be timely in recording wage reports, beneficiaries may consider establishing an estimated wage that is slightly higher than expected – as doing so will likely avoid an overpayment, with any resulting underpayments paid to the beneficiary in the future.
It is also important to report proposed reductions from monthly gross earnings, other than the standard $65 plus 50 percent exclusions. Proposed reductions could include IRWEs, blind work expenses, and any special exclusions, such as the student earned income exclusion or the exclusion for federally sponsored work study earnings. In some cases, the beneficiary or benefits counselor will want to refer SSA to the Program Operations Manual Systems (POMS) section that supports the special exclusions.
The SSI beneficiary must be aware of the SSI resource limit of $2,000 for individuals and $3,000 for eligible couples, with resources generally determined as of the first day of a month. If countable resources are expected to go above $2,000, the beneficiary must have a plan to either spend the extra money or put it into an exempt account, such as a Plan to Achieve Self Support PASS) or an Achieving a Better Life Experience (ABLE) account. An ABLE account is available to individuals with an onset of disability prior to age 26. See the ABLE National Resource Center for more information on ABLE accounts, www.ABLEnrc.org.
Appealing the Finding of Overpayment (or Overpaid Amount) through the “Reconsideration” Process
When the beneficiary receives SSA’s notice of overpayment, they can request a “reconsideration” to challenge the overpayment itself or the amount of overpayment, using form SSA-561-U2, https://www.ssa.gov/forms/ssa-561-u2.pdf, or any other form of written request. The beneficiary has 60 days from the date the notice was received to request reconsideration (and SSA will assume the beneficiary received the notice five days after the date on the notice), but it is always safest to get the appeal in much earlier. A request filed late can still be processed if SSA finds there was good cause for missing the deadline. By filing a timely SSDI or SSI request for reconsideration of the overpayment decision, any action to recover the overpayment is put on hold until a final decision is made. POMS SI 02220.017. Additional appeals include a hearing, Appeals Council Review, and US District Court review when earlier appeals are unsuccessful.
Rachel’s SSDI Overpayment and Appeal. She completed her TWP in December 2019. During all of 2020, Rachel’s gross earnings were $1,364 per month (assume earnings of $62 per workday during each month). During 2020, Rachel’s monthly SSDI payment was $1,200 and the amount of earnings considered to be SGA was $1,260. Rachel was laid off at the end of 2020 and did no work in 2021.
SSA sends Rachel a Notice of Overpayment dated September 15, 2021, stating:
Her benefit cessation month (first month of SGA-level earnings after TWP) was January 2020, and she was eligible for SSDI for January through March 2020 as a 3-month grace period.
Since she performed SGA during the remaining months of 2020, she was overpaid $10,800 (9 x $1,200).
What can Rachel do to challenge the information in this notice?
Using Paid Time Off to Reduce Countable Earnings. In determining whether monthly earnings are more than the SGA threshold, SSA will not count earnings if no work was performed to generate them:
“Only the earnings paid as a result of work activity should be used in determining if the individual has engaged in SGA in a particular month.”
POMS DI 10505.010 C. We traditionally think of PTO as paid days or hours of vacation, personal, holiday, or sick time, but it could include things such as paid bereavement time or pay received during a weather or pandemic-related office closure.
Rachel files a timely reconsideration appeal and provides evidence of PTO, along with a reference to POMS DI 10505.010 C. She referenced her PTO as follows:
April 2020 – employer business closed for the month due to COVID restrictions. Rachel received full pay but did no work, making her countable wages $0, less than the SGA level.
May 2020 – PTO for Memorial Day plus one vacation day (2 x $62 = $124 PTO). Countable wages now $1,240 ($1,364 – 124), less than $1,260 SGA level.
July 2020 – PTO for Fourth of July and one sick day (2 x $62 = $124 PTO). Like June, countable wages reduced to $1,240, i.e., below SGA level of $1,260.
October 2020 – PTO for Columbus Day (Indigenous People’s Day in some places), and two paid bereavement days (death of parent) (3 x $62 = $186 PTO). Countable wages reduced to $1,178, i.e., below SGA level of $1,260.
