How Social Security's overpayment mistakes can become your responsibility
This is an updated version of a story first published on Nov. 5, 2023. The original video can be viewed here.
Each month, about 71 million Americans - retirees, disabled workers and others – receive checks from Social Security. But as we first reported last fall, each year, about a million people get something else in the mail – a bill. They're told they owe the government money, sometimes tens of thousands of dollars, because the Social Security Administration miscalculated their benefits and paid them too much. It can happen to anyone. It can take years, even decades for these unexpected debts to suddenly come to light. It often doesn't matter if it's not the recipient's fault – they still have to pay. Few people realize it, but Social Security's mistakes are your responsibility.
In 2022, at Steven and Becky Sword's home in Chicago, a letter arrived from the Social Security Administration. When Becky Sword read it, she was stunned to discover that she and her husband owed Social Security "$51,887," and were expected to repay it "within 30 days."
Anderson Cooper: That letter changed your life.
Becky Sword: Oh, yeah.
Anderson Cooper: Are you scared?
Becky Sword: He's thinking we're gonna lose our house. You know, what are we gonna do? I mean, we were very scared.
When we spoke with Steven and Becky Sword in August, Steven was making $16 an hour as a security guard on the overnight shift at a condominium complex. Becky was working days as an occupational therapy assistant in a nursing home. They're 62-years-old and have worked full-time most of their lives.
But for several years now, Steven's been dealing with the effects of a pancreatic disease that nearly killed him in 2016.
Anderson Cooper: How long were you in the hospital for?
Steven Sword: About 105 days. It was hard 'cause when I left the hospital, it took me about two months to learn to eat and walk again.
Steven started receiving Social Security disability checks in 2017 as he recovered and returned to work. The agency's rules are complicated, but Becky faxed Steven's pay stubs to Social Security so the agency could monitor his earnings and eligibility. She kept the fax receipts…
Becky Sword: So I knew they were getting it, you know.
In return, Social Security sent the Swords letters like this one, saying it had increased Steven's benefits "to give him credit for his 2019 earnings."
Anderson Cooper: Is the impression you got from that, that they're examining the pay stubs--
Becky Sword: Uh-huh. Definitely.
Anderson Cooper: And they're pay attention--
Steven Sword: Uh-huh
Becky Sword: Yeah.
Anderson Cooper: And adjusting accordingly?
Becky Sword: Because they're increasing it.
Becky Sword and Steven Sword: Yeah.
But the letter the Swords got in 2022 from Social Security said Steven shouldn't have gotten any money at the time the agency gave him that increase. Steven and Becky owed more than $50,000, the agency said, "because we did not stop his checks" about three years sooner.
Anderson Cooper: Has anyone at Social Security ever, sort of, apologized?
Steven Sword: No.
Steven Sword: They-- they take no blame at all.
Becky Sword: They say it's our fault
Anderson Cooper: They're saying you should have known that--
Steven Sword: That I'm making too much money.
Anderson Cooper: That-- that Social Security--
Steven Sword: But--
Anderson Cooper: Was giving you too much money?
Steven Sword: Yeah.
Anderson Cooper: Even though Social Security didn't know that they were giving you too much money?
Steven Sword: Yeah. Which is strange because you're sending in all your pay stubs. Someone has to file that. And to me–
Becky Sword: And when we asked 'em, they said, "Well, they're not looking at that every month." And then she even said, "Well, they're not even looking at it every year." I would think yearly, at least, they would review it. I could see makin' a mistake after a few months, but not three years of a mistake. And then they blamed it on COVID. They blamed it on being understaffed. And so to me, right there it's saying it's their fault.
The Social Security Administration told us its privacy rules prevent it from commenting on individual cases like the Swords, and no one from the agency would give us an on camera interview. But Kilolo Kijakazi, the former acting commissioner of Social Security, gave this testimony before a congressional committee in October….
Rep. Mike Carey (R-OH-15): How many people are receiving overpayment notices in a year?
Kilolo Kijakazi: For FY 2022, 1,028,389. For FY 2023, 986,912.
Rep. Mike Carey (R-OH-15): Seems like an awful lot.
Terry Savage: Nobody knows this is happening to so many people.
