Social Security Disability Overpayments Due to Earnings

Social Security Disability Overpayments Due to Earnings

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July 2, 2024
Social Security Disability Overpayments Due to Earnings
Social Security Disability Insurance
partial reduction of benefits based on the amount of work
Social Security is a federal social insurance program that
activity above SGA.
provides monthly cash benefits to insured workers and their
eligible family members in the event of the worker’s
Return to Work as a Beneficiary
retirement, disability, or death. Social Security provides
Social Security provides beneficiaries with the opportunity to
disability benefits (hereinafter referred to as SSDI) to three
test their ability to work without losing benefits for months in
different groups: (1) disabled workers; (2) disabled
which they have earnings above the SGA threshold. SSA’s
widow(er)s of deceased insured workers; and (3) disabled
work rules are considered to be complex, and the
adult children of retired, disabled, or deceased insured
Government Accountability Office reported in October 2015
workers. Although disabled widow(er)s and disabled adult
that difficulty in understanding the rules by both beneficiaries
children are entitled based on a relationship to an insured
and SSA staff may contribute to overpayments.
worker who may be deceased, retired, or disabled, they are
often included in the term SSDI because they receive Social
The Trial Work Period (TWP) is nine months total during a
Security benefits due to a qualifying impairment. The
rolling 60-month window in which earnings exceed an
number and average monthly benefit of each type of disabled
annually adjusted monthly threshold ($1,110/month in 2024).
beneficiary is in Table 1.
For up to nine months, which do not need to be consecutive,
the beneficiary can work any amount above the monthly
Table 1. Number and Average Monthly Benefit of
threshold without losing eligibility for benefits. This means
Social Security Disability Beneficiaries by Type, May
that overpayments do not occur as a result of work activity
2024
during the TWP.
Number
Average
The Extended Period of Eligibility (EPE) follows the TWP.
Beneficiary Type
(in 1,000s)
Monthly Benefit
The EPE lasts for a minimum of 36 months and may last
Disabled Workers
7,229
$1,538
indefinitely (until benefits are terminated for SGA or medical
improvement or the beneficiary reaches full retirement age or
Disabled Widow(er)s
199
$927
dies). With the exception of a grace period comprising the
Disabled Adult Children
1,150
$1,038
first month of SGA and the following two months,
beneficiaries are not eligible for benefits in the months that
Source: SSA, “Benefits Paid by Type of Beneficiary,”
they engage in SGA.
https://www.ssa.gov/oact/ProgData/icp.html.
During the first 36 months of the EPE, benefits are
Overpayments
suspended for any month in which beneficiaries engage in
An overpayment is an amount paid to an individual that was
SGA. If benefits are paid during months that should have
more than the amount that should have been paid. SSDI
been suspended for SGA, payments for those months are
eligibility may depend on a number of factors, including
considered overpayments because the beneficiary was not
earnings, marital status, and disability status. A change in any
eligible for those benefits.
of these factors may affect continuing eligibility to receive
benefits. Overpayments may occur when the agency does not
Beginning with the 37th month of EPE or following the grace
impose deductions, the agency does not suspend, reduce, or
period, if a beneficiary engages in SGA, his or her SSDI
terminate payments; or there is a technician error. This may
benefits terminate immediately because of work. Because the
be due to beneficiaries not reporting timely (or at all) or
individual is no longer eligible for benefits, any benefits
agency failure to take appropriate and timely action.
received during or after the month with SGA are considered
overpayments.
Earnings as a Source of Overpayments
A study from 2019 found that from January 2010 through
Substantial Gainful Activity
December 2012, 2.7% of disabled-worker beneficiaries
The Social Security Administration (SSA) reports that
engaged in SGA after TWP and grace period completion,
substantial gainful activity (SGA) is a leading cause of
meaning that months with work activity above SGA could
overpayments of Social Security. SGA generally describes a
cause an overpayment if benefits were paid. Of this group,
level of earnings and work activity performed or intended for
71% (or 1.9% of disabled-worker beneficiaries) were
pay or profit. In 2024, the SGA amount is $1,550/month for
overpaid.
SSDI beneficiaries ($2,590/month for statutorily blind
beneficiaries). With exceptions, beneficiaries are not eligible
Earnings Self Reporting
for benefits in months they earn at least SGA. There is no
SSA instructs SSDI beneficiaries to report right away when
they:
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Social Security Disability Overpayments Due to Earnings
• start or stop work;
Information Exchange (PIE) contract to Equifax Workforce
•
Solutions. In its February 15, 2024, Notice of Proposed
change duties, hours, or pay rates; or
Rulemaking, an individual would authorize SSA to receive
• start paying disability-related work expenses (these may
wage and employment information from his or her