December 2020 – PTO for Christmas Day, one-half day PTO each for Christmas Eve and New Year’s Eve (2 x $62 = $124 PTO). Like May and June, countable wages reduced to $1,240, i.e., below SGA level of $1,260.
The reconsideration decision, dated January 20, 2022, reduces Rachel’s overpayment from nine months to four months during 2020. This reduces the overpayment to $4,800 ($10,800 – 6,000). Note: If Rachel had proof of IRWEs or subsidies for this period, she may be able to further reduce or eliminate the overpayment.
With her overpayment amount reduced to $4800 due to her reconsideration, what can Rachel do to have the remaining amount waived?
Seeking a “Waiver” of SSA’s Right to Collect an Overpayment
The typical way to obtain a waiver is for the SSDI or SSI beneficiary to meet a two-part test:
The beneficiary must be without fault; and
Either recovery would create an undue hardship, or recovery would be against equity and good conscience (e.g., beneficiary spent money or made a financial commitment believing they were entitled to payments).
POMS GN 02201.019, GN 02250.150.
This waiver is requested using form SSA-632 BK, https://www.ssa.gov/forms/ssa-632.html. The SSDI beneficiary must complete all parts of the form. The SSI beneficiary or dually eligible SSDI/SSI beneficiary need only complete the questions related to without fault, as undue hardship is assumed based on receipt of needs-based SSI.
A waiver can be requested at any time (no 60-day time limit), even after the overpayment has been recouped. POMS SI 02260.001 A.3.; GN 02250.310. The general rule is that if the beneficiary requests reconsideration or waiver within 60 days of the overpayment notice, payment will continue without adjustment until a decision is made. POMS SI 02220.010 A; GN 02201.025. Many Social Security local offices, however, begin to recoup if no waiver request has been made within 30 days of the overpayment notice. Benefits counselors should rely on these POMS and insist that SSA adhere to its own policies.
SSA will often schedule a meeting, in person, online, or by telephone to discuss the waiver request, and issue an initial decision, when they intend to deny the waiver. If reconsideration is not requested and waiver is requested outside the 60-day period, adjustment/collection efforts will cease, and there will be no further reductions to the SSDI or SSI payments while the waiver request is pending. POMS GN 02201.011 A.
Rachel’s Request for a Waiver: After her partial success in reducing the $10,800 overpayment to $4,800, she now seeks to have this remaining overpayment waived. She requests a waiver on February 15, 2022, and submits a completed form SSA-632 BK on which she documents:
She was without fault because: she submitted proof of monthly wages for every month of 2020, by the 15th of the next month, and SSA still did not complete its work review until September 2021; and she did not understand the work review process or the policies related to working, and assumed she was correctly paid when SSA continued paying her.
Based on her finances at the time, i.e., on February 15, 2022 (she was still not working in February 2022), her expenses were slightly more than her $1,220 SSDI payment each month.
By submitting her waiver request within 60 days of the January 22nd reconsideration decision, Rachel ensures that SSDI will continue, without reduction, pending the waiver decision. She has presented a good case for without fault, providing a strong likelihood of waiver approval since any repayment would present a hardship. A big lesson from this case is that SSA must consider hardship based on present circumstances and not based on a more favorable financial picture from the past.
Administrative Waiver for SSI Overpayment of $1,000 or Less
When the “original overpayment” (not the balance) is $1,000 or less, SSA will administratively waive recovery or adjustment of future SSI payments to collect the overpayment. However, the beneficiary must make a specific written or oral request for a waiver or reconsideration. SSA will not grant this waiver if “from the facts apparent on the face of the waiver or reconsideration request, [they] believe there is an indication of fault on the part of the overpaid recipient.” If an original overpayment is $1,000 or less and the beneficiary requests reconsideration, SSA will treat this as a request for waiver and grant the waiver request unless there is an indication of fault. POMS SI 02260.030 B.2, C.2.