Anderson Cooper: This is not a story Social Security wants to publicize.
Terry Savage: Ohhh no—
Laurence Kotlikoff: No.
Terry Savage writes a nationally syndicated column on personal finance. Laurence Kotlikoff, an economics professor at Boston University, created software to help people maximize their Social Security benefits. Together, they've been trying to draw attention to what they call, "Social Security horror stories," caused largely, they say, by the Social Security Administration's own mistakes.
Laurence Kotlikoff: Their mantra, their rule, is "Our mistake is your mistake." And you can appeal it or ask for a waiver. The only reason they will waive this-- clawback is if you are indigent: really, really poor.
Terry Savage: The worst part of it is they have all the power. Because they say, "If you don't pay us back, we're just gonna cut your benefit check." Imagine: People live on those checks. And all of a sudden you get no check? Or a small amount?
Anderson Cooper: If someone's been paid too much in Social Security benefits, why shouldn't they have to pay it back?
Laurence Kotlikoff: Because you relied on it. So you may have decided to-- retire early, or to spend the money on your child's tuition.
Overpayments have existed for decades and caused people a lot of financial pain. But fixing the problem has never been a high priority on Capitol Hill. In 2015, Congress did approve a measure to reduce overpayments by giving Social Security more timely access to payroll data. But eight years later, the agency still hasn't put the new system in place.
Aging technology and staff shortages have taken a toll on Social Security. In 2022, the agency's workforce hit a 25-year low as the number of people claiming benefits kept going up. When we took a close look at Social Security's annual reports to congress, we discovered something else has been going up as well: the amount of money the agency has been clawing back from the checks of people with overpayments.
Jean Rodriguez, who's 73-years-old, told us her retirement checks had been withheld for the past two years. A former school cafeteria worker, she started receiving benefits in 2014. But four years later, she and her husband Glenn were asked to come to the local Social Security office in Virginia Beach, Virginia to speak with a representative.
Jean Rodriguez: And he says, "We have a small problem."
Anderson Cooper: How much did he say they had overpaid you?
Jean Rodriguez: $72,000.
Anderson Cooper: That doesn't sound like a small problem.
Jean Rodriguez: No. It wasn't. We were both devastated.
Anderson Cooper: What did they tell you happened?
Jean Rodriguez: Somewhere along the line they made a combination of four other people in addition to my numbers.
Anderson Cooper: So they were giving you benefits based not just on your salary, but on four other people's salary--
Anderson Cooper: All combined?
Jean Rodriguez: Right.
Anderson Cooper: How does that happen?
Jean Rodriguez: Good question. (laugh) Don't know how they did it.
Anderson Cooper: Did Social Security admit to you that this was their fault?
Jean Rodriguez: Yes, they did.
But the agency said the Rodriguezes had to pay the money back anyway, because they could afford to do so. Jean and Glenn own their home and Glenn gets a pension from the Navy.
Jean Rodriguez: If it was something I knew I did totally wrong they have the right to come after me. But I didn't know how they calculated it. And then they waited four years to figure it out.
In a statement, the Social Security Administration told us "our payment accuracy rates are high," yet "even small error rates add up to substantial improper payment amounts." The agency said it's "required by law" to recover this money…and added that overpayments are not necessarily the agency's fault. They can happen "when a beneficiary does not timely report work" or other financial information.
There's no statute of limitations on how long Social Security can wait to collect an overpayment. More than two years ago, Roy Farmer of Grand Rapids, Michigan, got a letter from Social Security asking whether he'd forgotten to pay a debt he didn't know he had.
Anderson Cooper: This is an alleged overpayment from 20 years ago.
Roy Farmer: Yes, sir.
Anderson Cooper: When you were 11 or 12 years old.
Roy Farmer: Correct.
Roy Farmer grew up in rural Cadillac, Michigan, in a family of six that struggled to make ends meet.
Roy Farmer: We ended up near homelessness a couple of times-- at one point, even living, you know, six of us in-- in a camper trailer.
He was born with cerebral palsy.
Roy Farmer: I had leg braces. I had to walk with a child-sized version of, like, an old-person walker.
