Social security reduces the benefits of some people from 100% to 50%; experts still warn of the “destructive” effect

Just weeks after the announcement of the new 100% withholding rate for benefits overpayment, the Social Security Bureau has lowered interest rates for some beneficiaries to 50%.

But the monthly kickbacks for welfare checks can still put financial burdens on affected people, experts say.

According to an emergency message released by the Social Security Bureau, a 50% default withholding rate will apply to so-called II Title II benefits, which include retirement, survivors and disability insurance, for new payment notices sent after April 25 or after April 24.

The withholding rate for supplemental safety income benefits is still 10%.

“Obviously, it's better not to lose all your income,” said Kate Lang, director of Justice Federal Income Security, a national group dedicated to fighting high poverty.

“But if you rely on your own benefits to pay rent or mortgage and buy food, losing half of your income will be devastating and will still lead to people becoming homeless,” Long said.

How beneficiaries end up with social security

Beneficiaries may owe Social Security money to the Agency – when their monthly benefits checks far exceed their owed payments. An incorrect payment may occur for a number of reasons, such as a beneficiary’s failure to report changes to the situation to the institution, or if the institution fails to process information in a timely manner or enter errors in its data.

According to the agency, when the Social Security Bureau determines that the beneficiary is overpaid, a notice is issued to request a full refund.

Beneficiaries usually have 90 days to demand a lower withholding rate, reconsider or give up recovery. If they do not make such a claim in the 90-day window, the agency will withhold 50% of its benefits until the agency's update completely reimburses the overpaid amount.

The Social Security Bureau has previously announced that it will increase the overpaid default withholding rate to 100%. Under President Joe Biden, the withholding rate for defaults has been reduced to 10% of the beneficiary’s monthly benefits or $10, whichever is higher. Typically, the rates that beneficiaries comply with are based on the terms at the time of notice.

“Over the past 100 days, we’ve gone from as low as 10 (percentage) to 50 days now,” said Richard Fiesta, executive director of the Retired Americans Alliance.

Carnival said the 100% withholding tax was “very ridiculous and cruel”. The Social Security Bureau has said that, according to the chief actuary's estimates, changes in the total recovery rate will save about $7 billion in the next decade.

However, even if the default withholding rate is reduced in half, beneficiaries may still struggle financially.

“Losing 50% of the benefits for many people can put them in direct financial difficulties,” Carnival said.

Carnival says that in most cases, their payment is not the beneficiary’s fault. “They shouldn't be in a worse situation because of things they never did in the first place,” he said.

“Many discretionary rights” in negotiation repayment terms

According to Lang, although beneficiaries do have the ability to negotiate payments, there is no guarantee that they will succeed and the results may vary.

“There are thousands of employees who are individually going to deal with exemptions or demand to negotiate different repayment rates,” Long said. “There are a lot of discretion in the decisions of those employees.”

She said beneficiaries who are dealing with overpayment issues also face long waiting times to make an appointment to visit the Social Security Administration office, which could interfere with their ability to exercise available options.

The Social Security Bureau did not respond to CNBC's request for comment.