Social Security Will Undergo Two Significant Adjustments: What to Know?

The Trump administration is enacting reforms to reduce waste and fraud that affect recipients. The Trump administration has just unveiled two prominent and contentious policy changes that it claims are intended to address Social Security fraud and waste.

To reverse a rule that had limited clawbacks to lower amounts, the government first announced that it would once again seize the complete benefit checks of Americans who receive overpayments. According to Social Security authorities, the adjustment will aid in the government’s recovery of an extra $7 billion over ten years.

Later, the agency said that participants would have to visit a Social Security office in person or utilize an online method with two-factor authentication to modify their direct deposit information since they would no longer be able to do it over the phone. The goal of the measure is to stop certain kinds of fraud.

Critics have criticized both moves. According to former officials and outside experts, the new clawback policy would penalize poorer recipients who cannot afford to have their entire checks taken away, and the extra security procedures around bank account information will unduly burden many older adults who are not computer literate.

Clawbacks:

Accidental overpayments to the elderly and disabled total several billion dollars annually from the Social Security Administration. Errors can also arise from participants failing to disclose a life event, like getting married or changing jobs, that could impact their benefits. In other instances, the government overpays registrants while processing the adjustment, even after they submit the fact. The government attempts to recover the money by deducting it from an enrollee’s future benefits when it discovers an error.

The Trump administration said late last week that it would once again withhold 100% of an individual’s benefits if they owe money because of an overpayment. Before Biden, authorities reduced the maximum amount the government might withhold to merely 10% of an enrollee’s monthly payment in March 2024; such was the policy of Social Security.

To adequately protect public dollars, Lee Dudek, acting commissioner of Social Security, stated in a news statement, “It is our responsibility to amend the overpayment repayment policy back to full withholding, as it was during the Obama administration and the first Trump administration.” Only those who receive overpayments after March 27 will be subject to the reinstated regulations in the future. Additionally, Supplemental Security Income, which helps the poorest elderly and disabled Americans, is still subject to the 10% restriction.

However, there has been some quick criticism of the decision. After think tanks and news organizations like CBS’s “60 Minutes” brought attention to how some Social Security recipients were unintentionally being responsible for tens of thousands of dollars in overpayments because of mistakes made by the government or because they had become confused by a program’s complex eligibility and income requirements, the Biden administration modified its withholding guidelines. People who depended on Social Security for most or all of their income frequently found that their payments were abruptly cut off.

On Capitol Hill, the articles sparked bipartisan outrage, particularly from Florida Republican Sen. Rick Scott, who, in a letter to Social Security official, referred to the issue as “unacceptable.” During a congressional hearing last year, former Social Security commissioner Martin O’Malley stated that the agency was implementing the new 10% restriction to prevent “clawback cruelty.”

It is “cruel-hearted and appears designed to inflict a lot of hardship and anguish on beneficiaries through no fault of their own,” O’Malley told Yahoo Finance of the return to the 100% withholding rule.

Social Security Disability Insurance enrollees, who make up a significant portion of overpayments due to the program’s cap on the amount of money they may make from employment before losing benefits, may be disproportionately affected by the change. Work-related overpayments for Americans with disabilities average more than $8,000, according to research.

The Social Security Administration simplified waiving overpayment obligations for members who were not at fault, such as those who reported a rise in their income but got more funds. In contrast, the government processed the adjustment as part of the regulations it implemented last year. According to KFF News, such improvements are still in place. According to the administration, if a beneficiary cannot afford their full check withheld, they can ask for a lesser withholding rate.

However, others fear that applying for a waiver may become more difficult due to the Trump administration’s intentions to reduce Social Security’s workforce.

Jack Smalligan, a senior scholar at the Urban Institute who authored a seminal work on clawbacks, stated, “The staff is being drastically downsized.” “With the agency already operating at historically low staffing levels, how easy is it for someone to navigate all of this?”

Direct Deposit Changes:

The Washington Post’s early revelation that the government was mulling even more significant restrictions on Social Security’s phone services was one of the leading causes of the uproar around the new direct deposit rules. Instead, the government said late Wednesday that people already receiving assistance would need to update their bank details in person or online.

The modification is purportedly intended to stop scams in which a con artist phones and pretends to be a beneficiary or a family member, then redirects the recipient’s benefits to their bank account.

According to the organization, “calling SSA to update direct deposit bank information is linked to about 40% of Social Security direct deposit fraud.” “SSA’s current method of merely requesting identifying information over the phone is insufficient to stop fraud.”

Since Social Security offices have switched to an appointment-only system and may soon have drastically reduced staffing, some advocates worry that seniors who are computer illiterate or cannot easily visit an office will find it difficult to update their bank information. Since seniors frequently alter their direct deposit information for uncontrollable reasons, such as a bank merger that results in a new account number, these adjustments might be time-sensitive.

O’Malley says, “It’s a hassle for elderly or disabled people who can’t drive.” “My question is, are you going to shut down the online portals where the other 60% happen?” he said mockingly.

It’s unknown how frequently direct deposit fraud happens over the phone. Although there are no publicly available statistics on phone fraud, a 2019 investigation by Social Security’s inspector general revealed that 20,658 incidents of direct transfer fraud were perpetrated via the agency’s website between 2013 and 2017. (The Social Security Administration did not comment on this report or respond to a request for more information.)

However, former authorities assert that identity fraud over the phone has become a real worry in recent years., particularly as fraudsters have become more proficient.

Frontline Social Security staff who answer the phones are traditionally taught to ask questions to check for possible fraud and, if they suspect fraud, to refer callers to a field office to make any account adjustments in person. However, the agency has also included a few additional safeguards.

For example, it implemented a policy that automatically required anybody attempting to transfer benefits to one of those banks to visit a field office after learning that most fraudsters were wiring money to accounts at a few financial institutions. Additionally, the agency intended to use new technologies that would enable it to screen out phone calls that contained voice synthesizers, robocalls, and known issue numbers. It’s unclear if the Trump administration considered using such tools before declaring its policy shift.