In recent days, the Trump administration has announced two high-profile and controversial policy changes it says are meant to combat waste and fraud in Social Security.
First, the agency said it would resume garnishing entire benefit checks from Americans who receive overpayments, undoing a reform that had capped clawbacks at a smaller amount. Social Security officials claim the change will help the government recover an additional $7 billion over 10 years.
Later, the agency announced that enrollees would no longer be allowed to change their direct deposit information over the phone but would instead be required to use an online process with two-factor authentication or visit a Social Security office in person. The measure is meant to prevent some types of fraud.
Both decisions have been met with criticism. Former officials and outside experts worry the new clawback policy will punish poorer beneficiaries who can’t afford to have their full checks taken away, while the additional security measures around bank account information will unnecessarily burden many seniors who lack computer skills.
Here’s what you need to know.
Each year, the Social Security Administration sends out several billion dollars worth of accidental overpayments to people with disabilities and the elderly. Sometimes errors occur because enrollees fail to report a life event that can affect their benefits, such as getting married or finding a new job. In other cases, enrollees report the information, but the government keeps overpaying them while processing the change.
When the government notices a mistake, it tries to recoup the cash by subtracting it from an enrollee’s future benefits.
Late last week, the Trump administration said it would resume the practice of withholding 100% of a person’s benefits if they owe money due to an overpayment. That was Social Security’s policy until March of 2024 when Biden officials lowered the maximum amount the government could withhold to just 10% of an enrollee’s monthly check.
“It is our duty to revise the overpayment repayment policy back to full withholding, as it was during the Obama administration and first Trump administration, to properly safeguard taxpayer funds,” Lee Dudek, acting commissioner of Social Security, said in a press release. The restored rules will only apply going forward to individuals who receive overpayments after March 27. The 10% cap also still applies to Supplemental Security Income, which supports the poorest elderly and disabled Americans.
Still, the decision has received some immediate blowback. The Biden administration changed its withholding rules after think tanks and news outlets such as CBS’s “60 Minutes” highlighted how some Social Security recipients were unexpectedly finding themselves on the hook for tens of thousands of dollars in overpayments due to the government’s own errors, or because they had gotten tripped up in a program’s complicated income and eligibility rules. In many cases, people who relied on Social Security for most or all of their income suddenly found their benefits entirely yanked away.
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The stories led to a bipartisan outcry on Capitol Hill, including from Florida Republican Sen. Rick Scott, who called the problem “unacceptable” in a letter to Social Security leaders. In a hearing before Congress last year, former Social Security commissioner Martin O’Malley said the agency was adopting the new 10% cap to avoid “clawback cruelty.”
Returning to the 100% withholding rule 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.
The move could have an outsized impact on people enrolled in Social Security Disability Insurance, which accounts for a large share of overpayments because the program limits how much people can earn from work before losing benefits. Research has found that, for Americans with a disability, work-related overpayments average over $8,000.
As part of the rules it introduced last year, the Social Security Administration made it easier to waive overpayment debts for enrollees who weren’t at fault — for instance, if they reported an increase in their income but received extra money while the government processed the change. Those reforms are staying in place, KFF News reports. The administration also says beneficiaries can apply for a lower withholding rate if they can’t afford having their entire check taken.
But some worry that the Trump administration’s plans to cut Social Security’s personnel will make it hard to apply for a waiver.
“The staff is being downsized dramatically,” said Jack Smalligan, a senior fellow at the Urban Institute who wrote an influential paper on clawbacks. “How easily can someone navigate all this when the agency was already at historically low levels of staffing?”
Read more: What is the retirement age for Social Security, 401(k), and IRA withdrawals?
Martin O’Malley, former commissioner of the Social Security Administration, called the Trump administration’s intention to claw back overpayments from beneficiaries’ checks “cruel-hearted.” (Tom Williams/CQ-Roll Call, Inc via Getty Images) ·Tom Williams via Getty Images
The new direct deposit rules have also stirred controversy, though some of it revolved around early reporting by the Washington Post that the administration was considering vastly broader limits on Social Security’s phone services. Instead, the administration said late Wednesday that individuals already enrolled in benefits would have to change their bank information online or in person.
The change is ostensibly aimed at preventing frauds where a scammer calls claiming to be a beneficiary or their relative, and has their benefits redirected to their own bank account.
“Approximately 40 percent of Social Security direct deposit fraud is associated with someone calling SSA to change direct deposit bank information,” the agency said. “SSA’s current protocol of simply asking identifying questions by telephone is no longer enough to prevent fraud.”
The concern among some advocates is that seniors who lack computer skills or can’t easily get to an office will find themselves having trouble changing their bank information, especially since Social Security offices have moved to an appointment-only system and could soon have significantly reduced staffing. These changes can be time-sensitive for seniors since they are often changing their direct deposit information for reasons out of their control, like a bank merger that leaves them with a new account number.
“It’s a hassle for elderly or disabled who can’t drive,” said O’Malley. He then added, somewhat sarcastically: “My question is, are you going to shut down the online portals where the other 60% happen?”
Exactly how commonly direct deposit fraud really occurs over the phone is unclear. A 2019 report by Social Security’s inspector general found there were 20,658 cases of direct deposit fraud committed through the agency’s online portal between 2013 and 2017, but there doesn’t appear to be public numbers on phone fraud. (The Social Security Administration did not return a request for additional data or comment on this story.)
Still former officials say that identity fraud over the phone has been a genuine concern in recent years, especially as scammers have gotten more sophisticated.
Traditionally, frontline Social Security employees who answer the phones are trained to question callers to screen for potential fraud and direct them to visit a field office and complete any account changes in person if they have suspicions. But the agency has added some new protections as well.
For instance, after discovering that the vast majority of fraudsters were sending money to accounts at just a handful financial institutions, it instituted a policy of automatically requiring anyone trying to move benefits to one of those banks to visit a field office. The agency also was planning to adopt new tools that would allow it to filter out phone calls that used robocalls, voice synthesizers, and known problem numbers.
It’s unclear whether the Trump administration looked into deploying those tools before announcing its policy change.
Jordan Weissmann is a senior reporter at Yahoo Finance.
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