SSI Overpayment Caused by Excess Resource of $50 or Less
If excess resources were $50 or less for the month or for several months, POMS SI 02260.035 A.1 provides for a presumptive finding of without fault and waiver, “unless the recipient willfully and knowingly failed to report the value of his or her resources accurately and timely.” It will still be necessary for the beneficiary to request a waiver of overpayment for these months.
The Case of Lara (Excess Resources Between $35 and $45 for 6 months)
Based on the 2021 SSI Federal Benefit Rate of $794, Lara was found to be overpaid by $4,764. However, since her excess resources were below $50 for each of the 6 months, the full amount of the overpayment should be waived (following her request for waiver), unless she willfully and knowingly failed to timely and accurately report this information.
SSI Overpayment Caused by Resources Just Over $2,000
SSA will allow for a partial waiver when the beneficiary’s excess resources are more than $50 for each month of the overpaid period, but well below the overpayment amount. The beneficiary must show they were without fault. If a waiver is requested, SSA takes the month with the highest amount over the resource limit and subtracts that amount from the outstanding overpayment at the time the waiver is requested, with the remaining amount waived. POMS SI 02260.035 E.
The Case of Ashuk. His countable resources were above the $2,000 SSI limit for 10 consecutive months. His first of the month resources were between $2,200 and $2,350 during this period. The SSI notice he received says he was overpaid $7,940 because he was over the $2,000 resource limit for 10 months (10 x $794 SSI rate for 2021).
Ashuk requests a waiver within two weeks of getting the overpayment notice and before any steps are taken to collect the overpayment by reducing future SSI payments. He lays out the facts above and references the POMS policy. SSA takes the month with the highest amount over $2,000 ($350 in this case). It then subtracts $350 from the outstanding balance ($7,940 – 350) and the remaining $7,590 is waived.
Request the waiver before any significant recovery of the overpayment occurs. This is because the policy allows SSA to take the highest monthly amount over $2,000 and subtract it from “the outstanding balance” when determining how much will be waived.
Seeking a Favorable (or More Favorable) Rate of Repayment
See form SSA-634, “Request for a Change in Overpayment Recovery Rate,” https://www.ssa.gov/forms/ssa-634.pdf, allowing the beneficiary to show an inability to pay off an overpayment at an existing monthly rate.
SSI Overpayments. SSA action to recover an overpayment is limited to 10 percent of the maximum SSI payment rate for your state, or $84.10 monthly in a state that pays the 2022 federal benefit rate of $841. This 10 percent maximum applies to the person who gets SSI and no other income, and to the person who gets SSI as a supplement to another form of income. However, see POMS SI 02220.016 A, providing that the rate of adjustment of SSI payments to recover SSI overpayments “will be the lesser of” 10 percent of total monthly income (countable income plus SSI and State supplementary payment), or the entire monthly benefit. If the SSI payment is, for example, $10 per month, the maximum rate of recovery would be $10 per month.
You can expect the SSI program to use the 10 percent rule as the default monthly rate of repayment. The beneficiary can use form SSA-634 to request a lower rate of repayment by documenting current income, expenses, and non-essential assets. Additional strategies as documented in the next section can also be used.
Keep in mind that SSA may still use its “cross program recoupment” policy to collect an SSI overpayment from monthly SSDI payments. POMS GN 02210.008 A, GN 02220.020 (the SSDI payment can be reduced by no more than 10 percent to recover the SSI overpayment).
SSDI Overpayments – Full Withholding of Monthly Payment as Default. Unlike SSI, SSDI does not have anything like a 10 percent limit to the rate of recovery from existing payments to recover an SSDI overpayment. In fact, SSA policy requires: “An initial notice of overpayment should generally propose full withholding of the benefit due [excluding Medicare Part B premiums] …” POMS GN 02210.010 A. Thus, a full withholding of the monthly SSDI, until the overpaid amount is recovered will begin after the 60-day period for requesting a reconsideration expires. This withholding will occur automatically unless the beneficiary files a Request for Change in Recovery Rate. If the beneficiary proposes a lower rate of repayment that would allow SSA to fully recover the overpayment in 36 months or less, SSA is authorized to accept that amount without a completed form SSA-634. POMS GN 02210.030 A, B.
