SSA agrees to let overpayments slide for victims of fraud

By Stephanie Wasko
Special to Federal News Radio

The Social Security Administration’s inspector general said the agency should rethink its policies around penalizing beneficiaries who didn’t receive payments due to unauthorized account changes.

Auditors recommended SSA not hold beneficiaries liable for penalties due to the fraudsters stealing or taking their payments without authorization.

The IG identified 23,192 beneficiaries with multiple changes to their direct deposit accounts who did not receive a total of $28.3 million in Social Security payments between September 2011 and June 2012.


Of those 23,192 beneficiary reports, the audit said, “SSA sent replacement payments to 13,380 beneficiaries who reported they did not receive benefit payments totaling $17.4 million. SSA sent replacement payments to 7,695 of the 7,847 beneficiaries for whom it recovered the initial non-received payments. SSA also sent replacement payments to 5,896 of the 15,760 beneficiaries whose payments were not recovered.”

The report stated SSA typically didn’t replace anywhere from 38 percent to 51 percent of reported non-received payments over the course of the nine months.

SSA agreed with the recommendation to ensure that account holders given replacement payments due to unauthorized changes are freed from outstanding overpayments.

But SSA didn’t agree with the IG’s two other recommendations. The IG also said SSA should “provide beneficiaries replacement payments for missed payments due to unauthorized changes to their direct deposit information and implement a consistent policy to refund overpayments collected from beneficiaries for replacement payments received after unauthorized changes to their direct deposit information.”

SSA rejected the IG’s recommendations stating, “We have a policy for processing cases where beneficiaries allege their direct deposited benefits were misdirected. We have long-standing policies in our regulations and procedures that provide beneficiaries and recipients several levels of due process protections for overpayments.”

The IG looked at this issue, in part, because the Treasury Department required starting in March 2013 that all benefit payments are done electronically through direct deposit.

Lawmakers requested the IG look into how much money fraud is costing the government due to unauthorized direct deposit changes.

The IG received 36,000 reports of potentially unauthorized changes since October 2011.

The report stated when SSA sends out a replacement payment to a beneficiary, Treasury receives a teletrace request to find the lost payment. If Treasury discovers the deposit in an account under the beneficiary’s name, SSA places an overpayment on the account.

Often times, the IG said, individuals set up fraudulent accounts under beneficiaries’ names in order to receive their Social Security benefits. When this is the case, beneficiaries may be unfairly charged as an overpayment. Over the course of the IG’s investigation, SSA charged overpayments of $3 million to beneficiaries who had received replacement payments.

In response to this issue, SSA implemented a new policy in May 2012 protecting defrauded account holders from paying overpayments.

“SSA will provide eligible beneficiaries immediate payments to replace those not received due to unauthorized direct deposit changes and suspend the collection of overpayments caused by the replacement payments,” the report said.

During the audit, IG discovered that SSA did not always follow its revised policy. The agency agreed to correct the mishandled cases.

Stephanie Wasko is an intern with Federal News Radio.


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