Anderson Cooper: And you had surgeries. You had doctor's visits. You had it treated.
Roy Farmer: Yeah. And so thankfully they were able to get me to a point where I can live a more or less normal life-- with some limitations.
He's 33-years old now and works full time. But when he was a child, his mother received benefits on his behalf. Social Security told him that when he was 11-years-old, the agency determined he was no longer medically eligible for benefits and his mother received $4,902 too much. His mother died a few years ago, and the agency is insisting he pay back the money because it believes he can afford to do so.
Anderson Cooper: Could you afford $4,902?
Roy Farmer: No, sir. That much is about a sixth of my annual take-home pay.
Like most of the people we spoke to, Roy Farmer couldn't find a lawyer to help him. There's little financial incentive for attorneys to take on these cases. It took Farmer nine months to get the documents in his Social Security file. He was looking for the agency's evidence that he was no longer medically eligible for benefits when he was 11-years-old. But, he says, there was none.
Roy Farmer: And they told me "We probably had it at some point. But we don't have it now."
Anderson Cooper: And they admit there's no evidence you're at fault, but they're still coming after you for it.
Roy Farmer: Yes, sir.
Anderson Cooper: People at Social Security have told us-- "Look this is a law. This has to be changed through Congress. Our ti-- our hands are tied."
Laurence Kotlikoff: It's not, Anderson because the law says that-- "If equity and good conscience demands" that-- the clawback be waived, it should be waived.
Laurence Kotlikoff, the economist who's written about overpayments, is talking about a specific part of the Social Security Act that says the agency should not recover an overpayment if doing so would be "against equity and good conscience." The problem, he says, is that Social Security interprets that phrase in a very narrow way.
Anderson Cooper: So the agency itself-- Social Security Administration, has a lot of discretion.
Laurence Kotlikoff: Absolutely, yes.
Terry Savage: Oh, sure they do. But…
Laurence Kotlikoff: But financially the long-term picture's not good. And they've trained the staff, "Look, your job is to collect every penny you can, no matter what."
The Social Security trust fund for retirement and disability benefits is expected to be depleted around 2035 because the benefits being paid out are greater than the payroll taxes coming in. But Kotlikoff and Savage argue that clawing back money from the elderly and disabled isn't going to make much of a dent in that problem. They say there are some simple things Congress and the Social Security Administration could do to alleviate the stress and financial difficulty caused by overpayments. For example:
Terry Savage: Shouldn't there be a statute of limitations so that, after 18 months, it's their mistake, and they have to deal with it? And not the person who mistakenly received and lived on that benefit check?
Anderson Cooper: If it's more than a year or two
Laurence Kotlikoff: Just waive it. Say, "Our mistake. You're fine."
Roy Farmer in Michigan had been waiting four months to appeal his case before an administrative law judge who works for social security.
Jean and Glenn Rodriguez told us they'd been waiting four years.
As for the Swords in Chicago, Steven and Becky told us they were tired of fighting the government and had decided not to appeal the matter any further.
Becky Sword: I just figure we were gonna have to give up our retirement funds.
Anderson Cooper: That's the only way you can--
Steven Sword: Yeah.
Becky Sword: That's the only way.
Becky Sword and Steven Sword: Yeah.
Becky Sword: Because they said we'd have to pay it back in three years' time and we-- we'd have to come up with $1,400 a month to pay back and we don't have that. We don't have that, you know, kind of money.
When Steven Sword was not working the night shift, and Becky Sword was not working the day shift, they were preparing to hand over most of the $60,000 they'd saved for their retirement to the government agency charged with supporting Americans in their old age.
After we asked the Social Security Administration detailed questions about their cases, all of the people in our story received phone calls from the agency, saying they would not have to pay the money back after all. In March, the new Social Security Commissioner Martin O'Malley cited our story when he told a senate committee he was changing the way his agency handles overpayments. Social Security says it will no longer withhold more than 10% of a monthly check to recover an overpayment, and it will make it easier for people to receive waivers in cases where there's no evidence of fraud.
Produced by Andy Court. Associate producer, Annabelle Hanflig. Broadcast associate, Grace Conley. Edited by Stephanie Palewski Brumbach.