SSDI Beneficiary Must be Proactive to Prevent Full Withholding. As noted above, the beneficiary can delay any action to recover the overpayment while a reconsideration of waiver request is pending. When the beneficiary first gets the SSDI notice of overpayment and does not intend to file a request for reconsideration or waiver, they must be prepared to file the Request for a Change in Recovery Rate. If the person does nothing, they may soon be without a monthly payment and facing the inability to pay monthly bills. When SSA reviews income and assets on form SSA-634, they are required to ignore the first $3,000 of assets in determining the ability to make monthly payments but cannot accept a plan that will pay less than $10 per month. POMS GN 02210.030 B. Note: Once the reconsideration or waiver request has been decided, with some remaining overpayment outstanding, at this point the beneficiary must now be prepared to request the change in recovery rate.
$10 Per Month Repayments if Getting 100 Percent Medicare Part D Extra Help. This special rule applies only to those getting what is known as the full Part D Low-Income Subsidy or Extra Help benefit (based either on an income and assets test, or dually eligible Medicare and Medicaid status making them automatically eligible for the full Extra Help benefit). For these purposes, a Medicare Savings Plan beneficiary is considered a Medicaid beneficiary and automatically eligible for full Extra Help. See POMS GN 02210.030 C requiring, in these cases, the acceptance of any repayment plan for at least $10 monthly without requiring a completed form SSA-634.
The Case of Jonathan. He receives SSDI of $1,400 monthly and has an outstanding overpayment of $24,000 from a past overpayment. He is currently having $400 per month deducted from his earlier repayment agreement and cannot afford all his monthly expenses or expected car repair expenses. Jonathan has Medicare Parts A, B, and D, and gets Medicaid coverage through his state’s buy-in program for working individuals. Based on his dual eligibility for Medicaid and Medicare, he is automatically eligible for the full Part D low-income subsidy (Extra Help) benefit.
Jonathan files a written request for a new repayment rate of $100 per month, without submitting a completed form SSA-634 and references POMS GN 02210.030 C, requiring SSA to accept any proposed payment of $10 a month or more because he gets full Part D Extra Help coverage. SSA approves this new payment plan.
What Role Should the Benefits Counselor Play in These Activities?
Benefits counselors should be aware of any restrictions put on your work by the entity that funds you. If the funder limits your role on overpayment issues, you may be able to perform that work through another funding source or play a more limited role.
As beneficiaries transition into employment, benefits counselors can assist them in resolving issues that may affect their progress toward achieving self-support and long-term employment stabilization. While an overpayment is not always a consequence of working, beneficiaries may see it that way and decide not to continue working because of the overpayment and the inability to resolve the issue. The average beneficiary may not be able to effectively address an overpayment issue and may not understand how to navigate the complex SSA systems and structure described above.
Benefits counselors should consider working with the beneficiary, within the limits your funder allows, to address overpayments that arise. This may include advising the beneficiary on their appeal or waiver rights, helping them complete and submit the relevant paperwork to SSA, and advocating with SSA to ensure the timely processing of the appeal, waiver, or request for a better rate of repayment. Multiple efforts may be required, but this advocacy often results in a full or partial resolution of the overpayment. Remember that retroactively accessing unused but applicable work incentives will often help to reduce the total amount of the overpayment or to eliminate it completely. This is extremely important work if your funder and program supervisor support it.
Potential referral sources. If you cannot provide overpayment assistance, consider a referral to your state’s Protection and Advocacy for Beneficiaries of Social Security (PABSS) program (see PABSS locator by state tool at Ticket to Work/Find Help page, https://choosework.ssa.gov/findhelp/index.html), your local/regional Legal Services or Legal Aid program, or any other disability rights organization that may do the work.
Date of Article: March 10, 2022
Authors: James R. Sheldon, JD (Board Member), Disability Policy Consultant and Edwin J. Lopez-Soto, JD (NABWIS member), Extension Faculty, Cornell’s Yan Tan Institute (YTI)
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