be deducted from monthly earnings).
employer(s) through a participating payroll provider.
Individuals providing wage and employment data through the
SSDI beneficiaries can report by phone or mail or in person.
PIE would have reduced reporting requirements because SSA
They may also report monthly wages online through the my
would obtain that information directly from the payroll data
Social Security portal using the myWageReport tool.
provider. The comment period closed on April 15, 2024.
Other Sources of Earnings Data
Recovery of Overpayments
SSA verifies wages and detect unreported work through
Recovery of Social Security overpayments is authorized
matches with data from multiple state and federal agencies.
under Section 204 of the Social Security Act. Once SSA has
determined that an overpayment has been made, the agency
SSA verifies earnings by consulting sources in order:
notifies the liable recipient or representative payee (a person
paystubs on file in SSA systems, an SSA-approved wage
or an organization that receives and manages Social Security
verification company, beneficiary-provided paystubs,
or SSI payments for a recipient who is incapable of managing
verified wages for Supplemental Security Income (SSI) for
his or her own payments). Overpayment notices explain the
beneficiaries who also receive SSI benefits, the National
reason for the overpayment, the overpayment amount,
Directory of New Hires (NDNH), earnings records in the
repayment options, and appeal and waiver rights.
Master Earnings File (MEF), or a request to the employer.
SSA generally recovers overpayments through an adjustment
When an SSDI beneficiary does not report substantial
of benefits payable, a full refund or installment payments by
earnings, SSA uses other methods to identify the earnings.
the overpaid recipient, or other methods. In March 2024,
The Continuing Disability Review Enforcement Operation
SSA announced changes to overpayment policies, including
uses earnings from the MEF to alert technicians to conduct a
lowering default payment amounts, extending repayment
work continuing disability review (CDR). SSA also uses
plan lengths, and making it easier for beneficiaries and
quarterly earnings received from the Department of Health
recipients to request waivers.
and Human Services’ Office of Child Support Enforcement
(OCSE) to generate CDR alerts.
Consequences for Repeated Failure to
Report Earnings
Wage information obtained from NDNH and some federal
SSA may consider the use of punitive actions to deter future
and state databases is considered third-party information and
overpayments when individuals repeatedly fail to report
may only be used as wage evidence when the worker agrees
earnings as required, though an SSA Office of the Inspector
with the information on the query. SSA requires additional
General’s report from 2017 noted that SSA had not used this
documentation for these sources.
authority in the cases it studied. The report listed the actions
National Database of New Hires (NDNH)
available to the agency as follows:
The OCSE and SSA have a memorandum of agreement that
Similar fault provisions grant SSA the authority to
allows a file match and authorized SSA employees to query
withhold the full monthly payment from an
the NDNH to establish or verify eligibility and/or continuing
entitlement for SSDI. This database contains quarterly new
individual who knowingly makes an incorrect or
hires, quarterly wages, and unemployment information
incomplete statement or conceals information
reported by the states and the District of Columbia to OCSE.
material to a determination.
Wages are posted quarterly to the database based on when
Administrative sanctions may be applied when an
the earnings are paid to the recipient. An alert for a work
individual makes a false statement, misrepresents a
review is usually generated when quarterly earnings are at
material fact, or fails to disclose information that is
least three times the monthly SGA amount and indicate that
material to a determination. When sanctions are
the beneficiary has completed the TWP.
applied, payments are withheld as a penalty for
Master Earnings File (MEF)
improper actions and are not used to reduce or
Annual wage and self-employment data from the Internal
recover an overpayment.
Revenue Service (IRS) are stored in the MEF. The match
For Additional Information
compares the annual earnings amount reported on IRS Form
CRS Report R44948, Social Security Disability Insurance
W-2 or Schedule SE to set thresholds and verified earnings
(SSDI) and Supplemental Security Income (SSI): Eligibility,
(if any) reported to SSA for the tax year. An alert for a work
Benefits, and Financing
review is usually generated when earnings are greater than or
equal to 12 months of SGA for that enforcement year.
SSA, The Red Book—A Guide to Work Incentives and
Employment Supports, https://www.ssa.gov/redbook/
Payroll Information Exchange
SSA, Working While Disabled: How We Can Help,
Section 824 of the Bipartisan Budget Act of 2015 (P.L. 114-
https://www.ssa.gov/pubs/EN-05-10095.pdf
74) authorizes SSA to enter into information exchanges with
payroll data providers to obtain wage and employment
T. Lynn Sears, Analyst in Social Policy
information. In September 2019, SSA awarded the Payroll
IF12702
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Social Security Disability Overpayments Due to Earnings

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